Caixin
Aug 01, 2020 12:03 PM

Huawei’s New Lead Could Wither Amid Foreign Struggles

(Nikkei Asian Review) — Huawei Technologies has taken the crown in quarterly smartphone shipments for the first time by capitalizing on its home-field advantage in China, even as it steadily loses ground overseas.

The achievement of this long-held ambition owes largely to China being the first to open up its economy from a coronavirus lockdown. The dethroned smartphone king, Samsung Electronics, has struggled elsewhere amid the global pandemic.

At the same time, Huawei is losing share in other markets as the result of U.S. pressure. Without growth outside of China, it is unclear whether the company will maintain its lead for long.

A Huawei store here in Guangzhou says it is willing to accept trade-ins on mobile phones from any manufacturer. Data can be transferred in "one to three hours," according to the outlet.

Those switching phones from other makers, such as Apple, have recently accounted for half of its customers, a store representative said.

In China, Huawei has beaten other competitors to releasing a range of 5G-compatible phones, with the rapid addition of fifth-generation base stations in urban areas aiding its rise.

The company is also targeting bargain hunters. A Guangzhou store has launched a sales campaign that offers free water purifiers and other appliances worth hundreds of dollars to those purchasing high-end phones.

With Chinese consumption still sluggish due to the coronavirus impact, these incentives have helped Huawei maintain its level of shipments.

Huawei enjoyed a 72% share in China in the second quarter, according to U.S. research firm Canalys, up 8 points from a year earlier, in a period in which smartphone shipments there climbed 8%. That propelled Huawei to a 20% share of global smartphone deliveries during the quarter, IDC reported Thursday, growing 2.3 points from a year earlier.

Richard Yu, CEO of Huawei's consumer business group, said at a Barcelona expo last year that his company will eventually overtake Samsung in market share.

But the data shows that Huawei is in front mainly because Samsung has slowed down.

Deliveries by the South Korean conglomerate plunged 29% in the second quarter while Huawei's fell only 5%. However, Huawei deliveries outside of China dropped 27% in the second quarter, the fifth straight quarter of decline, Canalys reports.

This may be why the news of Huawei's lead did not cause much fuss inside the Chinese manufacturer.

"It's the same as usual," said a Huawei employee who works at a home office in Shenzhen. "There is no effect on our business."

Since May of last year, the U.S. has levied sanctions against Huawei, restricting components the company can procure from suppliers. Because Huawei is unable to install Google apps on its phones, it has lost foreign customers.

This past May, the U.S. essentially banned the sale of semiconductors made with American chipmaking equipment to Huawei. Estimates say the company will start feeling the impact of that move with models due out next spring. Huawei's already high smartphone market share in China means it will be hard-pressed to rely on its home turf to build further on its lead.

This story was originally published by the Nikkei Asian Review.

Contact editor Yang Ge (geyang@caixin.com)

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