Huawei Technologies is increasingly turning towards its domestic market to compensate for the loss of international business and with 2020 seen as the big year for 5G rollouts, it could step up shipments in a big way.
“Huawei is doing well in terms of global smartphone shipment. It did extremely well in China, as it increased share there aggressively. On the other hand, due to the Entity List, its overseas shipment has declined in both Q2 2019 and Q3 2019,” Mo Jia, an analyst at market research firm Canalys, told Asia Times.
In May, the US Commerce Department put Huawei Technologies on a trade blacklist, citing national security concerns. This blacklist, called the Entity List, allows the US government to restrict sales of US-made goods to the company, and some items made abroad that contain US technology.
But at home the story is different.
In the first three quarters of 2019, the company shipped 108.7 million handsets in China, a jump of 45.5% over last year, Canalys data showed.
In the third quarter, Huawei was the only vendor to register growth. Its shipments rose 66% year on year and it now commands 42% market share, doubling in just over two years. Rivals Vivo, Oppo, Xiaomi, and Apple all reported contraction in shipment.
Analysts attribute this phenomenon to a growing sense of patriotism and an advertising campaign that has lured customers away with features like better camera quality.
“Its core strategy remains investing in aggressive offline expansion, and luring consumers from rival brands Oppo and Vivo, while unleashing a wave of marketing spend to support new channels and technologies. Huawei’s retail partners are rolling out advertisements to link Huawei with being the patriotic choice, to appeal to a growing demographic of Chinese consumers willing to take political factors into account when making a purchase decision,” said Mo Jia.
This is reflected in its quarterly numbers with revenues jumping 24.4% in the nine months to September from a year ago. On a global basis, the company’s smartphone shipments in the first three quarters of 2019 exceeded 185 million units, representing a 26% year-on-year increase.
Even though estimates show that there could be a contraction in the fourth quarter, overall 2019 would be a year of growth for the company.
At a recent internal meeting, Huawei’s Consumer Business CEO Richard Yu said global shipments are likely to hit 230 million this year, an increase of 12% over 2018.
“Moving into 2020, Huawei will attempt wider marketing of HMS smartphones, and lack of GMS could cause the company to face a larger decline in overseas markets,” said Mo Jia.
China’s largest telecom operator China Mobile, which has already awarded over half of its 5G network contracts to Huawei in June, plans to double its connections to 1.75 billion in 2020 and has not ruled out the possibility of even hitting two billion.
“We see the current tensions as a technological Cold War, as tech nationalism intensifies,” Ben Wood, chief of research at CCS Insight, recently told BBC.
“With the Chinese government firmly committed to establishing China as a world-leading 5G nation, the opportunity for Huawei in its home market is immense.”
Meanwhile, European Commission chief Ursula von der Leyen voiced skepticism on Friday over involving Huawei in the rollout of Europe’s 5G networks amid concerns its equipment could be used for spying by Beijing.
Critics, led by Washington, say the firm is too close to Beijing and could by law be forced to hand over data to Chinese intelligence services.
“If there’s a risk that the data of civilians or companies can be tapped into on the basis of this law, then we can’t accept that,” von der Leyen told German weekly Der Spiegel.
The next-generation of superfast 5G mobile networks are “a crucial technology” for the future, she said, adding that the EU was working on common standards to respond to the security concerns.
“One of these standards has to be that the companies who provide us with these highly sensitive technologies are independent and can’t be forced by their governments to pass on data,” she told Der Spiegel.
The comments are the latest sign of a toughening stance towards Huawei after EU telecoms ministers this month urged member states to consider “the legal and policy framework” that potential 5G suppliers may be subject to.
– Additional reporting by AFP