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In 2019, the United States placed Huawei on the entity list. Why? The Trump administration viewed Huawei as a threat to U.S. national security due to its alleged ties to the Chinese Communist government. Some also noted that Huawei had recently overtaken Apple as the world’s second-largest smartphone maker and wondering if that had anything to do with US action. Some might argue that in some ways placing Huawei on the entity list could have backfired since it banned the company from its U.S. supply chain and these companies had done 18 billion dollars with Huawei the previous year.
Huawei was replaced as the number one smartphone brand in China
The Trump administration might have thought it had sunk Huawei’s battleship by forcing it to replace the Google licensed version of Android with the open source version. But at the start of last year, Huawei had actually briefly reclaimed the top spot to become the world’s largest smartphone maker for a month. This forced the Trump administration to take the next step. The Commerce Department has tightened an export rule that now prevents foundries from delivering cutting-edge chips made using unlicensed U.S. technology to Huawei.
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For the first time ever, Oppo is the number one smartphone brand in China
Announced exactly one year to the day as a placement on the Entity List, it was the drop that broke the camel’s back. This prevented Huawei, at the time the second largest customer of the TSMC contract foundry (behind Apple) from receiving the chips that power its flagship phones. And TSMC had just started producing Huawei’s most technologically advanced 5nm chip, the Kirin 9000; this component was intended for the sequel to Huawei’s foldable phone with the latest versions of its flagship handsets. Where placement on the entity list would have failed, the chip shipping ban was a grand slam for the Trump administration. This decision forced Huawei to sell its Honor sub-branded for $ 15 billion, a wise move by the Chinese manufacturer since it moved Honor out of Huawei’s orbit and prevented US restrictions from affecting it.
Counterpoint estimates that Oppo held 21% of the Chinese smartphone market in January, with Vivo’s 20% share placing it second. Huawei, Apple and Xiaomi are at a 16% deadlock. Varun Mishra, senior analyst at Counterpoint Research, explained how Oppo rose to the top in China. “Oppo has successfully repositioned its product lines in 2020,” Mishra said. “The rebranding of the Reno series and the launch of a more capable device at a lower price point than its predecessor helped Oppo capture the affordable premium segment. The strong momentum of the A-series in the mid-segment has strengthened the product portfolio for Oppo and it was able to meet the demand for 5G in China over a wide price range. It was also helped by the decline of Huawei. “
The scary part for Huawei is that the US ban will soon leave it without an inventory of 5G components. Given that over 65% of devices sold in China in the fourth quarter of 2020 were 5G compatible, Huawei faces serious problems. The company has tried to maintain an optimistic view, and its in-house HarmonyOS will make its smartphone debut on the Mate X2. But the real mood within the company could be described as grim, at least for now. Tom Purdy, Chief Security Officer of Huawei USA said: “It has been a very difficult struggle. But we take a very long term approach, and it helps us prioritize which products are most important, which components have- we.” Purdy says Huawei would like to eventually be able to work with Google again. And as for that, it will be up to President Joe Biden to lift the restrictions on Huawei.
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