Author(s): Raghu Gopal
For smartphone makers, the US can be a notoriously different market. From technical implementations to spectrum used, to strict carrier certification rules, the country presents hardware manufacturers with a series of unique challenges. Nonetheless, the size of the market makes up for the troubles.
During the past few months, stories began circulating that Huawei had entered talks with AT&T and Verizon to supply these leading US wireless carriers with at least one flagship smartphone model in 2018, possibly the Mate 10 Pro. In December 2017, Huawei essentially confirmed the rumours by revealing that it would sell smartphones through several US carriers. This would form an essential part of the Chinese company's lofty ambitions of becoming the world's leading global smartphone maker.
Huawei needs carrier channels to have a chance of grabbing market share in the US. By the manufacturer's estimates, carriers account for 90 percent of smartphone sales in the country. Without their support, Huawei's addressable market is the open channel segment. There's a trend toward open-market devices in the US, thanks to the growing number of consumers choosing to buy carrier-agnostic smartphones from Amazon, Best Buy or directly from manufacturers. However, this is still the fringe of the market.
Last week, news broke that AT&T has backed out of its smartphone deal with Huawei, apparently as a result of security concerns from the US government. Back in 2012, the House Intelligence Committee had pointed to Huawei and ZTE as security risks, owing to their potential connection to the Chinese government. Given the size of US government contracts and the number of enterprise customers that work with the government, carriers will continue to refrain from selling Huawei phones and other products.
This is a major disappointment for Huawei, a fact that the CEO of its consumer division, Richard Yu, made clear in a presentation at last week's CES show. Although he was subtle, Mr Yu said the recent news was "a big loss for consumers, because they don't have the best choice for devices", but that Huawei's Mate 10 Pro would be available as an open-market device in the US. However, it would not be sold through carriers. This isn't just a confirmation of a rumour, but an acknowledgement that something has to change if Huawei is to meet its goals.
In reality, selling through AT&T or other wireless carriers doesn't guarantee success for Huawei. Apple and Samsung currently dominate the US smartphone market, particularly in the high end. Huawei is constrained by brand value — few Americans have heard of the phone maker. The company is trying to address this with a major advertising campaign using the words "Wow Way" to help US consumers understand how to pronounce its brand name. This is a particularly brand-conscious market and even smartphones from companies as powerful as Google have had limited impact.
Pre-orders for Huawei's Mate 10 Pro phone begin on 4 February 2018 and in-store shipments start on 18 February. The handset will be sold through major electronics retailers like Amazon, B&H, Best Buy, Microsoft and Newegg. These are solid open channels for Huawei's flagship device, but its $799 price tag will limit sales. Unlike other Chinese smartphone makers, Huawei has a goal of being a major player at the flagship level of the market, rather than focusing on devices that offer value for money. Huawei is selling what it describes as "the best phone you've never heard of". It's an admission of the challenges it faces in the near future.