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Huawei’s smartphone fortunes battered

Peter Griffin, contributor. 13 May 2020, 10:18 pm


The latest global sales figures are in for the most ubiquitous of devices, the smartphone, and it doesn't present a pretty picture.

According to analyst group IDC, smartphone shipments dropped nearly 12 per cent in the first three months of 2020 as locked down phone users put off upgrading to the latest Android or Apple device.

As Bill Bennett points out in his wrap on the new IDC figures, electronics supply chains in major Chinese production hubs such as Shenzhen were disrupted through February and much of March due to Covid-19, compounding the issue.

Looking forward, the smartphone market will remain depressed, with US chip maker Qualcomm expecting a 30 per cent, year on year drop in chip component shipments. The world's two leading smartphone brands that use Google's Android operating system, Samsung and Huawei, have been hit hard. Samsung's handset sales were down 19 per cent, year on year, while Huawei suffered a 17 per cent drop, with its shipments outside the US down as much as a third.

Samsung is still top dog when it comes to Android smartphones and has just come off a quarter that beat analysts' expectations. It has a diverse business spanning TV display panels, semiconductors, whiteware and smartphones, so while it faces a tough year, it is well-placed to weather the storm.

Apple holds steady

Apple managed to contain its drop to just 0.4 per cent, which is testament to the popularity of the iPhone 11 line-up, which Apple should follow up with the return of the beloved iPhone SE which went on sale two weeks ago at $799.

But consider Huawei's position. It has not only felt the Covid chill on sales, but remains frozen out by the US, which has banned its companies from selling components to Huawei on national security grounds. The Chinese phone maker can still run a version of Android on its handsets, but without the full suite of Google apps, such as Youtube, Gmail and Google Maps.

Huawei spent most of 2019 building its own rival to the Google Play app store called AppGallery and has mobilised developers to create apps for it. That has been relatively successful in Huawei's home market, where most of AppGallery's 400 million users are located. But without the Google apps and app store favourites such as Facebook, Netflix, Spotify and, more recently, Zoom, Huawei's international phone business is in trouble.

We've seen the impact of that here in New Zealand. Huawei made great strides here in recent years with innovative and well-priced phones. But its latest flagship models, the Mate 30 Pro and P40 Pro have had very low-key launches. Huawei is talking up AppGallery and points out that you can access the likes of Youtube via the web browser. But that doesn't cut it for people used to living in the app world. I own a Huawei phone, but have never used AppGallery. Working everyday in Google Drive and relying on Google Maps to navigate around, not having those apps is a deal-breaker. Huawei faces an uphill battle trying to win over non-Chinese users with AppGallery.

Hanging up on Huawei

Huawei therefore faces a China-centric future for its phone business, unless it can break the deadlock with the US over the trade ban, something that appears increasingly less likely by the day as the US and China argue over who was responsible for the coronavirus outbreak.

Huawei's woes extend to its highly successful 5G equipment business, with that US antipathy towards the company seeing our security agency, the GCSB, rejecting Huawei's involvement in building 5G networks here. That situation is unlikely to change unless New Zealand breaks with the US, its Five Eyes intelligence partner. That is unlikely and Spark is already forging ahead preparing for 5G with Nokia and Samsung as partners. Huawei is still on the vendor list, but whether it gets to contribute to the network is yet to be seen - Spark will still need approval under the Telecommunications (Interception Capability and Security) Act 2013.

Other Chinese phone makers such as Oppo and Xiaomi are still happily selling their smartphones with Google apps internationally. But they are not 5G equipment providers so have avoided the US trade ban but mainly do business in Europe and Asia anyway.

The whole trade ban saga over Huawei is incredibly disappointing and damaging to global innovation and collaboration on technology. We are in danger of seeing diverging paths of technology development emerging with the US taking one track and China another. That's the sense I got when I wrote this New Zealand Listener piece after visiting China and meeting with AI and tech experts last year. 

5G is just the start

Today it is 5G technology that sees the US as a competitive disadvantage and lashing out as a result. The next battle will be over the technologies and platforms under the banner of artificial intelligence. 

Huawei has huge resources and ambition to match. It is in the process of ensuring it can source everything it needs from within China, from all of the electronic components and chips to the operating system and apps. It has its own expertise in AI too. 

That is impressive in itself, but it all runs counter to the spirit of open collaboration that has seen US technology companies in particular become so successful on the international stage. 

As the global economy staggers to its feet in the wake of the corona crisis, the forces of globalisation should be what speeds the recovery. But as the relationship between the world's two most powerful countries turns icy, we may be denied the best of both worlds as technology consumers.


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