SHENZHEN-BASED telecom equipment and smartphone maker Huawei Technologies Co. Ltd. on Friday said annual profit growth was nearly flat, its slowest pace in five years, as it ramped up spending to boost market share amid fierce competition.

Strong competition in China’s smartphone market from previously little-known domestic rivals OPPO and Vivo cost Shenzhen-based Huawei its top spot as the biggest vendor in the domestic market last year.

“Only revenue growth and no profit growth will not be tolerated,” said Huawei rotating chief executive Eric Xu.

Huawei, the world’s No. 3 smartphone maker behind Apple Inc. and Samsung Electronics Co. Ltd., said 2016 net profit edged up just 0.4 percent to 37.1 billion yuan (US$5.3 billion).

Profits took a hit after Huawei’s consumer business spent an additional 4.9 billion yuan in part on branding, while it continued to expand its smartphone business, which is less lucrative than its telecom equipment business.

In February, Reuters reported that internal memos highlighted intense pressure to improve earnings and efficiency and a smartphone division head said the flagship unit had missed internal profit targets.

Global revenue climbed 32 percent to 521.6 billion yuan, slightly slower than 35 percent growth a year earlier, the company said.

Xu declined to elaborate on goals for its consumer business but said keeping a net profit margin of 7 percent for the group overall “is a reasonable target now.”

Huawei’s net profit margin overall dropped to 7.1 percent from 9.3 percent a year ago. It shipped 139 million phones last year, up 29 percent compared with a flat global smartphone market. That just missed an earlier target of 140 million.(SD-Agencies)