Memo Style Case Study A Dark Horse in the Global Smartphone Market

Provide a written analysis of the case  The write-up should:

• Summarize the most important facts.

• Provide an analysis of the relevant issues.

• State the options for the business or entrepreneur.

• Make a recommendation and defend it.

• Be four pages in length (double spaced) or less.  APA format. No more than 2 references along with the article

• Be clear, well-written, and to the point.  Use business memo form.

IN1324

A Dark Horse in the Global
Smartphone Market:

Huawei’s Smartphone Strategy

09/2017-6269

This case was written by Yangao Xiao, Associate Professor of Management at the University of Electronic Science and
Technology of China, Tony Tong, Professor of Strategy and Entrepreneurship at Purdue University, Guoli Chen,
Associate Professor of Strategy at INSEAD, and Kathy Wu, Research Associate at INSEAD. It is intended to be used as
a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative
situation. The case was partially funded by INSEAD Emerging Markets Institute (EMI).

Additional material about INSEAD case studies (e.g., videos, spreadsheets, links) can be accessed at
cases.insead.edu.

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COPIES MAY NOT BE MADE WITHOUT PERMISSION. NO PART OF THIS PUBLICATION MAY BE COPIED, STORED, TRANSMITTED, REPRODUCED OR DISTRIBUTED IN
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On April 6, 2016, Huawei Technologies, the Chinese telecom equipment giant, released three
variants of its latest P9 series smartphone in London, with a price tag from €599 to €749,
matching that of Apple’s iPhone 6s in the UK. With Huawei’s own Kirin 955 chip and
Leica’s dual-lens camera, the P9 series was a perfect combination of a powerful smartphone
and a top-quality camera. The release in London not only won Huawei high recognition, but it
also sent a strong signal of the company’s ambitions in the global smartphone market.
According to a survey by the market research firm International Data Corporation (IDC), in
the first quarter of 2016 Huawei’s global shipments of smartphones topped 27.5 million units,
boosting its market share to 8.2% from 5.2% in 2015, helping it secure its No. 3 position in
the market after Samsung and Apple.1 A latecomer to smartphones, Huawei has emerged as a
global leader and is positioned to shape the competitive landscape in significant ways.

The Evolving Smartphone Industry

A Brief History

Smartphones have blurred the boundaries between cell phones and personal computers. With
an advanced operating system (OS), a smartphone works as a cell phone to place and receive
voice calls and text messages; it also works like a personal computer, combining features
from various mobile devices such as PDA (personal digital assistant), multimedia player, GPS
(global positioning system), digital camera, various sensor (e.g., sports/heart rate), and a
variety of software components and services known as apps.2

Smartphones originated from PDAs that lacked the features of cell phones. Simon, released
by IBM in 1993, is considered the first smartphone in the world – it had a touchscreen and
Zaurus OS, with only one app called “Dispatch It”.3 The Nokia 9000 Communicator, released
in 1996, offered a number of functions including email, calendar, address book, calculator,
notebook, web-surfing, as well as fax. The Ericsson R380e, released in 2000, was the first to
be officially dubbed a “smartphone”.4 As an ‘early riser’ in the smartphone market, Nokia,
with its Symbian OS and hardware capacity, was the leading global brand outside North
America. Another important, early player was the Canada-based RIM (Research in Motion),
which with its BlackBerry smartphones took a rising share of the market in North America
and globally.

Seeing the huge potential, many other companies entered the industry, releasing smartphones
with increasingly powerful functions. The advent of iPhone in 2007 and Android OS in 2008
re-contoured the industry landscape as Nokia lost its grip to the newcomers. Apple’s first-
generation iPhone, with a self-developed iOS, was announced in January 2007. With a stylish
design, touchscreen, and fool-proof operating system, it was instantly popular with consumers.

1 IDC Worldwide Quarterly Mobile Phone Tracker, April 27, 2016.
http://www.idc.com/getdoc.jsp?containerId=prUS41216716
2 Smartphone definition from Wikipedia.com. https://en.wikipedia.org/wiki/Smartphone
3 “Before iPhone and Android Came Simon, the First Smartphone”, by Ira Sager. Bloomberg Businessweek,

June 29, 2012.
4 “Ericsson Introduces the New R380e”, by Dave Conabree, Mobile Magazine, 2001.

http://www.mobilemag.com/2001/09/25/ericsson-introduces-the-new-r380e

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Sales topped 1.12 million in the US in three months after its official release on June 29th,
2007.5

Smartphones with the Android OS were launched in 2008.6 In October, the HTC Dream
(called T-Mobile G1 in the US) was the first successful application of the Android OS in a
smartphone. Samsung and Motorola followed suit in October 2009, LG in May 2010, Sony
Ericsson in August 2010, and Huawei in October 2010, each with its own Android OS-
powered smartphone. This series of events proved to be the beginning of the exponential
growth of the global smartphone industry in the years that followed. According to a
TrendForce report, global shipments in 2015 reached 1.293 billion units, with an annual
growth rate of 10.3%. Chinese brands alone amounted to 539 million units, accounting for
seven of the top 10 smartphone brands in terms of shipments that year (see Exhibit 1).

Suppliers

A smartphone has many software and hardware components, such as the OS, applications,
memory, processor, display, frame, battery, camera, and so forth, but the operating system
and the system on chip (SoC) are the key ones. The OS manages a smartphone’s hardware
and software resources, around which numerous applications and eco-systems revolve.
Currently, the main OSs are the Android OS by Google, iOS by Apple, Windows Phone OS
by Microsoft, and Blackberry OS. Android OS and Windows Phone OS are open to other
smartphone makers, whereas iOS and Blackberry OS are exclusive to Apple and Blackberry
smartphones, respectively, and their other mobile devices. According to IDC, in the second
quarter of 2016 Android OS had a dominant market share of 87.6%, followed by iOS (11.7%),
and Windows Phone OS (0.4%) (see Exhibit 2).7

An SoC is a type of integrated circuit (IC) that integrates multiple electronic components for a
particular purpose. It consists of baseband, radio frequency (RF), central processing unit
(CPU), digital signal processor (DSP), graphical processing unit (GPU), memory, as well as
other chips with camera, multimedia, navigation, wireless connection, touchscreen control,
and power control capabilities. The past ten years have seen the rise and fall of SoC suppliers.
Traditional PC SoC suppliers such as Intel, AMD, Broadcom, and NVIDIA failed one after
another, while newcomers like Qualcomm, MediaTek (MTK), Apple, Samsung, Huawei
HiSilicon, and Spreadtrum emerged as the major designers and suppliers of smartphone SoCs.

