Telecoms

Huawei Five-O

US consumers mispronounce Huawei as ‘Hawaii’

Huawei: top 3 in handsets by 2015?

Two tigers cannot share the same mountain, says the Chinese proverb. And for handset sales at least, it seems that China’s Huawei and Ericsson, which is headquartered in Sweden, won’t be prowling the same terrain in the years ahead.

That’s one conclusion to be reached on news that Huawei is stepping up its efforts to sell more mobile handset devices at a time when Ericsson has decided to do the precisely the opposite.

Growth in international sales raised Huawei’s total revenue to Rmb185.2 billion ($27.4 billion) in 2010, almost triple that of five years ago. Ericsson booked $28.3 billion in the same period, just $930 million more. That suggests they are practically level-pegging, says Bloomberg, given the difference equates to less than two weeks of Huawei’s sales last year.

Of course, Huawei still draws most of its revenues from network equipment sales, and it is here where its competition with Ericsson is most direct. But the Shenzhen-based firm has also been marketing its consumer devices business more aggressively than its European rival, chasing fast-growing demand for smartphones and tablet PCs.

Huawei Device, the division that sells handsets, wireless cards and tablet PCs, posted a 40% rise in shipments to 72 million units in the first half of 2011, with sales up 64% to $4.2 billion. Huawei, which ranks ninth in global sales of mobile devices, says its goal is to be one of the top three mobile phone brands by 2015. Ericsson, meanwhile, threw in the towel on making cellphones last October, announcing that it had sold its 50% stake in the joint venture Sony Ericsson for $1.5 billion. The (struggling) mobile handset vendor is now wholly-owned by Sony.

Ericsson says it no longer sees obvious synergies in having both a network technology portfolio and a handset business, with its consumer-focused business adding little to its core operation, which is selling equipment to telecom firms. Ericsson held about 20% of the $78.6 billion global market for carrier network infrastructure in 2010, according to estimates from research firm Gartner.

Ericsson also admits that it was struggling to keep up in the handset business. “In the past, 90% of time spent on cellphones was used for making voice calls and 10% for sending SMS. But for smartphones, 25% is for making calls and the rest is for doing other stuff. Ericsson is not the expert in this area,” says chief executive Hans Vestberg.

Although relatively new to the mobile device business, Huawei mustthink that it won’t have a problem bulking up its own expertise. It has already made commercial inroads in the US, where it has faced persistent problems selling its network equipment. Fortunately, US politicians seem much less bothered by Huawei’s activity in the handset market. Device-related revenue in North America was on pace to double in 2011, from a base of $772 million in 2010. The Chinese firm has also broken into the top ten of smartphones sales sold to US consumers, ranking seventh in the third quarter of 2011, according to technology data firm NPD Group.

In the US, Huawei has focused on selling low-to-mid-tier smartphones via deals with regional carriers. For instance, it has introduced the Ascend at Cricket Wireless, a small carrier with 7 million subscribers. Priced at $150 (without a contract), that bettered Cricket’s existing smartphone offering by $100. Huawei also sells smartphone models through MetroPCS, another regional wireless provider, at prices of less than $100, says the Wall Street Journal.

But Huawei still has to address several challenges if it is to climb further up the handset rankings. For a start, competition at the lower-end is getting more intense from manufacturers like local rival ZTE and LG of South Korea. Nor is Huawei very well-known in much of the US and those that have heard of the brand often mispronounce it.

“Hawaii” is a particular favourite.

“We’re not known to the general public,” James Jiang, vice president of product and marketing for Huawei, admitted to an industry gathering in San Diego late last year. “But we’re taking the initiative to build a name for ourselves”.


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