Huawei Technologies Co. Ltd., the world’s third largest smartphone maker, expected a triumphant moment at 2018’s Consumer Electronics Show (CES 2018). Yesterday was to mark the official Huawei U.S. launch. AT&T (NYSE:T) was supposed to be the first U.S. carrier to offer the new Mate 10 as an alternative to the Samsung Galaxy S9 and Apple Inc.’s (NASDAQ:AAPL) iPhones.
Instead, Richard Yu, the CEO of Huawei’s consumer division, was left on stage in Las Vegas. He showed off a smartphone that once again won’t make it to the showroom of U.S. carriers. Then, Yu delivered a speech about the lack of consumer choice.
What happened?
AT&T walked away from the deal at the last minute, reportedly under pressure from the U.S. government.
Huawei’s Consumer Division CEO Delivers Awkward CES Keynote
Huawei has been planning its triumphant entry into the American market for a long time. And CES 2018 was supposed to be the site of their victory. The company was partnering with AT&T to finally gain carrier support in the U.S., removing the final obstacle in its push to displace Apple as the number two smartphone seller worldwide.
Huawei’s keynote on January 9 was going to be a big deal.
Instead, Yu awkwardly demonstrated the new Mate 10 Pro flagship smartphone onstage, even though it won’t be available through U.S. wireless carriers. After that, his next move was to use the spotlight to go “off-script and rage at U.S. carriers” as The Verge describes it.
Yu vented his frustration about AT&T’s abrupt exit from the deal, not just for his company, but for smartphone users:
“It’s a big loss for us, and also for carriers, but the more big loss is for consumers, because consumers don’t have the best choice.”
In the U.S. market, just two companies (Samsung and Apple) manufacture more than 70% of all smartphones.
AT&T Walks Away From the Huawei Deal
The rumor mill has been rumbling for months that Huawei was working with U.S. carriers to finally bring its smartphones to the U.S. market. Just last week, a Huawei U.S. launch seemed almost a certainty. It was reported that the company and AT&T were finalizing a deal that would see the new Mate 10 Pro flagship smartphone in AT&T stores, complete with a $100 million marketing campaign.
But on Monday, the day before Huawei’s CES 2018 keynote, The Wall Street Journal reported that AT&T had walked away.
The reason?
While neither AT&T or Huawei would comment, The Wall Street Journal notes that a 2012 Congressional report pointed a finger at the Chinese company for state-sponsored spying related to its products. The Verge comes right out and says that concerns about espionage resulted in government pressure that led to AT&T backing out of the deal at the last minute.
In his presentation, Yu made the point that his company had won the trust of carriers worldwide, including in Europe and Japan, telling attendees:
“We are serving over 70 million people worldwide. We’ve proven our quality, we’ve proven our privacy and security protection.”
What Happens Now?
Whatever the reason for the torpedoing of the Huawei U.S. launch, Apple and Samsung are undoubtedly breathing a sigh of relief. The Chinese company has been posting double-digit growth numbers and as of last quarter was within striking distance of catching Apple (a 10.5% market share compared to 12.5%) — despite having no real presence in the U.S. market. The $799 Huawei Mate 10 Pro would have been a formidable threat. AT&T customers who are tired of hearing about Apple slowing its iPhones or Samsung’s Bixby not working as advertised might have jumped at the chance for an alternative.
Instead, any American consumers interested in a Huawei smartphone will have to bypass their wireless carrier and miss out on contract deals. Huawei put out a press release announcing the Mate 10 Pro will be launching in the U.S. in February. The phones will be available from select retailers, including Amazon.com, Inc. (NASDAQ:AMZN).
The closest thing the company’s website comes to mentioning the AT&T controversy is this line from the press release:
“Our newest consumer solution, the HUAWEI Mate 10 Pro, is the smartphone that U.S. consumers need and deserve.”
Without the AT&T launch deal or support from other U.S. carriers, Huawei’s dream of conquering the U.S. market and bringing the fight to dethrone the iPhone to Apple’s home shores will have to wait…
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