With the massive costs of manufacturing ICs and fast growth of silicon chips, the design,
manufacturing, testing and packaging of smartphone SoCs are often completed in different
factories. Most smartphone SoC suppliers adopt a model of a fabless semiconductor
company—focusing on the design of IC and outsourcing manufacturing to OEMs (original

5 In late 2006, the quarter before the iPhone was released, only 715,000 smartphones were sold in the U.S.

See “Are Smart Phones Spreading Faster than Any Technology in Human History?” by Michael DeGusta,
MIT Technology Review, 2012. https://www.technologyreview.com/s/427787/are-smart-phones-spreading-
faster-than-any-technology-in-human-history

6 In October 2003, Andy Rubin and three other technical experts founded Android Inc. in Palo Alto,
California to develop an operating system for mobile devices. Android was later acquired by Google in
August 2005. See “A Brief History of Google’s Android Operating System”, by Steve Brachmann, 2014.
http://www.ipwatchdog.com/2014/11/26/a-brief-history-of-googles-android-operating-system/id=52285

7 Smartphone OS Market Share, 2016 Q2, by IDC.
http://www.idc.com/prodserv/smartphone-os-market-share.jsp

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equipment manufacturers) such as TSMC (Taiwan Semiconductor Manufacturing Co., Ltd.),
UMC (United Microelectronics Corporation), Global Foundries, and SMIC (Semiconductor
Manufacturing International Corporation). The main smartphone SoC suppliers and their
products are listed below (see Exhibit 3).

1. Snapdragon series by Qualcomm, which is a fabless semiconductor company. SoCs
supplied by Qualcomm are used by numerous smartphones that run on the Android,
Windows Phone, and Blackberry operating systems. In 2015, Snapdragon series
accounted for 30.62% of the SoCs used in Android devices.

2. “A” series by Apple. Also adopting the fabless model, Apple’s “A” series SoCs are
manufactured by OEM companies such as Samsung and TSMC, and are exclusively used
for Apple’s iPhones and other smart devices.

3. Exynos series by Samsung. As an integrated device manufacturer (IDM), Samsung
supplies the Exynos series to its smartphones, as well as other smartphone makers
including HP, Acer, and Meizu. In 2015, Exynos series accounted for 15.84% of the
Android SoC market share.

4. MT series by MTK. Headquartered in Hsinchu, Taiwan, MTK is a fabless IC design
company specializing in system solutions based on Android smartphone SoC. Benefiting
from low price and high levels of integration of different software as well as hardware
components, the MT series are very popular among small and medium-sized smartphone
makers. In 2015, MT series comprised 29.35% of the Android SoC market share.

5. Kirin series by Huawei. Also using a fabless model, Huawei’s self-designed and
developed Kirin SoCs are mainly used for its Huawei and Honor smartphones. In 2015,
Kirin series comprised 7.73% of the Android SoC market share.

Distribution and Buyers

In the age of traditional feature phones, 8 phone distribution was dominated by telecom-
carriers, supplemented by the offline sales channels of distributors and retailers. Telecom
carriers usually bundle-sell feature phones of different brands, models and prices—a package
of “phone number + calling plan”—requiring buyers to sign a contract of fixed duration.
Telecom carriers forced phone makers to comply and had the upper hand in negotiation and
pricing.

With the increasing popularity of smartphones, the rise of internet-based instant messaging
tools, and the development of wireless connection technology, the functions of phone calls
and text messages offered in traditional feature phones became less important. Nowadays, in
addition to telecom carriers, smartphones’ distribution channels include vendors, dealers,
retailers, etc., in both online and offline markets. Indeed, many smartphone vendors (e.g.,
Apple, Samsung, Huawei, Xiaomi, etc.) have their own online and offline stores. Third-party
online retailer platforms—such as Amazon (U.S.), eBay (U.S.), Alibaba (China), JD (China),
Tesco (U.K.), Rakuten (Japan), Otto (Germany), MercadoLivre (Brazil), Ozon (Russia),
Lazada (Southeast Asia), Souq (Middle East), Jumia (Africa)—are also disrupting the

8 Feature phones typically incorporate features such as receiving/making phone calls, receiving/sending text

messages, accessing the internet, and storing and playing music, but lack the advanced functionality of
smartphones.

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traditional carrier-led distribution channels. In emerging markets such as China, Russia,
Southeast Asia, Latin America, and Africa, it is increasingly common for consumers to
purchase non-contractual phones distributed through smartphone vendors, dealers and
retailers in online or offline stores. However, in Europe and the US, telecom carriers still
maintain a relatively strong grip on the distribution of contract smartphones.

Demand from phone buyers saw similar changes, shifting from a focus on calling rate plans
and brand names (in the age of feature phones) to a growing recognition of the differentiated
features offered by smartphones, including wireless data and speech communication, camera
capabilities, social networking, self-expression, and identity. Feature phone buyers cared
about the call quality offered by the telecom carrier, the fee plan, and the brand; smartphone
buyers cared more about the mobile experience, high-tech style, as well as camera and
multimedia functions, payment, interactivity, community, battery life, and so forth.

These consumer demands attracted new entrants to the market that were not traditionally
considered phone-makers, including Apple, Samsung, LG, Huawei, and Xiaomi. These new
entrants redefined smartphone features and tightened their control over the market to squeeze
out traditional phone-makers such as Nokia, Ericsson, and Sony. The multiple functions
offered by smartphones required the makers to give more attention to software development
and content innovation, while improving the design of the hardware. As a result, the
traditional industry value chain centred around telecom carriers was transformed into a value
network and business ecosystem consisting of many interdependent parties, including
smartphone makers, OS suppliers, apps and content developers, hardware suppliers,
consumers, and telecom carriers.

Substitutes

Potential substitutes for smartphones include feature phones, desktop PCs, laptops, tablets,
smart TVs, game players, cameras, multimedia players, bank cards, as well as wearable
devices such as smart watches. However, smartphones are a strong substitute for these
products thanks to their high level of functional integration and expandability.

Take computers, for instance – which have seen shrinking demand since the rise of
smartphones. According to the market research company Statista, global shipments of
desktops shrank from 157 million units in 2010 to 133.85 million units in 2014, and were
estimated to fall to 121 million units in 2019. Shipments of laptops rose from 201 million
units in 2010 to 209 million units in 2011, then plummeted to 174.28 million units in 2014.
Shipments of tablets jumped from 19 million units in 2010 to 229.7 million units in 2014, and
were forecast to peak at 406.8 million units in 2017, but drop to 170.4 million units in 2019
(see Exhibit 4).9

The ups and downs of the digital camera have coincided with the integration of cameras into
smartphones. Statistics from Japan’s Camera and Imaging Products Association indicate that
the number of digital cameras sold in Japan rose from 5.088 million in 1999 to a peak of
110.07 million in 2008, but had since declined steadily to 22.341 million in 2015; sales

9 “Shipment forecast of laptops, desktop PCs and tablets worldwide from 2010 to 2019 (in million units)”, by

Statista: https://www.statista.com/statistics/272595/global-shipments-forecast-for-tablets-laptops-and-
desktop-pcs

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revenues followed the same pattern—from 227.903 billion yen (US$2.28 billion) in 1999 to
1,638.668 billion yen (US$16.39 billion) in 2008, and 307.148 billion yen (US$3.07 billion)
in 2015.10

Complements

Complements fall into two categories—hardware and software. Hardware complements
include peripherals such as wireless routers, Bluetooth earphones, and smartphone decoration
and protection. Currently, Apple leads the design and supply of smartphone decoration and
protection, while other companies (e.g., Huawei) are leaders in the design and supply of
routers and other products.

Software complements include various apps, online multimedia, mobile games, and
community-sharing and services. As smartphone hardware shipments and sales slowdown,
developing software capabilities and complements will prove critical for smartphone makers
to maintain a competitive advantage in the increasingly competitive market.

