Huawei rising


Rarely are the kings of one era the kings of the next.

Just as Nokia and BlackBerry were the kings of the pre-smartphone era, so they were eclipsed by Apple and its fast- follower Samsung. The same is true of Palm, which reigned in the preceding age of the personal digital assistant.

But, just as Nokia (which at one point sold two out of every three cellphones and had 60% market share) and BlackBerry (which had some 40% of the market share for smartphones) ultimately misjudged the next revolution, so it seems will Apple and Samsung.

Nokia and BlackBerry’s declining years were characterised by trivial, incremental upgrades that were punted as significant; but were ultimately inconsequential. Nokia and BlackBerry’s technologies had plateaued and no amount of spin could sell it otherwise. Consumers voted with their wallets.

These same signs of decay are emerging at Apple and Samsung. The iPhone 5 and Galaxy S4 were minor upgrades of their respective predecessors. The “institutional arrogance” as one analyst put it that plagued the previous kings, now characterises Apple and Samsung. That kind of holier-than-thou attitude can kill a business – just look at the stagnation at Microsoft and Yahoo.

At the once-mighty Apple, the Steve Jobs-inspired run is over. We might as well admit it. Even the beautifully designed new Mac Pro feels a little ho-hum.

At Samsung, the decade spend fighting to be “number one” in every category has paid off. Their TV screens lead the market, they sell more smartphones, Android phones, and just plain old phones than Nokia.

And yet, like all the once high-flying PC makers selling Windows computers, Samsung is as tied to Android as Dell or HP was to Microsoft. Samsung, on the smartphone front, is Google’s bitch. Samsung is great on the hardware, but weak on software, where they are reliant on Android, even if they captured an estimated 95% of all profit in Android smartphone sales.

And both Samsung (which sells half of all smartphones and one in four feature phones) and Apple face pressure because their primary market for smartphones, the developed world, is saturated. Despite projecting record sales, Samsung’s share price fell as investors were beset by this very fear.

The next behemoth waiting in the wings, ladies and gentlemen, is Huawei.

You might say, not entirely incorrectly, that they are merely cloning Samsung’s strategy of cloning Apple.

To put it another way, and perhaps unfairly to Huawei, if Apple and Samsung are the Ferraris and Lamborghinis of smartphones, then Huawei is the Toyota. And most of the world drive Toyotas. Especially in the developing world, including Africa, where all the growth is expected to come from.

Last month Huawei held their first launch outside of China (although there was another at CES in Las Vegas in January) of the super-slim Ascend P6. At just 6.18mm thin it is the latest claimant to the “thinnest smartphone in the world” revolving title. Launched on the 18th of the sixth month, it is a wonder of a smartphone, with all the usual trimmings you’d expect from such a high-end smartphone, except two: It’s price (an estimated R5-6000, where such handsets are easily R8000 or more) and the 5 megapixel (MP) front-facing camera (clearly designed for the selfie generation). The P6 is a Lexus priced as a Toyota.

The price is the key. Apple, Samsung, Sony, BlackBerry and Nokia are forced to charge high prices for their high-margin smartphones. Huawei’s core business is selling the actual networks they run on. And those 3G dongles we all use in our laptops.

Unlike the current kings which need to protect both their market share and margins, Huawei has nothing to lose. And everything to gain. They will make smartphones cheaper which will appeal to the price-conscious emerging market consumers; and that’s where the major cellphone (and economic) growth is going to come from in the next decade.

Describing it as “the most fantastic partner” and “the most extraordinary engineering organisation,” Carphone Warehouse founder and chairman Sir Charles Dunstone said at the P6 launch: “I think Huawei are going to be a very, very big player in the smartphone market.”

This column first appeared on Financial Mail.


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