Huawei has undoubtedly been performing well last year in the smartphone market. The Chinese manufacturer managed to inch closer to the likes of Apple and Samsung when it comes to the number of smartphone units shipped. However, Huawei has recorded a decrease in profit in 2016 compared to 2015 despite the fact that the company has sold 30 percent more smartphone units than the previous year.
According to a report by The Information, Huawei has recorded a $2 billion profit in 2016, $200 million down from the $2.2 billion profit recorded back in 2015. Not only that, Huawei reportedly had a projected target of $2.5 billion, so $2 billion is significantly lesser (20%) than the company’s internal target of profit. What could be the problem then?
The Information has reported that a couple of factors contributed to the drop in profit. One of the factors is the increase in pricing of components. It is a fact that smartphones in general have increased in their pricing compared to a few years ago. The price tags of Huawei handsets have definitely gone up as well, but due to the increased cost of components, that might explain why Huawei isn’t earning any more.
Another notable factor is the surge in marketing costs. This is possibly due to Huawei’s efforts to penetrate the Western market last year. With huge stars such as Hollywood actress Scarlett Johansson promoting the Huawei P9 flagship, it won’t be surprising if the company invested heavily on its marketing campaigns. Having said that, its efforts will likely cause the company to prosper in the long run.
Huawei is said to have doubled last year’s profits as its internal target for 2017, which will be $4 billion. Sounds ambitious, but not impossible at the same time. How well do you expect Huawei to perform this year?
Source: The Information
