HUAWEI'S DECLINE WILL AFFECT MORE THAN JUST CHINA STUDY WARNS: HUAWEI SHARPENS FOCUS ON CHINA

HUAWEI SHARPENS FOCUS ON CHINA 

“Huawei smartphones acquired an unprecedented 36 per cent market share in China in the first quarter, and that number is likely to exceed 40 per cent by the end of this year,” -Li 

If the US pushes through with its sanctions against Huawei, there is no doubt that the company’s smartphone production will be negatively affected. The US government may actually be counting on that in the hopes of convincing China to strike a deal. A new study, however, shows that while it will indeed have a big impact on China, Huawei’s decreased smartphone production will actually hurt other countries more, including some of the US’ own allies.

Huawei sources some critical parts like Corning’s Gorilla Glass, Compeq’s PCBs, and Micron’s DRAM from the US and those make up 16.3% of the build cost. However, it only makes up 0.9% of the total number of parts used, some of which might also be provided by companies outside of China.

China Mobile, the world’s largest wireless network operator, announced on June 6 a part of the results of its initial 5G network tender covering 40 cities, in which Huawei was awarded 49 per cent of the MME/SGSN equipment contracts and 54 per cent of the SAE-GW/GGSN orders. MME/SGSN provides optimisation and control of device signalling in a 5G network, while SAE-GW/GGSN is responsible for management and delivery of data traffic.

“Huawei smartphones acquired an unprecedented 36 per cent market share in China in the first quarter, and that number is likely to exceed 40 per cent by the end of this year,” Li said. That surge, he added, would put further pressure on Huawei’s main Android smartphone rivals in the country – Xiaomi Corp, Vivo and Oppo. He said news about the US campaign against Huawei has served as the best promotion for the company, encouraging more consumers on the mainland to buy its devices.

The Nikkei Asian Review made a study that analyzed each part that makes up a Huawei phone. It then lined these up by how much they contribute to the phone’s build cost and where they come from. It then proceeded to show how much a country actually contributes to making a Huawei phone and the numbers might surprise you.

Being a Chinese company, you’d presume that Huawei sources most of its parts from its home country. Parts from Chinese companies do make up 38.1% of the cost but, surprisingly, only provide 80 parts out of a recorded 1,631, just 4.9%. Those parts include the important HiSilicon Kirin processor, the OLED display from BOE, and touch panel from Goodix.

The bulk of parts actually come from Japan at 53.2% followed by South Korea at 34.4%. Together, they make up about $111.71 or 30.7% of the build cost. Those parts include Samsung’s flash memory, Sony’s cameras, Amperex’s batteries, and various other sensors from Japan.

In others, the Nikkei is saying that the US sanctions have an international effect and could actually hurt others outside of China more than China itself. Of course, China is reacting out of national pride and because Huawei is a Chinese brand. Its phones, however, are products of international cooperation.

Huawei’s total revenue is now expected to remain stagnant at around the US$100-billion level this year and in 2020, according to company founder Ren during a panel discussion in Shenzhen on June 17. He said overseas smartphone sales had already dropped 40 per cent, without specifying the time period.

“If the US export ban continues, Huawei will not be able to license any Google apps on its smartphones, nor will its phone users obtain any Android update and technical support from Google,” Jefferies equity analyst Edison Lee said in a recent report. “Therefore, it will likely lose the bulk of its overseas handset sales since foreign smartphone users rely heavily on Google apps.”

The trade ban has already prompted Huawei to indefinitely put on hold the launch of a new laptop in its MateBook series.

Smartphones under the company’s Huawei and Honor brands were ranked No 1 and No 3, respectively, in terms of sales volume from June 1 to June 18 on JD.com, operator of China’s second biggest e-commerce platform. Honor, the budget line of Huawei that is mainly sold online, dominated smartphone sales on JD.com, with seven different models ranked on the retail platform’s top-12 list during the midyear shopping event.

However, the company’s long-term business prospects will still rest on how, when and if Washington and Beijing can finally settle, or at least de-escalate, their trade and tech differences. As such, all eyes will be on the G20 meeting this weekend.