Entry Barriers

Feature phones are relatively simple devices both in terms of the components and the
assembling techniques. By contrast, smartphone manufacturing involves assembling a large
number of high-precision components such as SoC, wireless connector, antenna, camera,
battery, display, and so forth, all of which are integrated in a small-size phone. Hence, more
advanced assembly techniques and stringent standards are required. Given the high levels of
component integration and complexity of manufacturing processes, advanced manufacturing
execution systems (MES)—computerized systems used in manufacturing—have been widely
adopted. Smartphone makers often compete on scale and price if they are unable to
differentiate through hardware design or software and service.

The value of a smartphone is strongly tied to the capabilities of the OS, as well as the variety,
price, and number of apps available on the OS. A sound ecosystem of apps, developers, and
users is therefore key to smartphone success, creating entry opportunities for companies that
have a software advantage. For example, Apple’s entry into the smartphone industry in
January 2007 was greatly helped by its successful iTunes Store apps and resources. Google’s
launch of Nexus series smartphones in January 2010 benefited strongly from its Android OS
and bountiful Google apps. Xiaomi’s entry with M1 smartphones in August 2011 was greatly
facilitated by its frequent releases of updated versions of MIUI OS and MiChat (a community
chatting app). Even companies focusing on hardware, such as HTC, sought to create and
improve their software to build stronger user communities and strengthen their market
position.

Given the large number of embedded functionalities, there is a high degree of differentiation,
creating high brand loyalty as well as high switching costs. For instance, Blackberry’s mobile
business functions were attractive to business people; Samsung leads the way in display and
user experience, benefiting from its expertise in display technology; the iPhone’s design,
extensive apps, and seamless integration with other Apple mobile devices continue to delight
Apple fans; great community interaction and user experience are Xiaomi smartphones’ selling

10 Camera and Imaging Products Association. http://www.cipa.jp/stats/documents/common/cr300

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points; Huawei attracts consumers with its state-of-the-art design in hardware and software,
aided by its strengths in telecom equipment and cross-business synergies. The high level of
differentiation reflects the multi-dimensional nature of smartphone users’ demands, which
may suggest more niche market opportunities for new entrants. The market is still developing
and it is always possible that some new smartphone design, feature, or application will win
over consumers, as the current market leaders did before.

Evolving Trends

The smartphone market has seen exponential growth over the past decade. According to IDC
statistics,11 global shipments rose from 173.5 million units in 2009 to 1.433 billion units in
2015, with an average annual growth rate of 43.82%. More recently, the growth rate has
slowed from 75.62% in 2010 to 10.08% in 2015 (see Exhibit 5). The slowdown was due to
many factors including market saturation in developed economies. According to Statista, the
annual growth rate of smartphone shipments in North America declined from 27.4% in 2014
to 7.3% in 2015, and it is even estimated that there may be a negative growth rate in 2016.
Japan and other developed countries in Asia-Pacific, Western Europe, and Latin America
have also experienced a fall – large or small – in growth rates (See Exhibit 6).

By contrast, the growth rate in the emerging economies in Asia-Pacific, Middle East, and
Africa has been firmer. The smartphone shipment growth rate in the emerging economies in
Asia-Pacific reached 53.4% in 2014 and 35.8% in 2015. In China, smartphone sales of 385.3
million units in 2015 were down from 392.8 million units in 2014, but were estimated to
bounce back in 2016.12

The shift in demand from the developed markets to emerging markets has triggered a growth
in demand for low-end smartphones, driving down the average sale price (ASP). According to
Statista, the global smartphone ASP dropped from US$440 in 2010 to US$305 in 2015, or
6.99% annually.13 Smartphone sales revenues in certain regions also declined. For example,
sales revenues in developed countries in Asia-Pacific fell from US$39.6 billion in 2013 to
US$38.1 billion in 2014, and in Western Europe from US$55.8 billion in 2014 to US$52.9
billion in 2015.14

The slowdown in growth and declining ASP foreshadow increasingly fierce competition –
“The squeeze is on”, noted the Wall Street Journal in April 2016.15 Production capacity may
be consolidated and a shakeout expected, given the lack of economies of scale for smaller
makers and the high profit potential in the high-end market. Smartphone makers may be
increasingly seeking new growth and profit opportunities by offering new content, services, or
devices.

11 “Global Smartphone Shipments from 2009 to 2015”, by Statista:

https://www.statista.com/statistics/271491/worldwide-shipments-of-smartphones-since-2009
12 “Smartphone Unit Shipments Worldwide from 2013 to 2016 (in million units), by Region”, by Statista:

https://www.statista.com/statistics/412108/global-smartphone-shipments-global-region
13 Smartphone Statista Dossier, by Statista: https://www.statista.com/study/10490/smartphones-statista-

dossier
14 “Smartphone Sales Value Worldwide from 2013 to 2016 (in Billion U.S. Dollars), by Region,” by Statista:

https://www.statista.com/statistics/412145/global-smartphone-sales-value-global-region
15 “In Smartphone Market, The Squeeze is On”, by Jonathan Cheng and Min-Jeong Lee, The Wall Street

Journal, April 28, 2016.

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Major Players

In 2010, the top five vendors in terms of global smartphone shipments and market share were
Nokia (100.1 million units – 33.9% market share), RIM (48.8 million – 16.5%), Apple (47.4
million – 15.4%), Samsung (22.9 million – 7.0%), and HTC (21.7 million – 6.8%).16 Since then
the rapid growth of Samsung and Apple and the rise of Chinese smartphone makers including
Huawei, Xiaomi, Lenovo, OPPO, and ZTE have transformed the global smartphone landscape.
In 2015, the top five vendors in shipments and market share were Samsung (325.7 million
units – 22.9% market share), Apple (231.5 million – 16.2%), Huawei (106.2 million – 7.4%),
Lenovo (74 million – 5.2%), and Xiaomi (64.9 million – 5.0%). (See Exhibits 7a and 7b).

Apple and Samsung

Apple and Samsung, the current superstars, both started off manufacturing hardware, and both
have their own self-designed smartphone SoCs.

The iPhone, synonymous with stylish design, premium quality and cutting-edge technology,
continues to fascinate Apple fans. Targeting the premium segment of the market, iPhones
have brought vast sales revenues and profits to Apple. According to its 2015 Annual Report,
sales revenue of iPhones reached US$155 billion, accounting for 66% of Apple’s net sales, up
from 56% in 2014.17 Apple’s iOS not only contains more than 1.4 million apps and games,
but is perfectly paired with iTunes—the hub of its digital empire. Since launching its iPhone 4
in September 2010, Apple has released a new model each year (the current model iPhone 7
was released in September 2016). In addition to its tight grip on the premium segment, it is
testing the middle segment of the market. In September 2013, Apple released the iPhone 5C,
with a polycarbonate outer case, priced US$100 lower than its high-end iPhone 5S released at
the same time. In March 2016, the iPhone SE was launched with a sales price as low as
US$399.

Samsung was an early player in mobile phones and emerged in the smartphone industry only
after the launch of the Galaxy S—a high-end smartphone based on the Android OS. Taking
advantage of its expertise in LCD/LED/OLED display, Samsung applied its exclusive Super
AMOLED display technology to the Galaxy series smartphones to launch the Galaxy S2 with
a 4.3 inch display and 4G capabilities in May 2011, and the Galaxy Note with a 5.3 inch
display in October – signalling the advent of the “Phablet” era. It was these large high-
definition displays that enabled Samsung to compete with Apple (the iPhone 4S display was
only 3.5 inches at the time). In 2011, shipments of Samsung smartphones amounted to 94.2
million units, for the first time surpassing Apple’s 93.1 million.18 Samsung has retained its No.
1 position since then.

