Huawei Gets Aspirational

The Chinese mobile maker is releasing an ultra-thin, $580 Android phone, but can a company known for its affordable (don't say "cheap") phones for the world conquer the U.S.?

The soon-to-be-launched Ascend P6 smartphone has a stylish aluminum frame that’s a mere 6.18 mm, the thinnest in the world. It features a five megapixel front-facing camera specially designed for taking selfies, and it runs the latest version of Android. When it rolls out in the U.K. next month, it will sell for a suggested retail price of 499 euros, or about $580. (Release will expand to more EU countries and China in August, and to the U.S. at an unspecified later date.) That’s slightly less than the iPhone, but it’s a lot pricier than we’ve come to expect from its manufacturer Huawei, the Chinese company widely associated with cheap entry-level smartphones.

“We prefer the term ‘affordable' to cheap,” says Huawei vice president of external affairs Bill Plummer. The company changed the mobile industry with their IDEOS, the first sub-$100 line of smartphones. It proved to be enormously popular in Latin America, Africa, and the Middle East, often introducing people who'd never used a laptop or computer to the benefits of a multipurpose computing device. Americans who’ve heard of Huawei are likely to associate it with $89 IDEOS phones that are often co-branded with carriers and given away free with service.

Huawei isn't building brand awareness through big promotional deals like Samsung's partnership with Jay-Z. “We’re sponsoring the Jonas Brothers tour, does that count?” says Plummer. But it's now the third-largest maker of smartphones behind Apple and Samsung, and it’s increasingly making products to compete with those companies. The move from affordable devices to aspirational devices signifies stepped-up efforts to expand in Europe and America.

Huawei’s rise has been meteoric since it was founded 25 years ago. “At that time in China, a 20-story building would have one fixed line shared by everyone; you had to schedule the opportunity to make a phone call,” says Plummer. As a locally built, private enterprise, the company had its share of challenges. “Huawei couldn’t really get into the cities in China back then--they were all dominated by state-owned and Western companies. So we focused on rural China. And what we learned there has served us well in emerging markets. As we broke outside China,* that was the first place we tried to get into internationally.” From there, Huawei expanded from building networking infrastructure and enterprise equipment to mobile maker. Currently, 70% of Huawei's business is outside of the China.

Huawei continues to pursue both businesses, though they couldn't be more different. “The device business is very dynamic and volume oriented,” says Plummer. “There’s a big difference between $500 million networks and $500 phones.” But while the Ascend P6 may boost the company's reputation with U.S. consumers, suspicions of U.S. regulators and politicians have completely stymied its network equipment business in America.

Last year, the U.S. House Intelligence Committee report declared that Huawei posed a security threat because its network equipment could be used for espionage by the Chinese government. (The White House eventually cleared the company.) A condition of the recent Sprint merger with Softbank was that the companies agree to not use Huawei hardware. In April, Huawei announced that it was backing out of the U.S. network equipment market altogether.

"People think, 'Oh, they’re Chinese, so they must be a security threat,'" says Plummer. "But look, everybody’s based in China nowadays. Ericsson, Alcatel-Lucent, Nokia, Siemens, Cisco--they're all doing their coding in China. It’s just not relevant."

Plummer insists that the political obstacles for Huawei are ultimately costing U.S. consumers. "There’s a reason why U.S. wireless subscribers pay two to three times as much for broadband as EU consumers do--it's because the U.S. market is less open to competition and investment." He also believes that Huawei's R&D could help make the U.S. market more efficient, citing a recent CTIA report that show U.S. wireless providers are responsible for a quarter of the spending on wireless networks even though they only have 5% of wireless subscribers--—a $94 investment per subscriber versus $16 in other countries.** He says that the Internet of Things will make the need for more competition and suppliers of networking equipment and infrastructure even greater. "We're working with carriers to make bigger pipes that we desperately need, pipes as big as the ocean. We're moving to a time when billions of people communicating with smart devices are suddenly coupled with communications from tens of billions of smartphones."

*This sentence was updated to fix a transcription error
**Updated to clarify the CTIA data

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