Here Comes Huawei

Moneybox
A blog about business and economics.
Jan. 22 2013 10:01 AM

Here Comes Huawei

A truism of the smartphone market over the past few years is that for all the sales of Android smartphones, only Samsung is actually turning a profit making them. Now China's Huawei may be getting in on the party as its profits surged 33 percent in 2012, and the company now gets two-thirds of its revenue from outside of China.

It's difficult to say for sure if Huawei really has a profitable Android business because the firm is also a major manufacturer of telecommunications networking equipment (competing with Cisco and Erickson, in other words) alongside handsets and not all of its handsets are Android handsets. But there have been a lot of other indications of very high sales volume of Huawei Android smartphones, so it's likely that money is being made here. Huawei also looks like a classic low-end entrant. They haven't gotten much attention as a device-maker in the U.S. because nothing they've put out seems to be a serious contender for title of "the best" smartphone.

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But with digital component prices always falling and the Android OS available for free, there's a big market out there for people who don't want the best smartphone. What they want is a really cheap phone that can complement a cheap contract-free plan, and that has some "smart" features. That's a great product for tens of millions of low-income households in rich countries and for maybe a billion or three people in developing countries. Profit margins are sure to be low serving that low end, but it's a large market. And if you get really good at serving the bottom end of the market, you have the chance to creep up.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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