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China’s smartphone shipments are reportedly up for April, following COVID-19-fueled decline
Smartphone shipments are reportedly beginning to see signs of life in China, after a sizable dip from the COVID-19 pandemic. New numbers from China Academy of Information and Communications Technology (a government-connected agency) point to a 17% rise in shipments for April, pointing to some recovery for the market.
The figure, from the China state-supported group, is virtually a mirror reflection of the 18% dip Canalys reported for Q1. COVID-19 was the primary culprit for those figures, through a combination of decreased spending among China’s phone-buying public and sizable supply chain constraints, as many Asian nations were on lockdown to slow the spread.
Both Huawei and Apple benefited from the rebound, though Reuters notes that the firm opted not to include an OS breakdown for the first time in a while, making it more difficult to parse market share.
Smartphone shipments have suffered across the board, along with countless other industries. A rebound for China’s market could be a bellwether for positive numbers for the industry moving forward — especially given the country’s close ties to the global supply chain. In spite of being the first country hit, China’s official figures for COVID-19 deaths have remained low, compared to countries in Europe and North America.
That’s likely due in part to some draconian measures used to stop the spread. Other countries (the U.S. in particular) may not be so likely to rebound from the pandemic, leading to a more protracted impact on the global market.
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Smartphone shipments dropped 13% globally, and COVID-19 is to blame
We knew it was going to be bad — but not necessarily “lowest level since 2013” bad. As Apple was busy reporting its earnings, Canalys just dropped some of its own figures — and they’re not pretty. After two quarters of much-needed growing, the global smartphone market just took a big hit. And you no doubt already know who the culprit is.
The mobile industry joins countless others that have taken a massive hit due to the COVID-19 pandemic, with shipments dropping 13% from this time last year. Here’s a graph for those of you who are visual learners:
Analyst Ben Stanton used the word “crushed” to describe the novel coronavirus’s impact on the mobile market. “In February, when the coronavirus was centered on China, vendors were mainly concerned about how to build enough smartphones to meet global demand,” he writes. “But in March, the situation flipped on its head. Smartphone manufacturing has now recovered, but as half the world entered lockdown, sales plummeted.”
First it was impact on the global supply chain, which is centered in Asia, along with a drop in demand among consumers in China. As Europe, the U.S. and other locations continue to live under shelter in place orders, demand in those markets has taken a significant hit. People are stuck inside and many have lost jobs — it’s not really the ideal time to consider shelling out $1,000+ for what still seems a luxury for many.
Samsung regained the top spot, while still losing significant numbers. Both it and the number two company, Huawei, were down 17% for the quarter. Apple, at number three, dropped 8%. Chinese manufacturers Xiaomi and Vivo saw some gains, at 9% and 3%, respectively.
There are bound to be rough times ahead as well. Per Stanton, “Most smartphone companies expect Q2 to represent the peak of the coronavirus’ impact.” Apple noted the uncertainty of its own earnings by opting not to issue guidance for next quarter.
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Huawei’s ill-fated foldable returns with a more robust upgrade
MWC may have been canceled on account of rising coronavirus concerns, but the party still went on for Huawei (albeit to what appears to have been a mostly empty room). A year after wowing crowds with the Mate X, the company is introducing the Mate Xs.
Rather than a proper successor, the device appears to be the result of Huawei’s decision to go back to the drawing board, following Samsung’s very public problems with its own original foldable.
The design looks nearly identical to the original version of the phone — which is a pro. Honestly, the one major downside of the device (aside from a lofty price tag) is the fact that it never fully arrived, outside of what appears to be a relatively small batch offering in China.
Like Samsung, Huawei’s update focused a lot on the hinge; with increased mechanical components, the product should be more rugged than the original. Keep in mind that, while we were able to play around with the original Mate X, that was about it. Personally, I saw one at MWC and had an opportunity to try one for a few minutes during lunch, between meetings at Huawei HQ in Shenzhen.
Now that foldables have arrived, it seems Huawei is finally ready to take the leap. Of course, one ought not forget the company’s ongoing issues here in the States that will not only make it more difficult to procure here, but also blocks access to Android apps and services. That will continue to be a major issue for the company’s products, going forward.
