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Huawei shifts sights to high-end smartphones

The Chinese smartphone maker plans to turn its attention toward the higher-quality smartphone segment in the wake of increased competition.

Huawei no longer sees a profitable future in cheap phones. Sarah Tew / CNET

Huawei plans to start focusing on high-end smartphones as competition from local rivals such as Xiaomi increases.

According to the Wall Street Journal, the Chinese smartphone manufacturer is no longer convinced it can turn a decent profit with low-end smartphones.

The blame can be placed at the feet of Xiaomi, a Chinese company that develops low-cost handsets with designs similar to rivals' products. Xiaomi keeps prices low while boosting profit by focusing on online sales, removing the need for distribution costs.

And Xiaomi is not the only company targeting budget users in the region. Lenovo, Micromax, Samsung and Lava have all joined the fray with their own handsets.

On Tuesday, the leader of Huawei's consumer business group, Richard Yu, told reporters at a briefing in Shenzhen: "If we sold more low-end phones, we could even double our shipments...but in the low-end market there is no margin."

While rivals including Xiaomi are currently reaping the rewards of producing budget mobile devices, Yu considers it is a short-lived victory. According to Yu, most low-end smartphone makers will vanish in three to five years as their business models are not sustainable.

"There are too many brands in this industry," he said.

This idea does hold merit. Smartphones and tablets have evolved at a rapid pace over the last few years, but now are in danger of reaching the point of being too similar for there to be stand-out designs. Cameras, app stores, operating systems -- most often iOS or Android -- speed, screen resolution and size are all becoming uniform, and so there is little to distinguish companies. That boils things down to price -- but even this fluctuates, especially as competition increases. The only factors that can seem to ensure companies attract a loyal following are premium features and software, something that Huawei plans to pursue to push ahead of local competition.

This story originally posted as "Huawei pivots focus to high-end smartphones" on ZDNet.