SMARTPHONES: Huawei in Late-Year Surge, As Apple Tries to Halt Skid

Bottom line: Apple will need to lower its prices to stabilize its position in China, while Huawei could also soon face pricing pressure due to growing challenges from up-and-comers like Oppo and Vivo.

Huawei’s sales surge in Q3

Two of China’s top smartphone brands have been in the headlines in recent days, spotlighting a rapid ascension of the homegrown Huawei and the equally rapid decline of global giant Apple (Nasdaq: AAPL).

On the upside of the story, the surging Huawei announced it recently passed the 100 million mark in smartphones produced this year, reaching the milestone two months faster than in 2015. Meantime, Apple’s CEO was in China for at least the third time this year, announcing a new research and development center in a push to revive his company’s fast-fading position in its largest market after the United States.

The two stories illustrate how rapidly change occurs in the market, where an unknown name one day can become a superstar the next, only to rapidly fade just a year or two later.

Apple has bucked the broader industry trend by maintaining a leading position for a decade, largely thanks to its pioneering position in the current wave of smartphones centered on touch-screen technology. But that edge has rapidly faded as the technology matures, allowing others like Huawei to make products of similar caliber for far cheaper, and now Apple may have no choice but to lower its prices to remain competitive in China.

Meantime, Huawei has surged from relative obscurity just three years ago to become China’s leading smartphone brand, banking on a combination of high-performance products that sell for far less than comparable ones from global brands like Apple and Samsung. But even Huawei will need to watch its back, as a newer generation of domestic rivals challenge it with their own mid-range comparable models with ever cheaper price tags.

China is now the world’s largest smartphone market, accounting for nearly a third of the 345 million units shipped in this year’s second quarter, according to data tracking firm IDC. But it is also a microcosm of the rapid pace of change in the space, thanks to a booming local industry that has produced some of the world’s fastest growing brands with names like Xiaomi, Meizu and Oppo.

That boom is best represented by Huawei, whose long experience as a telecoms networking equipment maker has helped it to emerge as a maker of higher-quality smartphones that can increasingly compete with names like Apple. The company notched a major milestone last year when it just managed to ship its 100 millionth phone in December, a first for a Chinese manufacturer.

Now Huawei has just revealed that it recently passed the 100 million mark in phones produced, and is expecting a year-end surge that could help it to reach its target of 140 million, equal to 60 percent of the 230 million iPhones Apple sold in its latest fiscal year. (Chinese article) Huawei’s surge owes to a number of factors, including an aggressive global expansion and its growing reputation as maker of high-quality products at prices significantly lower than global leaders Apple and Samsung (Seoul: 005930).

Slumping Apple

Apple’s move in the opposite direction has been equally striking, with the company’s iPhone sales in China tumbling by nearly a third in this year’s second quarter to 8.6 million units. That drop saw Apple’s share of the China market also tumble to 7.8 percent from 12.6 percent a year earlier.

Worried about his company’s rapid decline, Apple CEO Tim Cook made at least his third trip to China last week, attending an innovation conference in the southern boomtown of Shenzhen. (previous post) He also announced that Apple would set up a new R&D center in the city, just months after announcing Apple’s first China-based R&D center in Beijing.

Apple should be commended for finally investing more seriously in China, after several years of making big profits in the market with minimal investment. But those investments may do little to halt its recent China slide. Analysts have said the new iPhone 7 is unlikely to do very well in China or globally due to a lack of major new features, highlighting the difficulties Apple is facing as a maturing market allows others like Huawei to play rapid catch-up.

To halt its skid, Apple will most likely be forced to lower its prices from their current premium levels that are often double those of Huawei and other Chinese rivals. Huawei could discover soon that it’s also not immune from a similar fate, as its own more modest premium prices come under pressure from the latest field of newly surging names led by Oppo and Vivo, which both posted growth of 70 percent or more to become China’s second and third largest players in the second quarter.

Related posts:

(NOT FOR REPUBLICATION)

(Visited 135 times, 1 visits today)