Chinese tech ‘wolf’ Huawei stalks Apple, Samsung

Ren Zhengfei, the founder of Chinese telecoms behemoth Huawei, likens the company to a ruthless “wolf” tirelessly running down its prey, an ethos that could soon make it the apex predator of the smartphone world. Despite being essentially barred from the US market, Huawei surpassed Apple to become the world’s number two smartphone maker in the second quarter of this year and has market leader Samsung in its sights.

Huawei has achieved this in part by refocusing away from the futile fight for US access and towards gobbling up market share in developing nations with its moderately priced but increasingly sophisticated phones, analysts say.

“Huawei’s image and brand recognition across markets and regions is getting better and better,” said Tarun Pathak of global market analysis firm Counterpoint.

Founded by Ren, now 73, with a few thousand dollars in 1987, Huawei focused initially on the backbone hardware for telecommunications networks, growing to become the world leader.

Fifteen years after introducing its first phone, Huawei surpassed Apple in the April-june quarter to take second place globally, International Data Corporation (IDC) said last week, the first time since 2010 that Apple was not in the top two.

Huawei’s consumer products chief Richard Yu raised the ante Friday, saying the company could overtake South Korean giant Samsung by late 2019.

“The importance of Huawei overtaking Apple this quarter cannot be overstated,” senior analyst Ben Stanton of Canalys wrote in a report on the latest sales data.

“Huawei’s exclusion from the US has forced it to work harder in Asia and Europe to achieve its goals.”

Based in the southern China tech hub of Shenzhen, Huawei had already been pushing into developing markets even before political pressure — peaking this year with President Donald Trump’s China trade war — effectively slammed the US door shut.

In the meantime, Huawei has built up its business in more price-conscious markets, from Indonesia to Saudi Arabia, South Africa and even Europe.

Analysts note that as those markets mature and customers graduate to higher end phones, they will already be in Huawei’s ecosystem.

“If Apple and Samsung want to maintain their market position, they must make their portfolios more competitive,” said Canalys’s Stanton.

Samsung shipped 71.5 million handsets for a 20.9-per cent global market share in the second quarter, compared with Huawei’s 54.2 million phones and 15.8 per cent share. Apple sold 41.3 million iphones for a 12.1-per cent slice.

Huawei shipped 95 million units in the first half and is targeting 2018 sales of 200 million, a threshold crossed previously only by Samsung and Apple.

But an industry sales slowdown and market saturation could limit its growth.

IDC said 342 million smartphones were shipped worldwide in the second quarter, down 1.8 per cent year-onyear and the third consecutive quarterly decline.

In the long term, the lack of a US foothold will be an Achilles heel for Huawei, analysts said, and some market studies project Apple reclaiming the number two spot when new iphone models are released later this year.

As Huawei customers graduate to higher end gadgets above $600, the Chinese company will have to compete head-to-head with Apple on quality and features.

“As you move upward, there are fewer competitors but the features, the challenges, the innovation, and the expectations grow,” said Counterpoint’s Pathak.

A critical test looms in the next two years, when 5G systems are expected to roll out and manufacturers will be judged on how their smartphones handle the enhanced capabilities.

Huawei is already gearing up for the challenge. Its R&D spending grew 17 per cent last year to $13.8 billion, putting the company in the same league as Samsung, Amazon and Google’s parent Alphabet.

Despite being barred from the US market, Huawei surpassed Apple to become the world’s number two smartphone maker in the second quarter of this year and has market leader Samsung in its sights