2005 Huawei

HUAWEI TECHNOLOGIES CO., LTD.

Annual Report 2005 To enrich life through communication

www.huawei.com

Annual Report 2005

HUAWEI TECHNOLOGIES CO., LTD. Huawei Industrial Base Bantian Longgang Shenzhen 518129, P.R. China

Contents

About Huawei Technologies Huawei Technologies is a leader in providing next generation

2

Financial Highlights

3

The Year

5

Message from the Company

and customized products, services and solutions to create

8

Vision, Mission and Strategy

long-term value and potential growth for

9

2005 Driving Forces

its customers. Huawei’s products and

17

Performance in Business Wireless Network: quickly becoming a world leading supplier Fixed Network: leading network transformation Optical Network: a leading global supplier Data Communications: leading in carrier-class IP network Application & Software: exploring new models for the future Wireless Terminals: building an end-to-end solution

24

Looking Forward

29

Corporate Citizenship

telecommunications network solutions for operators around the world. The company is dedicated to providing innovative

solutions are deployed in over 100 countries and serve 28 of the world’s top 50 operators, as well as over one billion users worldwide.

Contents

About Huawei Technologies

2

Financial Highlights

3

The Year

5

Message from the Company

8

Vision, Mission and Strategy

and customized products, services and solutions to create

9

2005 Driving Forces

long-term value and potential growth for

17

Performance in Business

its customers. Huawei’s products and

Wireless Network: quickly becoming a world leading supplier Fixed Network: leading network transformation Optical Network: a leading global supplier Data Communications: leading in carrier-class IP network Application & Software: exploring new models for the future Wireless Terminals: building an end-to-end solution 24

Looking Forward

29

Corporate Citizenship

30

Financial Report

Huawei Technologies is a leader in providing next generation telecommunications network solutions for operators around the world. The company is dedicated to providing innovative

solutions are deployed in over 100 countries and serve 28 of the world’s top 50 operators, as well as over one billion users worldwide.

Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

Financial Highlights Huawei Technologies Corporation and Subsidiary Companies

USD in millions

Year Ended December 31

2005

2004

2003

2002

2001(*)

Revenue

5,982

3,827

2,694

2,128

2,290

Net Income

681

624

384

108

258

Cash Flow From Operations

708

396

385

311

204

Operating Profit Margin

14%

18%

19%

10%

17%

Return on Net Assets

30%

31%

23%

7%

20%

Note: (*) Excluding discontinuing operations.

Unit: USD’000,000

Unit: USD’000,000

Unit: USD’000,000

800

7,000 5,982

6,000

800

700

681 624

CAGR:27%

CAGR:28%

600

5,000

500

3,827

400

1

Huawei Technologies

Annual Report 2005

258

NET INCOME (USD in millions)

100 0

2005

2005

2004

2003

2002

0

108

2001

2005

2004

2003

2002

2001

100

204

2004

200

2003

2,128

200

REVENUE (USD in millions)

396

300

2002

300

2,000

0

385 311

2,694 2,290

400

384

2001

3,000

1,000

CAGR:36%

600

500 4,000

708

700

CASH FLOW FROM OPERATIONS (USD in millions)

Huawei Technologies

Annual Report 2005

2

Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

Financial Highlights Huawei Technologies Corporation and Subsidiary Companies

USD in millions

Year Ended December 31

2005

2004

2003

2002

2001(*)

Revenue

5,982

3,827

2,694

2,128

2,290

Net Income

681

624

384

108

258

Cash Flow From Operations

708

396

385

311

204

Operating Profit Margin

14%

18%

19%

10%

17%

Return on Net Assets

30%

31%

23%

7%

20%

Note: (*) Excluding discontinuing operations.

Unit: USD’000,000

Unit: USD’000,000

Unit: USD’000,000

800

7,000 5,982

6,000

800

700

681 624

CAGR:27%

CAGR:28%

600

5,000

500

3,827

400

1

Huawei Technologies

Annual Report 2005

258

NET INCOME (USD in millions)

100 0

2005

2005

2004

2003

2002

0

108

2001

2005

2004

2003

2002

2001

100

204

2004

200

2003

2,128

200

REVENUE (USD in millions)

396

300

2002

300

2,000

0

385 311

2,694 2,290

400

384

2001

3,000

1,000

CAGR:36%

600

500 4,000

708

700

CASH FLOW FROM OPERATIONS (USD in millions)

Huawei Technologies

Annual Report 2005

2

Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

The Year Jan

supporting the new WiMAX / IEEE 802.16 standards and specifications.

On January 27, CAT Telecom Public Company Limited, one of the two largest state-owned telecom carriers in Thailand, awarded Huawei a contract worth US$187 million to expand its nationwide CDMA 2000 3G network.

Feb

On February 9, the eve of China’s Spring Festival, the softswitch network that Huawei constructed for China Mobile successfully handled peak traffic of more than three times its usual traffic and delivered communications for 200 million users, proving its stability, quality, and reliability.

On April 29, MTN and Huawei signed an equipment purchasing and service provisioning framework contract. MTN will purchase Huawei’s mobile communications equipment, SDH products and services for the entire southern African region.

May

On May 16, Huawei established its UK training center to provide overall training services across Europe, together with its existing training centers in France, Romania and Germany. Huawei now has training centers in all of its global regions.

On June 9, the UMTS 3G network built by Huawei Technologies for SUNDAY of Hong Kong was put into commercial application. The network consists of more than 1300 base stations covering the entire Hong Kong region. On June 15, Huawei was selected by Frost & Sullivan as 'Wireless Infrastructure Vendor of the Year 2005', 'NGN Infrastructure Vendor of the Year 2005', and 'Optical Vendor of the Year 2005', for its outstanding performance in the telecommunications and broadband industry in the Asia Pacific market. On June 18, Huawei ranked in the top five with 5% of the total number of UMTS Essential Patents, according to ETSI statistics.

At the 24th 3GPP GERAN conference held in Ireland in May, four proposals submitted by Huawei and three other members (Siemens, Sagem, and the Standard Institute of MII) related to GSM trunking were accepted without objection.

Jun Apr

On April 19, Huawei Technologies and Intel announced that they would cooperate in building carrier-class wireless broadband networks

3

Huawei Technologies

Annual Report 2005

On June 9, Huawei University was formally registered to focus on technical, management and cultural training for customers, Huawei management executives and employees worldwide.

enabled Huawei to become the major supplier for KPN in the optical market.

the InfoVision Awards Ceremony at the Broadband World Forum Europe (BBWF) in Madrid, Spain.

Jul

On October 18, Huawei launched its leading 40Gbps per wavelength DWDM transmission system for global telecom carriers. The new system allows operators to transmit large-capacity and long-haul DWDM signals securely and flexibly.

On July 1, Huawei Technologies was awarded 'Honorary Investment Advisor' at the Thailand-China Investment Seminar held in Beijing, for its continuous investment in Thailand.

Aug

On August 22, Huawei won China Mobile’s CNGI project to build the world’s largest IPv6 commercial network. On August 24, China Telecom, Zhejiang announced that Huawei Technologies was chosen for its switching network intelligence project for the entire province. The project is the largest of its kind in China to establish network intelligence using softswitch.

Oct On June 24, Royal KPN signed a commercial contract with Huawei for a CWDM/DWDM project, which included access layer CWDM covering the whole of the Netherlands and the national backbone DWDM. The success of this project

On October 4, Huawei’s MSAN HONET UA5000 won the InfoVision Award 2005 in honor of its innovative contribution to progress in the information industry, which was presented by the International Engineering Consortium (IEC) during

On October 19, Huawei opened its first inTouch Lab Experience Center dedicated to creating a dynamic marketplace of services and applications for telecom operators. In addition, Huawei developed the Huawei inTouch Lab Partnership Plan. At the PT/EXPO COMM China 2005 in Beijing, Huawei launched its end-to-end HSDPA commercial solution.

Nov

On November 10, the second largest fixed network operator in Germany, Arcor, chose Huawei to build its next generation SDH transmission network.

On November 14, Huawei signed a Strategic Partnership Agreement with Telefonica for 3G and broadband innovations. The two parties will also develop the Latin American market together. On November 21, Huawei signed a Global Framework Agreement with Vodafone and became an Approved Supplier for Vodafone’s Global Supply Chain.

Dec

On December 22, Huawei signed a contract with British Telecom (BT) for the deployment of its multi-service access network (MSAN) and transmission equipment for BT’s 21CN network. On December 29, Huawei won one million ADSL lines in China Telecom’s 2006 framework contract with its leading SmartAX MA5600, DSLAM equipment based on the full GE architecture. On December 29, Huawei signed a Strategic Partnership Agreement with Sonaecom in Portugal. Huawei was chosen as Sonaecom’s strategic partner in wireless network, fixed network, optical transmission and value-added services and applications. Together, the two parties will develop the Portuguese telecoms market.

Huawei Technologies

Annual Report 2005

4

Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

The Year Jan

supporting the new WiMAX / IEEE 802.16 standards and specifications.

On January 27, CAT Telecom Public Company Limited, one of the two largest state-owned telecom carriers in Thailand, awarded Huawei a contract worth US$187 million to expand its nationwide CDMA 2000 3G network.

Feb

On February 9, the eve of China’s Spring Festival, the softswitch network that Huawei constructed for China Mobile successfully handled peak traffic of more than three times its usual traffic and delivered communications for 200 million users, proving its stability, quality, and reliability.

On April 29, MTN and Huawei signed an equipment purchasing and service provisioning framework contract. MTN will purchase Huawei’s mobile communications equipment, SDH products and services for the entire southern African region.

May

On May 16, Huawei established its UK training center to provide overall training services across Europe, together with its existing training centers in France, Romania and Germany. Huawei now has training centers in all of its global regions.

On June 9, the UMTS 3G network built by Huawei Technologies for SUNDAY of Hong Kong was put into commercial application. The network consists of more than 1300 base stations covering the entire Hong Kong region. On June 15, Huawei was selected by Frost & Sullivan as 'Wireless Infrastructure Vendor of the Year 2005', 'NGN Infrastructure Vendor of the Year 2005', and 'Optical Vendor of the Year 2005', for its outstanding performance in the telecommunications and broadband industry in the Asia Pacific market. On June 18, Huawei ranked in the top five with 5% of the total number of UMTS Essential Patents, according to ETSI statistics.

At the 24th 3GPP GERAN conference held in Ireland in May, four proposals submitted by Huawei and three other members (Siemens, Sagem, and the Standard Institute of MII) related to GSM trunking were accepted without objection.

Jun Apr

On April 19, Huawei Technologies and Intel announced that they would cooperate in building carrier-class wireless broadband networks

3

Huawei Technologies

Annual Report 2005

On June 9, Huawei University was formally registered to focus on technical, management and cultural training for customers, Huawei management executives and employees worldwide.

enabled Huawei to become the major supplier for KPN in the optical market.

the InfoVision Awards Ceremony at the Broadband World Forum Europe (BBWF) in Madrid, Spain.

Jul

On October 18, Huawei launched its leading 40Gbps per wavelength DWDM transmission system for global telecom carriers. The new system allows operators to transmit large-capacity and long-haul DWDM signals securely and flexibly.

On July 1, Huawei Technologies was awarded 'Honorary Investment Advisor' at the Thailand-China Investment Seminar held in Beijing, for its continuous investment in Thailand.

Aug

On August 22, Huawei won China Mobile’s CNGI project to build the world’s largest IPv6 commercial network. On August 24, China Telecom, Zhejiang announced that Huawei Technologies was chosen for its switching network intelligence project for the entire province. The project is the largest of its kind in China to establish network intelligence using softswitch.

Oct On June 24, Royal KPN signed a commercial contract with Huawei for a CWDM/DWDM project, which included access layer CWDM covering the whole of the Netherlands and the national backbone DWDM. The success of this project

On October 4, Huawei’s MSAN HONET UA5000 won the InfoVision Award 2005 in honor of its innovative contribution to progress in the information industry, which was presented by the International Engineering Consortium (IEC) during

On October 19, Huawei opened its first inTouch Lab Experience Center dedicated to creating a dynamic marketplace of services and applications for telecom operators. In addition, Huawei developed the Huawei inTouch Lab Partnership Plan. At the PT/EXPO COMM China 2005 in Beijing, Huawei launched its end-to-end HSDPA commercial solution.

