US mobile companies benefit from void in the Chinese market left by Huawei
Published: Apr 29, 2021 07:03 PM
People shop at an Apple store in North China's Shanxi Province on October 23 after iPhone 12 was newly launched. Photo: cnsphoto

People shop at an Apple store in North China's Shanxi Province on October 23 after iPhone 12 was newly launched. Photo: cnsphoto

US mobile companies Apple and Qualcomm report strong financial results on Wednesday for their fiscal second quarter, riding high on China's strong economic recovery and benefiting from the vacuum left by key opponent Huawei, which is still under intense US crackdown on chip supply. 

According to Apple, its sales increased 54 percent from the same period last year, with double-digit growth in every product category listed in the report. Sales of iPhones were up by 65.5 percent and for Mac increased more than 70 percent. 

The blowout results were largely driven by Apple's earnings in the Greater China area, which saw an 87.5 percent growth for the quarter, totaling $17.7 billion, up from a 57 percent rise last quarter. 

US chip giant Qualcomm also attributed its 276 percent growth in its quarterly net profits to China's drastically improving smartphone demand. 

Both Apple and Qualcomm's performances are way past market expectations, driving shares up immediately after the release of the results. 

Ma Jihua, a senior tech industry analyst based in Beijing, told the Global Times on Thursday that Apple and Qualcomm's rosy quarterly performance in the Chinese market is partly because of Huawei's slipping smartphone business, which has been taking a hit from US chip ban.

"Apple is the largest beneficiary of Huawei's misadventure as the US tech firm targets high-end consumers, which overlaps with that of Huawei's premium P and Mate series that has seen shrinking shipment due to Kirin chipset shortage," Ma said. 

For the first quarter of 2020, Huawei's sales dropped by 16.5 percent to 152.2 billion yuan ($23.52 billion), mirroring a faltering smartphone business as the company is still struggling with the malicious US crackdown on its chip supply. 

Other Chinese vendors such as Xiaomi, Vivo and Oppo are also quickly filling the void left by Huawei. This has also driven demand for Qualcomm's semiconductor products.

But analysts stressed that those US tech companies' revenue jump in the Chinese market "is temporary and not sustainable," and could be navigating in uncharted water this year due to uncertainties from China-US relations and a stall in their tech innovation. 

"The reason why their businesses got a boost in the first three months is not because they're doing well, but rather because of their competitor's sudden fall. This is not tech-driven growth," Ma said. 

Huawei found itself on the blacklist in May 2019, which claims that the Chinese company is a "national security concern" to the US. Huawei has denied the accusation, but has been subject to a technology cut off as US companies are banned from selling essential technologies to Huawei.

But Ma pointed out that the US' malicious crackdown on China's tech sector is likely to speed up industrial reshuffling. "China's semiconductor innovation is rising at a remarkable speed to close gaps with foreign peers. If homegrown chips gain a foothold, it will revitalize Huawei and eat up the market shares of US chipmakers such as Qualcomm."

And in the worst case scenario, if the US further extends the chip ban, it will also exert a devastating effect on the Chinese business of US companies, analysts said.

Industry observers noted that the key to sustain growth in the Chinese market is innovation, which US tech firms such as Apple seem to be lagging behind in certain areas such as 5G and Internet of Things.

"5G will usher in a new wave of revolution for intelligent devices, and a step behind could overshadow Apple's future development," Ma said.

Liu Dingding, an independent tech analyst in Beijing, predicted that there's room for Apple to keep expanding in the Chinese market this year, after a slump in its market share in 2020. 

"US companies are highly dependent on the Chinese market, and that also mirrors an intertwined economic environment between the world's two largest economies," Liu told the Global Times on Thursday.

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