Bottom line: Huawei stands a reasonably good chance of meeting its goal of becoming the world’s second largest smartphone brand in the next 3 years, while ZTE’s sell-off with the resumption of trading in its shares looks overblown.
Huawei unveils mid-range P9 at London event
Two of China’s oldest and largest telecoms names are in the headlines, though Huawei and smaller rival ZTE are moving in opposite directions as we close out the week. New data are showing that Huawei continued to pick up share in China’s smartphone market in February, as the division’s head discussed his latest timeline for overtaking global leaders Apple (Nasdaq: AAPL) and Samsung (Seoul: 005930) in the next 4-5 years. Meantime, shares of ZTE finally resumed trading, and promptly tumbled as much as 16 percent, after a difficult few weeks due to a tussle with Washington.
The 2 stories reflect the opposite recent paths of these crosstown rivals, both based in the southern Chinese boomtown of Shenzhen. Huawei’s rapid rise in the smartphone space dates back to the middle of last year. ZTE’s woes are more recent, dating back to last month when Washington punished the company for illegally selling US-made equipment to Iran. But I would caution that Huawei’s rising fortunes could quickly run out of fuel in the fast-changing smartphone world, while ZTE may be oversold following resolution of its tussle with Washington. Read Full Post…
Bottom line: ZTE’s change of leaders is a much-needed move to revive the company’s fortunes, though the choice of its former technology chief as new chairman looks a bit conservative.
ZTE gets new chairman
Following a turbulent period that saw it nearly lose access to many of its key suppliers, telecoms giant ZTE (HKEx: 763; Shenzhen: 000063) has just announced the arrival of a new chief, as it seeks fresh starts in its 2 main businesses selling networking equipment and smartphones. Many are pointing to ZTE’s recent run-in with Washington for illegally selling products to Iran as the direct reason for the departure of Shi Lirong, who was chairman for the last 6 years.
Perhaps that’s partly true, but the reality is that Shi’s tenure at the helm of ZTE has been marked by a much longer series of stumbles that has cost the company millions of dollars in sales and market value. Those missteps led ZTE to launch a major overhaul a couple of years ago that seemed to be showing results for its older networking equipment business. But more recently ZTE’s newer smartphone business has been showing signs of stumbling, and the latest Iran controversy may have driven the board’s decision to replace Shi. Read Full Post…
Bottom line: A high-profile China visit by Google CEO Sundar Pichai reflects warming ties between the company and Beijing, and presages a probable launch of the Google Play app store and Nexus phones in China by the end of this year.
Google’s Pichai in high-stakes game with Beijing
In a move that looks like something from a high-stakes chess game, Google’s (Nasdaq: GOOG) CEO is taking advantage of the huge publicity surrounding a recent triumph of his company’s artificial intelligence (AI) to make a high-profile visit to China. Google is hardly a welcome name in the country, following its high-profile spat in 2010 over Beijing’s strict self-censorship policies that prompted it to shutter its China-based search service.
Since that blow-up, however, Google has more recently been gingerly tip-toeing back to China. Reports through much of last year indicated the company was making necessary preparations to launch a Chinese version of its Google Play app store, possibly in hopes of selling its Nexus brand of smartphones in the world’s largest mobile market. Read Full Post…
Bottom line: Xiaomi’s new Mi Ecosystem of smart appliances and devices outside its core smartphones are unlikely to gain much traction due to its limited resources and mediocre product designs.
Xiaomi rolls out high-tech rice cooker
Smartphone maker Xiaomi, a former headline grabber whose star has faded over the last year, is steaming back into the news this week with its launch of a new sub-brand that’s part of its attempts to build an ecosystem of interconnected products and services. The new sub-brand, called Mi Ecosystem, looks interesting conceptually and appears to be targeting more ordinary home appliances like rice cookers, which is the first official product carrying the new name.
The only problem is that this kind of ecosystem play has become a buzzword not just in China, but also throughout the world. Everyone is trying to figure out how to make smart devices that can talk to their owners and with each other to run homes more efficiently. Apple (Nasdaq: AAPL) was one of the earliest companies in the space, and in China nearly all of the big Internet companies now have partnerships with appliance and device makers in a bid to develop similar smart products. Read Full Post…
Bottom line: Coolpad’s sliding revenue and profits last year reflect intense competition in China’s smartphone market, and the company could become one of the first major victims of an upcoming shake-out for the sector.
Coolpad logs tough year in 2015
Fading smartphone maker Coolpad (HKEx: 2369) has just released financial results that show just how bloody China’s market was last year, with operating profits and revenue both tumbling by nearly half. The outlook certainly doesn’t look too promising for Coolpad, which was once an up-and-comer in the market but more recently has been overwhelmed by the non-stop competition. It also didn’t help that Coolpad lost an important backer last year, following a high-profile dispute with joint venture partner Qihoo 360 (NYSE: QIHU).
The year 2015 wasn’t a pretty one for Coolpad. The company benefited from its relatively early arrival to China’s smartphone market to become a leading local player, but by the end of last year had fallen out of the nation’s top 5 brands. It tried to bolster its position by signing up strategic partners that could ensure its future. But that plan backfired when one of those partners, Qihoo, became enraged after Coolpad formed another separate alliance with online video giant LeEco (Shenzhen: 300104), formerly known as LeTV. Read Full Post…
Bottom line: Lenovo’s latest overhaul looks promising by combining its older PC unit with its smartphones under a capable leader, but its longtime CEO could still get forced out if the plan doesn’t show signs of success in the next 6 months.