16 “Global Market Share Held by Smartphone Vendors since 4th Quarter of 2009”, by Statista:

http://www.statista.com/statistics/271496/global-market-share-held-by-smartphone-vendors-since-4th-
quarter-2009

17 Apple’s Form 10-K to U.S. Securities and Exchange Commission.
http://investor.apple.com/secfiling.cfm?filingID=1193125-15-356351&CIK=320193

18 “Worldwide Shipments of Leading Smartphone Vendors”, by Statista:
http://www.statista.com/statistics/271539/worldwide-shipments-of-leading-smartphone-vendors-since-2007

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Google and Microsoft

Google and Microsoft both began as software developers, and both have their own
smartphone OS—Google’s Android OS and Microsoft’s Windows Phone OS—but their
entries into the smartphone hardware business differed.

Embracing a “light-assets” business model, Google designed, developed, promoted, serviced
and supported the Google Nexus series, but outsourced manufacturing and partial
development to OEM partners such as HTC, Samsung, LG, Motorola, and Huawei. The
Nexus One, the first in the series, was manufactured by HTC and launched in January 2010.
On August 15, 2011, Google announced its acquisition of Motorola Mobility, for US$12.5
billion, to secure the Android community and respond to patent lawsuits by Apple and others.
On January 30, 2014, it sold most of Motorola Mobility’s assets to Lenovo for US$2.91
billion, including 3,500 employees, 2,200 patents, various registered trademarks, and sales
channels.

Unlike Google, Microsoft became a smartphone vendor through its acquisition of Nokia,
which was triggered by the intense competition in the smartphone market. Challenged by
Apple’s iOS and iPhone, Nokia’s smartphone shipments fell from 100.1 million units in 2010
to 77.3 million units in 2011, and it lost its market leadership.19 Meanwhile, with the rise of
the Android OS, competitors such as Samsung, LG, and HTC saw orders surge. The market
share of Microsoft’s smartphone OS—Windows Phone, plunged from 10.2% in the first
quarter of 2009 to 1.6% in the second quarter of 2011.20 Microsoft and Nokia later reached a
strategic agreement by which Microsoft’s Windows Phone operating system would become
Nokia’s main smartphone platform. In September 2013, Microsoft acquired Nokia’s mobile
business and patents for US$7.17 billion. As of January 2014, Nokia would no longer offer
Symbian OS and updates. In November, Microsoft launched its first Lumia series
smartphone—the Lumia 535. On May 18, 2016, Microsoft announced its new focus on
developing Windows 10 Mobile OS and manufacturing smartphone hardware, after shedding
its entry-level feature phone assets.21

HTC, Xiaomi, Lenovo and Others from Emerging Economies

Booming markets in China, India, Southeast Asia, Middle East and Africa greatly benefited
local makers including HTC, Xiaomi, Lenovo, Oppo, Vivo, Huawei, ZTE, and Meizu.

Taiwan’s HTC was the first to join the Android Open Handset Alliance led by Google in
November 2007. In October the following year, HTC launched HTC Dream, the first
commercially released smartphone in the world using the Android OS. In November 2010,
HTC released HTC HD7 and HTC 7 Mozart, both using Windows Phone 7 OS – with perfect
timing to enter the fast-growing global smartphone market: 2011 was the prime year for HTC,
with 43.5 million units sold and 9.1% of global share. Thereafter, a decline set in – HTC was
not as strong as Apple in software development, nor as Samsung in display technology or the

19 “Quarterly Global Smartphone Shipments by Vendors”, by Statista:
http://www.statista.com/statistics/271490/quarterly-global-smartphone-shipments-by-vendor
20 “Global Market Share Held by Smartphone Operating System”, by Statista:
http://www.statista.com/statistics/266136/global-market-share-held-by-smartphone-operating-systems
21 “Microsoft Selling Feature Phone Business to FIH Ltd. And HMD Global, Oy”, by Microsoft News Centre,

May18, 2016.

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ability to control the industry chain. It never made into the high-end market segment.
Meanwhile, surrounded by smartphone makers from mainland China, HTC also started to lose
the medium- and low-end market segments. Its smartphone shipments fell from 20.345
million units in 2013 to 15.623 million units in 2014.22

Xiaomi Inc., founded by serial entrepreneur Jun Lei in April 2010, quickly gained market
share thanks to its frequent updates of the Chinese-version MIUI OS based on Android, a
community-based online retailing business model, and its low-priced but high-value products.
In 2014, Xiaomi shipped 61.12 million units in China, or 12.5% of the market (up by 186.5%
year on year), overtaking Samsung (12.1%) in China. Henceforth, it started expanding to
India, Brazil, South Africa, the US, and other international markets, but was adversely
affected by lawsuits by Ericsson and other companies, including the US-based non-practicing
entity Blue Spike. In 2015, Xiaomi shipped 64.9 million units of smartphones, way below Jun
Lei’s expected goal of 80-100 million.

Lenovo’s cell phone business dated back to 2002, providing Chinese telecom carriers with
low-end feature phones. Thanks to its longstanding relationships with Chinese telecom
carriers, Lenovo rapidly expanded its market share in the low-end segment (below US$150)
of China’s smartphone market. In the fourth quarter of 2013, Lenovo had 13.2% of the market
in China, second only to Samsung. Its global market share was 4.51% – No. 5 in the world.
On January 30, 2014, Lenovo purchased Motorola Mobility from Google, thus focusing on
the medium- and high-end markets worldwide. In December 2015, it launched its high-end
smartphone Moto X in China, priced at CNY¥5288 (US$813), comparable to the iPhone 6S.
The PC legend did not turn itself into a smartphone legend, however. In 2016, Lenovo was
not even among the top five smartphone vendors in China, where Huawei, OPPO, vivo,
Xiaomi, and Apple accounted for about 60% of the total volume.23

Two other emerging smartphone giants are worth noting. Oppo and Vivo, both subsidiaries of
BBK Electronics based in Guangdong, China, are new trailblazers that have been highly
successful in China, as well as in Southeast Asia, India, Middle East, and Africa during the
last couple of years. They had a 7.1% and 5.9% global market share in the third quarter of
2016, respectively.24

Huawei—A Chinese Technology Giant

“A Chinese telecommunications giant founded by a former engineer of the
People’s Liberation Army is about to take a shot at challenging Apple Inc. and
Samsung Electronics Co. in the global smartphone market.”

Wall Street Journal, April 5th, 201625

22 HTC 2014 Annual Report.
http://media.corporate-ir.net/media_files/IROL/14/148697/AnnualReports/2014HTC-final%28en%29
23 Top 3 China Smartphone Vendors Maintains Streak with Combined 47% Total Market Share in 2016 Q2,

by IDC. https://www.idc.com/getdoc.jsp?containerId=prCHE41676816
24 Worldwide Smartphone Vendor Market Share, 2016 Q3, by IDC.
http://www.idc.com/prodserv/smartphone-market-share.jsp
25 “Huawei Makes Push to Get Ahead of Apple, Samsung in Smartphone Market”, by Juro Osawa and Sam

Schechner, The Wall Street Journal, April 5, 2016.

