Enlarge /. The Huawei logo at the Smart City Expo World Congress in Barcelona in November 2019.

Getty Images | SOPA pictures

Despite aggressive US government sanctions, Huawei is the world's leading smartphone maker, according to Canalys. With the company's 55.8 million smartphone shipments in the second quarter of 2020, the company topped the Canalys charts for the quarter, the first time the company overtook Samsung as the front runner.

Huawei's top spot is not really due to the fact that it defeated US sanctions. Huawei's sales have actually declined slightly compared to last year, but in the era of the corona virus, it is a huge win if sales are only "slightly" down. Huawei's sales decreased 5 percent from the second quarter of last year, but Samsung's sales increased and decreased 30 percent year-over-year. Samsung's dramatic decline was enough to put Huawei in first place with 55.8 million compared to Samsung's 53.7 million.

Canalys shows that smartphone sales are almost declining across the board this year. Overall, deliveries decreased by 14 percent compared to the second quarter of 2019. The only company with growth is Apple in third place, which grew by a whopping 25 percent. Canalys attributes much of this success to the new iPhone SE and explains: "(i) The new iPhone SE was critical in the quarter, accounting for approximately 28% of its global volume, while the iPhone 11 remained almost a strong bestseller 40% . "

  • The market share chart for the second quarter of 2020. Huawei notes, Samsung is far below and Apple is far above.

  • Huawei's business is becoming increasingly dependent on China.

It's a surprise that Huawei takes first place on the smartphone given the U.S. government's export restrictions, but the sanctions are taking effect. Huawei is falling like a stone on the global market, with international sales falling at least 26 percent in the last three quarters. Huawei somewhat offsets this loss with a higher market share in China. In the first quarter of 2019, Huawei's deliveries were almost equally distributed across China and the world market, at 51 and 49 percent, respectively. In the second quarter of 2020, the company sold 72 percent of its phones in China, according to Canalys, with only 28 percent of sales coming from the global market.

Huawei could survive the COVID economy for now, but it will only get worse for the company in the future. Canalys warns that "(s) strength in China alone will not be enough to keep Huawei at the top as the global economy begins to recover." Thanks to the export ban, Huawei is not allowed to send Google's Android apps for new models, which negates Huawei's appeal outside of China (where the Google apps are not available anyway).

Huawei cannot use US chips or technology in its products, but was able to stay afloat in China thanks to its in-house HiSilicon chip division. However, Huawei will soon be faced with a chip problem: TSMC, the world's leading silicon foundry, has announced that Huawei will be excluded from deliveries after September 14. Huawei apparently planned this and stocked up with huge orders. But this stock, like Huawei's success in the last quarter, will not last forever.


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