We’ve already reported on Huawei’s dramatic growth over the last year. The company sold 30 percent more phones in 2016 than in the year previous, despite smartphone sales generally slowing down across the globe. But new data from The Information implies those additional sales came at the cost of lowered profits.

According to the report, Huawei’s consumer business group only made $2 billion in profit last year compared to $2.2 billion the year before. Not only is this well bellow the $2.5 billion the company was shooting for, but it also begs the question: how do you sell more phones but make less money?

In 2016, the Huawei consumer business unit’s revenue increased by 42 percent to $26 billion, indicating that while revenue increased dramatically, expenses increased even more so. This is is in stark contrast to 2015 when the unit’s profit more than doubled. The Information cites various factors at play in the drop in profitability, including increasing component costs and a massive upswing in marketing costs.

See also:

Flashbacks and Forecasts: Huawei in 2017

February 1, 2017

But it’s also fairly well known that Huawei offers sweetheart deals to retailers and carriers that stock its phones. It’s a good incentive for carriers that already make use of Huawei’s network infrastructure and it’s a very good enticement for retailers looking for the highest profit margin on the phones it stocks. Ensuring the company’s increased visibility in Western markets may also have had a significant impact on its profitability.

That noted, Huawei is reportedly now looking at ways to cut spending over the year ahead, “especially on areas like marketing and retail sales channels”. The company reportedly has internal targets for 2017 that aim to double last year’s profit to $4 billion. Perhaps Huawei’s additional outlay last year will carry Huawei through 2017, but whatever happens, it seems likely we’ll be seeing less prominent advertising for upcoming Huawei devices as the company attempts to tighten its belt and increase profitability.

Up next: How do Chinese manufacturers offer such great specs at such low prices?

Kris Carlon
Kris Carlon is a Senior Editor at Android Authority. He is a half-British Australian who lives in Berlin, travels a lot and is always connected to a laptop, phone, smartwatch or tablet (and occasionally a book).
  • Goran

    It’s actually not surprising at all. Aggressive marketing, selling more cheaper phones (cheap huawei and honor sells much better) and raising qualify brought drop in profit. Though I must say Huawei is still lacking on quality on flagship lvl Samsung or htc offer. It’s much harder to become Samsung than they thought. Now they wanna offer P10 as pure S7 edge copy for bigger price. I expect further drop in profit if they wanna offer top notch speced and made phones. They will hardly achieve S sales numbers if they raise their price.

    • Novage

      The mate 9 is a true flagship. They are at the level of the biggest now

      • Goran

        Improve audio, separate DAC, amp and finally go for qhd than maybe. Amoled on Samsung level is no for next few years, Kirin is still inferior, problematic for improvement iand support even though is faster than ever and EMUI is another story. No, even in 2017 they will not be able to achieve top lvl. Maybe in 3 years if they survive obvious crisis. Raising prices further will make even bigger problem for huawei.

        • Novage

          Kirin 960 is a Monster, best Android chipset right now, does the S7 has separate DAC ? No but it’s still a great phone.

          They are not 3rd Smartphone seller in the World and china & Europe 2nd Smartphone seller for nothing.

          SINCE 5.0 EMUI is very good and they will continue to rise every year.

          • Goran

            Actually, Mali G71GPU in Kirin is still inferior to Adrenochrome 530, intact worse than Exynos Mali T880mp12, not to mention apple A10. But wider Kirin problem is ONLY huawei phones have it and support for it is Huawei depending which is not promising at all. Exynos also has inbuilt Wolfson DAC, and htc amd LGwho’s uses SD always has separate DAC,amp in their phones. So is Vivo, Oppo, Meizu and so on and on. But NON huawei phone. They are 3rd thnx to 5x, 6x, honor 6,7,8…Not thnx to P8,P9,mate 7,8,9. And EMUI is still the worst UI in all phones.

          • Novage

            The k960’s GPU is only behind because of gflop but gflop is not the only Thing to look at in a GPU. The G71 is more modern, newer architecture, better consumption. For exemple the Adreno 330 of the s801 is about 160gflop and the Mali t880 is 120gflop but this last is way better in games.

            The k960 has a dac the Hi6403 and i have emui 4.1 which is good and emui 5 will be better.

            And finally high end Huawei phones are selling a lot, 10 millions p9, 1 millions mate 8 in One month in China, 66% of there sales are mid rang and high range

          • Goran

            Kirin 960 is only in raw power strongest, for sure Huawei doesn’t have optimization of an HTC phone, even LG and Samsung. Thnx to still not good EMUI. Even HTC which I prefer over all other manufacturers, never made a phone on Samsung Note lvl, no-one did. As I said, Oppo is the future, not Huawei whos sale numbers I don’t trust at all. Time will show.

          • Novage

            Gosh you don’t have any argument. It’s nearly impossible to discuss with u

          • Goran

            That or you simply give too much credit to Huawei. Huawei is improving, but exactly that( higher end components and better build quality) is what’s slowing their income. It’s hard to be Samsung, maybe even impossible for them. Great phone is not only great specs, battery and design, but more features and great optimization are even more important. And that is where Huawei lacks behind not only world big manufacturers, but it is lacking behind some in China.

          • Novage

            Yeah this is why the mate 9 is One of the best if not the best big Smartphone in the World.

            You’re talking about optimisation wich Huawei is on top right now. I have a p9l mid range phone since october and he is very fluid and with no problem. The mate 9 in the other side don’t know the word “slowdown”

          • Goran

            Simply I am speachles:) think what you want, it’s a free world:) but that doesn’t make you right.

