ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintIcon Twitter
Business

Huawei keeps its sights on Apple amid battle at home

TAIPEI -- Huawei Technologies, China's largest smartphone maker, boasted on Tuesday that it may soon challenge Apple in the global market, since it expects shipments to grow this year while iPhone demand is slipping.

In 2015, South Korea's Samsung Electronics was the world's top smartphone brand by volume, shipping more than 300 million handsets. Apple ranked second, with 230 million handsets shipped. Huawei trailed the U.S. titan, shipping 108 million units.

The ranking is unlikely to change this year, but the gap between Apple and Huawei is expected to shrink.

Huawei's share of the global smartphone market in May reached 11.4%, "and it's still increasing," Richard Yu, chief executive of the company's consumer business group, said on Tuesday. "Now, the market share of [Apple] is about 13% to 15%. So Huawei has a good chance of becoming No. 2 or even better."

Yu, who oversees Huawei's smartphone and tablet operations, added that his group's revenue will grow at a higher rate than shipments this year, thanks to an increase in the average sale price of its handsets. For the January-June period, Huawei's consumer business group generated 77.4 billion yuan ($11.59 billion) in revenue, up 41% on the year. 

Huawei's sights are not set only on Apple. The Chinese company initiated a patent lawsuit against Samsung in the U.S. and China earlier this year. As a counter move, Samsung sued Huawei for infringing on its patents in China earlier this month.

For 2016, Yu said Huawei is maintaining an earlier target to ship 140 million smartphones, a nearly 30% increase from last year. In contrast, Apple's shipments are projected to drop slightly.

Pressure on the homefront

Yu's consumer business group is expected to book $28 billion in revenue, a 40% on-year increase. As brisk as that sounds, it pales in comparison to the 73% surge in 2015.

The slowing growth reflects fierce competition in the Chinese smartphone market. Huawei's overall operating margin has also taken a hit.

On Monday, Huawei reported that while its overall revenue rose 40% on the year to 245.5 billion yuan in the first six months of 2016, its operating margin narrowed to 12% from 18% during the same period last year.

Yu acknowledged the battle at home but said Huawei is primed to secure more domestic market share. The company expects to grab a 30-40% slice of the market, compared with 20% this year.

Yu predicted that most of China's handset makers will disappear "in three to five years" as a result of the stiff competition.

Bill Lu, an analyst at UBS, said in June that as far as he could recall, the top smartphone makers in China change virtually every year -- reflecting the intensity of the competition. This raises the question of whether Huawei can live up to Yu's optimistic outlook. 

"In June, Huawei actually told its assemblers that it has cut its goal for this year to 115 million units," said Jeff Pu, an analyst at Yuanta Investment Consulting. "Meanwhile, it is facing serious challenges from Oppo, which has superior marketing strategies and offline retail channels."

Eventually, Pu said, "Oppo is likely to overpower Huawei in the Chinese market."

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends July 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more