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Can China's phone makers take on Apple and Samsung?

Martyn Williams | Feb. 22, 2013
Huawei and ZTE have their sights set on a bigger presence in the US and European markets

A lot of brand-building in the smartphone business today revolves around TV ads. Samsung, Apple and Microsoft ads appear regularly on TV, and BlackBerry just spent several million dollars on a single commercial during the Super Bowl.

"Who is paying for that?" asked ZTE's Cheng. "The consumers at the end are paying. We won't spend that kind of money to build our brand the traditional way."

Instead, Cheng plans to use social media and viral marketing to build the ZTE brand -- a cheaper but potentially riskier strategy.

The companies already scored some online buzz at the recent International CES in Las Vegas, where both announced new products even though they will first be available in China.

ZTE said its Grand S is one of the thinnest smartphones available and Huawei boasted its Ascend Mate has the largest screen of any smartphone, at 6.1 inches. The phones generated headlines across technology blogs, even though there was no information about local availability.

And that could be repeated at next week's Mobile World Congress expo in Barcelona, the largest annual event on the mobile-phone-industry calendar. Both companies plan to announce new products there.

But a great phone isn't enough by itself to crack the U.S. market, said Carolina Milanesi, an analyst for Gartner. Telecom carriers control most of the sales channels, so the Chinese companies must first persuade carriers to offer and promote their phones, then take that message to consumers.

At present, the two companies serve a useful purpose for carriers by helping to keep price pressure on the major smartphone makers, and by providing handsets that might encourage feature-phone users to switch, she said.

"Once you get past the price-sensitive consumers, it's difficult [for other consumers] to see that China means quality," she said. The companies' current smartphones lack the build quality offered by the big players they want to compete against, Milanesi said. But she added that they have started to address this by switching suppliers in some cases to get better components.

Asked about the consumer perception of Chinese companies in the U.S. and Europe, both the Huawei and the ZTE executives were eager to assert the global nature of their companies. Whether it's non-Chinese board members, the number of offices in different countries, or where the stock is listed, both companies say they are global in nature.

The wish to be global extends even to the brand. ZTE recently tweaked the logo it uses overseas to drop two Chinese characters that always appeared alongside the letters "ZTE." Huawei, meanwhile, took to the streets of New York in a YouTube video to find out how many people could pronounce its name correctly (no one in the video could; it's pronounced 'WAH-way').


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