Samsung to Gain from Huawei's Difficulties


Wednesday, May 29, 2019   / 10:40AM / Fitch Ratings / Header Image Credit: Reuters


Turmoil from the US-China trade dispute brings Samsung Electronics Co., Ltd. (AA-/Stable) an opportunity to strengthen its position in the structurally weakening smartphone market, Fitch Rating says. The loss of access to Google's Android operating system could significantly hurt Huawei Technologies Co., Ltd's smartphone sales outside China, which could help Samsung improve its market share. 

Fitch expects the challenging outlook for smartphone manufacturers to continue in 2019 in light of weaker demand due to saturation in developed markets and a lengthening in the replacement cycle. Shipment volumes fell 6.6% yoy in 1Q19, according to the International Data Corporation. Smartphone vendors shipped a total of 311 million units in 1Q19, the sixth consecutive quarter of decline. Huawei was the only major company to show growth with a remarkable year-on-year volume growth of 50%. Huawei solidified its market position as the second-largest smartphone manufacturer by offering a broad range of high-quality devices at attractive prices. Its shipment market share expanded to 19% in 1Q19 from 12% in 1Q18, closing the gap with Samsung's 23%. 

Samsung's handset segment contracted in 1Q19 with revenue and operating profit declining by 6% yoy and 40% yoy, respectively. Volume dropped 8.1% yoy in 1Q19 as 71.9 million handsets were shipped, despite the launch of its new flagship model Galaxy S10 series. Apple Inc.'s iPhone shipments contracted 30.2% yoy in 1Q19 due to the double whammy of the US-China trade dispute and increasing competition from Huawei's high-end smartphones. Price cuts in China throughout the quarter along with favourable trade-in deals in many markets were not enough to encourage customers to upgrade. 

The restrictions on US companies providing hardware, software and components to Huawei's smartphone business could stir up the smartphone industry by pausing Huawei's positive momentum. Consumers used to the Android operating system are likely to consider buying other smartphone brands than Huawei, and Samsung could restore market share especially in regions such as Europe, Asia ex-China and South America where Huawei achieved most of its growth in recent quarters. Huawei generated 49% of its revenue outside China as of end-2018. Apple could be another victim of the US-China trade war and its market-share loss may accelerate in the Chinese market, benefitting other local smartphone brands. 

Huawei is also the biggest competitor of Samsung in the area of new generation smartphones such as 5G and foldable phones. US-Huawei trade issues may give Samsung an opportunity to acquire an early lead in these markets, although this will depend on how long the sanctions will last. UK and Japanese companies have followed suit in delaying the launch of Huawei's 5G smartphones, which could help boost the sales of Samsung and LG Electronics Inc. (BBB-/Stable) - two of a few 5G handset makers with ready-to-market products - at least in the short term.

Proshare Nigeria Pvt. Ltd.

Related News

1.       Huawei Overtakes Apple to Become Second Biggest Smartphone Maker

2.      Countdown To The Singularity 2013 – 2038

3.      Get Prepared for Tomorrow’s Opportunities, Start your Big Data Analytics Journey Now

4.      Global Telecom's 5G Spend Will Persist, Even in a Downturn - Fitch

5.      Pairview's Tech Explorer Workshop: Big Data is the "New Oil" to hold in May 2019

6.      Linking People, Data and Tech for Actionable Insights

7.      Remarks of President Muhammadu Buhari At The 9th Annual Investment Meeting in Dubai, UAE

8.     Wema Bank Holds 3 Day Hackathon Session in Lagos

9.      How Digital Transformation will Reshape Nigerian Organisations

10.  Five Key Inclusions To Consider When Building An IT Strategy

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Related News