U.S. smartphone buyers could soon be enticed by a new vendor.
Handset giant Huawei's smartphones are popular its home market of China. In the third quarter last year, the company sold more phones to Chinese buyers than anyone else, besting both Apple (AAPL 1.19%) and Samsung (NASDAQOTH: SSNLF) in the process. Huawei has also found success in Europe, Latin America, and other Asian countries, but remains virtually unknown to Americans.
That could be about to change. Given Huawei's rapid growth and recent success, its slow entrance into the U.S. smartphone market is a trend that could dramatically upend the space.
No. 3, but closing the gap
Huawei shipped 32.4 million smartphones last quarter, according to research firm IDC. That figure was enough to make it the third most popular vendor, behind only Apple and Samsung. Admittedly, the gap between Huawei and the two front-runners was large (Apple shipped more than twice as many phones as Huawei), but Huawei has a considerable lead on its next closest competitor, Lenovo, which shipped nearly 40% fewer handsets.
More impressive than total shipments, however, was Huawei's growth -- the company saw unit shipments surge 37% on an annual basis. Samsung experienced some growth (its unit shipments rose 14%), while iPhone demand was roughly flat. Starting from a smaller base, Huawei's growth was easier to come by, but if its current success continues, the company could soon close the gap on its larger rivals. Speaking to CNBC last month, a Huawei executive said the company hopes to overtake Apple by 2019, and Samsung by 2021.
What you can get for $200
The U.S. is the second-largest smartphone market in the world. Huawei may have taken the top spot in China, but to overtake Apple and Samsung on a global basis, it will need to capture at least some American buyers.
In late January, the company began selling its Honor 5X to U.S. buyers through Amazon. The handset, which retails for a mere $200 in total, is attractive for its price bracket, with a metal body and a fingerprint scanner -- two features largely unheard of among budget handsets. Reviews haven't been exceptionally positive, but the phone hasn't been poorly received, either. CNet complained about the phone's limited internal storage and camera, but concluded that it represented a "great deal for budget-phone seekers."
Huawei still isn't selling the Honor 5X through carriers, which should limit demand. However, Amazon is among the most popular retailers for handset buyers, and should dramatically expand Huawei's reach.
Admittedly, Huawei has been selling some of its phones to U.S. consumers through its website, GetHuawei.com, since the first half of 2014. But unsurprisingly, it has found little success: Estimates pegged its U.S. market share at under 1% last year. Its website is unfamiliar to most consumers, and the prospect of buying directly from the manufacturer remains a rarity in the U.S., where most phones are still purchased through carriers. It partnered with Alphabet to make last year's Nexus 6P, but that handset is sold under the search giant's banner, rather than Huawei's, and Nexus handsets don't sell in large numbers. So, while the Honor 5X's Amazon debut isn't technically Huawei's first appeal to U.S. shoppers, it is its most significant by far.
A sign of things to come?
With its middling processor and mediocre camera, the Honor 5X is -- at best -- a midrange phone. American buyers seeking a flagship device, such as the iPhone 6s or Samsung's Galaxy S7, aren't likely to give it a second thought. In that respect, Huawei isn't providing much competition for Apple or Samsung today, but investors in the space should monitor Huawei closely.
The Chinese and U.S. smartphone markets vary, but if Huawei can eventually translate some of the success it has had in China to the U.S., it may be able to emerge as a much stronger rival in the quarters to come.