Nov

On November 10, the second largest fixed network operator in Germany, Arcor, chose Huawei to build its next generation SDH transmission network.

On November 14, Huawei signed a Strategic Partnership Agreement with Telefonica for 3G and broadband innovations. The two parties will also develop the Latin American market together. On November 21, Huawei signed a Global Framework Agreement with Vodafone and became an Approved Supplier for Vodafone’s Global Supply Chain.

Dec

On December 22, Huawei signed a contract with British Telecom (BT) for the deployment of its multi-service access network (MSAN) and transmission equipment for BT’s 21CN network. On December 29, Huawei won one million ADSL lines in China Telecom’s 2006 framework contract with its leading SmartAX MA5600, DSLAM equipment based on the full GE architecture. On December 29, Huawei signed a Strategic Partnership Agreement with Sonaecom in Portugal. Huawei was chosen as Sonaecom’s strategic partner in wireless network, fixed network, optical transmission and value-added services and applications. Together, the two parties will develop the Portuguese telecoms market.

Huawei Technologies

Annual Report 2005

4

Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

For the first time, sales from international markets

Message from the Company

represented the majority of our contract sales, accounting for US$4.8 billion, or 58% of our total sales.

Dear customers, partners and peers, Through the hard work of our employees worldwide, Huawei‘s contract sales reached US$8.2 billion in 2005, a 47% year on year increase. 2005 also marked the first year that Huawei’s international sales exceeded domestic sales, comprising 58% (US$4.8 billion) of our total contract sales. As a result, the international market is becoming increasingly important to us, giving more balance to the company’s revenue distribution. Huawei is now a major global mobile equipment provider, with the proportion of revenue from our mobile product line steadily on the rise.

coexistence and jointly create maximum value for our customers.

By the end of 2005, Huawei’s products and solutions had been deployed in over 100 countries with 28 of the world’s top 50 operators choosing Huawei as their partner. Moreover, Huawei’s products and solutions now serve more than one billion users around the world. Huawei has also successfully passed strict authentication procedures from leading operators including BT, Vodafone and FT, winning their recognition and in turn demonstrating that Huawei’s corporate governance is on a par with international best practices. For the progress that Huawei has made so far, we would like to extend our sincere gratitude for your support throughout our development.

In the midst of convergence and transformation, the global telecoms industry is faced with great challenges and opportunities. We will continue to innovate in order to support network transformation and offer competitive services to our customers. In addition, we will be increasingly focused on our customers and globalization efforts, maintaining our sustainable development and accumulating our expertise. By growing together with our customers and partners, we hope to create a harmonious business environment.

When Huawei was established 18 years ago, we had minimal technology, talent and resources to leverage on. But we had a belief. Our belief in always putting our customers first with an emphasis on continuous innovation has kept our growth on the fast track. Undeterred by the difficulties and challenges that we encountered along the way, we persevered and increasingly won the trust of customers and partners around the world. In 1996, we embarked on our globalization strategy. Despite encountering many challenges and setbacks, we were determined to succeed in our global efforts. After ten years of hard work and perseverance, our efforts have paid off with breakthrough achievements. Throughout our international expansion, we have continued refining processes within our company by cooperating with top consultancies to introduce best practices guided by customer demand. By learning from the West with an open mind, we try to build a future-oriented, win-win business model that is based on the oriental wisdom of “harmony with diversity” to nurture harmonious

Given our achievements and progress thus far, we feel a greater sense of obligation toward our customers. We will embrace the challenges ahead in order to meet our customers’ expectations and strengthen our relationships with them. Huawei will also continue to develop and improve, while sustaining the operation of our customers’ existing networks and ensuring their evolution.

In 2006, Huawei will continue to innovate and invest, focusing on ALL IP and FMC solutions. We will also carry on with management transformation to establish process-driven structures, refine our marketing system to better meet customers’ requirements and improve our service network while upgrading our service capabilities to provide our customers with quality delivery of products and solutions. We firmly believe that serving our customers is the only reason Huawei exists. Customer demand is the fundamental driving force of our development. Together with our customers, we will embrace the future with an unwavering spirit of hard work. Through our quality products and services, we aim to continuously create long-term value for you and enrich people’s life through communication.

Executive Management Team Huawei Technologies Co., Ltd.

Research & Development Centre, Huawei Industrial Base, Shenzhen 5

Huawei Technologies

Annual Report 2005

Huawei Technologies

Annual Report 2005

6

Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

For the first time, sales from international markets

Message from the Company

represented the majority of our contract sales, accounting for US$4.8 billion, or 58% of our total sales.

Dear customers, partners and peers, Through the hard work of our employees worldwide, Huawei‘s contract sales reached US$8.2 billion in 2005, a 47% year on year increase. 2005 also marked the first year that Huawei’s international sales exceeded domestic sales, comprising 58% (US$4.8 billion) of our total contract sales. As a result, the international market is becoming increasingly important to us, giving more balance to the company’s revenue distribution. Huawei is now a major global mobile equipment provider, with the proportion of revenue from our mobile product line steadily on the rise.

coexistence and jointly create maximum value for our customers.

By the end of 2005, Huawei’s products and solutions had been deployed in over 100 countries with 28 of the world’s top 50 operators choosing Huawei as their partner. Moreover, Huawei’s products and solutions now serve more than one billion users around the world. Huawei has also successfully passed strict authentication procedures from leading operators including BT, Vodafone and FT, winning their recognition and in turn demonstrating that Huawei’s corporate governance is on a par with international best practices. For the progress that Huawei has made so far, we would like to extend our sincere gratitude for your support throughout our development.

In the midst of convergence and transformation, the global telecoms industry is faced with great challenges and opportunities. We will continue to innovate in order to support network transformation and offer competitive services to our customers. In addition, we will be increasingly focused on our customers and globalization efforts, maintaining our sustainable development and accumulating our expertise. By growing together with our customers and partners, we hope to create a harmonious business environment.

When Huawei was established 18 years ago, we had minimal technology, talent and resources to leverage on. But we had a belief. Our belief in always putting our customers first with an emphasis on continuous innovation has kept our growth on the fast track. Undeterred by the difficulties and challenges that we encountered along the way, we persevered and increasingly won the trust of customers and partners around the world. In 1996, we embarked on our globalization strategy. Despite encountering many challenges and setbacks, we were determined to succeed in our global efforts. After ten years of hard work and perseverance, our efforts have paid off with breakthrough achievements. Throughout our international expansion, we have continued refining processes within our company by cooperating with top consultancies to introduce best practices guided by customer demand. By learning from the West with an open mind, we try to build a future-oriented, win-win business model that is based on the oriental wisdom of “harmony with diversity” to nurture harmonious

Given our achievements and progress thus far, we feel a greater sense of obligation toward our customers. We will embrace the challenges ahead in order to meet our customers’ expectations and strengthen our relationships with them. Huawei will also continue to develop and improve, while sustaining the operation of our customers’ existing networks and ensuring their evolution.

In 2006, Huawei will continue to innovate and invest, focusing on ALL IP and FMC solutions. We will also carry on with management transformation to establish process-driven structures, refine our marketing system to better meet customers’ requirements and improve our service network while upgrading our service capabilities to provide our customers with quality delivery of products and solutions. We firmly believe that serving our customers is the only reason Huawei exists. Customer demand is the fundamental driving force of our development. Together with our customers, we will embrace the future with an unwavering spirit of hard work. Through our quality products and services, we aim to continuously create long-term value for you and enrich people’s life through communication.

Executive Management Team Huawei Technologies Co., Ltd.

Research & Development Centre, Huawei Industrial Base, Shenzhen 5

Huawei Technologies

Annual Report 2005

Huawei Technologies

Annual Report 2005

6

Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

Vision

• To enrich life through communication

Mission

• To focus on our customers’ challenges and needs by providing excellent communications network solutions and services in order to consistently create maximum value for customers.

Strategy Customer Focus • The radiating shapes of our logo are focused toward the center of the icon, indicating Huawei's customer-centric strategy and commitment to creating long-term value for our customers.

7

Steady and Sustainable Growth • A confident and optimistic symbol, the new logo conveys a sense of maturity and steadiness in a professional and international manner.

Innovation

Harmony

• Vivacious and contemporary, the new logo indicates that Huawei will continue to provide innovative, customized and competitive products and solutions for our customers with an enterprising spirit, and jointly face the challenges and opportunities in the future together with our customers.

• Adopting a graduated tone while keeping symmetrical, the new logo looks more natural and compatible, and acts as a metaphor for Huawei’s open-minded attitude and partnership strategy, indicating that Huawei will maintain a healthy growth by creating a harmonious business environment.

Huawei Technologies

Annual Report 2005

• Serving our customers is the only reason Huawei exists; Customer demand is the fundamental driving force of our development • High quality, excellent service, low operating costs, and giving top priority to meeting customer requirements to enhance their competitiveness and profitability • Continuously performing management transformation to realize efficient process-based organization operation for ensuring high quality end-to-end delivery • Developing with our peers in the industry as both competitors and partners to jointly create a favorable environment and share the benefits of the value chain

Huawei Technologies

Annual Report 2005

8

Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

Vision

• To enrich life through communication

Mission

• To focus on our customers’ challenges and needs by providing excellent communications network solutions and services in order to consistently create maximum value for customers.

Strategy Customer Focus • The radiating shapes of our logo are focused toward the center of the icon, indicating Huawei's customer-centric strategy and commitment to creating long-term value for our customers.

7

Steady and Sustainable Growth • A confident and optimistic symbol, the new logo conveys a sense of maturity and steadiness in a professional and international manner.

Innovation

Harmony

• Vivacious and contemporary, the new logo indicates that Huawei will continue to provide innovative, customized and competitive products and solutions for our customers with an enterprising spirit, and jointly face the challenges and opportunities in the future together with our customers.

• Adopting a graduated tone while keeping symmetrical, the new logo looks more natural and compatible, and acts as a metaphor for Huawei’s open-minded attitude and partnership strategy, indicating that Huawei will maintain a healthy growth by creating a harmonious business environment.

Huawei Technologies

Annual Report 2005

• Serving our customers is the only reason Huawei exists; Customer demand is the fundamental driving force of our development • High quality, excellent service, low operating costs, and giving top priority to meeting customer requirements to enhance their competitiveness and profitability • Continuously performing management transformation to realize efficient process-based organization operation for ensuring high quality end-to-end delivery • Developing with our peers in the industry as both competitors and partners to jointly create a favorable environment and share the benefits of the value chain

Huawei Technologies

Annual Report 2005

8

Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

• Customer Focus

2005 Driving Forces

• Continuous Innovation • Management Transformation • Partnership

Customer Focus Serving our customers is the only reason Huawei exists. Customer demand is the fundamental driving force of our development. Huawei focuses on our customers’ challenges and needs by providing competitive communications network solutions and services in order to consistently create maximum value for our customers. In 2005, we reinforced our strategy and marketing system to enhance its ability to guide Huawei’s overall development. We established process-based, systematic management systems that allow us to gain deeper insight into customers’ requirements. Our marketing framework has been extended to our regional offices, enabling us to have more training capabilities, which gives us differentiated service interaction with the strategy & planning, R&D and procurement advantages. Huawei has already established 72 technical departments of support platforms our customers in and 85 countryWe emphasize a culture of sincerity and customer level spare parts order for us to understand their orientation, working closely with customers to centers worldwide, needs more precisely providing our realize long-term mutual gains, striving to meet and rapidly. This customers with is done with the customer needs and achieve market development. round-the-clock help of processes service while strictly such as IPD complying with (Integrated Product Development), MM (Marketing customers’ service level agreements (SLA) to successfully Management), OR (Offering Requirement) and CCM fulfill the diverse and specific needs of our customers. (Customer Commitment Management). By integrating Support systems including logistics, procurement, and customer requirements into our product development and finance are also being adopted rapidly by our regional business roadmap planning, Huawei is able to help offices in order to provide better service to our customers. customers swiftly roll out new products and services. We fully understand that our relationship with our Huawei has established an inclusive sales and service customers is not merely contractual in nature. Rather, our system which includes 8 regional headquarters, 85 branch customers need complete end-to-end services, consulting offices worldwide, and a three-tier service system services in particular. Huawei has already formed our own (headquarters, regional & local). This comprehensive marketing management consulting team which provides system allows us to deliver stronger technical support and services including business consultation, network services. We also have a dedicated and professional planning, solutions, special maintenance, management of service team committed to providing quality service. In daily operations, database design and management, and addition, we have set up an excellent integrated service joint marketing. Furthermore, we research OPEX and platform armed with professional maintenance and develop corresponding solutions to enable customers to reduce their OPEX. 9

