P8 phone highlights Huawei ambition

Phone makers are not modest by nature. Their product launches are often a mix of razzamatazz, extravagant claims and a laundry list of features.

Huawei’s P8 phone launch in Singapore on Wednesday had razzamatazz. The event started with a sand artist's work — or is that performance? — projected on a big screen. Also there was a river trip with a laser light show, flying coloured dragon drones and glow-in-the-dark dancers.

The phone has a long feature list. The Huawei P8 includes most things you’d expect to see in a 2015 flagship device. Huawei emphasises the phone’s camera in its marketing. Above all it takes great pictures in poor light conditions.

Instead of extravagant claims, Huawei Consumer Business Group CEO Richard Yu used a post-launch press conference to outline Huawei’s ambition.

Huawei aims to beat Samsung, challenge Apple

Yu wants his phone brand to go all the way. Huawei plans to zoom past Samsung and challenge Apple’s market leadership.

That’s impressive considering until 2011 Huawei’s phone business was about churning out low-cost mobile phones sold with a cell-phone carrier brand.

Yu says Huawei got into the smartphone business through the back door. The company is the largest maker of the network equipment used by mobile carriers.

When those carriers approached Huawei to find low-cost starter phones to get customers hooked on 3G data services, it obliged.

Third largest smartphone brand

Five years ago the first Huawei branded models appeared. By last year it was the world’s third largest mobile phone brand behind Apple and Samsung.

Huawei is still a fair way behind the leading brands, but innovative new phones like the P8 should help it close the gap.

Huawei is already ahead of well-known names like Nokia, Sony, BlackBerry, LG and HTC.

Yu says the short-term goal is for Huawei to move to second place. That means selling more phones than Samsung.

Last year The Wall Street Journal reported Huawei’s market share was 6.9 per cent. There’s a lot of catching up to do. At the time Samsung was on 25 per cent. But Huawei saw sales jump 95 per cent in the second quarter while Samsung sales dropped almost 4 per cent.

Huawei keeps Samsung awake at nights

Huawei represents Samsung’s worst nightmare. The P8 directly challenges the Samsung Galaxy S6. Both flagship phones run Android.

During the formal launch Yu reeled off comparisons between features on the two phones. In each case Huawei offers more than Samsung. The two ranges are on a different release cycle, but at first sight Huawei’s flaghip phone is every bit as good as Samsung’s, possibly better.

At the time of writing Huawei has yet to announced the New Zealand price of the P8.

In Singapore, where the local dollar is on a par with the NZ dollar, the phone costs S$700. In that country the Samsung Galaxy S6 is S$1000. It’s likely the ratio between the two prices will be similar in New Zealand.

Samsung’s weak spot

Price hits Samsung where it is most vulnerable. The Galaxy S6 phones are expensive in comparison. Huawei offers something that is at least as good for 30 per cent less.

Samsung’s phone business barely breaks even, it has little room to move on price.

That leaves branding. Samsung remains a strong brand, especially among Android fans.

At the launch in Singapore and the press conferences after the launch there was talk of promotional campaigns that will boost Huawei’s profile in South-East Asia. We can expect similar here.

Within hours of the launch Huawei’s P8 advertising was noticeable on the Singapore metro system and at Changi Airport.

Beyond marketing

Huawei’s trump card in the tussle with Samsung is its lead in cellular networks. Yu says: “Our infrastructure business means can can be the first to support new standards when they emerge. We know how to build phones that support the latest technologies. We can make them run at higher speeds and lower latency”.

Away from engineering, Huawei’s close relationship with carriers gives it an advantage. In New Zealand the company has either built or is building networks for Spark and 2degrees.

Yu says carrier relationships help Huawei build better phones. They also help get phones into customer’s hands.

Organic growth

He says Huawei plans to get to the market top spot purely on organic growth. While Yu says he expects most other smartphone brands to disappear in the next three to five years — “globally only three or four brands will survive” — he isn’t in a hurry to buy their assets.

Last year Huawei’s consumer division, that’s the part of the company making phones, had revenue of US$12.2 billion. The goal is to reach US$16 billion this year — Yu says Huawei is on target. He wants that number to reach US$50 billion in four years.

Yu’s audacious Huawei ambition

If Yu’s consumer division follows the growth plan he has mapped out, it will soon become the dominant part of Huawei.

That will change the nature of Huawei. Its core business, telecommunications network hardware, is now at saturation point. After years of expansion any future growth is likely to be sluggish in comparison.

Huawei also has an enterprise information technology division. It’s still small but the overall IT market dwarfs the telecommunications network market. In 2013 the enterprise division accounted for just US$1 billion of Huawei’s total revenue of US$39 billion.

Huawei’s advantage

Huawei has an important advantage over its rivals in the network equipment, enterprise IT and smartphone markets. Unlike most other companies it is privately held, the shares are mainly owned by employees.

This means it doesn’t have to chase quarterly targets. Instead it can plan and invest for the long-term. At Huawei there’s a huge emphasis on research and development with up to 15 percent of revenues reinvested.

The company has already proved it knows how to focus on price, quality and customer service in the telecommunications hardware business. It has a patience and a maturity that’s rare in the flash-in-the-pan gadget world.

Huawei has already taken on and beaten the network equipment makers. It has the confidence to go head-to-head with the likes of Cisco, HP and IBM. In comparison tackling Samsung to win the Android phone crown doesn’t seem over ambitious.