Will Americans love Chinese tech brands? Two of China’s tech giants are about to find out

Tencent and Huawei, giants in their respective fields in China, are about to find out whether they can take on the likes of Apple and Facebook on their home turf

PUBLISHED : Friday, 22 December, 2017, 7:03pm
UPDATED : Friday, 22 December, 2017, 11:29pm

China’s tech giants have grown into some of the world’s biggest companies by satisfying the demand of the country’s increasingly affluent and internet-savvy middle class in their home market. Cashed up and confident, they are now leading another charge by Chinese brands to try to crack the US market.

Tencent Holdings, China’s biggest social media and mobile gaming company, this week introduced its maiden title in the US to catch the year-end holiday season. Huawei Technologies, the country’s largest smartphone maker, said it plans to sell its flagship model in the US next year.

The US still represents the holy grail for any company with global aspirations, according to Tim Zanni, KPMG’s global and US technology leader. US consumers have higher disposable incomes, meaning they are willing to pay more for quality products, said Zanni, who is based in California.

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“Any significant business needs to grow to be successful,” Zanni said. “Being the world’s largest economy, the US market is the most significant market in the world.”

But just as American companies have encountered obstacles in China, from complying with local laws to adapting to regional tastes, Chinese companies like Tencent and Huawei will likely face a steep curve in learning what works and what does not.

The Shenzhen-based Tencent didn’t immediately respond to an email request for comment on its US expansion on Friday. Richard Yu, president of Huawei, declined to comment its US plan on Thursday, saying he would announce details at the Consumer Electronics Show in Las Vegas in January.

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Even armed with the scale of China’s home consumer market and manufacturing ecosystem, China’s tech companies will be competing in the US with global leaders like Apple, Facebook and Google on their home turf.

“Brand equity remains the West’s firewall against Chinese manufacturing strength,” said Jeffrey Towson, an investment professor at Peking University in Beijing. “Very few Chinese brands have connected with American consumers. Yes, Chinese companies are great but so are American companies. And they have been serving American consumers for a long, long time.”

Tencent, in its maiden foray into the US gaming market, has adapted its chart-topping game Honour of Kings. Even though the title has more than 200 million players in China, its cast of characters, based on Chinese historical figures, would not resonate with American millennials, the key target demographic.

So instead of foisting Zhuge Liang, a renowned 3rd century AD military strategist on 16-year-old American teens, Tencent has swapped him for the more recognisable trio of Superman, Batman and Wonder Woman in the US version, called Arena of Valour.

For Huawei, the US entry would mark a second attempt at the American market after a Congressional report a few years ago had raised concerns the company posed a security threat. The smartphone maker said this week that its US sales would start with the flagship Mate 10, which is aimed at the same market segment as Apple’s iPhone X.

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Tailoring the right products aside, China’s hardware makers in particular may be in for a bumpy ride due to security concerns, according to William Carter, deputy director and research fellow of technology policy at Centre for Strategic and International Studies (CSIS), a Washington DC-based think-tank.

“There are concerns about Chinese government’s surveillance,” said Carter. US consumers are wary about “having a foreign company collect their data”.

Companies like Huawei should be “as transparent as possible, and limiting as little data collection as possible”, Carter said.

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Huawei may gain more trust if security researchers find the data collected by its smartphones is no different from, say what Google or Apple’s phones collect, he said.

DJI, the world’s largest recreational drone maker, introduced a mode that stops sending or receiving any data over the internet, after the US Army in August ordered its member organisations to stop using the Shenzhen-based company’s drones due to security concerns.

“We believe that any technology should address a need and create relevance or value for end users, less about where the company is originated or where the products are developed,” DJI said in a written statement when asked to comment on its expansion plan as well as challenges in the US.

The success – or failure – of Huawei and Tencent in cracking the US market will become test cases for the ongoing policy debates about Chinese companies’ market access and level of hospitality, said Carter at CSIS.

It will send an “interesting signal to Chinese peers and US companies who are currently looking at the Chinese companies’ presence in the US and wonder what will happen.”