The world's top smartphone market has a new number one brand

The world's top smartphone market has a new number one brand
In 2019, the U.S. placed Huawei on the entity list. Why? The Trump administration considered Huawei to be a threat to U.S. national security because of its alleged ties to the Communist Chinese government. Some also noted that Huawei had recently surpassed Apple as the second largest smartphone manufacturer in the world and wondered whether that had anything to do with the U.S. action. Some might argue that in some regard, placing Huawei on the entity list might have backfired since it banned the firm from its U.S. supply chain and those companies had done $18 billion with Huawei the year before.

Huawei has been replaced as the top smartphone brand in China

The Trump administration might have thought that it had sunk Huawei's Battleship by forcing it to replace the Google licensed version of Android with the open source version. But early last year, Huawei had actually taken over the top spot briefly to become the world's largest smartphone manufacturer for a month. That forced the Trump administration to take the next step. The Commerce Department tightened up an export rule which now prevents foundries from delivering cutting-edge chips made using American technology to Huawei without a license.

Announced exactly a year to the day as the entity list placement, this was the straw that broke the camel's back. It prevented Huawei, at the time the second largest customer of contract foundry TSMC (behind Apple) from receiving the chips that power its flagship phones. And TSMC had just started churning out Huawei's most technologically advanced 5nm chip, the Kirin 9000; that component was earmarked for the sequel to Huawei's foldable phone along with the latest versions of its flagship handsets. Where the placement on the entity list might have failed, the chip shipping ban was a grand slam as far as the Trump administration was concerned. The move forced Huawei to sell its Honor sub-brand for $15 billion, a shrewd move by the Chinese manufacturer since it moved Honor out of Huawei's orbit and prevented the U.S. restrictions from affecting it.

Originally when the U.S. started picking on Huawei, Chinese consumers backed up the company big time. During the third quarter of 2019, the company had a 42.4% market share of smartphone sales in China. According to estimates made by Counterpoint Research, that number is down to 16% and there is a new top smartphone brand in the country. For the first time ever, Oppo is on the tongue of more smartphone buyers in China than any other brand. Next week, the company is expected to roll out three new Find X3 handsets including the flagship Find X3 Pro.

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Counterpoint estimates that Oppo had 21% of the Chinese smartphone market in January with Vivo's 20% share placing it second. Huawei, Apple and Xiaomi are in a logjam at 16%. Varun Mishra, Senior Analyst at Counterpoint Research, explained how Oppo made its way to the top in China. "Oppo has been successfully able to reposition its product lines in 2020," Mishra said. "The rebranding of the Reno series and launching a more capable device at a lower price point than its predecessor helped Oppo capture the affordable premium segment. The strong momentum of the A series in the mid segment strengthened the product portfolio for Oppo and it was able to cater to the 5G demand in China across a wide price band. This was further helped by the decline of Huawei."

The scary part for Huawei is that the U.S. ban will soon leave it with no inventory of 5G components. Considering that more than 65% of the devices sold in China during the fourth quarter of 2020 supported 5G, Huawei faces some serious trouble ahead. The company has tried to maintain an optimistic view and its homegrown HarmonyOS will make its smartphone debut on the Mate X2. But the real mood inside the company just might be described as gloomy, at least for the time being. Tom Purdy, the Chief Security Officer of Huawei USA said, "It’s been a very difficult struggle. But we're taking a very long term approach, and it's helping us prioritize which products are most important, which components do we have." Purdy says that Huawei would like to eventually be able to work with Google again. And as far as that is concerned, it will be up to President Joe Biden to remove the restrictions on Huawei.

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