CELLPHONES: Apple Zooms In China; Lenovo, Huawei Aim High

By newsdoug on April 28, 2015

Bottom line: China is likely to become Apple’s largest smartphone market by next year, while Huawei’s smartphones could make significant gains in the next 2 years en route to becoming one of the world’s top 2 brands.

Three of the world’s top cellphone makers are in China-related headlines today, led by word that Chinese iPhone sales officially passed the US for the first time in Apple’s (Nasdaq: AAPL) latest reporting quarter. At the same time, 2 of China’s own homegrown cellphone makers with big aspirations are also in the headlines, with both Huawei and Lenovo (HKEx: 992) discussing their goals for the next few years.

One of those has Huawei’s smartphone chief saying he’s aiming to become the world’s largest brand within the next 3-5 years. The other has Lenovo’s chief executive saying he’s aiming to sell 100 million cellphones in the company’s latest fiscal year, as it consolidates its position after a period of rapid expansion.

These 3 news stories show just how hot the cellphone market has become, and also the importance of China to the global equation. Global cellphone sales are expected to approach the 2 billion mark this year, and China now accounts for nearly a third of that number. The huge size of the Chinese market has attracted the attention of big global names like Apple and Samsung (Seoul: 005930), while also fostering the rapid growth of domestic players like Huawei, Lenovo and many others.

Let’s begin with Apple, which has just released its latest quarterly results and confirmed that China was the largest single market for its flagship iPhones in the first 3 months of this year, passing the US for the first time. (English article) The development doesn’t come as a huge surprise since analysts had been predicting such an outcome, saying iPhone sales probably totaled around 19 million for the quarter versus 16 million for the US.

Apple doesn’t provide sales figures for specific markets, but has been working hard lately to improve its image in China where it was previously hurt by negative publicity. Its strong quarter in the market was probably due at least partly to seasonal factors, meaning the US could retake its place as Apple’s biggest iPhone market for the rest of the year. But the longer term trend seems to show that China will ultimately overtake the US in importance for Apple’s sales.

Next there’s Lenovo, which has been using its status as China’s dominant PC maker to try and carve out an equally large portion of its smartphone market. Now talkative CEO Yang Yuanqing is saying he wants to sell 100 million of the company’s cellphones in the next 12 months, with about 40 percent of that coming from China. (English article)

The China target is actually roughly comparable to Lenovo’s current market share in the 10-15 percent range. The global figure would also translate to a global market share of about 5 percent, which is also roughly consistent with Lenovo’s current share. That seems to imply the company will focus on consolidating its position and perhaps trying to move upscale with a new push for its recently acquired Motorola brand, which has become a key part of its global mobile strategy.

Finally there’s Huawei’s own talkative cellphone chief Richard Yu, who is being quite bullish with his own proclamation that he’s aiming to make Huawei the world’s top cellphone brand in the next 3-5 years. (Chinese article) Yu doesn’t provide too much detail on how exactly he hopes to achieve its goal, except to say that Europe will be a major focus for the company this year.

The goal seems quite lofty, as Huawei’s worldwide market share was around the same as Lenovo’s at the end of last year in the 6-7 percent range, or about a third of that for global leaders Samsung and Apple. Of course 3-5 years can be quite a long time in the rapidly-changing smartphone space, as we’ve seen with the demise of Nokia and the recent sudden downturn for Samsung. All that said, I do sense that Huawei’s products are quickly gaining respect on the global stage, and that perhaps it really could claim a place as the world’s top or second largest brand within the next 5 years.