In the absence of a flashback to the United States, a huge Huawei-shaped hole will open in the global smartphone sector next year, which will be a game-changer for the industry. A blacklist-induced shortage of chipsets is expected to plummet Huawei’s sales when current stocks run out. While this seems like an incredible opportunity for Apple and Samsung, it is under threat. China inc. is convinced that Huawei’s recipe for success can be replicated and is acting quickly to do so.
The first to flush and repeat Huawei’s “premium smartphones for less” strategy was the much smaller Xiaomi, which beat Huawei in Europe for the first time in the second quarter of this year, its revenue soared 65% as Huawei shrunk. Xiaomi took third place, behind Samsung and Apple. Most notably, Xiaomi has seen its exports of high-end devices (over € 300) increase by more than 99% year on year.
Xiaomi has positioned itself as the likely successor to Huawei’s Chinese exports, but that is about to change. China’s Oppo is only just behind Xiaomi in overall global sales, but much more important in China itself. Counterpoint highlights Oppo as the other Chinese brand to watch. “Geopolitical policies and political affairs between nations affect the smartphone market in many ways – we are seeing players like Samsung, Apple, Xiaomi and Oppo benefit the most.” Oppo is part of BBK, which also has Vivo in its stable, and is a serious competitor to Apple and Samsung around the world.
Returning home to China, where Huawei surged as patriotic consumers responded to the U.S. blacklist, Xiaomi, Oppo and Vivo chased Huawei’s unstoppable growth. During this second trimester, Huawei has overtaken Samsung in the world– an anomaly caused by the recovery of the Chinese market compared to others. But Huawei got a staggering 46% market share in China itself – and that wasn’t an anomaly. Unsurprisingly, Samsung is now back on top globally. According to Counterpoint, Samsung provided 22% of the global market in August against 16% of Huawei.
Analysts have suggested that – in the absence of a US flashback –Huawei could move as few as 50 million smartphones in 2021. Even with the loss of Google, the company would otherwise expect to sell 180-200 million units. With 76% of its smartphones sold in China, domestic sales will account for a huge percentage of the decline. But exports will also continue to decline. And it is these export markets that Huawei’s domestic competitors are now targeting.
Building on its growth in Europe and its already strong position in other markets, particularly India, some analysts suggested Xiaomi could become one of the top three global players. But now, as reported by Nikkei, Oppo “aims to have a market share of at least 5% in Europe by next year and plans to be a major player there over the next three years.” Backed by BBK, Oppo is arguably a more serious long-term threat than Xiaomi.
Oppo claims to have tripled sales in key regions of Europe this year. “But for any smartphone maker,” Alen Wu, global sales manager at Oppo, told Nikkei, “you have to reach a 10-15% share in a market to qualify as a leader and hit that threshold. profitability… We aim to achieve this goal within the next two to three years. Xiaomi has shown that it can be done. Ironically, the most likely obstacles to Oppo’s growth are Xiaomi and its stable partner BBK Vivo, who will also likely increase exports to take advantage of Huawei’s likely decline. While the two phone companies need to work on brand recognition outside of Asia, they have grown rapidly and now rank very well for global sales.
Huawei was in a unique position to take on Apple and Samsung, ultimately targeting that number one spot. In fact, his moratorium leveled the playing field for others. There may be some brand loyalty for Xiaomi in Europe, but nothing compared to the stickiness that Huawei had created. And recent rapid growth suggests recent converts who can possibly be retrained. All of this will be obvious to Oppo, Vivo and BBK, which also owns the OnePlus and RealMe brands and poses a real threat to the world’s largest smartphone manufacturers.
Conversely, Apple and Samsung clearly benefit from strong consumer loyalty. But Huawei has shown that it can be successfully targeted. When Huawei toppled Samsung for the second quarter, despite relying on strong sales in China, Canalys said it was “the first quarter in nine years that a company other than Samsung or Apple led the market. “.
So what about Huawei? As I have previously reported, the company has adjusted its strategy to focus on its software ecosystem as it braces for a shortage of smartphone chipsets. For the new strategy to succeed, other manufacturers, presumably Chinese, must adopt it as an alternative to Android. It will work well in China but will be an inhibitor in Europe and elsewhere. It’s hard to see why an OEM with a chance to target European consumers would do anything to make that job more difficult or to help a rival.
The scale opportunity for Oppo and Vivo opened directly due to Huawei’s blacklist restrictions. Huawei has managed to overtake Apple and target Samsung. We now have several Chinese brands looking to replicate the recipe and achieve the same. Obviously, these Chinese brands will compete for market share with each other, with Huawei remaining in the picture although shrinking. For Apple and Samsung, however, the bottom line is an increasingly competitive market fueled by exporting Chinese manufacturers capable of changing the economics of the industry.
Reports this week that Huawei may sell its Honor brand to free it from U.S. sanctions are a perfect illustration of the scale of the changes we can now see. Beyond that, there is the small question of an American election. One cannot help but conclude that the relative silence of Huawei and China awaits the outcome and an assessment of the changes to come. In the meantime, BBK has become the Chinese smartphone giant most likely to take its crown, even though its brands appear to be publicly distancing themselves from the parent company (which are all private companies) and genuinely competing.