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HONOR Bucks Market Trend With Fast Overseas Expansion

The global financial crisis has hit consumers hard, weakening demand and making 2022 the worst year for smartphone shipments since 2013, even taking into account COVID-ravaged 2020.

Times are tough for most smartphone OEMs but HONOR’s performance thus far is noteworthy. While some are having to carefully manage inventory in the face of weak consumer demand, and as most other Chinese OEMs pivot strategies to be less aggressive in their expansion plans due to uncertain market conditions outside of their home market, HONOR is actually expanding.

In its overseas markets (i.e., outside of China), HONOR’s shipments grew almost four-fold in Q1 2023 versus Q1 2022. The only other major OEM to register growth in the same period was HMD; many others posted double-digit declines.

Yes, HONOR’s growth is from a much smaller base than the others, since it only became an independent brand (separating from Huawei) in November 2020, but the growth trajectory – especially in a declining market, is positive.

So, what are HONOR’s growth prospects could we see it higher up the top 10 non-China rankings list in 2024?

Regional expansion is a work in progress

In terms of HONOR’s key overseas markets, over the last year, HONOR has seen impressive growth in three regions – Europe, Middle East & Africa and Latin America – where its shipments increased by over five-, six- and eight-fold respectively.

Source: Counterpoint Research. Note: Europe data excludes Russia and Turkey.

 

Europe

It took a bit of time for HONOR to get started in Europe following its independence in November 2020. After a period of re-grouping, HONOR returned in early 2022 with partnerships with many major retailers and some of region’s biggest operators (including Three UK, Orange and SFR France and Wind Tre Italy). Operators are crucial to future growth prospects as their sales channels account for around 40% of the region’s smartphone sales in Q1 2023 (and around 55% in Western Europe).

HONOR now operates a three-tier strategy in Europe:

  • The flagship Magic smartphones, starting with the Magic4 Pro, established HONOR’s premium credentials, and has done well in France, Germany and the UK.
  • The mid-tier HONOR 50 and 50 Lite were HONOR’s main sellers in Q1 2022, replaced by the HONOR 70 which was HONOR’s key volume driver in Europe in Q1 2023.
  • The budget X series has done well in the more price-conscious markets, for example Italy and Eastern Europe.

This complete portfolio offering has helped HONOR grow quickly in Europe. HONOR is hoping to maintain this momentum with the well-reviewed Magic5 Pro (launched in Q2 2023) and the Magic Vs (HONOR’s foldable launched in Europe).

Source: Counterpoint Research. Note: Europe data excludes Russia and Turkey.

Latin America

HONOR’s fastest growing overseas region is Latin America, where its shipments grew nearly eight-fold YoY and more than tripled compared to the previous quarter. HONOR is growing share in most of the countries in the region: it entered the top five in Colombia and Peru (where it has double-digit share) and is also seeing success in Panama and Guatemala.

MEA

HONOR identified MEA as a key growth market, especially the Middle East region which has so far weathered the macro headwinds extremely well and is one of the few growing markets in the world. It has entered top five in some key markets such as UAE, Saudi Arabia, and Iraq.

HONOR bringing new flagships to global markets

HONOR has so far relied on its Number and X series to grow outside of China. However, it is now looking to its Magic series to help secure its position as a key player, adopting a dual flagship approach with the Magic5 Series and Magic Vs smartphones.

HONOR overseas expansionThe Magic5 Pro is HONOR’s most ambitious flagship to date and it is getting a positive reception on various review sites as well as ranking top of DXOMARK’s camera ratings when first released.

Starting at $1,200, this device is expensive, placing it in the same price bracket as the Samsung Galaxy S23 Ultra. This may cause issues in markets where consumers tend to favour more affordable devices. However, it has an opportunity to gain share in the more premium markets like the UK, France, Germany and the UAE, where high-end smartphones are relatively more popular.

 

Honor smartphone

The Magic Vs, meanwhile, is HONOR’s second foldable smartphone, and it’s first to be launched outside China. HONOR is hoping to ride the wave of foldables growth started by Samsung’s Fold and Flip smartphones, and more recent offerings like the OPPO Find N2 Flip and the upcoming Google Pixel Fold.

Although the foldables market is still small, its growth is an industry bright spot. We expect global shipments of foldable smartphones to grow at an annual rate of just under 50% over the next five years, passing 90 million, or 6% of total smartphones, by 2027. Around three-quarters of this will be outside of China, and HONOR is banking on the Magic Vs to establish it as a key challenger to Samsung in the foldables space.

Future prospects

Developing a portfolio approach

As noted above, HONOR is using a three-pronged portfolio approach in the smartphone market with ranges that span the price bands. In key flagship segments, HONOR’s product performance is approaching that of the market leaders. And its flagship products act as heroes that help to build brand momentum that filters down to its mid- and low-end products.

HONOR is also gradually filling out its portfolio with an ecosystem of partner products including wearables, tablets, PCs and more, which will support efforts to build brand awareness.

So, what can we expect?

Counterpoint Research expects HONOR will gradually grow its overseas market position, gaining share from rivals as it achieves increasing distribution across both operator and retail channels, its product portfolio expands and its brand gains awareness.

We do not expect explosive growth, rather a steady increase in strength from which HONOR can build. And we further expect this to occur in some key countries such as UK, France and Germany, Latin American countries including Mexico, Colombia, Peru , and select countries of Middle East and North Africa.

This forecast is the most likely outcome given HONOR’s current position and strategy, but it’s not pre-determined – HONOR can and likely will disrupt it through its own actions.

Feedback or a question for the analyst that wrote this note?

 

Jan Stryjak

Associate Director

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Background

Counterpoint Technology Market Research is a global research firm specializing in products in the TMT (technology, media and telecom) industry. It services major technology and financial firms with a mix of monthly reports, customized projects and detailed analyses of the mobile and technology markets. Its key analysts are seasoned experts in the high-tech industry.

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Jan is an Associate Director with Counterpoint Research, based in London, and leads the company’s research in Europe. He is a seasoned analyst with over 13 years’ experience in the TMT sector, most recently with GSMA Intelligence where he was responsible for key research deliverables and led a team of analysts producing highly impactful regional insights. Before that, Jan held strategy and analyst positions at Vodafone and Qualcomm, and started his career with research firm TNS (now Kantar).

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