CELLPHONES: Huawei Ramps Up In US, LeTV Joins Crowded Space
Bottom line: Huawei could make significant progress in the US smartphone market this year if it devotes more resources to the campaign, while LeTV’s smartphone foray looks necessary but could face difficulty due to stiff competition.
Rapid developments in the smartphone space are showing no sign of slowing in the New Year, with the latest reports that stalwart Huawei is preparing for a major new push in the US, as online video specialist LeTV (Shenzhen: 300104) prepares its own campaign to enter the crowded arena. Of these 2 news bits, the Huawei one looks like the most significant, as it will see the company make a major play at a US market that is the world’s largest but has been elusive for the Chinese telecoms giant. LeTV previously hinted at its plans to enter the crowded smartphone space, and its relatively late arrival means its endeavor in the crowded field could ultimately fail.
Let’s begin with the new Huawei campaign, which was disclosed by a company executive in an interview on the sidelines of CES, the world’s largest consumer electronics show taking place this week in Las Vegas. (Chinese article) The report doesn’t have much detail on the actual new campaign, but does point out that Huawei currently gets less than 4 percent of its revenue from the US market.
Industry watchers will know that Huawei and crosstown rival ZTE (HKEx: 763; Shenzhen: 000063) have been largely locked out of the US for their core telecoms networking products, after Washington banned the pair 2 years ago over national security concerns. But Washington never banned less controversial Chinese cellphones, and ZTE has built a relatively successful business selling its smartphones into the market.
Huawei has also attempted to sell its smartphones in the US. But the executive revealed it hasn’t made much headway despite global growth of more than 30 percent for its consumer products division last year and its current status as one of the world’s top 5 cellphone brands. He blamed the lackluster performance for failure to properly develop its sales channels in the US, and also a failure to raise consumer awareness of its brand.
Both ZTE and Lenovo (HKEx: 992), another Chinese smartphone wannabe, have made more serious attempts to build their brand in the US, including major endorsement deals with the NBA Houston Rockets franchise and leading Hollywood actor Ashton Kutcher, respectively. (previous post) But Huawei has yet to sign such a big deal in the US, instead making headlines for its own endorsement deal in Europe last year with soccer club AC Milan. I expect we’ll see a major overhaul of Huawei’s US strategy this year, including a much larger marketing budget and perhaps a major local endorsement deal.
Meantime, LeTV’s talkative CEO Jia Yueting has confirmed that his company will launch its own smartphones, after hinting at such a move last week on his microblog. (previous post) Jia also disclosed the latest move on his microblog, spelling out 3 guiding principles for his company’s new product. (Chinese article) Frankly speaking, this kind of move does make sense for an online video company like LeTV, especially as China’s broadcasting regulator takes moves to ban private companies like LeTV, Xiaomi and Youku Tudou (NYSE: YOKU) from offering their products over traditional TVs.
But that said, LeTV seems to be a bit hyperactive these days in its new product initiatives, which hints at a lack of focus. Among its steady stream of new campaigns, LeTV has announced a cloud computing initiative with Microsoft (Nasdaq: MSFT), plans to develop a new energy car, and now this smartphone initiative. I admire Jia for his enthusiasm and realization that development of supporting infrastructure and distribution channels will be key to his company’s future success. But that said, I would advise him to focus on a few key areas, and quietly shelve some less important initiatives like the new energy vehicle cars.
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