Huawei Technologies

Annual Report 2005

At Huawei, we strongly believe in being customer oriented and ensuring a service culture of integrity. We work closely with and continuously strive to satisfy our customers, and support our market development in order to achieve long-term mutual gains. By constantly stressing our belief that “serving our customers is the only reason Huawei exists,” we encourage our employees to provide excellent customer service. By creating an evaluation system that includes a positive incentive system and takes into consideration our employees’ responsibilities and achievements, we aim to achieve goals that are in line with our customers’ requirements. Through a series of process-based organizational frameworks and standardized operations, Huawei takes every measure to guarantee customer satisfaction, thereby creating a customer-focused and highly-efficient professional culture which strengthens our core competitive edge. Huawei achieved a breakthrough in terms of our international business in 2005, with international sales occupying 58% of our total contract sales. We successfully passed strict and thorough authentication procedures from top-tier operators such as BT (British Telecom), Vodafone, Italia Telecom, Royal KPN, and Telefonica, enabling us to become their partners in both European and global markets. Our products and solutions have been commercially deployed in over 100 countries, and serve 28 of the world’s top 50 operators, as well as over one billion subscribers worldwide. Huawei has also made great progress in our localization endeavors, and our local employees are a strong driving force of Huawei’s service culture. Out of over 10,000 overseas Huawei employees, more than 60% were recruited locally. Through a variety of training programs and cross-cultural exchanges, Huawei helps our local employees understand and adapt to our customer-centric corporate culture. The company also provides local employees with favorable career development paths, with

some of them already in upper-management level positions, supervising local branch offices and areas such as sales and services. As a result of these efforts, our products and solutions have achieved wide success in international markets, for example: • 19 UMTS commercial networks had been deployed by the end of 2005 • Huawei is the No.1 NGN provider in the global VoIP market with 29.3% of market share in terms of port shipments (Dittberner, 3Q05) • No.2 in the global DSLAM market with 16.9% of market share, and No.1 in the global IP DSLAM market with 32% market share (Infonetics, 3Q05) • No.1 provider in MSAN with 32.3% of market share in terms of port shipments (Infonetics, 3Q05) • No.2 in the global optical network market with 10.3% of market share (Ovum-RHK, 4Q04-3Q05) • No.1 in the global long-haul DWDM market with 15.9% of market share (Ovum-RHK, 4Q04-3Q05) • No.3 in the global carrier-router market (Gartner, 2Q05) • No.1 in terms of the number of users of intelligent network products with 21.6% of market share (Ovum-RHK)

Huawei Technologies

Annual Report 2005

10

Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

• Customer Focus

2005 Driving Forces

• Continuous Innovation • Management Transformation • Partnership

Customer Focus Serving our customers is the only reason Huawei exists. Customer demand is the fundamental driving force of our development. Huawei focuses on our customers’ challenges and needs by providing competitive communications network solutions and services in order to consistently create maximum value for our customers. In 2005, we reinforced our strategy and marketing system to enhance its ability to guide Huawei’s overall development. We established process-based, systematic management systems that allow us to gain deeper insight into customers’ requirements. Our marketing framework has been extended to our regional offices, enabling us to have more training capabilities, which gives us differentiated service interaction with the strategy & planning, R&D and procurement advantages. Huawei has already established 72 technical departments of support platforms our customers in and 85 countryWe emphasize a culture of sincerity and customer level spare parts order for us to understand their orientation, working closely with customers to centers worldwide, needs more precisely providing our realize long-term mutual gains, striving to meet and rapidly. This customers with is done with the customer needs and achieve market development. round-the-clock help of processes service while strictly such as IPD complying with (Integrated Product Development), MM (Marketing customers’ service level agreements (SLA) to successfully Management), OR (Offering Requirement) and CCM fulfill the diverse and specific needs of our customers. (Customer Commitment Management). By integrating Support systems including logistics, procurement, and customer requirements into our product development and finance are also being adopted rapidly by our regional business roadmap planning, Huawei is able to help offices in order to provide better service to our customers. customers swiftly roll out new products and services. We fully understand that our relationship with our Huawei has established an inclusive sales and service customers is not merely contractual in nature. Rather, our system which includes 8 regional headquarters, 85 branch customers need complete end-to-end services, consulting offices worldwide, and a three-tier service system services in particular. Huawei has already formed our own (headquarters, regional & local). This comprehensive marketing management consulting team which provides system allows us to deliver stronger technical support and services including business consultation, network services. We also have a dedicated and professional planning, solutions, special maintenance, management of service team committed to providing quality service. In daily operations, database design and management, and addition, we have set up an excellent integrated service joint marketing. Furthermore, we research OPEX and platform armed with professional maintenance and develop corresponding solutions to enable customers to reduce their OPEX. 9

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Annual Report 2005

At Huawei, we strongly believe in being customer oriented and ensuring a service culture of integrity. We work closely with and continuously strive to satisfy our customers, and support our market development in order to achieve long-term mutual gains. By constantly stressing our belief that “serving our customers is the only reason Huawei exists,” we encourage our employees to provide excellent customer service. By creating an evaluation system that includes a positive incentive system and takes into consideration our employees’ responsibilities and achievements, we aim to achieve goals that are in line with our customers’ requirements. Through a series of process-based organizational frameworks and standardized operations, Huawei takes every measure to guarantee customer satisfaction, thereby creating a customer-focused and highly-efficient professional culture which strengthens our core competitive edge. Huawei achieved a breakthrough in terms of our international business in 2005, with international sales occupying 58% of our total contract sales. We successfully passed strict and thorough authentication procedures from top-tier operators such as BT (British Telecom), Vodafone, Italia Telecom, Royal KPN, and Telefonica, enabling us to become their partners in both European and global markets. Our products and solutions have been commercially deployed in over 100 countries, and serve 28 of the world’s top 50 operators, as well as over one billion subscribers worldwide. Huawei has also made great progress in our localization endeavors, and our local employees are a strong driving force of Huawei’s service culture. Out of over 10,000 overseas Huawei employees, more than 60% were recruited locally. Through a variety of training programs and cross-cultural exchanges, Huawei helps our local employees understand and adapt to our customer-centric corporate culture. The company also provides local employees with favorable career development paths, with

some of them already in upper-management level positions, supervising local branch offices and areas such as sales and services. As a result of these efforts, our products and solutions have achieved wide success in international markets, for example: • 19 UMTS commercial networks had been deployed by the end of 2005 • Huawei is the No.1 NGN provider in the global VoIP market with 29.3% of market share in terms of port shipments (Dittberner, 3Q05) • No.2 in the global DSLAM market with 16.9% of market share, and No.1 in the global IP DSLAM market with 32% market share (Infonetics, 3Q05) • No.1 provider in MSAN with 32.3% of market share in terms of port shipments (Infonetics, 3Q05) • No.2 in the global optical network market with 10.3% of market share (Ovum-RHK, 4Q04-3Q05) • No.1 in the global long-haul DWDM market with 15.9% of market share (Ovum-RHK, 4Q04-3Q05) • No.3 in the global carrier-router market (Gartner, 2Q05) • No.1 in terms of the number of users of intelligent network products with 21.6% of market share (Ovum-RHK)

Huawei Technologies

Annual Report 2005

10

Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

• Customer Focus

2005 Driving Forces

• Continuous Innovation • Management Transformation • Partnership

Continuous Innovation Not only do customers need products and technology, but more importantly, they need solutions that can bring them success in their business. Huawei has already made the transition from being technology-oriented to being driven by customer requirements, from solely providing products to offering complete end-to-end solutions, allowing the development of our products to be driven by our customers’ success. team, we are able to make our international R&D strategy We continuously work towards improving our ability to a reality. In fact, our R&D institutes in Bangalore, Nanjing, innovate based on our customers’ needs. Huawei has Shenzhen and Shanghai have all achieved CMM-level 5 been investing a minimum of 10% of our annual revenue certification, demonstrating that Huawei’s software into R&D, with 10% of that investment used for management and quality control have already reached the pre-research to stay at the forefront of new technologies highest level in the industry. and breakthroughs. At present, Huawei By the end of We have a global R&D strategy. Huawei has set up 2005, Huawei had has already successfully rolled out research institutes in Stockholm in Sweden, filed over 11,000 products and Bangalore in India, Dallas and the Silicon Valley in patent applications, solutions in areas 1,844 of which the USA and Moscow in Russia, as well as had been approved. including FMC, IMS, WiMAX and In 2005, Huawei China-based institutes. IPTV. applied for over In addition, we have re-structured the organizational framework of our product line, in anticipation of future network convergence and industry transformation. Huawei provides complete end-to-end solutions in areas including the service and application layer, core layer, bearer layer, access layer, and terminals, thereby offering our customers distinct advantages to face network convergence. Furthermore, Huawei has a global R&D strategy. We have set up research institutes in Stockholm in Sweden, Bangalore in India, Dallas and the Silicon Valley in the USA and Moscow in Russia, as well as China-based institutes in Shenzhen, Shanghai, Beijing, Nanjing, Xi’an, Chengdu, and Wuhan. Through the cooperation of our multicultural 11

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Annual Report 2005

hold leading positions in areas such as mobile softswitch, UMTS, super-long-haul DWDM, MSTP, NGN, MSAN, IP telecom network, IP DSLAM, intelligent network and signaling network. Huawei has also become one of the leading providers in CDMA, 3G terminals, intelligent optical network ASON, core routers and switching. In addition, we have invested heavily in the development of our ASIC chips. At present, we have developed over 100 types of ASIC chips including UMTS baseband and HSDPA chips, optical network chips, router chips, and broadband access chips, greatly improving the system’s capabilities and thus enabling us to offer unique advantages at a lower cost. Huawei has formed numerous partnerships with leading companies, and cooperates with them on the foundation of our self-developed technologies. We work closely with leading multinationals such as TI, Motorola, IBM, Intel, Agere, ADI, Altera, SUN, Microsoft, Oracle and HP to improve the time to market of our products, and to incorporate the latest technologies and best management practices into our company. We are introducing the world’s best R&D management models into our company and strengthening the support

of our broad and shared platforms. Through the Marketing-PMT-IPMT-IRB framework, Huawei changed our product development and planning process, and gradually solved challenges involving the effectiveness of decision-making. Using CBB (a hardware and software sharing module), we established a technology sharing system that comprises various layers such as system design, platform, modules and components. With the experience gained from eight years of CMM implementation, we established a large and sophisticated software engineering management system. Meanwhile, we also introduced the fundamental ideas of CMM into our hardware quality management system. Most of our software development research institutes have already passed CMM level-5 certification. Huawei also promotes standardized, component-based and platform-specific management in our research and development, and simplified the structure of our systems and organizational framework to prevent the leakage of technology. With an asynchronous development method, we coordinate development progress at various levels, manage the time-to-market of our products and speed up our response time to market demands. Data Centre, Huawei Industrial Base, Shenzhen

3,600 patents. By the end of 2005, we had applied for over 3,000 UMTS patents and held 5% (69 patents) of the world’s UMTS essential patents, ranking amongst the top five in the world. Huawei actively participates in over 70 international standardization organizations including ITU, 3GPP, 3GPP2, IEEE, IETF, ETSI, OMA, TMF, FSAN and DSLF, and contributed over 1,000 articles in 2005 alone. Meanwhile, Huawei’s representatives have been elected to positions in various organizations, including vice president of ITU-T SG11, president of ITU-R 8F Technology Group, vice president of 3GPP TSG SA2, vice president of OMA MCC as well as vice president of OMA GS. By focusing on key network technologies, Huawei has formed core technology systems for systems architecture, hardware, software and ASIC design. Also, we currently Huawei Technologies

