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Thursday, January 24, 2013

Why Huawei should get out of the mobile handset market

or why Huawei need to spend their £1.6 billion profit on marketing

James Rosewell writes:

Huawei is a company one can’t miss at Mobile World Congress. They bring their own building!  Plus last year a wonderful “Pegasus” flying horse sculpture made using Ascend handsets was proudly displayed next to the main fountain to hail the launch of the Ascend series of handsets.

Huawei has been busy following MWC12. They now run major parts of Everything EverywhereThree and O2’s network in the UK. On a less positive note they’re not welcome in the US.

But how has the devices side of the business performed?

Poorly when measured by their share of web traffic. According to over the past 15 months web usage share has fallen in the US to below 1.5% and remains static in the UK not peeking above 0.2%. See the following chart.

Huawei Share of Web Usage during December 2012 in the UK and US

Huawei Share of Web Usage during December 2012 in the UK and US. Source

Huawei has an excellent range of handsets including the Ascend D Quad; a quad-core phone released in 2012. They make the CPU themselves. Then there’s the mid-range Ascend G300 which retails for less than £120 on pay as you go in the UK. The problem isn’t handset quality or range. Huawei does not have an established consumer brand.

Huawei needs to fix the brand problem if they’re serious about the devices business in western markets. That does not mean a few high profile adverts during the Olympics or more clever sculptures at Mobile World Congress in February. It means much more:

  1. For consumers Huawei are an unknown brand. “Who are they?”  They will need a jaw-dropping advertising budget. How about the bulk of the recently announced £1.6 billion 2012 net profit for starters.
  2. Huawei needs serious deals with carriers. This is possible in the UK, but harder in the US due to the dim view rightly or wrongly taken by the US government. These will come if the aforementioned marketing budget is there.
  3. Aggressively priced market leading handsets. Samsung quality at a lower price.

Unless Huawei stumps up the advertising budget they might as well give up. Maybe switch to making good OEM handsets for others to slap their brand on. Or perhaps just stick to what they do best, networks, and avoid the mistake Ericsson made in the late 1990s trying to grow in the GSM handset business (anyone else remember the T28?).

Others have tried to enter the western handset market and failed due to insufficient marketing budgets. HP was the most recent example and it cost them dearly.

PS. Whilst writing this post I was discussing the subject with a a friend who'd been at CES a few weeks ago. He commented on the Huawei executives who all sheepishly hid their Samsung Galaxies when asked about Huawei's handsets. If the staff aren't using the handsets then that's not a good sign either.

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Categories: Handsets and manufacturers, OpinionNumber of views: 4231

Tags: smartphonehuaweimarketing

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