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 current 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 to this story that may be a bigger challenge. for Apple and its iPhone in the long term, and marks a fundamental change 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 have soared 64%, putting it in second position ahead of Apple. Even those statistics forget that Honor – the Huawei spin-off caused by United States sanctions – is widely linked to Apple. If we add Huawei and Honor together, we’ll be back to the kind of dominance we saw before Trump.
This resurgence of Huawei is independent of the American generation that drove 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 user experience facilities. The American ban first eliminated Android and then the chipsets that made everything work.
Today, Huawei is back with a probable independent origin chain, a new operating system and a new ecosystem prepared to separate itself from the Android world from which it emerged. Nothing happens by chance in China. 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 manages to build a successful HarmonyOS ecosystem is enormous. Not only does this ensure secure independence, but it also gives Huawei the “third way,” the first major upheaval. in 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 resurgence has the analysts. The Chinese giant has announced its goal of separating from Android with HarmonyOS Next. And even Nvidia said that Huawei’s chipsets now make it a serious competitor in AI speed.
Five years ago, most of my caution about China was as much, if not more, than about Huawei. The irony is that Huawei – like TikTok has done since then – puts 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 compelling 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 the adoption of the Huawei-developed HarmonyOS cellular operating system, boosting Google’s Android-powered platform and Apple’s iOS in 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 across industries. “. ” 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 makers into the mix, starting with their Chinese counterparts,” and a few months later, “If Huawei can, if Chinese (and perhaps non-Chinese) smartphone manufacturers move from Android to their own operating formula and app store, It will be a great fortune. This will also pose a serious risk to Google’s blocking of the Android market.
This pilot task will be an attractive test to see to what extent China can function independently. If we remove Apple from the equation, and since Samsung is nowhere to be found, the OEM market is completely domestic. Add the ecological choice formula and the operational formula and you get this third way.
For now, this is just an internal factor in China, which has hit Apple hard given its exposure to this market. This doesn’t have much short-term implications beyond that. But in China, it’s now starting to look a lot more realistic than it did in 2019/20, when Huawei took a backseat and HarmonyOS was seen 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 American dominance in the smartphone sector and advertise its own solutions. Just take a look at their technique for purchasing telecommunication network equipment. But whether non-Chinese dealers would ever play is a much more difficult question.
But here’s the next potential twist in this ongoing saga: AI. Google is doing everything possible with its mobile and its applications. Samsung, the world’s leading manufacturer of Android devices, has placed Galaxy AI at the center of its strategy. And Apple announced that this fall’s iOS 18 will be all about AI.
AI in 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 thing today. Forget North America and Western Europe, instead take a look at the rest of Asia, Eastern Europe, and Africa, and learn about the appeal of a cheap AI device in those markets driven through an end-to-end Chinese ecosystem.
AI may simply be the leveller China wants for its next wave of foreign growth. And here again, the news that little by little built all the plays around an issue. Huawei’s ecosystem includes hardware, chipsets, devices, an operating system, and AI. Chinese OEMs are striving to adapt foreign advances in generative AI to devices. Everything fits.
At this point, much of this is speculation, but at least for the Chinese market, it’s predictable. We are precisely where I advised us to be. China discovers a third-way smartphone ecosystem and then looks for ways to advertise its 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 entails: bad news for Washington and California. Could it be that the US elections in November will bring about a rematch, a complete 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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