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Huawei crackdown

Huawei steps up challenge to Apple with China flagship store

Shanghai opening intensifies head-to-head retail battle amid tech clash with US

People stand in line in front of Huawei's new flagship store, as it officially opens in Shanghai on June 24.   © Reuters

TAIPEI/SHANGHAI -- Huawei Technologies has opened its largest flagship store along one of China's most exclusive shopping streets, defying a tightening U.S. crackdown in a move to grab a larger domestic market share at the expense of rivals such as Apple.

Queues formed early on Wednesday at the three-floor store in a stylish art deco building in Shanghai, which is a statement of intent from the world's second-biggest smartphone maker. It is not just a challenge to Apple -- which has its own flagship store across the street -- but also to South Korea's Samsung, which has unsuccessfully tried to invade Huawei's home turf.

At a time when Huawei is being pressured by the administration of U.S. President Donald Trump and its throttling of key components because it believes the Chinese group is a security threat, the store opening represents a chance to appeal to the patriotism of Chinese consumers.

"My wife loves Apple [and] I use my old Samsung phones, but my family always laughs at me," Lance Long, an exhibition manager and local Shanghai resident, told the Nikkei Asian Review. "But my parents and older relatives have really turned to Huawei since last year to show their support for the company after it suffered from the U.S. clampdown."

Long added: "Huawei's store will definitely become an attraction ... For local people like me, rather than Huawei smartphones, I think it's a good opportunity to experience some of its smart home speakers, routers and smart displays that I haven't had a chance to see before."

A crowd of mainly young visitors waited before the store threw its doors open. "I am here to buy the latest P40 smartphone and experience other product lines," said a customer who gave his surname as Yang. A student said: "I am here to support Huawei."

Chen Nixing, a retired man, said: "I have been waiting for today's opening. Huawei's technology is better than others and I am here to check out the latest."

The opening of the Shanghai store changes the focus -- at least momentarily -- of the battle between Huawei and the U.S.: a battle over tiny components found in phones, 5G equipment and other electronics. Washington's crackdown last month extended to all companies in the global tech supply chain, seeking to stop them using U.S. equipment to fabricate chips for Huawei and its semiconductor arm HiSilicon, China's top chip developer.

The supply chain disruption led Huawei to delay the production of components and parts for its upcoming premium Mate series -- the company's answer to Apple's iPhones each autumn, Nikkei reported.

Huawei's flagship store in Shanghai closely resembles that of the Apple Store across the street, as the Chinese giant looks to take a bigger bite out of the domestic market.

Wednesday's opening emphasizes Huawei as a consumer brand, with the company wanting to engage more with consumers as part of a campaign to rescue itself in the face of geopolitical headwinds.

Another Shanghai resident and tech industry employee told Nikkei that more than half his friends and colleagues had turned to Huawei for smartphones after the U.S. placed the company on a blacklist. "I really see fewer local people using Oppo, Vivo and Xiaomi," he said, referring to other domestic brands. "It's very natural that when Huawei is facing a battle for survival, it has to secure its home market."

Apple customers, however "are still quite loyal," the man admitted.

Huawei's store will host free daily lectures on topics from video production to fitness and music. Similar to Apple, there will also be around 220 consultants offering translations in 10 languages to help customers.

"Huawei is really showing its muscle in launching such a luxury store in such difficult times," Joey Yen, a tech analyst at research company IDC, told Nikkei. "It's telling the world that Huawei is still offering the best products and can stand head-to-toe with Apple."

Yen added that no matter what happens outside China, "opening a huge flagship store for Chinese consumers shows that Huawei wants to reinforce its commitment to partners and retailers, and even to expand its large domestic market share."

At almost 5,000 sq. meters, Huawei's Shanghai store is redolent of an earlier era of Chinese commerce, having once housed a well-known fabric and tailors' shop. It later became the flagship store of U.S. fast-fashion brand Forever 21 before the retailer filed for bankruptcy in 2019.

Huawei, which says its products are in 70,000 stores worldwide, is shifting its retail strategy, moving from mainly collaborating with worldwide operators and retail channel partners to running its own stores like Apple.

Experts say this could help the company better shape and control its brand image.

Last year Huawei opened what it called its "first global flagship store" last September in downtown Shenzhen, where the company is based. The three-story showroom is served by a 5G network and demonstrates a wide range of Huawei devices -- from smartphones, smart displays and speakers to notebooks, routers and wearable devices. Big wooden display tables mimic those found in Apple stores.

Huawei has also opened big marquee stores in Madrid and Paris to boost its brand in Europe. However similar plans for London and Vienna have been postponed, with Huawei declining to say if the delay was linked to Washington adding the company to its so-called Entity List in May 2019. Huawei now says its next European store will be in Berlin.

During the Shanghai grand opening, Huawei demonstrated augmented reality technologies dubbed Cyberverse, which can display virtual fireworks and integrate virtual avatars into real scenes through the lens of its P40 smartphones. Apple has also bet big on AR, with upcoming iPhones expected to have a rear 3D camera, which can sense the environment and surrounding objects.

Huawei had a 38% share of China's smartphone market last year and has continued its ferocious expansion, hitting 41% for the January-March quarter.

Huawei has taken Apple head on, with a sign announcing the opening of its Shanghai store planted directly in front of its U.S. competitor.

Apple's flagship store on Shanghai's Nanjing East Road is just a one-minute walk from Huawei's. The U.S. company ranked fifth in China with only 9% market share. Samsung, which also competes head-to-head with Apple and Huawei globally, also opened its first flagship store in China on the same street last year, but is lagging in the Chinese market, accounting for only 1% of smartphone sales there in 2019, according to IDC.

Huawei still has a way to go to catch up with the retail strategy used by Apple, which opened its first Chinese store in 2008 in Beijing. Apple has since expanded to around 42 in the country, including seven in Shanghai, and more than 500 globally. Apple is known to its retail partners and suppliers as a "perfectionist," insisting that even light bulbs in suppliers' production sites comply with certain standards.

All Apple Store staff are direct employees and are trained to hone their technical product knowledge before they can serve customers.

Apple CEO Tim Cook said during this year's annual shareholder meetings that the maker would love to operate all Apple Stores by itself. "I don't want somebody else to run the brand for us," Cook said of the company's retail strategy. "We like to do things our way."

Additional reporting by CK Tan in Shanghai

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