SMARTPHONES: Huawei Takes New Look at India

Bottom line: Huawei’s new push into India looks like a smart and well-timed move to take advantage of the country’s emerging middle class, and could help it take the global smartphone crown by the end of next year.

Huawei takes aim at India

As it creeps up on its goal of becoming the world’s largest smartphone maker, the controversial Huawei appears to finally be waking up to the potential of the fast-growing India market. That’s the key takeaway from some Indian media reports last week, which quoted a company executive saying Huawei is planning a major push into an India market that it has largely ignored up until now.

The bigger theme in this particular story is that India is quickly emerging as a market not to be taken lightly on the smartphone scene. Global leader Samsung (Seoul: 005930) learned that early on, and until recently was the market leader before getting eclipsed by China’s Xiaomi (HKEx: 1810). I was quite surprised when doing some quick research for this post to learn that India actually passed the US to become the world’s second largest smartphone market in the third quarter, behind only China.

I’ll give some actual numbers in a moment to show what I mean, and why Huawei is suddenly taking such a strong interest in the market. The report in the Economic Times of India quotes a Huawei official saying the company is currently setting up 100 “experience zones” in the shops of its various retail partners in India. (English article) It further states the company plans to expand that count to 1,000 such zones by 2020.

The official discussed that brick-and-mortar expansion as Huawei held an India launch event for one of its more upscale models, the Mate 20 Pro, which will cost the equivalent of about $1,000 when it goes on sale this month. That’s quite a lot for such a price-sensitive market, and shows that Huawei thinks Indians are ready to start moving up the value chain with their smartphone purchasing. Such price sensitivity is one of the key issues that has largely kept global giant Apple (Nasdaq: AAPL) out of the market so far.

Returning to India, the figures are quite compelling in terms of the market’s potential. China is far and away the world’s largest smartphone market, with about 100 million units shipped each quarter. The US was second after that, but it got passed by India in the third quarter of this year when the former shipped 40 million units to the latter’s 43 million, according to my source at IDC. To put that in perspective, India only shipped 34 million smartphones in this year’s first quarter, so the number is growing quite quickly.

Huawei has been a relative bit player in India to date, though it has grown substantially over the past year to become the market’s seventh largest player with 3 percent share. Much of that has come through sales of its lower-end Honor brand phones, and much of that has been sold through online channels.

Emerging Middle Class

Thus this latest event last week appears to show the company is finally ready to take a shot at the country’s emerging middle class, which perhaps aren’t afraid to spend up to $1,000 on a phone. Apple will probably be watching this particular move closely, and perhaps we could see a push for iPhones coming as well if Huawei gets some positive results. The fact of the matter is that India is probably about 10 years behind China economically, and one could note that Apple has now been in China for nine years following its landmark entry in 2009. So perhaps India is now ripe for the higher-end smartphone picking.

All that said, Huawei’s move does look quite savvy and well-timed. The Chinese brands that now dominate the market, including Xiaomi, Vivo and Oppo, are famous for their cheap models that command little if any customer loyalty. By comparison, Huawei has done a much better job of cultivating a reputation for quality models at affordable prices, and I’ll be first to admit that I’m a convert to the brand and now own one that has left me quite satisfied for the last year and a half.

Accordingly, I do think Huawei could quickly become a major player in India, which in turn could help to boost its global standing as it challenges Samsung for the position as world’s biggest smartphone seller. Such a handover would be quite symbolic, marking the first time a Chinese brand has taken the global smartphone crown. That’s unlikely to happen this year, but I could see it perhaps by the end of 2019 if this India campaign does well and other global trends continue.

 

(Visited 184 times, 1 visits today)