Huawei and Xiaomi bounce back in China’s mobile phone market
Huawei and Xiaomi are making a strong comeback in China's smartphone market.
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The backstory: A few years ago, tensions flared between Huawei and the US over national security concerns. The Trump administration imposed strict restrictions on the Chinese tech giant, citing worries about data breaches and espionage. This led to Huawei's blacklisting and had a big impact on its global smartphone business.
As the Biden administration took charge, restrictions tightened with new curbs imposed on advanced semiconductor tech exports to Chinese companies, escalating the US-China tech competition. On the other side of the globe, China's mobile industry also faced a contraction mainly due to excess inventory during the zero-COVID lockdowns.
More recently: A few months ago, Huawei grabbed headlines by introducing smartphones with a groundbreaking 5G chip produced in China, which was first seen in the Mate 60 model. This sparked a lot of questions about just how advanced China was in making this kind of tech domestically despite those international export curbs.
Meanwhile, Xiaomi's 14 series has been making waves since its late-October release, accumulating over a million orders. The company's market value even surged by around US$20 billion, bouncing back from a June low, thanks to the success of its latest handsets and ventures into electric vehicles (EVs) and other sectors.
The development: Huawei and Xiaomi are making a strong comeback in China's smartphone market, overcoming oversupply challenges and economic strains and getting double-digit growth in October. According to Counterpoint Research, phone sales in China, the world's largest mobile market, surged by 11% last month compared to the same period a year ago. Huawei saw an 83% boost, while Xiaomi had its sales jump by a third. Counterpoint emphasized Huawei's contribution to this boom, particularly with its new Mate 60 series.
But now, the dynamics have shifted, with Counterpoint noting a new challenge for Chinese phone makers. With this recent boom, for example, Huawei is having a hard time making enough devices to meet this unexpectedly high demand.
This growth by Chinese phone companies can also mean challenges for Apple, which has gotten roughly 20% of its revenue from China in recent years.
Key comments:
"The clear standout in October has been Huawei, with its turnaround on the back of its Mate 60 series devices. Growth has been stellar," said Counterpoint China analyst Archie Zhang.
"Huawei’s ability to scale up to this new normal will be a major determinant not just for their own growth, but for the broader market,” said Ivan Lam, a senior Counterpoint analyst.
"The revenue guidance downward revision could be the last cut for TSMC as the inventory correction cycle is likely coming to an end in 4Q23, in our view and we see TSMC well positioned for a strong growth outlook in 2024," said Goldman Sachs in a research note.
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