Due to consumer spending pressures this year, the smartphone market is not as robust as before. With Apple facing strained relations with China, market sentiment continues to be pessimistic about Apple’s prospects.

Recently, citing from a report from Jefferies Financial Group’s analyst, Bloomberg stated that the sales volume of Apple’s latest products in China is expected to decline by 30% compared to last year in 2024, potentially experiencing a double-digit decline for the whole year.

The Wall Street Journal once reported that last year, the Chinese government announced its restriction on officials using iPhones, with at least eight provinces instructing officials to cease using iPhones.

This restriction not only applies to government agencies but also extends to state-owned enterprises, including large entities in China’s power generation, harbor construction, mining, manufacturing, education, and investment markets.

In addition to political restrictions, Apple is also facing pressure from Chinese competitor Huawei. Analysts from Jefferies Financial Group previously stated that sales of Huawei’s Mate 60 Pro surpassed the iPhone 15.

In 2023, Huawei held the highest market share in the Chinese smartphone market, growing by approximately 6% compared to the same period in 2022, while Apple’s market share in China declined by 4% year-on-year.

Patriotic Enthusiasm Supports Local Smartphone Brands

Driven by “patriotic enthusiasm,” according to Jefferies’ estimation, Huawei’s smartphone shipments last year reached 35 million units, falling below the expected 40 million, possibly due to constraints in component supplies.

The Huawei Mate 60 Pro features a SMIC-manufactured 7nm processor tailor-made for the domestic market. Huawei continues to develop and expand its HarmonyOS operating system, competing with iOS and Android.

Yet, according to MacDailyNews, Huawei has allegedly exaggerated the capabilities of the Mate 60. In reality, its processor specifications lag behind Apple by several generations.

The “Kirin 9000S” is a 7nm chip, with a Geekbench 6 single-core score of 1,267 and a multi-core score of 3,533. In comparison, Apple’s A17 Pro features a 3nm chip, scoring 2,902 in Geekbench 6 single-core and 7,221 in multi-core tests.

The Huawei Mate 60 falls behind even Apple’s entry-level third-generation iPhone SE. The latter is equipped with the 5nm A15 Bionic chip from September 2021, scoring 2,237 in Geekbench 6 single-core and 5,173 in multi-core tests.

Smartphone Price Reduction Fails to Boost Sales

To salvage the market, iPhone 15 Pro and iPhone 15 Pro Max witnessed a substantial 16% price reduction on the Pinduoduo e-commerce platform during the first week of 2024, with similar discount levels observed in December. However, analysts from Jefferies believe that these discounts will not stimulate sales growth.

As iPhone sales constitute approximately 52% of Apple’s total revenue, China has consistently represented Apple’s most crucial international market.

In the face of the competitive pressure in the Chinese market this year, TrendForce analysis suggests that Huawei’s successful sales will exert sales pressure on Apple, which also targets the high-end market in China.

Therefore, TrendForce is not optimistic about the production forecast for Apple in 2024, estimating the annual production volume to be around 215-225 million, slightly lower or flat compared to the previous year.

In terms of regional market operations, Apple continues to increase its production share in India, aiming to offset the lost market share in China through the growth of the high-end market in India. It is estimated that by 2025, the production share in India will further increase to 25-30%.

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(Photo credit: Huawei)

Non-Apple IC manufacturers are reporting positive business performance this quarter. Chinese brands are experiencing a revival driven by the release of new Huawei smartphones, and a resolution in inventory clearance in emerging markets. This has led to an increase in orders. Additionally, Samsung’s success in foldable phones is contributing to the upsurge. This overall trend is benefiting companies like MediaTek and Novatek in the smartphone-related IC manufacturing sector.

As reported by CTEE, China holds about 25% of the global smartphone market, with industry analysts predicting sales of 260 million units in China for 2023. Huawei’s re-entry into the smartphone market will significantly impact the smartphone SoC market share in 2024. This development will challenge Apple’s market share in China, and Huawei’s upcoming Nova mid-range smartphones will also affect brands like Honor, OPPO, Vivo, Xiaomi, and others, as they vie for market share.

Key drivers of the smartphone industry’s recovery

According to Economic Daily News, many Chinese smartphone brands are optimistic about the local market’s improvement following the launch of Huawei’s new smartphones. Beyond flagship models like the Mate 60, mid-range series like Nova are also showing increased activity. Leading non-Apple smartphone manufacturers are gearing up for a surge in demand and are actively stocking up on top-tier flagship chips, thus stimulating the supply chain’s demand for additional orders.

At the same time, Taiwanese manufacturers mention that Chinese smartphone brands that primarily target emerging markets have already digested their accumulated inventory and are now starting to replenish their stocks. Some smartphone-related chip manufacturers have also pointed out that Samsung and other Korean smartphone giants are enjoying good sales of foldable phones and have recently conveyed messages about increasing orders.

TrendForce notes that the current revival on demand side in the global smartphone market is primarily driven by inventory restocking. The potential for sustained orders remains uncertain due to the prevailing economic challenges.

(Image: MediaTek)

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According to IJIWEI’s report, industry insiders reveal that Huawei has set a goal of shipping 100 million smartphones next year. This target represents a 40% increase over earlier predictions, as various market research firms had previously estimated Huawei’s smartphone shipments for the next year to be around 70 million units.

