Chinese Tech Firms Look to CES as a Launchpad for the US
All the big names in the tech world have flocked to Las Vegas for the annual CES conference. But this year, the A-list includes some names that most Americans may not know. Huge Chinese firms have taken high-profile spots at the show, despite having little brand recognition in the United States – a fact that they’re trying to change at the tech industry’s annual confab.
Huawei, which is one of the world’s largest smartphone manufacturers, has been tapped to make a keynote speech at the show – a coveted spot that in past years was filled by firms such as Intel and Microsoft. Manufacturer TCL made a splash by relaunching the BlackBerry, complete with keyboard. And Xiaomi, a smartphone maker that once made headlines for poaching one of Google’s top Android executives, made its CES debut this year to much fanfare.
These firms have taken a page from the US technology industry’s playbook by offering slick, trendy product announcements that rival the spectacle and stagecraft of any Apple or Microsoft launch. Booming sound effects accompanied Huawei’s announcement that a new phone from its youth-targeted Honor line would start at just $250. In fact, bright lights and heavy beats have become standard for all these firms as they try to gin up excitement for their products – and try to persuade Americans to embrace brands they’ve never heard of before.
Chinese firms have some of the most impressive booths on the show floor – soaring, well-lit glossy structures elegantly packed with bright and saturated televisions, smart home appliances and almost aggressively cheerful attendants eager to explain their products.
The show draws a global audience of tech insiders and media, who flow through the booths on tours – sometimes confessing that, no, actually, they’re not that familiar with the company.
These companies are working to raise their profile at the gadget show for a few reasons, analysts said. For one, they said, demand in the Chinese technology market has been leveling off in recent years.
That means companies such as Huawei have to seek customers in new places to continue expanding. “They can no longer rely on domestic growth,” said Patrick Moorhead, President and principal analyst at Moor Insights & Strategy.
But the US market is very different from the Chinese market. To attract customers here, Chinese firms are adapting the playbook used by Japanese firms in the 1980s, said Arthur Dong, professor at Georgetown’s McDonough School of Business.
“Japanese firms had to turn to the higher end of the market to attract American customers,” Dong said. China wants to follow the same path, he said, which explains why they tout their innovative features along with their lower prices.
At the show, several Chinese companies hammered home the idea that their products are just as good as their competitors – for a fraction of the price. Huawei chief executive Richard Yu, while launching a new phone from its millennial-focused Honor line, was quick to point out that his company’s devices had a dual-camera before Apple’s iPhone did. Others went with a more direct appeal to American pocketbooks. Executives from Hisense, a television manufacturer, said they want to make high-end televisions that are “not just for the one percent” but are accessible to the masses.
Still, there are many obstacles for Chinese firms to overcome, even if they make their mark at CES.
For example, even with lukewarm enthusiasm for Apple’s latest iPhone and a complete debacle for Samsung – which had to recall its Note 7 phone due to batteries that were prone to combustion – analysts say Huawei will still have a tough time unseating either firm.
Americans are “drunk on Apple iPhone and Samsung,” said Ramon Llamas, an analyst at IDC in an email. That makes it very difficult for any other brand – even ones that Americans already know – to grow very successful in the US market. For Chinese companies that have almost no name recognition among American consumers, the challenges are greater yet.
Plus, Chinese firms still have to work with US carriers to distribute their phones, Llamas said. Those arrangements take a long time to work out, and haven’t yet been established in a way that lets these companies make their mark.
Chinese firms have also faced political difficulties gaining traction in the US market – a problem that analysts believe could get worse under a Trump administration. The president-elect has said several times that trade policies with China will change during his tenure – rhetoric that has caught the attention of Chinese firms, Dong said.
“These companies are very much aware of the political environment; the incoming president made clear that it’s going to be a different ballgame with US-China relations,” he said. Here again, there seem to be echoes from the 1980s, he said. Chinese companies fear that the government will enact protectionist barriers similar those encouraged by American firms decades ago in the face of flourishing Japanese technology and automotive companies.
In fact, some firms have faced resistance from the United States because they are based in China. Huawei in particular has been the focus of scrutiny in the United States, with politicians in 2012 questioning whether the firm was using its telecom network hardware to help spy for the Chinese government. Huawei strenuously denied that accusation, which was fueled by complaints from its US-based competitors, and no concrete proof was made available to the public.
But, Dong said, those accusations may have contributed to the company’s troubles in getting a foothold in the States. “Huawei has been successful everywhere except the United States,” Dong said. And, he said, other Chinese firms looking for a US expansion will likely face similar questions from politicians.
With some serious headwinds facing their goals of breaking into the US market, analysts said that marketing is the key way for these firms to reach their intended audience as they continue to make their case that high-performance doesn’t have to mean high price.
Llamas said that some Chinese firms have found early success, even without becoming household names. Alcatel, a subsidiary of the Chinese giant TCL, became the No. 5 smartphone vendor in the United States for most of 2016 by focusing on bringing higher-end technology to mid-market phones.
But he is skeptical that Chinese firms will be able to make considerable headway in the all-important US smartphone market any time soon – even though Huawei has said publicly that it wants to overtake Apple as the world’s second largest smartphone maker in the next two years. Such a lofty goal would require it to gain a substantial foothold in the United States.
A more realistic goal, Moorhead said, might be for Huawei to aim to become the third-largest smartphone maker in the next three years.
“It’s a long-term play,” he said. “It is still going to take a couple of years for them to make a dent.”
© 2016 The Washington Post