HONG KONG—For the past three years, Samsung Electronics Co. has
been the world's smartphone leader, outselling all other vendors,
but its global dominance appears to be increasingly under attack
from fast-growing Chinese rival Huawei Technologies Co.
Long known as a telecommunications-equipment supplier to global
carriers, Huawei has already toppled Samsung in China, the world's
biggest market, where 425 million smartphones are expected to be
shipped this year. Globally, the Shenzhen-based company became the
third-largest smartphone maker in the second quarter, according to
data from IDC. This is due, in part, to its ability to gain market
share in the Middle East and Africa, where smartphone growth is
faster than in any other region.
With handset revenue up 87% in the first half of this year,
Huawei expects profit from its smartphone business to more than
double this year. If its pace of growth continues, Huawei hopes it
can challenge the current two-horse race between Samsung and Apple
Inc. in the smartphone market.
"The best product and the best innovation are coming from
Huawei. Not from Apple, not from Samsung," said Richard Yu, who
heads Huawei's consumer business including smartphones, at a
briefing in July.
Huawei is trying to break out of the mold of a budget handset
maker by selling more high-end models with higher price tags. On
Wednesday, at the IFA consumer trade show in Berlin, Huawei
unveiled the Mate S, which the company says will cost at least €600
(US$679) in Europe—its most expensive smartphone to date. It has a
5.5-inch touch screen that can distinguish between a light tap and
deep press, a feature similar to what will likely appear in Apple's
next iPhones, according to people familiar with the matter.
The new flagship phone could help Huawei gain more ground
against Samsung. The two companies compete in similar price
segments and both make devices based on Google Inc.'s Android
operating system.
Samsung's global market share has been slipping amid stiff
competition from Huawei and other Chinese rivals over the past
year. In the second quarter, Samsung's smartphone shipments fell
2.3% as its share of the global market fell to 22% from 25%,
according to IDC. In contrast, Huawei's smartphone shipments rose
48% from a year earlier, giving it an 8.9% share and making it the
fastest-growing competitor among the top five global vendors, IDC
says.
Bhekinkosi Ncube, a 23-year-old legal adviser in Johannesburg,
has owned several Samsung smartphones. In July, he bought a Huawei
phone for the first time, paying $300 online for the Chinese
company's Ascend P7, which has a higher-resolution screen and
larger battery capacity than Samsung's Galaxy A5, which costs more
on the same website.
"Huawei is a lot cooler than it used to be," even though Samsung
is a better-known brand, Mr. Ncube said.
In the Middle East and Africa, Huawei's market share more than
quadrupled in two years, from 2.6% in the second quarter of 2013 to
11% in the second quarter of this year, while Samsung's share fell
to 32% from 53% during the same period, according to IDC.
As China's smartphone market gets more saturated, the Middle
East and Africa are becoming increasingly important: In the second
quarter, total smartphone shipments in the Middle East and Africa
jumped 60%, according to IDC.
"With aggressive plans to expand in the region, especially in
Africa, Huawei will continue to be a threat to Samsung," said
Nabila Popal, IDC's research manager for the Middle East and
Africa.
Samsung declined to comment on its falling market share and how
it plans to fend off competition from Huawei.
Ashraf Fawakherji, who heads Huawei's smartphone business in the
Middle East, joined the Chinese company in early 2013 after
managing Samsung's mobile unit in the Persian Gulf for six years.
He says to compete against Samsung's deep pockets, Huawei needed to
think creatively about its marketing.
His team's first Facebook campaign in 2013 asked people to
pronounce "Huawei." Thousands of people across the region submitted
their recorded voices to win free Huawei smartphones.
Huawei has also enlisted the help of Nancy Ajram, a popular
singer in the Arab world. In April, it launched an online contest
asking fans to submit videos of them singing one of Ms. Ajram's
songs. Finalists performed in front of Ms. Ajram and the winner
received $25,000 of solid gold.
Expanding sales channels is, however, a challenge in the Middle
East, where most phones are sold by retailers, not by telecom
carriers. Mr. Fawakherji, a 20-year industry veteran, said his
experience of working for both a local mobile distributor and
Samsung came in handy, as he already knew managers at local
retailers.
Huawei is also gaining market share in parts of Europe, where it
has been sponsoring professional soccer teams such as Spain's Atlé
tico Madrid and Italy's AC Milan. In the second quarter, its market
share in Spain rose to 10% from 6%, while its share in Italy
increased to 9% from 7%, according to IDC.
Still, Samsung's lead in smartphones against Huawei remains
large and the South Korean company is a far more established
consumer brand. Given its marketing might, it won't be easy for
Huawei to narrow that gap, some analysts say.
Last year, Samsung was ranked No. 7 in Interbrand's 100 Best
Global Brands ranking, while Huawei, the only Chinese company on
the list, was No. 94. Huawei phones also have little presence in
the U.S., where its telecom-networking-gear business has been
effectively banned because of security concerns raised by lawmakers
who said Chinese equipment could be used by Beijing for spying.
Huawei has rejected the view that it could pose a threat to
security. It has said it would launch new smartphones in the U.S.,
without giving details.
Mr. Yu contends more consumers are starting to recognize the
improvements in Huawei's products. "Rome was not built in a day,"
he said at the briefing in July.
Alexandra Wexler in Johannesburg, Nicolas Parasie in Dubai and
Dahlia Kholaif in Cairo contributed to this article.
Write to Juro Osawa at juro.osawa@wsj.com
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(END) Dow Jones Newswires
September 02, 2015 13:05 ET (17:05 GMT)
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