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You might want to look Huawei now: Smartphone market returns to growth as Chinese giant's shipments plunge

Analyst figures add insult to injury for embattled comms biz

Huawei's godawful 2020 continues to worsen, with the Chinese smartphone maker suffering a double-digit drop in shipment volumes globally, according to analysts' preliminary Q3 sales estimates.

IDC claimed Huawei's shipments fell 22 per cent year-on-year to 51.9 million units, and Canalys reckoned the company declined 23 per cent to 51.7 million. It seems Huawei's time at the top of the smartphones sales charts, as happened in the prior quarter, was short lived.

In a statement, IDC said Huawei declined across international markets, including a 15 per cent drop in China – the only dependable geography that Huawei has left.

"The company continues to face challenges due to the ever increasing impact of the US sanctions, which are taking a toll on its performance even in China as the brand is trying to pace out its shipments over a longer period," said IDC.

The stats reported by Canalys show Huawei sales in China dropped 18 per cent to 34.2 million in Q3. "The market decline was expected," said Mo Jia, Canalys analyst.

"Huawei was forced to restrict its smartphone shipments following the 17 August US sanctions which caused a void in channels in Q3... Huawei is facing its most serious challenge since taking the lead in 2016. If the position of the US administration does not change, Huawei will attempt to pivot its business strategy, to focus on building the Hongmeng OS and software eco-system, as the Chinese government is eager to nurture home-grown alternatives to global platforms."

At home, Huawei has been forced to confront steep competition from arch-rivals Xiaomi, Vivo, and OPPO. Complicating matters, Huawei also delayed its flagship Mate 40 series, which typically sees a release around the IFA tech trade show.

Huawei faces significant long-term challenges to its smartphone business due to the continued assault on its supply chain by the US government, which threatens sanctions against any company willing to supply American-derived tech to the firm without a licence.

The loss of access to Google's Play Store and other services have severely dented demand for Huawei phones outside of China. And just last month, contract fab TSMC said it would cease working with Huawei. The Taiwanese chip maker has traditionally been the fab of choice for Huawei's HiSilicon SoCs, and is one of two firms presently capable of using a 5nm manufacturing process.

Huawei will most likely switch production to SMIC – a mainland semiconductor manufacturer that has also found itself in Washington's crosshairs. SMIC uses a less sophisticated 14nm process, which will represent a huge step backwards for Huawei in terms of performance and power efficiency. Consequently, Huawei's devices will become less competitive against rivals, which are able to take advantage of the latest advances in semiconductor tech.

Other elements of Huawei are under sustained attack, including its carrier business. Earlier this year, the UK Department of Culture, Media, and Sport banned carriers from using Huawei's infrastructure products on their 5G networks. This was largely the product of US lobbying efforts, as well as the perceived precariousness of Huawei's supply chain.

The US government is separately pushing against Huawei in other countries that aren't party to NATO or Five Eyes, and where the national security arguments aren't as obvious. This includes the offer of loans to nations that otherwise might be tempted by cheaper networking kit from so-called "high risk" vendors like Huawei and ZTE.

Huawei is under no illusions it's in a desperate existential fight. Last month, rotating chairman Guo Ping described the company's goal as "survival".

"Huawei is in a difficult situation," he said. "Non-stop aggression has put us under pressure and we are still assessing the impact. Survival is the goal."

It's alright for some

Even more damning for Huawei, its slump comes at a time of relative resurgence for the smartphone market, which returned to growth in Q3 2020. Shipments were up 1.3 per cent, reaching a total of 353.6 million.

Earlier this year, analysts of all stripes predicted significant – often double-digit – drops in volume in the smartphone market. According to IDC, these green shoots are thanks to the gradual reversal of lockdown measures over the summer and early autumn periods.

The vendor that performed strongest during Q3 2020 was Samsung, which reclaimed its crown from last quarter's global leader Huawei. Samsung shipped 80.4 million smartphones, up 2.9 per cent on the same quarter last year, in the process growing its market share to 22.7 per cent.

IDC attributed this to Samsung's shift to online retail, as well as its strong performance in the low-end $250 price segment. This was further bolstered by the release of two high-profile flagships: the Note 20 and Note 20 Ultra.

Samsung also released a cheaper version of the Galaxy S20 earlier this month. The Galaxy S20 Fan Edition – although well-received by reviewers – arrived towards the end of October and thus is unlikely to have moved the needle in any significant way.

Xiaomi also performed well, clinching third place from Apple, which shipped 41.6 million or 16 per cent fewer units due to delays in the release of the highly anticipated iPhone 12 series.

Xiaomi's shipped 46.5 million units, which IDC pinned on the rapid recovery in the company's production capacity following the relaxation of coronavirus lockdown restrictions, as well as formidable demand in its two strongest markets, India and China. ®

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