People probably already expect that something as novel and futuristic as a foldable phone would be expensive to make, justifying the expensive price tag slapped on them. What few might have expected, however, is that the price tag may actually be lower than what was needed to profit from them. At least that seems to be the case with Huawei’s latest foldable phone which it apparently sold cheaper than it should have, costing the company millions in production costs.
Making smartphones is neither easy nor cheap, something that startups and small companies have learned the hard way. Never mind the difficulty in finding an assembler who’d be interested enough to take your business, the parts for high-end components will make anyone but the richest companies would be able to stomach.
Although big, Huawei isn’t immune from such considerations. Its strategy, however, is unusual and probably not smart in the long run, especially considering the current status of its mobile business due to US restrictions. To ensure that its products are still accessible despite the high costs of production, it is selling them at a loss.
The example given by Consumer Business head Yu Chengdong was the Huawei Mate Xs. It didn’t go into sales numbers but mentioned that the 16,999 RMB ($2,400) foldable phone was actually sold at a loss and cost Huawei no less than $60 million. Considering how limited its availability is, the Mate Xs probably isn’t even selling by the hundreds.
The good news for Huawei’s remaining fans is that the company is willing to take the hit to sell its more expensive phones and probably hope to make up for it by the numbers. How long it will be able to keep that up, however, remains to be seen especially during these uncertain times.