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Huawei Targets Gradual Growth to Win European Smartphone Ground

CEATEC Japan 2013 Exhibition
Huawei Technologies Co. is relying more on handsets while it fights cybersecurity concerns that have restricted its access in U.S. and Australian phone-equipment markets. Photographer: Kiyoshi Ota/Bloomberg

Huawei Technologies Co., the third-largest smartphone vendor, is focusing on a gradual growth strategy instead of acquisitions to chase Samsung Electronics Co. and Apple Inc. for market share, its deputy chairman said.

“We’re not expecting an explosive development of our smartphone business, rather we want to grow that business step by step,” Eric Xu told reporters in London yesterday. “Ultimately we want to be the leading brand worldwide in smartphones, but it will take a while to get there.”

Xu confirmed Huawei’s smartphone growth target of 10 percent this year and next. The company is relying more on handsets while it fights cybersecurity concerns that have restricted its access in U.S. and Australian phone-equipment markets. Huawei, China’s largest supplier of telecommunications networks, isn’t planning an acquisition to bolster its position because of potential product overlaps, he said.

The comments would damp speculation over a linkup by the Chinese company with takeover targets such as France’s Alcatel-Lucent SA and BlackBerry Ltd of Canada. Huawei hasn’t held any discussions with BlackBerry, said Xu, who is also acting chief executive officer under a rotating arrangement set up two years ago by the closely held company based in southern city of Shenzhen.

European carriers are accelerating their expansion of fourth-generation networks, and Huawei will focus on upgrading existing customers in the region to faster services, Xu said.

As telecommunications operators move toward consolidation in the region, Xu said Huawei has found operators prefer having choices in their vendors, comparing it to the fashion industry in that “customers’ needs are changing constantly.”

Long Run

Huawei shipped 12.5 million smartphones in the third quarter, taking 4.8 percent of the global market, trailing only Samsung’s 31 percent and Apple’s 13 percent, researcher International Data Corp. said last month.

Huawei is closely trailed by Lenovo Group Ltd., which held 4.7 percent of the global smartphone market in the quarter with 12.3 million units shipped, and LG Electronics Inc. at 4.6 percent with 12 million unit shipments, according to IDC.

“We don’t know if we can keep that spot next quarter and we don’t care much about being No. 3 at any given quarter,” Xu said. “We want to be an athlete in the long run and grow step by step.”

Smartphones helped boost Huawei’s sales 11 percent in the first six months this year to 113.8 billion yuan ($18.7 billion). Its 10 percent annual smartphone growth could raise consumer devices to 25 percent of the company’s sales in 2017 from 22 percent last year, Deputy Chairman Guo Ping said in April. Sales of network equipment will fall to 60 percent of revenue in 2017 from 73 percent in 2012, Guo said.

A U.S. congressional committee last year said network equipment from Huawei and ZTE Corp. could provide opportunities for spying by Chinese intelligence services. Huawei has denied those claims and called for governments and industry to develop globally consistent standards on cybersecurity.

The concerns “have had no significant impact on our smartphone business in the U.S.,” Xu said. “What customers care about most is a good smartphone.”

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