Huawei's Honor phones sales surge in 2014

Low-priced line has 20m devices sold in one-year period from last Dec

The sales of Huawei Technologies Co Ltd's low-priced Honor brand smartphones have reportedly surged by twentyfold in just one year, which analysts Wednesday attributed to an Internet marketing strategy copied from rising start-up Xiaomi.

Honor handsets, which have been marketed independently of the Huawei brand since December 16, 2013, sold 20 million from 1 million in one year, according to Reuters' Tuesday report, without specifying the exact time period.

Huawei failed to reply to the Global Times' inquiries about this by press time.

Targeting low-end and price-sensitive consumers only through online marketplaces, the Honor series appears to be something the telecommunications equipment maker intends to rely on to emulate the success of Xiaomi, which broke into the world's top five in just a few years thanks to its word-of-mouth online marketing and low-budget phones.

According to a speech made by CEO of Huawei's Consumer Business Group Yu Chengdong during the 2014 Dark Horse Start-up Trade Fair in Beijing on Sunday, Honor was released as a subsidiary brand to compete with rivals like Xiaomi.

"By marketing and distributing as Internet firms did, Honor can inevitably lower costs and become attractive, signifying a big threat to Xiaomi," Li Yi, secretary-general of the China Mobile Internet Industry Alliance, told the Global Times Wednesday.

The launch of the latest Honor 6 Plus can spur growth in Huawei's phone sales, said Li.

The Honor 6 Plus started selling Tuesday at a price ranging from 1,999 yuan ($321.60) to 2,499 yuan, mainly on Huawei's self-run online marketplace and China's second-largest online retailer jd.com. Experts said that this is less than what most comparative phones currently on the market cost.

Actually, Huawei's Internet marketing and distributing strategy seems to have already taken off.

In the third quarter, Huawei shipped 16.8 million smartphones, according to a statement on Huawei's website issued in late October, while US market consultancy Gartner said in a mid-December report that Xiaomi sold 15.8 million units over the same period.

However, Xu Hao, an industry analyst with Beijing-based market research firm Analysys International, told the Global Times Wednesday that it is not time for Huawei to relax yet as it still has lots to learn from Internet companies.

"As phones become more similar to each other in terms of hardware, the one who can win the future market should gain a competitive edge in mobile applications and user experiences, in which companies like Xiaomi are good," said Xu.

Huawei is not the first and will also not be the last to adopt Xiaomi's distributing model. Lenovo Group also said in October that it would sell a line of smartphones on the Internet only, according to media reports.

Coolpad, which is the fourth-biggest domestic smartphone brand by sales in Analysys International's second-quarter report, kicked off an online-only brand Dazen in January 2014 whose phones will cost less than 2,000 yuan.

As domestic phone makers embrace the Internet, they should not reduce their efforts in the off-line sales channels, said Li. "Most phone sales in China are still from brick-and-mortar stores and telecom carriers."

Both Xu and Li are also concerned that a low-cost strategy would trigger price wars in China, eroding margins at all local phone makers.

Xiaomi revealed in a regulatory filing of domestic appliance manufacturer Midea Group, which tied up with the phone maker in mid-December, that its 2013 operating profit margin was 1.8 percent. By comparison, Samsung's margin reportedly stood at 18.7 percent in 2013.

In order to widen its profit, Huawei needs to raise its brand value and woo wealthier consumers with a high-end line, said Xu.

According to Yu, Huawei is trying hard to catch up with Samsung and Apple in the high-end battleground via its Huawei-branded handsets, such as the Huawei Ascend Mate 7.

Li noted that some of Huawei's phones can compete with Samsung, but the brand is unable to compete with Apple in the foreseeable years for lack of a better user experience.