Analysis: Huawei returns to the Brazilian smartphone arena

Huawei this week officially confirmed its much-anticipated return to the Brazilian smartphone market with the launch of its new P30 smartphones in the country.

The flagship P30 Lite and the P30 Pro devices will be sold through eight online and physical retail channels from May 17 at 2,500 reais (US$636) and 5,000 reais, respectively.

To sell the phones, the Chinese giant inked partnerships with retailers Magazine Luiza, Via Varejo, B2W, Fast Shop and Telefônica Brasil.

The handsets will initially be imported, but Huawei is said to be considering domestic manufacture in the future depending on demand.

The initiative marks the return of the Chinese company to the hotly-disputed Brazilian smartphone market after years of absence and failed attempts to make its mark.

Last year, for example, Huawei announced a partnership with Brazil’s largest electronics manufacturer, Positivo, for local sales of its phones. The agreement was commercial but paved the way for future production in the country in partnership with Positivo.

However, it all came to an end just a few months after being announced with no devices sold and no concrete achievements.

Brazil is the largest consumper market in Latin America and Huawei is the world's second largest smartphone company in terms of devices shipped.

Samsung remains the world’s number one vendor, but it is coming under growing pressure from Huawei.

According to the latest research from Strategy Analytics, Huawei grew 50% year-on-year and outpaced all of its major rivals to ship 59.1mn smartphones worldwide during 1Q19, up from 39.3mn in 1Q18, giving it an 18% market share.

The gains came mainly in China, Western Europe and Africa. So the move into Latin America's biggest national market makes sense as a next step.

Canalys reported similar numbers, saying that Samsung’s shipments fell 10% to 71.5mn units in Q1 and that Huawei was the chief beneficiary, with a 50.2% increase to 59.1mn units.

Both Canalys and Strategy Analytics, as well as IDC, Gartner and other consultancies, forecast a new year of declines in global smartphone sales as various markets become saturated.

Canalys analyst Mo Jia said that to meet its public goal of overtaking Samsung as the world’s leading vendor by 2020, Huawei will need to achieve at least another 10mn shipments in a single quarter.

“It is not possible to take this many new customers in a single market, such as China, nor is it possible to focus only on growth markets, such as Russia and Indonesia. Huawei needs to battle on all fronts, including saturated and mature markets,” he said.

Hence the bet on Latin America and on Brazil in particular.

The stakes are high, hut Huawei’s life won’t be easy in Brazil. The Brazilian smartphone market is already almost saturated, with few first-time buyers, which means it will soon depend heavily on replacement purchases.

“We are very close to saturation. From now on, the growth in the smartphone market will come more from replacement of devices than anything else,” researcher Fernando Meirelles said during the recent presentation of a survey.

The consumer needs a reason to change his or her phone, whether that be a novelty or a new feature. Will they be able to find that in Huawei's phones? It could well be.

But the consumer also needs affordability to buy a new device and smartphone prices are on the rise.

It doesn’t help that the country’s economy has weakened, with the consequent impact on consumption. This has already led to the cooling of phone sales.

According to IDC, 42.5mn smartphones will be sold this year in Brazil, down from 44.4mn in 2018.

Furthermore, the Brazilian market has changed little in recent years. It has been dominated by Samsung, followed by Motorola, LG and Sony, all of whom have relatively stable market shares.

Brand awareness is another important issue for Huawei. Due to its absence from shop shelves and shop windows, Huawei is not very well known among end-consumers in Brazil, having a higher profile in the corporate segment for its provision of telecom equipment to telcos.

This means that significant and diversified marketing investments for brand awareness will be key.

But there is another issue related to brand: Huawei is facing intense scrutiny worldwide over alleged cybersecurity breaches – which the company fiercely denies – and is facing a boycott campaign against its products led by the US.

However, that topic seems a little far off for the average Brazilian. In the end, the biggest influence will be the price and cost-benefit assessments that guide and define consumers' decisions.

But as it goes under the spotlight in Brazil with handset sales, Huawei could also become more exposed. It is double-edged sword.