Huawei plans to focus on producing high-end smartphones as competition from local competitors such as Xiaomi increases.
As reported by the Wall Street Journal, the Chinese smartphone manufacturer does not believe there is a margin in the low-end smartphone market any longer.
The shift in the low-end smartphone market can be placed at the feet of Xiaomi, a Chinese smartphone developer which develops handsets which often appear similar to rival designs. However, the company draws out additional profit by focusing on online sales, removing the need for distribution costs. This, in turn, makes handsets cheaper and more attractive to consumers.
However, Xiaomi is not the only company targeting budget users in the region. Lenovo, Micromax, Samsung and Lava have all joined the fray with their own handsets.
On Tuesday, the leader of Huawei's consumer business group, Richard Yu, told reporters at a briefing in Shenzhen:
"If we sold more low-end phones, we could even double our shipments [...] but in the low-end market there is no margin."
While rivals including Xiaomi are currently reaping the rewards of producing budget mobile devices, Yu believes this is a short-lived victory. According to the official, most low-end smartphone makers will vanish in three to five years as their business models are not sustainable.
"There are too many brands in this industry," he said.
This idea does hold merit. Smartphones and tablets have evolved at a rapid pace over the last few years, but now are in danger of reaching the point of being too similar for there to be stand-out designs. Cameras, app stores, operating systems -- most often iOS or Android -- speed, screen resolution and size are all becoming uniform, and so there is little to distinguish companies. Except when things boil down to price -- but even this fluctuates, especially as competition increases. The only factors which can ensure companies attract a loyal following are premium features and software, something which Huawei can pursue to push ahead of local competition.
If Yu's opinion reflects that of Huawei as a whole, this would indicate why the tech giant is altering its business model. The firm expects 30 percent of its consumer devices shipped over 2015 to be priced above 2,000 yuan ($320), which is up 18 percent from last year. In addition, Huawei claims its handsets have been well received in emerging markets such as Pakistan and Colombia.
Read on: In the enterprise
- Enterprise understanding of DevOps expands, but has a long way to go
- Apple cuts off developers in Crimea
- Twitter snaps up Indian startup ZipDial
- Amazon moves into movie market
- Samsung taps new design chief
- Virgin, Qualcomm invest in high speed Internet satellite network
- Lenovo, Zenoss partner to improve IT solution delivery