Last year, Huawei's Device Business Group set an ambitious goal of shipping 60 million smartphones, but managed only 32 million, keeping it out of IDC's top five smartphone vendors in 2012. That said, for Q4 that same year Huawei did finally break into top three, but it didn't change the fact that it had been a tough period for Huawei's smartphone division, especially for its CMO Shao Yang (pictured above with his 6.1-inch Ascend Mate). At the 2013 Huawei Global Analyst Summit in Shenzhen yesterday, the exec was kind enough to share his side of the story about the hurdles his team faced last year -- the period when Huawei was transforming from an original design manufacturer (ODM) to serve others, to an original equipment manufacturer (OEM) in order to build devices according to its own specifications.
As Huawei Device chairman (and also CEO of Huawei's Consumer Business Group) Richard Yu once told us, the reason his company needed the transformation was partly because of the tight margins from the demanding ODM requests from carriers. Yesterday, Shao added that going OEM would let Huawei build high-end premium phones, thus letting his team "save" the carriers from "suffering from Apple and Samsung" -- in the sense that these two competitors run on strong self-centeredness, as opposed to what Shao calls the "ying yang mind" of the "consumer-oriented" Huawei.
But the fact is Huawei got a lot of flak from old customers at Mobile World Congress last year. "All the operators blamed Huawei," said Shao. "Typically, customers focus on 'I want you to do this ODM, this size, this function and this price,' but we were transforming so we said, 'Sorry, we cannot do this,' and they punish us."
Shao said the first half of last year saw Huawei losing up to a staggering 90 percent of its smartphone partners in Europe. But regardless, Huawei would continue with its plan and would rely on other channels -- both online and open channels -- to move its new premium phones, should there be little support from the operators.
According to Shao, Huawei's bold move paid off. After several brand awareness campaigns and launches of flagships like the Ascend Mate, the Ascend D2, the Ascend W1 and the Ascend P2, Shao told us that many European operators are returning to his company's smartphone division again this year, and that they are even willing to use Huawei's brand instead of their own on the devices. Shao added that the company's seeing a ten-fold year-on-year increase in shipments to Western Europe, a key market for influencing other parts of the world due to its vast range of languages and cultures. Of course, China will still be the main source of income for Huawei (the region contributed 33.4 percent of total revenue in 2012), but to our surprise, Shao threw in Japan as the third key market -- as a testing ground for quality, regardless of its size. Indeed, at MWC Richard Yu told us that his team learned a lot about waterproofing techniques courtesy of tight requirements in Japan.
As for the rest of this year, Huawei is still going for the same old 60 million smartphone target, with the help of stepped-up efforts in marketing. Shao acknowledged the fact that his firm can't spend as much as, say, Samsung's reported $12.5 billion in marketing, so it'll focus mainly on public relations, digital and retail, followed by TV advertisements and sponsorships (Huawei is currently sponsoring Australia's Canberra Raiders rugby team, as well as the upcoming Jonas Brothers Tour this summer). The exec wasn't afraid to admit that marketing is still a weak part of Huawei, which is why it'll continue to hire talent and build partnerships with agencies, in the hope to better build the connection with its target audience. "We need to let people know what's Huawei's innovation, what's Huawei's differentiator," said Shao.
"We will have a much more competitive product in the middle of this year."
"We will have a much more competitive product in the middle of this year," said Shao. "We need to have the best hardware and design from Huawei. I believe with the next product we're launching, we are going to achieve this."
Sounds like this may be the same mysterious device that Richard "Big Mouth" Yu wouldn't stop talking about during our MWC interview, and chances are this may also be the metallic "Edge" that was leaked back in March -- check it out in the gallery below. Not bad, eh?
Shao added that this year Huawei will also continue to accumulate the capability of producing or better sourcing chipset, display, power management, ID, material and connection. That said, it's unlikely that the company will end up manufacturing all of these by itself -- Huawei is not in a position to have significant cash reserve or large-size acquisitions, said EVP Eric Xu in an earlier session; though he didn't rule these out entirely, either. As for 2014 and 2015, the focus will shift to the software side, especially Huawei's Android-based Emotion UI and cloud services. Here's hoping that the former will get a much needed revamp sooner than later.
As a relatively newcomer to the smartphone game, Huawei clearly still has some way to go before it overtakes the "superheroes like Apple and Samsung," or the "strong, traditional competitors like Nokia, Sony, Motorola and LG." Even Huawei predicts that its enterprise business will grow much faster than its consumer counterpart in the next five years: from five percent to 15 percent versus 22 percent to 25 percent, respectively. But as a veteran at Huawei, it's just the same old game for Shao.
"Only innovation can let people know Huawei."
"I want to say this [crowdedness] is always the situation when Huawei joins an industry," said the exec. "I remember 15 years ago when I joined Huawei, we often said it was a very crowded market, and there were seven big giant mountains beyond us: Ericsson, Nokia, Motorola, Siemens, Lucent, Alcatel and Nortel. When I look at them, look at their markets, look at their products, I try to say it's too excellent, but they can't block us from dreaming, from progressing, and from making our own effort."
"I think one thing is very important: to be brave with innovation. Only innovation can let people know Huawei. If we can't bring the best innovation to the customer or consumer, we will fail."