How the Huawei-Positivo smartphone deal fell apart

A planned partnership between Huawei and manufacturer Positivo Tecnologia to sell the Chinese tech giant's smartphones in Brazil has fallen apart.

A source inside Huawei told BNamericas that the licensing agreement ended about two months after it was announced to the market in June.

Officially, the companies have not confirmed whether they are still partnering or not.

The deal was supposed to bring Huawei's phones back to the Brazilian market for the first time in four years.

Under the licensing agreement, Positivo was going to be responsible for the marketing and selling of Huawei's Pro 20 and Nova smartphones, which were going to be imported starting in 3Q18.

The deal left open the possibility of eventually manufacturing Huawei's smartphones locally through Positivo or another partner. Positivo is a PC and phone manufacturer, and also sells feature phones and mid-tier Quantum phones.

According to the Huawei source, the deal flopped in August amid disagreements over the go-to-market strategy. "I knew back in June it was a bit hasty – not because of Positivo, but because we didn't even have a market analysis," the source said.

Rival smartphone brands such as Samsung and LG were aware that the deal had fallen through for some time now. Brazilian daily Valor Econômico first reported the story early Tuesday.

The source said that Huawei has not given up on selling smartphones in Brazil and is currently assessing other options.

In a statement, the Chinese tech giant said: "The main focus of Huawei CBG internationally is the consumer. We are committed to bringing the best technology solutions to consumers around the world who are asking for them - and Brazil is no exception. Although we do not comment on rumors and speculation, Brazil is the fourth largest smartphone market in the world in number of units shipped. Based on business opportunities, we will continue to study the market and evaluate the best products and experiences necessary to meet the demand and expectations of Brazilians."

Officially, Positivo said the following: "In the face of all the recent events, Positivo is still in discussions with Huawei about whether it will participate [in bringing Huawei's phones to Brazil] and how will [Huawei] eventually enter Brazil."

THE COMEBACK

The deal announced in June was part of a ceremony in Brasília to mark Huawei's 20th operational anniversary in Brazil. Huawei is one of the major suppliers of telecoms equipment for Brazilian carriers, but the company quit the local smartphones market four years ago because of tax and competition issues.

Huawei's head of device business development in Brazil, Adam Xiao Ersong, told reporters at the time that Positivo was chosen for its commercial capillarity, technical support network, expertise and local structure. It also said that talks were advanced with major retail chains such as Via Varejo and Fast Shop to sell the phones online and, mostly, via kiosks in malls and at stores.

In August, Positivo's Q2 results included disappointing smartphone sales, which fell 18.3%. Feature phone sales, on the other hand, grew 34.8%.

Sales of the three best-selling brands in Brazil - Samsung, Motorola and LG - accounted for 82% of the total Brazilian market in June, compared to 74% the year before.

Positivo failed to increase its market share even though its handset sales rose 0.7% by units in the quarter.

In Q3, sales of mobile phones recovered and expanded 26.8% y-o-y, with an increase of 4.8% in smartphones and 60.6% in feature phones. With that, Positivo's market share grew to 4% in Q3 from 2.4% in the year-before quarter.

Huawei, for its part, passed Apple in August to become the world's second-largest maker of smartphones.

Huawei's Consumer Business Group, which includes smartphones, is managed in Latin America from Chile, where Huawei's phones have been sold for years and where the company owns Huawei stores.

All the other CBG divisions are headquartered in Brazil.