January 2, 2018

2018: Huawei’s Year of Opportunity

Jim Harris

Becoming The 2nd Largest Smartphone Maker Globally

Smartphone OS war is over. And Android won:

Android will finish 2017 with 85.1% market share and iOS 14.7%, predicts IDC. So, there are only two operating systems left standing. Android is dominant by market share and sheer volume of units shipped but Apple is taking the lion’s share of revenue and profit. From the chart above it’s clear that the open source Android operating system was a profoundly disruptive innovation to Symbian, Blackberry and Windows, driving their smartphone market share to basically nothing.

Why 2018 Will Be A Great Year For Huawei

Huawei surpassed Apple in market share globally in July 2017 according to Counterpoint. With the release of the iPhone 8 and X, Apple has regained the second spot but some fundamental shifts are favouring Huawei’s continued rise.

Samsung Crisis on Note 7 Exploding Battery

One: Samsung seriously faltered with the fiasco of the exploding Note 7 batteries. Up until that point, I had been a Samsung fan and had been an avid user of the Note 4. I had been planning on upgrading to the Note 7 but the fiasco turned me off. The product recall cost Samsung $6 billion and the stock price in the short term lost $17 billion. The biggest hit, however, was to the company’s reputation.

Harris Poll ranks the reputation of the 100 most visible companies in the US and in 2017 Samsung dropped dramatically. In 2016, it was ranked seventh; in 2017 it dropped to 49th. (In 2015, it was ranked third.)

While Samsung created the phablet category with the Note, it lost its leadership position allowing Huawei to steal market share. (A phablet is such a large phone that it’s almost a tablet [like an iPad], so the term phablet means something between a phone and a tablet).

Apple’s Current Crisis

In December 2017, what we long suspected to be true about Apple was confirmed: Apple has been intentionally slowing down older iPhones. The company claims it was to protect system shutdowns. The real reason, of course, was to create dissatisfaction with older iPhones and get Apple customers to upgrade. I will be interested to see the impact on Apple’s reputation in the next Harris poll results.

Apple Has Become Too Greedy

This comes at a time when Apple launched its most expensive iPhone ever, the X. The 64GB model sells for $US999 and the 256GB model for $1,150. From my perspective, Apple has simply become too greedy. While Apple did sell out in 20 US cities – the iPhone loyalists seem to be completely price-insensitive, what will the less loyal do?

The average selling price for iPhones has been steadily climbing over the years with the release of each new model:

This ultimately is a risk for Apple – because a staggering 70% of the company’s profit comes from the iPhone. If the least loyal iPhone customers switch brands at the time of upgrade, Apple will lose both market share and long-term value.

So, the question will be, have iPhone sales stalled? I will be interested to see the analysis for sales after Christmas 2017. But since 2015 total iPhone sales have been flat. The only way for Apple to increase revenue and profit is to raise prices.

2018 A Year Of Opportunity For Huawei

I have been a Huawei Mate 9 Pro user since March 2017. And I am eagerly looking forward to the launch of the Mate 10 Pro at the Consumer Electronics Show in Las Vegas next week (January 9-12, 2018). Huawei is the largest Chinese smartphone maker. It’s the third largest smartphone maker globally and it has experienced exceptional growth. In the Chinese market, it dominates the high-end phone market.

It is about to announce a partnership rumoured to be with AT&T to sell its phones in the US. Opening the largest high-end smartphone market will be a key strategic move for Huawei. I predict that this will allow Huawei to permanently surpass Apple and become the second largest smartphone maker globally.

Huawei’s philosophy is to provide cutting-edge features at the best value in the market. I believe it is a positioning that will serve the company well. Huawei’s spending on research and development surpassed Apple’s in 2016. It is now the 6th most R&D intensive tech company in the world:

Why I’ve become a Huawei fan

The Mate Pro series has some amazing features:

  • Two high-end German Leica lenses – on a 20-megapixel monochrome and 12-megapixel colour – resulting in amazing photos and 4K videos.
  • A fast processor and a huge 4,000 mAh battery
  • SuperCharger that can drive your battery capacity up to 80% in just 20 minutes.
  • The new Mate 10 Pro will have a 6-inch crystal clear bright OLED screen.

These are some of the features that make the Huawei Mate Pro series amazing smartphones.

This highlights a principle of disruptive innovation: disruption is driven by companies that are hungry for growth, releasing cutting-edge features that enhance the user experience – at a price point that represents great value. By contrast, Apple is seeking to milk the market – extracting the highest revenue and profit that it can while bringing out new phones that don’t have any revolutionary new features.  

So 2018 will be the year of opportunity for Huawei.

Jim Harris is the author of Blindsided which focuses on disruptive innovation. It’s published in 80 countries worldwide and is a #1 international bestseller. You can follow him on Twitter @JimHarris or email him at jim@jimharris.com. He is also a columnist for i3 magazine.

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