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Headquartered in Shenzhen, China’s technology giant Huawei provides telecom carriers,
enterprises, and consumers with products and services including ICT (information and
communication technology) solutions, fixed and mobile networks, routers, smartphones, and
other mobile devices. Ranking No. 1 in the global telecom equipment market (replacing
Ericsson in 2013), and No. 3 in the global smartphone market (after Samsung and Apple),
Huawei serves more than 170 countries and regions, and over one third of the world’s
population.26 In 2015, revenues totalled US$60.839 billion and operating profits US$7.052
billion (see Exhibit 8a). Revenues from China and overseas respectively accounted for 42.5%
and 57.5% of the total. Revenues from serving telecom carriers, enterprises and consumers
accounted for 58.8%, 7.0%, and 32.7% of the total respectively (see Exhibit 8b).

Founded in 1987 by Zhengfei Ren, a former engineer of the People’s Liberation Army, with a
registered capital of CNY¥21,000 (US$3,000), Huawei started as a sales agent for a Hong
Kong company producing private branch exchange (PBX) switches. Huawei earned its first
fortune when it succeeded in developing its C&C08 2000-line switch and winning the
government’s official recognition in 1993, jumpstarting its entry into the Chinese telecom
equipment market. In 1997, Huawei seized the opportunity of China’s booming mobile
cellular network and launched wireless GSM-based solutions, significantly driving down the
sales price of GSM equipment (then dominated by foreign firms) in China.27 Young as it was,
Huawei’s growth was unstoppable. In 1999, it launched its first digital product in China –
access servers – and within one year would supply 70% of all newly-installed access servers
on the market, thwarting Cisco’s ambitions in China.28

After China’s accession to the World Trade Organization (WTO) in 2001, the following
decade saw Huawei’s entry and rapid growth in the global telecom equipment market. With a
strategy of “continuous customer-centric innovation and win-win cooperation”, Huawei
expanded its R&D sites from China to the US, Canada, Japan, and Western Europe,
establishing 17 R&D centres and 36 joint innovation centres worldwide in collaboration with
leading telecom carriers including Vodafone. In 2002, Huawei reached cross-licensing
agreements with Ericsson and Nokia, the main patent holders of WCDMA (Wide-band Code
Division Multiple Access), paving the way for its entry into the 3G market.

In 2003, Huawei pioneered distributed base stations in the market, cutting the volume of base
station equipment by 10 times and weight by 15 times, as well as slashing carriers’ operation
and maintenance costs by 30%. Its endeavours paid off handsomely, especially in the
European market: in 2005 Huawei became Vodafone’s strategic supplier and British
Telecommunications’ “21 Century Network (21CN)” priority supplier. By the end of 2007 it
had formed partnership with all the top telecom carriers in Europe, taking 62% of the LTE
(long term evolution, also known as 4G) market in Europe.

26 Huawei Annual Report 2015. http://www.huawei.com/en/about-huawei/annual-report
27 “Path and Responsibility—a Tale of Wireless: Birth of Huawei’s GSM”, by Ganghua Yang and Tao Jiang,

Huawei People, vol. 188. Translated by the case writers.
28 Milestones, Huawei company website:

http://www1.huawei.com/en/about-huawei/corporate-info/milestone/index.htm

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From 2011, Huawei focused on an integrated “cloud-pipe-device” strategy (cloud computing,
intelligent information networks, and smart devices), aiming to develop synergies among the
three businesses.29

“Cloud” refers to Huawei’s entry into the field of cloud computing and service. According to
its Annual Report 2015, Huawei’s massive data storage has maintained its rapid growth and
serviced more than 4,000 enterprises over 150 countries and regions in the world.

“Pipe” denotes wireless network infrastructure and mobile telecommunication technology.
Seizing the opportunity of commercializing 4G, Huawei set up more than 400 LTE
commercial networks and more than 180 EPC (Evolved Packet Core) commercial networks to
service almost half of the world’s 4G users. Since 2009, it has devoted substantial resources to
researching 5G technologies, planning to put them into large-scale commercial use by 2020.

“Device” refers to various smart devices for consumers, best represented by smartphones. In
December 2003, Huawei Device Co., Ltd. was founded with a registered capital of CNY¥760
million (US$116 million), charged with the development, manufacturing, marketing, and
sales of mobile devices and accessories. In February 2004, Huawei’s first 3G mobile phone
debuted at the 3GSM Conference in Cannes, France. Like other Chinese smartphone
manufacturers, Huawei started its smartphone business as an OEM, manufacturing low-end
phones for telecom carriers including Vodafone, FTE, PCCW and Emobile. Since 2011,
Huawei has striven to break into the premium segment, and has made progress in brand
recognition, channel development, and eco-system creation in the global smartphone market
over the last five years. In 2015, it shipped 108 million smartphones, a year-on-year increase
of 44%, and secured its position among the top three global smartphone brands (with
Samsung and Apple). In particular, its market share in the medium- and high-end market in
Europe rose substantially, ranking among the top three smartphone vendors in Spain, Italy,
Belgium, Swiss, Portugal, and several other European countries.

Three Pillars of Huawei’s Smartphone Strategy

The “cloud-pipe-device” strategy introduced in 2011 significantly elevated the importance of
the device business to Huawei. To provide “high-quality devices and services to build a
premium brand and lead the global consumer market”, 30 Chengdong (Richard) Yu was
appointed Chairman of Huawei Device and CEO of Huawei Consumer Business Group. Yu,
who joined Huawei in 1993 and had a profound understanding of its corporate culture,
strategy, and market,31was deemed the ideal candidate to lead Huawei to conquer the global
smartphone market. The target set by Zhengfei Ren, founder and CEO, was clear: to become
one of the top three global smartphone makers by 2015. It was by no means an easy task. On
the global market, Huawei had to compete with established leaders including Apple,

29 Huawei Annual Report 2011.
http://www.huawei.com/ucmf/groups/public/documents/attachments/hw_126991
30 Huawei Annual Report 2015. http://www.huawei.com/en/about-huawei/annual-report (Page 4)
31 Since Mr Yu joined Huawei in 1993, he has served as Director of 3G Products, Vice President of

Marketing for Wireless Products, President of Wireless Products, President of Huawei Europe, Chief
Strategy and Marketing Officer.

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Samsung, Nokia, BlackBerry, and HTC. Domestically, Huawei was confronted with emerging
smartphone giants including Lenovo, ZTE, and Xiaomi.

Market Repositioning and Channel Restructuring

Huawei was initially viewed as offering low-end phones (below US$150); the high-end
market was seen as being exclusive to Apple and Samsung. Over 80% of Huawei phones
were made for telecom carriers, who often placed large orders but targeted the low-end mass
market. Such phones could not help build Huawei’s own brand, nor bring knowledge about
end-users’ preferences, as the phones were made for carriers instead of consumers.

Under the new leadership, Huawei Device cut more than 80% of Huawei’s old phone models
and kept less than ten. While this risked retaliation from carriers (Vodafone and FTE stopped
partnering with Huawei for a while), it enabled Huawei to understand consumers’ fast-
changing preferences and eventually move up to the premium segment of the market.
Huawei’s decision also helped to differentiate itself from other Chinese smartphone makers
such as ZTE and Lenovo, which still relied heavily on telecom carriers to distribute their
phones.

