This Chinese giant wants to take on Apple, Samsung in the US

Huawei says a US launch is inevitable, and seems to be eyeing the advent of 5G as the time to do it.

Daniel Van Boom Senior Writer
Daniel Van Boom is an award-winning Senior Writer based in Sydney, Australia. Daniel Van Boom covers cryptocurrency, NFTs, culture and global issues. When not writing, Daniel Van Boom practices Brazilian Jiu-Jitsu, reads as much as he can, and speaks about himself in the third person.
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Daniel Van Boom
5 min read
Huawei P10
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Most people in the US have never heard of Huawei , let alone know how to pronounce the name. The Chinese technology giant wants to change that.

Huawei (pronounced "wah-way") is the world's third biggest smartphone brand thanks to its strength in China and Europe. But if it wants a chance at closing the gap between itself, Apple and Samsung , it needs to crack that US market. And Huawei knows that.

"We clearly understand, at some point we need to enter and have a strong performance in the US market," Colin Giles, executive vice president of Huawei's Consumer Business Group, said in an interview Monday.

And it wouldn't be a bad thing for US consumers. Huawei is far from an iPhone knockoff -- something many Chinese brands are accused of. Its P9 was the first phone with a dual camera, a feature since adopted by Apple on the iPhone 7 Plus . The 5.7-inch Mate 9 is one of the most highly regarded phablets -- jumbo phones -- out there, and is significantly cheaper than the Samsung Galaxy S8 Plus.

Huawei does have a presence in the US, but it's a tiny one. It's been selling its budget brands online since 2014, but with minimal carrier support. That's given the company just a 0.2 percent share of the US phone market, according to Counterpoint Research's Neil Shah.

The highest-profile phone Huawei's had in the US was the Nexus 6P -- which didn't even carry the Huawei brand name. The company's Chinese competitors ZTE and Alcatel have had more success selling inexpensive devices on American soil.

The company knows it'll have to spend a lot of time and money to have a shot at carving out a bigger slice of the market for itself, Giles said, adding that "timing on the US is something that needs to be well considered."

So, when is the right time?

5G is the catalyst 

There's no word on exactly when it'll be time to shift to the US, but Giles did give a hint: the 5G era.

Huawei makes billions in revenue from selling telecommunications products (although not in the US, where it's banned from doing so), but that's not why Giles is excited about 5G. The fifth generation of wireless connectivity promises to open up a whole new world of technological possibility, from self-driving cars all the way to remote surgery. This, he said, will give Huawei an opportunity to strut its stuff.

Watch this: 5G lets you remotely perform surgery with a robot arm

"As 5G develops, we have a unique opportunity to position ourselves as a [phone] leader," he said. Giles said Huawei's expertise in networking tech, production of its own chipsets and strong emphasis on research and development (where 15 percent of its revenue goes) gives it a chance to take advantage of the chaos 5G could bring.

"There are synergies from the network into the handset [businesses], but we also have our own chipsets, which provides a unique benefit as well for us to be able to integrate those technologies into the phones [and] bring them to market potentially earlier," Giles said.

Proper widespread 5G is still a couple years off, though. T-Mobile is racing to build its network by 2018, while Sprint said it'll have a commercial network up by late 2019Australia's Telstra and South Korea's SK Telecom are both aiming for 2020.

Meanwhile, Giles said there's a global trend toward consumers buying phones themselves rather than getting them through carriers, and that's good for Huawei and its high-end phones. "We're not putting on a brand premium like our competitors," he said.

But carrier support is still essential, according to Counterpoint's Shah.

"Sales in the US are completely dominated by carriers, with nine out of 10 phones being sold through carrier channels," he said. 

Smells of success

There's a reason Huawei is so confident about its prospects in the US -- it's dominated nearly all other markets.

After trading victories with Xiaomi and Oppo , Huawei stands as China's biggest phone brand, selling just shy of 21 million phones there in the first quarter, according to IDC.

Giles said Huawei was able to tap into China's sizable e-commerce market to make that happen. About 20 percent of the nation's sales are conducted online, and lots of consumers, especially young people, have figured out you don't need to spend $700 to get a good phone. To take advantage of this, the company has been pushing its Honor brand online and establishing the Huawei name as premium with devices like the P10 and Mate 9.

Separation is key to that balancing act between online and offline brands, Giles said. "Xiaomi is a great example. They have one brand focused online. As a result of that, it's hard for them to develop their capability offline."

(Xiaomi refutes this, with a spokesperson noting to CNET that the company recently opened its 100th Mi Home store in Shenghai, adding "our offline model has seen great success, breaking sales records in many locations." At last word, Xiaomi was pegging 2019 as the year it expects to start selling its phones in the US.)

Huawei P10 camera test photos

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Europe has been good to Huawei, too. "We were able to grow our market share to 12 percent in Europe," Giles said, pointing to success in countries like Spain, Italy, Poland and Brussels.

One country where Huawei doesn't have a strong presence, though, is India, where Xiaomi has thrived. Despite being a huge and growing market, Giles doesn't see India as its key to topple Apple or Samsung.

"It's very difficult to be profitable in the Indian market," he said, citing heavy competition and cost-sensitive buyers -- most phones sold in India cost less than $150. "We have been very open in our aspirations to be a premium-focused player in the industry and to be more and more premium-focused."

That brings us back to the US. In total, Huawei sold 34 million phones in the first quarter, a 21 percent increase from the year before. That's impressive, but Apple sold 15 million more iPhones, and Samsung's shipments were just under a gargantuan 80 million.

It's not a bad spot, but unless Huawei can become a thing in the US, third place is where it'll stay. 

Update, 3:10 p.m. PT:  Added comment from Xiaomi. 

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