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Huawei Chips Away at Samsung

By noreply@blogger.com (InfoseekChina)

(WSJ) For the past three years, Samsung Electronics Co. has been the world’s top seller of smartphones, but its global lead is now under attack from fast-growing Chinese rival Huawei Technologies Co.

Long known as a telecommunications-equipment supplier to global carriers, Huawei has already toppled Samsung in China, the world’s biggest market, where 425 million smartphones are expected to be shipped this year. Globally, the Shenzhen-based company became the third-largest smartphone maker in the second quarter, according to data from IDC. This is due, in part, to its ability to gain market share in the Middle East and Africa, where smartphone growth exceeds that of any other region.

With handset revenue up 87% in the first half of this year, Huawei expects profit from its smartphone business to more than double this year. If its pace of growth continues, Huawei hopes to challenge top competitors Samsung and Apple Inc. in the smartphone market.

“The best product and the best innovation are coming from Huawei. Not from Apple, not from Samsung,” said Richard Yu, who heads Huawei’s consumer business including smartphones, at a briefing in July.

Huawei is trying to break out of the mold of a budget handset maker by selling more high-end models with higher price tags. On Wednesday, at the IFA consumer trade show in Berlin, Huawei unveiled the Mate S, which the company says will cost at least €600 (US$679) in Europe—its most expensive smartphone to date. It has a 5.5-inch touch screen that can distinguish between a light tap and deep press, a feature similar to what will likely appear in Apple’s next iPhones, according to people familiar with the matter.

The new flagship phone could help Huawei gain more ground against Samsung. The two companies compete in similar price segments and both make devices based on Google Inc. ‘s Android operating system.

Samsung’s global market share has been slipping amid stiff competition from Huawei and other Chinese rivals over the past year. In the second quarter, Samsung’s smartphone shipments fell 2.3%, with its share of the global market shrinking to 22% from 25%, according to IDC. In contrast, Huawei’s smartphone shipments rose 48% from a year earlier, giving it an 8.9% share and making it the fastest-growing competitor among the top five global vendors, IDC says.

Bhekinkosi Ncube, a 23-year-old legal adviser in Johannesburg, has owned several Samsung smartphones. In July, he bought a Huawei phone for the first time, paying $300 online for the Chinese company’s Ascend P7, which has a higher-resolution screen and larger battery capacity than Samsung’s Galaxy A5, which costs more on the same website.

“Huawei is a lot cooler than it used to be,” even though Samsung is a better-known brand, Mr. Ncube said.

In the Middle East and Africa, Huawei’s market share more than quadrupled in two years, from 2.6% in the second quarter of 2013 to 11% in the second quarter of this year, while Samsung’s share fell to 32% from 53% during the same period, IDC said.

As China’s smartphone market gets more saturated, the Middle East and Africa are becoming increasingly important. In the second quarter, total smartphone shipments in the Middle East and Africa jumped 60%, according to IDC.

“With aggressive plans to expand in the region, especially in Africa, Huawei will continue to be a threat to Samsung,” said Nabila Popal, IDC’s research manager for the Middle East and Africa.

Samsung declined to comment on its falling market share and how it plans to fend off competition from Huawei.

Ashraf Fawakherji, who heads Huawei’s smartphone business in the Middle East, joined the Chinese company in early 2013 after managing Samsung’s mobile unit in the Persian Gulf for six years. He says to compete against Samsung’s deep pockets, Huawei needed to think creatively about its marketing.

His team’s first Facebook campaign in 2013 asked people to pronounce “Huawei.” Thousands of people in the region submitted their recorded voices to win free Huawei smartphones.

Huawei has also enlisted the help of Nancy Ajram, a popular singer in the Arab world. In April, it launched an online contest asking fans to submit videos of them singing one of her songs. Finalists performed in front of Ms. Ajram and the winner received $25,000 of solid gold.

Expanding sales channels is, however, a challenge in the Middle East, where most phones are sold by retailers, not by telecom carriers. Mr. Fawakherji, a 20-year industry veteran, said his experience of working for both a local mobile distributor and Samsung came in handy, because he already knew managers at local retailers.

Huawei is also gaining market share in parts of Europe, where it has been sponsoring professional soccer teams such as Spain’s Atlético Madrid and Italy’s AC Milan. In the second quarter, its market share in Spain rose to 10% from 6%, while its share in Italy increased to 9% from 7%, according to IDC.

Still, Samsung’s lead in smartphones against Huawei remains large and the South Korean company is a far more established consumer brand. Given Samsung’s marketing might, it won’t be easy for Huawei to narrow that gap, some analysts say.

Last year, Samsung was ranked No. 7 in Interbrand’s 100 Best Global Brands ranking, while Huawei, the only Chinese company on the list, was No. 94. Huawei phones also have little presence in the U.S., where its telecom-networking-gear business has been effectively banned because of security concerns raised by lawmakers who said Chinese equipment could be used by Beijing for spying.

Huawei has rejected the view that it could pose a threat to security. It has said it would offer new smartphones in the U.S., without giving details.

Mr. Yu contends more consumers are starting to recognize the improvements in Huawei’s products.

“Rome was not built in a day,” he said at the briefing in July.

Source: Wall Street Journal by Juro Osawa

Source:: Huawei Chips Away at Samsung

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