October 30, 2019 / 3:13 AM / 22 days ago

Huawei tightens China market hold with 42% share at expense of iPhones: Canalys

SHENZHEN, China (Reuters) - Huawei Technologies captured a record 42% of China’s smartphone market in the third quarter as local consumers rallied behind it after U.S. sanctions, leaving Apple (AAPL.O) to languish towards the bottom of the pile, market data showed.

FILE PHOTO: A Huawei company logo is pictured at the Shenzhen International Airport in Shenzhen, Guangdong province, China July 22, 2019. REUTERS/Aly Song

Apple’s market share in China slipped to 5% from 7% in the year-ago quarter, according to a report that market research firm Canalys released on Wednesday, hours before the Cupertino, California-based company was to report quarterly results.

The July-September quarter marked the iPhone’s weakest sales in China in five years, said Nicole Peng, vice president of mobility at Canalys, with shipments likely down more than a quarter.

Concerns about slowing iPhone sales in China have dogged Apple for many quarters even as the global smartphone market has slowed and a resurgent Huawei has hit record sales in the country.

Huawei, the world’s No. 2 maker of smartphones, was all but banned by the United States in May from doing business with American companies, significantly disrupting its ability to source key parts.

The company was then granted a reprieve until November but the blacklisting pushed up patriotic purchases of its smartphones in China, helping it more than offset a shipments slump in the global market.

With the expected rollout of the super-fast 5G network in China in coming months, Huawei’s advantage is expected to grow further.

“Huawei is in a strong position to consolidate its dominance further amid 5G network rollout, given its tight operator relationships in 5G network deployment, and control over key components such as local network compatible 5G chipsets,” Peng said.

“This puts significant pressure on Oppo, Vivo and Xiaomi, which find it very hard to make any breakthrough.”

Oppo, Vivo, Xiaomi (1810.HK) and Apple together accounted for 50% of the market in the third quarter, down from 64% a year earlier.

Huawei said last week it had sold more than 200 million phones globally in 2019, 64 days earlier than in 2018. The company’s profits have remained resilient and revenue jumped 27% in the third quarter.

The Chinese smartphone market contracted by 3% in the third quarter, and Huawei smartphones made up 41.5 million of the 97.8 million shipped in the period, Canalys said.

Apple and Xiaomi did not have an immediate comment on the Canalys data. Huawei and Oppo declined to comment, while Vivo said it does not comment on third-party reports.

IPHONE 11 HOPES

Apple launched its latest iPhone 11 range in China in September to tepid responses on social media, but shoppers have warmed to the model’s additional cameras and cheaper pricing.

“Apple is more prepared than previous years to face strong headwinds in China,” said Canalys analyst Louis Liu, noting the iPhone 11’s camera improvements and lower launch price “were critical market stimuli”.

Slideshow (5 Images)

The company’s quarterly results likely received a boost from the launch and accounted for 40% of its shipments, with customers willing to wait two to three weeks to receive shipments of the newer models, Peng said.

“But it faces a looming challenge, as Chinese vendors and operators are set to drive heavy marketing and promotions around 5G in the next two quarters,” Liu added. “This could steal its thunder.”

The U.S. tech giant is expected to report flat revenue and a dip in earnings in the September quarter, based on Refinitiv data.

Reporting by David Kirton; Editing by Sayantani Ghosh and Muralikumar Anantharaman

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