Vaunting ambition: can Huawei really become global smartphone vendor #1 within 4 to 5 years?

via Flickr © Janitors (CC BY 2.0)

via Flickr © Janitors (CC BY 2.0)

  • Wants to have "more than 20 to 25 per cent" of the global market by 2021
  • But can't do it without conquering the US market
  • And yet another novelty smartphone probably isn't the way
  • The "Daydream". Virtual Reality versus market reality in a single handset

Huawei of China wants to be the top-selling smartphone manufacturer and vendor on the planet by 2021 at the latest - and preferably by 2020. All it has to do to achieve that aim is overtake Samsung and Apple. It's rather more likely that we'll see a plume of white smoke emanating from the Vatican announcing that Huawei CEO Ren Zhengfei has been elected as the next pope.

Ambition is all well and good and when it is based on even a remotely realisable possibility it is admirable and what help keeps the world of comms technology turning. However, pie-in-the-sky posturing is something else. Is Huawei really expecting us to accept that within five years or less it will come to dominate the US market? The chances of that are close to zero.

In an interview with the Wall Street Journal, Richard Yu, the head honcho of Huawei's consumer electronics business, announced that the company expects to be "the No. 1 smartphone, smart-device supplier in the world" over the course of the next "four or five years" by which time it will have "more than 20 per cent, maybe more than 25 per cent" of the global market." As the old proverb puts it, "If wishes were horses, beggars would ride".

Look at the facts rather than executive spin. At the end of Q4 2015 was at Number 3 in the world ranking of smartphone vendors behind Samsung and Apple. That translated to a global market share of 8.1 per cent and Huawei wants to ramp that up to "maybe more than 25 per cent" by 2021 at the latest even as smartphone sales begin to taper off with markets around the world saturating and subscribers replacing their existing handsets less and less frequently. Meanwhile, Samsung and Apple will continue to innovate and compete in a market that never stands still. Sure there have been changes in the vendor rankings over the years but for Huawei to leapfrog the two behemoths ahead of it is more than just your average a tall order, it's beyond the bounds of reason given the handicaps under which Huawei labours in the all important US market.

It is true that Huawei has come from nothing to become an important world player in a very short time and continues to grow in many markets. Huawei's accounts show that it achieved a net profit increase of 33 per cent last year over what it recorded in 2014 but that was by no means due solely to increased handset and smartphone sales. Much of it came from sales on mobile and fixed line infrastructure hardware and therein lies a problem.

The US government has long been highly suspicious of Huawei, its antecedents and its relationship to and with the Chinese state, government, politburo, security services and the People's Liberation Army. Back in 2012 a US federal report said, unequivocally, that Huawei (and the other main Chinese telecoms equipment manufacturer ZTE) are direct and determined security threats to the United States and are engaged constantly in industrial espionage and cyber-warfare against the country.

Meanwhile, the US Commerce Department, acting on information and evidence that Hauwei and ZTE had been involved in busting UN and US sanctions, subpoenaed the company and demanded that it turn over "all information regarding the export or re-export of American technology to Cuba, Iran, North Korea, Sudan and Syria".

The report from the US House Intelligence Committee bluntly said that Huawei and ZTE “cannot be trusted to be free of foreign state influence” and directed that the two companies must be blocked from “acquisitions, takeover or mergers” in the US. Thus the authorities moved to prevent Huawei selling its network infrastructure products to Tier 1 and other important American telcos.

In response the aforementioned Ren Zhengfei, told the French newspaper, Les Echos, that he was sick  and tired of the company being "in the middle of US-China relations" and had therefore decided to exit the US market. He added that "Huawei is a private enterprise without any high-level political position. If Huawei gets in the middle of US-China relations it's not worth it. Thus we have decided to exit the US market, and not stay in the middle."


After that  unusual exhibition of frankness combined with petulance, the CEO quickly back-tracked and announced that Huawei would, of course, continue to support all its customers in the US and since then the company has refocused its attentions on selling to Tier 3 and smaller comms companies in the America. So now Huawei lists the likes of Union Wireless of Wyoming, United Wireless of Kansas and Pioneer Telecom of Oregon as customers. Locally significant they may be but AT& T and Verizon they ain't.

Meanwhile, Maurice D'Souza, the man responsible for Huawei's carrier sales in the US claims Huawei's revenues from US wireless operators grew by "between 10 per cent and 15 per cent between 2014 and 2015, (pretty vague, huh?. Surely he could be more accurate than that?) and "expects" revenues to be up again over 2016 - although he is remarkably coy about putting a figure on his optimism. What's more he won't name the "new carriers" that he claims are testing Huawei's kit. Hmm.

Mr. D'Souza says "We're working with a multitude of WISPs (Wireless Internet Service Providers and growing them". Presumably in a Petrie dish given that most WISPs have between 100 and 2000 subscribers and don't need to buy much in the way of equipment to provide service to such tiny subscriber bases. Huawei certainly isn't going to overtake Samsung or Apple by going down that particular route.

And Richard Yu admits it. He told the WSJ, "In the U.S. market people get smartphones mainly from the carriers. We will need to cooperate with them to promote our Huawei brand flagship smartphone".

That's quite an understatement given that almost no US carriers sell Huawei phones to their customers. Nonetheless Huawei is, at some unspecified date, going to launch "a new flagship smartphone" into the American market as well as the MateBook, which Mr. Yu describes as "a two-in-one laptop" and, last but not least, a smart watch. It begs the question that if neither Apple, Samsung or many others can't make consumers like smartwatches enough to buy them in serious numbers, what can Huawei possibly bring to the market that will change their minds? Suggestions on a postcard please to Cubicle No 3, Gentlemen's Conveniences, Waterloo Station, London, England.

Mr. Yu says, "In the US, we are going to need some more time to build our capability". Yup you sure are, and it will be a lot longer than four or five years. Huawei's new handset will come with virtual reality capability. It's called the "Daydream" and neatly sums what Huawei seems to be doing where its global smartphone ambitions are concerned.

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