Samsung smartphones to benefit from US-China trade war

The escalating global politico-economic risks are expected to benefit Samsung smartphones but impact the overall global demand this year, especially for Apple and Huawei. Mia Huang, analyst at TrendForce, said that the demand has weakened even more than originally predicted due to the ongoing trade war between the US and China.

“We previously forecasted this year’s total smartphone production volume to stand at around 1.4 billion units (a 3.7% decline from 2018), with the worst case scenario previously forecast to be negative growth of 5% but we have now lowered that estimation to negative 7%,” she said.

Even though Samsung is expected to benefit from the stalled US-China trade talks, the top six vendors for this year remain the same Samsung, Huawei, Apple, Oppo, Xiaomi and Vivo. Therefore, TrendForce adjusts its predictions for Samsung's total production volume upwards back to a level of above 300 million units. 

TrendForce noted that Samsung produced 293 million smartphones and Huawei produced 205 million units in 2018.

Huang said that due to the enormous fluctuations in the market and the possible influences to shipments that may arise from the G20 negotiations, “we currently predict Huawei’s total production volume this year to go below 200 million units”.

“For Huawei’s smartphone production volume, our forecast made earlier this year may probably be cut by 30% as of now despite benefiting from domestic demand in the second half-year and softening the impact of markets abroad,” she said.

Huawei’s main markets consisted of Europe and South America in the past, but she said the competitor Samsung also has a long history in these regional markets and is predicted to emerge as the direct beneficiary from the politico-economic risks.

Huawei founder Ren Zhengfei had indicated that its revenues may continue decreasing towards the end of this year but the US ban will not lead to negative growth. After blacklisting Huawei, the White House has issued three-month reprieve to allow US companies to continue to do business with the group, until August 19.

“There is no clarity yet and we don’t know really what is going to happen. Right now, it is regarding the security threat coming from the telecoms equipment and as smartphone business is linked to it, Huawei and ZTE are under the microscope,” Anshul Gupta, Research director at Gartner, said.

Huawei to release its own OS

Tarun Pathak, Associate Director, Counterpoint Research, said that Huawei is making its mark in the premium segment, a segment which is growing fast, a seamless integration of hardware and software is a must to drive consumer experience. In the absence of Android licensing, he said that Huawei will have a task to cut out to drive or live up to the Android experience. 

Even if Huawei releases its own operating system based on Android, Pathak feels that it will be a “daunting task” for Huawei to maintain it and will have to rely on third-party Android app markets where users will have to sideload some of the core applications.

Moreover, he said that Huawei users will also lose access to critical security updates and scanning of Android apps from Google which could make it less reliable. “The quality of apps also could be an issue as some of them might be dated or less secure...thus making the out-of-the-box experience less appealing to Android driven users”. There are reports that Huawei is considers using Sailfish OS instead of its own OS.

For the near-term, until the US-China trade-war situation is amicably resolved, he said that Huawei will face a speed bump which would derail its ambitions to narrow the gap with Samsung and become the largest smartphone brand in the coming years.

On the other hand, Huang said that Apple is also feeling the effects of the trade war, suffering a blow to sales performance in Chinese markets. TrendForce predicts iPhone’s market shares in China to drop from the 7% originally projected to 5%, with this year's production volume adjusted down from 190 million units to 183 million.

And while Xiaomi, Oppo and Vivo will feel the fallout from Huawei's outspoken domestic presence, Huang feels that the three brands may, however, find consolation in the gains made in Southeast Asian and Indian markets and hope to trend flat in production volume this year compared to 2018.