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HUAWEI sold a ton of phones in 2016, but profit margins are declining
Huawei, the third biggest smartphone manufacturer in the world in terms of sales, has recently released its financial report for 2016. The company probably has some mixed feelings about it based on the fact that it increased its revenue by 32 percent, while its operating profit stayed more or less the same when compared with the previous year (0.4 percent increase).
In 2016, the company generated RMB 522 billion in revenue, which is around $75 billion. Its operating profit stood at RMB 37 billion or $5 billion, however, when compared with the year before, HUAWEI’s profit margin dropped by three percentage points down to 9 percent. This is because the consumer electronics division, which has lower margins than the company’s enterprise business, contributed a larger share of the total revenue.
Huawei’s consumer electronics division grew thanks to great devices like the HUAWEI P9, Mate 8, and others. The company sold around 140 million smartphones last year, which is a 30 percent increase, but it still has a lot of room to grow, especially in Western markets. According to the financial report, HUAWEI made 45 percent of its 2016 revenue in China.
The company’s financial results can dramatically improve in the future if HUAWEI increases its presence in important global markets, mainly in the US. The Chinese manufacturer is well aware of this and has said that the US market is important in the long run. However, it is not a priority for the company at this point, at least not for its smartphone business.
HUAWEI has released a few interesting smartphones this year including the P10 and P10 Plus. It also has quite a few great devices on offer under its HONOR sub-brand, which offer an even better price performance ratio. The HONOR 9 should be hitting the American market sometime mid-year.
At least for now, it looks like the company has a bright future ahead. It is doing great in China and has been increasing its presence in Europe. Once and if it makes it big in the US, it just might challenge Apple for the number two spot on the list of the biggest smartphone manufacturers in the world.