The Huawei phenomenon

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The Huawei phenomenon

In February 2010, I wrote a column titled “Huawei Phenomenon” to discuss the fierce technological advancement of the Chinese communications company. Huawei was competing against Ericsson, the biggest industry leader at the time, and surprised the world by winning a bid to build a next-generation communication network in Sweden. That year, Huawei became the third-biggest telecommunication equipment and service provider in the world, after Ericsson and the Nokia-Siemens Network.

Three years have passed now, and I have to write a follow-up on Huawei’s success, this time in the smartphone market. According to the IDC and Gartner’s market reports, Huawei has risen as the third-biggest smartphone maker in the fourth quarter of 2012, after Samsung and Apple. Huawei, which had a mediocre presence three years ago, is growing sensationally. Huawei isn’t the only Chinese company to achieve surprising growth. ZTE is in the fifth place, and Lenovo, which entered the market in 2010, is chasing Samsung’s lead closely in the Chinese market. We need to keep a close eye on the technological advancement of China in the smartphone industry.

Some disparage China’s presence as a storm in a teacup, only expanding in the low-end market. However, this was proven wrong at CES 2013, the Consumer Electronic Show held in Las Vegas in January. Huawei introduced Ascend D2, an ambitious new model aiming at the high-end market. Huawei’s entry into the market was one of the biggest issues at the show. Ascend D2 is currently sold at 4,000 yuan in China, about $640. While it is 400 yuan more expensive than Samsung’s Galaxy 3, Ascend D2 is selling briskly in China.

Of course, Huawei is far behind Samsung at the moment. Samsung has 29 percent of the global market, while Huawei has less than 5 percent. However, we cannot say that China has a long way to go because it has one strong weapon that no other country can dare to imitate. It is the gargantuan size of their domestic market. At the end of last year, China became the biggest smartphone market in the world over America. It is the usual course for a Chinese company to begin from the domestic market before dominating the global market. The strategy has pushed Korea out from the top spot in market share for 12 items last year alone.

Moreover, Huawei has reinvented itself as an innovative company by investing 10 percent of its revenue on technology development. Huawei also produces most of the parts used in their smartphones on their own. If you still see China as a manufacturer of knock-off goods, you do not understand the gravity of Huawei’s emergence.

When Huawei became the third largest communication equipment provider in the world, the industry doubted it would ever reach the top. But last year, Huawei surpassed Ericsson and took the top revenue spot. There is no guarantee that it would not take the same path in the smartphone industry. That’s why we need to pay attention to Huawei’s dramatic rise in the smartphone market and be prepared for the threat.

*The author is the director of the China Institute of the JoongAng Ilbo.

by Han Woo-duk
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