Huawei 'giving up' on cheap smartphones, hopes to sell 100M smartphones in 2015 by targeting high end

Huawei wants to increase sales in its consumer unit this year to $16 billion from around $12 billion in 2014, in part by focusing on higher-end smartphones. The company wants to boost its smartphone unit sales to 100 million this year from 75 million last year.

Huawei said total sales revenue for its consumer device business jumped 30 percent year-over-year to $12.2 billion in 2014, crossing the $10 billion mark for the first time. The company said total device shipments grew by 7.8 percent to 138 million, including 75 million smartphones, which represented a 44 percent increase in smartphone shipments.

While average selling prices for smartphones are dropping, especially in Huawei's home market of China and other markets in Asia, Huawei does not think focusing on the entry-level market is the best path forward.

"If we sold more low-end phones, we could even double our shipments … but in the low-end market there is no margin," Richard Yu, the CEO of Huawei's consumer business group, said at a briefing at the company's headquarters in Shenzhen, according to the Wall Street Journal.

Huawei expects more than 30 percent of its consumer devices shipped this year will be priced above 2,000 yuan ($320), up from 18 percent in 2014. As a result, Huawei plans to focus heavily on devices like the higher-end Mate 7, P7, and Honor 6, as well as new premier devices it is likely to introduce at the Mobile World Congress trade show in March and throughout the year.

Although Huawei has set a goal of hitting 100 million smartphone shipments in 2015, the company has a history of failing to meet its own smartphone shipment projections. For 2014, the company had said it would ship 80 million smartphones, and wound up shipping 75 million. In 2013 the company said it expected 60 million smartphone shipments, and ended up shipping 52 million. In 2012, Huawei had forecast it would ship 50-60 million smartphone units but wound up shipping 32 million.

Huawei is facing increasing competition from Xiaomi, Lenovo and its Motorola brand, ZTE and OnePlus. Yet Yu said he thinks most low-cost vendors from China will likely die off in three to five years because their business models aren't sustainable in the long term. "There are too many brands in this industry," he said.

"We are giving up the low end of the market," Yu added, according to Bloomberg. "Many vendors are suffering. Only two vendors have had a good life: Apple and Samsung." Huawei was the No. 5 global smartphone maker in the third quarter, according to research firm Strategy Analytics.

"Over the last two to three years, and in 2014 in particular, we have seen Huawei make concerted efforts in the mid-range of the market," IDC analyst Kiranjeet Kaur told Bloomberg. "Their flagship models, like Honor 6, have helped them achieve their ambition to move up the value chain."

Despite Yu's prediction that there will be consolidation in the smartphone market, he said Huawei will focus on organic growth for the time being. "Currently, we have no short-term acquisition plans," Yu said. "In the future, that may be possible. In the short term, we are mainly focused on our own capability, building our own capability."

For more:
- see this release
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Reuters article

Related Articles:
Huawei CFO defends 2014 earnings, as early figures show slowdown in profit growth
Xiaomi, OnePlus and other Chinese manufacturers face hurdles in international smartphone expansion
Huawei, ZTE launch branded smartphones in U.S. to raise their profiles
Huawei ships 52M smartphones in 2013, again misses its own target

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