The mobile phone business has been delayed in 2015. Why, in 2016, Huawei’s overall profit margin has declined again? If it is as stated before, then I guess the following two reasons. First, it may be the pressure of the cost of chip development costs, or the increase in costs. Second, it may be the increase in the cost of mobile phone parts.
Who has lowered Huawei's profit margin? Who has lowered Huawei's profit margin?
After soaring 99 in the world's top 500 list, Huawei ushered in its half-year performance report.
On July 25, Huawei released its business performance report for the first half of 2016. According to the report, Huawei's revenue for the first half of the year was 245.5 billion yuan (about 37 billion US dollars), an increase of 40% over the same period in 2015. However, there is a flaw, that is, Huawei's operating margin for this half year is 12%, down from 18% in the same period last year.
At the same time of the increase in revenue, the profit margin has dropped a lot. At this time, I have a question: What is the lowering of Huawei's profit margin?
In the public report, the reason is as follows.
The Wall Street Journal said, "As the company increased its investment in smartphone business, the company's operating profit margin dropped to 12%." The Huawei spokesperson explained that "the shrinking of operating profit margin is due to the company's increased investment in smartphone business." To promote future growth."
In other words, the smartphone business has pulled the back of Huawei's profit margin.
In the general impression of the average person, Huawei is a mobile phone brand. In fact, the smartphone business is just one of Huawei's three major businesses, but it is more beautiful in recent years and more close to ordinary consumers.
However, in 2015, the smartphone business (both consumer business) was Huawei's “contributorâ€.
In the first half of 2015, Huawei achieved sales revenue of RMB 175.9 billion, a year-on-year increase of 30%; operating profit margin of 18%. At that time, Huawei officially attributed the growth in the first half of 2015 to the development of the terminal consumer business. Huawei's 2015 annual financial report shows that Huawei's 2015 sales revenue was 395 billion yuan, and consumer business revenue reached 129.1 billion yuan. According to the data, Huawei's smartphone shipments in 2015 were 108 million units.
In 21015, in the case that the domestic mobile phone brand's profit margin is generally not high, there is data that Huawei's mobile phone ranks first in domestic mobile phones with a net profit margin of 8.6%, and Huawei has become the most profitable domestic mobile phone manufacturer.
Although Huawei's mobile phone has made great achievements in “Greater Huawei†in 2015, the net profit margin of 8.6% of mobile phones in 2015 is still a drag-and-drop role compared with Huawei's overall profit margin of 18%.
The mobile phone business has been delayed in 2015. Why, in 2016, Huawei’s overall profit margin has declined again? If it is as stated before, then I guess the following two reasons.
First, it may be the pressure of the cost of chip development costs, or the increase in costs.
Huawei's annual research and development costs are high, but this research and development should involve all Huawei's business.
However, part of Huawei's R&D expenses is definitely aimed at the smartphone business.
According to statistics, nearly 30% of the mobile phone chips used by Huawei belong to their own chips. Here, we will not entangle the autonomy of Huawei chips. Looking at the sales of Huawei's mobile phones in 2015, we can generally estimate the number of Huawei's own chips in 2015.
There is a saying in the industry that if the shipment size does not exceed 2-3 billion units, it is not cost-effective to develop chips independently. I think this is what it means to plan for shipments to share R&D costs. According to this statement, the research and development cost pressure of Huawei's mobile phone chips should still be very large.
In order to catch up with even the mainstream products of rivals, Huawei should increase its R&D investment.
In this case, the pressure on the cost of chip development costs, or the increase in research and development costs, may reduce the profit margin of Huawei's mobile phones, thereby lowering Huawei's overall profit margin. The phrase "to promote future growth" should be said to mean this.
Second, it may be the increase in the cost of mobile phone parts.
Before, the characteristics of China's mobile phone brands were low-priced and high-priced. Some manufacturers who are proficient in this road have always been very beautiful. However, since last year, this feature has begun to reverse, and several manufacturers who have taken the high-priced route have begun to become popular.
Huawei's mobile phone has adopted a similar high-priced approach to its flagship product in 2016.
In 2016, Huawei's new flagship phone P9 used a Leica lens. Despite the controversy of this new girl, there was even a "photo door incident." However, one fact that cannot be ignored is that a mobile phone with a Leica lens definitely adds cost.
What is the cost of Leica? At present, Huawei has not disclosed it. However, there are various rumors. There are even two tit-for-tat rumors, one for a Leica lens and the other for a cost of $1,500.
Such an unreliable and mutually contradictory statement, we don't have to pay attention to it first. If Huawei's profit margin is really affected by mobile phones in the first half of this year, the cost of the Leica lens may play a role.
According to data released by Huawei, the sales of Huawei's new flagship P9 and P9 Plus have exceeded 2.6 million units in the past two months. If the price does not follow the corresponding increase in the price, then the profit margin will naturally decline.
If Huawei's profit margin decline is a factor in smartphones, it should be the above two reasons.
In addition, in the first half of 2016, Huawei did not segment the income of different businesses. However, in addition to mobile phones, I believe that Huawei's profit margins should be affected in other areas, mainly in the carrier business.
The golden age of the communications industry has passed, and Huawei and its rivals will not develop as fast as before, and the competition will become more intense.
Let's take a look at Huawei's opponents.
On July 19, Ericsson’s second-quarter earnings report showed that its revenue was SEK 54.1 billion (approximately US$ 6.44 billion at the financial reporting exchange rate), a year-on-year decrease of 11% and a 4% increase from the previous month. The net profit was SEK 1.6 billion (approximately US$ 197 million). ), both year-on-year and month-on-month fell by 26%.
On May 10, the first quarter of fiscal 2016 released by New Nokia (after merger with Alcatel-Lucent) showed that Nokia’s first quarter net sales were 5.499 billion euros (US$6.256 billion) according to IFRS. ), an increase of 87% over the same period last year of 2.935 billion euros; a net loss of 513 million euros (about 584 million US dollars), while a net profit of 177 million euros in the same period of 2015.
And Huawei, the rival of another business in another field, is not satisfactory. Cisco's fiscal third quarter of fiscal 2016 (unlike our calculations) reported that Cisco's third-quarter net profit was $2.3 billion, down 4% from $2.4 billion in the same period in 2015; net revenue was $12 billion. , down 1% from the $12.1 billion in the same period in 2015.
Huawei did not elaborate on some things in the semi-annual financial report, but its profit margin should be affected when its rivals are sluggish and Huawei's own revenue is greatly increased.
In addition, there are reports that “Huawei has increased its investment in the futureâ€. I think that future investment in 5G and other futures should also affect Huawei's profit margin.
The impact of business outside the smartphone business on profit margins should continue.
Come back, let's talk about Huawei's smartphone business.
According to reports, Huawei has announced that in the first quarter of 2016, Huawei's mobile phone shipments have reached 28.3 million. According to the data, Huawei shipped 29 million units in the second quarter of 2016. In this way, the total shipments of Huawei mobile phones should not be lower than last year, or even more than last year, but the extent of the transcendence will not be too large. Therefore, in the second half of the year, Huawei's profit margin should also be affected by the smartphone business.
In this way, there is a smartphone business that lowers Huawei's profit margin, and there may be other businesses, including those that we have not analyzed in detail.
In summary, there are many factors that drive down Huawei's profit margin, and the impact of these factors on the future will exist for a long time. Therefore, if Huawei's profit margin continues to decrease in its next financial report, we should not be surprised.
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