Huawei's Yu says few phone manufacturers will survive the economics of the industry

Render of the Huawei P20 Plus with a rear triple camera setup

Render of the Huawei P20 Plus with a rear triple camera setup

In the future, we could see as few as four smartphone manufacturers left standing as the expensive investments needed to stay relevant in the industry start picking off smaller firms. That's the word from Richard Yu, the CEO of Huawei's consumer business. Yu has said in the past that Huawei will be the top smartphone producer by 2021, and the company is currently third behind number one Samsung, and Apple. Smaller Chinese companies lack the financial resources to invest in the latest equipment, marketing, branding and R&D, noted Yu. He says that smaller Chinese smartphone manufacturers will need to consolidate if they want to have a global presence, and most of the firms will simply disappear.

The Huawei executive suggested that any company with a market share of under 10% after all these years, is losing money in the business. Yu's own firm is on the bubble as Huawei grabbed a global market share of 10.2% in the fourth quarter of last year, according to IDC and Strategy Analytics. But Huawei is growing fast. Last year, its smartphone unit recorded 30% growth and the figure this year will be even higher, according to Yu. The executive expects Huawei to move up a spot and become the second largest smartphone manufacturer in the world this year or next. He still insists that Huawei will be number one sooner or later.

Next month, the Huawei P20, P20 Plus and P20 Lite will be unveiled in France. The P20 and the P20 Plus are expected to have a triple camera setup on back. Still, for Huawei to have a shot at surpassing Apple and Samsung, it would help to have a relationship with U.S. carriers. Verizon and AT&T were reportedly going to offer the manufacturer's current high-end model, the Huawei Mate 10 Pro, but both pulled out at the last minute. With the government warning consumers not to use Huawei phones, it appears that the top two U.S. carriers received advanced notice and pulled out of any deal they had in place with the manufacturer. Eventually it was revealed that U.S. lawmakers are trying to pass a bill that would prevent the U.S. government from purchasing equipment from Huawei or ZTE.

source: Reuters

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20 Comments

1. kiko007

Posts: 7459; Member since: Feb 17, 2016

The ROI for mobile phones is just far too steep for most OEMs to keep up with the big players long-term. That an a market that grew INCREDIBLY fast over a span of a decade are a deadly combo for smartphone manufacturers to overcome. The market has since saturated, innovation has come to an unexpected head, and the money all flows in two directions (Apple and Samsung). I'm shocked more OEMs haven't given up yet considering their chances in the market moving forward.

2. p51d007

Posts: 697; Member since: Nov 24, 2013

Well, we all knows what happens, when choice is dropped to just a few... $$$$$

9. fyah_king unregistered

Apple need not to worry. The sheep does not have a choice. :)

16. Trex95

Posts: 2315; Member since: Mar 03, 2013

Apple and Samsung sheep.

3. IAMBLCKJ3ZUS

Posts: 399; Member since: Sep 29, 2015

That's because it's coming down to updates! S9 just is releasing March with 8.0 and note 8 still doesn't have Oreo update. Pretty soon Android P will be here and it's going to be harder for people to spend money on phones that can't push out updated IMO.

4. Sparkxster

Posts: 1146; Member since: Mar 31, 2017

Hopefully that won't be the case we need oems to stay in the game without them we don't have choice. More OEMS=more choices for consumers.

5. Subie

Posts: 2269; Member since: Aug 01, 2015

"any company with a market share of under 10% after all these years, is losing money in the business" I somewhat disagree with Richard YU. Market share does not guarantee profitability. A smaller company with a smart business model could have less of the market and remain profitable, while a larger less well managed company could have 25% or more and still be losing money. Samsung alone sell upwards of 100 million more phones per year than Apple yet look who makes more money! Remember, GM used to sell more cars world-wide than any other OEM and yet they still filed for bankruptcy protection in 2009...

6. miketer

Posts: 491; Member since: Apr 02, 2015

A small market share doesn't allow you to keep a good profit margin on a product that's common in features with the other. A small market share will never give you the Domino effect. Business analytics says that you need to reach 20% share for the Domino effect to take place. Till that time, you need to stay relevant by making people buy your product.