Annual Report 2005

12

Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

• Customer Focus

2005 Driving Forces

• Continuous Innovation • Management Transformation • Partnership

Continuous Innovation Not only do customers need products and technology, but more importantly, they need solutions that can bring them success in their business. Huawei has already made the transition from being technology-oriented to being driven by customer requirements, from solely providing products to offering complete end-to-end solutions, allowing the development of our products to be driven by our customers’ success. team, we are able to make our international R&D strategy We continuously work towards improving our ability to a reality. In fact, our R&D institutes in Bangalore, Nanjing, innovate based on our customers’ needs. Huawei has Shenzhen and Shanghai have all achieved CMM-level 5 been investing a minimum of 10% of our annual revenue certification, demonstrating that Huawei’s software into R&D, with 10% of that investment used for management and quality control have already reached the pre-research to stay at the forefront of new technologies highest level in the industry. and breakthroughs. At present, Huawei By the end of We have a global R&D strategy. Huawei has set up 2005, Huawei had has already successfully rolled out research institutes in Stockholm in Sweden, filed over 11,000 products and Bangalore in India, Dallas and the Silicon Valley in patent applications, solutions in areas 1,844 of which the USA and Moscow in Russia, as well as had been approved. including FMC, IMS, WiMAX and In 2005, Huawei China-based institutes. IPTV. applied for over In addition, we have re-structured the organizational framework of our product line, in anticipation of future network convergence and industry transformation. Huawei provides complete end-to-end solutions in areas including the service and application layer, core layer, bearer layer, access layer, and terminals, thereby offering our customers distinct advantages to face network convergence. Furthermore, Huawei has a global R&D strategy. We have set up research institutes in Stockholm in Sweden, Bangalore in India, Dallas and the Silicon Valley in the USA and Moscow in Russia, as well as China-based institutes in Shenzhen, Shanghai, Beijing, Nanjing, Xi’an, Chengdu, and Wuhan. Through the cooperation of our multicultural 11

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Annual Report 2005

hold leading positions in areas such as mobile softswitch, UMTS, super-long-haul DWDM, MSTP, NGN, MSAN, IP telecom network, IP DSLAM, intelligent network and signaling network. Huawei has also become one of the leading providers in CDMA, 3G terminals, intelligent optical network ASON, core routers and switching. In addition, we have invested heavily in the development of our ASIC chips. At present, we have developed over 100 types of ASIC chips including UMTS baseband and HSDPA chips, optical network chips, router chips, and broadband access chips, greatly improving the system’s capabilities and thus enabling us to offer unique advantages at a lower cost. Huawei has formed numerous partnerships with leading companies, and cooperates with them on the foundation of our self-developed technologies. We work closely with leading multinationals such as TI, Motorola, IBM, Intel, Agere, ADI, Altera, SUN, Microsoft, Oracle and HP to improve the time to market of our products, and to incorporate the latest technologies and best management practices into our company. We are introducing the world’s best R&D management models into our company and strengthening the support

of our broad and shared platforms. Through the Marketing-PMT-IPMT-IRB framework, Huawei changed our product development and planning process, and gradually solved challenges involving the effectiveness of decision-making. Using CBB (a hardware and software sharing module), we established a technology sharing system that comprises various layers such as system design, platform, modules and components. With the experience gained from eight years of CMM implementation, we established a large and sophisticated software engineering management system. Meanwhile, we also introduced the fundamental ideas of CMM into our hardware quality management system. Most of our software development research institutes have already passed CMM level-5 certification. Huawei also promotes standardized, component-based and platform-specific management in our research and development, and simplified the structure of our systems and organizational framework to prevent the leakage of technology. With an asynchronous development method, we coordinate development progress at various levels, manage the time-to-market of our products and speed up our response time to market demands. Data Centre, Huawei Industrial Base, Shenzhen

3,600 patents. By the end of 2005, we had applied for over 3,000 UMTS patents and held 5% (69 patents) of the world’s UMTS essential patents, ranking amongst the top five in the world. Huawei actively participates in over 70 international standardization organizations including ITU, 3GPP, 3GPP2, IEEE, IETF, ETSI, OMA, TMF, FSAN and DSLF, and contributed over 1,000 articles in 2005 alone. Meanwhile, Huawei’s representatives have been elected to positions in various organizations, including vice president of ITU-T SG11, president of ITU-R 8F Technology Group, vice president of 3GPP TSG SA2, vice president of OMA MCC as well as vice president of OMA GS. By focusing on key network technologies, Huawei has formed core technology systems for systems architecture, hardware, software and ASIC design. Also, we currently Huawei Technologies

Annual Report 2005

12

Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

• Customer Focus

2005 Driving Forces

• Continuous Innovation • Management Transformation • Partnership

Management Transformation For years, Huawei has been working with leading consultancies such as IBM, the Hay Group, PwC and FhG to carry out management transformation in order to keep abreast with international industrial benchmarks. In terms of Integrated Product Development (IPD), Integrated Supply Chain (ISC), human resources management, financial management and quality control, we have undergone comprehensive transformation, introduced the industry’s best practices, and established IT-supported management platforms. continuous development of our business, it has also Through consistent implementation of management gained worldwide recognition from our global customers transformation, and partners, thereby we have gradually Through many years of development, we have gradually providing strong perfected our support for our perfected our operation and management processes in company’s global operation and management endeavors. accordance with international standards. processes. In addition, we have managed to strike a balance between our company’s size, Process Realignment business profitability, and cultivating our expertise. With the introduction of practical industry benchmarks that are implemented through processes such as Marketing Business Model Management (MM), Integrated Product Development In Huawei’s macro business model, product development (IPD), Integrated Supply Chain (ISC) and Customer is inspired by our customers’ needs, and the goal of Relationship Management (CRM), complemented by the management is to establish a process-based organization transformation of our financial management and human structure. We have worked with IBM, Hay Group, KPMG, resources management (Hay Group), we have completely PwC, FhG, Mercer and Gallup to implement the best industry transformed our business processes and established an IT practices in terms of management and methodology. Moreover, platform to support such transformation. we have carried out thorough and organized transformation in business processes, organization, quality control, Organization Transformation human resources, financial management, and customer Starting from the product lines, Huawei’s Executive satisfaction in order to create value for our customers. Management Team and “Strategy and Customer Standing Through continuous improvement, our management Committee” strengthened the decision-making ability of system has now reached international standards. Not only the marketing system for understanding customer requirements has our management system withstood the rapid and and planning Huawei’s strategic direction and business 13

Huawei Technologies

Annual Report 2005

development. With the help of the Investment Review Board (IRB), Marketing Management Team, Product System Management Team, Operation & Delivery Management Team and various other supporting teams, Huawei has ensured the efficient implementation of an overall strategy that is driven by customer needs.

Quality Control and Production Process Huawei’s production process system including the 3D warehouse, the automatic warehouse and the entire production line layout was designed by FhG of Germany. The new system reduced the need for transportation of materials and decreased production time, thereby increasing the all-round efficiency and quality of production.

Financial Management Huawei has established a financial management and monitoring system, implemented and unified financial regulations, procedures, codes and monitoring, and established a system for worldwide financial monitoring and management. We have built the Shenzhen Capital Management Center and Hong Kong Capital Management Center, and have also established partnerships with more than 20 banks to meet the capital requirement for our company’s business development. In addition, Huawei has created an independent auditing system, and we are currently constructing a 3-level monitoring system that covers external auditing, internal control and business auditing to minimize our financial and operation risks.

Human Resource Management In addition to setting up a cohesive and efficient human resource team, Huawei is gradually working towards developing an impeccable HR system. Through cooperation with the Hay Group, we improved our methods for evaluating employee performance, set up a remuneration framework which includes remuneration regulation, and introduced the KPI system. We continuously improved performance management by introducing the caliber model to refine the process of staff recruitment and development. In addition, we set up management systems in terms of positions, remuneration, performance, competency, and staff training. We also developed hierarchical performance management systems such as the work reporting system, PBC system and an appraisal system. These systems are inspired by our customers’ requirements and measured by responsibility results, key events and behavior processes.

Huawei Technologies

Annual Report 2005

14

Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

• Customer Focus

2005 Driving Forces

• Continuous Innovation • Management Transformation • Partnership

Management Transformation For years, Huawei has been working with leading consultancies such as IBM, the Hay Group, PwC and FhG to carry out management transformation in order to keep abreast with international industrial benchmarks. In terms of Integrated Product Development (IPD), Integrated Supply Chain (ISC), human resources management, financial management and quality control, we have undergone comprehensive transformation, introduced the industry’s best practices, and established IT-supported management platforms. continuous development of our business, it has also Through consistent implementation of management gained worldwide recognition from our global customers transformation, and partners, thereby we have gradually Through many years of development, we have gradually providing strong perfected our support for our perfected our operation and management processes in company’s global operation and management endeavors. accordance with international standards. processes. In addition, we have managed to strike a balance between our company’s size, Process Realignment business profitability, and cultivating our expertise. With the introduction of practical industry benchmarks that are implemented through processes such as Marketing Business Model Management (MM), Integrated Product Development In Huawei’s macro business model, product development (IPD), Integrated Supply Chain (ISC) and Customer is inspired by our customers’ needs, and the goal of Relationship Management (CRM), complemented by the management is to establish a process-based organization transformation of our financial management and human structure. We have worked with IBM, Hay Group, KPMG, resources management (Hay Group), we have completely PwC, FhG, Mercer and Gallup to implement the best industry transformed our business processes and established an IT practices in terms of management and methodology. Moreover, platform to support such transformation. we have carried out thorough and organized transformation in business processes, organization, quality control, Organization Transformation human resources, financial management, and customer Starting from the product lines, Huawei’s Executive satisfaction in order to create value for our customers. Management Team and “Strategy and Customer Standing Through continuous improvement, our management Committee” strengthened the decision-making ability of system has now reached international standards. Not only the marketing system for understanding customer requirements has our management system withstood the rapid and and planning Huawei’s strategic direction and business 13

Huawei Technologies

Annual Report 2005

development. With the help of the Investment Review Board (IRB), Marketing Management Team, Product System Management Team, Operation & Delivery Management Team and various other supporting teams, Huawei has ensured the efficient implementation of an overall strategy that is driven by customer needs.

Quality Control and Production Process Huawei’s production process system including the 3D warehouse, the automatic warehouse and the entire production line layout was designed by FhG of Germany. The new system reduced the need for transportation of materials and decreased production time, thereby increasing the all-round efficiency and quality of production.

Financial Management Huawei has established a financial management and monitoring system, implemented and unified financial regulations, procedures, codes and monitoring, and established a system for worldwide financial monitoring and management. We have built the Shenzhen Capital Management Center and Hong Kong Capital Management Center, and have also established partnerships with more than 20 banks to meet the capital requirement for our company’s business development. In addition, Huawei has created an independent auditing system, and we are currently constructing a 3-level monitoring system that covers external auditing, internal control and business auditing to minimize our financial and operation risks.

Human Resource Management In addition to setting up a cohesive and efficient human resource team, Huawei is gradually working towards developing an impeccable HR system. Through cooperation with the Hay Group, we improved our methods for evaluating employee performance, set up a remuneration framework which includes remuneration regulation, and introduced the KPI system. We continuously improved performance management by introducing the caliber model to refine the process of staff recruitment and development. In addition, we set up management systems in terms of positions, remuneration, performance, competency, and staff training. We also developed hierarchical performance management systems such as the work reporting system, PBC system and an appraisal system. These systems are inspired by our customers’ requirements and measured by responsibility results, key events and behavior processes.

Huawei Technologies

Annual Report 2005

14

Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

• Customer Focus

2005 Driving Forces

• Continuous Innovation • Management Transformation • Partnership

Supply Chain Huawei has developed a flexible supply chain, which has enhanced our competitiveness in terms of providing fast, cost-effective and quality supply. We have also formulated pertinent supply guarantee strategies and built flattened manufacturing organizations that allow us to meet market demands efficiently and flexibly. In addition, we carried out transformation of the Integrated Supply Chain (ISC) to ensure that new processes and systems were implemented effectively, and also introduced quality engineering technologies to continuously improve supply chain capabilities and customer service. We have also developed partnerships with principal suppliers, enhanced purchase performance management, and carried out supplier certification procedures based on the industrial benchmark, TQRDCE.

