Huawei Technologies Shines in the First Half of 2016

The Chinese smartphone vendor made a big lift despite slowness in the smartphone market.

Huawei Technologies Shines in the First Half of 2016

By: Abdullah Saeed Qureshi Published:
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The Chinese smartphone vendor made a big lift despite slowness in the smartphone market

Huawei Technologies, the world’s third largest smartphone maker, said on Monday that its revenues for the first half of 2016 surged 40% due to strong smartphone sales during the period. The Chinese smartphone giant reported $36.67 billion (245.5 billion yuan) in revenue, well above the consensus estimate. In 2015, it reported about 175.9 billion yuan in revenue for the first six months.

Huawei’s CFO Sabrina Meng said in an official statement: “We achieved steady growth across all three of our business groups, thanks to a well-balanced global presence and an unwavering focus on our pipe strategy." She is also confident that the company will maintain the current momentum and will deliver sound financial results at the year-end.

Huawei has witnessed extraordinary growth in the past one year, and several analysts predict that the company is set to lead the smartphone market this year as well, leaving behind tech giant Apple Inc (NASDAQ:AAPL), and the world’s largest smartphone maker Samsung Inc.

The company, which also specializes in the making of networking equipment such as antennas and base stations, is ready to challenge the world’s leading smartphone makers not only in the mainland territory but also in international markets such as the Middle East and Europe.

On the other hand, the company’s operating margin for the first half of 2016 dropped to 12% from 18% reported in the first half of 2015. The decline in operating margin was due to increased investments made by the company to assist future growth. Additionally, the company didn’t disclose its net profit for the first half.

Huawei also said that it will invest more in Research and Development (R&D) to come up new innovative products. The company also promised to remain customer centric and stick to its pipeline strategy. Miss Meng said: “Huawei will continue to work with its customers and partners to maximize the value of new developments and technologies, and to build a Better Connected World.”

In January 2016, CBN reported that Huawei has already established 16 R&D centers, which gives it a cutting edge over most smartphones vendors, as many of them depend on third parties for components. Through extensive R&D, the company is keen to manufacture its own components and develop smartphones according to consumers' needs.

In addition, the company’s consumer business revenue also shot up by 69% to $9.09 billion in the January-June period. Huawei’s consumer segment accounted for more than one third of the company’s total sales in the first half.

In an official statement, Huawei said: “Huawei's consumer business has maintained steady growth globally. Its flagship products, such as the P9, Mate 8, Honor V8, and MateBook, have all won significant support from consumers around the world.”

Moreover, the company’s smartphones also become one of the most favored device brands in about 30 countries. Moreover, “Huawei's first 2-in-1 laptop, the MateBook, is now available in dozens of countries.”

Huawei shipped more than 100 million smartphones last year; the first Chinese smartphone company to do so. The number one Chinese smartphone maker has ramped up its shipments to 100 million from three million in the past five years, representing a 33% increase. Currently, Huawei holds about 15% of the Chinese smartphone market, which Apple and Samsung once dominated. Likewise, on a global scale, Huawei enjoys a healthy 8.7% share of the smartphone market. In a short span of time, the smartphone maker increased its global market share from 4.1% to 8.7%, and industry experts believe that the numbers will continue to rise.

The strong half-yearly performance is primarily driven by Huawei’s high end smartphones including the likes of P7, P8 and P9. Last year, it sold about 750,000 units of P8 Lite and more than 200,000 units of P7 model. The numbers are expected to increase this year. In the first half, Huawei earned $7.23 billion in revenues from its smartphones sales, representing a mesmerizing 87% increase on a year-over-year (YoY) basis.

Huawei, which recently entered the lucrative US market after facing a ban since 2012 due to national security concerns, also launched its high end Mate 8 smartphone in the country. Though the US smartphone market is dominated by Samsung and Apple with about 26% and 36% share, respectively, it will be difficult for the Chinese smartphone maker to even grab a shorter piece of the market in the short term. However, Huawei will likely be able to stand should-to-shoulder with these giants in the long-run.

Huawei, which already holds a significant t market share in China, now aims to extend its reach in European, Latin America, African and Middle Eastern markets. Recently, the company also established a design facility in Paris. In addition, it is also working on setting up a design studio in San Francisco. The studio is still awaiting regulatory approval. Moreover, the company is also collaborating with Alphabet Inc for virtual reality and the Daydream product, and will soon launch a smartphone with this new virtual reality technology.

Huawei is one of the few smartphone vendors who have been able to perform despite an overall slump in the smartphone market. China, which is currently the world’s largest smartphone market, is experience a major slowdown in its economy, which has affected sales of most leading smartphone vendors, including Apple and Samsung. The Chinese company has made swift progress and we believe that it is likely to maintain its growth momentum despite uncertainties revolving around the smartphone market.