Reborn for 1066 days, glory runs into ‘a series of ups and downs

Reborn for 1066 days A Journey of Glory and Adversity

Apple CEO Tim Cook has recently appeared in several cities in China. Whether it’s the various selfies and check-ins posted by influencers on social media, or the various creative visit activities offline, it all shows the “absolute cooperation” of the CEO with the Chinese marketing team.

In September, this company released its latest flagship phone, the iPhone 15 series, globally. Cook’s trip to China undoubtedly brings more hype to this phone.

In the past two years, Apple’s market share in China has surpassed 25%, making it one of the most important players in the high-end market.

But the competition in the mobile phone market is fierce. As soon as the clock strikes midnight, both new and old players start a new round of market competition, and opportunities are brewing again. From recent market data, whether it’s the full-scale comeback of Huawei’s high-end phones or the “triple release” of foldable screen phones by Honor, domestically made phones are putting pressure on Apple in the high-end market.

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“After the release of the Magic V2, the number of Apple users has increased by 300%. The experience of foldable screens is evolving comprehensively, challenging flagship flat screens.” Honor CEO Zhao Ming frankly stated in a recent interview: When defining Magic V2 and Magic Vs2, the foldable screen products released this year, they were defined as competitors to Apple’s Pro Max and Pro, which is a core consideration. “Currently, we have seen that Huawei Mate60, Honor Magic V2, and Magic Vs2 are putting pressure on Apple’s market share, making the time Apple leads in market share shorter.”

According to the latest data released by the market organization mentioned above, in the third quarter of this year, in the domestic “big foldable” smartphone market, Honor Magic V2 ranked first, while Huawei Mate X3 and Mate X5 ranked second and third respectively. Following Huawei’s footsteps, Honor has grown into a powerful player in the high-end market that cannot be ignored.

“The smartphone industry is full of competition and vitality. Only by challenging and breaking Apple’s dominance can it be vibrant.” Zhao Ming said.

On November 17, 2020, Huawei made a statement that it was separating from Honor.

Huawei stated that in difficult times when sustainable access to industrial technology elements is not available and consumer business is under tremendous pressure, Huawei Investment Holdings Co., Ltd. has decided to sell the assets of the entire Honor business, in order to ensure the continuity of Honor’s channels and suppliers. Over 30 Honor agents and dealers jointly initiated the acquisition, which is a self-rescue action launched by the Honor-related industry chain.

In the statement, Huawei mentioned that the Honor brand was born in 2013 and has always been targeting young people. In seven years, it has grown into an internet mobile phone brand with an annual shipment volume of over 70 million units.

In other words, Honor, which used to focus on online channels, needs to stand up again in a very short amount of time. It needs to transform itself from an internet brand to a brand that covers all channels and all customers. Only by upgrading brand content, expanding technological barriers, widening product layout, and expanding channel systems, can it have enough strength to compete with current competitors. However, the strategic time window for a brand’s rebirth and rise is always short. If one is not careful, opportunities will slip away, especially in the fiercely competitive mobile phone industry.

After becoming independent, Honor was pushed into this competition arena with little time for preparation. At that time, it faced not only the need to rebuild its supply chain and channel capabilities, but also the relentless competition from other competitors for market share. Some media outlets described Honor’s situation at the time as “a person who grew up in a big family, wrapped in a warm coat, suddenly stripped of their cover and exposed to the cold rain,” and the umbrella holder left, so Honor had to learn to trek alone in the rain.

Ni Jiayue, the China Regional President of Honor Terminal Co., Ltd., has witnessed all of this and has more than ten years of market experience. As a former “veteran” of Huawei Terminal, she knows that the market does not need the weak. In order for Honor to survive, it must quickly build its core capabilities.

In a recent interview, Ni Jiayue told reporters that Honor is a company that makes long-term investments and does not care about short-term gains. So, in the three years of its growth, no matter what problems it encountered, Honor’s strategy has never changed, which is to target the high-end market and provide valuable products to consumers, allowing users to perceive Honor as a company that makes products well. “For us, we don’t have the right or the qualification to pick our opponents. It’s enough to win every game.”

