Huawei to Increase Smartphone Prices Further Amid Rising Memory Chip Costs

TLDR

• The Chinese manufacturer confirms additional smartphone price increases driven by escalating memory chip expenses
• Production costs per device have surged by $200, company executive reveals
• Budget smartphones priced below $200 could become extinct by the end of this decade
• First-half profits plummeted 36% year-over-year
• International expansion into European and Middle Eastern premium markets planned

Huawei Technologies has announced intentions to implement further smartphone price adjustments. The Chinese tech giant attributes this decision to escalating memory chip expenses that continue to impact the industry.

Richard Yu, who leads Huawei’s consumer division, delivered this announcement to media representatives this week. The briefing took place in the company’s home city of Shenzhen.

According to Yu, manufacturing expenses for each Huawei smartphone have already increased by approximately $200. The executive did not specify the exact timeframe during which this cost escalation occurred.

“Pricing adjustments are inevitable as we move forward, although we’ll keep them reasonable,” Yu stated. He acknowledged that these rising expenses are significantly impacting profitability.

Memory Component Shortage Transforms Industry Landscape

Memory chips serve as the storage foundation for smartphones and similar devices. The cost of these essential components has surged throughout this year.

This trend has elevated production expenses industry-wide. Competitors including Apple and Xiaomi have already implemented price adjustments in response to identical cost pressures.

Yu maintains that these market shifts could benefit Huawei strategically. He suggested that budget-focused competitors will face greater challenges than his company.

According to projections from Counterpoint Research, approximately 230 million smartphones in the sub-$200 category will exit the market before 2030.

“The low-end product market will shrink considerably, pushing manufacturers toward mid-range and premium segments, where Huawei maintains competitive advantages,” Yu explained.

Chinese consumer spending has remained sluggish throughout this year. Counterpoint’s data indicates that weekly smartphone transactions in China have declined by double-digit percentages compared to the previous year, a pattern that began in July.

The company’s financial performance reflects these market conditions. Huawei’s net income contracted 36% during the year’s first six months.

This decline was partially attributed to Huawei’s strategy of stockpiling components ahead of anticipated price increases. The company made these advance purchases to mitigate future cost exposure.

Telecommunications infrastructure and consumer devices each represent approximately 40% of Huawei’s revenue. These segments form the foundation of the company’s operations.

Foldable Device Category Fuels Huawei’s Momentum

Unlike competitors, Huawei has maintained stable pricing throughout this year. Rivals Xiaomi and Oppo have implemented several price adjustments during the same period.

Yu credits this pricing strategy with attracting additional customers. Market data supports this assessment.

The company anticipates approximately 8% growth in smartphone shipments this year. Conversely, other Chinese manufacturers could experience shipment declines reaching 34% during the identical period, based on Counterpoint’s analysis.

Foldable devices have emerged as a significant growth driver. Yu noted that Apple’s entry into the foldable segment has unexpectedly benefited Huawei.

Following Apple’s foldable iPhone launch, Huawei’s Pura X Max experienced a 76% sales surge. The device retails for $1,650 and has achieved 1.4 million units in shipments to date.

The company also markets the Mate XT 2, a tri-fold device starting at $2,980. Huawei aims to surpass one million units for this model within the year.

International expansion of premium devices represents a key strategic priority. Huawei is focusing on European and Middle Eastern markets for this initiative.

The company continues navigating the aftermath of US sanctions that severed relationships with chip manufacturers and software providers like Google. These restrictions compelled Huawei to develop HarmonyOS, its proprietary operating system.

Since 2021, HarmonyOS has powered Huawei smartphones in the Chinese market. The platform is projected to reach 100 million users before year-end.

Looking ahead, Huawei intends to deploy HarmonyOS on internationally sold devices in upcoming years, phasing out Android on those units.