Huawei has again mentioned that the cost of making foldable phones like the Mate Xs is too high at the moment. In fact, the CEO of the company's customer Business unit, Yu Chengdong, says all high-end phones like the Huawei P40 phones involve huge expenses.
So, even though the Chinese giant's flagships carry a hefty price tag, it insists that gross profit is low when compared to rivals like Apple and Samsung.
When it comes to conventional phones, the display panel, camera sensors, and chipsets are usually the pricey components. For instance, Huawei says a single camera component of the P40 costs over $100.
Mate Xs is not raking in profit
Throw bendable screens into the mix and things get more complicated and expensive. So even though the Mate X and Mate Xs cost around $2,400 and $2,700 respectively, Huawei is actually incurring a loss on the sale.
And it's no minor loss. Per Yu Chengdong, the company has lost nearly $60-70 million on the Mate Xs.
Huawei mainly attributes the loss to the cost of foldable screens. Understandably, this is a new technology, so no wonder prices are high. And unless the price comes down, Yu Chengdong doesn't think the company will be able to make money on bendable devices.
Previously, the executive had said that it can take up to two years for the price of foldable phones to come down to the level of ordinary phones.
Huawei is also increasing its R&D investment this year. Side by side, as the company continues to make more foldable devices, its scale of operations will also increase. This will theoretically allow the tech giant to reduce costs. And hopefully, this will be passed on to consumers.
Another idea is to sell bendable displays to other vendors to increase revenue. Royole, which released the first foldable phone, has already announced it will sell its second-generation flexible screen to ZTE.
Demand remains huge for foldable phones, at least in China
As for why Huawei is still making foldable phones like the Mate Xs despite losses, it's because of the high demand. Both Mate X and Xs received a great response during the initial flash sales in China. It took a couple of minutes for the inventory to get wiped out.
Huawei is seemingly willing to sustain losses in the short run to capitalize on the trend. That's why, instead of backing out, it wants to expand production.
In 2019, the consumer wing of the company managed to grow its revenue by 34 percent compared to the last year. In the wake of the ban stamped by the U.S., the manufacturer has increased its focus in China.
The worst is apparently over for China, as the country slowly returns to normalcy after the coronavirus outbreak. Huawei is confident that despite the pandemic and U.S. embargo, it will be able to achieve growth this year.
Thus, as long as other products are bringing in profits, Huawei can presumably afford to make losses on foldable phones.
As you may already know, the Mate Xs was an improved version of the Mate X. The phone's true successor is expected later this year.