Profit growth key for Huawei

Firm seeking to take a bigger slice of the action from Apple in premium market

Huawei Technologies Co's renewed focus on profits in 2017 signals a shift in its smartphone business, as the Chinese tech group seeks to outsell Apple Inc in the premium handset sector, analysts said on Jan 2.

The world's third-largest smartphone vendor says it will focus on boosting profits this year, as it deals with greater global economic uncertainty.

"Despite our robust revenue growth, marketing costs and retail channel investments are rising too quickly," says Yu Chengdong, CEO of Huawei's consumers business.

The consumer unit, which mainly includes smartphones, saw its sales increase 42 percent to 178 billion yuan ($25.6 billion; 24.4 billion euros; 20.8 billion) in 2016, Yu says.

Roger Sheng, a senior hardware analyst at Gartner Inc, says the announcement indicates Huawei is no longer content with a rapid rise in smartphone shipments.

"It realized there is an urgent need to prioritize profits, especially as the global smartphone market reaches a saturation point and competition heats up."

Huawei shipped 139 million handsets in 2016, up 29 percent year-on-year. By comparison, the global smartphone market grew by just 1 percent, research firm International Data Corp estimates.

According to Sheng, the Shenzhen-based company has done a good job in cracking the high-end segment. Shipments of its premium handset P9 series exceeded 10 million units within eight months.

"But costs have outpaced its revenue and gross margin growth after Huawei wrote big checks for marketing," he says.

Huawei has signed Argentine soccer superstar Lionel Messi and US actress Scarlett Johansson as global ambassadors to promote its consumer electronics.

Last year, Huawei grew rapidly in overseas markets but lost its home crown to domestic rival Oppo Electronics Corp. The firm said it would streamline its smartphone product lineup and improve supply chain management.

Nicole Peng, research director at Shanghai-based consultancy Canalys, says it is difficult for Huawei to balance its revenue growth and profit growth in the short term, as it still needs to rely on large-scale marketing to shape its brand in foreign countries.

"Our research shows that if a firm's smartphone sales exceed a 10 percent share in a single market, it will have bigger say in its ties with retailers and handset parts makers. Huawei needs to work in this direction," Peng says.

masi@chinadaily.com.cn