While Apple’s sales figures in China for early 2024 have grabbed the headlines, there is a much greater risk that was also quietly displayed this week. And this is a real challenge for Google and Apple and may fundamentally replace the smartphone market in the coming years.
Apple’s ongoing struggles in China made headlines this week, with Counterpoint reporting that sales fell 24% in the first six weeks of the year. But that’s not the only compelling news this week: It’s the twist of this story that may be a bigger challenge. for Apple and its iPhone in the long run, and marks a fundamental shift in Google’s influence on 2/3 of smartphones worldwide.
Although China’s Vivo now leads the pack, dethroning Apple from the top position, the real winner is Huawei, whose sales are up 64%, putting it in second position ahead of Apple. Even those statistics forget the fact that Huawei’s Honor — the pivot — caused by United States sanctions is broadly on par with Apple. Add Huawei and Honor together, and we’re back to the kind of dominance we experienced before Trump.
This resurgence of Huawei is independent of the American generation that pushed the expansion of its smartphones last time. Huawei’s initial recipe was to largely mirror the functionality of iPhone/Samsung devices at a lower price and then run Android and its app ecosystem. and facilities for user experience. The US ban first removed Android and then the chipsets that made everything work.
Today, Huawei is back with a likely independent source chain, a new operating system, and a new ecosystem poised to separate itself from the Android world from which it emerged. The lessons learned from national independence for the 2019-2021 era are well planned. And the rest will be just as well planned.
I warned in 2019 that “the praise for Huawei over the next decade if it can build a successful HarmonyOS ecosystem is enormous. “This not only ensures independence, but also provides Huawei with the “third way,” the first major restructuring of the smartphone ecosystem in more than a decade. All of this would be bad news for Washington and California. »
Five years later and here we are. The speed of Huawei’s independent analysts resurfaces. The Chinese giant has announced its goal of separating itself from Android with HarmonyOS Next. And even Nvidia has said that Huawei’s chipsets now make it a strong contender in AI speed.
Five years ago, my utmost caution, if not more, about China as well as Huawei. It is ironic that Huawei – as TikTok has done since then – is putting all its efforts into escaping China’s gravitational pull and adapting as Western as possible, in order to compete with the American giants.
The threat to the comfortable smartphone world ruled through Apple’s walled lawn and Google’s Android ecosystem has been only a third way, born in the world’s largest smartphone market and bringing together consumers, developers and device makers to break the duopoly. Once again, here we are.
Perhaps even more enticing news this week is that Shenzhen, the city at the center of China’s high-tech industry, along with Huawei, is entering the fray.
As the South China Morning Post reports, Shenzhen “plans to boost adoption of the HarmonyOS cellular operating system developed by Huawei, pushing the platform with Google’s Android and Apple’s iOS into the world’s largest smartphone market.
Shenzhen does not plan to “increase the number of its local HarmonyOS-based programs and announce their adoption in various primary sectors,” however, the city’s action plan for 2024, released last weekend, states that “HarmonyOS-based programs will be followed in all sectors. “. ” that come with government services, education, healthcare, banking and finance, transportation, and welfare.
In 2019, I warned that “if Huawei takes a broad view, playing the role of licensor rather than product owner, then it will bring other device brands into the mix, starting with its Chinese counterparts,” and a few months later, “if Huawei can do it. If Chinese (and perhaps non-Chinese) smartphone makers move from Android to their own operating formula and app store, it will also pose a serious risk to Google’s lock in the Android market. .
This pilot mission will be an attractive test to see how independently China can operate. Take Apple out of the equation and since Samsung is nowhere to be found, the OEM market is completely domestic. Add the choice ecoformula and the operational formula and you have this third form.
For now, this is just an internal challenge in China, which has hit Apple hard given its exposure to that market. This has no short-term implications much beyond that. But in China, it’s starting to look much more realistic now than it did in 2019/20, when Huawei was in the background and HarmonyOS was perceived as a desperate measure to survive.
It’s easy to see how Shenzhen’s initiative can take China further: the country needs nothing more than to break the US dominance in the smartphone sector and advertise its own solutions. Just take a look at their technique to buy telecommunications network equipment. But whether non-Chinese dealers would ever play is a much tougher question.
But here’s the next potential twist in this ongoing saga: AI. Google is doing everything imaginable for its installations and mobile apps. Samsung, the world’s largest maker of Android devices, has placed Galaxy AI at the center of its strategy. And Apple has announced that this fall’s iOS 18 will be all about AI.
AI on devices requires expensive hardware. And this will benefit Chinese OEMs, whose strategy has been to have more devices for less money. This is how Huawei built its overseas expansion before the sanctions, and this is how Xiaomi is doing the same today. Forget North America and Western Europe, instead take a look at the rest of Asia, Eastern Europe and Africa, and find out about the appeal of a cheap AI device in those markets powered through a Chinese ecosystem end to end.
AI may simply be the leveller China wants for its next wave of foreign growth. And again, the news that little by little was building all the pieces around a theme. Huawei’s ecosystem includes hardware, chipsets, devices, an operating system, and the AI that underpins it all. Chinese OEMs are scrambling to adapt foreign advances in generative AI to devices. Everything comes together.
Right now, a lot of this is speculation, but at least for the Chinese market, it’s completely predictable. We are precisely where I advised us to be. China discovers a third-way smartphone ecosystem and then studies how to promote expansion into its vast domestic market and beyond.
The U. S. giant has had heavy exposure to China, which has been behind recent sales headlines and has put pressure on its stock value and long-term sales forecasts. The challenge is rarely very big with the iPhone 15 or iPhone 16. It’s much greater than that.
Huawei is back with all that it entails: bad news for Washington and California. Could the US election in November see a rematch, a full return to the battles of the past, and if so, what cards are left to play that were presented last time? We’ll have to wait and see. . .
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