(Chinese Version)

Editor’s Note:
The following article is written by a senior employee in Huawei, who see crisis in the heyday of Huawei. Such awareness, to some extent, is the best way to address crisis.

With so many things to handle recently, I found no time to sit down and write about Huawei, also my employer. After just getting back from a business trip, I finally got a precious half day of my own to write something about Huawei smart phones.

It is fair to say that Huawei’s smart phone business made much progress in the past few years. Huawei took a shot atthe  high-end market with the Ascend P1. Later on, although Ascend P2 proved to be a total failure in the market, Ascend P6 and P7 saved the game and turned out to be semi-successful, and finally Ascend P7 and Ascend Mate7 made a hit in the market. Yet, it is not so good as it seems, considering that Ascend D series all turned out to be complete failure. Still, on the whole, Huawei’s smart phone business made huge progress in the past few years.

However, Huawei shall never ignore the following three challenges:

Challenge One: The human nature to love new and detest old

The other days, I saw a piece of news about the drop of Samsung’s revenue and net profit. For sure, the president of Samsung must feel upset by the news, yet Yu Chengdong, the CEO of Huawei Consumer Business Group, might also feel a sense of crisis. How come? With Samsung’s revenue declining, Huawei might also face a decline in its revenue. Likewise, if there is something wrong with Ericsson, the number one provider of communication technology and services in the world, Huawei might also be in danger

Once, when I accompanied my boss to report to one of the three heads of Huawei, he spoke frankly to us that he worried most the terminal business in achieving the five-year goal to earn 100 billion USD annually. I didn’t understand his worry at that time, but later found that Huawei planned to earn 50 billion USD with terminal business while only 10 billion USD with enterprise service business. That is to say, if the terminal business failed to achieve the goal, then it is probable that Huawei wouldn’t be able to achieve the five-year goal.

Why are the heads of Huawei so worried about terminal business? I guess they are actually worrying about the human nature to love new and detest old.

Take the experience of my own as an example. Once, a college friend of mine asked me a favor to buy an Ascend P7 for him. I felt quite puzzled at his request since he is the boss of a big-scale company and could afford to buy 1,000 iPhone6 at a time. Why didn’t he buy an iPhone but instead ask me to buy an Ascend P7 for him? Later, I came to find out that he did have an iPhone, but was already bored with it and the IOS. That is to say, he bought an Ascend P7 merely to try a different operating system.

It is acknowledged that Samsung is a model Android-based smart phone maker around the world. With cutting-edge technologies, reputation, the willingness to develop new technologies, and a brilliant supply chain, it is the best Android-based smart phone maker. If Samsung’s sale volume is declining, then it follows that Huawei will also meet the same challenge within three to five years if Huawei follows Samsung’s path.

Such phenomenon has already taken place between HTC and Xiaomi. HTC paled into insignificance not because there was a lack of innovation, but rather for the fact that consumers were just tired of HTC’s appearance and interface. Although Xiaomi’s sales volume still looks good, its net profit might not be roaring as in the past. It is probable that consumers will also get bored with Xiaomi since they found no key innovation and breakthrough in the latest MIUI 7.

In a word, to love new and detest old is human nature, and no smart phone maker can avoid the challenge of human nature.

Challenge Two: The lost of the low-end market

There is a  joke about Huawei wide-spread on the Internet, saying that “In the past, we can buy Huawei’s smart phones if we don’t have much money; nowadays, however, we can’t afford a Huawei’s smart phone anymore”. The joke made fun of the price of Huawei’s smart phones but pointed out an inevitable fact, that is, the price of Huawei’s smart phones has been increasing steadily. Moving to high-end market is, for sure, a good thing for a smart phone maker, but when Huawei pushed it too hard, things might just backfire in the end. Previously, Samsung and HTC both attempted to move to the high-end market, but at last they came to realize that they failed to stand still in the high-end market and had already lost the low-end market.

Huawei had expected to set the price of its Ascend series below 2,000 RMB, but the successive presidents of Huawei were too ambitious to raise the price to around 2,500 RMB. In the end, the price of Huawei’s smart phones ranged from 1,500 RMB to 2,500 RMB. Huawei had expected to cater to the low-end market and develop Ascend Y series, but such effort was nipped in the bud. Ascend G series were also charged at 2,000 RMB to 2,500 RMB. Whether Huawei admits it or not, it has already given up the low-end market (where smart phones are charged at below 1,000 RMB), and an important approach to controlling cost. Yet, there seems to be no way back.

At the same time, Xiaomi and Meizu did a pretty good job in the low-end market. However, the other side of the story might be that while they succeeded in the low-end market, they missed opportunities to play a role in the high-end market and to expand themselves. Nevertheless, all innovation are from the edge to the center. Although we still don’t know who will outperform Huawei in the future, we are sure that it must rise from the edge, quietly and slowly, just like Xiaomi.

Challenge Three: The lack of breakthroughs

Both Huawei and Apple have to face this challenge.

In the past, no Android-based smart phones got to develop fingerprint recognition technology that was as user-friendlyas Apple’s Siri. (Personally, I can never understand why Samsung failed to develop fingerprint recognition technology) Ascend Mate7 filled in the gap and hit the market along with a big screen. To be honest, never had Huawei expected such success.

Yet, the other side of the story is that Huawei finds it hard to come up with a new model as eye-catching as Ascend Mate7. The latest Ascend Mate S and Ascend P8 are far from enough to attract consumers to give up Samsung and turn to Huawei.

In conclusion, I predict that Huawei may develop pretty well in the coming two or three years, but it remains to see if Huawei can maintain its dominance in the long run.

[The article is published and edited with authorization from the author @Ji Yongqing, please note source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at ECHO), working for TMTpost.