Apple (NASDAQ:AAPL) investors are currently celebrating a big quarter, with AAPL stock continuing its march toward a $1 trillion market cap. However, one bit of news hit yesterday that took a little of the shine off. Multiple industry trackers are reporting that Huawei overtook Apple last quarter to become the world’s second largest smartphone vendor.
With the iPhone so critical to AAPL stock, is this something for Apple investors to be concerned about?
IDC: Huawei Surges Past Apple to Take Second Place in Smartphone Sales
China’s Huawei is on a roll when it comes to smartphone sales. Major industry trackers, including IDC, IHS Markit and Canalys all agree that Huawei saw very strong growth in the previous quarter (ending June 30), leapfrogging Apple to take second place in world smartphone sales.
And it looks like it wasn’t even close. According to IDC’s numbers, first place Samsung had a 20.9% share of global smartphone shipments. Second place Huawei had 15.8% and third place Apple was at 12.1%. What makes Huawei’s performance even more impressive is that the company managed to grow its quarterly shipments by 40.9% year-over-year, at a time where the overall smartphone market shrank by 1.8%. And it did this despite being shut out of the U.S., after efforts to partner with American wireless carriers at the start of the year were blocked. Anyone wanting to want to buy Huawei smartphones in the U.S. has to look for unlocked versions through websites like Amazon (NASDAQ:AMZN) or eBay (NASDAQ:EBAY).
IDC says this is the first time iPhone sales have put Apple in third spot in seven years. However, Counterpoint Research did publish a report that Huwaei had bumped Apple at about the same time last year. Other industry trackers did not agree, and by the next quarter, Apple was firmly back in second place — by everyone’s measurements.
Not Time for Apple to Panic
Obviously, being bumped into third place is not great news for Apple, but this is also not something to panic about. It’s more bragging rights than something that would cause AAPL stock to take a hit.
And it’s also not as bad as it may look for Apple, once you look more closely at the data. Despite slipping to third spot, IDC reports Apple iPhone shipments did eke out 0.7% year-over-year growth on the quarter. That’s despite selling models like the iPhone X that are more expensive than ever, amid an overall contraction in the global smartphone market. Rival Samsung remained in top place, but its shipments dropped by 10.4% on the quarter.
In addition, the numbers are for a traditionally slower sales period for Apple. Consumers begin to put off iPhone purchases as rumors about the next generation models hit the headlines. Look for AAPL to regain second place once those new iPhones launch.
The bigger threat in the long term isn’t that Huawei took second place, however.
Much of its volume is in entry level and midrange phones like the $200 Honor 7X, so it can drive huge unit sales by hitting markets like India and China where many buyers are price sensitive. However, the company has begun producing flagship smartphones like the P20 Pro that are selling in the $800 price range. In the long term, buyers of entry level Huawei smartphones may choose a P20 Pro when they can afford an upgrade, instead of an iPhone or Galaxy. Once established as a premium smartphone maker, Huawei could siphon sales from other flagship competitors, attracting upgraders from rival brands.
That specific issue is probably far off yet, and Android smartphone manufacturers like Samsung will be at bigger risk than Apple — it’s far easier to make a leap from one Android phone to another.
So for now AAPL investors can enjoy the Q3 earnings results and watch AAPL stock continue to climb. But they should keep one eye on Huawei …
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
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