In addition to the product side, the core to Honor’s market success lies in the construction of its channels.

Ni Jiayue said that during Honor’s growth process, channel partners and retailers have provided great support. “They can feel all the benefits that Honor shares in the development process. Even in the face of any difficulties, Honor will never harm its channels, because they are the closest to consumers, including frontline product consultants who sell products to consumers. So everyone can also feel why there are more and more retail customers and experience stores in Honor’s development process, it is because they can see that Honor not only wants to make good products, but also wants to do retail well.”

According to reports, as of now, Honor has more than 40,000 dedicated counters in the Chinese market, with approximately 2,000 experience stores, and mall stores accounting for 50%, expected to reach 60% by the end of the year.

Zhang Ming (alias) is a member of the Honor agent team. At the end of April 2021, they opened the first Honor experience store in Guangzhou. After three years of development, they have become a small-scale agent for Honor in the Guangzhou area.

“When we first started collaborating with Honor, it was the most difficult time for them. At that time, their market share was only 3-4%. The store had an area of 295 square meters, which was quite large. During the trial period, they only had one phone for sale, the Honor V40. Later, they added the V40 Luxury Edition, but with only two models available at eight counters, it was clearly not enough. They only sold about a hundred phones in a month,” Zhang Ming told reporters. However, after surviving the initial two months, the confidence of the agents returned.

“Our confidence comes from the market and the consumers. When the Honor 50 series was launched, sales exceeded 100 units on the first day. As the products gradually regained popularity, Honor’s market share continued to rise,” Zhang Ming said. In 2021, during the pandemic, the sales of Honor 50 surpassed everyone’s expectations. As the first flagship product after Honor’s independence, from product development to channel operations, it was all handled independently by the new Honor team. Honor’s ability to cope and explode under extreme survival conditions has made more and more channel partners firm in their investment in Honor. In 2022, with the richening product line of Honor and the acceleration of the construction of the systematized capabilities, Honor has begun to demonstrate stronger market competitiveness.

“There used to be some controversies, but there has been an obvious change this year,” another agent said. The average turnover cycle for mobile phones is 20 days, with the ideal turnover rate being around 10 days. “Honor Magic V2 is generally controlled within 8-9 days, while Honor 90 is around 12 days. These are core categories.”

Ni Jiayue said that the core value Honor adheres to is doing things that are long-term and correct. “I often say that we leave difficulties and uncertainties to ourselves, and we leave focus and simplicity to the furthest people, such as channel partners. No matter how far and how many layers the county-level channel partners are, we must leave simplicity and focus to them and leave difficulties and uncertainties to ourselves. Only in this way can the entire channel system become healthier.”

With the return of Huawei’s high-end products, it is generally believed that Honor will be the first to be affected. However, the Honor China team led by Ni Jiayue does not have any concerns about this market view. “We can be the first when all major phone brands are releasing new products.” And the performance of Honor in the Chinese market in the third quarter as a whole is the best evidence for Ni Jiayue’s judgment.

After experiencing a market share low of 3% in the early stages of independence, Honor has started to reclaim lost market share and has gradually found its own rhythm in the high-end smartphone arena.

In March of this year, as the annual release venue for Huawei’s P series flagship phones, the Shanghai Mercedes-Benz Cultural Center was packed with mobile channel distributors and supply chain partners from across the country, waiting for new opportunities. However, this time the spotlight shifted from Huawei to Honor.

On that day, Honor unveiled its annual flagship phone, the Honor Magic 5 series, in Shanghai. The product line is equipped with self-developed radio frequency enhancement chips and Qinghai Lake battery technology, with a starting price of 3,999 yuan ($600) and a high-end version priced as high as 7,499 yuan ($1,120).

