Huawei's margins are not 'razor thin' and Xiaomi famously - and deliberately - keeps its margins low by design. In fact Huawei just invested 15 billion dollars in R&D. It may not have the highest profits but it ploughs between 10 and 15% of its revenues back into its business. And that is all without access to the U.S market. It still has billions leftover. You can't do that on razor thin margins. And the CE division has been growing wildly for years now.
It's not about the 'greatest impact' because at this point it is simply impossible to know.
Literally impossible.
And long before the coronavirus, Huawei was evaluating opening manufacturing hubs in the EU, which it seems have just become official (5G first):
And if we are talking business, Apple remains heavily reliant on iPhone sales and absolutely DOES depend on shipping vast quantities. You only have to go back a year to see evidence of that. The 'minimal cost' doesn't make a lot of sense when there have been amazing growth numbers for Chinese brands with prices actually increasing. Those phones that do have a minimal cost are still propping up the bottom line as long as they are profitable in the bigger scheme of things.
Having a decent spread of phones at all price bands is a positive, not a negative and most Chinese brands have ecosystems too. It will be harder for some than for others but any failure in a Chinese brand would probably benefit other Chinese brands making them stronger in the process.
All the Chinese brands have put a lot of energy into expanding their presence in the E.U, India and South America. In the case of Huawei, Africa too.
You say a lot, but it is so contradictory it's hard to even converse with you. Margins are either there or they are not. Slim margins aren't a "feature," even if some companies are trying to make it work. They don't have a choice. And yes, Huawei does have funding from the PRC and the army, both directly and in as a favored company owned by PRC military leaders with a stated goal of taking over the world, initially economically.
But the reality remains that Huawei can't do things that it can't afford. The PRC is propping up domestic companies, but it's not going to fund the priority assembling of cheap Huawei phones for 80 milliion people mostly in India when it benefits more from Foxconn building 60M iPhones for Apple supporting its own affluent people. Alliances aren't rigid.
Your manufacturing link relates to an attempt by Huawei to talk about building 5G networking gear in the EU as an appeasement to get past the revulsion by the EU to allow PRC access to its infrastructure. It has nothing to do with phones (!), nothing to do with manufacturing capacity in 2020 (!!) as an option to the temporarily shuttered factories in China (!!!), and it is nothing more than talk (!!!!). It's literally the most random bit of totally irrelevant nonsense in your post.
And then you're going to argue (!) that Apple (does!!) sell and ship lots of iPhones. Again, the issue is that Apple has the resources and circumstances to pay for the assembly of ~60M $800 iPhones that it can sell at ~38% margins, which is a totally different situation than Huawei and other Android makers who desperately need to figure out how to make more like 80M $200 phones with near 0 margin just to remain as barely profitable as last year. Those are two wildly different things.
Huawei doesn't just have lots of prices, it has an ASP of ~$230. So that fact that it sells some inconsequential number of $1000 or $2500 show off models is just as pointless as Samsung selling $300 phones and a smattering of wildly expensive concept pieces. Look at Samsung's profitability in IM and see how well that "wide spread" is working. Hint: Samsung IM is circling the drain.
Huawei is certainly trying, but going into Africa to sell even cheaper phones is not exactly a hedge. And Huawei is also caught up in the US blocking Google from allowing it to sell Google-Androids to markets that demand google apps, including the very valuable EU market, which is much more valuable than SA, India, etc. Not to mention the US.
I know you are arguing on behalf of Huawei, but I'm only arguing on behalf of reality. Apple is well positioned because it has done a number of things very well, but there are also other factors that have nothing to do with Apple itself in play here, including the chaos of the Trump administration and the fact that this outbreak is occurring in the middle of a country that Huawei is based in and now gets most of its sales from.
This isn't Apple vs Huawei, it's Apple, Huawei and other companies and their positions in a complex world, market, and turn of events.
Also, you've been materially wrong and dishonest about Huawei here repeatedly because you have a strong emotional attachment to the company. I've been writing about Apple and the CE market for 15 years, and my goal isn't just to aggrandize or defend Apple, it's to accurately describe what's going on.
