In China’s slumping smartphone market, debate swirls over how Xiaomi’s 5 per cent margin pledge is too high
Honor, the sub-smartphone brand of Huawei, said it was difficult for Chinese tech hardware companies to record a 5 per cent net profit margin
Zhao Ming, the president of Huawei Technologies sub-smartphone brand Honor, said that was barely a commitment from Xiaomi.
“Among all the [tech] hardware companies in China, are there any of them able to achieve a net profit margin of five per cent?” Zhao said on the sidelines of the Global Mobile Internet Conference in Beijing on Thursday. “It should be extremely rare, given that net profit is a result of eliminating all costs, inputs and contributions.”
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Xiaomi, which has pledged to cap the net profit margin on its hardware business at five per cent from this year, declined to comment on the Honor chieftain’s criticism.
“But we are extremely proud of our unique and highly efficient business model,” the Beijing-based company said.
The debate has erupted in China as cutthroat competition is expected to force smaller players to exit the world’s largest smartphone market.
Analysts said this shake-up will play out this year because consumers in China are waiting longer for more significant upgrades in features before replacing their smartphones, which has contributed to a slowdown in domestic sales.
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China has increasingly become a fight between Huawei, Oppo, Vivo, Xiaomi and Apple according to a report on Thursday by research firm Canalys.