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Huawei phonesReuters reports: Huawei overtakes Samsung as top handset maker thanks to robust China sales

China’s Huawei Technologies snatched the title of biggest smartphone seller from Samsung Electronics in the second quarter, underscoring the resilience of the China market even as global demand for phones plunged amid the pandemic.

Huawei shipped 55.8 million devices in the April-June period, trumping Samsung’s 53.7 million, according to data from research firm Canalys.

There’s not much in it and phone companies can, sometimes do,  manipulate ‘shipping’ data. Numbers for China are notoriously rubbery.

Yet Huawei snatching the phone sales crown from Samsung marks an important turning point. Five years ago at the Huawei P8 phone launch in Singapore, consumer business group CEO Richard Yu told me his goal was to beat Samsung.

Beat Samsung, challenge Apple

Yu also said Huawei plans to challenge Apple. Samsung may have been the best selling phone brand, but Apple is the one that makes all the money and is recognised by its rivals as the leader. That’s another story.

What’s remarkable about Huawei passing Samsung this year is the company can’t sell a thing in the US, one of the largest markets. It is also hamstrung by US sanctions that mean it can’t use new American-made technology from companies like Google or Microsoft. Most important of all, this means Android.

The pandemic could have been another barrier between Huawei and its phone sales ambition. Covid-19 hit China hard early on and disrupted the country’s supply chains.

Huawei made it to the top rank on the back of dominating sales in China, the world’s biggest phone market.

It’s not all good news for Huawei. The company’s phone sales were down five percent when compared with the same period a year ago. Meanwhile Samsung sales fell 30 percent. Huawei’s non-China sales fell by almost as much: 27 percent.

It’s likely normal service will be resumed when markets recover from the pandemic. Samsung can press home its Android advantage. The company has moved closer to Google since the US pushed its main rival away from the search giant.

There’s a possibility the lack of Android and Google services has yet to sink in with Huawei’s non-China customers.

Yet for now, we can let Huawei enjoy reaching its long-held goal.

 

Apple Installed Base (Number of Users)
Apple Installed Base (Number of Users)

For the second year in a row, Apple held a developers conference that should frighten its competitors. Relying on a nearly maniacal obsession with the user experience, Apple is removing oxygen from every market that it plays in.

At the same time, the tech landscape is riddled with increasingly bad bets, indifference, and a lack of vision. Apple is pulling away from the competition to a degree that we haven’t ever seen before.

Source: Above Avalon: Apple Is Pulling Away From the Competition

Above Avalon analyst Neil Cybart says Apple is stealing a march on other technology companies. He says the company has made long-term decisions that mean its rivals will struggle to catch up.

The story needs to be read through a careful filter. Cybart writes about the company both from an investment point of view and from a Silicon Valley perspective.

This doesn’t necessarily make his analysis biased or wrong, it isn’t,  but it can lack broader context.

Coherence

Cybart’s main idea is that Apple has pulled now all its strands together. The range of products and services has a new coherence and a clear direction.

This, according to Cybart, comes at a time when rivals are weakening.

Together these two trends have set up conditions that will move the company even further ahead of rivals over the next decade.

He makes a good case. Yet there are flaws in this line of thinking. Maybe flaw is too strong. Let’s say questions.

Samsung lack of vision

In the middle of the web post Cybart lists the ways Apple is beating key rival technology companies. He, rightly, notes that Samsung “remains rudderless from a product vision perspective.”

While that’s true, Samsung is a major component supplier to Apple and other hardware companies. If you look closely at Samsung’s financials, it’s clear the areas that compete with Apple are not central to Samsung’s profits.

The areas where the two companies co-operate are more important to Samsung.

Cybart correctly dismisses Google and Amazon as direct rivals. In the greater scheme of things their hardware products are inconsequential. Yet both remain on growth trajectories that could yet pose a threat to Apple.

Microsoft hardware

Microsoft’s hardware move has failed to alter the balance of power between Macs or iPads and Windows hardware. Cybart is right on the money when he says Surface mainly takes business away from Microsoft’s Windows partners.

Yet like Amazon and, to a lesser degree Google, Microsoft is powering ahead with cloud computing. These companies are building a significant digital world where Apple doesn’t play.

This is not a criticism of Cybart’s story. He is on the money as far as personal computer hardware and its immediate successor technologies are concerned. Apple does look set to dominate.

Beyond this there are parallel markets where Apple is, at best a bit player. These markets interact with Apple’s market. In the future they may interact in ways that are not yet clear.

