Huawei plans to sink $800 million into a Brazilian smartphone factory to combat international opposition

Markets Where Huawei Is Facing Opposition

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Huawei is planning to invest up to $800 million over the next three years to expand its presence in Brazil via a new manufacturing facility in São Paulo, according to Reuters. The purpose of the proposed factory is likely smartphone production, as the company told Reuters that the project depends “on the performance of the smartphone operation in the local market.”

The Chinese communications technology titan already has roots in Brazil: It has operated in the country for over 20 years and employs 2,000 workers at a networking-equipment manufacturing plant in São Paulo. The news comes amid continued threats of bans that would block US companies from conducting business with Huawei.

Here’s what it means: Huawei is investing in its Brazilian operations to secure its spot in a burgeoning market.

Brazil’s upcoming 5G auction and large smartphone market present the company with two opportunities to sell its 5G products.

Telecoms are gearing up for a massive 5G spectrum auction and will need networking equipment like Huawei’s to deploy networks using their licensed spectrum In March 2020, Brazilian telecoms will bid on spectrum in the 2.3 GHz and 3.5 GHz bands, and possibly the 700 MHz and 26 GHz bands as well — making it the world’s largest 5G spectrum auction by the amount up for bid, according to Nokia Latin America CTO Wilson Cardoso cited by Reuters. By establishing a local presence, Huawei will be readily available to supply the necessary equipment. Adding more facilities could also help sway contract decisions in Huawei’s favor. Brazil’s vice president said the country doesn’t plan on banning Huawei from providing 5G equipment to telecoms. However, the country’s unpredictable President Jair Bolsonaro could go against this sentiment and, following the US’ lead, ban Huawei; Bolsonarotouts himself as a “pro-America president” and has said he wants closer ties with the US.
The company can grow its small share of the South American smartphone market. In South America, Huawei is the fourth-largest smartphone vendor, behind Samsung, Motorola, and Apple, with an 8% market share, according to Statcounter. Brazil’s mobile phone market holds a growing revenue opportunity despite decreased unit sales due to macroeconomic factors — revenue from phone sales jumped 8% year-over-year (YoY) to 13.7 million reals ($3.5 million) in Q1 2019, according to IDC data cited by ZDNet. A local factory could help the phonemaker reduce device prices, as it would no longer have to ship devices from its factories in China. This could make the phones particularly attractive in the cost-sensitive Brazilian market.

The bigger picture: Huawei is investing in production facilities around the world to build goodwill and placate security …read more

Source:: Businessinsider – Tech


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