SMARTPHONES: Huawei’s Surging Honor, Xiaomi’s India Advance

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Bottom line: Huawei’s smartphone unit is finishing 2015 on a solid note, meeting its annual targets a month early, while Xiaomi will need to show better overseas performance next year to regain some of its fading momentum.

Huawei meets smartphone targets early

A flurry of new numbers are coming from the smartphone space as we head into year end, reflecting the different focuses of domestic leaders Huawei and Xioami. When the history books are written, 2015 will be remembered as the year when Huawei surged to become the world’s third biggest smartphone brand behind only Apple (Nasdaq: AAPL) and Samsung (Seoul: 005930), and also the clear Chinese leader.  But for Xiaomi, 2015 could be a year the company would rather forget, as it lost momentum in its home China market due to stiff competition and saw slow progress in its overseas expansion.

The latest headlines have Huawei forecasting its overall revenue will surpass the $60 billion mark this year, equating to a rise of 29 percent or higher from last year’s $46.5 billion. That would mark a nice acceleration from the previous year’s 20.6 percent revenue growth, with much of the gains coming from the company’s rapidly growing smartphone division.

Meantime, the news on Xiaomi is coming from high-profile international division chief Hugo Barra, who discussed some the company’s progress outside its home market. Unfortunately for Xiaomi, international sales don’t seem to be growing as quickly as the company had hoped to offset slowing sales growth in China.

Let’s begin with Huawei, whose $60 billion revenue forecast for 2015 came from Vice President Wu Dong, head of the company’s enterprise division, speaking at an event in Dubai. (Chinese article) Wu said Huawei’s enterprise business, another fast-growing unit that sells mostly to corporate customers, would grow by about a third to $4.2 billion in sales this year.

Huawei has recently said it expects to beat its earlier target of more than 100 million smartphone sales this year, which would represent a similar growth rate from last year’s 75 million units. In terms of dollar amounts, that would equate to about $16 billion in sales, or a little more than a quarter of its total.

Solid Honor

A separate new report talks to the head of Huawei’s division that makes smartphones under the Honor brand, and revealed the brand has already reached its target of 40 million units and $5 billion in sales for this year. (Chinese article) Those figures are consistent with ones the company discussed earlier this year (previous post), but it’s somewhat significant that Huawei is meeting the targets a month before the end of the year. It’s also significant that Honor’s share of Huawei’s total unit sales now stands at about 40 percent, as Huawei positions the brand to become one of its major flagships outside China.

Things aren’t so rosy for Xiaomi, which had originally targeted a similar 100 million smartphone sales this year but later pared back the figure to 80 million as its momentum slowed. It hasn’t commented much on that target lately, but it looks unlikely that it will meet the figure based on reports from other data-tracking firms.

The company had hoped to offset slowing momentum at home from overseas sales, and Barra is detailing some of the progress on that front in a new interview. Significantly, Xiaomi passed a major milestone by selling more than a million smartphones in the third quarter in India, its second largest market behind China. (English article)

Based on Bara’s latest comments and previous ones, it appears that Xiaomi will sell about 4 million smartphones in India this year, an impressive figure but still only a small fraction of the company’s 80 million total target for 2015. Barra’s comments are also noteworthy for what he doesn’t say, namely sales figures for any of Xiaomi’s other overseas markets that include Brazil, Singapore, Malaysia and Taiwan.

That would seem to indicate that those markets still aren’t contributing too much. If we’re generous and say those markets combined contributed another 4 million phone sales, then Xiaomi’s 2015 overseas sales would have totaled 8 million units, or just one-tenth of its annual target. I wouldn’t write off Xiaomi just yet, but would add that it will need to show some major advances overseas in 2016 if it wants to regain some of its fast-fading momentum.

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