As Huawei reduced its dependence on telecom carriers, it developed other channels. The
success of Xiaomi’s internet-based sales model centring on fans inspired Huawei to embrace
the opportunities offered by online sales. Considering that high-end consumers might still
prefer the in-store shopping experience, Huawei adopted a “dual-brand and dual-channel”
model. The “dual brands” were the “Huawei” brand which offers high-end smartphones (the P
series), and the “Honor” brand designed to encourage young people “to be the best they can
be”, targeting the medium end of the market. “Dual-channel” refers to both offline and online
sales channels. Offline sales channels include traditional agents, retailers, and Huawei’s
company-owned and affiliated stores; online sales channels include online agents, Huawei’s
own e-commerce channel VMALL, and third-party online retailers such as JD.com.

Under the new model, Huawei aimed to boost the sales through “dual channels” to 80%,
while driving down sales through telecom carriers to below 20%. Its “Honor” brand mainly
used online retailers supplemented by offline channels. Internet sales channels greatly reduced
distribution costs and drove up volume. Honor started independent operations in December
2013, and within two years had successfully entered 74 countries and regions.32 In 2015,
Honor shipped more than 40 million units and doubled its 2014 sales revenue. By contrast, the
“Huawei” brand smartphones, targeting the high-end segment, mainly used offline channels
supplemented by online retailers. Specifically, Huawei’s Mate series were designed for
business people and comparable to Samsung’s high-end smartphones, while the Huawei P
series focused more on technologically sophisticated users, comparable to Apple’s premium
smartphones.

Responding to its “dual-brand” strategy, on June 18, 2013, in London, Huawei released
Ascend P6, its first premium smartphone. With a stylish design and all-metal case, it was the
slimmest smartphone in the world at that time (6.18mm), priced at €499 in Europe. Shipments
of Ascend P6 reached 4 million units by May 2014. On September 4, 2014, Huawei launched

32 “ZHAO Ming: Insistence on Quality and Innovation”, by FTChinese, October 20, 2015.
http://www.ftchinese.com/story/001064431

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Ascend Mate 7 in Berlin, priced at €500, designed for business people, featuring an aviation-
grade aluminium case, a 6-inch FHD display, a super eight-core Kirin 925 SoC chipset, and a
4100 mAh lithium polymer battery. By November 2015, 7 million units had been shipped
globally. The success of the P series and Mate series helped Huawei move up to the medium-
and high-end market, and increased its brand value.

Focusing on SoC Development and Smartphone Design

Huawei’s rise and rapid growth benefited greatly from its continued focus on R&D.33 In 2015,
Huawei employed over 79,000 R&D personnel, accounting for 45% of its total employees.
R&D spending reached CNY¥59.607 billion (about US$9.2 billion), accounting for 15.1% of
its total sales revenue (see Exhibit 9), and outstripping its major competitors including Apple
(3.45%), IBM (6.42%), Cisco (12.63%), and Ericsson (14.1%). Believing that “R&D and
design are key to a successful smartphone business”,34 Huawei devoted substantial financial
and managerial resources to SoC development and smartphone design.

Huawei had founded HiSilicon Technologies Co., Ltd. (HiSilicon) in October 2004, a fabless
IC design company with design centres located in Beijing and Shanghai in China, Silicon
Valley, and Sweden. HiSilicon had been a driving force of Huawei smartphone’s growth. Its
Kirin SoCs were core to Huawei’s release of its latest smartphone models. For instance, in
April 2015, HiSilicon released Kirin 935, which was used to power Huawei P8 (Deluxe
Model) and Honor 7. Later, HiSilicon released Kirin 950 and 955, which were used for
Huawei Mate 8 launched in November 2015, and Huawei P9 launched in April 2016,
respectively. On a broader level, Huawei’s dedication to the development of SoC enabled it to
move up the market, joining an elite club of smartphone leaders with their own SoCs,
including Apple and Samsung.

Huawei conceived its smartphones as a “collision between high-tech and fashion”,
emphasizing both technological capability and user interface design. To this end, Huawei
collaborated with leading camera and audio companies such as Leica and Harman/Kardon to
improve smartphone quality and user experience. Huawei’s P9 smartphone, for example, has
a dual-lens camera jointly designed and developed by Huawei and Leica. Hungry for global
talent in industrial and user-interface design, in August 2010, Huawei recruited Hagen
Fendler, former Director of Product Concept Design of Siemens and former Chief Designer of
BMW, to lead an international product development team, working with 200 engineers across
design centres located in China, Western Europe, Japan, and the US.

In November 2012, Huawei hired Joon Suh Kim to join Huawei as VP of Mobile Design /
Chief Designer, and later promoted him to Chief Design Officer/President of Huawei
Consumer Business Group’s Design Team.35 Having worked in key positions with LG, Philip
and Nokia, Kim was most recently the former Creative Director of Samsung, leading the
design of Samsung’s Galaxy series smartphones. At Huawei, he emphasized exquisite
industrial design and was the chief designer for many of Huawei’s flagship products such as
the Huawei P7, Mate S, P9, and Honor 6.

33 Huawei Annual Report 2012.
http://www.huawei.com/ucmf/groups/public/documents/annual_report/hw_u_256032
34 “Huawei YU Chengdong: Xiaomi Will Phase out in Three to Five Years”, tech.qq.com, March 4, 2015.
35 Joon Suh Kim. https://cn.linkedin.com/in/joonsuh-kim-b387765

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In October 2015, Abigail Sarah Brody, former Deputy Director of Global Design of eBay and
former Creative Director of Apple, joined Huawei as VP of Huawei Device and Chief User
Experience Designer of Huawei Consumer Business Group.36 These strategic moves reflect
two core principles followed by Huawei in smartphones: industrial design directing the design
of hardware, and user experience directing the design of software.

Driving Synergies between Businesses

Huawei’s background and technological capabilities as a telecom equipment provider give its
smartphone business a technological advantage. For example, battery life has been a pain-
point for smartphone users, and Huawei developed Kirin 950 SoC to address this problem by
leveraging its deep understanding of 3G and 4G wireless Modem technologies. First used in
Huawei Mate 8 smartphones, the new chipset not only made a significant improvement to
CPU performance, but greatly enhanced battery life, allowing two days of continual use once
fully charged. Huawei also successfully integrated its pseudo base station detection
technology into the Kirin 950. With this technology, information or signals sent from pseudo
stations can be automatically filtered out by the chip to ensure smartphone security. As
another example, Huawei was able to leverage its patents in telecommunications as a
bargaining chip or competitive weapon against other smartphone makers. For example, in
2015, Huawei licensed 769 patents to Apple covering wireless telecommunication
technologies including GSM, UMTS and LTE, while Apple licensed 98 patents to Huawei.37

In June 2016, Huawei sued Samsung in China and the US for infringement of Huawei patents
related to wireless telecommunication and smartphone user interface.38

Huawei’s telecom network assets and relationships with carriers gave another advantage to its
smartphone business. For more than 20 years it had been collaborating with leading global
telecom carriers. By the end of 2015, Huawei LTE had entered 140 capital cities and
successfully deployed more than 400 LTE networks and more than 180 EPC (Evolved Packet
Core) networks, serving almost half of the world’s 4G users. What’s more, Huawei had
constructed more than 280 400G core router networks, and provided the Indoor Connected
Solution for more than 40,000 hotspots operated by 120 carriers in 75 countries. These assets
and relationships help to promote Huawei smartphones globally. Not only do they make it
easier for Huawei to distribute smartphones through local telecom carriers’ sales networks,
but also give Huawei smartphones unique access to wireless data transfer and speech
communication, as well as other capabilities offered by carriers. For example, Huawei Mate 8
smartphones can connect to the wireless networks of more than 1,000 carriers in 200 countries,
covering five 2G frequency bands, ten 3G frequency bands, and 18 4G frequency bands.
These resources and capabilities are unique to Huawei, and are unmatched by major
competitors including Apple and Samsung.

