Huawei reports slowest revenue growth in 4 years

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Chinese smartphone vendor Huawei is expecting revenue growth of 15% for 2017, a notable deceleration from 32% revenue growth in 2016 and the company's slowest calendar year growth period since 2013, according to Huawei chief executive Ken Hu.

This deceleration is due in part to a shift in Huawei’s smartphone strategy which has constrained growth of its mobile devices unit; Revenue from Huawei’s Consumer Business group, which includes smartphones and smartwatches, is expected to increase 30% in 2017, decelerating from 44% in 2016 and 73% in 2015.

Smartphone shipments for 2017 are projected to reach 153 million units and grow 9% over 2016, representing a slowdown from the 40% growth Huawei saw in 2016 over 2015 (see chart, below).

Huawei has undertaken two major smartphone strategy shifts in 2017 that are impacting its growth. First, the company announced in July 2017 that it would give up on low-end smartphones, opting instead to focus only on mid-range and premium devices. Second, Huawei is focusing on growing in developed foreign markets due to competition from other Chinese vendors both at home and abroad. Here's why Huawei's looking to high-end device sales outside of China: 

• Huawei is the market leader in China, but it can’t rely on its home market for growth as smartphone adoption there slows. Smartphone adoption in China was 71% in 2016 and will crawl to 74% in 2020, according to the GSMA. As adoption in China grows, shipment growth will be limited to users upgrading their handsets, rather than from new purchases of smartphones.
• Competing Chinese smartphone vendors are growing their presence in emerging markets, most notably with low-end devices. Xiaomi doubled its share of the global smartphone market in Q3 2017 over Q3 2016, as it YoY shipments growth 103% according to the IDC. Meanwhile smartphone shipments for OPPO, the fourth largest smartphone vendor globally in terms of shipments, grew 19%. That’s compared to Huawei’s 16% increase in global smartphone shipments in Q3. Xiaomi and OPPO haveboth heavily invested in growing shipments in India, but Huawei’s shift to high-end devices indicates it will look to developed markets for smartphone growth.

One key market Huawei is eyeing for expansion is the US. Huawei is reportedly in talks with US carriers Verizon and AT&T about selling its smartphones to US consumers in 2018. Huawei already sells its budget devices in the US via Amazon, Walmart and other retailers, but working directly with US carriers could help guarantee success in the market because selling devices via telecoms, which are the dominant distribution channels in the nation, could strengthen its presence in the US.

And the newfound ability to further tap into the world’s third-largest smartphone market will help the Huawei expand its global smartphone shares further, which can in turn, boost smartphone revenue. This method has worked for Huawei's expansion efforts in other developed markets, where partnering with telecoms has helped the company challenge Apple and Samsung in mid-range and premium devices.

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