8. Subie

Posts: 2269; Member since: Aug 01, 2015

Apple has less then 20% smartphone world wide market share each year. So would you say then that they are just trying to stay relevant... https://www.statista.com/statistics/266136/global-market-share-held-by-smartphone-operating-systems/ https://www.statista.com/statistics/216459/global-market-share-of-apple-iphone/

14. toukale

Posts: 599; Member since: Jun 10, 2015

Perfect case of someone who uses statistics to make a disingenuous argument/case. There are many reasons why Apple is the exception to this. First of all they have their own OS, they are also the platform owner and makes money on apps and services. On top of that they only compete in the expensive high end. No one in the industry has or come close to their ROI. So using Apple market shares to try to argue your point prove the usual failing when fanboys try to argue Android entire markeshares to iOS. What Huawei is talking about are the oems and vendors in the android ecosystem. Those guys mainly competes on price, and they don't have deep pockets while doing so. While such strategy worked when the marking was growing, that is no longer the case now. We do not need to look far to see what will happen in the mobile space. The pc market is a carbon copy of what we should expect in the mobile space in the next 5+ years.

17. Subie

Posts: 2269; Member since: Aug 01, 2015

No, Richard Yu is not just talking just about the Android space. He is directly targeting Apple as well with his comments. From this article: "Huawei will be the top smartphone producer by 2021". Read Yu's comments from this and the source article and he/Huawei are definitely considering Apple as a market share competitor and not just Android OEMs. Yes, Apple is definitely an exception to a lot of things but I still stand by the logic I presented in post #5.

18. toukale

Posts: 599; Member since: Jun 10, 2015

@Subie - The problem with your logic is flawed when it comes specifically to Apple and also not taken into account small regional vendors. I always laugh at folks who uses market shares (which is an old way of thinking in today's age of digital). Folks are still using the pc era ways of thinking in the mobile space. Let's take Apple for example, they have about 15-18% of the market depending on when you do the calculation. That percentage is only in the high end market, meaning phones that sells above $500. They own over 60% of that segment market. Not only that, they own the OS, the ecosystem and a lot of the services on that platform. They extract a ton of cash from that ecosystem, which is the reason why they are so profitable compare to everyone else. Let's take Samsung for example, since they are the most successful android vendor. Samsung only source of income comes from their hardware. They don't own the ecosystem, their make no money on apps or services (not for a lack of trying btw). So Samsung is no better than any other android oem's except they have other business they can go to when things get though in mobile that most of those other vendors can't. Like I said what the Huawai ceo is saying is nothing new, the pc industry went exactly through that. My only issue with it is that you and him have taken the wrong lesson from it.

7. cmdacos

Posts: 3807; Member since: Nov 01, 2016

Here's my list of manufactures that need to pull their mobile plug... HTC, LG, Sony, Essential, Motorola plus all the crap brands that put unibrows in their phone to try and capture the iPhone attention.

11. josephnero

Posts: 775; Member since: Nov 16, 2011

So you like less competition?

10. josephnero

Posts: 775; Member since: Nov 16, 2011

Sony has been profitable last year. So market share doesn't matter.

12. mootu

Posts: 1360; Member since: Mar 16, 2017

Sony as a company are profitable, but the mobile business was more than likely not. Sony would likely close the mobile part if it kept loosing large amounts each quarter, just like it did with the laptop side of the company. Same goes for LG who are losing close to $1 billion a year on mobile.

19. Subie

Posts: 2269; Member since: Aug 01, 2015

"On the mobile side, Sony reported sales of 759 billion yen, along with full year profits of 10 billion yen." http://www.xperiablog.net/2017/04/28/sony-mobile-reports-full-year-profit-expects-sales-growth-next-year/ But what will Sony report this year at the end of March...

20. Subie

Posts: 2269; Member since: Aug 01, 2015

Agreed. Market share does not guarantee profitability.

13. LumiaLover

Posts: 237; Member since: Sep 27, 2012

Nokia / HMD could be the winners here with their close cooperation with Google and excellent hardware.

15. toukale

Posts: 599; Member since: Jun 10, 2015

LOL at that line of argument. There is no long term future for any oem's that just ships hardware, just look at the pc industry for example, who in the pc industry are killing it? They are all just barely getting by with low single digit margins. The os vendor (Microsoft/Intel) are the ones ripping all the profits in that industry the last 20+ years. Everyone else are just getting by. It's even worst on mobile since the os vendor for android (Google) is also the platform owner and serves all the basic services for free in exchange for ads. So all those hardware oem's can't even compete on services since Google offer theirs for free.

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