At IFA 2016 in Berlin this September, Huawei Consumer Business Group unveiled the Huawei Nova and the Huawei Nova Plus, the first smartphones in a new series designed to meet the needs of a more diverse customer-range. As the world’s third largest smartphone vendor, Huawei is spreading its wings, says Roland Sladek, vice president of International Media Affairs at Huawei, who recently spoke to Active Telecoms about the challenges Huawei faces in penetrating new markets like the United States, to see through its ambition to be the top premium smartphone distributor in the world.
2016 has seen Huawei increase its reach as a strong premium brand. Earlier this year, TrendForce, a global market intelligence provider, published its yearly ranking of the world’s foremost smartphone manufacturers. Huawei comfortably moved its way up to number three, while Lenovo slipped down a place. The Chinese tech giant shipped over 100 million smartphones during 2015 to account for roughly 8.4 percent of the market share. To achieve this, Huawei has had to reposition itself in the market as a premium brand.
“Huawei has a triple definition of innovation. The first is in terms of products, services and solutions which is classic innovation. Huawei invests heavily into research and development, specifically US$9.2 billion in 2015 which is 15 percent of its overall sales,” Mr. Sladek told Active Telecoms.
“The second type of innovation is ownership structure: Huawei is privately-owned so we have about 80-90 thousand shareholders who get to collectively decide the future of the company,” he added, referring to Huawei’s uniqueness as one of the largest privately owned companies in the world, which is important because it gives the company long-term perspective.
“We can invest in technologies which we believe are essential, and go for it,” said Sladek. “Many of our competitors are restricted by short-term financial pressures. Smart Cities is an example of this, where it’s necessary to invest in the long-term.”
The third example of Huawei’s innovation is ‘governance’. Huawei has a rotating CEO position – three people who rotate the position every six months. This creates “a collaborative decision-making process”. It also enables the company to make long-term decisions and plan for the future.
Moving up in the market
An unprecedented opportunity arose for Huawei Consumer Business Group in recent months. Its top rival, South Korean smartphone manufacturer Samsung Electronics had to recall its flagship Galaxy Note 7 device around the globe. Samsung has admittedly suffered a loss of credibility in the smartphone market due to the fiasco. That leaves Huawei the chance to catch up to its other rival Apple.
But rather than focus on the mishaps of its competitors, Sladek says Huawei is “very much focused on its own strategy and doesn’t look too much at its competitors in the market.” He said Huawei has been “doing well with its focus, and has been significantly growing over the last five years to become the third largest smartphone vendor in the world, scooping up market share from Samsung, Apple, and other companies.”
Huawei is “very ambitious” he said, and “hopes to be number one at some point in the near future.” Sladek added that the company “understands that there are several dimensions of how to achieve this.”
The most important thing for Huawei is positioning its consumer brand in the premium segment of the market. Huawei is investing heavily in marketing and also corporate alliances with other premium companies such as Leica for its smartphone cameras.
Huawei’s second position is taking an international approach to expansion. The company is “heavily investing in certain regions such as Europe and the Middle East,” said Sladek. China is the world’s largest smartphone market where Huawei is now number one.
Huawei performs well in Europe, and is growing in Japan as well as GCC, said Sladek. The company is positioning itself as a premium brand; therefore, it seems to be more consumers in developed markets who are able to afford Huawei’s smartphones.
But to maintain a global position, Huawei has a selection of devices in the mid-range level which are selling in developing markets such as South Africa and Nigeria. Huawei’s recently released mid-range Nova devices – being more affordable – are aimed at emerging markets. Nova is considered a "mid-tier" brand for Huawei.
According to Sladek, Huawei made a strong decision not to try to do everything at the same time, and rather focus on certain areas and certain regions in order to establish itself comfortably in the market. Out of the company’s main lines of business – which include networks, cloud computing, and consumer devices – Huawei’s consumer business mainly consists of building up the brand.
Huawei had the choice between focusing on the U.S. or Europe, and it chose Europe where it has historic relationships with telecommunications operators. Huawei is “expanding its footprint there and becoming a more desirable brand,” said Sladek, confirming that it was the right decision for the company.
“Now Huawei wants and needs to be in the U.S., but it is very much a mid- to long-term aspiration. We began the journey last year with our collaboration with Google. Huawei produced the Google Nexus smartphone which was a huge success. This gave us the credibility to be in the U.S. where Huawei plans to launch new products in the future.”
The key issue is that Huawei doesn’t have a strong brand in the U.S. yet, and to be an important player there, it needs stronger brand positioning as a premium device choice instead of Samsung or Apple. This falls under Huawei’s premium market strategy, which Sladek says aims to achieve greater market penetration through innovation in its devices as well as through partnerships.
“Huawei launched a Corporate Identity Campaign – a multi-year communication campaign focused around three pillars to highlight Huawei’s innovation, its commitment, and assistance for our customers. For our consumer segment, we tend to highlight our premium positioning, and then on our network-side we try to highlight the innovation behind Huawei’s technical capabilities and what solutions Huawei brings to its corporate customers.”
One of the major challenges for Huawei looking ahead is that while the company is well-known in the networking space, it is less well-known in the cloud computing space. Therefore, Huawei is making an effort to position itself as an enabler in that ecosystem and establish different alliances with partners. In the consumer space, the challenge for Huawei is building a brand and positioning it in areas where the brand isn’t as strong.
“There are also corporate challenges,” said Sladek. “Huawei is a very successful company which has been growing in double digits the past few years which is amazing for such a huge company, so it’s important for Huawei to be modest and continue to focus on what customers want, because they are our main priority.”