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Huawei 2017 Analyst Event Day One: Growth in Revenue but Decline in Profitability

by Yiwen Wu | Apr 11, 2017

More than 500 analysts and media gathered from the world in Shenzhen, China for Huawei Global Analyst Summit 2017 from April 11-13. Our analysts from Wireless Smartphone Strategies (WSS) services are attending the event this year.

The key theme of Day One is an overview of Huawei’s corporate strategy as well as a brief performance review. Huawei has a mixed 2016 in terms of financial performance. Its overall revenue reached RMB 522 billion (USD 75 billion), up +32% YoY. However, its operating profit margin dropped to 9%, significantly down from 12% a year ago. Huawei generated RMB 37 billion (USD 5 billion) operating profits and grew a merely 0.4% YoY. The decreased margin is largely due to the greater portion of lower-margined consumer business, as well as much higher marketing expenses on branding, channel and others in 2016.

While the operator business remained the lion’s share (56%) of Huawei’s 2016 revenue, the consumer business increased its contribution to 34% this year, up from 32% in 2015. The consumer business group (smartphone, MBB and other products) in total posted revenue of RMB 180 billion  in 2016, significantly up +44% YoY. Its global smartphone shipment reached 140 million units in 2016 and grew +30% YoY.

Geographically, China contributed to 45% of Huawei’s total revenue in 2016, up from 42% in 2015. It is a combined result of strong growth in its 4G LTE networks business and its smartphone business in domestic market. All other regions (Europe, Africa, Middle East, Asia Pacific and America) witnessed healthy growth in 2016, while their total contribution declined. For US market, Huawei acknowledge its strategic importance for the long run, but clarified not a prioritized market in the short run, at least for smartphone business for now. 

Regarding to the smartphone business, Huawei remained as the world 3rd largest vendor by volume and by value in 2016, according to our latest report from Wireless Smartphone Strategies (WSS) services. (Our WSS services track and forecasts global smartphone shipments by region by quarter for 27 of the world's largest vendors from 2015 to 2018 in this report.) However, compared with Apple and Samsung, the operating margin for its smartphone business remained slim. How to increase its profitability is the key issue for Huawei Consumer Business Group to address in 2017.

Looking forward, Huawei is going to prioritize profitability over volume in its smartphone business. What is its implication on the vendor’s smartphone shipment and its global expansion in 2017? More specifically, what is expected change on the vendor’s strategies on product, channel, and branding in 2017? Please stay tuned for our day two blog.

Day One-Huawei Event Photo by Linda

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