Does Huawei need the West?
The Huawei Mate 30 is delayed in Europe, but can rising sales in China keep the company afloat?
Huawei is backing away from its biggest market outside of China. The company announced that it’s delaying sales in Europe of its newest flagship phones, the Mate 30 and Mate 30 Pro, because the handsets have no access to Google apps and services under the US trade ban.
Huawei phones have already been effectively locked out of the US. And as analysts have pointed out, buyers in the rest of the world will be much less likely to buy a Huawei phone that doesn’t ship with popular Google apps like Google Maps, YouTube and Google Play, the default app store for most Android users outside China.
Inside China, business is booming. But is it enough to carry Huawei while it struggles overseas?
Huawei smartphone sales were already rising in China before tensions with the US rose sharply this year. Now the company is also getting a boost from patriotic Chinese netizens who are calling for their compatriots to switch from their beloved iPhones to Huawei devices as a gesture of support for their country.
“Huawei’s brand image in China is at its highest point,” said Canalys analyst Mo Jia.
Thanks in part to the company’s focus on marketing back home, China has become more important than ever to Huawei.
In the second quarter of this year, 62% of Huawei's global smartphone shipments were in China. That’s up from 53% in the second quarter of last year, according to IDC analyst Bryan Ma. China was also responsible for 58% of Huawei’s revenue in the first half of the year, up from 52% for all of 2018.
As part of Huawei’s push to defend and promote the brand, company chairman and founder Ren Zhengfei has been on a media blitz in recent months, and many retailers have already identified Huawei as the local patriotic choice, according to Jia.
Now Huawei’s renewed focus on China is helping give the embattled smartphone giant the boost it needs as it struggles overseas. The company has already brought back to China many members of its international teams since May this year. That’s when the US government put Huawei on its Entity List, which bars it from purchasing products and services from US companies without authorization.
“Huawei has indeed diverted its resources to the domestic market, chasing after lower-tier cities in an effort to offset their losses overseas,” said Ma.
Of course, one important reason Huawei has been able to rely so much on China is that the market huge. Out of the 1.4 billion phones shipped around the world in 2018, 400 million of them were shipped in China. This is despite the fact that the smartphone market has become saturated, so people are upgrading their devices less frequently.
And with Google locked out of China, there’s no reason for consumers in the country to not buy Huawei’s latest devices. Google shut down its search engine in China in 2010 and nearly all of the company’s services have been blocked in the country since 2014. So while pretty much all smartphone companies in China are using Android, they ship with homegrown alternatives to Google apps, like Baidu Maps and the Baidu app store.
However, it seems unlikely that Huawei can match the success it had before the ban. The previous generation of the company’s two flagship phones, the Mate 20 and P30, were well-received among reviewers and consumers, helping Huawei’s global sales figures rise rapidly.
Still, the effects of the ban appear muted so far. In the first quarter of 2019, Huawei’s phone sales were up more than 50% from a year prior. By the second quarter this year, Huawei had more than 17% of the global smartphone market, behind only Samsung.
Huawei will start taking pre-orders in mainland China for the new Mate 30 phones starting next week. But Huawei still faces plenty of competition at home. Other local smartphone companies like Xiaomi, Oppo and Vivo aren't going to make it easy for Huawei on their home turf.
“Huawei's new domestic prioritization won't be enough to offset its overseas losses, but it provides a bit of padding at least,” Ma said.