Huawei, a prominent communications technology and smart device maker, produces smartphones and laptops that compete with the likes of Apple and Samsung. Based in China, Huawei has spread its influence throughout the world. Huawei leverages its technology, marketing and unique sales channels to boost growth, but faces increasing pressure from policymakers internationally, making its future as the number two smartphone seller by market share uncertain.

Apple and Samsung were long thought of as the untouchable top two smartphone manufacturers. However, as of August 2018, Huawei outsold Apple to become the number two smartphone seller by market share. According to the International Data Corporation (IDC), Huawei sold 54.2 million units in 2018, giving it a 15.8 percent market share in the tech smartphone market. In comparison, Samsung and Apple had 20.9 and 12.1 percent market shares respectively.

While Huawei outsold the U.S. tech giant, Apple historically has strong Q2 sales right after it releases new smartphone models. This means that Apple could overtake Huawei in Q2 before falling back down again. This flip flopping will stop once Huawei takes a decisive step ahead of Apple. Huawei’s market power grew 30 percent from 2016 to 2017 and 40 percent from 2017 to 2018. If this trend continues, Huawei may surpass Samsung. Samsung already has weak presence in China, which accounts for a third of Huawei’s annual sales, according to Huawei’s 2017 Annual Report. Furthermore, Samsung growth is flattening after a weak 2018 fiscal year and reported a 10 percent decrease in Q4 revenue from 2017 and 29 percent down in quarterly operating profit. If Samsung ends up excluded from China, Huawei could overtake Samsung to be the number one smartphone seller by market share.

One reason that Huawei captured so much of the market is its product pricing. Huawei has a much more diversified product portfolio than Apple. Similar to Samsung, Huawei has numerous models of high-end, mid-range and budget smartphones, which attracts more diverse consumers. One of Huawei’s best budget models, the Huawei P Smart, sells for around $200 on Amazon, as compared to the iPhone 7, which costs $449. Having a range of product offerings allows Huawei to appeal to more diverse consumers, especially in low income communities. In contrast, Apple charges a premium for its products, alienating a segment of consumers who cannot afford them. With a wider array of product offerings, Huawei has a competitive advantage against Apple in appealing to a larger market.

Huawei’s budget phones still offer premium features, allowing them to give customers the quality of an iPhone at a much more affordable price. Huawei’s Mate 20 Pro competes directly with the Apple iPhone X and the Samsung Note 9. It also carries a camera that rivals that of Google Pixel, widely regarded as the best smartphone camera according to Business Insider. The Mate 20 Pro has an in-screen fingerprint sensor, which allows the user to unlock the phone from anywhere on the screen. It can charge 70 percent in 30 minutes and has a massive 4,200mAH battery. According to Wired, the Mate 20 is “the phone the iPhone XS should be.” On the tech front, Huawei competes well with Apple and can outcompete iPhones in terms of tech specs. Tech review website CNet says that Huawei is providing customers with alternative phones that rival the quality of an iPhone.

Huawei is dominating the smartphone market because of its unique sales channels. Data from Apple’s 2018 10K shows that roughly half of the company’s sales are dependent on American markets. Huawei, excluded from U.S. markets and only earning just one third of its sales from China, is far more diversified in international markets. Further, in the U.S. most cellphones sold are connected to a carrier such as T-Mobile and AT&T. However, in Europe, smartphones are sold through smartphone dedicated stores, giving consumers a larger variety of options. Huawei also has $7,849 million USD in business to business (B2B) sales in 2017 with expectations to reach around $11,400 million USD in 2020 to complement its consumer sales. With more diverse sales channels and freedom selling through smartphone stores, Huawei is far ahead of Apple in making customer connections.

