Huawei Predicts More Smartphone Price Hikes Due to Memory Crunch

(Bloomberg) -- Huawei Technologies Co. plans to join rivals in jacking up smartphone prices to counter rising memory costs, betting on a chips-to-software edge to protect its lead while it explores markets abroad.

The Chinese technology champion has seen an average increase of $200 in its smartphone costs, according to Huawei's consumer business chief Richard Yu, though he did not specify a time frame for comparison.

"We'll have to raise prices going forward, though it will be moderate," Yu told reporters in Shenzhen, home to Huawei, this week. "It's hurting our profitability very badly."

At the same time, Yu said the memory crunch will give Huawei an edge as a premium smartphone maker against budget brands. Some 230 million smartphones priced below $200 will be wiped out by the end of this decade, market tracker Counterpoint Research recently estimated.

"Demand for low-end products will be further compressed, forcing everyone to move to the mid- and high-end segment, which is what Huawei excels at," Yu said. "We are confident we can survive this cycle to bring more product innovation."

Global smartphone and electronics brands from Apple Inc. to Xiaomi Corp. have seen their margins come under pressure this year, as an unprecedented AI buildout pushes up costs for various components. Apple, Xiaomi, and Huawei all raised pricing of their devices in September.

Amid the memory crunch, consumer demand in China has remained soft this year and weekly smartphone sales in the country have declined by double digits year-over-year since July, Counterpoint said this week.

Huawei's net income fell 36% in the first half this year in part because it stockpiled raw materials to mitigate impact from rising costs. Telecoms and consumer electronics are two major pillars of Huawei's core business, with each segment contributing about 40% (CK) to its total sales.

The company has largely kept its prices unchanged while domestic rivals Xiaomi and Oppo raise smartphone prices several times so far this year — a maneuver that Yu said was meant to win more customers.

The strategy seems to be working. Huawei is expected to see its smartphone shipment grow about 8% this year, while other Chinese brands are set to report declines as steep as 34% during the same period, Counterpoint said in an earlier note in August.