As Huawei itself predicted at the turn of the year, the impact the U.S. blacklist is having on the company is significantly worse this year than last. A year on from new smartphone launches unimpaired by the loss of Google, the impact is biting hard. Until now China sales have been the saviour, but the COVID-plunge in smartphone demand in the country has put paid to that. And looking to the west for help will not work—thus far it’s been about Google, that’s now been overtaken by coronavirus.
The latest figures from Strategy Analytics report a huge drop in global smartphone shipments for February—down “38% year-on year, mainly due to the outbreak of COVID-19, which disrupted supply chains and depressed consumer demand significantly.” The researchers estimate global February shipments dropped from 99 million in 2019 to just 62 million in 2020.
But within the figures there is a deeper, starker warning for Huawei. Its February shipments plunged from 12.2 million units in January to 5.5 million units. And while Apple (16.0 million to 10.2 million) and Samsung (20.1 million to 18.2 million) also dropped, it was worse for Huawei and is now a worrying trend.
According to Strategy Analytics, Huawei’s last five months have shown a steady decline, down from 22.2 million in October to 5.5 million in February. The company shipped 22.2 million units in October, 19.6 million in November, 14.2 million in December, 12.2 million in January and just 5.5 million in February. Given the pandemic, it is unlikely that March will offer any respite.
To put this into context, even last year Huawei felt it was in with a chance of overtaking Samsung for the global number one spot, and was holding off Apple to keep itself in second place. Huawei’s February shipments were a mere 30% of Samsung’s. To say this is a shock to the system is a serious understatement.
The deeper worry for Huawei, though, is much closer to home than Trump, Apple or Samsung. Domestic competitors Xiaomi and Oppo smell blood and are pushing the country’s leading tech giant hard. So hard, in fact, that Xiaomi took third-spot from Huawei for the first time ever, shipping 6.0 million units to its larger competitor’s 5.5, relegating Huawei to fourth spot. This is a big deal. Huawei sales dropped 70% February to February, 2019 to 2020. Xiaomi is down just 30% on its smaller base.
Leaked information from inside Huawei suggests the company is expecting a drop in smartphone sales of 20% this year—judging the current impact of coronavirus, that could be much worse. And now its domestic competition, unhindered by U.S. supply chain restrictions on top of the general market slump, is looking to capitalize.
Earlier this month, the CEO and founder of Xiaomi put down a very public challenge to Huawei, announcing on Weibo that “we will go all out in the high-end market,” which until now has been seen as Huawei’s domain, with a huge 80% market share.
“Xiaomi 10 is the first product to carry the company into the high-end market”, Lei Jun told reporters later. “Our previous customers were mainly young people—and now we have to put effort into all aspects to get acceptance for Xiaomi from high-end smartphone users.” What he means, more simply, is Huawei users.
With all this in mind, it is hardly surprising that Huawei is pushing hard to soft land the new P40, a flagship it needs to sell more successfully than last year’s Mate 30, despite the loss of Google. As I reported just days ago, the company is even testing an official “workaround” to help users source missing apps and functionality, even as it ploughs millions into its own version of Google’s Mobile Services.
Domestically, the hope for Huawei is that as China returns to normal, it will see a recovery in sales through the physical outlets where it has always been strong. The risk is that the market suffers a longer-term impact and its dynamics change. We will know more over the next 8-10 weeks. Chinese media is certainly talking up the start of a market recovery as as a wave of new 5G handsets hit the stores.
Internationally though, the COVID situation looks set to hit sales across all key markets for some time to come. And even as overall shipments fall, Huawei has still not addressed the Google question that hit the Mate 30 so hard. And it’s against this backdrop that the P40 is about to launch.
At the turn of the year, Huawei warned its employees that “survival will be our first priority,” and 2020 “will be a difficult year for us.” At the time, the issue was purely the U.S. blacklist and its impact on international sales and 5G contacts. The global horror show that is coronavirus has made that much worse. And for Huawei, the most alarming aspect of that could be the softening of its domestic dominance which, until now, has been the safety net for its consumer business.
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