Entering the second half of the year, Honor continues to focus on the foldable screen field. In a very short period of time, they have released three flagship foldable screen phones: Magic V2, V Purse, and Magic Vs2. Among them, the market performance of Magic V2 has been hot, surpassing Huawei’s Mate X3. Not only did it achieve the first place in the growth of horizontal foldable screen phone users in July and August, but it also topped the sales ranking in the domestic “big foldable” smartphone market in the third quarter, with Huawei’s Mate X3 and Mate X5 ranking second and third, respectively.

Counterpoint analyst Archie Zhang told reporters that currently, all manufacturers in the high-end market basically adopt a dual flagship strategy of flat panel and foldable screens. Since its return, Honor has been striving to establish a presence in the high-end market and is a major competitor in this segment. “The Magic series focuses on the traditional flagship track, with imaging as the main focus, including concepts such as multi-main camera fusion calculation. Secondly, it focuses on the big foldable screen track. After launching the first foldable phone, the Magic V, in 2022, it then released the Magic Vs and later this year the V2 and V Purse, making a more diversified layout,” Archie said. Honor aims to make the thickness of foldable screens as thin as possible, even thinner than flat panel phones, while providing users with a large screen and dual screen experience, significantly increasing its appeal to flat panel phone users.

This kind of layout has also enabled Honor to achieve high-quality growth in a sluggish market. In the W37 (September 11th-17th) period, Honor held the top spot in the Chinese market with a 18.2% market share. This is the 12th cumulative week from June 26th to September 17th, with Honor taking the top spot in the market share for a total of 11 weeks. Since W26 (June 26th to July 2nd), except for W33 (August 14th-20th), Honor has consistently been in first place.

Achieving this kind of success is not easy when major mobile phone brands are all releasing new products at the same time. Zhang Ming said that currently, the Magic5 series accounts for about 35% of sales in the Honor stores he represents, while foldable screens make up about 10%.

“Honor’s product line planning this year is very good, with the Magic series mainly focusing on high-end products, using foldable screens and the Magic5 series as anchors. The mid-range products are the Honor 90 series, and the entry-level products are the X40 and X50 series. The Play series primarily targets carrier products. The positioning of these four series is very clear, and the user profiles are also very clear,” said Zhang Ming. During the Huawei era, Honor’s products were mainly priced below 4,000 yuan and focused on online products. However, this does not mean that Honor’s R&D team lacks the ability. Given time, they can gradually move up in the market.

In Zhang Ming’s view, Honor’s breakthrough in high-end phone technology is thanks to breakthroughs in R&D, such as the Qinghai Lake battery, risk-free dimming eye protection screens, and the Falcon Eye camera launched with the Magic5 series.

For Ni Jiayue, these results are not surprising. In her opinion, building confidence goes both ways. Better technology and better products, combined with better retail presentation from partners, once retailers have confidence, they will communicate more about the Honor brand and its products, creating a very positive cycle. Every link can feel the progress, and the spirit is particularly high.

It is worth noting that Honor has also adjusted its market strategy deployments this year. All adjustments, from products and channels to retail, are based on consumer dwell time and the manifestation of distance, medium, and close-range experiences.

“What is long-range? When a consumer passes by your store, do they have a chance to enter the store because of the store’s decoration, even without knowing the brand? That’s long-range; medium-range is when they enter the store and have a chance to get close to your experience counter; close-range is whether they have a chance to pick up your phone and try it out. So, Honor’s entire SAP (store and product) project presents everything from long-range to close-range, all built around the consumer,”

In Ni Jiayue’s view, building a brand is like running a relay race. The product is the first leg, marketing is the second leg, and good products must have the language of consumers to speak for them. Retail is the third leg, and both online and offline retail are included here. Service is the final leg. “Why do we call it a complete business closed loop? The baton exchanges between legs are crucial. First, each leg has to win on its own. The core is to win this race. Second, the process of passing the baton is also essential. You’re not throwing the baton, you’re handing it over, and you also have to accompany the runner for a while, provide the connection, and give each leg a better lead, bringing speed to them,” said Ni Jiayue. In the current uncertain situation, passing the baton has become like speed skating relay. You must push your speed to your teammate and you may even need to run a few more laps if you have the ability.

