The Path to New Growth: Enabling Digital Industry

Ladies and gentlemen,

Good morning!

Welcome to the Huawei Global Analyst Summit 2017. My topic today is The Path to New Growth: Enabling Digital Industry. The Greek philosopher Heraclitus said: "The only thing that is constant is change." Our HAS event has expanded from less than 50 guests, when it first started, to 500 guests today. Some of you have attended this event five times, ten times, or even more. Thank you for being the constant amid the change, and for your ongoing support of the HAS. I'd like to extend a warm welcome to all of you, no matter how many times you have attended HAS.

1. Industries Are Going Digital Faster, Changing the Way We Live and Work

We are now at a critical moment of digital transformation. The digital transformation of industries is accelerating, driving the modernization of industries like finance, transport, manufacturing, and government services. It is changing the way we live and work.

In Shenzhen, we don't have to carry a wallet any more, because we can purchase anything we want with just a mobile phone. In New York, you can search for shared cars nearby on your phone. In Munich, IT systems have been integrated into automobile production lines, so that the manufacturing process is entirely automated. In Jiaxing, a city in eastern China's Zhejiang province, the municipal government is using cloud technology to streamline administrative processes. Today, residents never have to visit more than one government office to get the approvals and licenses they need.

2. Industry Digitization: Huge Opportunities for the ICT Industry

100 years ago, electrification swept through every industry in the US. Between 1900 and 1930, electricity generation in the country increased 24-fold. Power generation was known as the "thermometer of the economy".

Today, it is the turn of ICT. ICT is rapidly driving the digitization of verticals. The inevitable result will be an explosive growth in data. We estimate that the amount of data generated and stored globally every year will reach 180 ZB by 2025, 150 times more than in 2010.

Industry digitization will bring huge benefits, including new business opportunities and higher efficiency for millions of companies. This process will also place much higher demands on our digital infrastructure (devices, data pipes, and the cloud), presenting huge opportunities to the ICT industry.

3. GCI 2017: ICT Fuels Economic Growth, Cloud Is a Primary Driver

Connectivity is the foundation of digital life. Every year since 2014, Huawei has released the Global Connectivity Index, or GCI. This index quantifies the progress of countries towards a digital economy.

According to GCI 2017, global progress towards a digital economy is picking up pace. The world's GCI score is up four percentage points since 2015. The report shows that ICT has become an engine of economic growth. Every US$1 invested in ICT infrastructure generates US$3 in new GDP growth. Companies are using ICT not just as a business support system, but as a core production system and even a decision-making system, and that will significantly increase both efficiency and innovation. By 2025, every US$1 invested in ICT infrastructure is expected to generate US$5 in extra GDP growth.

However, GCI data also illustrates an ICT version of Matthew Effect ("to everyone who has will more be given"). The digital divide has become a digital chasm. Frontrunner nations are pulling even farther ahead of Adopters and Starters. The GCI's correlation analysis shows that cloud is a primary driver of growth. When fixed broadband penetration reaches the threshold values of 10% and 35%, cloud adoption jumps significantly. And when a country's level of cloudification hits 3%, investment in big data analytics and the Internet of Things takes off.

We recommend that Starters and Adopters increase investment in cloud as well as in broadband, as this will lay a stronger foundation for their digital development.

4. Driving the Digital Transformation of Industries

To help all industries go digital, Huawei must first digitize our key business processes. Cloud services will be the foundation for the digital transformation of telecom operators and all other industries. To respond to this trend, Huawei has established a Cloud Business Unit. We will be investing heavily in open platforms for public cloud. Working with partners, we will build cloud ecosystems. By helping operators migrate their networks and services to the cloud, we are working with them to serve customers of all industries, and to serve the digital transformation through cloud services.

5. Digital Huawei: Exploring the Depths of Digital Enterprise

Here at Huawei, we will improve our own efficiency and capacity for innovation by going digital. We plan to spend three to five years turning Huawei into a digital company, exploring the depths of digital transformation, and defining best practices. Externally, we will digitize our customer engagement and sales processes to deliver a Real-time, On-demand, All-online, DIY, and Social (ROADS) experience to five key groups of users: customers, consumers, partners, suppliers, and employees. We aim to make our services fast, agile, and convenient to elevate levels of customer satisfaction. Internally, functions like R&D, supply chain, and project delivery will be digitized and delivered as a service. We will enable a free flow of information between domains to achieve industry-leading levels of efficiency.