Shorn of context, Apple is powering ahead. But let’s not forget Amazon and Microsoft are also powering ahead. Technology is not a simple zero-sum game.

Samsung’s Galaxy Z Flip is the best foldable phone so far. It flips and folds like phones did 20 years ago. The difference between then and now is that today both halves are part of a full colour touch screen.

My hands-on session with the Samsung Galaxy Z Flip was positive, but I ended by mentioning a potential problem with the phone.

Overseas reports say Samsung put advertising on the phone. That’s on the nose when you pay NZ$2400 for the hardware.

According to Android Police the ads are intrusive and annoying. I decided to check this out.

Ads embedded into key apps

Vodafone ad on browser home page

We’re not talking about the kind of ads you see if you head to a web page on the phone, we are talking about ads in basic phone apps, like the one used to dial calls or get a weather report.

Take the Samsung phone call app. When it loads, a bunch of Yelp ads for cafes and restaurants show up. The choice is weird, many are a long way across town from where I live. The nearest is 19.5km. At a guess, these are the companies who paid someone, possibly Yelp, for the placement.

More worrying in some ways is that the Samsung Galaxy Store shows a gambling advertisement for a Poker app that offers 100,000 chips and 300 coins to get you started. That’s going to be a problem for some people.

The stock web browser opens on a page showing an ad for Vodafone broadband. On the notification page there are advertisements for Spotify.

Advertising everywhere

There are ads everywhere. It’s a reminder of when grasping PC makers loaded up Windows computer with unavoidable crapware that you need to remove before you can work.

Spotify ad on Galaxy Z Flip phone

Except that it doesn’t seem possible to remove, mute or otherwise bypass the ads on the Galaxy Z Flip.

You might expect to see advertising if you use free software like Gmail or the Chrome browser. That’s part of the deal. But this is among the most expensive phones on the market.

It’s another to make me rethink the last thought on my hands-on look at the phone where I said I’d like one. Make that, I’d like one if I could get rid of the ads.

Afterthought: Assuming Samsung makes a decent margin selling phones at NZ$2400, it is probably doing its overall business more harm than good when it sells ads. If normal prices apply, the Samsung phone ads can only be worth a few dozen dollars per phone per year, but once word gets out Samsung will lose hardware sales worth hundreds of dollars.

Samsung Galaxy Z Flip

In February I posted a short note about the then forthcoming Samsung Galaxy Z Flip. This week I got my hands on one.

It is by far the best foldable phone I’ve seen to date. There’s a satisfying feel to the way it folds.

The way the screen copes with being folded again and again is also satisfying. When you hold and fold the Galaxy Z Flip you are not left wondering if you are dealing with classy engineering.

Impressive

The Flip is technically impressive, cool looking and fun to use. Sadly these three qualities do not necessarily make a great phone.

Mind you, no-one can accuse the Galaxy Z Flip of being boring.

Nor can you accuse it of being cheap.

You could spend the NZ$2400 Samsung asks for the Flip elsewhere, even with Samsung1, and get better value for your money.

The cost of folding

Samsung’s much vaunted foldability adds about NZ$1200 to the device price. Which would be fine. Yet it turns out being able to fold the Flip is not always a huge benefit.

Yes, the neatly folded square is about half the length of and the same width as other premium phones. It also happens to be twice the depth.

In other words, the Flip occupies the same volume of pocket space as any other phone. The difference is that Flip redistributes the volume.

It’s fine in the jacket pockets and loose trouser pockets that might otherwise contain a normal size phone. It’s a problem in the tighter pockets that would struggle with bigger phones.

So while folding could be helpful, it might not always be NZ$1200 worth of helpful.

Samsung Galaxy Flip shown with Apple IPhone 7 for size comparison

Flipping futuristic

Despite all of this, I find myself liking the Flip more and more. It feels right. It also feels futuristic.

Let’s not discount that emotive and subjective response. When you buy a phone you commit to spending a lot of time with the device, you don’t want it to not feel right.

One aspect of being able to open and shut a phone is the distance this activity puts between you and the device. This can be positive or negative.

Most of the time I like the fact that it requires more effect to respond to every incoming stimulus. On the other hand, you can’t surreptitiously glance at the screen without others noticing.

The Galaxy Z Flip has been around for months. You can find plenty of in depth reviews elsewhere. Look harder and you’ll find some long term test drives. For what it’s worth here are my observations:

Screen:

The display is tall and narrow. When you turn it sideways to watch a movie you get black bars unless you watch a widescreen version.

