Huawei's Revenue Increased In 2016, Profitability Did Not

Huawei, one of the largest players in the telecommunications industry, has seen a mixed 2016 in terms of financial performance. In this year's Huawei Global Analyst Summit in Shenzen, China, Huawei provided a quick overview of its performance in the previous year. For 2016, Huawei reported revenues amounting to $75 billion (522 billion Yuan), which is higher by 32% compared to the same period last year. The main contributors to this big jump in revenue are the massive increase in the revenue of Huawei's consumer business division, which saw an increase in revenue of around 44% to $26 billion (180 billion Yuan) compared to last year, and the strong performance of its 4G LTE Network business. Under the consumer business division are the smartphone and mobile broadband products of Huawei, with the big jump in the division's revenue attributed to the strong sales of Huawei smartphones around the world. Recently, Huawei became the 3rd largest smartphone vendor in the world in terms of value and volume last year with the company seeing 30% increase in smartphone shipments in 2016.

However, it is not all good news for the Chinese telecommunications giant. Profitability, which measures the degree to which a company has been generating profit, is down for Huawei, with the operating profit margin of the company down to 9% from 12% last year. The decrease in the operating profit margin is caused by the increased contribution of lower-margin businesses to the company's revenue. Among the lower-margin businesses is the consumer business division, which increased its share of Huawei's revenue to 34% this year, due to its increased expenses on brand marketing. Despite the lower operating profit margin, the actual operating profit of Huawei went up to $5 billion, an increase of 0.4% compared to last year.

While it is estimated that Huawei posted $200 million in profit from its smartphone business, the company thinks it could do better in terms of profitability, especially in comparison with Samsung and Apple, and it had taken measures to improve profitability. Among the possible measures, Huawei considered laying off staff members that Huawei sees ineffective, as shown in a strong-worded internal memo from Huawei founder Ren Zhengfei. It may also slow down shipments of smartphone products and trim down product portfolio. Huawei hopes that the implementation of these measures improves the profitability of its smartphone division.

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Mark Real

Staff Writer
Mark Real has written for Androidheadlines since 2017 and is a Staff Writer for the site. Mark has a background in sciences and education. He is passionate about advancements on hardware and software technologies and its impact on people’s lives. Contact him at [email protected]
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