The US sanctions have been affecting Huawei Technologies for several years, but since May it has lost the ability to order HiSilicon processors from TSMC, and therefore its position in the smartphone segment will soon be shaken. But the second quarter was unconditional success for the Chinese giant – Huawei sold more smartphones than its closest competitor Samsung.
The situation is best illustrated by the saying “there would be no happiness, but misfortune helped.” Firstly, the Chinese economy was the first to start recovering from the novel coronavirus pandemic, which allowed Huawei to sell more than 70% of smartphones sold in the second quarter in the PRC market. Rival Samsung sold 53.7 million smartphones in the second quarter, a 30% year-on-year decrease in sales. Huawei looked better against this background, as sales of smartphones fell by only 5%, and their absolute value reached 55.8 million units. For the first time in Huawei’s history, the company has become the largest smartphone supplier in the world, according to Canalys.
Secondly, Huawei’s focus on the domestic Chinese market was outlined last year, when the first wave of US sanctions caused a patriotic enthusiasm among Chinese consumers, and they literally “voted with the yuan” for the national manufacturer when choosing smartphones. In the second quarter, Huawei increased its smartphone sales in China by 8%, although in overseas markets they decreased by 27%. Samsung in this sense could not rise at the expense of China, since the company’s share in the local smartphone market does not exceed 1%, and the coronavirus raging outside the PRC has significantly limited sales of mobile devices.
Analysts warn Huawei’s success is unlikely to be long-term. First, sooner or later, the economy will begin to recover from the consequences of the pandemic outside of China, eliminating the existing head start. Second, US sanctions will inevitably affect Huawei’s business in the coming quarters. The leadership of the Chinese company was underpinned by its own processors, now Huawei will be forced to rely on third-party components, and competition in the smartphone segment will intensify, depriving it of this advantage.
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