Huawei P7 realizes the dream of tens of millions, and needs to climb over ＂three mountains＂

On June 18, 2013, the P6 was released in London, UK, priced at 2688 yuan. This is a brave exploration of Huawei’s brand road. Yu Chengdong, president of Huawei’s end point, released a bold statement that the sales target of P6 is 10 million units. In a year, P6 sales 4 million units, far from achieving the so-called goal. But this does not affect the success of P6.

Say it’s a success, because P6 is a pathfinding product. Since it’s a pathfinding, it doesn’t matter if you can reach your goal. The key is to see where the road leads. If the road is right, don’t be afraid of the distance.

Taking this road, Huawei wants profits, and related to it, there are brand premiums and reducing dependence on operators. Although thousands of people have invested in research and development and over 100 million in marketing investment, shipping 4 million at a price of about 3,000 yuan is enough to amortize these costs. According to Yu Chengdong, a certain brand premium has been formed. Huawei’s global brand recognition of consumer goods has increased from 25% in 2012 to 52%. P6 is indispensable. Xu Qinsong, vice president of Huawei’s consumer business, said that the ratio of Huawei’s intelligent end point in domestic public channels to operator channels is 1:1. It is speculated that P6 should not be delayed in reducing dependence on operations. In addition, Yu Chengdong continues to sit at the end point and continue the P6 strategy, which also reflects Huawei’s high-level recognition of the success of P6.

In recent days, Huawei Ascend P7 has held press conferences in Paris, France and Beijing, the capital. Yu Chengdong once again threatened that the sales volume of a single product will reach 10 million, and this dream of tens of millions has been transferred from P6 to P7. On the road of the brand, P6 is the way to explore, and P7 has already identified the direction and started to run. Huawei will have a sales forecast, even if it is less than 10 million, it will definitely not be a small number. The burden of P7 is really not light.

There are four advantages that can give Huawei the confidence to take the plunge on the P7:

First, the brand influence of Huawei and P6 can play a roleIt has been mentioned above, and it will not be expanded here.

Second, replication expansion can increase overseas market share.Huawei’s strength lies in getting operators. At present, most of the overseas markets are shipped through operators, which is highly reproducible. Although the situation in each country in the overseas market is different, the expansion experience can be learned. At the press conference in Paris, Yves Beyer, executive vice president of France Telecom Orange, was on the P7 platform, which can see the recognition of Huawei. This year, Huawei’s overseas marketing investment is still very large, including sponsorship marketing covering the five major European leagues. The first batch of P7 listing countries has risen from the original 8 countries to the current 33 countries. It is foreseeable that P7 will achieve good results in overseas markets.

Third, Huawei’s HiSilicon chip is a powerful backing for production capacity.The 4G end point has not seen scale, and the bottleneck is the chip. Huawei HiSilicon chip sold $2 billion in 2013, making it the largest chip solution company in China and ranking among the top 20 in the world. In the process of achieving the five-mode and ten-frequency requirements of operators, HiSilicon’s time progress is second only to Qualcomm (currently also Marvell and Ericsson have realized it, but the production capacity is limited). At present, Qualcomm accounts for more than 80% of the 4G chip, and the production capacity of general 4G end point products depends on Qualcomm. And Huawei can have no worries about production capacity with its own chips and good cooperative relations with Qualcomm.

Fourth, there is still a certain window period for the development of 4G end points.MIIT Telecom Research Institute released data show that from January to April this year, the cumulative sales volume of 4G mobile phones 16.36 million, which is far behind the sales target of the three operators totaling over 100 million. The current 4G market is still less than demand, at least from the perspective of operators. Although Huawei wants to reduce its dependence on operators, it still acknowledges that operators are the main body of its channel sales. With 4G subsidies from operators, it is relatively easy for P7 to form a certain sales scale.

However, to achieve the dream of selling tens of millions of units, it is still very difficult overall, and there are "three mountains" in front of you.

Since the beginning of this year, the three operators have increased their investment in the construction of 4G networks; the inter-network settlement has greatly reduced the profits of Huawei P7’s largest partner. The implementation of the "business-to-business" policy after June 1 will bring pain to the operators in the short term. Overall, it will be an indisputable fact that the profits of operators will drop sharply. The SASAC, the regulatory department of the three operators, will not sit idly by and will definitely put forward requirements to reduce costs and ensure profits. The network is fundamental, and investment in it cannot be reduced. Then it must be made a fuss about end point subsidies and channel remuneration.

