Apple Turns to More Profitable Areas after Feeling Huawei Heat
In online stock trading, you need to realize that competition from rivals can affect stocks and their performance. But they can counter that by turning their attention to other, more profitable areas of business.
Apple in Stiffer Competition
Apple ($AAPL) has been knocked off its perch as the 2nd largest global smartphone manufacturer by upstart Chinese firm Huawei. The news was confirmed by reports from Counterpoint Research, International Data Corp. (IDC), Canalys and IHS Markit. 2018's second quarter witnessed a smartphone market decline of 1.8%, but Huawei's market share rose to 15.8%, and it sold 54.2 million shipments, a massive 41% jump from the previous year.
Apple shipped only around 41.3 million units in the second quarter. It only had a humble 0.7% growth from the year-ago period and just missed the 41.8 million devices forecast of the Street. Apple's global smartphone market share is now 12.1%, says the IDC.
Top-end Features of Huawei Phones Sealed the Deal
What swung the tide in Huawei's favor was, according to IHS Markit, the raft of top-end features the company infused into its flagship smartphones. That has given it great brand recognition in Asia and Europe. It's even brought the brand in a confrontation with Samsung in some of the higher price categories. IDC data states that Samsung enjoys a 21% market share and has sold 71.5 million devices this quarter.
According to Canalys, Huawei's P20 Pro and Honor sub-brand are the primary factors contributing to the intense demand for Huawei phones. Honor smartphones were the primarycontributors to Huawei shipments outside China, and they grew to 4 million from last year, a 150% growth!
"Honor" Sub-brand Gains Popularity Overseas
Huawei may have failed to strike a partnership with a US carrier till now, but Canalys reckons it has gotten around it by focusing on low end volume growth and not worrying too much about its profitability drive. Honor wasn't a particularly well known brand overseas, though it has been popular in China, India and other Asian markets. But that's all begun to change, and Honor is taking the major role in expanding Huawei's international footprint.
Apple Focuses on Other Areas and Is a $1T Company
So where does all that leave Apple? With it becoming the world's first company valued at $1 trillion, Huawei's rise is hardly a shock to the system. Apple has just been gravitating towards more profitable areas. The company has been moving away from hardware sales towards software and services. These provide Apple the potential for subscriptions that bring recurring revenue for the company. That's a sensible strategy since market demand is waning for the iPhone, and the replacement cycles are getting longer. The App Store, Apple Music, video streaming, artificial intelligence and autonomous vehicle technology segments are what Apple focuses on, with the only hardware segment being smart home speakers.
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