Honor lives in Huawei's shadow

"We are alive again, we are back again," Yu Chengdong exclaimed when he received the sales report of Huawei Mate 50 exceeding 6.8 million units.

Perhaps in his opinion, although the Mate 50 does not have 5G, the 4G has been enhanced, and the use of WiFi 6 can make up for some of the shortcomings. Of course, Honor, which has become independent, also believes that it has returned.

On February 27, the first day of the opening of the 2023 MWC conference in Barcelona, ​​Honor held a product launch conference with the theme of "Unleashing the Power of Magic", releasing the Honor Magic 5 series of mobile phones and the overseas version of the Magic Vs folding screen mobile phone, as well as a resounding statement that "we have the strength to compete with Huawei."

According to data from statistical agencies after the meeting, Honor was the most discussed brand at MWC that day.

A week later, on March 6, Honor held a launch conference for the Chinese version of the Magic5 series in Shanghai, at which the official officially unveiled the silicon-carbon negative electrode technology used in the previously preheated "Qinghai Lake Battery".

On December 5 last year, rumors about Honor's listing were brewing again: considering the long time it would take for an IPO, Honor might seek financing through a backdoor listing with a valuation of about US$45 billion. Putting aside speculation about capital speculation, if successful, it would also mean that Honor has fulfilled its promise to go public within three years when it announced its independence.

Although Honor immediately came out to clarify the rumors, as a subsidiary that was once spun off from Huawei, Honor has been wavering in the dilemma of getting rid of the "Huawei halo" and enjoying Huawei's dividends in recent years. Now that it has openly thrown out such "backstabbing" remarks as surpassing Huawei to the public, it may also show that Honor is eager to get rid of this dilemma. Whether it goes public or not, Honor's story hopes to start a new chapter.

However, even though Honor's shipments in the domestic market have been second only to Apple in recent years, and it has become the fastest-growing domestic mobile phone brand and the second in market share, does Honor really have the confidence and strength to take over and challenge Huawei, which has also claimed to be "back"?

01 The shadow of Huawei cannot be shaken off

In the winter of 2013, with the issuance of 4G licenses, the Honor brand was born within Huawei. At that time, Honor was a sub-brand of Huawei and the best competitor to Xiaomi.

What followed is a story known to everyone. Huawei, which was severely affected by the chip supply cut, officially announced the sale of 100% of Honor's equity on November 17, 2020.

A month later, on the evening of the 2020 Double 12 Shopping Festival, Honor CEO Zhao Ming expressed his attitude towards Huawei for the first time on CCTV's interview program "Genting Dialogue": Respect for Huawei means defeating Huawei in the market, in products, and in winning consumer support.

In fact, at the time when Huawei was in prison and had its hands tied, such an open competitive statement was actually somewhat flattering. Later, facts also proved that Honor, with the addition of Qualcomm chips, not only defeated Huawei, but even achieved a counter-trend rise under the overall slowdown of the smartphone market.

But with such achievements, it is hard to say that Rongyao is not benefiting from the legacy of its "fathers".

Because no matter from which angle you look at it, although Honor is nominally a new company, its team, talents, technology, channels, etc. all come from Huawei, and it is not at all "original". It can be said that Honor's entire team, technology, resources, including hardware, software, core algorithms, modules, etc., and even executives, are all inherited from Huawei.

The core management team of New Honor consists of Wan Biao, Zhao Ming, Fang Fei, Yang Jian and others.

Wan Biao, chairman of the new Honor, was previously the COO of Huawei's consumer BG. Fang Fei, president of the new Honor product line, was previously the vice president of Huawei's product line, responsible for the research and development of Huawei's nova and Changxiang mobile phone lines. Yang Jian is appointed president of Honor retail management, responsible for global retail work and part of the channel management. Previously, he was the head of the retail management department of Huawei's consumer business in China. Zhao Ming continues to serve as CEO of Honor.

In terms of talent, Honor was spun off from Huawei and includes the entire end-to-end system. The new Honor has a team of 8,000 people covering R&D, sales, marketing, supply chain and other aspects, more than half of whom are R&D personnel, including many core R&D personnel who are engaged in imaging development for Huawei P and Mate series.

In terms of technical support, Huawei did not skimp. During the separation, Huawei made a platform-based technology transfer of some system development and moved all of them to Honor, such as the most advanced camera technology, and the well-known GPU Turbo, Link Turbo and other technologies.

Zhao Ming himself did not hide this and said: "The company announced its independence on November 17 (2020), and the division process came to an end at the end of the year. Today, most of Huawei's high-quality things have been inherited." "The specific support is a lot of core technologies. We also hope that after we become independent, we can stand on the shoulders of the Huawei giant and grow rapidly."

