Samsung slump makes Huawei the world’s biggest smartphone brand for the first time, report says

Huawei became the world’s top smartphone seller last quarter, overtaking Samsung for the first time ever, according to an independent market research report released Thursday.

The Chinese tech company shipped 55.8 million phones in the three months ended in June, surpassing longtime rival Samsung, which shipped 53.7 million, according to the Canalys report.

“Taking first place is very important for Huawei,” said Canalys analyst Mo Jia. “It is desperate to showcase its brand strength to domestic consumers, component suppliers and developers.”

A years-long US pressure campaign against Huawei has handicapped the Shenzhen-based firm’s global business.

Huawei still suffered an annual decline in smartphone shipments of 5%. But Samsung’s was a lot bigger at 30%, according to Canalys.

The market research firm said Huawei’s victory over Samsung wouldn’t have happened without Covid-19. The company was able to take advantage of the economic recovery in China, where Huawei now sells over 70% of its smartphones. Samsung has a very small presence in China.

A pedestrian passes the Huawei Technologies Co. flagship store in Paris, France, on Tuesday, July 7, 2020. France's decision to give only temporary security approval for 5G mobile equipment shows the government intends to gradually sideline?Huawei, a majority party lawmaker said. Photographer: Nathan Laine/Bloomberg via Getty Images

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Huawei’s global smartphone and telecom gear business continues to suffer the fallout from US sanctions that cut the company off from key American tech and supplies.

Without access to popular Google apps such as YouTube, maps and Gmail, Huawei’s latest smartphones are a lot less attractive to international buyers. That will make it very difficult for Huawei to hold on to the global No. 1 position, according to Jia.

“It will be hard for Huawei to maintain its lead in the long term. Its major channel partners in key regions, such as Europe, are increasingly wary of ranging Huawei devices, taking on fewer models, and bringing in new brands to reduce risk. Strength in China alone will not be enough to sustain Huawei at the top once the global economy starts to recover,” he said.

“Our business has demonstrated exceptional resilience in these difficult times,” Huawei spokeswoman Evita Cao said. Cao did not respond to questions on how the company can maintain its lead going forward.

Huawei’s victory came on the same day Samsung posted a big profit bump for the second quarter, with strong chip demand helping the company weather the fallout from the coronavirus pandemic.

Samsung reported operating profit of 8.15 trillion won ($6.8 billion) for the three months that ended in June, up more than 23% compared to the same period last year.

Samsung said sales fell about 6% to 53 trillion won ($44.6 billion).

Shares in Samsung were last up 0.7% in Seoul. South Korea’s Kospi rose 0.1%.

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Despite the double digit declines in annual smartphone shipments for the quarter noted by the Canalys report, Samsung reported that the unit remained profitable thanks to savings on marketing costs. (Samsung does not break out specifics about its smartphone shipments, but noted that they declined.)

For the second half of 2020, however, Samsung is warning that “uncertainties related to Covid-19 linger” for its mobile business.

That could be enough to drag the company to revenue losses for the year, according to research firm Crisp Idea.

The consumer electronics unit, which includes smartphones and TVs, is “expected to decline significantly as Covid-19 affects demand and leads to store and plant closures globally,” Crisp Idea analysts wrote in a note earlier this month.

Smartphone shipments worldwide are expected to fall about 18% in the first half of the year as the pandemic continues to affect consumer spending, analysts at IDC said in a note last month.

The market research firm added that global smartphone shipments are not expected to return to growth until the first quarter of 2021.

That would also hurt Samsung’s memory chip business, because the company supplies chips for rival smartphone companies such as Apple (AAPL) and Huawei.