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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.

Published by Bill Bennett

Not actually a geek, more a chronicler of geekdom. Still mainly a journalist, sometimes a blogger.

10 replies on “The threat to Huawei’s Android phone brand”

  1. It’s already happening in New Zealand. I have a high end Huawei which is an amazing piece of hardware. The camera really is something else. I get frequent comments from people about the Chinese government spying on me. There is awareness about the issue. Does it effect sales? Who knows…

  2. Shame and it is disheartening to see how governments can wreck companies. I don’t like Huawei brand of phones myself—just subjective personal preference—but I admire them as a company and their dominance in network infra business.

    I wish Huawei fights back and gains its foothold. It sucks to see those analysts/pundits/whichever rogues who are spreading FUD that affects Huawei.

  3. Huawei is going to struggle. Its equipment offerings are excellent but it is hard to remove the stain of “spying for the government” once an allegation is made. Anything they say to the contrary will be viewed with suspicion.

    I have no doubt that the NSA knows its way around all the network equipment and mobile handsets out there. It is just one of those things that it does. I have no idea how hard, or not, the NSA works to get “help” from Cicso & Alcatel-Lucent. It probably doesn’t need to work too hard. It may not even need any extra help; its staff may be that good.

    Cisco & Alcatel-Lucent operate in countries with a degree of transparency that would allow any governmental transgressions to eventually be revealed and punished. The same cannot be said for Huawei. The PRC is one of the world’s least transparent governments. That lack of transparency ensures that once suspicion falls it is unlikely to ever lift.

  4. It puts pressure on the top two brands and ensures Android phone buyers have a plausible alternative to Samsung.

    There are several plausible alternatives to Samsung.

    Google phones (of course)
    Nokia (or whomever owns them now)
    Sony
    Motorola

    and many more. The problem isn’t a lack of choice but if people even know of those choices are available and if they’re available in NZ.

    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.

    They alrteady do. My nephew was telling me the other day that they can’t sell his girlfirends top of the line Hawei phone.

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

    They may do – if they stop having their phones made in China.

    1. Yes, they are plausible alternatives in a strict technical sense. They’re not in terms of what’s actually happening on the ground. Google, Sony and Motorola don’t have a New Zealand presence to speak of. Nokia’s presence is limited. As far as sales numbers are concerned they remain a freak show. The four brands you mention don’t add up to 10 percent of the market between them. They barely crack five percent.

  5. What is interesting about the “security” issues surrounding the Huawei brand is the lack of disclosure by all of the other brands on who they are spying for. It seems like if your brand is tapped into the 5 eyes network that is ok but not the (alleged) Chinese link.

    Pretty sure most of this is mostly trade level xenophobia. All big companies are bastards (my opinion) why should Huawei be singled out. Most of the users just want a phone to use.

    The bigger fallout will come in Australia if TPG/ Vodafone can’t build their 5G network using Huawei gear and same in NZ. Handsets is a highly visible thing but it is really a sideshow and a smoke screen to the bigger picture. Which is; as always divide and conquer and plain old commercial skullduggery. Follow the money. Who says there is a security problem. The same people who benefit from other brand relationships.

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