Internal Staff Shareholding System At Huawei, we have an internal staff shareholding system. With the help of international human resource consulting firms, we implemented the virtual limited share system, virtual share option plan and MBO virtual share plan, which have enhanced our incentive plan. Our staff shareholding system has helped to support the company’s development through the provisioning of effective, long-term incentives for our staff.

15

Huawei Technologies

Annual Report 2005

Partnership Huawei believes that cooperating with customers, suppliers and leading players in the industry to face challenges together through a win-win strategy is essential in today’s business world. We strive to build more stable partnerships with our customers and suppliers and reinforce strategic cooperation with international and domestic mainstream operators. Furthermore, we will enhance our position in key international markets, strengthen partnerships with major suppliers, and improve our response speed and service advantages in our supply chain. In addition, we will further cooperate with our industry peers on many levels to set up a future-oriented, secure, and win-win development framework. Through this, we aim to create greater value for our global customers. In the past few years, we have also initiated multi-level cooperation in several fields including technology, products and marketing in order to face risks and challenges together.

Together with 3Com, we have established a data communications joint venture and developed a distribution system which has helped our data communications services grow rapidly. In 2005, based on the joint venture agreement, 3Com bought an additional 2% worth of shares from Huawei, resulting in 3Com holding 51% of the stock. The joint venture is currently making good progress. We have also set up a joint venture with Siemens which focuses on the research, production, sales and services of TD-SCDMA in order to further advance its development. We have also announced the establishment of a joint venture with Nortel to combine our expertise in products and technology in order to develop ultra-broadband access solutions for the global market and provide better service to our customers.

Huawei Technologies

Annual Report 2005

16

Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

• Customer Focus

2005 Driving Forces

• Continuous Innovation • Management Transformation • Partnership

Supply Chain Huawei has developed a flexible supply chain, which has enhanced our competitiveness in terms of providing fast, cost-effective and quality supply. We have also formulated pertinent supply guarantee strategies and built flattened manufacturing organizations that allow us to meet market demands efficiently and flexibly. In addition, we carried out transformation of the Integrated Supply Chain (ISC) to ensure that new processes and systems were implemented effectively, and also introduced quality engineering technologies to continuously improve supply chain capabilities and customer service. We have also developed partnerships with principal suppliers, enhanced purchase performance management, and carried out supplier certification procedures based on the industrial benchmark, TQRDCE.

Internal Staff Shareholding System At Huawei, we have an internal staff shareholding system. With the help of international human resource consulting firms, we implemented the virtual limited share system, virtual share option plan and MBO virtual share plan, which have enhanced our incentive plan. Our staff shareholding system has helped to support the company’s development through the provisioning of effective, long-term incentives for our staff.

15

Huawei Technologies

Annual Report 2005

Partnership Huawei believes that cooperating with customers, suppliers and leading players in the industry to face challenges together through a win-win strategy is essential in today’s business world. We strive to build more stable partnerships with our customers and suppliers and reinforce strategic cooperation with international and domestic mainstream operators. Furthermore, we will enhance our position in key international markets, strengthen partnerships with major suppliers, and improve our response speed and service advantages in our supply chain. In addition, we will further cooperate with our industry peers on many levels to set up a future-oriented, secure, and win-win development framework. Through this, we aim to create greater value for our global customers. In the past few years, we have also initiated multi-level cooperation in several fields including technology, products and marketing in order to face risks and challenges together.

Together with 3Com, we have established a data communications joint venture and developed a distribution system which has helped our data communications services grow rapidly. In 2005, based on the joint venture agreement, 3Com bought an additional 2% worth of shares from Huawei, resulting in 3Com holding 51% of the stock. The joint venture is currently making good progress. We have also set up a joint venture with Siemens which focuses on the research, production, sales and services of TD-SCDMA in order to further advance its development. We have also announced the establishment of a joint venture with Nortel to combine our expertise in products and technology in order to develop ultra-broadband access solutions for the global market and provide better service to our customers.

Huawei Technologies

Annual Report 2005

16

Financial Highlights

The Year

Message from the Company

Performance in Business

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

Huawei specializes in the R&D, production, marketing and service provisioning of technologies, products and solutions in the information and communications fields, covering wireless network, fixed network, optical network, data communications network, application & software, and terminals.

Wireless Network: quickly becoming a leading global supplier Huawei’s wireless network solutions now serve 140 million subscribers worldwide and have become a key area of revenue growth for the company. In wireless network, Huawei has become a mainstream global equipment supplier. By the end of 2005, Huawei had already served 22 of the top 50 mobile carriers in the world. In the area of 3G, Huawei established partnerships with many leading carriers including Vodafone, Orange Group, and KPN. We also won 19 UMTS commercial contracts, 12 of which were achieved in 2005, ranking Huawei No.2 worldwide in terms of the number of contracts won in 2005. Huawei’s GSM products have maintained fast growth, having doubled its market share each year for the past three consecutive years. Huawei’s GSM products are now widely deployed in over 60 countries, serving more than 100 million subscribers, with over 400,000 TRXs of GSM BTS. Huawei’s CDMA products now serve over 30 million subscribers globally, and have won 15 CDMA2000 1xEV-DO commercial contracts, ranking Huawei No.3 in the newly-added CDMA market. In addition, Huawei is now the world’s largest mobile softswitch equipment supplier. By the end of 2005, Huawei’s mobile softswitch had been deployed in over 40 countries, and served more than 50 million subscribers. Furthermore, Huawei launched the world’s first commercial mobile softswitch network based on an IP bearer network. Huawei’s packet core network was deployed in over 30 countries, served over 40 million subscribers worldwide and ranked No.2 in terms of port shipments in 2005. As a pioneer and leader for new-generation base stations, Huawei took the lead in launching the new-generation UMTS base station in 1995. The current new-generation UMTS base station not only supports full-performance HSDPA networks with a maximum data rate of 14.4Mbps, 17

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Annual Report 2005

but also adopts the latest technology in multi-carrier and low-consumption digital power-amplifiers, greatly reducing carriers’ CAPEX and OPEX, thereby enhancing their competitive edge. In addition, Huawei rolled out UMTS Cell Multi-media Broadcasting, effectively implementing the industry’s most economical mobile TV solution. Recognizing the importance of protecting carriers’ investment, Huawei launched the EnerG GSM solution, which adopts 3G technology for 2G systems to improve the system’s capabilities and integration abilities. Delivering 3G services on a 2G network enriches users’ experience. The core network supports both 2G/3G access and adopts a unified 2G/3G platform for BTS controllers, paving the way for smooth evolution from GSM to 3G. Meanwhile, Huawei contributed actively to the development of TD-SCDMA in its joint venture with Siemens, TD-Tech, by strongly promoting the commercial application of TD-SCDMA. In 2006, Huawei will further invest in wireless communications. Driven by our customers’ requirements, Huawei will continue to provide innovative and leading solutions. In terms of UMTS, Huawei will take the lead in launching the Hybrid IP RAN solution, and maintain its leading position in distributed base stations and indoor coverage. As for GSM, Huawei will launch 2G/3G dual band BTS and a full series of Dual Density BTS in order to deliver a complete GSM solution to meet the needs of 3G. In the area of CDMA, Huawei will launch an advanced CDMA-series enhanced BTS and CDMA 2000 1xEV-DO Rev. A solution. To face the oncoming fixed mobile convergence, Huawei’s IMS solution will be put into commercial application in Europe in 2006.

Huawei Technologies

Annual Report 2005

18

Financial Highlights

The Year

Message from the Company

Performance in Business

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

Huawei specializes in the R&D, production, marketing and service provisioning of technologies, products and solutions in the information and communications fields, covering wireless network, fixed network, optical network, data communications network, application & software, and terminals.

Wireless Network: quickly becoming a leading global supplier Huawei’s wireless network solutions now serve 140 million subscribers worldwide and have become a key area of revenue growth for the company. In wireless network, Huawei has become a mainstream global equipment supplier. By the end of 2005, Huawei had already served 22 of the top 50 mobile carriers in the world. In the area of 3G, Huawei established partnerships with many leading carriers including Vodafone, Orange Group, and KPN. We also won 19 UMTS commercial contracts, 12 of which were achieved in 2005, ranking Huawei No.2 worldwide in terms of the number of contracts won in 2005. Huawei’s GSM products have maintained fast growth, having doubled its market share each year for the past three consecutive years. Huawei’s GSM products are now widely deployed in over 60 countries, serving more than 100 million subscribers, with over 400,000 TRXs of GSM BTS. Huawei’s CDMA products now serve over 30 million subscribers globally, and have won 15 CDMA2000 1xEV-DO commercial contracts, ranking Huawei No.3 in the newly-added CDMA market. In addition, Huawei is now the world’s largest mobile softswitch equipment supplier. By the end of 2005, Huawei’s mobile softswitch had been deployed in over 40 countries, and served more than 50 million subscribers. Furthermore, Huawei launched the world’s first commercial mobile softswitch network based on an IP bearer network. Huawei’s packet core network was deployed in over 30 countries, served over 40 million subscribers worldwide and ranked No.2 in terms of port shipments in 2005. As a pioneer and leader for new-generation base stations, Huawei took the lead in launching the new-generation UMTS base station in 1995. The current new-generation UMTS base station not only supports full-performance HSDPA networks with a maximum data rate of 14.4Mbps, 17

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but also adopts the latest technology in multi-carrier and low-consumption digital power-amplifiers, greatly reducing carriers’ CAPEX and OPEX, thereby enhancing their competitive edge. In addition, Huawei rolled out UMTS Cell Multi-media Broadcasting, effectively implementing the industry’s most economical mobile TV solution. Recognizing the importance of protecting carriers’ investment, Huawei launched the EnerG GSM solution, which adopts 3G technology for 2G systems to improve the system’s capabilities and integration abilities. Delivering 3G services on a 2G network enriches users’ experience. The core network supports both 2G/3G access and adopts a unified 2G/3G platform for BTS controllers, paving the way for smooth evolution from GSM to 3G. Meanwhile, Huawei contributed actively to the development of TD-SCDMA in its joint venture with Siemens, TD-Tech, by strongly promoting the commercial application of TD-SCDMA. In 2006, Huawei will further invest in wireless communications. Driven by our customers’ requirements, Huawei will continue to provide innovative and leading solutions. In terms of UMTS, Huawei will take the lead in launching the Hybrid IP RAN solution, and maintain its leading position in distributed base stations and indoor coverage. As for GSM, Huawei will launch 2G/3G dual band BTS and a full series of Dual Density BTS in order to deliver a complete GSM solution to meet the needs of 3G. In the area of CDMA, Huawei will launch an advanced CDMA-series enhanced BTS and CDMA 2000 1xEV-DO Rev. A solution. To face the oncoming fixed mobile convergence, Huawei’s IMS solution will be put into commercial application in Europe in 2006.

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Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

Fixed Network: leading network transformation In 2005, the trend towards network convergence resulted in many mainstream carriers taking the initiative to accelerate their strategic transformation. To address their needs, Huawei persisted in continuous innovation and led the industry in providing innovative applications and end-to-end solutions. In 2005, Huawei achieved recognition from numerous global carriers in the area of fixed network. Many Western carriers adopted Huawei’s fixed network products, which now serve countries including China, the UK, France, Germany, Spain, Portugal, Italy, Austria, Greece, and Canada. In the area of NGN, Huawei rolled out a series of NGN products based on IMS architecture and contributed greatly to NGN’s development by introducing an industry-leading network intelligence model. In the field of broadband, Huawei launched end-to-end broadband solutions featuring IPTV and Triple Play, as well as its industry-leading IP DSLAM SmartAX MA5600 broadband access platform and access products including FTTx, wireless and xDSL, thereby ensuring the success of

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telecom network transformation from broadband access to broadband content and service. Due to its excellent performance in NGN, Huawei won the “NGN Infrastructure Vendor of the Year” award at the Frost & Sullivan’s Asia Pacific Technology Awards in June, 2005. Huawei’s MSAN also won the InfoVision Award by IEC in 2005 for its innovation in broadband. In 2006, Huawei will continue to strengthen our expertise and upgrade our solutions. We will further promote IMS broadband multi-media applications, network evolution, value-added service deployment, the establishment of the value chain for information service, as well as the research and development for the commercial application of IP access technology, wireless access technology and optical access technology to provide better service for the construction of next generation networks. In addition, we will continue to work together with carriers to promote the transformation of networks and services.