Price, too, will continue to be an issue, at around $2,700 when it goes up for sale in certain markets next month. That extremely inflated price gets you a 6.6-inch display, 5G, a beefy 4,500 mAh battery, the latest Kirin 990 chip, 8GB of RAM and 512GB of storage. Go big and/or go home, right?
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Huawei files patent infringement lawsuits against Verizon Communications
Huawei has filed two patent infringement lawsuits against Verizon Communications in U.S. District Court.
The Chinese telecommunications equipment giant wants Verizon to compensate it for the use of technology it says are covered by 12 Huawei patents, including ones related to networking, security and video communications. Before the lawsuits were filed, Huawei claims it negotiated with Verizon in a series of meetings from February 2019 to January 21, but was unable to reach a license agreement.
(Disclosure: TechCrunch is owned by Verizon Media, a division of Verizon Communications.)
Huawei technology is used by telecommunication companies around the world. In a press release about the lawsuits, it says it puts about 10% to 15% of its revenue into research and development each year, and has spent about $70 billion on R&D over the last decade, including about $15 billion in 2018 alone.
This resulted in Huawei receiving more than 80,000 patents around the world, including 10,000 in the U.S.
In its filings, Huawei claims Verizon has “profited greatly” from infringing on its patents, noting that Verizon Communication’s total revenue for its wireline division in 2018 was $29.8 billion.
Huawei maintains a close relationship with many other tech companies, including some competitors, through licenses. Huawei says it has received more than $1.4 billion in patent license fees since 2015. In addition to providing customers access to its own technology, Huawei has also paid over $6 billion to license patents from other companies, with more than 100 license agreements signed with vendors in the U.S., Europe, Japan and South Korea.
In its press release, Huawei’s chief legal officer Song Liuping said “Verizon’s products and services have benefitted from patented technology that Huawei developed over many years of research and development.”
“For years now, we have successfully negotiated patent license agreements with many companies. Unfortunately, when no agreement can be reached, we have no choice but to see a legal remedy,” Song added. “This is a common practice in the industry. Huawei is simply asking that Verizon respect Huawei’s investment in research and development by either paying for the use of our patents or refraining from using them in its products and services.”
Rich Young, a Verizon spokesperson, told TechCrunch in an emailed statement that “Huawei’s lawsuit filed overnight, in the very early morning, is nothing more than a PR stunt. This lawsuit is a sneak attack on our company and our nation. The action lacks merit, and we look forward to vigorously defending our company and our nation.”
The patent infringement lawsuit is taking place against the backdrop of Huawei’s legal entanglements with the U.S. government, which claims it is a national security threat, a charge Huawei denies.
Huawei has been on a U.S. trade blacklist since the last May and is suing the government over what it says is an unconstitutional ban on the use of its products by federal agencies and contractors. Huawei’s technology is used by many telecom companies around the world, however, and its close ties with U.S. supply chains were underscored last month when the Defense and Treasury Departments reportedly put pressure on the Commerce Department over the ban.
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No pan-EU Huawei ban as Commission endorses 5G risk mitigation plan
The European Commission has endorsed a risk mitigation approach to managing 5G rollouts across the bloc — meaning there will be no pan-EU ban on Huawei. Rather it’s calling for Member States to coordinate and implement a package of “mitigating measures” in a 5G toolbox it announced last October and has endorsed today.
“Through the toolbox, the Member States are committing to move forward in a joint manner based on an objective assessment of identified risks and proportionate mitigating measures,” it writes in a press release.
It adds that Member States have agreed to “strengthen security requirements, to assess the risk profiles of suppliers, to apply relevant restrictions for suppliers considered to be high risk including necessary exclusions for key assets considered as critical and sensitive (such as the core network functions), and to have strategies in place to ensure the diversification of vendors”.
The move is another blow for the Trump administration — after the UK government announced yesterday that it would not be banning so-called “high risk” providers from supplying 5G networks.