          • Novage

            You too

          • Have you used a Huawei flagship? I love Samsung phones, If Samsung wouldn’t shut Note 7 down forcefully through update I still would have gotten it. S7 has a great design, and great camera. But, the optimisation on Huawei is great. I am running a beta version of Android 7 with EMUI 5 and it is great. It is fluid, open apps and loads games faster than most flagship phones including S7 and has a great battery life despite a not so bigger 3000 mAh battery.

          • milho

            HTC lover???? Please, go somewhere quite and blow your brain… If you can find brain at all in your head…

        • The speakers on Huawei flagships are better than those of Galaxy S7’s. When it comes to battery life, Mate 8, and Mate 9 blows everyone out of water. EMUI is bettery optimised for faster performance and battery life. Even my Honor 8 which is a mid-ranger beats almost every other Android flagships in speed tests.

          • Goran

            S7 has good reason why it has average speakers, water resistance. Exynos model with inbuilt Walfson DAC is just behind HTC 10 and LG V series in sound quality on 3.5, lvl of quality that huawei can only dream of. Great that you are happy with ur phone, but be realistic, S7 is just different league. Amoled on S7 is simply, by far, the best screen in the world.

          • The AMOLED displays of Samsung are unmatchable, Their cameras are the best, The design of the S7 is also the best. But their software optimization is certainly not good. Huawei does better there. I don’t know which EMUI have you used, but I am using EMUI 5 on my Honor 8 and it is buttery smooth and beautiful. The notification menu has been fixed, and there is a drawer now. The fingerprint sensor can be used to perform various functions. You can lock individual apps with the fingerprint sensor.

          • Goran

            I am htc fan for a reason, both touchwiz and EMUI are torture for me. But S could be forgiven for its touchwiz simply bcs of overal quality and feature packed phones.

          • Anon

            totally agreed. screen and camera wise, s7 cant be beat. almost everything else, the honor 8 is better. touchwiz can’t compete with EMUI 5.0.

        • I don’t care if Huawei makes profits or loss, I am loving the fact that they are providing me better built phones at cheaper prices.

  • Daggett Beaver |dBz|

    I have to wonder if the Porsche, a phone almost nobody would want to pay for, has anything to do with it.

  • Dusty

    I doubt that they plan to cut back on advertising, except to see higher prices across the board on their devices.

  • Diego Kaku

    They need to focus on Honor, Mate and P line, the others need to “die”. They to stop to sell different models and have max two types of P9 Plus for example (my is P9VIE-L29 C605 and there is C10 to 900, why?) And rise the price will not help, they will sell even less phons

  • milho

    FUCKING COCKSUCKING MORONS- “Huawei’s consumer business group” DOESN’T mean “phone division” (like LG’s or Sony’s), they have LARGE (I bet on 500+ products) portfolio with “consumer electronics”.

    And there is no problem to sell more phones for less profit- in EU shitty Samsung A5 (2017) with Android 6.0 is priced OVER €350 and Huawei P8lite (2017) with 7.0 out-of-the-box and which is around 30% more powerful is priced UNDER €240. In fact they priced their phones at least 35% lower than Samsung’s and sell more phones- it’s that simple. Of course profit drops, but main objective for next 2 years is to become well known brand, and not only “known brand”- they must be known as brand with good quality and attention to user needs… And they succeed, at least for now…

    • Novage

      “FUCKING COCKSUCKING MORONS”

      Lol you have made my day

    • Goran

      Don’t even try that. P8 lite 2017 has 30℅ cheaper components and NO WAY NEAR build quality and NO WAY NEAR screen quality of A5 2017. There is a reason why A5 is better and should be more expensive. Even touchwiz is lighter and smoother than EMUI.

      • milho

        I see- you want to suck my big, fat dick… Only IDIOT can believe that crappy amoled is better screen- go hang yourself and stop breathing my air…

        • Goran

          Well, I guess you deserve P8 lite. And also, as soon as possible, help for anger control.

          • milho

            Your daughter is welcome to help me- a blowjob is always relaxing.

          • Benjamin Haube

            You’re a disgusting, pitiful troll. You give us all a bad name. Try having some respect or don’t post anything at all. I hope you get banned.

          • milho

            I hope you’ll break a leg… Or 2…

        • AMOLED is better, accept it.

          • milho

            If you consider things like unrealistic colors, burn-in problems and PWM for “better” than YES, amoled is better. Amoled is better ONLY in battery consumption… Simple questions:
            Is there amoled PC monitors? And how many of them are “professional grade”? None? 1? 5?
            How many amoled TV’s are on the market? 5? 20? Samsung is leader on TV market, they are leader in amoled screens- WHY they DON’T use amoled in TV’s?

            PS: Ask your ophthalmologist how PWM affects your eyesight…

          • There are no AMOLED TVs because AMOLED is costly. As for the saturation is concerned you can tune it down. Still it offers the best contrast unmatchable by an LCD panel.. I own an Honor 8 though.

      • My Honor 8 with EMUI beat Galaxy S7 with Touchwiz in every speed test… In real speedtest … not talking about benchmarks.

  • Anon

    They spent more money on R&D than Apple. Advertising is also important especially when breaking into new markets. These will pay off in the long run.

  • Jason C

    Funny how Americans think that Huawei is cheap while in China most people think they are expensive, especially when all Huawei phones are priced lower in China than the rest of the world.

  • eliHd

    Stop using porsche and Barcelona fc for your advertisement we all know Barcelona players and people who drives Porsche have and uses iphones instead of huawei mate 2017!