Since launching its Mate 60 Pro series last August, Chinese tech giant Huawei has made a comeback in China’s smartphone market, overtaking Apple.APL-American Lead Association) from its pedestal.
Huawei and other local smartphone makers have seen double-digit growth this year, China smartphone shipments increase 8.9% year over year in the second quarter, according to the International Data Corporation.
Chinese companies Vivo, Huawei, Oppo, Honor (a former Huawei subsidiary) and Xiaomi took the top spots in China’s smartphone market, respectively. Apple, meanwhile, fell to sixth place. And despite price reduction on some iPhone models To compete, data showed that Apple’s year-over-year sales decreased by 3.1%.
Apple’s iPhone shipments in China saw a “marginal decline” in the second quarter of this year, Counterpoint Research said, noting that during the same period last year, Apple had the the third highest number of shipments —only behind Oppo and Vivo— while Huawei came in sixth place.
Apple’s decline in China may be related to many factors, experts said, including the The country’s faltering economy and the changes in the way its citizens view their country compared to the rest of the world amid the pandemic and the Increasing number of sanctions imposed by the West.
“There is a greater degree of nationalist sentiment right now within China, of buying local and buying local equipment rather than buying an American product,” Arthur Dong, a professor at Georgetown University’s McDonough School of Business, told Quartz. .
Huawei is the “national champion” of the Chinese economy
Since Huawei was included on the US trade blacklist In 2019, under former President Donald Trump, the company faced increasingly tough trade restrictions under President Joe Biden, especially on the latest generation of semiconductors, such as those from Nvidia.NVDA), Dong said.
The tightening of trade rules on China and Huawei is putting the tech company, which has ties to the Chinese government and which Dong called “a national champion of the Chinese economy,” “in a difficult situation right now.”
“Huawei is scrambling right now to try to find alternative sources for these very important chips, as well as some very significant self-development efforts to try to replicate these technologies and build chips on their own,” Dong said. “On that topic, China is having a really difficult time being able to replicate the chips that are in some ways driving AI advances simply because they don’t have access to the tools and machinery that build these chips, all of which are inside from the confines of US export controls.”
Dong said he doesn’t think the current situation will get better for Huawei. With another round of Restrictions expected In the coming months, the “gaps” that China and Huawei depend on to get around sanctions “will close,” he said.
Apple is no longer a status symbol
In the early 2010s, Apple was seen as a “legitimate, ultimate status symbol,” Andy Tsay, a professor of business and analytics at Santa Clara University’s Leavey School of Business, told Quartz.
Tsay, who is also a visiting professor in Peking University’s MBA program, said his friends in China “placed orders” for iPhones because Apple products were harder to find there and there were shortages. More Apple stores in the country.
“There was really no comparison, no competitor,” said Tsay, who has visited China roughly every year since 2006. “Now, people still think Apple is a good, legitimate luxury product. But the difference is that they are no longer fans.”
On his most recent visit to China a few months ago, Tsay asked his MBA students, part of China’s professional class, what they thought about their iPhones.
Although his students told him they were satisfied with their iPhones, they also said that their next phone “won’t necessarily be an Apple” and that “there are some Chinese options that are pretty good.”
“I will buy the phone that has the best price-benefit ratio,” Tsay’s students told him.
China’s deepening economic woes and a post-pandemic cultural shift
In 2020, Huawei had 18% of the global smartphone market, Dong said. Two years later, that figure fell to 2%, largely because Huawei was restricted from needed chips and components, he said, and he doesn’t think the company will recover any time soon.
“They still face challenges in the Chinese market because China’s overall consumer economy has taken a nosedive,” Dong said. “Apple’s problems are mainly related to the fact that the Chinese consumer has gone into hibernation and cannot afford this type of phone because their entire economy is, in a sense, collapsing.”
Huawei’s growing sales are “only because its phones are much cheaper than Apple’s,” Dong said. If Huawei and other Chinese smartphone makers offer cheaper alternatives, consumers will want those smartphones, he added.
China is “more isolated” than during its superpower status in the 2010s, Tsay said, likely due to anti-Chinese sentiments stemming from the pandemic.
Meanwhile, companies are “trying to stop becoming too dependent on China” and Western governments continue to ban China’s access to certain technologies, such as equipment to build advanced semiconductors.
“If you combine all that with the rise of domestic products, and if people, locally, can feel a little better about themselves by supporting the local team, there is a little something to the trend,” Tsay said.
Huawei chips could be “noisier and less biting”
There are two views on AI chips in Huawei smartphones, Dong said.
“On the one hand, it could send us an alarming signal that China has the ability to create its own chips,” Dong said. “But there are other stories that you’ll see where these chips have been looked at and the engineering analysis on them is that they’re not even close to the capabilities of what Nvidia is producing, that they’re actually several generations and years behind.”
Despite Huawei’s “headline-grabbing” announcements about developing its own chips, Dong said he finds it difficult to imagine how the company has manufactured its advanced chips without access to critical machines and components under trade restrictions.
“Maybe there will be more noise and less bite when it comes to this announcement that they have advanced level chips,” Dong said.
The competition between Huawei and Apple goes beyond artificial intelligence functions
The competition between Apple and Huawei in China is also tied to the difference between what Apple can offer its American consumers versus its Chinese consumers, Tsay said.
Apple’s advantage in the United States is its control over its ecosystem, according to Tsay, which allows it to offer a differentiated user experience. China, however, has a “unique situation” in that its “version” of Apple’s iOS is WeChat.
“You almost don’t need the tightly integrated, walled garden of Apple’s ecosystem in China to deliver that experience because it already exists within the world of WeChat,” Tsay said. “That gives local cell phone companies an advantage in that they can use Android or their own version of Android or a completely new operating system; They don’t need to create that autonomous ecosystem that Apple has worked so hard to create over the years because Tencent (TCEHY) already did it for them by creating WeChat.”
Tsay said the only point where the two companies differ is on Apple’s security and privacy features. “Of course, no one in China has any expectations of security and privacy when online,” he said.
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