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<\/div>VCG via Getty Images<\/small><\/p>\n<\/figcaption><\/figure>\n
If Huawei was from anywhere but China, its consumer smartphone business would not have survived the unprecedented blacklist that has stripped away the company\u2019s U.S. supply chain. Clearly, though, with one or two exceptions, if Huawei was from anywhere but China, it would not have been blacklisted in the first place. But when the world\u2019s largest smartphone market rallies around one of its own, strange things can happen.\u00a0Huawei\u2019s smartphone business has done more than survive\u2014it has thrived. <\/p>\n
Huawei had set the headline goal for 2020 to overtake Samsung as the world\u2019s leading smartphone manufacturer by volume. With the blacklist in effect, most assumed that goal was lost. It is not. \u201cAs the new situation has emerged, it is too early to say whether we are able to achieve the goal,\u201d Zhao Ming, the president of Huawei\u2019s Honor brand said in June. But as things stand, Huawei will be knocking on Samsung\u2019s door by the end of 2019 and overtaking its Korean rival at some point next year.<\/p>\n
At the end of October, I reported that Huawei had posted extraordinary growth in smartphone shipments in its home market in the third quarter of the year. \u201cThis is Huawei\u2019s sixth consecutive quarter of double-digit growth amid a gloomy China market,\u201d market researcher Canalys said, as the company posted 66% annual growth, reaching a staggering 42% market share, leaving Apple and its domestic rivals lagging.<\/p>\n
Now Canalys has released its global market analysis for the third quarter, and while the headline levels of Huawei\u2019s growth beyond China are much lower, the story is the same. Huawei\u2019s growth continues unabated. Apple has fallen further, and while Samsung posted annualised growth for the quarter of 11%, Huawei\u2019s was almost three-times better at 29%. The blacklist took an inevitable toll on international sales\u2014this was always the risk, and the company shipped less smartphones outside China than a year earlier. But such was the strength of its domestic market, that it didn\u2019t matter.<\/p>\n CANALYS<\/small><\/p>\n<\/figcaption><\/figure>\n Stepping back from the most recent quarterly results, let\u2019s put this into some kind of perspective. In 2017, Samsung shipped more than 316 million phones, Apple more than 215 million, Huawei just 153 million. Last year, Samsung and Apple both shrunk sales\u2014down 7.2% to around 294 million units and down 1.7% to 212 million units, respectively. Huawei posted growth of 34.5%, shipping 206 million units. <\/p>\n CANALYS<\/small><\/p>\n<\/figcaption><\/figure>\n In October, Huawei announced that it has already shipped more than 200 million smartphones in 2019, a full two months ahead of reaching that same milestone in 2018. The company had been targeting 300 million units for the year, although that has now been cycled back to 270 million. In the all-important fourth quarter, the \u201choliday quarter,\u201d last year Huawei shipped 60 million units. Its annualised quarterly growth so far this year is 50%, 8% and 29%. It is not inconceivable that it can surpass those 270 million units, especially with buoyant demand for the Mate 30 Series. The company claims the first run of 100,000 Mate 30 5G units sold out in under a minute. <\/p>\n Samsung sold just under 294 million units last year. Its annualised quarterly growth so far this year lags far behind Huawei\u2019s at -10%, 6% and 11%. Samsung is likely tracking around 20-40 million units ahead of Huawei this year, Apple could be as much as 60 million units behind. Huawei will be knocking on Samsung\u2019s door by the end of the year, and is almost guaranteed to reach that coveted top spot pretty quickly in 2020. Despite the blacklist, it looks set to do exactly what it said it would.<\/p>\n Huawei knows that there are some serious qualifiers behind its continued growth: A shifting balance to China, keen pricing, heavy marketing, huge investments required into an ecosystem that can target international markets. The real issue, though, is simple mathematics. There is only so far the company can take its China growth\u2014China is vast, it is not unlimited. But as Huawei\u2019s domestic rivals suffer in its wake, as Samsung struggles in China, as Apple languishes, it can likely hit a 50% market share, perhaps more. But then it becomes much harder. More critically, though, the phones shipping in China are skewed away from the pricey high-margin flagships and towards lower priced devices. While unit volumes paint a pretty picture, the combination of device mix and pricing will take a toll on profitability. <\/p>\n A critical holiday season for all, then. Apple will be looking for a boom in iPhone sales off the back of the iPhone 11 launch. Sales of its flagship devices have dropped steeply in the last year and it needs to show how it can compete with the releases of 5G devices from Samsung and Huawei and others as it awaits next year\u2019s models. Samsung needs a successful holiday season to keep its lead on Huawei. And Huawei needs to consolidate a stellar growth year and get close to its goal. <\/p>\n And then into 2020. It is very possible that Huawei will hit its goal just as its life gets much harder. A year on from the P30 release, it will not be able to launch an update with Google and full-fat Android onboard. It will be entering uncharted territory in market saturation if it manages to post similar levels of growth at home to this year. Much will depend on the Mate 30, its sales in China and its ability to persuade enough consumers outside China to take a Google-less punt. The picture could well be more volatile next year, quarter by quarter.<\/p>\n For now, though, the painful message in Washington is that the blacklist has not caused the impact its architects had expected. Huawei is still signing 5G contracts. And while the totemic U.K. 5G decision has been delayed until after the December election, the feeling remains that the company will get some kind of pass. There is clearly a patriotic dimension in China behind Huawei\u2019s growth\u2014and it hasn’t hurt the company\u2019s aspirations in Russia, either, where it is now the largest smartphone brand. As I\u2019ve commented before, the less an impact the blacklist has on Huawei, the more likely it is that the Trump administration will uses it as leverage in the ongoing trade talks. And for Huawei, that is what it really needs. A break in the politics. <\/p>\n Here\u2019s an even more serious question, though, for the rest of the smartphone industry. What can Huawei achieve if it does secure the return of Android and Google? It will have built an unassailable domestic position and attained its global goal. It will have lost the headline impediments to international sales. For the industry, that is a question worth serious evaluation.<\/p>\n<\/div>\n![\"Screenshot](\"https:\/\/specials-images.forbesimg.com\/imageserve\/5dbd2f95ca425400079c4cd4\/960x0.jpg?fit=scale\")
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