Huawei holds onto number two smartphone spot… for the moment

Huawei has held onto the number two spot for smartphone shipments during the first quarter of 2019, but storm clouds are gathering on the horizon.

According to estimates from Gartner, Samsung is leading the smartphone manufacturers owning 19.2% of market share over the first three months, though Huawei is closing the gap with 15.7%. All three Chinese brands in the top five grew market share over the period, with Apple also declining to 11.9%, shrinking in the Huawei shadow.

Brand Q1 2019 market share Q1 2019 shipments Q1 2018 market share Q1 2018 shipments
Samsung 19.2% 71.6 million 20.5% 78.5 million
Huawei 15.7% 58.4 million 10.5% 40.4 million
Apple 11.9% 44.5 million 14.1% 54 million
Oppo 7.9% 29.6 million 7.3% 28.1 million
Vivo 7.3% 27.3 million 6.1% 23.2 million
Others 37.9% 141.4 million 41.5% 159 million

This might look very promising for the under-fire Chinese vendor, but it does seem the joy might be short-lived. While European and Asian governments are keen not to ban the vendor from selling smartphones or infrastructure equipment in their markets, they might not be able to stem consumer fears.

The anti-China rhetoric might not be anywhere near the same levels as in the US, but consumers will not be keen to invest in a substandard product. This might be the case moving forward, should Huawei remain on the ‘Entity List’, effectively banning it from working with any US firms, including Google.

The prospect of an Android-less Huawei device, and a home-grown operating system to replace it, has been much discussed, but soon enough the reality will hit home with consumers. Without support for popular Google-owned applications, experience will soon drop. Huawei might be able to provide a suitably effective alternative, but not being able to access Google’s apps and services will turn off some consumers.

One of the issues Huawei will face is that of the unknown. Huawei’s OS might be perfectly good, but no-one knows. It might have the supporting ecosystem, but no-one knows. It might be able to create apps to rival Google offerings, but no-one knows. Asking cash-conscious consumers to spend so much on so many unknowns will be a very difficult task.

This might not have an impact on Huawei’s biggest market, China, where the firm controls around 29% market share for smartphones, but Europeans are Google obsessed. This is Huawei’s second biggest region, representing 69% year-on-year growth for the first quarter, and one which represents more opportunity for growth. The US friction could put a severe dent in the consumer unit’s ambitions.

For Apple, it seems its traditional business is becoming increasingly competitive. There will of course be several reasons for this, namely a lack of innovation in recent years and extortionate prices, but there might be a glimmer of hope on the horizon.

As it stands, the misery is likely to continue over the next couple of months. With 5G phones hitting the shelves, early adopters may well snub their loyalties to experience the connectivity euphoria. Apple will not release a 5G-compatible device until 2020, but by missing out on the first wave it will learn the pitfalls of rival launches.

The second-wave of devices, Apple will be a front-runner in this one, will likely be where we see the greatest progress. The bugs and shortfalls will be identified and corrected, and there might well be some applications to make use of the data headroom which is created through 5G. There will also be more attractive tariffs available, with prices driven down by competition. These factors will push 5G into greater market adoption.

It might also recapture the loyalties of faltering iLifers…

Winning in the market share rankings today is certainly something to shout about, however success needs to be maintained over the next 12-18 months. Once 5G is pushed out to the mass market, there will be plenty of opportunities to sell extortionately priced devices. Apple appear to be aiming at this second-phase of 5G devices, building with the consumer hype, while Huawei will have to navigate the stormy seas.

If US tension forces Huawei devices out of consumer hands before the 5G device refreshment cycle, it might just miss out on the bigger prize.

Apple fights back in China with iPhone price cuts

Apple has taken advantage of a reduction in Value Added Tax (VAT) to cut the price of some iPhone models as it attempts to recapture the attention of distracted Chinese consumers.

What used to be a profit machine for Apple is now proving to be a difficult market. During the most recent financial results, sales in Greater China declined to $13.1 billion, 15.6% of total revenues, compared to $17.9 billion, or 20.3% in the same period of 2017. The overarching smartphone segment in struggling, but it seems to be hitting Apple harder than most.

According to Reuters, the Chinese Government is scrapping a 3% VAT on many luxury goods across the country in an effort to inspire consumer spending. As a result, Apple will be reducing prices for the iPhone XS by 5.8%, and 4.6% for the iPhone XR.

This is not the first time this year iPhone models have seen a cut, as many retailers dropped prices in January following a period of weak sales. China has not been a happy hunting ground for Apple in recent months.

At one point, the iPhone was one of the most desirable devices across the country, with the Apple brand being viewed as somewhat of a status symbol. It was rumoured all Apple had to do to boost sales was release a limited-edition device which was a different colour, and such was the desirability of the brand, sales would spike as consumers wanted to prove they were on-trend with the latest device.

Unfortunately for Apple, these days are seemingly in the past. Not only are smartphone sales plummeting across the country, but domestic brands are proving to be stiff competition.

Research from analyst firm Counterpoint suggest smartphone sales declined by 12% year-on-year during the final quarter of 2018, with Apple’s sales also dropping 12%. The reason has been put down to price, as cheaper, domestic rivals boosted sales across the period. Chinese manufacturers now account for four of the five top-selling brands in China, with Huawei firmly positioned at the top of the pile with 28% market share.

This is of course not a trend which is limited to China. Apple did decline year-on-year across the world, while Chinese brands are proving to be attractive to consumers.

Xiaomi international sales increased 118% to make up 40% of its total revenue in the fourth quarter, compared with just 28% for 2017, while Huawei is now the second most popular smartphone brand worldwide with Consumer CEO Richard Yu suggesting it could be number one by the end of 2019.

Apple CEO Tim Cook will be frustrated over recent performances, as while the supply chain guru is certainly improving processes and operations at the business, a lack of innovation is seemingly worrying consumers. Apple is often known for breaking the mould when it comes to new products, but nothing innovative has emerged over the last couple of years. Alongside this drudge of incremental gains, prices have been shooting northwards.

This seems to be the main concern for a lot of consumers; prices are increasing but there is very little to justify the vast financial outlay. As a result, refurbished devices are becoming more popular, while some consumers are simply holding onto products for longer.

While reducing the price of its products seemingly contradicts Apple’s quest to maintain its luxury and exclusive brand identity, it has started working with Alipay. The partnership here will offer Chinese customers zero-percent finance options to entice more customers back into the increasingly deserted Apple stores.

After shedding revenues, declining shipments and price cuts, Apple has shown it is not immune to global trends. It defied logic for many years, but now reality is catching up.

Having said that, Apple is sitting out the initial 5G devices surge, as is its tradition when new hype emerges around smartphones. We’ll be unlikely to see an Apple 5G device until 2020, but you can almost guarantee this will be a product which will attract the queues to the front of the Apple stores in the early hours of the morning.