Huawei Promises a $600 5G Smartphone

Huawei, the world’s second-biggest maker of smartphones, has laid down the gauntlet to its rivals by saying it plans to sell a 5G phone for $600, roughly half the price that analysts expected for next-generation handsets. Peter Zhou, chief marketing officer for wireless marketing, said in an interview with the Financial Times that the Chinese group would be selling 5G phones for $600 this year.

“Next year, some people say we may see [5G] smartphones at $300 and I think that’s very much possible,” he added. Expensive phones are seen as one of the challenges for the widespread adoption of 5G, the next generation of mobile internet. Huawei’s price point is likely to pose a serious threat to rivals such as Apple, which has yet to outline its plans for 5G. On Tuesday, Apple resolved a long-running battle with Qualcomm over the royalties it pays for smartphone chips.

The dispute was hampering Apple’s ability to source 5G chips and the settlement should clear the way for the iPhone maker to ramp up its 5G ambitions. Huawei’s advantage in achieving profitability is its control of the supply chain, said Ben Stanton, senior analyst at Canalys: it makes its own chipsets and modems so is not paying out royalties to the likes of Qualcomm. Even without that supply chain control, he noted, fellow Chinese smartphone maker Xiaomi is planning to bring a €600 5G phone to market in Europe — but will sacrifice the quality of cameras, display and speed to do so.

“The big question is, is that phone going to be able to showcase 5G in a positive light? I’m not sure there’s a demographic of people out there that want to sacrifice these features in favor of 5G,” he said.

Mr Zhou of Huawei dismissed suggestions the phones would be loss-leaders aimed at supporting the group’s broader 5G business in telecoms equipment. “It will be profitable,” he said. “And by using 5G, more apps will be coming so people will be using more apps on their smartphones.”

Huawei, which has the biggest market share in telecoms equipment, last year overtook Apple to become the second-biggest smartphone maker and now has Samsung of South Korea in its sights. That battle, however, would be dictated by lower-end phones rather than 5G ones, said Mr Stanton.

“Not many markets are still growing — there’s Russia, Indonesia, India. The $100-$400 phone is where the real scrap is, in the low to mid-end.” Mr Zhou said Huawei — which has in effect been blocked by the US, Australia and Canada because of security fears — was pushing to ensure networks met the relevant requirements, but the lack of global criteria made it a complex task.

Huawei has already flagged that it could end up allocating more than the $2bn it has previously pledged to spend on overhauling its business to deal with technical concerns raised by the UK government. “In reality it’s going to be much more than $2bn,” said Mr Zhou.―Financial Times