Huawei Discovers Cellphones 华为手机要向世界前三进军

By newsdoug on January 17, 2012

Huawei's new cellphone drive Huawei Technologies, one of China’s most successful exporters but also one of its most frustrated, is following in the footsteps of crosstown rival ZTE (HKEx: 763; Shenzhen 000063) in discovering cellphones, a far less controversial product than its traditional networking equipment business. The move looks like a smart one for Huawei, even if the company is a little late coming to this product area, with many interesting implications. Chinese media are quoting an executive saying Huawei is aiming to become one of the world’s top 3 cellphone makers within the next 5 years — a big order for a company that is currently just a minor player but certainly not impossible for one with Huawei’s vast resources. (Chinese article) Equally significant was where the executive made his remarks, namely at the Consumer Electronics Show (CES) last week in Las Vegas, the world’s largest consumer electronics show that Huawei was attending for the first time. The new push will add an interesting new competitor to the market, posing a challenge not only for domestic rivals like ZTE and Lenovo (HKEx: 992), but also for foreign companies like Motorola Mobility (NYSE: MMI) and even faded global leader Nokia (Helsinki: NOK1V). Huawei is no doubt finally realizing that cellphones are far less sensitive as a product than its core telecoms equipment business, which is showing signs of quickly slowing amid resistance in western markets like the US, where security is a concern (previous post), and even in India, where a corruption scandal has brought the industry to a standstill. (previous post) As a product area, cellphones are also far less cyclical than traditional networking equipment, whose sales tend to spike when new technologies like 4G or wi-fi come out, but then subside afterwards. Lastly and perhaps most interesting, the development of a strong cellphone business could provide Huawei with an opportunity for something that’s been talked about for years but has never happened, namely a Huawei IPO. Huawei tried to sell of its cellphone business several years ago but failed after it didn’t get the price it wanted. But that business was very small at the time, making it not very attractive to outside buyers. If it was one of the world’s top 3 players, on the other hand, it would certainly become a much more attractive candidate for an international IPO, finally giving investors a chance to buy into this interesting buy controversial company.

Bottom line: Huawei’s new drive into cellphones could create a major new global player in a short time, with a potential IPO for the unit in the next 5 years if the drive is successful.

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