CELLPHONES: Huawei’s Honor Smartphones Zoom in India, Eye US

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Bottom line: Strong sales growth for Huawei’s Honor brand in the first half of the year reflects the company’s broader accelerating momentum, and could pose a growing challenge for domestic rival Xiaomi.

Huawei’s Honor brand grows in India, eyes US

More new data is showing the growing momentum for smartphone aspirant Huawei, with word that the company’s Honor brand surpassed its sales target in the first half of the year as it prepares to enter the US. The latest numbers continue to portray a surging Huawei, and show how the company is using its traditional strengths in product development and a newer expertise in consumer marketing to overtake big domestic rivals like Xiaomi and Lenovo (HKEx: 992) and also a host of smaller ones like Meizu and Coolpad (HKEx: 2369).

These latest numbers don’t look extremely impressive at first glance, as they show that Honor just slightly surpassed its sales target for the first half of the year. But in the current climate where many companies are missing their targets due to intense competition in China, the ability to not only meet but even slightly exceed a sales target does seem like a noteworthy accomplishment.

Huawei

Honor discussed its first-half results at an event to launch its latest model, in what’s becoming a crowded season for such new introductions. Samsung (Seoul: 005930) launched its own new smartphone models earlier this month, and Apple (Nasdaq: AAPL) and Google’s (Nasdaq: GOOG) Nexus brand are expected to launch their latest models in the next 2 months as well. The stumbling Xiaomi was originally hoping to launch its own newest model by now, but reportedly has run into technical issues and may have to wait until closer to the end of this year.

But let’s return to the latest Honor figures, which saw the brand notch $2.6 billion in sales in the first half of the year. (Chinese article) The figure was more than half of the $5 billion Honor is targeting for the full year, and easily surpasses the $2 billion in sales that the brand posted for all of last year.

Honor is rapidly emerging as an important part of the smartphone strategy for Huawei, which is allowing the brand to be run separately targeting a younger, trendier audience than its own-brand smartphones. Honor now accounts for about a third of Huawei’s total smartphone sales. Crosstown rival ZTE (HKEx: 763; Shenzhen: 000063) is using a similar strategy by developing its own separate Nubia as a separately run brand targeting artsy types. (previous post)

Exporting Competition to India

Honor is already in 74 countries worldwide, but one of the biggest and fastest growing outside of China is India, the latest reports say. That doesn’t look good for other Chinese domestic names, many of which were looking to India to offset tough conditions in their overheated home China market.

Xiaomi in particular had been counting on India to spearhead its global expansion, but has faced a patent dispute in the market and is now facing growing competition from Huawei and other Chinese rivals. Huawei’s growing presence in the market could be a big factor behind Xiaomi’s decision to lower its annual global sales target to 80-100 million from a previous 100 million units, compared with its 61 million unit sales last year. (previous post)

Meantime, Honor is gearing up to further boost its own global footprint with plans to enter the lucrative but also highly competitive US market. Division chief Zhao Ming didn’t give a specific timetable, but said he is making preparations to enter the US with a higher end smartphone. Such a move looks difficult but necessary if Huawei wants to become a truly global player, and I expect the going will be tough and Honor will probably require at least a couple of years to achieve any meaningful results with its US foray.

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