Monday 22 January 2018

Huawei takes a bite out of Apple and Samsung in China market

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Yimou Lee

Smartphone shipments in the world's biggest handset market shrank in the first three months of 2015 for the first time in six years.

But one company is bucking the trend and is on track to considerably beat expectations. China's Huawei - the world's fourth largest smartphone maker globally - more than doubled its revenue in the first half of the year thanks to a focus shift to high-margin premium models. That helped push worldwide shipments between January and June to 48.2m phones and puts the company on course to move 100 million mobiles this year - a third more than last year.

The turnaround comes almost three years after the Shenzhen-based company decided to shed its budget appeal and challenge Samsung and Apple at the high-end of the market, where analysts said an increasing number of previously price-conscious Chinese consumers are willing to spend their money.

In contrast to Huawei, overall smartphone shipments in China shrank for the first time in six years in the first quarter, and one-time leader Xiaomi booked its first fall in sequential semi-annual sales, saying the domestic market is nearing saturation.

"There's that buzz going around Huawei in China right now and it's being increasingly associated with better product quality," said Bryan Ma, researcher IDC's Asia-Pacific vice president. "It's quite dramatic how successful they've been."

Behind that success is convincing Chinese consumers that it is worth paying more for its feature-packed yet moderately priced devices, Ma said.

Its first-quarter average selling price jumped to $222 from $128 a year earlier, he said.

Huawei's consumer business group, which includes its smartphone division, booked global revenue of $9.09bn for the first six months, up 69pc on year, and raised its year-end goal to $20bn from $16bn.

In China, where it sells most of its mobiles, phone revenue rose 124pc.

On Monday, head of consumer business Richard Yu in a memo touted the success of Huawei's high-end P8.

The handset is priced in China well below premium models from rivals such as Samsung, which fell out of China's top three in the first quarter for the first time since 2011.

"The consumer business group recorded an unexpectedly high rate of growth," Yu wrote without elaborating.

Huawei's consumer business division makes electronic goods such as smartphones, smartwatches, tablet computers and modems.

Analysts said Huawei's sales growth may not be down to company strategy alone, and that it may have benefited from pricing or distribution missteps at competitors.

But now Huawei's fast-growing Honor sub-brand has copied Xiaomi's online distribution model, the triple-digit growth rates Xiaomi has enjoyed in China in recent years may be under threat, said Strategy Analytics executive director Neil Mawston. (Bloomberg)

Irish Independent

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