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The threat to Huawei’s Android phone brand

Huawei is no longer welcome as a phone network build in some western democracies.

There’s an unproven suspicion the company is already spying for China. Even if it is not spying, western governments are wary of depending on a Chinese firm for critical infrastructure.

Sooner or later those fears about Huawei network equipment will spill over into phone handsets.

Negative headlines and ministerial statements here and overseas have already damaged Huawei’s brand. It could get worse.

Implications

What could fear of Huawei mean for the phone market?

It may lead to reduced choice, higher prices and less innovation. Mind you, the second two are already happening, with or with a Huawei effect.

Last year Huawei was the fourth most popular phone brand in New Zealand. It sits behind Samsung, Apple and Vodafone. Huawei had roughly ten percent of the market by unit numbers. The top two brands dominate by a long way.

Because Vodafone-branded handsets are at the low-end of the market, Huawei was number three in terms of revenue. Huawei’s share of revenue was also about ten percent. This number matters more than unit sales.

Huawei fast growing

Also important, Huawei was by far the fastest-growing phone brand in New Zealand both in terms of unit sales and revenue growth. It took market share from both Apple and Samsung.

Huawei plays an important role in New Zealand’s market. It puts pressure on the top two brands and ensures Android phone buyers have a plausible alternative to Samsung.

New Zealand is one of Huawei’s better markets. The phones are invisible in the US. In Australia Huawei is number five in the market, but with a much smaller share. Apple sells roughly 18 phones for every phone sold by Huawei. Samsung sells about 12.

Both Australia and the US have been wary of Huawei network hardware for some time.

Fear spill over

Of course other factors are at play, but it’s reasonable to assume those network security fears have something of a knock-on effect in the handset market.

It’s likely something similar will happen here.

Phone buyers might reason that if ministers and intelligence agencies are concerned about snooping at the network level, the same might apply to Huawei mobile phones, tablets and personal computers.

At the same time, people might look askance when a phone owner reveals they own a Huawei handset. Phone snobbery is real enough already, this is another level.

Employers might decide they don’t want employees doing business on a Huawei handset. There doesn’t need to be an outright ban, a lot of frowning will have a chilling effect.

Retail

It may even become harder to buy a Huawei phone. If things get worse, it’s possible the telcos will want to distance themselves from the brand. That means you either won’t see the handsets in Spark, Vodafone or 2degrees stores or they will be relegated to almost under-the-counter status.

Huawei may decide it needs to ramp up its marketing to calm customer fears. It’s possible, the company is good at talking to the industry, but consumer communication has not been a Huawei strength.

Who wins?

If consumers and retailers turn their back on Huawei, it will take price pressure off rival phone makers. Samsung will benefit most. Huawei has been snapping at Samsung’s heels for some time. Huawei Android phones tend to be as good as Samsung models, but cost a little less.

Apple stands to benefit too. We’ll come back to that point in another post.

There’s every possibility that unease about Huawei phones will spread to other Chinese brands.

Oppo has made a splash here, but the brand needs to work hard to explain why it should not be tarred with the same brush.

After all, if the Chinese government can bully its most prestigious technology company into handing over data, stomping on a smaller player will be simple.

All of this is speculation. It’s possible the scare goes away. It could be that New Zealanders don’t follow Americans and Australians in treating the Huawei brand with caution or suspicion. But on overseas evidence, we should prepare for a phone market shake up.

In my next post about Huawei, I’m going to look at why spying-related suspicion about the company’s phone handsets is misplaced.

Disclosure: Bill Bennett has travelled to China and elsewhere as Huawei’s guest on three occasions.

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