Huawei emerging as a smartphone challenger

Huawei Technologies, a Chinese company with little name recognition in the United States, is poised to challenge Samsung Electronics and eventually even Apple in the $219.1 billion market for smartphones. Its strategy: inexpensive handsets.

Already China’s largest maker of telephone-network equipment, Huawei likely passed Nokia Oyj and Research In Motion in the second quarter to become the world’s third-biggest seller of smartphones, said Horace Dediu of equity-research firm Asymco.

Huawei, based in Shenzhen, entered the mobile phone market in the past decade by selling bare-bones handsets to price-sensitive buyers in emerging economies.

Now, as it focuses on models with better screens and faster chips, Huawei will probably widen its lead over smaller manufacturers and siphon users away from Samsung, Dediu said.

“They’re the guys that don’t get a lot of respect, because they’re not big in the U.S.,” said Dediu, who’s based in Helsinki, Finland. “Samsung ought to be looking over its shoulder.”

While Huawei trails Apple and Samsung by a wide margin, it’s working to narrow the gap by selling handsets through AT&T and T-Mobile of the U.S. Huawei’s devices have features found on more expensive smartphones and provide access to the apps at Google’s online store.

Carriers benefit from pairing with Huawei because low phone prices help them win bargain-hunting shoppers and Huawei has historically been willing to support their marketing rather than pushing its own brand.

“We essentially made the market for affordable smartphones,” said Bill Plummer, a U.S. spokesman for Huawei. “We’re in a good position because we’ve established ourselves as a trusted partner to carriers.”

Huawei’s annual smartphone sales are expected to triple to 60 million units this year, compared with 134.1 million for Apple and 207.2 million for Samsung, according to Dediu.

Huawei owes much of its success to Google’s Android software, said Mike Morgan, an analyst at ABI Research.

While Samsung, HTC and Google’s Motorola Mobility Holdings focused on adding their own software and features to command higher prices, “Huawei just slapped Android on some hardware and shipped it,” Morgan said.

That’s made Huawei a leader in sales of below $200 (228,000 won) smartphones, a corner of the market that Morgan expects to grow at a faster pace in the coming years.

Wireless carriers typically pay manufacturers full price for the phones and sell them more cheaply to customers in exchange for multiyear-contract commitments.

High-end devices, such as the iPhone and Samsung’s Galaxy line, which cost the carrier more than $400, are expected to hold steady, at about a quarter of the market. The market for mid-tier handsets will drop, Morgan said.

Huawei was established in 1987 to sell telecommunications equipment to China’s phone companies. In fiscal 2010, the telecom equipment company was worth $18 billion.

Bloomberg