Over the past decade the smartphone has becomeone of the most important pieces of personal technology. For many individualsit has become a replacement for their home phones, personal computer, musicplayer, GPS devices, cameras and has now even begun to replace the physicalwallet. According to a 2015 article in the Economist, the average American wasspending over two hours per day on their smartphone and 80% of owners checkedtheir phone within 10 minutes of waking up.1 The industry has seenexplosive growth and global sales have increased from 122.32 million units in2007 to almost 1.
5 billion units in 2017.2 According to anInternational Data Corporation abstract, sales are projected to increase toover 1.7 billion by 2021.
3 As sales have skyrocketed so have global salesfigures and according to Statista, global revenues from smartphone sales haveincreased from approximately 330.4 billion U.S.
Dollars in 2013 to 434.5billion U.S. Dollars in 2016 and expected to “plateau at about $400 billionU.S. Dollars.
“4 It is important to note that this same source statesthat a quarter of this revenue is expected to be generated in China with over130 billion U.S. Dollars.Although the industry is very attractive, it isimportant to note that markets are evolving and as the industry matures, therewill be tremendous competition and great pressure to reduce costs.
NorthAmerica and Europe are relatively saturated and most of the future growth inthe smartphone market is tied to sales in developing regions. As a result,pressure is on to bring lower priced models to market and this will likely leadto lower margins and slowdowns in revenue. Another area where growth isexpected to increase is in China and brands such as Huawei, Xiaomi Inc, Lenovo,Oppo and Vivo are queuing up to take advantage of this opportunity. Huaweiis the leading smartphone provider in China and ranks no. 3 worldwide behindSamsung and Apple.6 It’s hard to imagine that this brand, worth $7.3billion in May 2017, was established with a few thousand dollars in 1987.
5Its background as a telecommunications equipment provider gives Huawei atechnological advantage over its competitors. For instance, one major complaint echoed by smartphone users worldwideis the lack of longevity when it comes to battery life. Huawei used their knowledge of 3G and 4Gwireless modem technologies to create a device with an enhanced battery lifethus outshining its competitors.6 Through years of extensive”customer-centric” R, Huawei developed numerous patents that were used asboth a bargaining tool and leverage against its competitors.6 Italso developed strong relationships with carriers that spanned more than twentyyears allowing Huawei to easily distribute its devices when it first emerged asa player in the smartphone industry. Huawei’s “cloud-pipe-device” strategyallowed it to create all the major components of wireless communications fromthe telecom networks to the SoC (system on chip) and smartphone devices.6 Thisis a competitive advantage that is unique to Huawei and ultimately helpedpropel them to their current position in the smartphone industry.Huawei’s early successand influence in the telecommunication equipment market within China allowedthe company to grow at a rate that warranted global expansion.
In 2001, Huawei established 17 R centersin the United States, Canada, Japan, and Western Europe and collaborated withleading telecom carriers to establish 36 joint innovation centers worldwide.6This expansion aided Huawei’s “continuous customer-centric innovation” into thesmartphone and premium smartphone industry. When Huawei’s Chengdong (Richard)Yu was appointed Chairman of Huawei Device and CEO of Huawei Consumer BusinessGroup, his goal was to move away from low-end phones that were produced fortelecom carriers and instead, streamline the company’s focus on smartphones.The focus on smartphones also led to the adoption of a “dual-brand anddual-channel” business model which captured consumers looking for either amedium-end or a premium high-end smartphone through offline and online channelswhich is resource neededto stay competitive in the global smartphone industry. The focus onsmartphones allowed Huawei to analyze and understand the fast-changingpreferences of consumers in the industry, and their collaborations with leadingglobal telecom carriers provides them with smartphone assets globally, anadvantage unmatched by even Apple and Samsung.Huawei’scontinued pursuit of providing for the needs of their customers offers thecompany a flexible advantage that contributes to the stability of theircompetitive advantage. However, the company’s lack of ability to substantiallyexpand its customer base in the U.
S. is a major threat to their future goals. Afew weeks ago, Huawei’s long-anticipated partnership with AT to sell anew flagship smartphone imploded due to security concerns. Though Huawei is aprivately-owned company, U.S. officials fear that ties to the Chinese CommunistParty may undermine national security, suspecting potential espionage on U.
S.citizens and government officials who could potentially own Huawei phones. Inorder to challenge Apple and Samsung on a global scale, Huawei will have tonavigate these concerns to gain ground in the U.S.
, otherwise they seem stuckin third place in the industry. In similar fashion to security concerns inWashington, Huawei does hold a strong competitive advantage on their home turfin the Chinese cellular market, as “Chinese officials have repeatedly calledfor technology made by American companies to be replaced by locally producedones.” Huawei must continue their efforts to break into the U.S.
cellularoligopoly—made up of Verizon, AT, Sprint, and T-Mobile—in order toimprove on its strengths and gain global competitive advantage. 1 www.economist.com/news/leaders/21645180-smartphone-ubiquitous-addictive-and-transformative-planet-phones2 www.statista.com/statistics/263437/global-smartphone-sales-to-end-users-since-2007/3 www.businesswire.com/news/home/20170829005316/en/Smartphone-Growth-Expected-Remain-Positive-Shipments-Forecast4 www.
statista.com/statistics/237505/global-revenue-from-smartphones-since-2008/5 www.forbes.com/companies/huawei/6 Xiao, Yangao, et al.
ADark Horse in the Global Smartphone Market: Huawei’s Smartphone Strategy.INSEAD, 2017, pp. 10 – 14.