Chinese Device Providers Take On Security, Quality and Obscurity

During recent conversations with Chinese device providers, we noted three common issues facing the companies, as well as the strategies they are employing to overcome them.

Security, Perceived Quality and Awareness

1. Security

In 2018, governments across the globe fretted about the possibility of Chinese device companies building in back-door access to their network systems which could potentially send sensitive military and other data from client companies to Beijing. Spearheaded by the United States, the campaign saw the US reach out directly to allies to explicitly urge them not to install Chinese systems. Now the FTC is considering a ban on telecom technology it deems a security risk (to wit Huawei, ZTE, et al.) and President Trump signed a on Federal agencies purchasing Chinese hardware or services.
The erratic US-China trade war also underscores security issues, spotlighted by the arrest of Huawei’s CFO, the daughter of the founder and CEO, under the accusation that a subsidiary of Huawei was selling network equipment to Iran despite US sanctions.
Vladimir Putin and Meng Wanzhou, Huawei’s former CFO
Chinese companies also face data privacy and security issues. Facial and vehicle recognition, crowd control tools (referred with the euphemism of a “micro-census” by one organization), centralized databases, etc. have added to the concern that many Chinese device makers are simply police-state technology providers.

2. Perceived device quality issues

Despite familiar, global brands like Microsoft and Apple producing most of their devices in identical Chinese factories with identical quality standards, many rightly or wrongly perceive Chinese device brands as inferior products. Much of this assumption stems from the conflation of hardware and software. A consumer familiar with the user-friendly, known-quantities of Apple or Google may be unfamiliar with apps and software from unknown providers and attribute learning curve issues to substandard hardware.

3. Brand awareness

Chinese companies have perpetually struggled with global brand awareness, though BrandCulture believes this will be one of the transformations we see in 2019. Beyond Huawei, companies such as Xiaomi and Oppo are not yet household names in most of Europe and the United States. Despite quickly gaining domestic market share, these organizations are still mostly known only among a handful of aficionados outside of China.
Similarly, escaping from the long shadow of Huawei is no easy task. As the clear front runner, Huawei’s sophisticated marketing strategy and brand dominance do not yet allow for much competition (see below).

Branding, Product Ecosystems and Seeing Beyond Connectivity

1. Mass branding campaigns

The central squares of many major European cities furnish a vast canvas on which to build brand awareness. Huawei has been taking full advantage. While absent in the United States, the Huawei Mate advertising campaign is impossible to miss in Europe—imagine a 12-story high, city-block-long facade covered with just one vinyl advertisement. The Huawei brand messaging often features a beautiful woman or couple floating gracefully in a lofty, European-looking art gallery, underscoring brand pillars of elegance, ease, poise and sophistication.

Huawei European Ad

2. Building out product ecosystems

Following Apple and Samsung’s lead, Chinese device providers have been developing and deploying broad, interrelated product ecosystems. Xiaomi for example is on the third iteration of its miBand, a semi-competitor to the iWatch. The miBand does not compete directly with Apple or Samsung on functionality, lacking features like full texting capability or voice response. But the smaller, sleeker and more streamlined device still offers the appearance of a broad product ecosystem without overdoing R&D and production spend. Chinese device providers have also invested heavily in building out their app ecosystems.

Xiaomi Mi Band 3

3. Capabilities beyond connectivity

With an aim to diversify beyond connectivity, many Chinese device providers are also using their deep knowledge bench to develop broader technologies such as artificial intelligence, robotics, smart city solutions, etc. As a strategic pivot, many organizations stated that they’ll go wherever the market ultimately guides them, so we’ll be keeping tabs on this trend. That said, more than one device provider admitted, in confidence, that while they had advanced research on artificial intelligence and the aim to make it a central brand strategy, they still struggled with how to package those competencies into a commercially viable product. Stay tuned as what’s next in these emerging areas comes into sharper focus, but rest assured that Chinese companies are poised to claim their fair share… and then some.

Read more about our special China series below: