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China’s Smartphone Sector Set for Shakeout, Says Huawei

By noreply@blogger.com (InfoseekChina)

(WSJ) Huawei Technologies Co.’s sales of smartphones and other consumer products are holding up in China despite slowing economic growth, with global revenue from the retail business set to grow 30% next year to more than $20 billion, according to a top executive.

Richard Yu, who heads the Chinese company’s consumer business group, said on Friday that the slowdown in China could still trigger consolidation in the domestic smartphone market which would benefit Huawei.

“The cool down is good for us, there are too many competitors in the market,” Mr. Yu said in an interview with The Wall Street Journal on the sidelines of the IFA trade show here.

Long known as a telecommunications-equipment supplier to global carriers, Huawei, which has been expanding quickly in the smartphone market, has already toppled Samsung Electronics Co. in China where 425 million smartphones are expected to be shipped this year.

Globally, the Shenzhen-based company became the third-largest smartphone maker by shipments in the second quarter behind Samsung Electronics Co. and Apple Inc., according to data from research firm IDC.

The Shenzhen-based firm’s smartphone shipments rose 39% to 48.2 million units in the first half of this year. Chinese rival Xiaomi Corp. in comparison sold 34.7 million smartphones in the same period.

To sustain growth, Huawei is attempting to sell more high-end smartphones. This week at IFA, Huawei unveiled the Mate S smartphone, which is the Chinese company’s most expensive handset at 750 euros ($845). Mr. Yu said he aims to sell “several millions” of the Mate S this year, after selling 3 million in the first four months of its predecessor flagship phone, the P8, which was launched in the spring.

“In terms of technology we can do better than our competitors, but we need some time to build up the trust of the brand,” he said.

For many years, Huawei supplied low-cost devices to mobile operators to be sold under their brands. Entering the high-end segment in its own right is a logical step for Huawei, Mr. Yu said.

“With high-end phones we have a higher profit-margin, so more money to invest in research and development,” he said, declining to give specific figures.

Mr. Yu also said that the company won’t be increasing its spending on marketing drastically. He said Huawei currently spends less than 10% of its consumer products revenue to promote its products.

Mr. Yu has an ambitious target of becoming the world’s biggest smartphone provider in the world in three to five years, though he cautioned it could take longer.

“We don’t want to be just number two, that is not our company DNA, we want to be the number one.”

Still, in the U.S. the Chinese firm has a long way to go. A congressional report in 2012 concluded that Huawei posed risks to national security, alleging that the company’s telecom equipment could become a vehicle for Chinese spying. Huawei denies the allegations. In the U.S., its smartphone market share is less than 1%, according to IDC. “We entered the market too late, did too much (of the) white-labeling business,” he said. Huawei won’t sell the new flagship phone, Mate S, in the U.S., but Mr. Yu plans to bring high-end phones to the U.S. in due course. He didn’t provide a more specific time frame.

“As people now await new Apple phones, in future they will await new Huawei phones,” Mr. Yu said.

Source: Wall Street Journal by Archibald Preuschat

Source:: China’s Smartphone Sector Set for Shakeout, Says Huawei

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