How big the impact on P7 will be depends on the time proposed by SASAC. The worst case scenario is that the three operators’ profits fell sharply in June and began to reduce end point subsidies in July. In a better case, it is not expected to be later than the end of the year.

The tightening of end point subsidies for operators will make the indicator orientation of mobile phone sales more prominent. The so-called indicator orientation, first, if operators want to retain or develop high-end customers, they must sell a certain amount of high-end mobile phones, such as Apple, Samsung, HTC, etc. Second, if operators want to expand the scale of users, they must sell a large number of low-end mobile phones to impact sales. Limited subsidies will flow to the high-end and low-end. The price of Huawei P7 is 2888 yuan, which is very embarrassing and may be separated from the operator’s key development models. There is not much time window left for P7. Whether it can reduce the impact depends on Huawei’s negotiating ability with operators.

The reason why the thousand-yuan machine market is in full swing is that the entry threshold for this price segment is low, the competition is fierce, and there is no monopolist. The mid-range and high-end are different. It is an indisputable fact that the high-end is monopolized by Apple and Samsung. The situation in the mid-end market is similar. There are two forces. One is the price-reduced version of foreign high-end products, such as Samsung, Apple, HTC, LG, Nokia, Sony, etc. The user base of this force is very clear. They want to buy high-end foreign brands. They only want to own them at a reasonable price, not early adopters. The other is the three major brands in the open market, Gionee, OPPO, and VIVO (among which OPPO and VIVO belong to BBK). No matter whether it is on a third-party e-commerce platform or a physical mobile phone store, the new products in this price range are basically dominated by these three companies.

From the perspective of product configuration, design and quality, P7 is not inferior in this price range, but it is not outstanding either. Four brands are on the table, each with their own strengths. In this case, it is marketing and channels that are at stake.

In terms of marketing investment, Huawei is much smaller than these three companies. Mainly because Huawei has long-term cooperation with operators, the need for marketing efforts is not large. The three open market brands are different, and they need to rely on their own strength and invest more in entertainment program titles, in-feed ads, soft advertising, etc.

In terms of channels, Huawei is in its infancy. The three open market brands are all their own fixed sales channels, which are spread all over the country. Thanks to long-term manufacturers’ profits, the channel loyalty is high. Huawei has also been expanding social channels in the past two years. Its expansion model is "4 + Top16", that is, it cooperates with agents of the four major chains of Sunny, Gome, Dixintong, and Leyu and Top16 in various provinces. This kind of cooperation has just started, and the channel support is difficult to match the three open brands. Channel construction does not happen overnight. Having channels is just the beginning. The key is the enthusiasm of the channel, which depends on the coverage rate and first push of the product in the channel.

Generally, when a manufacturer launches a flagship product, they will choose one or several main channels for sales. This can not only cultivate channel feelings, but also improve the sales enthusiasm of the channel and invest more resources. The strategy of P7 is different. Just online, P6 has chosen 7 channels such as Huawei Mall, JD.com, Tmall, Ning, Gome, Yihaodian, and Amazon to sell at the same time. For users, this is a good thing, and products can be bought in various channels. For channel providers, they cannot reflect their own advantages, and their enthusiasm will not be very high. If you want which channel to launch P7 first or increase promotions, then most of this investment must come from Huawei.

The more channels there are, the more difficult it is to trade. It is mainly reflected in two aspects. One is price management. Each channel has its own small nine or nine, and has its own promotion strategy, so P7 will definitely form different prices in different channels. The appearance of random prices will affect the brand of P7. A shrewd channel provider will definitely require Huawei to provide a full price guarantee or a price guarantee for several months, transferring the risk to Huawei. The second is inventory management. Each channel provider forecasts market demand differently, and the sales situation is also different, so there will be a large amount of inventory spread on the channel. This is a great challenge for Huawei’s traders. Poor inventory management, even if a single product earns more profits in the early stage, it may be tied to the later clearance of tail goods.

The "three mountains" are all pressing on Huawei’s soft underbelly. If you turn over, both the P7 and Huawei’s brand strength will be greatly enhanced. If you can’t turn over, I think Huawei will continue to climb and explore on this road, and will not stop.