In Numbers – The Rise of Huawei

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What makes a good smartphone brand, a great one? Innovation? Definitely. Collaboration with big brands? Works in the longer run. A presence in non-smartphone areas? More fishing rods in the pond, right? It’s quite a given, actually: a smartphone brand cannot be great by following a singular path.

Now while the last few years might have seen tumultuous changes in the smartphone arena – mainly in the evolution of technology, the emergence of powerful offerings in the budget segment and the demise of established players – Huawei has been one such brand which has gradually proved its mettle on a global scale. From partnering with Google for the Nexus 6P, to being the third largest smartphone vendor in the world – Huawei is definitely shaking up the industry as we know it.

And that shall be the crux of this article. I’ll be talking about the growth of the company as a whole, with emphasis on the share of the company on the local Chinese and the global markets, emerging markets, as well as other areas the company might be making its presence in.

A BROAD PERSPECTIVE

Huawei is a company that relies solidly on its technical breadth of product lineups. Smartphones are just the tip of the iceberg that encapsulates other areas such as telecom networks and advanced chipsets. In fact, the company that’s solely owned by its employees has four major entities: cloud, consumer, telecommunication and enterprise.

In all spheres, Huawei comes with a very unique proposition – of a low cost (although not the lowest in the market), but a very high quality vendor. It is this quality to price ratio which attracts collaborators and customers alike.

Huawei Watch 2

Deviating from the central idea of the article for a minute, it’s worth noting that more often than not, patents can propel a company forwards in multiple areas, and this is where Huawei truly made some headways. In 2014, the company topped the International Patent Filing Chart with a total of 3,442 patents filed. This was followed by 3,898 patents filed in 2015, resulting in the company being ahead of other contenders such as Philips, Qualcomm and Microsoft.

But now, let’s get back to the smartphone side of affairs for Huawei.

SHIPMENTS

Huawei’s worldwide shipment of smartphones has been growing steadily, and has even made Samsung and Apple – the current market leaders in terms of global shipments and market share – more vary of the Chinese behemoth.

emberify_huawei_worldwide_shipments

Data Source: Statista

The trend started off with 16.4 million shipments globally in Q4 2013, resulting in 23.6 million shipments in Q4 2014, followed by 32.7 million shipments in Q4 2015. 2016 was the defining year for the company, with the Q3 2016 statistics to the tune of about 34 million shipments (not far behind Apple’s shipment score of 46 million, but definitely not in the same league as Samsung’s 73 million). Q4 2016 ended with Huawei making 45.4 million shipments worldwide – a 35% increase over its previous quarter’s score.

And with the increased shipments, the revenue for the company is also seeing an upwards turn – in H1 2016, Huawei reported that its global revenue is $11.6 billion, a 41% increase from 2015.

While we’re discussing the shipments and the revenue, let’s also take a look at the market share of the company.

MARKET SHARE

First things first, Huawei is a Chinese behemoth, so let’s start off with the brand’s position in China.

emberify_vendors_and_market_Share_in_china

Data Source: Statista

In China, the major smartphone vendors include the likes of Apple, Xiaomi, Huawei, Samsung, Lenovo (and Motorola), OPPO and vivo, among others. In Q4 2014, Huawei had 10.9% of the market share in China. This grew to 15.7% in Q4 2015, and 16.9% in Q4 2016.

emberify_chinese_market_Share_huawei

Data Source: IDC

In the global market, Huawei has the distinction of being the third highest smartphone vendor in the world in terms of shipments, right after Samsung and Apple. Currently, the company has a 10.6% market share globally.

(This statistic might differ according to the firm compiling the report. Gartner suggests that Huawei had a 9.5% market share in Q4 2016, while Statista says 10.6%. All statistics, however, agree that Huawei is the third largest vendor globally.)

emberify_huawei_global_market_share

Data Source: Statista

The primary focus of Huawei has been premium devices (such as the P9 and the recently launched P10), among other mid-range and high-end devices. All this accounted for 57.2% of the company’s smartphone shipments in Q3 2016, according to IDC.

emberify_huawei_worldwide_market_share

Data Source: IDC

The market share is definitely rising for Huawei, and what’s more interesting is the target market for Huawei.

TARGET MARKET

Huawei is already the biggest vendor in China, and with loans from the Chinese government, the company built its network business in Africa and Latin America. The reputation built in these regions enabled the company to win network deals with carriers in Europe.

In a domino effect, Huawei began selling its phones in Europe, and the results were this: in the first 9 months of 2016, the company doubled its smartphone market share to 12%. In fact, Huawei is the top seller in Portugal and the Netherlands, and the second biggest in Italy, Poland, Hungary and Spain.  Needless to say, the trends in Europe are pushing the market share upwards for Huawei.

In the US, however, things are moving at a relatively slower pace. The primary reason has been the distrust caused due to the brand’s connections with the Chinese government and (consequently) the Chinese army. Owing to this, the company isn’t making much of an impact in the US smartphone market.

That being said, Europe, Africa and Latin America shall remain Huawei’s stronger markets, with a market share of more than 15% in 33 countries and a market share of more than 20% in 22 countries, including Italy, Finland (home of Nokia!), Spain and Netherlands.

WHAT’S NEXT

Huawei takes R&D very seriously – the expenditure on R&D was $5.9 billion in 2014, $8.7 billion in 2015 and $9.45 billion in 2016. To put things in perspective, only eight other companies spent more than this amount on R&D, and these companies include the likes of Samsung, Apple, Alphabet and Microsoft among others.

While this has definitely led to technological breakthroughs in the form of 5G wireless service from Huawei, it has brought the profits down by 10% in 2016. That being said, Huawei aims at being a leader in innovation, probably on the same level as Ericsson in Telecom and Apple in Mobile Technology.

The collaboration with other brands such as Leica has been good for the brand so far. What remains to be seen is how well these collaborations and innovations might work on the global scale. In 2016, OPPO had the most market share in terms of shipments in China, so Huawei might be concentrating on that as well, besides expanding on its US presence of course.

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With a presence in wearables, and advancements in AI, Huawei is definitely poised to be a top lifestyle tech brand. The next few years will be crucial for the Chinese company, as it establishes its stronghold in the local and global markets and innovates at the same time.

Source / Further Reading:

http://fortune.com/huawei-china-smartphone/

http://www.zdnet.com/article/huaweis-huge-r-d-expenditure-causes-thinner-earnings/

http://www.strategyand.pwc.com/cn/home/press/press-releases/displays/2016-global-innovation1000-study-cne

 

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Nivedit Majumdar

An analyst for the Emberify blog, Nivedit is a technophile and a blogger. He likes to observe new technology trends and write about them. Know more: about.me/niveditm