As we slowly creep closer to the end of Washington's 90-day grace period for Huawei, the company's anxieties are rising as Huawei tries to figure out how it will sell smartphones without Google's Android operating system.
After revealing on Monday that the company expects sales to decline as much as 60 million units across foreign markets due to the Trump Administration's ban, a Bloomberg report detailed the company's new strategy to help it cope with a prolonged trade fight: Focus on its domestic smartphone market, which it already dominates with a one-third market share.
In many foreign markets, losing access to Google's software and app store will transform Huawei phones into "paperweights," one analyst said. With access to Google less of an obstacle for consumers on the mainland, Huawei is hoping that its plan to combine cutbacks to overseas markets with more investment at home will help insulate it from Washington. Currently, the company is weighing whether to pull its soon-to-launch Honor 20 phone, which was built to run on Android 9. Huawei is also delaying the introduction of its own 'foldable' smartphone
Priced at $500, the Honor 20 was supposed to be the latest in a line that’s won over budget-conscious consumers. While the phone is powered by the company’s own Kirin chip, meaning it doesn’t need Qualcomm Inc. processors, the Google ban will make the company's phones significantly less functional for millions of users accustomed to Google's software and app store.
Huawei is also delaying the launch of the foldable Mate X to September to conduct more testing.
The company's founder and former CEO said in an interview that the hit to Huawei's revenue from the blacklisting could be as large as $30 billion, per WSJ.
While its hopes of overtaking Samsung as the world's largest smartphone seller have been (at least temporarily) dashed, Huawei hopes that, by turning inward, it can blunt the impact on one of its most important businesses. How does it plan to do this? By "investing in distribution" and "marketing."
Faced with lukewarm international demand, Huawei - which in 2018 overtook Apple Inc. to become the world’s No. 2 smartphone vendor - is turning inward.
Huawei aims to grab as much as half of the smartphone market in China in 2019 to offset the decline overseas, the people said, citing internal discussions about year-end goals. While the domestic market is shrinking, Huawei hopes to boost shipments by investing in marketing and expanding distribution channels, one of the people said. Some executives have argued that the target was too high to achieve, the person added.
Huawei’s China smartphone market share could grow to as much as 45% versus a previous estimate of between 30%-35% thanks to "a more proactive sales strategy" after the Trump ban, TF International analyst Ming-Chi Kuo wrote in a report on Wednesday.
In other words, the company is hoping that the patriotic Chinese consumers will forego iPhone purchases and bail it out. Or, perhaps, that the yuan will depreciate enough to offset any supply chain disruptions.