Huawei Beating Samsung in Sales Shows Its Future Lies in China

Defying the COVID-19 pandemic, Huawei has taken for the first time in a single quarter, the top spot in the smartphones field to become the biggest player.

Smartphones shipment witnessed 27% decline year-on-year in the second quarter. But the Chinese company beat the South Korean Samsung to assume the top position owing to sales in China.

The US sanctions have limited Huawei’s international business, forcing it to depend more on the Chinese market for its smartphones sales.

Huawei sold over 70% of its smartphones in mainland China in the second quarter. Outside China, the company shipped 55.8 million devices compared to Samsung’s 53.7 million, according to data from research firm Canalys. However, the figures indicate a 30% plunge compared to the same period in 2019.

The decline in sales affected the European market where Huawei has a stronghold. It is the third-largest smartphone maker in Europe after Samsung and Apple. But the market’s fall to 16% from 22% compared to the same period last year plummeted Huawei sales in the region, making China its major market in the April to June quarter.

But Huawei’s troubles emanating from US sanctions cast doubt on its long term growth. Analysts believe it that the security concerns have put a spotlight on its devices and consumers outside China are wary of it.

“It will be hard for Huawei to maintain its lead in the long term. Its major channel partners in key regions, such as Europe, are increasingly wary of ranging Huawei devices, taking on a fewer models, and bringing in new brands to reduce risk. Strength in China alone will not be enough to sustain Huawei at the top once the global economy start to recover,” Mo Jia, analyst at Canalys said.

The major reason for this forecast is Huawei’s ouster from the Android operating system. Last year, the US government had ordered Google to remove Huawei from the Android store, as part of its clampdown on the Chinese company. That means, Huawei users outside China don’t have access to the Android store on its latest devices.

To solve that problem, Huawei developed the HarmonyOS operating system which is yet to sell in the international market. With the dominance of the Android operating system, the HarmonyOS appears to have little chance of selling outside China. In addition, the recent US rule requiring foreign companies to get licenses in order to access the US chip market compounded Huawei’s woes.

The rule has involved the Taiwanese chipmaker TSMC, which is a major supplier of chips to Huawei.

Other smartphone makers record low sales as economies struggle to reopen. Samsung said on Thursday it expects demand to pick up as economies open in the second half of the year. Many believe that opening economies will help competitors in the international smartphone market as Huawei’s lack of Android operating system will increase their advantage.

Reuters reported that S&P Global Ratings said on Wednesday that the latest restriction on Huawei could wipe out $25 billion from several Asia-based firms. India is gearing up to take advantage of Huawei’s ordeal with its recent affront on tech, especially smartphones. Jio’s partnership with Google means there’s going to be a disruption of Chinese dominance in India’s smartphone market – and Huawei among other Chinese smartphone makers will pay the price.

Huawei’s way out of this bleak future would lie on its 5G devices, but that too has been stymied by US’ ban of chip supply to Chinese tech companies and HarmonyOS, which has yet to win a profitable number of users outside China.

With the growing apathy toward Huawei from Europe to Asia, where it has key markets, its survival’s play seems to lie in China and its booming population. The embattled company may likely cash in on the wide gap in available 5G devices. With the help of the Chinese government that has been pushing chipmakers in the country to fill the gap the US’ recent rule created, there may be enough chips for enough 5G smartphones for the Chinese people.