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Huawei cashes in on Xiaomi’s business model

by on24 December 2014

Cheap is the way forward

Huawei has taken sales of its low-price Honor brand of smartphones to 20 million from 1 million in just one year by using the online-only strategy it copied from smaller upstart Xiaomi. 

Huawei executives hope to emulate the phenomenal growth of Xiaomi, which broke into the global top five in just a few years.

Analysts warn that the low-cost strategy has fanned the price wars and thin profit margins prevalent in China, and that its spread could affect margins at all makers. Honor brand president Jeff Liu said industry transition to an online sales strategy was inevitable given the competitive pricing, afforded by reduced distribution expenses that would otherwise make up 30 percent of handset costs.

"E-commerce is massively changing the traditional channels for the smartphone industry, and we needed to go in that direction too," Liu said.

Honor handsets dropped the Huawei name last December and have since been marketed and distributed independently of Huawei-branded phones. They are sold all over the world primarily via marketplaces such as those of in China and Flipkart in India. The brand makes up a quarter of Huawei's 2014 shipment goal, and in the third quarter, helped the Shenzhen-based telecoms equipment maker pip Xiaomi to the number three spot in global market share, according to data from Gartner.


Last modified on 28 December 2014
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