Huawei Seeks to Double Smartphone Sales While Boosting Price (1)

Bloomberg News

Huawei Technologies Co., the world's third-largest smartphone maker, forecast it will sell as many as 100 million smartphones this year, nearly twice the 2013 level, as it focuses on higher-end devices rivaling 's or Samsung Electronics Co. (005930)

Eric Xu, the Shenzhen, China-based company's deputy chairman and rotating chief executive officer, predicted Huawei will sell 80 million to 100 million smartphones in 2014, with emphasis on mobiles priced at 300 euros ($411) and more.

'We're far from being a dominant player with our brand in the consumer space,' Xu told reporters yesterday, speaking through a translator at the Mobile World Congress in Barcelona. 'Our strategy is to build the Huawei brand -- if our brand was as strong as Apple or Samsung, we could charge as much as them.'

Huawei is relying more heavily on mobile devices while it fights cybersecurity concerns that have restricted access for its traditional network equipment in the U.S. and Australia. The company boosted worldwide smartphone shipments 68 percent last year to 48.8 million devices, International Data Corp. reported in January. The company shipped more than 50 million smartphones last year, Xu said yesterday.

Last year's sales trailed only Samsung and Apple as the Chinese company boosted its share of the global market to 4.9 percent from 4 percent in 2012, IDC said. Xu said Huawei aims to increase its market share to 8 percent this year.

Home Market

Huawei faces challenges in both its aspiration to boost sales and raise prices. The global market is moving toward slower shipment growth and lower pricing, researcher International Data Corp. said in a report yesterday.

Worldwide, the average smartphone selling price was $335 in 2013, and that's expected to drop to $260 by 2018, IDC reported. Meanwhile, growth in shipment of the devices will slow worldwide to 8.3 percent in 2017 and 6.2 percent in 2018, compared with a 39 percent gain last year, IDC said.

While global sales have made Huawei the largest China-based smartphone vendor, it hasn't been able to dominate its home market, the world's largest for the devices. Huawei ranked fourth in China during the last quarter of 2013, trailing Samsung, Lenovo Group Ltd. (992) and Coolpad Group Ltd. (2369), previously known as China Wireless Technologies Ltd., according to IDC data.

'For our phone business, we started outside of China and then moved in,' Xu said. 'The Chinese market is going to be important for Huawei this year, but it takes time to build up a brand and a distribution network.'

Smart Bracelet

Looking beyond smartphones and tablets to wearable devices, Huawei unveiled its first smart bracelet in Barcelona this week. Xu said the bracelet is an accessory to the smartphone and that Huawei wouldn't have expanded into this segment independently from its phone strategy.

The company's total revenue increased about 8 percent to more than 238 billion yuan ($39 billion) last year, according to preliminary data the company released in January. Sales this year will rise about 10 percent, Chief Financial Officer Cathy Meng forecast at the time.

The company has diversified into mobile devices as sales of network equipment encountered opposition in markets including the U.S., where politicians say equipment from the Chinese vendor may pose a security threat.

Security Issue

While competitor Nokia Oyj (NOK1V)'s NSN network gear unit has signalled it is willing to sacrifice some profit for growth, Huawei is following a similar strategy to Ericsson AB (ERICB) and Alcatel-Lucent SA (ALU) by saying it won't cut prices to win contracts.

'Our strategy is to increase our margin, that's why we're delivering high quality,' Xu said. 'We got rid of the practice of acquiring market share by cutting prices.'

Xu predicts growth of Huawei's infrastructure equipment sales will stabilize around 10 percent per year.

Ren Zhengfei set up Huawei in 1987 after retiring from the Chinese military in 1983, and his background has been cited as a cause for concern by U.S. lawmakers. A U.S. congressional committee in 2012 said Huawei and crosstown competitor ZTE Corp. (763) provide opportunities for Chinese intelligence services to tamper with telecommunications networks for spying, a claim both companies have denied.

From 2011, Ren began splitting the CEO role with a panel of three executives who rotate at six-month intervals as acting CEO. That panel includes Xu, Ken Hu and Guo Ping. Guo Ping will take over in April this year, Xu said yesterday.

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net; Marie Mawad in Paris at mmawad1@bloomberg.net

To contact the editors responsible for this story: Michael Tighe at mtighe4@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net