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Huawei Dethrones Apple To Become Second Largest Smartphone Brand, Amid Global Slowdown

Courtesy of ZeroHedge. View original post here.

Apple Inc. delivered a stellar earnings report for its fiscal third quarter on Tuesday, as demand for premium iPhones remained resilient and services such as App Store, Apple Music, Apple Care and Apple Pay sales expanded to record levels. The result: Apple’s fiscal third quarter shows how the iPhone maker is finding alternative means to grow amid the threat of a smartphone slowdown in developed markets.

Research firms International Data Corporation (IDC), Counterpoint Research, IHS Markit and Canalys all reported that the worldwide smartphone industry has entered into a slowdown.

More specifically, Counterpoint’s Market Monitor service confirms that global smartphone shipments decreased 2 percent annually in 2Q18 and continued a downward trend from a 3 percent decline in 1Q18:

  • Smartphone shipments declined 2 percent annually to 360 million units in Q2 2018.

  • China’s smartphone market has declined continuously for the last four quarters, affecting the shipment growth of some Chinese brands like OPPO, vivo, Meizu and Gionee.

  • Chinese brands have continued investing in countries and regions outside China to offset weak demand in their home market. India, South East Asia, Europe, Middle East and Africa being the key markets for expansion.

The analysis specifies that ten smartphone manufacturers captured roughly 79 percent of the market, thereby leaving 600 brands to fight for the remaining 21 percent. With too many brands saturating the marketplace, the report said smartphone demand has cooled in developed markets like China, North America, and the European Union, where replacement cycles are expanding.

Huawei Technologies Co. surged ahead of Apple Inc. in a deteriorating Chinese market and seized the second spot in the global smartphone shipment rankings for the first time just behind Samsung Electronics Co., solidifying the emergence of Chinese competitors.

Huawei and Apple Inc. Performance Insights:

  • Huawei shipments grew 41 percent annually in Q2 2018. The company managed to be the fastest growing (21 percent) smartphone brand amid a declining China smartphone market, and grew fully 71 percent overseas.

  • Huawei’s continuous efforts to expand in markets outside China has resulted in strong annual growth in Europe (+75 percent), MEA (+67 percent), and in India (+188 percent), where its Honor brand retained its place in the top five smartphone rankings.

  • Apple shipped 41.3 million iPhones during Q2 2018, up 1 percent compared to the same quarter last year. iPhone X remains the top seller for Apple during the quarter. ASP’s fell marginally compared to the previous quarter due to the greater mix of iPhone 8, 8 Plus and older iPhone models.

  • Second quarter Apple shipments remain flat in China year over year. During the quarter, share of online sales for Apple grew both sequentially and annually due to comparatively higher discounts available online as compared to offline channels.

  • Apple had a slow quarter in India, the third largest smartphone market globally. It underwent changes in its distribution strategy. Apart from this, its domestic assembling is yet to pick-up pace, which means the company is still relying on imports for its sales in India. Apple had 1 percent market share during the quarter, its lowest in recent history.

Reflecting on Huawei dethroning Apple for second place, Tarun Pathak, Associate Director at Counterpoint Research said:

“Huawei had a good second quarter in 2018 as it shipped more smartphones than Apple to capture the second spot in the global smartphone rankings, after seven years of Apple-Samsung dominance. Huawei achieved this by launching smartphones in the premium segment and capturing the mid-tier segment with its fast-growing Honor sub-brand. Huawei with its Honor brand is offering a broad and recently refreshed portfolio at affordable prices that is driving growth in the overseas market. Honor, which is already strong in the e-commerce segment, is now adopting a multi-channel strategy through branded stores in the South East Asia market. We expect store counts to increase in the future.”

Commenting on the increasing trend of the average selling price for major smartphone brands, Research Analyst, Shobhit Srivastava, noted:

“Major Chinese brands like OPPO, vivo, Huawei are now focusing on increasing their ASPs through gradually upgrading their portfolio to higher price bands by bringing in features like Artificial Intelligence, bezel-less displays, dual cameras and with innovative industrial design and colors, materials and finishes in the affordable premium segment. Brands in the mid-tier segment now launch multiple variants of the same smartphone with different storage capacities, tempting customers to spend more on a higher spec’d device. This also helps drive sales by increasing the portfolio breadth as well increased margins by selling devices with a higher price point.”

Samsung Electronics’ quarterly earnings were disappointing when it reported earnings Tuesday. The South Korean company, blamed the drop in revenue on “softer sales of smartphones and display panels.” The company’s most powerful smartphone, the Galaxy S9, went on sale at the end of the previous quarter, but Samsung describes its performance as “slow. Analysts recently forecasted that the Galaxy S9 would be worst-selling Galaxy S flagship phone since 2012’s Galaxy S3.

“Huawei’s momentum will obviously concern Samsung, but it should also serve as a warning to Apple, which needs to ship volume to support its growing services division,” Stanton said in a statement. “If Apple and Samsung want to maintain their market positions, they must make their portfolios more competitive.”

As for now, Huawei overtaking Apple Inc. this quarter as the second largest smartphone brand in the world could be an ominous sign of things to come…


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