Huawei Eyes Big Growth, ZTE Rolls Out Game Box

By newsdoug on March 24, 2014

Telecoms giants Huawei and ZTE (HKEx: 763; Shenzhen: 000063) are in the headlines today for their newer product initiatives, as each tries to offset slowing growth in their core telecoms equipment business. Of the pair, Huawei’s news looks the most bullish, with the company targeting a sharp rise in smartphone sales as it sets its sights on overtaking Apple (Nasdaq: AAPL) as the world’s second largest seller. Meantime, ZTE has formally rolled out its new gaming console, the FunBox, which looks a bit more exciting that I’d originally imagined and carries an extremely low price tag.

Let’s start out with Huawei, since that’s the more serious of these 2 news bits, even though it’s less colorful than the FunBox. The latest reports say Huawei is aiming to sell 80 million smartphones this year, which would give it around 8 percent of the global market based on forecasts for about 1.1 billion smartphone sales this year. (Chinese article) That market share would be up sharply from the fourth quarter of last year, when Huawei became the world’s third largest smartphone maker with 5.7 share, behind only Apple and global leader Samsung (Seoul: 005930). The 8 percent figure looks difficult but not impossible, as Huawei’s position has risen rapidly over the last 2 years as it aggressively promotes its newer smartphone line.

Huawei first announced the 80 million figure last month, but what’s more interesting in this latest news is its forecast that it is aiming for as much as 10 percent of the global smartphone market this year. That means we’re likely to see it become quite aggressive, since that figure would require sales of up to 110 million. Also interesting is the declaration by consumer products chief Yu Chengdong at a product launch this week that he’s aiming to unseat Apple next year as the world’s second largest smartphone seller.

This kind of ambitious talk certainly isn’t that unusual for an aggressive company like Huawei, and mirrors similar talk by PC leader Lenovo (HKEx: 992) on its way to recently unseating Hewlett-Packard (NYSE: HPQ) as the world’s largest computer seller. I can personally testify that Huawei’s smartphones have become quite popular in China in a very short time, as people like their quality and also affordable prices. Huawei has also shown it isn’t afraid to spend big money on global marketing campaigns, leading me to predict that it is likely to meet the 80 million sales target and has a 50-50 chance of attaining 90-100 million mark.

From Huawei, let’s take a quick look at the FunBox, which was rumored a week ago (previous post) and has now been formally announced. (company announcement; Chinese article) ZTE is rolling out the product in partnership with faded online game operator The9 (Nasdaq: NCTY), and I’ll admit the photos of the FunBox actually look quite nice. Hardware specifications are a big more upscale than I expected, and I was also impressed by the fact that the box will allow people to conduct video chats and teleconferences over their TVs. That certainly plays to ZTE’s strength as a telecoms equipment specialist.

But what most caught my attention was the product’s pricing, with media reporting the FunBox will sell for just 499 yuan, or just $80. At that kind of a price, the product might be worth it simply for the videoconferencing capabilities. Of course only time will tell if people ultimately embrace this newest game box, which will have to compete with an increasingly crowded field of similar online TV products from a wide range of domestic and global hardware and Internet companies. But if the teleconferencing feature works well and the gaming component is also competitive, then perhaps this FunBox could stand a reasonable chance of success.

Bottom line: Huawei stands a strong chance of meeting its 80 million smartphone sales target this year and could even sell 90 million, while ZTE’s new game console could also do well based on its features and low price.