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

Optical Network: a leading global supplier In 2005, Huawei’s optical network gained increasing recognition and affirmation from global carriers with its quality products and services. Huawei’s overseas market share grew rapidly, and the company established partnerships with world-renowned carriers including BT, Telefonica, KPN, Vodafone and MTN, gradually becoming a mainstream optical equipment vendor for more developed nations around the world. By the end of 2005, Huawei’s OptiX optical network products had served over 80 countries across the world, with over 410,000 sets applied on the network. According to an Ovum-RHK report, Huawei has ranked No.2 in the global optical network market, and No.1 in the Asia Pacific market for the past five consecutive years. Huawei has also ranked No.1 in the global market in terms of long-haul DWDM products. Thanks to an excellent performance in optical network, Huawei was also awarded “Optical Vendor of the Year” at Frost & Sullivan’s Asia Pacific Technology Awards in June, 2005.

Huawei is also a pioneer for optical network technologies in terms of research, standards and commercial application. In 2005, during China Telecom’s evaluation of its intelligent optical network, the routing capability of Huawei’s optical equipment was deemed the best in the industry. In the inter-connectivity tests organized by OIF, Huawei’s products also excelled. Huawei is also currently a member of many standardization organizations including ITU-T, ETSI, IETF, MEF, OIF and CCSA. In 2005, Huawei’s optical expert was elected president of the Inter-connectivity Group of OIF.

Huawei has also received widespread recognition for its full series of unique ASON products and solutions, and successfully constructed intelligent transmission networks in China, Brazil, Russia, Romania, and Saudi Arabia. Huawei’s unique Super WDM technology has successfully enabled low-cost super-long-haul transmission, with over 400,000 kilometers of DWDM backbone network built for customers around the world. Huawei’s GE-ADM technology and Metro WDM technology have also jointly helped provide a new solution for Metro Ethernet service transmission, the preferred choice of many Chinese and European carriers for the construction of high-efficiency transmission networks for IP DSLAM, IPTV and GE VPN. Huawei’s OptiX BWS1600G DWDM system can realize hybrid transmission of 10Gbps and 40Gbps per wavelength, providing carriers with an increased capacity and improved long-haul transmission solution.

In 2006, Huawei will continue to collaborate more extensively with global telecom carriers on network planning, equipment supply and bandwidth operation of transmission networks. In addition, we will focus on our customers’ key areas of concern such as IPTV, enterprise VPN, leased line, VoIP, and 3G transmission networks. Huawei will also pay close attention to the development of carrier Ethernet technology and further optimize our products and solutions to help rapidly construct and deploy flexible networks for our customers to serve them as a reliable strategic partner in the course of their development.

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Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

Fixed Network: leading network transformation In 2005, the trend towards network convergence resulted in many mainstream carriers taking the initiative to accelerate their strategic transformation. To address their needs, Huawei persisted in continuous innovation and led the industry in providing innovative applications and end-to-end solutions. In 2005, Huawei achieved recognition from numerous global carriers in the area of fixed network. Many Western carriers adopted Huawei’s fixed network products, which now serve countries including China, the UK, France, Germany, Spain, Portugal, Italy, Austria, Greece, and Canada. In the area of NGN, Huawei rolled out a series of NGN products based on IMS architecture and contributed greatly to NGN’s development by introducing an industry-leading network intelligence model. In the field of broadband, Huawei launched end-to-end broadband solutions featuring IPTV and Triple Play, as well as its industry-leading IP DSLAM SmartAX MA5600 broadband access platform and access products including FTTx, wireless and xDSL, thereby ensuring the success of

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telecom network transformation from broadband access to broadband content and service. Due to its excellent performance in NGN, Huawei won the “NGN Infrastructure Vendor of the Year” award at the Frost & Sullivan’s Asia Pacific Technology Awards in June, 2005. Huawei’s MSAN also won the InfoVision Award by IEC in 2005 for its innovation in broadband. In 2006, Huawei will continue to strengthen our expertise and upgrade our solutions. We will further promote IMS broadband multi-media applications, network evolution, value-added service deployment, the establishment of the value chain for information service, as well as the research and development for the commercial application of IP access technology, wireless access technology and optical access technology to provide better service for the construction of next generation networks. In addition, we will continue to work together with carriers to promote the transformation of networks and services.

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

Optical Network: a leading global supplier In 2005, Huawei’s optical network gained increasing recognition and affirmation from global carriers with its quality products and services. Huawei’s overseas market share grew rapidly, and the company established partnerships with world-renowned carriers including BT, Telefonica, KPN, Vodafone and MTN, gradually becoming a mainstream optical equipment vendor for more developed nations around the world. By the end of 2005, Huawei’s OptiX optical network products had served over 80 countries across the world, with over 410,000 sets applied on the network. According to an Ovum-RHK report, Huawei has ranked No.2 in the global optical network market, and No.1 in the Asia Pacific market for the past five consecutive years. Huawei has also ranked No.1 in the global market in terms of long-haul DWDM products. Thanks to an excellent performance in optical network, Huawei was also awarded “Optical Vendor of the Year” at Frost & Sullivan’s Asia Pacific Technology Awards in June, 2005.

Huawei is also a pioneer for optical network technologies in terms of research, standards and commercial application. In 2005, during China Telecom’s evaluation of its intelligent optical network, the routing capability of Huawei’s optical equipment was deemed the best in the industry. In the inter-connectivity tests organized by OIF, Huawei’s products also excelled. Huawei is also currently a member of many standardization organizations including ITU-T, ETSI, IETF, MEF, OIF and CCSA. In 2005, Huawei’s optical expert was elected president of the Inter-connectivity Group of OIF.

Huawei has also received widespread recognition for its full series of unique ASON products and solutions, and successfully constructed intelligent transmission networks in China, Brazil, Russia, Romania, and Saudi Arabia. Huawei’s unique Super WDM technology has successfully enabled low-cost super-long-haul transmission, with over 400,000 kilometers of DWDM backbone network built for customers around the world. Huawei’s GE-ADM technology and Metro WDM technology have also jointly helped provide a new solution for Metro Ethernet service transmission, the preferred choice of many Chinese and European carriers for the construction of high-efficiency transmission networks for IP DSLAM, IPTV and GE VPN. Huawei’s OptiX BWS1600G DWDM system can realize hybrid transmission of 10Gbps and 40Gbps per wavelength, providing carriers with an increased capacity and improved long-haul transmission solution.

In 2006, Huawei will continue to collaborate more extensively with global telecom carriers on network planning, equipment supply and bandwidth operation of transmission networks. In addition, we will focus on our customers’ key areas of concern such as IPTV, enterprise VPN, leased line, VoIP, and 3G transmission networks. Huawei will also pay close attention to the development of carrier Ethernet technology and further optimize our products and solutions to help rapidly construct and deploy flexible networks for our customers to serve them as a reliable strategic partner in the course of their development.

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Financial Highlights

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Message from the Company

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Data Communications: leading in carrier-class IP network

Application & Software: exploring new models for the future

The telecommunications industry began to undergo transformation in 2005. In response, global carriers adopted a common development strategy of making IP network more telecom-based and telecom networks more IP-based. In 2005, Huawei launched its ME60, the first in the industry that complies with the ITU-T Y.1291 standard architecture. Huawei’s ME60 can be applied at the core edge of the bearer network, enhancing telecom services such as Triple Play, 3G, and NGN. This converges all network services while allowing them to be controlled separately, thus supporting carriers’ strategy of providing segmented services. Meanwhile, the largest mobile softswitch bearer network in the world that Huawei constructed for China Mobile has been operating smoothly for more than a year, validating China Mobile’s decision to switch to carrier-class IP network for its strategic transformation.

Huawei’s application and software product line made rapid progress in 2005. Huawei maintained its No.1 position in terms of the number of intelligent network subscribers in the value-added services and operation support market, and No.2 in short message quantity. Due to its strength in these two areas, Huawei developed quickly in the systematic development and market expansion of innovative mainstream services. Our service solutions have been successfully deployed by 230 carriers in 94 countries, and more than 100 million subscribers worldwide are using our Color Ring Back Tone service. Our mobile data service has also been deployed on a large scale, and our full 3G solutions have proven themselves through successful applications in mature markets. The popularity of network intelligence is currently at a peak in China, and our NGN service platform has a market share of more than 60% in China.

By the end of 2005, Huawei’s datacom products had been widely deployed in 91 countries including the UK, Germany, Spain, Russia, Singapore, and South Korea, across a variety of industries such as carriers, government, education, banking, securities, insurance, taxation, and electricity. Huawei’s datacom products have also gained extensive trust from customers with carrier-class features of strong scalability, high reliability and high security. 2006 will see the further development of the carrier-class IP network, and Huawei will respond by launching a series of products and solutions designed to meet customer demands in carrier-class IP network, as well as carrier Ethernet. Through this, Huawei will be able to fully utilize its rich experience in designing telecom networks and have the ability to provide customers with both industry-leading equipment as well as a manageable, operable and profitable carrier-class IP network .

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Vision, Mission and Strategy

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Our operation support system has not only completed deployment with the CMCC BOSS system, but has also been successfully implemented in more than ten countries. We stay updated with future market trends in areas including digital music, media entertainment, integrated messaging center, converged billing/management, voice message increments, group/industry applications and IMS convergence applications.

Financial Report

areas such as partner alliances, platforms, standards and patents, combination and convergence application, system integration, development of localization, project management and the profit model. Led by the unified SDP application framework, our ENIP2.0 open technical architecture supports the evolution of TELLIN, InfoX and TopEng into a richer, more open and integrated application and service delivery capability system and also supports smooth upgrade to IMS applications. With a customer-oriented and user-friendly telecoms network operation system as the foundation for an ordered information society in the future, not only will 3G and NGN be able to provide subscribers with access and forwarding capabilities, but service networks will also be able to provide subscribers with calculation and storage capabilities. With the continuous strengthening of the application engine, billing engine, service engine and integrated comprehensive capabilities, we will assist the infrastructure carriers in the information society in establishing a flexible product line that is sensitive to market demands. Ultimately, we aim to offer service solutions covering product, price and service in the information market.

Faced with industry trends such as convergence, transformation and a change of focus in the software industry from products to services and operation, Huawei’s application and software department proactively explored business models and cooperation, application architecture and integration, as well as technical architecture and platforms. Using the concepts of "network-based business, open-style architecture, modularized platform, baseline version, and customized requirements" as a foundation, we enhanced our abilities in key competitive Huawei Technologies

Annual Report 2005

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Financial Highlights

The Year

Message from the Company

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Data Communications: leading in carrier-class IP network

Application & Software: exploring new models for the future

The telecommunications industry began to undergo transformation in 2005. In response, global carriers adopted a common development strategy of making IP network more telecom-based and telecom networks more IP-based. In 2005, Huawei launched its ME60, the first in the industry that complies with the ITU-T Y.1291 standard architecture. Huawei’s ME60 can be applied at the core edge of the bearer network, enhancing telecom services such as Triple Play, 3G, and NGN. This converges all network services while allowing them to be controlled separately, thus supporting carriers’ strategy of providing segmented services. Meanwhile, the largest mobile softswitch bearer network in the world that Huawei constructed for China Mobile has been operating smoothly for more than a year, validating China Mobile’s decision to switch to carrier-class IP network for its strategic transformation.

