image

Smartphones

A look at Honor, the unsung hero that drives Huawei’s rise as world’s No. 2 phone maker

Honor is projecting that its international sales will account for about half of total sales in 4 to 5 years. It is targeting 20 overseas markets including the US, India and Russia

PUBLISHED : Thursday, 12 October, 2017, 1:43pm
UPDATED : Thursday, 12 October, 2017, 11:22pm

Honor, the sub-smartphone brand by China’s Huawei is living up to its name as the unsung hero that has helped the tech giant overtake Apple and Samsung in sales at home and abroad.

In mainland China, it has also clobbered domestic maker Xiaomi in the most competitive budget phone sales market segment, which Huawei had long vowed to avoid.

Honor, launched four years ago, has thrived by taking advantage of its parent’s more established brand name – Huawei. It shipped 26.3 million handsets in China in the first half of 2017, according to Chinese market research firm Sino-Market Research, one of the few agencies that provides a separate set of Honor sales data.

But it was now time for Honor to shake off its inherent image as a Huawei-branded phone, said Zhao Ming, Honor’s president.

“The dual-brand strategy [within the Huawei group] has never been clearer to us than now,” said Zhaoin an interview with the South China Morning Post in Xian on Wednesday.

“Honor is an internet brand that only targets young people. There might be certain technically complementary effects between Huawei and Honor, but as a brand, Honor will become more independent in the future.”

The dual-brand strategy [within the Huawei group] has never been clearer to us than now
Zhao Ming, Honor

Operating as an internet brand with cost-effective strategies to avoid huge rental and labour costs has enabled Honor to sell its flagship model phones at between 2,000 to 3,000 yuan, and between 1,000 to 2,000 yuan for the rest of its product lines. The price tags, Zhao said, had ensured success for almost all Honor phone series, with sales reaching more than 10 million units each time a new version was introduced.

Read: Huawei launches mid-range Honor 7 smartphone, but risks ‘cannibalising’ P8 range market share

He said their business model was built on being able to offer a cost-effective product for young people, which means spending the least on marketing to cut costs and stay profitable.

Although the company now sells about half of its handsets in offline retail stores, he stressed that the business model would not change.

The company releases five to six new phones every year. One of which was its latest Honor 7X series of phones released on Wednesday in Xian. The phone is equipped with a 5.93-inch full-view screen without a button on the front. The handset comes with a dual-camera and starting price of 1,299 yuan.

“We are doing our best to lower the price and we are trying to win from the large sales volume, in spite of the squeezed margins,” he said.

Honor’s sales numbers are critical to Huawei’s claim to the global ranks, as they are aggregated into the group’s overall shipment data. The Huawei brand has focused on high-end handsets sold at above 3,500 yuan (US$500).

In a research note last month, Counterpoint said that Huawei had for the first time overtook Apple to capture second spot for global smartphone shipments during June and July, and the research firm expects the lead to extend into August amid fewer new handset launches during the period.

Review: Honor Magic smartphone that goes into sleep mode when you look away from screen

Global shipment for Honor’s flagship Honor 9 model crossed the 1 million-unit benchmark only 28 days after its launch in June, setting a record for the brand, the company said in July, compared with Honor 8, which took two months to sell 1.5 million units last year.

With Honor selling about 15 to 20 per cent of its smartphones abroad, it would account for nearly 40 per cent of Huawei’s total sales. Shenzhen-based Huawei announced in July that it shipped 73.01 million smartphones worldwide in the first half of 2017, up 20.6 per cent from the same period last year.

We are doing our best to lower the price and we are trying to win from the large sales volume, in spite of the squeezed margins
Zhao Ming, Honor

Between January and August 2017, Honor had shipped a total of 35.1 million handsets in China with sales exceeding 50 billion yuan, Sino-Market Research said. It was the No 1 internet smartphone brand in China, followed by Xiaomi and Meizu with shipments of 32.6 million units and 13.6 million units in the eight-month period, respectively, said the research note, without elaborating on other non-internet smartphone brands such as Huawei phones.

Still, the internet brands are losing their shine to new brands like Oppo and Vivo which have splurged on opening local stores and hiring celebrities to promote their products.

In response, Xiaomi, Honor’s major competitor in the market that has previously relied on online sales, said in July that it would continue to expand its physical presence, with plans to open 2,000 new stores around the world within three years.

Honor, which now sells half its phones in offline retail stores, said it had also been opening up retail stores with local agents over the past years.

“Our offline sales might soon outstrip that from the internet, but it does not mean that we are no longer an internet brand, as Honor will stick to its business model,” said Zhao, adding that the stores are run by the third-party vendors through partnerships.

Honor is also eyeing to replicate its model which has been successful in the mainland, in overseas markets, even though international sales already accounts for 15 to 20 per cent of its brand sales.

“Honor’s international sales will take about half of overall sales in about four to five years,” Zhao said. He said the company had scaled down its targeted overseas markets to about 20, including the US, India and Russia.

“Many Chinese smartphone brands are selling phones by losing money in countries like India. We will never do that. We are a profitable brand,” Zhao said.