“One of the key factors behind Honor’s success lies in the strong collaboration and teamwork within the entire team. The process of passing on the baton is a true display of unity.” Ni Jiayue expressed that all problems are opportunities, and many brands and companies often try to conceal their problems. However, the entire Honor team is able to find opportunities within these problems and find certainty within uncertainty.

Honor’s goal is not the continuous expansion of market share, but rather aiming to become the “first brand of folding screens.” This serves as an important strategic foundation for competing with Apple and Huawei in the high-end market.

Talking about Huawei, Zhao Ming once said that the best tribute to Huawei is for Honor to compete with Huawei using the strongest products and in the best condition. It’s through this battle of strength that the industry as a whole becomes more vibrant. “Everyone says the mobile phone industry has become a bit boring, but now the resurgence of manufacturers and brands bringing more possibilities is a good thing for the entire industry.”

Honor is currently the first company among smartphone manufacturers to openly declare its actions towards Huawei. In the past, Zhao Ming did not shy away from the intricate relationship between Huawei and Honor.

At the end of 2020, Ren Zhengfei expressed at the Honor farewell ceremony that he hopes Honor fully embraces global industrial resources, quickly establishes relationships with suppliers, and becomes Huawei’s strongest global competitor. “Surpass Huawei, and even call for the downfall of Huawei, as a slogan to motivate yourselves.”

Public information shows that at least 8,000 employees, half of whom were key members of Huawei’s original R&D system, joined the new Honor. Wan Biao, former Chief Operating Officer of Huawei’s consumer business, became the chairman of the new Honor. Fang Fei, former Deputy General Manager of Huawei’s consumer business product line, became the President of the new Honor product line and is responsible for planning the new Honor product line.

After three years of technological accumulation and systematic capacity building, Honor has reached a true “take-off” moment and entered a time of comprehensive explosion.

In Honor’s view, all the points of focus in strategic thinking should be consumers’ pain points. Honor challenges Apple for the same reason Huawei challenged Apple back then. Without the heart of a challenger, it is impossible to become a successful challenger.

“After three years of accumulation, it is time for Honor to take off. It doesn’t matter who you jump alongside during the jump, it would be even better if Huawei jumps with you. And if you encounter Apple, that would be even more interesting.” Ni Jiayue pointed out that the core of seeking change within uncertainty is continuous innovation and providing better products to consumers.

Honor is a cutting-edge brand, so its ability to embrace the “new” is very strong. “For example, with Honor Magic V2, the number of users who switched from Apple is three times higher than before. This ability to embrace the new is crucial and depends on innovation capabilities behind the scenes, as well as the service capabilities of retailers and channels. It is a comprehensive embodiment,” said Ni Jiayue.

And a few months ago, in the face of the upcoming market explosion, Honor had already made comprehensive preparations. Especially in terms of retail and channels, Honor has thought about what kind of bearing capacity and service capability should be achieved, and how to make the entire retail and channels more efficient. Ni Jiayue believes that “only pressure can make an organization’s ability to improve rapidly.”

Facing the future, Zhao Ming believes that in the mobile phone market, in the future, we can see Huawei, Apple, and Honor leading in market share one after another, or taking turns to lead. This will become the norm in the industry. “We can’t decide what our competitors will do, but we can decide how to be the best version of ourselves.”

Ni Jiayue gave a similar judgement: Two high-speed racing cars can only run faster if they compete with each other. This is the biggest advantage that Huawei’s return brings to Honor.

Looking at market share, although Apple still has a relatively high market share, the domestic mobile phone market is undergoing changes with fierce attacks from Huawei and Honor. If the alternating leadership that Honor is looking forward to becomes the new norm, then the future market structure, especially the high-end market, may gradually shift from Apple’s dominance to a three-way competition led by Apple, Huawei, and Honor.

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