Huawei’s application and software product line made rapid progress in 2005. Huawei maintained its No.1 position in terms of the number of intelligent network subscribers in the value-added services and operation support market, and No.2 in short message quantity. Due to its strength in these two areas, Huawei developed quickly in the systematic development and market expansion of innovative mainstream services. Our service solutions have been successfully deployed by 230 carriers in 94 countries, and more than 100 million subscribers worldwide are using our Color Ring Back Tone service. Our mobile data service has also been deployed on a large scale, and our full 3G solutions have proven themselves through successful applications in mature markets. The popularity of network intelligence is currently at a peak in China, and our NGN service platform has a market share of more than 60% in China.

By the end of 2005, Huawei’s datacom products had been widely deployed in 91 countries including the UK, Germany, Spain, Russia, Singapore, and South Korea, across a variety of industries such as carriers, government, education, banking, securities, insurance, taxation, and electricity. Huawei’s datacom products have also gained extensive trust from customers with carrier-class features of strong scalability, high reliability and high security. 2006 will see the further development of the carrier-class IP network, and Huawei will respond by launching a series of products and solutions designed to meet customer demands in carrier-class IP network, as well as carrier Ethernet. Through this, Huawei will be able to fully utilize its rich experience in designing telecom networks and have the ability to provide customers with both industry-leading equipment as well as a manageable, operable and profitable carrier-class IP network .

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Vision, Mission and Strategy

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Annual Report 2005

Our operation support system has not only completed deployment with the CMCC BOSS system, but has also been successfully implemented in more than ten countries. We stay updated with future market trends in areas including digital music, media entertainment, integrated messaging center, converged billing/management, voice message increments, group/industry applications and IMS convergence applications.

Financial Report

areas such as partner alliances, platforms, standards and patents, combination and convergence application, system integration, development of localization, project management and the profit model. Led by the unified SDP application framework, our ENIP2.0 open technical architecture supports the evolution of TELLIN, InfoX and TopEng into a richer, more open and integrated application and service delivery capability system and also supports smooth upgrade to IMS applications. With a customer-oriented and user-friendly telecoms network operation system as the foundation for an ordered information society in the future, not only will 3G and NGN be able to provide subscribers with access and forwarding capabilities, but service networks will also be able to provide subscribers with calculation and storage capabilities. With the continuous strengthening of the application engine, billing engine, service engine and integrated comprehensive capabilities, we will assist the infrastructure carriers in the information society in establishing a flexible product line that is sensitive to market demands. Ultimately, we aim to offer service solutions covering product, price and service in the information market.

Faced with industry trends such as convergence, transformation and a change of focus in the software industry from products to services and operation, Huawei’s application and software department proactively explored business models and cooperation, application architecture and integration, as well as technical architecture and platforms. Using the concepts of "network-based business, open-style architecture, modularized platform, baseline version, and customized requirements" as a foundation, we enhanced our abilities in key competitive Huawei Technologies

Annual Report 2005

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Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

Looking Forward Wireless Terminals: building an end-to-end solution

The telecoms industry is undergoing great changes with the constant development of technology, especially IT and IP technologies. There is also increasing convergence between industries such as telecommunications, IT, media and consumer electronics. The next few years will be a critical time for the transformation of the telecoms industry as broadband, packetization, convergence and mobility become widely recognized as the main trends of the future.

In 2005, Huawei sold over 10 million wireless terminal products, with a year-on-year increase of more than 100%. Huawei’s UMTS and HSDPA data cards were widely adopted by mainstream European carriers, and specifically used by Vodafone in large quantities. In addition, Huawei’s UMTS handsets have entered the Asia Pacific and European markets. Our CDMA handsets have achieved great success in Asia Pacific, Latin America and China, and were deployed by many leading carriers including TATA of India. Huawei’s CDMA handset, C218, was well received in the market and achieved a total sales volume of over 2 million units in 2005. In June 2005, Huawei’s first commercial 3G handset, the U626, won “Best 3G Handset” awarded by the Charlton Media Group in Singapore. Huawei also won the “Most Promising Vendor for 3G Terminals” award from People’s

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From the network perspective, ALL IP and FMC will be key trends in the next three to five years. The telecommunications network will be undergoing end-to-end changes in all layers including the service layer, control layer, bearer network, access network and terminals. Even carriers’ positioning and business models may need to change.

Posts and Telecommunications News, an authoritative media in China’s telecommunications industry. In 2006, Huawei will make further investments in wireless terminals, and strengthen R&D capabilities and the marketing network to reinforce its leading position. Huawei expects its total sales volume of wireless terminals to exceed 25 million units in 2006.

The development towards ALL IP architecture will gradually change the “vertical network,” characterized by technologies such as PSTN, SDH, ATM and FR, and services such as voice, data and Internet, into a flattened, “horizontal network.” The most direct driver of FMC originates from the need to upgrade the customer experience so access to the same experience can be achieved via any terminal from any location at any time. FMC also lowers OPEX and improves efficiency. FMC includes industry convergence (including the telecoms, IT,

content & media and consumer electronics industries), service convergence (including voice, data, multimedia and content), network convergence (including a unified service network, a unified control network, a unified packet switched bearing network and a unified BOSS) and the convergence of terminals (such as dual-mode terminals and intelligent terminals). FMC is not simply a technology or a characteristic. ALL IP and FMC encompass the transformation and upgrade of an entire network, requiring overall end-to-end considerations. From the service perspective, the main services that carriers provide today such as bandwidth leasing (e.g. wholesale and leased lines) and voice services cannot meet the requirements of future customer demands and market competition. With development of globalization of information, carriers need to focus on new services, namely multi-play services for consumers and ICT services for business users. IPTV is currently the most promising technology to enter the individual consumer market, while the ability to provide integrated solutions which include solution design, service hosting, service outsourcing, service consulting and business process outsourcing will be a key area of concern for future business users. Meanwhile, the business model of carriers will change from the “Bit Pipe” model to “Service” provisioning. During this transformation, openness, cooperation and value chain integration will be crucial for success.

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The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

Looking Forward Wireless Terminals: building an end-to-end solution

The telecoms industry is undergoing great changes with the constant development of technology, especially IT and IP technologies. There is also increasing convergence between industries such as telecommunications, IT, media and consumer electronics. The next few years will be a critical time for the transformation of the telecoms industry as broadband, packetization, convergence and mobility become widely recognized as the main trends of the future.

In 2005, Huawei sold over 10 million wireless terminal products, with a year-on-year increase of more than 100%. Huawei’s UMTS and HSDPA data cards were widely adopted by mainstream European carriers, and specifically used by Vodafone in large quantities. In addition, Huawei’s UMTS handsets have entered the Asia Pacific and European markets. Our CDMA handsets have achieved great success in Asia Pacific, Latin America and China, and were deployed by many leading carriers including TATA of India. Huawei’s CDMA handset, C218, was well received in the market and achieved a total sales volume of over 2 million units in 2005. In June 2005, Huawei’s first commercial 3G handset, the U626, won “Best 3G Handset” awarded by the Charlton Media Group in Singapore. Huawei also won the “Most Promising Vendor for 3G Terminals” award from People’s

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From the network perspective, ALL IP and FMC will be key trends in the next three to five years. The telecommunications network will be undergoing end-to-end changes in all layers including the service layer, control layer, bearer network, access network and terminals. Even carriers’ positioning and business models may need to change.

Posts and Telecommunications News, an authoritative media in China’s telecommunications industry. In 2006, Huawei will make further investments in wireless terminals, and strengthen R&D capabilities and the marketing network to reinforce its leading position. Huawei expects its total sales volume of wireless terminals to exceed 25 million units in 2006.

The development towards ALL IP architecture will gradually change the “vertical network,” characterized by technologies such as PSTN, SDH, ATM and FR, and services such as voice, data and Internet, into a flattened, “horizontal network.” The most direct driver of FMC originates from the need to upgrade the customer experience so access to the same experience can be achieved via any terminal from any location at any time. FMC also lowers OPEX and improves efficiency. FMC includes industry convergence (including the telecoms, IT,

content & media and consumer electronics industries), service convergence (including voice, data, multimedia and content), network convergence (including a unified service network, a unified control network, a unified packet switched bearing network and a unified BOSS) and the convergence of terminals (such as dual-mode terminals and intelligent terminals). FMC is not simply a technology or a characteristic. ALL IP and FMC encompass the transformation and upgrade of an entire network, requiring overall end-to-end considerations. From the service perspective, the main services that carriers provide today such as bandwidth leasing (e.g. wholesale and leased lines) and voice services cannot meet the requirements of future customer demands and market competition. With development of globalization of information, carriers need to focus on new services, namely multi-play services for consumers and ICT services for business users. IPTV is currently the most promising technology to enter the individual consumer market, while the ability to provide integrated solutions which include solution design, service hosting, service outsourcing, service consulting and business process outsourcing will be a key area of concern for future business users. Meanwhile, the business model of carriers will change from the “Bit Pipe” model to “Service” provisioning. During this transformation, openness, cooperation and value chain integration will be crucial for success.

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Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Core Network

Bearer Network

Due to the strengthening of network standardization and the trend towards more open networks at the core layer, it is not possible for networks which integrate switching, control and services to adapt to the development of future services. Thus, it is the industry’s consensus that IMS will become the future core network.

With the development of broadband and multimedia services, the traditional bearer network with SDH/ATM cannot meet the demands of future services. Currently, there are two main trends that can be seen in the bearer network: packetization and intelligence. The aim of these two trends is to simplify network layers and increase the amount of intelligent features in order to realize a “data perceptive” transmission network, thereby reducing network complexity and operating cost.

However, from the current deployment perspective, IMS is fit for multi-media services which will distinguish it from other services. But IMS still faces a number of inherent problems such as handling voice, QoS, IP security, terminal match, as well as cost. Meanwhile softswitch has established its role as a bridge for IMS, especially in the mobile field, due to its proven ability in solving voice. Thus, softswitch and IMS will likely co-exist in harmony for a long time. Huawei’s softswitch has been deployed on a large scale, and the company has accumulated rich experience in areas such as IP QoS, IP security and IP maintenance. Huawei intends to utilize this experience and expertise in the development of our IMS. Because softswitch is future-oriented and takes into account long-term results, it can easily migrate to the IMS network through software

Packetization will have an impact in two areas: the metro network and backbone network. Carrier Ethernet + NG-WDM will become the main model for building metro networks, while TSR + DWDM will become the preference for backbone networks. All services including voice, data and multimedia will be transmitted using the same IP technology. upgrades that protect carriers’ investment and guarantee service continuity. In addition, unified user data management is an important characteristic of the future core network and also serves as an important foundation for providing a unified service experience (one customer account, one bill, one service password, etc.). Huawei’s integrated HLR is a user management solution for the future converged network. So IMS is not only an important way to realize FMC and ALL IP, but is also the key to the creation of a unified control layer.

With the growing importance of IP in telecom networks, carrier-class IP networks must be available in order to maintain service quality for users in the new technology system. Based on the “operable and manageable” concept that we have been following since 2000 and through many years of continuous innovation, Huawei proposed and implemented the concept of the IP Telecom Network in 2003. Today we have completed end-to-end control and management of the IP network and have laid a solid theoretical foundation for more telecom-based IP.

Corporate Citizenship

Financial Report

will extend into the access layer to address the great demands of future large-scale broadband development. In this area, Huawei has proposed the creative concept of GE-ADM, which has become one of the key features in NG-WDM. Intelligence can be seen from two different perspectives. On one hand, it can be seen through the intelligent control on each layer of the transmission network. In this situation, automatic routing and configuration via dynamic signaling can be realized on each of the different layers of SDH, WDM, Ethernet and IP. On the other hand, intelligence can be seen from the transmission of the interaction between different layers, especially the interaction between the packet layer (Ethernet and IP) and the optical layer (WDM and OTN) to realize a “data perceptive” transmission network. This improves the automation degree and application rate of the network, the service response time and customer satisfaction, and also reduces the operation and maintenance cost of the network.

Ethernet is also attracting more attention due to its simplicity, affordability and broad scale application. However, Ethernet needs to provide guaranteed services like a telecom network. In 2003, Huawei proposed the idea of V-Switch in the Ethernet field and put it into operation. Currently, Huawei’s V-Switch is widely deployed. In order to respond to the increasing popularity of packet-switched services, the optical system needs to adapt to the trend of packet switching. Thus, NG-WDM for packet transmission will be widely applied in the next three to five years and 25

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Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Core Network

Bearer Network

Due to the strengthening of network standardization and the trend towards more open networks at the core layer, it is not possible for networks which integrate switching, control and services to adapt to the development of future services. Thus, it is the industry’s consensus that IMS will become the future core network.

