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Huawei Consumer Business: Technology Leadership Challenges

REF ID : UST092
HBP Product : ST92
Case Author : Prof Ronald LAU and Prof Suri GURUMURTHI
PublicAction Date : 11.09.2020

Abstract

As the largest telecommunications equipment manufacturer in the world, Huawei has been building telecommunications networks and services since its inception in 1987.  Leveraging its close relationship with other telecommunications service providers, Huawei entered the consumer mobile devices market, supplying mobile phones and other white-label products for telecom service providers in the mid-2000s. In 2010, Huawei also began designing, manufacturing, and selling the first smartphones under its own brand, targeting middle-to-high-end consumer segments. By 2015, Huawei ranked first in China and third in the world in the smartphone market.  By the first quarter of 2020, Huawei also became the largest smartphone vendor of the world, overtaking the title from Samsung for the first time. This case study explores the strategies that have resulted in Huawei’s fast to rise to the top in the consumer business even as many of its competitors scaled back their footprint.

In parallel, however, this remarkable success has been tinged with the challenges and headwinds faced by its telecom equipment business. In recent years, the company has been subject to increasing sanctions led by the US government related to some of its 5G telecom equipment business practices. In May 2020, the Trump Administration announced a new direct product rule (DPR) that effectively blocks Huawei's access to advanced semiconductors for all its products. Sanctions of this magnitude have put the company into crisis mode and has caused a rethinking of its supply and value chain strategies. This case highlights some lessons for Chinese companies as they attempt to globalize their brands and operations in a world that still perceives them as a threat. The case also highlights the need to evaluate supply and value chain risks from the strategic standpoint and not just an operational view. The case aims to foster discussion on how companies could formulate a proactive strategy to respond to and recover from geopolitical movements, coordinated competitive challenges, or even a systemic shock such as the COVID-19 pandemic.

Learning Objectives

Through the case, students should be able to:

  • - Perform a life cycle analysis for an industry, and SWOT analysis of an individual company
  • - Learn the concept of “diagonal diversification” – diversify into inter-related industries and products to maximize value
  • - Discuss the advantages of adopting value positioning in the areas of design/development and distribution (the “smiling-curve” concept)
  • - Develop a competitive strategy for a consumer technology firm
  • - Perform a broad risk assessment of an international supply chain
  • - Identify risk mitigation, contingency, and response measures in response to regulatory risks

Company/Organization Huawei Technologies Co., Ltd.
Industry Telecommunications, technology, Smartphones
Major Discipline Strategy
Subject(s) Business strategy, Operations Management, risk assessment, Life cycle analysis, Diagonal diversification, Smiling-curve model, Regulatory risks, Diversification, Smartphones
Geography China, Asia, USA
Case Nature Library
Page count of the Case 23
Teaching Notes 16
Supplementary Materials Case Presentation Slides
Publisher HKUST
Last Revision Date 11.09.2020