Date
22 October 2018
George Zhao is pictured on the stage during the Honor 10 global launch event earlier this year. The Honor smartphone brand chief aims to boost overseas sales in a big way as the domestic Chinese market has become very crowded. Photo: Honor
George Zhao is pictured on the stage during the Honor 10 global launch event earlier this year. The Honor smartphone brand chief aims to boost overseas sales in a big way as the domestic Chinese market has become very crowded. Photo: Honor

Honor, Huawei’s mid-range brand, steps up overseas push

Honor, a smartphone brand established by Huawei Group in 2013, has stood out in the crowded Chinese smartphone market. As a budget-friendly Huawei sub-brand, Honor offers consumers an alternative in the lower to mid-range smartphone segment, helping it succeed in the marketplace.

During Singles’ Day online shopping event in China last year, Honor generated over 4.02 billion yuan (US$605 million) revenue on Alibaba’s e-commerce platform, a testament to the brand’s popularity.

Having entrenched itself in China, Honor now aims to compete aggressively in overseas markets, with Southeast Asia a top focus, a top company official told EJ Insight in a recent interview.

“With the dual-brand strategy of Huawei and Honor, we have a different customer segment,” Honor President George Zhao pointed out.

The mature Huawei brand offers smartphones at the price range over US$600 or more in overseas markets, targeting professionals and high-end consumers, while Honor’s products aim to be the “technical fashion for youths, millennials, and digital natives,” according to Zhao.

Honor devices have gained appeal as they offer advanced features from the group’s premium line of Huawei phones at a much lower cost. Launched in China this April, Honor 10, the brand’s flagship product, features a dual-lens camera with smart photo-taking features based on artificial intelligence technology. Available in high-end models, it is priced at about US$400 overseas.

“The product is basically invincible at this price,” said Zhao, when asked about Honor 10′s prospects in the European smartphone market. “We hope that our products will be able to compete head-to-head with Apple and Samsung in the future.”

In 2017, Honor outlined a target to be among the world’s top five smartphone brands by the end of 2020. The brand has staked out market share gains in Europe, with 21 additional international markets from Asia to Africa to follow, particularly in the mid-range segment where market leader Samsung has not been very dynamic.

According to the firm, Honor has outrun Apple to be the second smartphone brand in volume, with about 16 percent market share, in Russia as of June. In India, it claims to have recorded a 300 percent increase in sales volume and revenue in the first half of 2018. Among Western Europe’s five largest national markets, it has become a top 5 brand in France and Italy, and its sales in the UK have grown 200 percent year-on-year.

As it kicked off its global strategy, Zhao sees Southeast Asia as a market with huge potential for growth. Honor has entered key markets in the Southeast Asian region, including Indonesia, Vietnam, Philippines, Malaysia, and others.

“Honor is going to grow aggressively in these populated markets in the Southeast Asia region,” the executive said.

As the Chinese smartphone market slows, Honor will step up focus on overseas markets this year. “In 2017, Honor sold about 85 percent of its units in China, with 15 percent overseas. Our aim for 2018 is to make that ratio to 75:25, and we target to make that ratio to 50:50 in three years,” said Zhao.

In its home base, Honor has seen the smartphone market get crowded with competitors. Mid- and low-end smartphones with aggressive prices have emerged as the segment that is witnessing the most fierce competition.

“Despitestrong players like Oppo and Vivo, Honor has managed to grow fast, and ranked fifth in the Chinese smartphone brands,” said Zhao.

Speaking about Honor’s sales strategy, Zhao said: “We don’t set up physical stores; our products are all distributed through our partners’ online and offline sales platforms.”

As of now, there are only about 100 people in Honor’s offline sales team, in comparison with the hundreds of thousands of promoters and salesmen hired by Oppo and Vivo in the country, he said. Despite limited resources, Zhao claimed that his brand’s offline sales have contributed half of its overall revenue.

In the mid-range smartphone segment, Honor and Xiaomi are arch-rivals in China as well as in some fast-growing markets like India. Asked about the close competition with Xiaomi, Zhao said Honor never takes the low price as its core advantage.

“Honor is a trend-setting brand born for digital natives, we are devoted to offering unrivaled products and unbeatable value,” he said. “And we insist on maintaining reasonable profits for all our partners along the supply chain.”

Xiaomi had announced recently that it will cap its hardware profit margin at 5 percent indefinitely. However, Zhao said he believes Xiaomi is far from reaching a 5 percent profit margin in its hardware sales.

“Chinese hardware makers which can achieve that are extremely rare; everyone is trying to increase higher-margin services in the later stage,” he said. “I will be so happy if Honor can achieve that, considering our large R&D investment.”

Chinese smartphone makers have a long-standing image of being copycats, with vendors across the country selling look-alike products.

“Honor led a trend by introducing color elements into smartphones, releasing the Honor 8 in Sapphire Blue in 2016. After that colour edition launched, we can see there are so many smartphone brands rolling out their feature products in blue, like Xiaomi Mi 8,” said Zhao, adding that “in the China market, there is no way we can stop people from doing this.”

Xiaomi completed its public offering in Hong Kong in July. Asked about his firm’s plans, Zhao said going public is not on the table for Honor right now.

“We don’t see the need to do an initial public offering,”  he said. “Staying private allows us to have long-term investments that can constitute our core technology advantages.”

And it will allow the company to avoid situations wherein it might face pressure to take business decisions with an eye on short-term stock performance, Zhao added.

Among overseas competitors, Taiwanese electronics company HTC is working on a new blockchain phone, which is due to be released later this year.

In May, Honor’s parent Huawei rolled out a bitcoin wallet in its AppGallery app store, as the first digital currency application offered on Huawei devices.

Asked about if Honor will introduce blockchain technology in its future products, Zhao said: “We don’t get swayed by the market trend.”

He said he believes whenever a new technology hits the high points of hype, like “VR three years ago”, it is likely not the best timing for technology commercialization.

Talking of blockchain technology, he said several smartphone makers in the industry started talking about introducing the technology in devices in past two years, but wondered as to whether they can succeed.

“Blockchain smartphone is more like a gimmick,” he said.

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BN/RC

EJ Insight writer

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