After becoming independent, Honor has basically built up strong R&D capabilities covering the entire series of mobile phones and smart ecosystem products.

On the other hand, Honor's supply chain can also be said to be "inherited" from Huawei. As Huawei employees for more than 20 years, Wan Biao and Zhao Ming are a perfect match. After the release of Honor V40, Zhao Ming mentioned in an interview with the media that Wan Biao was responsible for the management and the entire supply chain in the original Huawei system and had very rich experience in the industry. Wan and Zhao worked together, and in just over two months, almost all partners completed the signing of supply agreements.

But even so, the painful period after Honor was separated from Huawei came as expected.

The first half of 2021 was Honor's darkest moment. It was reported that the monthly shipments of Honor mobile phones in the Chinese market plummeted from 6 to 7 million units to hundreds of thousands, and Honor's market share in China once dropped to only 3%. Before the Entity List incident, Honor was the second-ranked mobile phone brand in China, with a market share of 16.7%.

However, in the second half of 2021, Honor's sales have been rising all the way. Even in the fourth quarter of that year, its shipment share was as high as 17%, surpassing a number of competitors such as OV and ranking second.

According to a previous report by Leifeng.com, many senior people in the mobile phone industry said that the reason why Honor was able to achieve such a V-shaped rebound against the trend is nothing more than two words: Huawei. Some practitioners even bluntly commented that "Honor is the shadow of Huawei."

On the one hand, Honor continues to establish and emphasize the corporate image of "I am not Huawei" in terms of equity relations, business rules, and legal supervision. On the other hand, in terms of channel maintenance and expansion, product construction and promotion, consumer awareness and acceptance, at least terminal sales personnel will consciously or unconsciously construct the brand impression of "I am Huawei."

Some channel dealers also revealed that Honor officials do not deliberately emphasize the Huawei label in channel training, but offline shopping guides will consciously and actively emphasize the relationship between the two brands in order to promote sales. Sometimes on the counter, they will even directly handwrite a "Huawei" paper label on a Honor phone - for example, Honor Play 30 Plus is written as "Huawei 30 Plus".

As for channels, needless to say, after Huawei was sanctioned, Honor's first priority was to quickly take over Huawei's offline business.

Since the offline channels of OV had already formed their own systems in the process of years of development, Xiaomi and Honor became the best choices for channel dealers. But in fact, the low gross profit margin of Xiaomi mobile phones was already a well-known fact in the industry, so a large proportion of Huawei channel dealers turned to Honor without hesitation after a period of waiting and watching.

It can be said that Huawei's years of accumulation in team, talent, technology, channels, etc. have been deeply engraved in Honor's corporate DNA. No matter how vigorously Honor promotes its goal of defeating Huawei, there will always be people who will be curious about whether the son who took over the wealthy family and separated from the family can really be considered to have started from scratch? Can such "rebellious" behavior in the eyes of the outside world really catch up with the pace of its "old father" Huawei?

02 How far is it from Huawei?

"Kill yourself" is a phrase that Honor CEO Zhao Ming has often said in the past two years.

Even after its full recovery, Honor has always maintained a trembling and fearful mentality. On the day Honor became independent, Zhao Ming formulated a strategy: to lead Honor to move upward and enter the high-end market; the other was to help Honor tear off the Huawei label and become Honor itself.

As for the latter transformation, whether Honor has torn off the Huawei label has been discussed in the previous article, and opinions vary. As for the former goal of entering the high-end market, judging from the current performance, it seems that it is not satisfactory.

From a macro perspective, according to IDC data, the global smartphone market shipments in 2022 will only be 1.21 billion units, a year-on-year decrease of 11.3%, a 10-year low. In the domestic market, China's smartphone shipments have also fallen by double digits for four consecutive quarters, with a year-on-year decrease of 3.2% for the whole year, the largest drop in history, and shipments fell below 300 million, falling back to the level of ten years ago.

But objectively speaking, Honor's overall performance is already impressive enough. It has bucked the downward trend of the entire industry, with its shipments increasing by more than 34% year-on-year in 2022 and its market share accounting for 18.1%, only 0.5% away from the industry leader vivo. It seems that it is just around the corner to replace vivo in 2023.

If we cut it a little deeper and look at the high-end market alone, Honor has indeed failed to deliver on the goal set by Zhao Ming. According to data from Counterpoint, in the Chinese mobile phone market in 2021, iPhone accounted for 63.5% of the market share in the price range above US$600. By 2022, the share of iPhone in China's high-end mobile phone market will even rise to 80%. This also means that since Huawei was sanctioned by the United States in May 2019, domestic brands have been fighting to the death in the high-end market, and Cook is the winner who laughs the most.

