Huawei aims for Samsung as it becomes second biggest smartphone maker

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Huawei has leapfrogged Apple to become the second largest smartphone manufacturer by shipments thanks to a twin focus on high-end and value devices, two separate analyst reports have claimed.

Canalys and IHS Markit said Huawei's growth would be a concern for both Apple and Samsung. While the Korean manufacturer remains the world's largest smartphone maker, its Q2 shipments fell eight percent to 73 million according to Canalys.

The research house found Apple had growth of one percent to 41 million units. Both analyst houses attributed this to traditional seasonal weakness ahead of its usual autumn device launches. However, it continues to impress the markets with stellar financial performance. Last night it reported profit growth of more than 30 percent to $11.5 billion.

Huawei's year on year growth of 41 percent saw smartphone shipments hit 54.2 million. Canalys said this was driven by the success of its P20 flagship and sales of its Honor value brand, which accounted for two thirds of its growth.

Mo Jia, Canalys Analyst, said: “Huawei’s strategy has evolved significantly over the last six months. Despite its failure to strike a US carrier partnership earlier this year, the company has turned around quickly, moving away from its drive for profitability and focusing instead on finding volume growth at the low end.

"Honor, which has long been a major brand in China but relatively small overseas, has taken a pivotal role in this strategy.”

While it has started from a low ebb, Canalys said shipments of the Honor range outside of China hit four million in Q2, up 150 percent year on year.

Gerrit Schneemann, Senior Research Analyst, Smartphones, at IHS Markit, said Huawei saw growth of more than 60 percent across Europe, the Middle East and Africa. The only blot on its performance was in the United States, where the manufacturer is subject to a device sales ban.

He said: "Huawei is shifting to more value-added models, by launching new flagship smartphones with the latest features.

"Huawei’s P20 Pro is the first flagship smartphone model to be equipped with triple cameras, beating competitors to market.

"Increasing brand recognition in Europe and Asia is enabling the company to challenge Samsung in many price segments."

Schneeman said Huawei's success spelled bad news for Samsung, which admitted earlier this month that sales of its flagship Galaxy S9 were lower than expected. IHS found Samsung experienced its worst quarterly performance since mid 2013.

[Read more: Samsung Electronics CEO to step down amid "unprecedented" crisis]

He said: "Samsung is struggling to fight off the competition with its Galaxy S9 and S9 Plus devices, and the company needs the next Galaxy Note to deliver in the latter part of the year.

"Samsung has been facing severe competition from Chinese manufacturers, especially Huawei and Xiaomi. These two brands have been disturbing Samsung’s smartphone sales in Europe and Asia."

At Canalys, Senior Analyst Ben Stanton said Huawei's success should also not be underplayed by Apple. He said: “The importance of Huawei overtaking Apple this quarter cannot be overstated. It is the first time in seven years that Samsung and Apple have not held the top two positions. Huawei’s exclusion from the US has forced it to work harder in Asia and Europe to achieve its goals. Further momentum in Huawei’s Honor and Nova sub-brands is likely to sustain its rate of growth.

"Huawei’s momentum will obviously concern Samsung, but it should also serve as a warning to Apple, which needs to ship volume to support its growing Services division. If Apple and Samsung want to maintain their market positions, they must make their portfolios more competitive.”