36 Yu Chengdong’s Weibo on Oct 29, 2015. http://t.qq.com/huaweiyuchengdong
37 Huawei Started to Licence Patents to Apple, xinhuanet.com, May 10, 2016.
http://news.xinhuanet.com/fortune/2016-05/10/c_128972509.htm
38 Huawei Filed Lawsuits against Samsung for Patent Infringement, FTChinese.com, May 25, 2016.
http://www.ftchinese.com/story/001067709?full=y

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The Future of Huawei Smartphones

In 2015, when asked about Huawei’s experience with its smartphone business in the global
market during the past five years, Chengdong Yu said he would “keep on fighting despite
non-stop setbacks.” Benefiting from market repositioning, continued focus on R&D, and
synergies between businesses, Huawei has emerged as one of the leaders of the global
smartphone industry. Yet many challenges await: weaknesses in designing operating systems
and apps, limited ability to control the industry chain, and rising manufacturing costs in
China, to name a few. Nonetheless, on February 21, 2016, Yu announced that Huawei’s
strategic goal for its smartphone business was to overtake Apple in three years and Samsung
in five years. Given the dynamic industry environment and Huawei’s smartphone strategy,
was this feasible or too big a dream?

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Exhibit 1
Top 10 Global Brands of Smartphones in Shipment Market Share, 2014-2016 (%)

Rankings
2014 2015 2016

Company Market
Share

Company Market
Share

Company Market
Share (E)

1 Samsung 27.8% Samsung 24.5% Samsung 22.2%
2 Apple 16.4% Apple 17.5% Apple 16.8%
3 Lenovo+Motorola 7.9% Huawei 8.4% Huawei 9.3%
4 Huawei 6.2% Xiaomi 5.6% Lenovo 6.1%
5 LG 5.4% Lenovo 5.4% Xiaomi 5.8%
6 Xiaomi 5.2% LG 5.3% LG 5.0%
7 Coolpad 4.2% TCL 4.0% TCL 4.0%
8 Sony 3.9% OPPO 3.8% OPPO 3.9%
9 TCL 3.3% BBK/VIVO 3.3% BBK/VIVO 3.4%

10 ZTE 3.1% ZTE 3.1% ZTE 3.1%
Others 16.6% Others 18.8% Others 20.3%

Note: 2016 data is estimated.

Source: TrendForce, January 2016. http://press.trendforce.com/press/20160114-2265.html

Exhibit 2
The Market Share of Smartphone OS, 2012 Q2 – 2015 Q2 (%)

Period Android iOS Windows Phone BlackBerry OS Others
2016 Q2 87.6% 11.7% 0.4% N/A 0.3%
2016 Q1 83.4% 15.4% 0.8% N/A 0.4%
2015 Q4 79.6% 18.6% 1.2% N/A 0.5%
2015 Q3 84.3% 13.4% 1.8% N/A 0.5%
2015 Q2 82.8% 13.9% 2.6% 0.3% 0.4%
2014 Q2 84.8% 11.6% 2.5% 0.5% 0.7%
2013 Q2 79.8% 12.9% 3.4% 2.8% 1.2%
2012 Q2 69.3% 16.6% 3.1% 4.9% 6.1%

Source: IDC, August 2015. http://www.idc.com/prodserv/smartphone-os-market-share.jsp N/A: Not available.

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Exhibit 3
Android SoC Market Share in 2015 (%)

Source: AnTuTu Benchmark V5.0. http://m.jb51.net/shouji/391972.html

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Exhibit 4
Shipment Forecast of Desktop PCs, Laptops, and Tablets Worldwide

(in million units), 2010 – 2019

Source: Statista.

Exhibit 5
Global Smartphone Shipments (in millions of units) and Annual Growth Rate (%),

2009-2015

Source: Statista.

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Exhibit 6a
Worldwide Smartphone Shipments (in million units) by Region

2013-2016

Exhibit 6b
Worldwide Smartphone Shipments Annual Growth Rate (%) by Region

2013-2016

2014 2015 2016 (Est.)
North America 27.4% 7.3% -0.7%
Developed APAC1 -4.7% 12.7% -1.4%
China 9.4% -1.9% 13.8%
Western Europe 10.8% 5.9% -1.3%
Latin America 57.9% -1.8% -11.5%
Central & Eastern Europe 36.1% 3.2% 7.8%
Emerging APAC2 53.4% 35.8% 5.3%
Middle East & Africa 36.1% 19.4% 8.8%

Source: www.statista.com. https://www.statista.com/statistics/412108/global-smartphone-shipments-global-
region

Notes:

1. Developed APAC: Australia, Hong Kong, Japan, New Zealand, Singapore, South Korea, Taiwan.

2. Emerging APAC: India, Indonesia, Kampuchea (Cambodia), Malaysia, Philippines, Thailand, Vietnam.

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Exhibit 7a
The Shipments of Global Smartphone Vendors (in millions), Q4’ 09 –Q1’ 16