On the other hand, Honor's overseas expansion does not seem to be very successful.

According to OMDIA data, Honor's global market shipments in 2022 will be 59 million units. Combined with the report released by Canalys, Honor's domestic market shipments will be 52.2 million units. Subtracting the two, Honor's overseas sales in 2022 will be about 6.8 million units. At that time, people close to Honor said that the actual number may not be as high as this amount.

Such results are not even satisfactory. Faced with a market where time is of the essence, Honor is also trying to speed up its transformation into overseas markets.

At the end of 2022, Honor China ushered in personnel adjustments today. The former President of China, Wang Ban, was transferred to the position of Vice President of Organization and Service (Overseas and Platform), and is no longer responsible for the business in China. The position of President of China was taken over by Ni Jiayue, who was previously the President of Honor's All-Scenario Business Department.

Going overseas and impacting the high-end are the top priorities of Honor's next stage of work. Wang Ban has been in charge of sales in China since the establishment of the new Honor and has witnessed Honor's strong return. This transfer is enough to demonstrate Honor's emphasis on overseas business.

Three years ago, in 2020, Huawei occupied 44.1% of the domestic high-end market of US$600, slightly ahead of Apple's 44%. In foreign markets, Huawei took the world's number one market share in the second quarter of 2019. For such a gap, the insignificant statement of "arm wrestling with Huawei" seems to lack some persuasiveness.

The reason why it is difficult to seize the high-end market is largely because manufacturers have not built up their own technological accumulation and moat. The success of Kirin chips has helped Huawei seize the high-end market, and there is no need to elaborate on it.

It stands to reason that similar to vivo's V1 chip and OPPO's Mariana imaging ISP chip, as long as they are willing to invest, it won't be a big problem for Honor. But they don't even develop their own ISP chips - at least in terms of publicity and publicity, there is only one reasonable explanation for this: security.

As one of the few Chinese mobile phone companies that stays away from developing its own chips, Honor's stress response syndrome caused by the sanctions on Huawei was fully reflected in the company.

Taking the newly released Honor high-end Magic5 series as an example, Honor has just launched the world's first self-developed RF enhancement chip - Honor C1 chip, aiming to provide consumers with a mobile phone communication experience of "communication even when the signal drops to the bottom".

On the other hand, the "Qinghai Lake" silicon-carbon negative electrode battery technology that Honor emphasized at the press conference is actually not an industry first. The 4680 battery released by Tesla in 2020 uses high-nickel positive electrode + silicon-carbon negative electrode materials, and another mobile phone manufacturer, Xiaomi, also tried it very early.

As early as 2019, Xiaomi used silicon-carbon negative electrode batteries on its concept phone MIX Alpha, with a battery capacity of 4050mAh. On Xiaomi 11 Pro and Ultra, Xiaomi began to use silicon-oxygen negative electrode batteries. In the latest Xiaomi true wireless AR glasses, the official also mentioned that they are equipped with silicon-oxygen negative electrode batteries.

However, for China, a market where base stations are not so scarce, the imagination that a chip that enhances the mobile phone communication experience can provide is still questionable, and it may not be enough to build Honor's brand moat with just the "Qinghai Lake" technology. In an era where chips have almost become the only standard for high-end assessment, regardless of whether it is all gimmicks, lacking self-developed innovation and breakthroughs at the chip hardware level, Honor wants to benchmark Apple and become Huawei? It seems that it is not an easy task.

03 Conclusion

Facing the future, Zhao Ming believes that "there is no worst environment, only the worst response."

From the moment Honor became independent from Huawei, listing on the capital market has become a footnote to its fate. Once the goal of listing is set, it is difficult not to be coerced and constrained by financial figures and capital. For the Honor team, which has been accustomed to the Huawei model in the past, this is a problem that needs to be solved urgently and has to be faced.

On the other hand, all players in the entire smartphone industry, including world-class giants like Apple, actually have to face a cruel fact, that is, the overall market capacity of smartphones is continuing to shrink, especially in the Chinese market where competition is as fierce as hell. This will make the future path of players more difficult, and even a system as powerful as Honor will hardly be an exception.

It is obvious that as the mobile phone market continues to shrink and solidify, the competition between Honor and Huawei has been put on the stage. Whether it is deliberate or inevitable, the "Huawei halo" of Honor has gradually dissipated in the cheers as time goes by.

But in order to survive, Rong Yao may have no choice but to keep his head down and run wildly, trying his best to get rid of his yesterday self - no matter if he is covered in dust or his running looks ugly, he really can't care about so much.

*The title image and accompanying images in the article are from the Internet.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.