It just sounds like I'm defending and aggrandizing Apple because Apple is winning on a level never seen before. That's why I like to remind people that Apple wasn't wining in the 90s "just because it was Apple," and that if Apple did things the losers were doing it would suffer similar consequences. I'm not a brand worshiper. I'm a realist trying to be as accurate as possible.
You are a brand worshiper. And that's why you are wrong so much and desperately need to spin up irrelevant facts such as "Huawei was talking about building 5G equipment in the EU, ergo, maybe it doesn't have so much exposure to manufacturing its phones in China!!"
Huawei's margins are not 'razor thin' and Xiaomi famously - and deliberately - keeps its margins low by design. In fact Huawei just invested 15 billion dollars in R&D. It may not have the highest profits but it ploughs between 10 and 15% of its revenues back into its business. And that is all without access to the U.S market. It still has billions leftover. You can't do that on razor thin margins. And the CE division has been growing wildly for years now.
It's not about the 'greatest impact' because at this point it is simply impossible to know.
Literally impossible.
And long before the coronavirus, Huawei was evaluating opening manufacturing hubs in the EU, which it seems have just become official (5G first):
And if we are talking business, Apple remains heavily reliant on iPhone sales and absolutely DOES depend on shipping vast quantities. You only have to go back a year to see evidence of that. The 'minimal cost' doesn't make a lot of sense when there have been amazing growth numbers for Chinese brands with prices actually increasing. Those phones that do have a minimal cost are still propping up the bottom line as long as they are profitable in the bigger scheme of things.
Having a decent spread of phones at all price bands is a positive, not a negative and most Chinese brands have ecosystems too. It will be harder for some than for others but any failure in a Chinese brand would probably benefit other Chinese brands making them stronger in the process.
All the Chinese brands have put a lot of energy into expanding their presence in the E.U, India and South America. In the case of Huawei, Africa too.
You say a lot, but it is so contradictory it's hard to even converse with you. Margins are either there or they are not. Slim margins aren't a "feature," even if some companies are trying to make it work. They don't have a choice. And yes, Huawei does have funding from the PRC and the army, both directly and in as a favored company owned by PRC military leaders with a stated goal of taking over the world, initially economically.
But the reality remains that Huawei can't do things that it can't afford. The PRC is propping up domestic companies, but it's not going to fund the priority assembling of cheap Huawei phones for 80 milliion people mostly in India when it benefits more from Foxconn building 60M iPhones for Apple supporting its own affluent people. Alliances aren't rigid.
Your manufacturing link relates to an attempt by Huawei to talk about building 5G networking gear in the EU as an appeasement to get past the revulsion by the EU to allow PRC access to its infrastructure. It has nothing to do with phones (!), nothing to do with manufacturing capacity in 2020 (!!) as an option to the temporarily shuttered factories in China (!!!), and it is nothing more than talk (!!!!). It's literally the most random bit of totally irrelevant nonsense in your post.
And then you're going to argue (!) that Apple (does!!) sell and ship lots of iPhones. Again, the issue is that Apple has the resources and circumstances to pay for the assembly of ~60M $800 iPhones that it can sell at ~38% margins, which is a totally different situation than Huawei and other Android makers who desperately need to figure out how to make more like 80M $200 phones with near 0 margin just to remain as barely profitable as last year. Those are two wildly different things.
Huawei doesn't just have lots of prices, it has an ASP of ~$230. So that fact that it sells some inconsequential number of $1000 or $2500 show off models is just as pointless as Samsung selling $300 phones and a smattering of wildly expensive concept pieces. Look at Samsung's profitability in IM and see how well that "wide spread" is working. Hint: Samsung IM is circling the drain.
Huawei is certainly trying, but going into Africa to sell even cheaper phones is not exactly a hedge. And Huawei is also caught up in the US blocking Google from allowing it to sell Google-Androids to markets that demand google apps, including the very valuable EU market, which is much more valuable than SA, India, etc. Not to mention the US.
