Can China's 'Spies', Huawei crack US smartphone market [like it did Canada with their "Backdoors"]?
Chris Ratcliffe | Bloomberg | Getty Images
Models demonstrate Huawei Ascend P7 smartphones.
U.S. consumers are getting familiar with the names Alibaba andTencent as China's Internet giants expand westward. Huawei is the next Chinese tech powerhouse hoping its products soon find their way into the American psyche by way of retail shelves.
Long known for its ongoing battles with Cisco and Alcatel-Lucent in networking and infrastructure, Huawei has spent the past four years building a smartphone business using Google's Android operating system. In fact, Huawei was the third-biggest global smartphone vendor in the third quarter of 2014, with 5.3 percent of the market, according to Gartner,
But while consumers in Asia and Europe may know the brand, Americans have seen little of Huawei. The U.S. market is dominated byApple and Samsung, and includes a number of devices from Motorola, LG and even BlackBerry. Huawei's presence has been limited to white-labeling under carrier names and selling its branded phones through small carriers like Cricket Wireless.
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The Shenzhen-based company expects that to change. While it's not saying which of the top service providers will jump first, Huawei says this will be the year that its own branded smartphones reach one or more major U.S. phone companies. Additional phones from Huawei's discount Honor brand will also be sold.
"We had to prove ourselves," said Bill Plummer, Huawei's vice president of external affairs, in an interview. Plummer, who's based in Washington, D.C., said the smartphone push is part of an overall investment in U.S. branding and marketing. "The company is coming of age in terms of building a brand. That's a huge priority."
Huawei's approach to the U.S. is very different from the strategies pursued by Alibaba and Tencent. Those companies have been acquiring or investing in start-ups that give them access to the U.S. market, or partnering with businesses that can help with distribution. For example, Alibaba announced a deal last week with LendingClub to help U.S. small businesses get the credit necessary for purchases on Alibaba.com.
Smartphones are a tough business. In addition to the price war that's making devices ever cheaper, success requires forging tight relationships with the big carriers, who handle much of the promotion and shelf placement in their stores.
And Huawei is not alone among Chinese vendors trying to tackle the U.S. Xiaomi, often described as the Apple of China, is neck and neck with Huawei in terms of global shipments and is also said to be preparing a run at the U.S. market. In 2013, Xiaomi hired Hugo Barra, who was a vice president in Google's Android unit, to run the company's global division.
Chinese companies, big and small, are seeking an entree into the U.S. as part of a broader strategy to compete on the worldwide stage. Tao Li, a former vice president of Chinese software maker Qihoo 360, founded an Android application development start-up called Apus Group last year and immediately began building for a global audience. Apus' Android launcher product has been used by 100 million people to date, with 8.7 percent of them in the U.S., according to Li, who said that the Chinese market is highly competitive and saturated.
"Chinese tech companies are building products domestically for the international market," Li said. "The reason why Apus has grown so fast is because we saw the demand and trends of the markets."
Despite its lack of name recognition in the U.S., Huawei is already a global force. The company, which is privately held, said 2014 revenue reached about $46 billion and plans are to hit $70 billion by 2018. Smartphone sales accounted for about $12 billion in sales last year.
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Founded in 1987, Huawei got its start building China's telecommunications networks before beginning its global expansion a decade later. The company has 150,000 employees, with products in 170 countries. Global telecom giants like Vodafone in the U.K. andDeutsche Telekom in Germany have turned to Huawei for network buildouts.
Huawei has 1,500 employees in the U.S. and opened a domestic headquarters in Plano, Texas, in 2001. But the U.S. market has been a challenge, as politicians have voiced concerns about having a Chinese company in charge of critical telecommunications infrastructure. Carriers have been pressured to keep Huawei out.
Getting to consumers in the U.S. poses a new set of challenges, but the company is committed to making it work. Huawei phones have already been available at Amazon.com, and the site GetHuawei.com was launched last year to let consumers buy devices directly. The Ascend Mate 2, with a 6.1 inch screen and 13 megapixel camera, sells there for $300.
"Last year we piloted some things," Plummer said. "This year we're making a bigger investment."
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