Two weeks after being placed on an export backlist that resulted in Google and other tech companies ceasing relations, the business impact on Huawei is somewhat clearer. An analyst report today look at how the U.S. trade ban will affect smartphone shipments and the competitive market.
Ming-Chi Kuo of TF International Securities has a reliable supply chain track record that often details new Apple and Samsung devices ahead of time. A “Critical issues and scenario analysis” was released today and based on discussions with investors over the past two weeks.
The report features several primary points, including how Samsung is forecasted to the “primary beneficiary.” Kuo estimates that shipments from the South Korean manufacturer could increase from 290 million units to 300-320 million. This is predicated on Huawei declining in non-Chinese markets that previously accounted for 40-45% of total shipments. Apple might be the second beneficiary of the trade ban.
Apple’s market share gain in non-Chinese markets is likely to offset its market share loss in the Chinese market, and we expect that annual iPhone shipments could return to around 200 mn units.
One model indicates that Huawei smartphone shipments will decline by 8-10 million units per month in the second half of 2019 “before the company is able to find the replacement solution for Android+GMS.” If that replacement OS is able to launch by July, the “best case is that the Huawei smartphone shipment estimation in 2019 will revise down to 240-250 from 270 mn units.”
The conservative case is to revise down shipments to 180-200 mn units if there is no OS launch of its own in 2H19 or if this OS isn’t able to replace Android+GMS.
Time to market is a key determining factor in that alternate operating system’s success, according to Kuo. He also interestingly suggests that Huawei make the OS open source:
Let the own OS be an open source OS. The Chinese government could offer incentives to encourage major Chinese companies (e.g., key internet service providers and other Android brands) to work together to build ecosystems.
Meanwhile, according to the analysis, “losing brand trust due to unstable shipments in the long term” is the biggest issue facing Huawei.
We think the most important impact would be losing brand trust if Huawei couldn’t offer stable shipments due to the U.S. export ban. The motivations of customers (consumers and operators) to buy Huawei products might be lower due to unstable shipments. Also, component suppliers may have a concern about offering differentiation services (e.g., customized components). It’s not easy to save brand trust if it’s gone. Even if the U.S. cancels the export ban, customers may not turn back and buy Huawei products.
Other longer-term impacts include 5G, camera, and other smartphone technologies growing slower than expected. Additionally, China is expected to “accelerate the development of the domestically-made supply chain” even if the US halts the trade ban and other effects on Huawei recede.
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