I know you are arguing on behalf of Huawei, but I'm only arguing on behalf of reality. Apple is well positioned because it has done a number of things very well, but there are also other factors that have nothing to do with Apple itself in play here, including the chaos of the Trump administration and the fact that this outbreak is occurring in the middle of a country that Huawei is based in and now gets most of its sales from.
This isn't Apple vs Huawei, it's Apple, Huawei and other companies and their positions in a complex world, market, and turn of events.
Also, you've been materially wrong and dishonest about Huawei here repeatedly because you have a strong emotional attachment to the company. I've been writing about Apple and the CE market for 15 years, and my goal isn't just to aggrandize or defend Apple, it's to accurately describe what's going on.
It just sounds like I'm defending and aggrandizing Apple because Apple is winning on a level never seen before. That's why I like to remind people that Apple wasn't wining in the 90s "just because it was Apple," and that if Apple did things the losers were doing it would suffer similar consequences. I'm not a brand worshiper. I'm a realist trying to be as accurate as possible.
You are a brand worshiper. And that's why you are wrong so much and desperately need to spin up irrelevant facts such as "Huawei was talking about building 5G equipment in the EU, ergo, maybe it doesn't have so much exposure to manufacturing its phones in China!!"
Nothing is contradictory.
Margins:
The last time I saw anything on Huawei's net margins, they were thought to be around 7.9% (net). That is far from slim.
Xiaomi, by design, has said they will not let net margins go over 5%.
Neither Huawei nor Xiaomi are exclusively hardware companies. They both have large services operations.
You spoke of not just low margins but 'razor thin'. My point was that in some cases, low margins were deliberate and in others, simply incorrect.
Huawei wouldn't, in its wildest dreams, be able to do what it has done in processors on 'razor thin' margins. It wouldn't be reporting billions in net profit either.
You'll have to detail what you mean by PRC funding. Huawei has said it receives the same kind of 'funding' from government as any other corporate citizen.
"Owned by PRC military leaders?" That's a throwaway line unless you back it up with some hard facts. I'll wait.
I thought it was the U.S which wanted to take over the world economically. Lots of evidence for that, from trying to destabilise the euro, preventing the euro from becoming an oil reference and trying to maintain the dollar as the world's reserve currency. But that's a China reference, not Huawei. They are not the same.
Huawei can't do things it can't afford? How about doing the things it can afford? Between 10 and 15% of revenues ploughed back into R&D year after year or using its net profits. It has some government financing to fall back on but that option is an option companies have the world over. Nothing new there and that is without getting into those cases where companies are considered too big to fail. Precisely over the last few weeks, members of the U.S administration have even banded around the idea of using government money to compete with Huawei. It seems that every day there is a new plan to pump government billions into U.S (or foreign) companies.
Foxconn is not Chinese, it is Taiwanese and doesn't only make phones. Your whole 80M Huawei phones vs 60M iPhones and China benefitting as a result, is nonsense. Pure nonsense. Everybody benefits from Hon Hai. Whatever the product being manufactured. If anything, China (and Huawei) benefit more from less U.S components shipping in those Huawei phones. In fact, the real loser here is U.S technology companies in general.
I said that Huawei had announced plans to begin manufacturing efforts in Europe. 5G first. It isn't just talk! Last year it was just talk because it was just a rumour. Now it has been announced officially. I even provided a link! Here is another.
And who referenced Huawei's EU manufacturing capacity for 2020. Not me! I said the decision had been up for consideration long before the coronavirus became an issue. There is no revulsion in the E.U over Huawei except when Pence & Co are wasting U.S tax dollars on Trump owned Irish golf courses. There is real revulsion towards Trump.
I'm arguing on behalf of facts.
The amount of 1,000 dollar phones that Huawei ships is not 'inconsequential'. We are talking in the millions too. And increasing. Apple, on the other hand, has remained flat for years and as a result will in all likelihood make yet another change in strategy to release a low cost offering. And it is still heavily dependent on iPhone.
ASP is only relevant for investors. The proof of that is precisely Huawei, which with a lower ASP has blazed a trail for others to follow (Apple included!).
Huawei definitely gets lower margins on phone chargers than Apple but everyone loves their SuperCharge charger more than the 5W Apple charger! What did you say? 38% margins and they still ship a 10 year old trickle charger!?
