Huawei better off embedding Baidu’s digital assistant than building its own

Credit: photo_master2000 / Shutterstock, Inc.

It looks like Huawei has decided to build its own Chinese language digital assistant to cement its recent gains at home, but no matter how many bodies it throws at this task, its lack of the core raw materials (data and history) is going to cause problems.

The digital assistant is the first real Digital Life service that is entirely dependent on artificial intelligence for its functionality, which creates a huge challenge. Furthermore, in order to evolve, all digital assistants need to generate usage data that can then be used to improve the algorithms that power the user experience.

Even the best assistants out there today are hugely limited in terms of what they can understand and what they can achieve. For example, to accurately answer questions around exchange rates, the assistant has to be taught what these are, how they work and in what form the questions are likely to be asked. For example, asking Amazon Alexa how many US dollars there are to the British pound provides the correct answer – but ask for UAE dirhams to the pound or dollar and Alexa falls silent. Only Google Assistant is able to provide the right answer due to the combination of the best search system and the best AI available.

In effect, RFM research has found that Alexa, Cortana and Siri have been programmed with a fairly narrow set of capabilities, and the AI and data set are simply not there to support the service when something unexpected is requested.

Fortunately for Huawei, Google is not present in China, but at home it will be facing an opponent that is almost as good: Baidu.

Baidu dominates the search market in China and has been working on its AI algorithms for nearly 20 years. Furthermore, Baidu has already launched its own digital assistant called Duer, which I suspect will be significantly better than anything that Huawei is likely to produce in the medium term.

However, in China, none of the ecosystems are preinstalled devices – meaning that Baidu will be unable to install Duer on the device and set it as default. RFM research has found that this could confer a substantial advantage to any ecosystem, as strategy is virtually absent in the Chinese market outside of the app stores.


As a handset maker, Huawei will have this advantage, so I can see a scenario where users try its digital assistant – but unless it is superb, they will quickly switch to Duer. This is where I think Huawei will have difficulties, as even though it has 100 engineers working on this product, it is starting from scratch – and building decent AI takes years, and requires vast quantities of data. Hence, it is unlikely that Huawei will ever come up with a product as good as Baidu’s.

This is where Huawei and Baidu could help each other, as Baidu has the product and Huawei a mechanism for distributing it. A deal where Huawei installs Duer at the factory and sets it by default in return for being paid TAC (traffic acquisition cost) makes more sense to me than paying 100 engineers to come up with an inferior product. This will not help Huawei’s ambitions to develop an ecosystem and generate better profitability, but TAC revenue from Baidu would certainly help improve margins.

Given its recent market share gains at home, the time to negotiate this deal is now rather than when its own assistant has tried and failed. Although Baidu looks like it may be backing out of its ecosystem, the short-term improvement in its financials that cost cuts could generate could give the shares a lift. This is why it is still on my preferred list along with Tencent and Microsoft.

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