Honor may catapult Huawei to top spot for smartphones in 2020

The use of Huawei and Honor as a dual-brand strategy may very well help Huawei clinch the top spot in 2020.

"That's a Huawei phone?" a Chinese friend of mine asked me when I showed him a review unit of the Honor View 20. I had to show him the manufacturing stamp, which clear as day, said "Made in China, Huawei Technologies Co., Ltd," to prove that it was indeed so. 

My friend then shrugged, and said, smiling, "We have so many different brands, and so many choices."

What he said is true. Smartphone growth in China has stalled in recent years and the players have established their positions -- drastic changes like the rise and decline of Xiaomi appears unlikely. What has not changed however, is that the Chinese market is still stratified and diverse. Even on its worst days the Chinese market is dynamic and consumers love choice. They love choice to an extent that, I think, can baffle foreigners. Any brand worth its salt must be prepared to provide a list of minute details about its products, as well as the price plans and options, or face anonymity.

My friend, a self-made successful businessman, without batting an eye, told me he would only ever buy Apple's iPhone because he is, well, successful. All of his employees only have iPhones as well, he stressed. 

Read more: Huawei aiming to be biggest smartphone brand by 2020

But go to any shopping mall in downtown Shanghai and there are Huawei and Samsung booths aimed at the middle class. Beijing, the capital, is also a battleground. In the streets of Zhuhai, big neon signs of Oppo and Vivo light the streets. And inside the city's various malls, there are so many phone brands that I have never heard of. The word China can be deceptive. It denotes one country, but it has nearly 1.4 billion people and 26 provinces. Besides the different dialects, there are subtle provincial politics that I am not going to even pretend to understand.  

And the Honor brand is very much a product of this. To be honest, I have never really been impressed with any one Honor phone. What has impressed me, however, is the diversified mind-set behind the brand.

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Honor brand's offerings are competent and price-competitive, designed to gain market share in a saturated market. The Chinese brand now has its eyes squarely in Europe. 

(Image: Honor)

A dual brand strategy that worked

What Huawei has done successfully is harness that diversified mindset through exporting Honor globally, since 2014. It's not the only Chinese company to do so, of course. While global titans Apple and Samsung failed to catch onto these changes, or couldn't because of their legacy premium brand images, Huawei certainly did. It dropped the "Huawei" from Honor.

Huawei didn't invent the wheel on brand strategy, but for smartphones, I think the company has executed its strategy the best. There is a clear distinction between Huawei and Honor in terms of product identity, one is high-end and the other low-end. The company also overlaid different narratives for each brand. Huawei is the best of the best and Honor is for digital natives, millennials, and all of that trendy stuff. Up until now, at least in China and Southeast Asia, this has been very successful. Now it is testing the limits of the brand strategy with the launch of the new Honor 20 in Europe on May 21.

See: 10 best cheap phones: $400 (or much less) buys an iPhone, Pixel, or Galaxy alternative  

A dual brand strategy can backfire so there was risk on Huawei's part. In comparison, a company not doing the best job of managing its brand is LG's mobile business. For some hard-to-grasp reasons, the South Korean electronics-maker split its flagship into the G brand and V brand. It also decided to make the name of its phones more complicated by adding "ThinQ", which I still get confused about when I am forced to read it. Thankfully 5G is here and LG has somewhat adjusted the V brand to be 5G and G to be 4G LTE, at least in South Korea. This kind of risk also makes Apple and Samsung avoid dropping iPhone and Galaxy even for their low-ends to this day.

The razor-thin margin that Honor can cope with is also thanks to the drastic price drop of components. The success of smartphones has made LCD a relatively cheap commodity, allowing companies like Huawei to buy practically endlessly from suppliers, whoever they may be. The only thing standing in Huawei's way are high-end image sensors, thanks to the popularity of cameras, but access is not as hard as it was in the heydays.

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Honor View20's punch-hole that allows "full screen". 

(Image: Cho Mu-Hyun/ZDNet)

An "Honorable" Strategy

Huawei has also been bold when it comes to experimentation with Honor. It's easy to brush aside the brand as "tacky", such as when Honor launched its Magic 2 with a slide-out camera, but I think there's more depth behind the brand. Honor products have a very short life-cycle, and the whole point of the brand is to keep that cycle spinning. The goal of Honor is to be level with the best of the best smartphones in the market, not to overcome it. 

The Chinese phone-maker has tried water drop notches, regular notches, punch-holes, sliding mechanisms, and so on so forth. This is a good follower strategy: Samsung and LG, when they aimed straightly at Motorola and Nokia, also experimented heavily with what a feature-heavy phone could do -- remember the Chocolate Phone or the Magic Slide?

The Honor View20 is a great example of this. It has the touted punch-hole that allows for an almost-full screen design. It's similar to the Samsung Galaxy S10, which has a punch-hole on the top right corner of its screen, but the Honor device uses an LCD screen instead of an OLED one.

Read more: IDC report - Huawei increases lead over Apple, with Samsung in its sights in battle for top spot

"After a lot of data analysis of consumer habits, we decided to put the front camera on the left. First of all, placing the hole in the middle would attract too much attention, defeating the purpose of building a better version of our "full view" technology," said Sean Yilin, senior product manager of Honor View20, in an email interview with ZDNet.

"Both the left and right sides have less visual impact on the user. The reason why it is placed on the left side is because when the user is playing games while holding the phone horizontally, the hole on the left side will be in the lower left corner of the user's vision, and at the same time blocked by the thumb, so that the visual impact is relatively small."

Last year, Huawei's consumer business beat its traditional telco equipment business in sales for the first time. The company reportedly sold more Honor models than Huawei ones in China, and this is probably true for the global market as well. This could be read as cannibalisation, but not when you use the high-end brand for profitability and the other for market share. After all, the bad can be turned into good with proper preparation and strategic thought, according to Sun-Tzu. 

While it remains to be seen whether Huawei will clinch the smartphone top spot by 2020, it is no empty boast. The global market and Chinese market operate by different rules, and Honor understands both.

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