I read a news report that stated that 15% of confirmed cases result in pneumonia. Well, that’s not surprising considering that “about 80% of those who died were over the age of 60 and 75% of them had pre-existing health conditions such as cardiovascular diseases and diabetes.”
Those numbers match up. Young healthy adults seem to be survived by the course of the virus, which looks to be onset of symptoms+two weeks. Looking at the ramp of the confirmed cases and the delayed ramp of the recoveries, I predicted last week that recoveries would hit 2000 by Saturday, Feb 2nd., when that prediction panned out, conforming to me that recoveries are trailing confirmed cases bu two weeks. And than allowed me to predict for today, Tuesday, Feb 11, recoveries totaling 4000. And that has now panned out. So now I’m predicting recoveries at 10,000 by Friday, Feb 14.
i see news headlines that speak of total confirmed cases and total deaths, but so far none that include recoveries. The media tends to be sensationalist, and not very nuanced in their analysis of the facts. But soon the recoveries will ramp to a number that grabs their attention and it’ll start getting reported on. Recoveries will ramp strongly going forward, with the number of active cases (confirmed minus deaths and recovered) evening out at some point, I think around 60-90k. That’s when the pressure on the medical system levels out, allowing the medical response to scale to catch up. Then we should start to see a leveling out in new confirmed cases while the recoveries continue to ramp for a couple weeks as the majority move through the course of the virus.
By mid-March all of the above will have played out and the virus should be mostly contained.
It is fun to read old comments with predictions, isn't it? We are in mid-May and the virus is nowhere near contained.
Comments
You say a lot, but it is so contradictory it's hard to even converse with you. Margins are either there or they are not. Slim margins aren't a "feature," even if some companies are trying to make it work. They don't have a choice. And yes, Huawei does have funding from the PRC and the army, both directly and in as a favored company owned by PRC military leaders with a stated goal of taking over the world, initially economically.
But the reality remains that Huawei can't do things that it can't afford. The PRC is propping up domestic companies, but it's not going to fund the priority assembling of cheap Huawei phones for 80 milliion people mostly in India when it benefits more from Foxconn building 60M iPhones for Apple supporting its own affluent people. Alliances aren't rigid.
Your manufacturing link relates to an attempt by Huawei to talk about building 5G networking gear in the EU as an appeasement to get past the revulsion by the EU to allow PRC access to its infrastructure. It has nothing to do with phones (!), nothing to do with manufacturing capacity in 2020 (!!) as an option to the temporarily shuttered factories in China (!!!), and it is nothing more than talk (!!!!). It's literally the most random bit of totally irrelevant nonsense in your post.
And then you're going to argue (!) that Apple (does!!) sell and ship lots of iPhones. Again, the issue is that Apple has the resources and circumstances to pay for the assembly of ~60M $800 iPhones that it can sell at ~38% margins, which is a totally different situation than Huawei and other Android makers who desperately need to figure out how to make more like 80M $200 phones with near 0 margin just to remain as barely profitable as last year. Those are two wildly different things.
Huawei doesn't just have lots of prices, it has an ASP of ~$230. So that fact that it sells some inconsequential number of $1000 or $2500 show off models is just as pointless as Samsung selling $300 phones and a smattering of wildly expensive concept pieces. Look at Samsung's profitability in IM and see how well that "wide spread" is working. Hint: Samsung IM is circling the drain.
Huawei is certainly trying, but going into Africa to sell even cheaper phones is not exactly a hedge. And Huawei is also caught up in the US blocking Google from allowing it to sell Google-Androids to markets that demand google apps, including the very valuable EU market, which is much more valuable than SA, India, etc. Not to mention the US.
I know you are arguing on behalf of Huawei, but I'm only arguing on behalf of reality. Apple is well positioned because it has done a number of things very well, but there are also other factors that have nothing to do with Apple itself in play here, including the chaos of the Trump administration and the fact that this outbreak is occurring in the middle of a country that Huawei is based in and now gets most of its sales from.
