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.
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.