Huawei’s aggressive sales plan for the upcoming year is propelled by the favorable reception of its recently launched flagship smartphone series, the Mate 60. By the end of this year, Huawei aims to have shipped approximately 20 million units of the Mate 60 series, contributing to the projected annual smartphone shipments ranging between 40 million and 50 million units. This surpasses the previous year’s shipments of 30 million units by 30 to 70%.

With the growing shipment volumes, the supply of Huawei Mate 60 series smartphones featuring organic light-emitting diode (OLED) panels has also seen an increase recently, with suppliers ramping up their production rates.

The Huawei Mate 60 series has become a much-anticipated success in the consumer electronics market. During the Huawei Autumn Full-Scene New Product Launch event, Huawei’s Terminal BG CEO and Chairman of the Intelligent Automotive Solution BU, Richard Yu, expressed his delight with the positive response to the “Pioneer Program” products.

Huawei is currently working around the clock to meet the surging demand for its products. The “Pioneer Program” includes the Mate 60 Pro, Mate 60 Pro+, and the foldable Mate X5.

Several supply chain sources and analysts have indicated that since earlier this year, Huawei has been steadily increasing its stock of components such as lenses, cameras, printed circuit boards, and various other parts to meet its shipment targets. Huawei has also requested that its sole 4G mobile chip supplier in the U.S., Qualcomm, deliver the full-year orders before June.

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(Photo credit: Flickr)

According to the news from Taiwan media, CNA, Huawei has broken through the U.S. blockade and launched a 5G smartphone equipped with domestically produced Chinese chips, sparking discussions. Huawei stated that although Chinese-made chips lag behind foreign counterparts, if they are not used, staying behind will always be a setback. If widely adopted, it could drive technological progress and catch up gradually.

According to reports from Chinese media Yicai, representatives from Huawei made these remarks during a speech at the “2023 World Computing Conference” on the 15th.

Huawei mentioned that the computing industry includes PCs, servers, operating systems, databases, as well as processors, memory modules, SSDs, HDDs, network cards, RAID cards, SSD controllers, network chipsets, and RAID card chipsets that constitute PCs and servers, which are the most critical problems to solve.

“We couldn’t even make LOM and RAID cards before, and we couldn’t even create a PMIC for a server. So, we need to return to the basics of the computing industry.”

Huawei believes that China needs to develop its own processors, operating systems, and databases. If all of these are sourced from external suppliers, there is a risk of information breaches through backdoors and vulnerabilities in PCs and servers. It could also be exploited as a means of attacking other servers and PCs.

“If our opponent is at an expert level, even though we have domestically produced products, we are still at a basic level, making it relatively easy to attack and steal information”. Huawei emphasizes that domestic production does not necessarily equate to security; only by enhancing capabilities can genuine security be achieved.

“There are currently more than 600 Chinese enterprises listed on the U.S. government’s entity list,” said Huawei’s representative, covering chips, hardware, software, algorithms, and applications. Additionally, export controls have impacted everything from design tools and materials to manufacturing equipment and chip products.

“In this situation, a practical problem we face in the long term is that China’s semiconductor manufacturing process will remain behind for quite a while. Huawei believes that this situation will persist for a considerable period because advanced processes are needed to produce more advanced chips. On the other hand, due to U.S. sanctions, obtaining advanced chips or computing systems presents challenges, if not impossibilities. Based on our years of experience and future judgment, this is a long-term situation. Don’t harbor any illusions about the future.”

“Although the chips, servers, and PCs we produce lag behind those produced abroad, if we don’t use them, the gap will always be there, and falling behind will always be the case. But if we use them on a large scale, it could drive progress in our entire technology and product development, gradually catching up”. According to Huawei, only through widespread use of domestic chips can push the entire computing industry to progress and develop.

Huawei recently quietly launched a high-end 5G smartphone equipped with the 7nm chip “Kirin 9000S,” manufactured by SMIC. While Chinese public opinion refers to it as a “breakthrough of the U.S. blockade” and a “strong return to 5G,” experts point out that its performance still lags behind the latest smartphone chips by two generations and question its manufacturing yield rate and output.

(Source: https://www.cna.com.tw/news/acn/202309160229.aspx)

Report to the media, China Times the analyst, Ming-Chi Kuo, from TF International pointed out that demand for the Huawei Mate 60 Pro exceeded expectations, leading to a 20% increase in shipments in the second half of 2023, reaching 6 million units. In 2024, Huawei is set to launch new high-end phones in the P series and Mate series, with procurement reaching a scale of 30 to 40 million units.

Kuo emphasized that Taiwanese manufacturer COMPEQ will experience revenue growth thanks to Huawei’s high-end phones and Amazon’s AI servers.

Due to the Huawei Mate 60 Pro’s adoption of a 12-layer anylayer HDI motherboard, COMPEQ’s production yield is better, accounting for approximately 50% to 60% of shipments, significantly higher than the second supplier, Founder Technology.

It is expected that COMPEQ will be the largest motherboard supplier for Huawei’s new high-end P and Mate series in 2024, with contributions from Huawei’s high-end phones projected to grow by at least 150% to 200% in 2024.

COMPEQ will also enter the AI server market in 2024, becoming a long-term growth driver for the company. If successful, Amazon/AWS will be one of COMPEQ’s key customers for AI servers in 2024. (Image credit: Huawei)

(Source: https://www.ctee.com.tw/news/20230914700952-430502)