With the development of broadband and multimedia services, the traditional bearer network with SDH/ATM cannot meet the demands of future services. Currently, there are two main trends that can be seen in the bearer network: packetization and intelligence. The aim of these two trends is to simplify network layers and increase the amount of intelligent features in order to realize a “data perceptive” transmission network, thereby reducing network complexity and operating cost.

However, from the current deployment perspective, IMS is fit for multi-media services which will distinguish it from other services. But IMS still faces a number of inherent problems such as handling voice, QoS, IP security, terminal match, as well as cost. Meanwhile softswitch has established its role as a bridge for IMS, especially in the mobile field, due to its proven ability in solving voice. Thus, softswitch and IMS will likely co-exist in harmony for a long time. Huawei’s softswitch has been deployed on a large scale, and the company has accumulated rich experience in areas such as IP QoS, IP security and IP maintenance. Huawei intends to utilize this experience and expertise in the development of our IMS. Because softswitch is future-oriented and takes into account long-term results, it can easily migrate to the IMS network through software

Packetization will have an impact in two areas: the metro network and backbone network. Carrier Ethernet + NG-WDM will become the main model for building metro networks, while TSR + DWDM will become the preference for backbone networks. All services including voice, data and multimedia will be transmitted using the same IP technology. upgrades that protect carriers’ investment and guarantee service continuity. In addition, unified user data management is an important characteristic of the future core network and also serves as an important foundation for providing a unified service experience (one customer account, one bill, one service password, etc.). Huawei’s integrated HLR is a user management solution for the future converged network. So IMS is not only an important way to realize FMC and ALL IP, but is also the key to the creation of a unified control layer.

With the growing importance of IP in telecom networks, carrier-class IP networks must be available in order to maintain service quality for users in the new technology system. Based on the “operable and manageable” concept that we have been following since 2000 and through many years of continuous innovation, Huawei proposed and implemented the concept of the IP Telecom Network in 2003. Today we have completed end-to-end control and management of the IP network and have laid a solid theoretical foundation for more telecom-based IP.

Corporate Citizenship

Financial Report

will extend into the access layer to address the great demands of future large-scale broadband development. In this area, Huawei has proposed the creative concept of GE-ADM, which has become one of the key features in NG-WDM. Intelligence can be seen from two different perspectives. On one hand, it can be seen through the intelligent control on each layer of the transmission network. In this situation, automatic routing and configuration via dynamic signaling can be realized on each of the different layers of SDH, WDM, Ethernet and IP. On the other hand, intelligence can be seen from the transmission of the interaction between different layers, especially the interaction between the packet layer (Ethernet and IP) and the optical layer (WDM and OTN) to realize a “data perceptive” transmission network. This improves the automation degree and application rate of the network, the service response time and customer satisfaction, and also reduces the operation and maintenance cost of the network.

Ethernet is also attracting more attention due to its simplicity, affordability and broad scale application. However, Ethernet needs to provide guaranteed services like a telecom network. In 2003, Huawei proposed the idea of V-Switch in the Ethernet field and put it into operation. Currently, Huawei’s V-Switch is widely deployed. In order to respond to the increasing popularity of packet-switched services, the optical system needs to adapt to the trend of packet switching. Thus, NG-WDM for packet transmission will be widely applied in the next three to five years and 25

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Annual Report 2005

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Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Access Network

Service Network

At the access network layer, the major trends for the next three to five years are broadbandization and packetization for both wireline and wireless access. The current trend in the wireline access field is “more optical and less copper” with FTTx becoming the primary way to build a network. In developed regions, mainstream carriers will provide each subscriber with 20-50M bandwidth in the next few years to support the development of high-bandwidth services, especially video services. Generally, in the next few years, when considering factors as bandwidth, coverage and cost, FTTB/C + ADSL2+/VDSL will become primary network models while FTTH will become a complementary method for network construction in new home zones.

Currently, the service layer is built largely around voice service. With an increase in data services, the focus of the service layer will shift toward integrated services and customer experience. There will also be multiple service platforms for different user groups and services such as the multimedia communications platform for personal users, the media and information platform for home users and individual users (typical services including broadband portal and IPTV), and the IT platform for business users (typical services including software hosting and outsourcing). These platforms exist in a relationship that is both independent and cooperative at the same time, with unified user data at the core.

In the wireless access field, technologies such as HSPA, WiMAX, LTE and AIE will push forward the development of packetization and broadbandization. Meanwhile, intelligent terminals (handsets) and mobile PCs will greatly increase the demand for higher bandwidth. It is important to note that, in the next five years or more, multiple access technologies will co-exist in harmony as there will be no single technology that can satisfy all application situations when factors such as bandwidth, coverage, mobility and cost are considered simultaneously. Thus, seamless mobility between multiple access technologies will be critical and will become a vital element in realizing FMC.

Corporate Citizenship

Financial Report

The multimedia communications platform and the media and information platform provide multi-play services for home users and individual users, while the multimedia communications platform and the IT platform provide integrated solutions - namely ICT services - for business users. In the future service network, NG-SDP will become the core technology, and the ability to integrate the entire supply chain and experience marketing will be the key to ensuring carriers’ success. The next three to five years is a pivotal period for telecoms transformation. Network development is moving toward ALL IP architecture and FMC, while technologies such as IMS, carrier-class IP, seamless mobility and NG-SDP will prove to be crucial in helping carriers carry out network transformation in the future. Huawei will focus on innovation and investment in the areas of ALL IP and FMC to ensure that there will be no discrepancy in the experience and services that customers enjoy via any terminal, anywhere, and at anytime.

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Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

2005 Driving Forces

Performance in Business

Looking Forward

Access Network

Service Network

At the access network layer, the major trends for the next three to five years are broadbandization and packetization for both wireline and wireless access. The current trend in the wireline access field is “more optical and less copper” with FTTx becoming the primary way to build a network. In developed regions, mainstream carriers will provide each subscriber with 20-50M bandwidth in the next few years to support the development of high-bandwidth services, especially video services. Generally, in the next few years, when considering factors as bandwidth, coverage and cost, FTTB/C + ADSL2+/VDSL will become primary network models while FTTH will become a complementary method for network construction in new home zones.

Currently, the service layer is built largely around voice service. With an increase in data services, the focus of the service layer will shift toward integrated services and customer experience. There will also be multiple service platforms for different user groups and services such as the multimedia communications platform for personal users, the media and information platform for home users and individual users (typical services including broadband portal and IPTV), and the IT platform for business users (typical services including software hosting and outsourcing). These platforms exist in a relationship that is both independent and cooperative at the same time, with unified user data at the core.

In the wireless access field, technologies such as HSPA, WiMAX, LTE and AIE will push forward the development of packetization and broadbandization. Meanwhile, intelligent terminals (handsets) and mobile PCs will greatly increase the demand for higher bandwidth. It is important to note that, in the next five years or more, multiple access technologies will co-exist in harmony as there will be no single technology that can satisfy all application situations when factors such as bandwidth, coverage, mobility and cost are considered simultaneously. Thus, seamless mobility between multiple access technologies will be critical and will become a vital element in realizing FMC.

Corporate Citizenship

Financial Report

The multimedia communications platform and the media and information platform provide multi-play services for home users and individual users, while the multimedia communications platform and the IT platform provide integrated solutions - namely ICT services - for business users. In the future service network, NG-SDP will become the core technology, and the ability to integrate the entire supply chain and experience marketing will be the key to ensuring carriers’ success. The next three to five years is a pivotal period for telecoms transformation. Network development is moving toward ALL IP architecture and FMC, while technologies such as IMS, carrier-class IP, seamless mobility and NG-SDP will prove to be crucial in helping carriers carry out network transformation in the future. Huawei will focus on innovation and investment in the areas of ALL IP and FMC to ensure that there will be no discrepancy in the experience and services that customers enjoy via any terminal, anywhere, and at anytime.

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Annual Report 2005

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Annual Report 2005

28

Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

Corporate Citizenship It has always been one of Huawei’s core values to contribute to countries and communities in which we operate. As part of our efforts to fulfill our responsibility as a corporate citizen, Huawei has joined the Global Compact, an initiative advocated by the United Nations to promote corporate citizenship worldwide. The ten principles of the Global Compact on human rights, labor rights, environmental protection and anti-corruption are now an integral part of Huawei’s corporate culture.

million (US$2.42 million) worth of emergency communications equipment and an additional RMB 20 million (US$2.42 million) in cash to affected countries including Indonesia, Thailand, Sri Lanka and India.

In July 2005, an unprecedented flood struck the Chinese province of Guangdong. In response, Huawei employees donated RMB 3.8 million (US$475,000) in cash to help people severely affected by the disaster rebuild their lives.

In August 1998, Huawei donated remote wireless access equipment worth RMB 25 million (US$3.02 million) to relief efforts for the strongest flood to hit China in over a hundred years. The equipment was used to support rescue efforts and restore communication infrastructure damaged by the flood. In addition, Huawei and its employees donated RMB 15 million (US$1.82 million) in cash to rebuild schools in areas hit by the flood.

Our overseas offices are also actively engaged in disaster-relief efforts. At the end of 2005, each employee from Huawei’s representative office in India made a donation of half a day’s pay to Parikrma, a non-governmental organization that helps needy children gain access to education. In our North American office, employees donated to hurricane Katrina victims through the American Red Cross in November of 2005. Huawei also participated in disaster-relief efforts in the aftermath of the devastating tsunami which struck Southeast Asia on December 26, 2004. Huawei was the first Chinese company to respond to the disaster, donating RMB 20

2005 Driving Forces

Performance in Business

Looking Forward

Corporate Citizenship

Financial Report

Financial Report

From 2002 to 2005, Huawei donated over RMB 21.29 million (US$2.66 million) in cash, along with hundreds of computers and 750 boxes of clothing, to schools in poverty-afflicted regions in China.

Huawei has also voluntarily set up a total of five Hope Schools in Ansai County of Shaanxi and Yongjing County of Gansu to help provide education to less privileged children. In addition, Huawei has donated RMB 25 million (US$3.02 million) to the National Education Commission of China for the establishment of the “Huawei Education Fund”, which provides needy students with an undergraduate education. Huawei has continuously contributed to the countries and communities where we operate and strongly encourages employees to give back to society. Huawei has established an employee organization known as the “Association of Care”, in which members actively participate in community service activities during their free time. Through various means, Huawei employees actively contribute to a sustainable and harmonious environment

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Annual Report 2005

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Annual Report 2005

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Financial Highlights

The Year

Message from the Company

Vision, Mission and Strategy

Consolidated Statement of Cash Flows Huawei Technologies Corporation and Subsidiary Companies

For the year ended December 31

2005

2004

USD '000

USD '000

Cash generated from operation

872,081

491,765

Interest and income tax paid

(163,939)

(95,888)

Cash Flows from Operating Activities

708,142

395,877

Cash Flows from Investing Activities

(220,580)

(331,957)

Cash Flows from Financing Activities

(733,106)

166,997

Net Increase in Cash and Cash Equivalents

(245,544)

230,917

Cash and Cash Equivalents at January 1

1,100,860

869,922

Effect of foreign exchange rate changes

27,713

21

883,029

1,100,860

Cash Flows from Operating Activities

Cash and Cash Equivalents at December 31

Note: • All financial data are quoted from the unqualified auditors reports of KPMG which are presented in accordance with International Financial Reporting Standards. • Solely for the convenience of the readers, the consolidated financial statement of 2005 has been converted to United States dollars at the rate of US$1.00=RMB8.0702 ( 2004: US$1.00=RMB8.2765)

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Huawei Technologies

Annual Report 2005

HUAWEI TECHNOLOGIES CO., LTD.

Annual Report 2005 To enrich life through communication

www.huawei.com

Annual Report 2005

HUAWEI TECHNOLOGIES CO., LTD. Huawei Industrial Base Bantian Longgang Shenzhen 518129, P.R. China