Instead the UK said it will place restrictions on such suppliers — barring their kit from the “sensitive” ‘core’ of 5G networks, as well as from certain strategic sites (such as military locations), and placing a 35% cap on such kit supplying the access network.
However the US has been amping up pressure on the international community to shut the door entirely on the Chinese tech giant, claiming there’s inherent strategic risk in allowing Huawei to be involved in supplying such critical infrastructure — with the Trump administration seeking to demolish trust in Chinese-made technology.
Next-gen 5G is expected to support a new breed of responsive applications — such as self-driving cars and personalized telemedicine — where risks, should there be any network failure, are likely to scale too.
But the Commission take the view that such risks can be collectively managed.
The approach to 5G security continues to leave decisions on “specific security” measures as the responsibility of Member States. So there’s a possibility of individual countries making their own decisions to shut out Huawei. But in Europe the momentum appears to be against such moves.
“The collective work on the toolbox demonstrates a strong determination to jointly respond to the security challenges of 5G networks,” the EU writes. “This is essential for a successful and credible EU approach to 5G security and to ensure the continued openness of the internal market provided risk-based EU security requirements are respected.”
The next deadline for the 5G toolbox is April 2020, when the Commission expects Member States to have implemented the recommended measures. A joint report on their implementation will follow later this year.
Key actions being endorsed in the toolbox include:
- Strengthen security requirements for mobile network operators (e.g. strict access controls, rules on secure operation and monitoring, limitations on outsourcing of specific functions, etc.);
- Assess the risk profile of suppliers; as a consequence, apply relevant restrictions for suppliers considered to be high risk – including necessary exclusions to effectively mitigate risks – for key assets defined as critical and sensitive in the EU-wide coordinated risk assessment (e.g. core network functions, network management and orchestration functions, and access network functions);
- Ensure that each operator has an appropriate multi-vendor strategy to avoid or limit any major dependency on a single supplier (or suppliers with a similar risk profile), ensure an adequate balance of suppliers at national level and avoid dependency on suppliers considered to be high risk; this also requires avoiding any situations of lock-in with a single supplier, including by promoting greater interoperability of equipment;
The Commission also recommends that Member States should contribute towards increasing diversification and sustainability in the 5G supply chain and co-ordinate on standardization around security objectives and on developing EU-wide certification schemes.
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The Pentagon pushes back on Huawei ban in bid for ‘balance’
Huawei may have just found itself an ally in the most unexpected of places. According to a new report out of The Wall Street Journal, both the Defense and Treasury Departments are pushing back on a Commerce Department-led ban on sales from the embattled Chinese hardware giant.
That move, in turn, has reportedly led Commerce Department officials to withdraw a proposal set to make it even more difficult for U.S.-based companies to work with Huawei.
Defense Secretary Mark Esper struck a fittingly pragmatic tone while speaking with the paper, noting, “We have to be conscious of sustaining those [technology] companies’ supply chains and those innovators. That’s the balance we have to strike.”
Huawei, already under fire for allegations of flouting sanctions with other countries, has become a centerpiece of a simmering trade war between the Trump White House and China. The smartphone maker has been barred from selling 5G networking equipment due to concerns over its close ties to the Chinese government.
Last year, meanwhile, the government barred Huawei from utilizing software and components from U.S.-based companies, including Google. Huawei is also expected to be a key talking point in upcoming White House discussions, as officials weigh actions against the repercussions they’ll ultimately have for U.S. partners.
The Commerce Department has yet to offer any official announcement related to the report.
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Huawei’s answer to life after Google Maps? TomTom
Losing access to Google software and services understandably threw Huawei for a loop. The Chinese hardware giant has clearly been working on a contingency plan to deal with the loss of access to things like Android and the Play Store, but Google’s offering formed so much of the devices’ software core — as they do so many of its competitors.
Huawei just lined up a pretty big name in its attempts to rebuild a competitive software suite. Dutch mapping giant TomTom has agreed to provide access to its navigation, mapping and traffic information. The two companies finalized a deal this week, per Reuters, letting Huawei use that information to build its own proprietary apps.