Lenovo in new corporate overhaul
A series of new stories are highlighting the growing rivalry between fast-rising gadget maker Huawei and the older Lenovo (HKEx: 992), which has just launched a major overhaul as it tries to right its fast-sinking ship. The overhaul looks like a last-ditch effort by longtime CEO Yang Yuanqing to save both his company and his own job, following a series of missteps over the last year in the critical smartphone space.
Meantime, other reports are showing how Lenovo is also trying to maintain its globally-leading position in the PC arena with the recent launch of a new series of models from its core ThinkPad series. That launch comes as Huawei gets set to roll out its first-ever rival notebooks. Lenovo actually unveiled its new ThinkPad X1 series back in January, though the actual products are just now beginning to find their way into the market. Read Full Post…
Bottom line: ZTE will avoid major fallout from its clash with Washington over illegally selling products to Iran, though its shares could drop 5-10 percent when trade resumes after its April 6 results announcement.
ZTE seals plea agreement with Washington
It’s not often that I write about earnings date announcements, but in this case one such announcement from telecoms equipment maker ZTE (HKEx: 763; Shenzhen: 000063) appears to show it believes it has found a long-term resolution to its recent run-in with Washington. ZTE was originally set to publish its fourth-quarter results on Wednesday this week, but hastily scrapped that plan after the clash began with Washington earlier this month.
Now ZTE has just published an announcement detailing what it hopes will be a long-term resolution to the clash, which began when Washington find it guilty of selling US equipment to Iran in violation of a ban. As a result, ZTE has announced a new date of April 6 for releasing its fourth-quarter and full-year results. (HKEx announcement) Read Full Post…
Bottom line: ZTE’s temporary relief from sanctions for illegally selling US products to Iran is probably contingent on its assistance in a broader probe of the matter, and could result in more arrests and sanctions against others in the case.
ZTE assisting in US probe
In a move that surprised me, Washington is indicating it might reduce the stiff punishment it previously announced for telecoms equipment maker ZTE (HKEx: 763; Shenzhen: 000063) for illegally selling US-made equipment to Iran. In the past, Washington has shown little tolerance for Chinese companies that break the rules, even though Beijing often protests such inflexibility.
But this time is slightly different from the past, since it involves a single company rather than an entire industry. Still, this kind of temporary relief does seem a bit unusual for Washington. Accordingly, I suspect that ZTE is quietly cooperating behind the scenes with an investigation that could ultimately incriminate many other companies and individuals that helped it to circumvent Washington’s rules prohibiting the sale of US-made networking equipment to Iran. Read Full Post…
Bottom line: ZTE will lose its appeal of tough US export sanctions for illegally selling high-tech equipment to Iran, as Washington sends a strong signal that companies engaging in such actions will face stiff punishment.
ZTE to appeal US sanctions
An increasingly frantic ZTE (HKEx: 763; Shenzhen: 000063) is working on several fronts in a bid to stop crippling US sanctions, after Washington determined the company illegally sold equipment to Iran. I used to be a strong supporter of compromise in China’s frequent trade conflicts with the west, and still believe that some form of compromise might be the best solution here.
But at the same time, the frequent tendency by Chinese companies to flout laws and agreements both at home and abroad shows that sometimes harsher measures are the only way to convince these firms to play by the rules. Accordingly, I do expect we could see Washington take a relatively tough stance against ZTE in this case, despite protests from Beijing and the potential for big disruption to the operations of one of China’s largest telecoms equipment makers. Read Full Post…
Bottom line: Huawei’s move into electronic payments is its first foray outside its traditional strength as a hardware developer, and reflects its growing aspiration to challenge global rivals Apple and Samsung.
Huawei tries services with Huawei Pay
Fast-rising smartphone maker Huawei no longer seems content to target homegrown rivals like Xiaomi as its main competitors, and is increasingly looking to challenge global leaders Apple (Nasdaq: AAPL) and Samsung (Seoul: 005930). That’s my interpretation of the latest headlines, which say Huawei is preparing to roll out a new mobile payments service in China, less than a month after similar moves by the 2 global leaders.
This particular move comes as a bit of a surprise, since there were no previous indications that Huawei was planning such a foray. Up until now, Huawei was largely been a company focused on hardware, unlike Apple, which has built a big stable of service-related offerings like Apple Pay and its music and video services around its core smartphones and computer products. Read Full Post…
Bottom line: The closure of small smartphone maker Dakele marks the latest distress signal from the sector, with one or more larger, more familiar brands likely to close shop within the next 6 months.
The inevitable has finally happened in China’s 2-year-old smartphone wars, with word that a smaller player named Dakele has officially closed shop after running out of money. It’s not completely true to call Dakele the first victim of China’s smartphone price wars, since we saw a steady stream of bankruptcies among component makers that supply the actual brands toward the end of last year.
But Dakele’s closure does mark a major milestone, since it’s the first case I’ve seen of a sizable brand going bankrupt and probably signals more closures in the year ahead. Some of the most likely candidates for such closure, or perhaps purchase by another larger player, include mid-size brands like OnePlus and Smartisan, which have failed to find an audience and are probably losing big money. Read Full Post…
