For all the talk of globalisation, the world is still a big place. In the technology industry, companies can become market leaders while still having significant weaknesses in big geographic areas – for example a player that is big in China doesn’t necessarily have to be strong in Europe, and vice-versa, while market leadership in Africa doesn’t automatically translate to a strong position elsewhere.
There are a number of factors behind this. Language, for one, and in the case of China, a regulatory regime which has led to local companies dominating in markets where US players lead the way elsewhere. This has often led to localised innovation, with products emerging that are exactly suited to the markets where they are available.
While the US has contributed companies such as Facebook, Google, Amazon and Apple to the world’s stage, when it comes to the mobile world there is one key difference between the US and the rest of the world: Huawei.
It is now such an accepted fact that the US market is out of play for the Chinese giant, Huawei doesn’t even seem to comment much on the issue anymore.
So far in 2017, the global smartphone market has been dominated by Samsung and Apple. No great surprise there, with both companies being strong players across the world. But number three-placed Huawei is closing in on the leaders, and is doing so without having a significant presence in the US.
Of course, there is a precedent here: when Nokia dominated the global handset market, its US market share lagged its international position. But with the Q2 2017 top five rounded out by Oppo and Xiaomi, which also aren’t a feature of the US mobile landscape – or in Europe – it is clear some of the vendors coming from Asia don’t need to look too far overseas to build their strength.
There is an interesting question as to whether US customers are missing out by not having access to smartphones from companies who are major players on the global stage. Certainly there are options beyond Apple and Samsung – LG and Motorola offer some tasty devices, for example, and ZTE holds a solid position in contract-free devices – but Huawei, Xiaomi and others have offered devices blending good specifications with competitive prices that could appeal to the US consumer if available.
The infrastructure market is similar. Ericsson, Huawei and Nokia lead the way globally, but with Huawei again building its position without strength in the US.
There is a lot of history to this.
It was 2010 when the issue came to a head. Political opposition put Huawei out of the running for a major Sprint network contract, against a backdrop of concern that having Chinese equipment at the heart of a significant mobile network would pose a security risk.
The same concerns were believed to be responsible for Huawei losing out on a number of acquisitions which would have bolstered its presence in the market, including network assets being sold by Motorola (subsequently acquired by the then Nokia Siemens Networks), 3Com and 2Wire.
This hasn’t done much to harm Huawei. In 2016 it reported a healthy profit as sales increased 32 per cent over 2015, even without a presence in a key global mobile market. Less than 10 per cent of its sales were attributed to the Americas segment, although even this region saw growth due to strength in markets such as Mexico.
But with a heavy investment in 5G underway, the omission of Huawei is notable. Now the consolidation dance has ended in the infrastructure market – at least for a while – there are a handful of top-tier suppliers left, with Huawei joining Ericsson and Nokia at the top of the list.
Of course, there are other choices alongside Ericsson and Nokia, but these are not without their own shortcomings. ZTE is tarred with the same Chinese brush as Huawei and, following its recent run-in with the US authorities, is perhaps less likely to get a green light.
Samsung’s network business should also not be counted out – it was cited as a factor when the European Union gave the Nokia/Alcatel-Lucent deal the go ahead and was also a winner in the Sprint deal from which Huawei was excluded. But while the company looks set to be a significant player especially in 5G, at present it is not in the same league.
Huawei is also a key figure in groups developing technology for IoT and 5G.
Certainly from the infrastructure standpoint, there would need to be a change of political viewpoint before Huawei could move into the US market in any meaningful way, and there is certainly little sign of that happening soon – if anything, it is less likely now than at the time of the original spat.
It is easy to point to the success of 4G, and strong push toward 5G, coming from the US to indicate the market is doing well enough without Chinese help, thank you very much.
But there have been rumours Huawei may find an operator partner for a flagship smartphone in the near future. Not a low cost device, not an unlocked sale, but a fully-fledged operator partnership to offer a flagship smartphone out of Shenzhen. Although this could prompt another familiar debate for US consumers…
…How do you pronounce Huawei?
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.