This isn't Apple vs Huawei, it's Apple, Huawei and other companies and their positions in a complex world, market, and turn of events.
Also, you've been materially wrong and dishonest about Huawei here repeatedly because you have a strong emotional attachment to the company. I've been writing about Apple and the CE market for 15 years, and my goal isn't just to aggrandize or defend Apple, it's to accurately describe what's going on.
It just sounds like I'm defending and aggrandizing Apple because Apple is winning on a level never seen before. That's why I like to remind people that Apple wasn't wining in the 90s "just because it was Apple," and that if Apple did things the losers were doing it would suffer similar consequences. I'm not a brand worshiper. I'm a realist trying to be as accurate as possible.
You are a brand worshiper. And that's why you are wrong so much and desperately need to spin up irrelevant facts such as "Huawei was talking about building 5G equipment in the EU, ergo, maybe it doesn't have so much exposure to manufacturing its phones in China!!"
Margins:
The last time I saw anything on Huawei's net margins, they were thought to be around 7.9% (net). That is far from slim.
Xiaomi, by design, has said they will not let net margins go over 5%.
Neither Huawei nor Xiaomi are exclusively hardware companies. They both have large services operations.
You spoke of not just low margins but 'razor thin'. My point was that in some cases, low margins were deliberate and in others, simply incorrect.
Huawei wouldn't, in its wildest dreams, be able to do what it has done in processors on 'razor thin' margins. It wouldn't be reporting billions in net profit either.
You'll have to detail what you mean by PRC funding. Huawei has said it receives the same kind of 'funding' from government as any other corporate citizen.
"Owned by PRC military leaders?" That's a throwaway line unless you back it up with some hard facts. I'll wait.
I thought it was the U.S which wanted to take over the world economically. Lots of evidence for that, from trying to destabilise the euro, preventing the euro from becoming an oil reference and trying to maintain the dollar as the world's reserve currency. But that's a China reference, not Huawei. They are not the same.
Huawei can't do things it can't afford? How about doing the things it can afford? Between 10 and 15% of revenues ploughed back into R&D year after year or using its net profits. It has some government financing to fall back on but that option is an option companies have the world over. Nothing new there and that is without getting into those cases where companies are considered too big to fail. Precisely over the last few weeks, members of the U.S administration have even banded around the idea of using government money to compete with Huawei. It seems that every day there is a new plan to pump government billions into U.S (or foreign) companies.
Foxconn is not Chinese, it is Taiwanese and doesn't only make phones. Your whole 80M Huawei phones vs 60M iPhones and China benefitting as a result, is nonsense. Pure nonsense. Everybody benefits from Hon Hai. Whatever the product being manufactured. If anything, China (and Huawei) benefit more from less U.S components shipping in those Huawei phones. In fact, the real loser here is U.S technology companies in general.
I said that Huawei had announced plans to begin manufacturing efforts in Europe. 5G first. It isn't just talk! Last year it was just talk because it was just a rumour. Now it has been announced officially. I even provided a link! Here is another.
http://en.people.cn/n3/2020/0215/c90000-9657942.html
And who referenced Huawei's EU manufacturing capacity for 2020. Not me! I said the decision had been up for consideration long before the coronavirus became an issue. There is no revulsion in the E.U over Huawei except when Pence & Co are wasting U.S tax dollars on Trump owned Irish golf courses. There is real revulsion towards Trump.
I'm arguing on behalf of facts.
The amount of 1,000 dollar phones that Huawei ships is not 'inconsequential'. We are talking in the millions too. And increasing. Apple, on the other hand, has remained flat for years and as a result will in all likelihood make yet another change in strategy to release a low cost offering. And it is still heavily dependent on iPhone.
ASP is only relevant for investors. The proof of that is precisely Huawei, which with a lower ASP has blazed a trail for others to follow (Apple included!).
Huawei definitely gets lower margins on phone chargers than Apple but everyone loves their SuperCharge charger more than the 5W Apple charger! What did you say? 38% margins and they still ship a 10 year old trickle charger!?
I worship nothing, btw.
It is fun to read old comments with predictions, isn't it? We are in mid-May and the virus is nowhere near contained.