TomTom confirmed the deal, but declined to offer additional information. The move comes as the mapping company has taken a step back from hardware offerings in favor of monetizing its software services. Given Huawei’s pretty massive footprint in the global smartphone market, this presents a pretty big deal for TomTom, which had previously provided info for AppleMaps.
Huawei was left reeling from U.S. sanctions that cut off access to U.S.-produced software and components. The company has been working to build its own Android competitor behind the scenes, though what we’ve seen of HarmonyOS has thus far been fairly muted. Rumors have also swirled around Huawei developing its own Maps competitor, so it’s hard to say how much it views this new deal as a stopgap.
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Have we hit peak smartphone?
Last Halloween, we broke down some “good news” from a Canalys report: the smartphone industry saw one-percent year-over-year growth — not exactly the sort of thing that sparks strong consumer confidence.
In short, 2019 sucked for smartphones, as did the year before. After what was nearly an ascendant decade, sales petered off globally with few exceptions. Honestly, there’s no need to cherrypick this stuff; the numbers this year have been lackluster at best for a majority of companies in a majority of markets.
For just the most recent example, let’s turn to a report from Gartner that dropped late last month. The numbers focus specifically on the third quarter, but they’re pretty indicative of what we’ve been seeing from the industry of late, with a 0.4 percent drop in sales. It’s a fairly consistent story, quarter after quarter for a couple of years now.
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Huawei reportedly got by with a lot of help from the Chinese government
For those following Huawei’s substantial rise over the past several years, it’ll come as no surprise that the Chinese government played an important role in fostering the hardware maker. Even so, the actual numbers behind the ascent are still a bit jaw-dropping. Huawei reportedly had “access to as much as $75 billion in state support,” according to a piece published by The Wall Street Journal on Christmas Day.
That massive figure is culled from poring over various forms, including grants and tax breaks. Huawei, for its part, isn’t denying any government support, but said in response that what it received was “small and non-material,” in line with the usual variety of grants awarded to tech startups and companies.
Per WSJ’s accounting of public records, Huawei got around $46 billion in loans and other support, coupled with $25 billion in tax cuts used to accelerate tech advances. There’s also a billion or two here and there for things like land discounts and grants. At the very least, it seems China had a vested interest in the rise of a hardware company that could go head to head with the likes of Apple and Samsung. Certainly it’s not unheard of that a government would foster some growth in the form of grants, but there’s a clear question of how much.
The phone maker’s alleged close ties to its government have been a major sticking point in its swift international expansion. Such notions have raised flags in the United States, where the company has been barred from providing mobile hardware for government bodies. Many leaders have also raised concerns over use of Huawei telecom equipment, as the company looks to be a linchpin in a global 5G rollout.
Due to such perception and central role in U.S./China trade tensions, it’s no surprise the company was quick to deny any such ties. Huawei has, of course, been hampered by a U.S. trade ban that has barred the use of U.S.-originated hardware and software. A domestic push and patriotic ad campaign, however, have helped its sales figures in China, even as it has struggled to expand in other parts of the world.
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A false start for foldables in 2019
A year from now, this is likely to have all blown over. A year from now, the Samsung Galaxy Fold’s turbulent takeoff may well be a footnote in the largest story of foldables. For now, however, it’s an important caveat that will come up in every conversation about the nascent product category.
How history remembers this particular debacle will depend on a number of different factors, the ultimate success of the category chief among them. If foldables do takeoff, the Galaxy Fold’s very public false start will be remembered as little more than a blip. There’s plenty of reasons to root for this — devices have seemingly hit the upper threshold of product footprint. If the trend toward larger screens continues, it’s going to take a clever form factor like this to accommodate that need.
If foldables are relegated to the dustbin of history, however, the Fold misfire will take much of the heat. It’s clear that a trail of broken units will have little impact on Samsung’s bottom line. Two Galaxy Note 7 recalls were a testament to the hardware giant’s resilience in the public eye, after serving as a rounding error in the company’s bottom line that year. Sending some half-baked models to a handful of reviews wasn’t nearly as major of a mistake, but the category, much like the Fold itself, is in a fragile state.
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