Take Huawei's R&D cloud as an example. We leveraged our global data centers to provide desktop cloud services for 100,000 employees, with 1.1 million virtual machines. Code is fully cloudified; R&D operations are fully cloudified. The time spent on each R&D activity has been cut by 50%; R&D efficiency has almost doubled.

6. Helping Operators Go Digital for New Markets and New Growth

We will help operators migrate all of their networks, operations, and services to the cloud. After going digital, operators can make use of their strengths in data transmission to create new markets and achieve new growth.

We will help operators develop video services to seize opportunities in the trillion-dollar video market. We will also help them deliver cloud services to support the digital transformation of industries. They will take a slice of the 15-trillion-dollar market that will be created by the digital transformation of industries over the next decade, by providing enterprise and government customers with services including computing, storage, networking, enterprise communications, enterprise connectivity, and IoT.

Take Deutsche Telekom as an example. It has launched new services like cloud, video, and IoT.

For consumers, it has provided an NGTV service. In the enterprise market, it has launched Open Telekom Cloud, and now provides cloud services to Mercedes Benz, Volkswagen, Bosch, and many other well-known companies.

7. Investing in EMs, Helping Increase ROI, Realizing the EM Dividend

We have also noticed that emerging markets still have a growing, underserved user base, and the basic communication needs are far from being met. There are a total of 4.7 billion people in emerging markets, but 3 billion of them have no Internet access, and 800 million households have no access to broadband.

The major obstacle to market development in emerging countries today is low returns on investment. The CAPEX and OPEX of operators remain stubbornly high.

Huawei has established a department dedicated to developing solutions for emerging markets. For example, we have established industry alliances like the FTTx Alliance and Site Alliance to help alleviate the high cost of resources.

We have developed innovative technologies like EasySite and Mini OLT to reduce the cost of network rollout.

We offer solutions such as wireless-to-the-x (WTTx) to help rapidly roll out home broadband networks.

We have helped operators develop video and other services to increase their average revenue per user.

And, we share global best practices and experience with operators to help them upskill, accelerate their delivery of services, and cut their O&M costs. In some cases, the payback period for new network investments has shortened from nine years to around four years.

We estimate that emerging markets will add 2 billion new mobile Internet connections and 500 million new home broadband users by 2025.

8. "Platform + Ecosystem" Strategy: Helping Enterprise Customers Go Digital

In the enterprise market, Huawei is positioned to enable digital transformation and become the best possible partner. We will help our customers transform and succeed.

We follow a "platform + ecosystem" strategy. We are building a platform for synergy all the way from the cloud, through the data pipes of telecom networks, to the user's own devices: cloud-pipe-device synergy. We are working with industry partners to establish healthy, open, collaborative ecosystems for shared success.

To drive this strategy, we plan to invest US$200 million in building another 15 OpenLabs over the next three years, bringing the total number of global OpenLabs to 20.

Let's look at an IoT success story. Schindler is the second largest manufacturer of escalators and elevators in the world. It has millions of escalators and elevators in operation worldwide. Through the Internet of Elevators & Escalators project between Huawei and Schindler, operational data from escalators and elevators is transmitted to a monitoring center in real time, enabling big data analytics and preventive maintenance. Escalator and elevator safety has been significantly enhanced, and unnecessary labor costs has been slashed.

9. Building a New Digital Ecosystem with Industry Alliances

We are building new digital ecosystems with industry alliances. We will continue to expand our efforts to develop and invest in industry alliances, business alliances, open source communities, and developer platforms, for shared success across the ecosystem.

As a member of the Steering Committee of the Industrial Internet Consortium (IIC), Huawei is working to make the IIC a global industry platform. We work with industry partners to build testbed projects and leverage cutting-edge ICT technologies like LTE-U, edge computing, slicing, and PLC-IoT. Through these efforts, we are encouraging the development of open architectures and open standards for each industry and helping to coordinate across different industries. In this way, we can collaborate and share success with our industry alliance partners.

10. The Path to New Growth: Enabling Digital Industry

Ladies and gentlemen, this is the best of times. Before us we see unprecedented technological innovation, unprecedented business innovation, and unprecedented industry innovation. Looking to the future, Huawei will continue to create value for our customers; to work with our partners in other industries; to enable the digital transformation of industries; and to help our customers embark on the path to new growth!

Thank you!