HONOR's outlook seen by three experienced analysts

After launching phones that support Google services globally, we asked analysts about HONOR's prospects.

Late last month, HONOR launched its first series of smartphones outside of China to support Google Mobile Services since its separation from Huawei.

The supplier was a sub-brand of Huawei until last year, when it became a standalone smartphone brand through an acquisition by Shenzhen Zhixin  New Information Technology — a consortium of more than 30 entities including the Shenzhen city government.

Following the acquisition, the HONOR brand was again granted permission to use Google Mobile Services, which it had lost as part of Huawei's U.S. restrictions.

HONOR Devices CEO George Zhao  said the company achieved a 16% market share in China this August, after the company unveiled the Series 50 in June.

Although some U.S. politicians have tried to ban Honor, let's analyze the opinions of industry analysts  to see if they think HONOR can reach new heights as a solo brand if it is able to avoid restrictions.

Can HONOR become a successful standalone brand?

Canalys principal analyst Ben Stanton:Honor can certainly succeed as a standalone brand. The smartphone market is diverse and rapidly  evolving, and brands can achieve high-level status in short time frames. Just look at Xiaomi's extraordinary momentum in Europe, or how quickly  Realme  has become a global top-ten brand.  

Peter Richardson, Head of Research at Counterpoint  Research:Yes, there's no reason why it can't be a successful standalone brand. He has a lot of engineering talent on board and a management team with a deep understanding of how to run a successful smartphone business. But it won't be easy, especially in today's constrained supply chain environment.

Marta Pinto, research manager at IDC:It  will be a difficult journey. Re-entering a market is already difficult, but for HONOR it will mean having to regain the trust of customers. To do this, the brand will need to invest to make sure the new message of reliability, privacy, and security passes to customers and channel partners. HONOR is also entering the market in the wake of a pandemic – and although the market is still very dynamic, the focus on Samsung and Apple leaves less market to be divided from all the other brands.

Will HONOR be able to shake off Huawei's past?

Stanton: In a way, HONOR may not want to shake up its Huawei legacy. Huawei was a very popular brand in Europe, with devices, innovation and category-leading pricing. While you won't see Honor mention Huawei much in its official messaging, you can bet that on the front line, retail store staff will mention Huawei whenever they try to sell an Honor phone to a customer.

Richardson: That's  a difficult question. Immediately after the first sanctions were applied to Huawei [in May 2019], we asked consumers if the US move had changed their opinion on the brand. For some it did, but many others said they would be willing to consider Huawei if sanctions were lifted.

However, many consumers were unaware of the connection between Huawei and Honor, so it should be easier for HONOR to escape any brand obfuscation. But trade knows history. There may be some residual concern that the US might impose restrictions on Honor if it believes Honor is essentially a recast of Huawei. However, at the moment we believe that the risk of this happening is quite low.

Pinto:To break with the past, HONOR will have to show the value proposition. So far, partnerships with Qualcomm and Google help the industry build a credible brand image, but that's not enough. Regaining trust is a difficult task for brands and takes time.

Launching the Honor 50 series with a design so close to the Huawei Nova 9 is not the best move, as the similarities will be immediately highlighted.

What will HONOR require to claim significant market share?

Stanton: You need money to begin with. There is definitely a gap to be exploited, as none of Xiaomi, Oppo and Vivo have really replaced Huawei.

But getting into the main channels requires money; building marketing campaigns requires money; bringing the best account managers requires money. So it needs to spend a lot if it wants to have a chance to reclaim Huawei's former glory.

Richardson: The company must have competitive products at the right prices and build a strong brand, including excellent after-sales and even buyback facilities. This should be sufficient to enable you to find distribution partners.

But none of this is easy. There are many brands that attempt the exact same thing, so Honor won't have an easy life.

Pinto:Honor will have to rebuild everything from scratch. From channel presence to partnerships with component manufacturers and other brands to market awareness, the brand will have to make a lot of effort and investment.

As the market is now highly concentrated among major suppliers, there is an appetite for new value proposals that bring more diversity to the shelves. But the channels have been in a pandemic during which they have closed stores and faced investments in new online channels and logistics, so  they will need brand support if they are listing a new brand.

Meanwhile, some channels already had partnerships with HONOR and as the ban was imposed on Huawei and operations began to suffer, some channels had to cope with having legacy devices to sell, with or without Honor support. Those channels still have this clear in their memories and may want to wait and see how the brand grows.

What challenges are there for Honor to succeed?

Stanton: HONOR has some challenges. He is returning to a very different market from the one he left behind. He is no longer the incumbent and needs to have a challenger mentality to disrupt Samsung and Xiaomi. And he may even have to struggle with his legacy when it comes to negotiating the channel. Major channels such as operators are still cautious about being sought again, as they were when Huawei fell under US sanctions.

And with U.S. politicians moving to target Honor, some are nervous about spacing its devices. Getting some Carrier-Ranged HONOR phones will be a comfortable outcome, but convincing a carrier to move 25% of its range to Honor devices will take a long, long time.

Richardson: Shaking off the industry's nervousness about its resilience is a challenge. Building a distinctive brand is also a challenge, keeping in mind that it has now repositioned itself to be a more general brand and away from the more youthful atmosphere that its previous incarnation attempted.

And there are strong brands out there now. But still no one has filled Huawei's shoes enough,  so  there's a chance that HONOR could capture at least a portion of that share.

Pinto:The price can also be problematic, as the market has now oriented itself towards two distinct segments: high-end, where Apple and Samsung take the lead, and a smaller share in the mid-range, where Oppo, Xiaomi, Vivo,  Realme,Alcatel and Motorola play.

HONOR will have to clearly show what its value is and what it is offering that can push consumers to spend almost $500 on an HONOR device. Xiaomi's proposal, for example, is clear, with an ecosystem and affordable technology; Oppo's proposal has already been welcomed by most telecommunications companies and retailers in the region; and Motorola is a well-known brand that has a powerful group behind its operations and a logistical advantage. HONOR will have to cover all these areas and still educate consumers about its value proposition.

In which market segments will Honor compete, and can the brand move to the highest level after being traditionally seen as a mid-level supplier?

Stanton: Everywhere and everywhere. It is now a challenger, but it aims to be a mass brand. Thankfully, the previous incarnation of Honor — which was mid-to-low-end and focused on young demographics — wasn't so well-known as to contaminate the new Honor.

Richardson: The brand was traditionally mid-range, or affordable premium, but has long had high-end products in China like the Magic devices – with the current Magic 3 series solidly in the premium segment. If it can justify such positioning it will come both from the quality of the product, and from the development and positioning of the brand. Again, this is not easy and will take time. But Honor has many experienced people on the team who have a decent chance of handling the task.

Pinto:Competing at the high end will mean, in general, trying to take market share from Apple and Samsung, and this is extremely difficult for any brand. Although the brand is already well established in the market, with good technology, clear ecosystem proposals, established logistics and partnerships, it will have a hard time fighting the first two.

What are your opinions about the future of our Brand globally? Will it be able to excel in the rankings according to the expectations of the Shenzhen house?

Source: MobileNews