Huawei smartphone shipments could fall by 25% due to US sanctions

File Reuters

UNITED STATES (VOP TODAY NEWS) — Analysts believe that the Chinese company Huawei, affected by the exorbitant US sanctions, may cut supply by a quarter this year and face the possibility that its smartphones will disappear from international markets.

Deliveries of Huawei smartphones, the world’s second largest mobile gadget maker, could fall by 4–24% in 2019 if the US ban is maintained, according to Fubon Research and Strategy Analytics.

Several experts said they expected a reduction in Huawei’s shipments over the next six months, but declined to give an accurate estimate due to the uncertainty associated with the ban.

Last week, the US Department of Commerce banned Huawei from buying goods in the US amid growing trade disputes with China.

The ban applies to products in which as many as 25% or more of the technology or materials are manufactured in the United States, and therefore may affect non-US firms.

Technology companies, including Google and SoftBank Group-owned chip maker ARM, said they would stop supplying equipment and software for Huawei products.

“Huawei may disappear from the smartphone market in Western Europe next year if it loses access to Android,” said Linda Sui, director of wireless strategy for smartphones at Strategy Analytics.

She predicts that shipments of Huawei phones will drop another 23% next year, but she believes that the company will be able to survive while remaining in the huge Chinese market.

Fubon Research, which previously predicted that Huawei will ship 258 million smartphones in 2019, now expects the company to ship only 200 million at worst.

According to IDC, Huawei’s share is almost 30% of the global market, last year the company delivered 208 million phones, half – outside of China. The company considers Europe as the most important market for its premium smartphones.

Huawei says it has been developing technologies that will allow the company to be self-sufficient for many years. But experts do not believe, considering that the key components and intellectual property required for Huawei devices cannot be found outside the United States.

Perhaps, Huawei will have to lay off thousands of people, and “for some time the company will cease to be a global player,” said Stewart Randall, an analyst at Shanghai-based consulting company Intralink.

Analysts at brokerage and investment company CLSA believe that Huawei has enough resources to preserve the production of smartphones and telecommunications equipment for 5G networks in the coming months.

According to expert estimates, Huawei’s smartphone business’s inventory should last for five to six months, and Huawei’s reserves can reach 9-12 months in the 5G equipment industry, CLSA expert Sebastian Hou told CNBC.

CLSA believes that by the end of this year, Huawei will be able to ensure the smooth operation of its units in the production of smartphones and 5G equipment, although in the future the company’s fate will depend on the outcome of the US-China trade negotiations.

Also in an analytical note CLSA says that many may underestimate the potential of HiSilicon, which develops chips for Huawei devices. In the past few years, HiSilicon capabilities have grown significantly. According to experts, HiSilicon is able to provide up to 80-90% of Huawei’s needs.

However, analysts added that Huawei’s survival largely depends on whether TSMC, the world’s largest chip maker in the world, continues to work with it.

So far, TSMC has said that the company’s products for Huawei do not fall under the sanctions of Washington. The fact is that the US export rules apply only to those products in which the share of American technology exceeds 25%. According to CLSA estimates, TSMC semiconductor products range between 15% and 20%, which allows the company to continue business with Huawei.

However, CLSA does not exclude that Washington may tighten the rules.

In the event of a deterioration of the situation with Huawei, potential buyers of the company’s phones are likely to switch to Samsung Electronics and Apple Inc devices, as well as buy middle-class phones from OPPO and Vivo competitors.

According to Eugene Investment & Securities analyst Lee Sen-Wu, if Samsung succeeds in capturing half of the annual sales of Huawei smartphones outside of China, which is estimated at 100 million units, it will receive an additional 1.35 trillion won ($ 1.13 billion) operating profit. This amount is about 14% of the operating profit of the mobile business of the South Korean giant.

“Huawei smartphones will quickly lose their share in foreign markets if sanctions from software vendors increase,” the expert warns. He added that Samsung has a chance to “restore the growth rate of its smartphone business, which suffered from the rapid rise of Huawei.”

According to Counterpoint Research, in the first quarter of 2019, shipments of Samsung smartphones decreased by 8% year-on-year to 72 million units, while Huawei increased shipments by 50% to 59.1 million units. Although Samsung maintained its market leadership with a 21% market share, Huawei overtook Apple and ranked second in the rankings with a record 17% presence.

However, the US sanctions can play against Samsung, since the display division of the company supplies panels for Huawei smartphones. If sales from the Chinese vendor go down, the revenue Huawei provides to Samsung will fall.


This article is written and prepared by our foreign editors writing for VOP from different countries around the world – edited and published by VOP staff in our newsroom.

Our Standards, Terms of Use: Standard Terms And Conditions.

Contact us: [email protected]

VOP Today News — Breaking news source, real-time coverage of the world’s events, life, politics, business, finance, economy, markets, war and conflict zones.

Stay connected with VOP Today News on Twitter – VOP Today News on Facebook, also with our online services and never lost the breaking news stories happening around the world.

Support The VOP from as little as $1 – it only takes a minute. Thank you.

We are the Voice of People — the only funding and support we get from people – we are categorically not funded by any political party, any government somewhere or from any grouping that supports certain interests – the only support that makes VOP possible came from you.