In everyday use the crease stays out of the way although I wouldn’t go as far as to say you don’t notice it. You will, but your eyes and brain adjust so it is less of an issue.

Yet, you constantly feel it with your fingers. There’s also a shallow dip at the top above the selfie camera.

External display:

When the phone is folded there is a tiny display on the outside. You can see the time and date without opening the phone. That turns out to be more useful than you might imagine if you don’t wear a watch.

The small screen will show remaining battery life. I’m not convinced that’s much help.

There are notifications on the small screen. They wizz past fast. Often before you can read them.

By double tapping the power button, you can take pictures with the camera without opening the phone. When you do this, the tiny external display works as a selfie viewfinder.

Samsung Galaxy Z Flip closed showing small screen

Durability:

Open or shut, there’s a solid feel to the Galaxy Z Flip. It seems robust enough to take the kind of treatment we usually mete out to phones.

Unlike almost every other modern phone you can buy in 2020 there is no water or dust resistance. This could be a problem for many potential buyers.

I also found dirt, pocket fluff and even hair could get trapped in the fold. It’s not clear what that might mean over the long haul. In the short term it isn’t a problem.

Camera:

Phone makers usually make a great song and dance about the cameras on their phones. There’s a feeling in the industry that people choose cameras rather than phones. I’m not convinced of that. Some will. Others won’t.

Samsung has used the same camera technology as the Galaxy S10. It’s good, but not up there with, say, the iPhone 11. Few people will buy the Samsung Galaxy Flip for the camera.

Verdict

Samsung has got screen folding technology right with the Galaxy Z Flip. You get a phone that looks and feels a little ahead of its time. On paper you might not get a huge amount of phone for the price, in practice this matters less than you might expect.

After a few days with the Flip I found myself coming back to it again and again. Yep, I’d like one. But there is a big problem that I’m saving for another post.


  1. The Galaxy S20 Ultra is $200 cheaper but does more. ↩︎

IDC reports shipments1 of new phones dropped 11.7 percent year on year in the first three months of 2020. That’s a total of 275.8 million phones.

It is the biggest year-on-year drop ever seen.

First quarter numbers are usually lower than the fourth quarter which includes all the phones purchased as Christmas gifts. The fourth quarter usually also captures sales of new phones immediately after the major product launches.

Yet this took place before phone buyers faced the full impact of the Covid–19 pandemic. Sure parts of China were closed down. And China does account for about a quarter of the worldwide new phone market. That’s going to have a huge impact.

Likewise, most of the world’s phones are made in China. Production and the pre-production supply chains were badly affected in the second half of the quarter.

It’s unlikely the current quarter will see much improvement. China may be back at work, but people elsewhere have been, many still are, in lockdown. That’s not great for phone sales. Nor is the economic uncertainty. That new phone sale is an easy expense to cut when the future looks tougher.

Samsung hit hard

While Samsung remains top dog with 58.3 million phones and a 21.1 percent share, it suffered the largest drop in shipments during the quarter. Year on year sales are down 18.9 percent.

There is good news for Samsung. IDC says the higher price of the Galaxy G20 phone means better profits.

Samsung has two important phones scheduled for launch later this year. The Fold 2 and the Note 20 are both likely to be expensive phones at a time when demand for pricey high-end models could cool.

Huawei better than you might expect

The political waves rocking Huawei’s boat have harmed phone sales less than you might expect. Year on year sales are down 17 percent. That’s bad, yet not as bad as Samsung.

Apple’s year on year sales were, in effect, flat with a 0.4 percent decline. This translates into an increased share of the overall market. It has 11.8 percent. The company’s success was mainly thanks to its iPhone 11, which in certain configurations is the most expensive non-folding handset.

IDC says that if the trend to lower price phones continues, and let’s face it that looks likely, Apple should have a hit on its hands with the iPhone SE.

What next?

To get an idea of how this quarter could go, Qualcomm, which makes chips for mobile phones, says it expects a 30 percent year on year drop for the current, second quarter. Given that it takes orders from phone makers ahead of manufacturing, it has a good handle on the market. That would be a huge drop.

IDC suggests a bright spot could be 5G. People need new handsets to use the faster wireless technology. It’s possible customers will trade up to 5G phones later in the year.

On the flip side of this, most users won’t notice any performance difference from switching to 5G. Data will download faster, but at the time of writing there are no mobile apps that can use faster data speeds.


  1. Shipments is industry talk for products that have left the warehouse en route for customers. While a shipment is not the same as a sale, it is close enough. Retailers don’t tend to carry huge inventories of product these days. ↩︎