Chinese technology group Huawei's sales grew almost one-third over 2016 while net profit rose just 0.4%, its smallest gain in five years, as a new focus on smart phone sales and preparations for the roll out of 5G networks left it with narrower margins.
Shenzhen-based Huawei, the world's No.3 smart phone maker behind Apple (AAPL) - Get Report and Samsung (SSNLF) , reported net profit of 37.1 billion yuan ($5.3 billion) in 2016, on revenues of 521.6 billion yuan.
Despite the slower profit growth CEO Xu Zhijun said he was happy with the results. "Margins ranging around 7% are appropriate," he said.
The group's slowing net profit growth follows a new push to expand sales of the company's smart phones in overseas markets and amid strong competition in its domestic market from rivals Vivo and OPPO Electronics.
Huawei shipped 139 million phones in 2016, up 29% year-on-year, and just under its target of 140 million. Revenues from the group's consumer business, which includes the smartphones, rose 44% over 2016 to 179.8 billion yuan. Huawei's telecom carrier arm, which provides infrastructure for mobile phone networks, posted revenues of 290.6 million yuan, up 24%.
Huawei's efforts to grow its mobile phone sales have been lead by significant investment in higher-specification models that are positioned to more directly take on Apple's leading iPhone brand as well as Samsung's upmarket phones.
Huawei spent 76.3 billion yuan on R&D in 2016, up from 59 billion yuan in 2015, as it prepared for the roll out of 5G networks and accelerated development of its range of phones. The company also took a 4.9 billion special charge related to marketing and promotion of its Mate 9 phone, which was launched in the U.S., a market Huawei had previously avoided due to issues with regulators.
Huawei made 45% of its sales in China in 2016, 30% in the EMEA region and just 8.5% in the Americas, notably in Mexico.