To compensate for limited presence in American markets, Huawei focuses its efforts on marketing internationally. As mentioned in Marketing Week, Huawei hosts photo competitions that are judged by its Artificial Intelligence (AI). Huawei uses this competition to promote the AI capabilities of its smartphone cameras. Huawei’s Chief Financial Officer, Meng Wanzhou also constantly travels and meets with heads of state, giving more publicity to Huawei’s products. Huawei’s 2017 Annual Report states that the number of non-Chinese consumers considering Huawei doubled. It is the second most recognized brand in Germany, Italy, Spain, Finland and many other European countries. Another facet of Huawei’s marketing and business model is government advisory, which Huawei mentions in its 2017 Annual Report. Huawei has partnered with many global governments to improve their economic standing and help with national issues. For example, Huawei helped the German government implement optic fiber 5G networks to its wireless base stations. This has contributed to the quick spread of Huawei around the world, compared to Apple, which has little involvement with foreign governments.

Huawei stands out by investing heavily in Research & Development (R&D). According to Apple’s 2018 10K filing, it dedicates only 5 percent of its net sales to R&D, while Huawei proportioned 14.9 percent of its net sales, or $13.2 billion USD for R&D in 2017 alone, according to its 2017 Annual report. As reported by Reuters, Huawei plans to dedicate $15 billion USD in 2018, keeping in line with its huge R&D spending. As a result, Huawei currently has 74,307 patents, with more than 110,000 patents filed and pending. In contrast, Apple has 75,000 patents with only 10,000 filed and pending. It is important for companies in the smartphone sector to innovate quickly. Samsung’s and Sony’s waterproof phones and Samsung’s Galaxy Note Edge – the first phone with edge-to-edge display – generated buzz and improved sales. Huawei seeks to join the ranks of these innovators by including three back camera lenses, in-screen fingerprint sensor and wireless charging to other phones. Huawei’s R&D progress speaks for itself and helped propel Huawei to the number two smartphone manufacturer by market share. Apple needs to increase its R&D if it hopes to compete technologically with Huawei. While Apple’s phones sell as a status symbol, Huawei’s phones sell because of their functionality.

Huawei seems to be in a good place competing with Apple, but there are risks in its future. Richard Yu, Chief Executive Officer of Huawei’s consumer division, claims that it can overtake Samsung in terms of market share by 2020 despite losing the U.S. market, according to a January 2019 article by Reuters. However, the U.S. has warned against Huawei since 2012. In 2018, the U.S. increased its accusations of espionage against Huawei, claiming that its smartphones, cloud and network are backdoors that allow the Chinese government to hack user data. Countries such as the UK, Australia and Canada are considering banning the use of Huawei devices in their governments and by their citizens. Canadian officials even arrested Huawei’s Chief Financial Officer, Meng Wanzhou, on December 1, 2018. Huawei will need to be able to survive U.S. accusations and masterfully navigate the political atmosphere to remain competitive.

If Huawei’s efforts to prove its innocence are not successful, they will lose much of their current market share. Despite current strong sales in Europe, government regulation around the world has already limited Huawei to far fewer markets to participate in and sell, plummeting their sales. For example, Huawei’s Australia revenue plummeted by $50 million from $673 to $623 million due to delays in product rollouts. According to Bloomberg, Deutsche Telekom, one of Huawei’s biggest customers, is considering disassociating with Huawei, which would cost Huawei an estimated €20 billion. In the U.S., Huawei was repeated blocked by the government from partnering with providers such as AT&T and Sprint. Huawei’s America’s revenue, which accounts for 39.39 percent of its sales, decreased by 10.9 percent from 2016 to 2017, according to Huawei’s 2017 Annual Report.

Despite the slowdown in dominant European and American markets, Huawei’s presence in emerging markets should continue growing. Gene Jiao, President of Huawei Consumer Business, Middle East and Africa, claimed that shipments to those regions grew 76 percent year over year in 2018 and revenue doubled. Huawei is dominant in Egypt, Jordan and Lebanon, with Jiao claiming that Huawei is planning to expand in United Arab Emirates and Saudi Arabia. Bloomberg analysts have even recommended that Huawei begin focusing on expanding in emerging markets instead of developed markets, given the situation they are in.

While the current political atmosphere and spreading weariness of Huawei hold back growth, increasing presence in emerging markets and smartphone quality positively drive Huawei’s growth. Huawei’s future is contingent upon if they can improve their public relations in the face of U.S. accusations, and only time will tell if they can dominate the market.