Samsung Apple Nokia** RIM* HTC LG* Huawei* Lenovo* Xiaomi ZTE* Others

Q4 ’09 1.8 8.7 20.8 10.7 2.4 – – – – – 9.5

Q1 ’10 2.4 8.7 21.5 10.6 2.7 – – – – – 9.5

Q2 ’10 3.6 8.4 24 11.2 4.4 – – – – – 12.8

Q3 ’10 7.3 14.1 26.5 12.4 5.9 – – – – – 16.6

Q4 ’10 9.6 16.2 28.1 14.6 8.7 – – – – – 24.8

2010 22.9 47.4 100.1 48.8 21.7 63.7

Q1 ’11 11.5 18.6 24.2 13.8 9 – – – – – 24.5

Q2 ’11 18.4 20.4 16.7 12.4 11.6 – – – – 2 26.8

Q3 ’11 28.1 17.1 16.8 11.8 12.7 – – – – 4.1 33.1

Q4 ’11 36.2 37 19.6 13 10.2 – 5.7 – – 6.4 26.4

2011 94.2 93.1 77.3 51 43.5 5.7 12.5 110.8

Q1 ’12 44 35.1 11.9 9.7 6.9 4.9 5.1 – – 6.1 29

Q2 ’12 50.3 26 10.2 – 8.8 5.8 – 4.9 – 6.4 43.8

Q3 ’12 56.3 26.9 6.3 7.7 7.3 – – – – 7.5 67.7

Q4 ’12 63.7 47.8 6.6 – – – 10.8 – – 9.5 79.6

2012 214.3 135.8 35 17.4 23 10.7 15.9 4.9 29.5 220.1

Q1 ’13 69.7 37.4 6.1 – – 10.3 9.3 7.9 – 9.1 72.8

Q2 ’13 77.3 31.2 7.4 – – 12.1 10.4 11.4 – 10.1 93.4

Q3 ’13 85 33.8 8.8 – – 12 12.5 12.3 5.6 – 106.6

Q4 ’13 84.4 51 – – – 13.2 16.6 13.9 5.9 – 107.7

2013 316.4 153.4 22.3 47.6 48.8 45.5 11.5 19.2 380.5

Q1 ’14 88.5 43.7 – – – 12.3 13.5 12.6 13.52 – 117.8

Q2 ’14 74.9 35.2 – – – 14.5 20.2 15.8 13.8 – 127.7

Q3 ’14 79.6 39.3 – – – 16.8 16.5 16.9 17.3 – 146.2

Q4 ’14 75.1 74.5 – – – – 23.6 14.1 16.5 – 174

2014 318.1 192.7 43.6 73.8 59.4 61.12 565.7

Q1 ’15 82.4 61.2 – – – 15.4 17.4 18.8 10.5 – 125.5

Q2 ’15 73.2 47.5 – – – – 29.9 16.2 17.9 – 152.5

Q3 ’15 84.5 48 – – – – 26.5 18.8 18.3 – 159.1

Q4 ’15 85.6 74.8 – – – – 32.4 20.2 18.2 – 168.3

2015 325.7 231.5 15.4 106.2 74 64.9 605.4

Q1 ’16 81.9 51.2 – – – – 27.5 – – – 141.5

Source: IDC. http://www.statista.com/statistics/271490/quarterly-global-smartphone-shipments-by-vendor

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Exhibit 7b
The Market Share of Global Smartphone Vendors (%), Q4’09 – Q1’16

Samsung Apple Nokia RIM HTC LG Huawei Lenovo Xiaomi ZTE Others

Q4 ’09 3.3 16.1 38.6 19.9 4.5 – – – – – 17.6

Q1 ’10 4.3 15.7 38.8 19.1 4.9 – – – – – 17.2

Q2 ’10 5.6 13 37.3 17.4 6.8 – – – – – 19.9

Q3 ’10 8.8 17 32 15 7.1 – – – – – 20.1

Q4 ’10 9.4 15.9 27.6 14.3 8.5 – – – – – 24.3

2010 7.0 15.4 33.9 16.5 6.8 20.4

Q1 ’11 11.3 18.3 23.8 13.6 8.9 – – – – – 24.1

Q2 ’11 17 18.8 15.4 11.5 10.7 – – – – 1.8 24.8

Q3 ’11 22.7 13.8 13.6 9.6 10.3 – – – – 3.3 26.7

Q4 ’11 22.5 23 12.2 8.1 6.4 – 3.5 – – 4 16.4

2011 18.4 18.5 16.3 10.7 9.1 3.5 3.0 23.0

Q1 ’12 28.8 23 7.8 6.4 4.5 3.2 3.3 – – 4 15.4

Q2 ’12 32.2 16.6 6.6 4.9 5.9 3.7 4.1 3.1 – 4.1 14

Q3 ’12 31 14.4 – 4.3 4 3.8 3.8 3.7 – 4.4 25.7

Q4 ’12 29.1 20.9 – – – 3.8 4.6 4.1 – 4.4 28.6

2012 30.3 18.7 7.2 5.2 4.8 3.6 4.0 3.6 4.2 20.9

Q1 ’13 31.9 17.1 – – – 4.7 4.3 3.6 – 4.2 33.8

Q2 ’13 32.3 13 – – – 5 4.3 4.7 – 4.2 36.4

Q3 ’13 32.5 12.9 – – – 4.6 4.8 4.7 2.1 – 38.4

Q4 ’13 28.83 17.43 – – – 4.6 5.66 4.51 2.03 – 36.94

2013 31.4 15.1 4.7 4.8 4.4 2.1 4.2 36.4

Q1 ’14 30.7 15.2 – – – 4.3 4.7 4.4 – – 40.8

Q2 ’14 24.8 11.7 – – – 4.9 6.7 5.2 4.6 – 42.1

Q3 ’14 23.9 11.8 – – – 5.1 5 5.1 5.2 – 43.9

Q4 ’14 19.9 19.7 – – – – 6.3 3.7 4.4 – 46.1

2014 24.8 14.6 4.8 5.7 4.6 4.7 43.2

Q1 ’15 24.6 18.3 – – – 4.6 5.2 5.6 – – 37.6

Q2 ’15 21.7 14.1 – – – – 8.9 4.8 5.3 – 45.2

Q3 ’15 23.8 13.5 – – – – 7.5 5.3 5.2 – 44.8

Q4 ’15 21.4 18.7 – – – – 8.1 5.1 4.6 – 42.1

2015 22.9 16.2 4.6 7.4 5.2 5.0 42.4

Q1 ’16 24.5 15.3 – – – – 8.2 – – – 42.3

Source: IDC. http://www.statista.com/statistics/271496/global-market-share-held-by-smartphone-vendors-since-
4th-quarter-2009

For the exclusive use of D. McPhatter, 2021.
This document is authorized for use only by Dulcie McPhatter in MAN 780 taught by EDWARD ROGOFF, CUNY – Baruch College from Jan 2021 to Jul 2021.

Copyright © INSEAD 22

Exhibit 8a
Huawei’s Revenue and Operating Profit, 2006-2015

Year
Revenue Operating Profit

CNY(¥) Million USD Million CNY(¥) Million USD Million
2006 66,365 8,499 4,846 621
2007 93,792 12,840 9,115 1,247
2008 125,217 18,321 16,197 2,370
2009 149,059 21,830 21,052 3,083
2010 185,176 27,961 29,271 4,420
2011 203,929 32,396 18,582 2,952
2012 220,198 35,353 19,957 3,204
2013 239,025 39,463 29,128 4,809
2014 288,197 46,515 34,205 5,521
2015 395,009 60,839 45,786 7,052

Source: Huawei Annual Reports 2010 – 2015, compiled by the case-writer.

Note: Converted into the US Dollar (“USD”) using the closing rate as of December 31 for each year, e.g., in
2015, USD1.00 = CNY6.4927; in 2014, USD1.00 = CNY6.1958; and so on.

For the exclusive use of D. McPhatter, 2021.
This document is authorized for use only by Dulcie McPhatter in MAN 780 taught by EDWARD ROGOFF, CUNY – Baruch College from Jan 2021 to Jul 2021.

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For the exclusive use of D. McPhatter, 2021.
This document is authorized for use only by Dulcie McPhatter in MAN 780 taught by EDWARD ROGOFF, CUNY – Baruch College from Jan 2021 to Jul 2021.

Copyright © INSEAD 24

Exhibit 9
Huawei’s R&D Expenditure as a Percentage of Sales (%), 2009-2015

Source: Huawei Annual Reports 2009-2015.

8.90%
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2009 2010 2011 2012 2013 2014 2015

For the exclusive use of D. McPhatter, 2021.
This document is authorized for use only by Dulcie McPhatter in MAN 780 taught by EDWARD ROGOFF, CUNY – Baruch College from Jan 2021 to Jul 2021.