• Mon
  • Oct 20, 2014
  • Updated: 10:09pm
Corporate China
PUBLISHED : Tuesday, 29 July, 2014, 9:17am
UPDATED : Thursday, 31 July, 2014, 6:17pm

Weibo: Huawei's loss, Smartisan's headaches

BIO

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young’s China Business Blog (www.youngchinabiz.com), commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, “The Party Line: How the Media Dictates Public Opinion in Modern China.”
 

Smartphone chatter has dominated the microblogging realm among tech executives this past week, led by nonstop debate surrounding the hyperactive Xiaomi and its newly launched fourth-generation model. But I'm personally growing a bit tired of this company, and thus thought I'd turn my attention this week to smartphone chatter from two lower profile brands, namely the unappreciated Huawei and recently launched Smartisan brand.

Huawei executives were in a state of mourning over the past week following the sudden death of one of their colleagues, cellphone chip executive Wang Jin. Meantime, Smartisan's top executive was bemoaning problems facing his young company due to capacity constraints, as several CEOs of similar young rival brands looked on in sympathy that was perhaps mixed with just a touch of gloating.

The growing volume of smartphone chatter these past few months reflects the very real fact that the space has become untenably crowded with both major and smaller players vying for share in the lucrative but incredibly competitive market. Aggressive big players like Xiaomi, Lenovo, Huawei and ZTE (0763.HK; Shenzhen: 000063) have all made well documented moves into the space, as each spends heavily on product development and promotion.

But the rise of a parallel group of much smaller, boutique brands has been less visible, with names like Smartisan, OnePlus, IUNI and Oppo all trying to carve out their own spaces in the market. While I have a certain degree of admiration for these smaller brands and the people behind them, I do sense that most lack the experience and resources for long-term success. That means most are likely to ultimately end up on the in the rubbish bin of gadget history over the next few years.

One of the newer players dealing with the problems of youth is Smartisan, which launched its smartphones less than two months ago. I previously wrote about this newest of China's boutique smartphone makers, and how its story was less about its new product and more about the company's founder Luo Yonghao. Luo's name is a household word for many in China due to his famed series of English language instructional materials, a background that didn't seem too relevant to his newer foray into smartphones.

So it's not surprising that Luo has run into his first major obstacle less than two months after the launch of his maiden product, the Smartisan T1. It seems demand was stronger than Luo anticipated, leading to product shortages due to lack of manufacturing capacity and other supply chain bottlenecks. Of course, a more seasoned manufacturing professional probably would have done more market research and drafted a back-up plan to allow for this kind of unexpectedly strong demand.

On his microblog, Luo says that his company's manufacturing capacity has run into a "serious problem" that will take several weeks to fix. He goes on to detail several steps Smartisan is taking to placate frustrated consumers, some of whom have paid in advance for phones from their favorite English teacher. Such a negative development is never good for a new brand and product, as it creates negative buzz in the market and will inevitably hurt the company's credibility.

Several of Luo's peers voiced sympathy, including Chen Mingyong, CEO of smarphone maker Oppo. Chen says such problems are routine for new products, and called on Luo to persevere. Similar sentiment was coming from He Xiaojun, CEO of another new smartphone maker named IUNI, who said such problems are inevitable. I do think these sentiments are largely sympathetic and genuine, though the cynic in me also senses a slight degree of gloating from these executives at the struggles of a new challenger.

Meantime, the tone was much more somber at Huawei, where current and former executives were mourning the recent death of Wang Jin, a top executive responsible for chips in the company's cellphone division. The news was broken online by Wang's former colleague Xu Xinquan, who now works at e-commerce giant JD.com (Nasdaq: JD). Wang describes his shock at learning of the sudden death of Wang, who joined Huawei nearly 20 years ago, and is filled with the usual kind words for a former friend and colleauge.  

Huawei executives Liu Jiangfeng and Yu Chengdong reveal that Wang suffered from sudden chest pains and was rushed to the hospital, suggesting he died of a sudden heart attack. The outpouring of sympathy from such a wide range of current and former colleagues means that Wang almost certainly enjoyed a high degree of respect among his peers and was a very capable manager. Accordingly, his death represents a setback for Huawei's cellphone business, as the company jostles with all the other recent rivals in a bid to find its place in the ultra-competitive space.

To read more commentaries from Doug Young, visit youngchinabiz.com

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