Huawei emerging as Samsung’s strongest smartphone rival

Huawei emerging as Samsung’s strongest smartphone rival

Staff Reporter

2014-05-30

In October 2009, the operating profits of Samsung Electronics exceeded the combined operating profits of nine leading Japanese electronics firms, including Sony, Panasonic and Hitachi, which could be attributed to the fact that South Korean firms had become bolder than Japanese rivals during the economic recession and had stepped up investment when Japanese companies had scaled back.

South Korean media reports have recently focused on Chinese smartphone maker and telecommunications equipment giant Huawei Technologies. South Korean IT experts believe that if any company can catch up with Samsung as the world’s leading smartphone manufacturer, it will definitely be Huawei.

Huawei has now become the world’s third largest smartphone maker and the largest telecommunications equipment supplier, recently overtaking Ericsson.

According to the Chinese-language Economic Observer, Huawei owes its success to its research and development (R&D) ability. In 2013, Huawei allocated 30.7 billion yuan (US$5.1 billion) to R&D, equivalent to 12.8% of its annual operating income.

Over the same period, Samsung spent US$14.4 billion on R&D, equivalent to 6.5% of its operating income. Some 45% of Huawei’s employees work in the R&D division, compared to only 26% for Samsung.

Over the last decade, Chinese firms have not only penetrated the market with their low-cost products, but have also started to tap into the high-end sector.

The Competitive Industrial Performance Index released by the United Nations Industrial Development Organization (UNIDO) showed that South Korea was in the fourth spot, behind Japan, Germany and the United States while China had reached seventh, up from the 23rd in 2000.

The Economic Observer reported that Chinese firms have benefited from the enormous and emerging domestic consumer market. If they manage to score a larger share at home, they are then well set to establish a firm footing in the global market, the report said.

Even though Chinese companies such as Xiaomi and Lenovo started out offering products, they are now able to compete with Samsung through middle and high-end devices, it said.

Despite the strong challenge posed by Chinese firms, Samsung still holds an outstanding competitive edge with the vertical integration of its supply chain, however.

A decade ago, no one would have expected Samsung to replace Nokia as the world’s largest phone manufacturer. But will Huawei also overtake Samsung in a decade?

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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