Despite U.S. sanctions, Huawei Technologies Co is making a bold move to reclaim its position in the premium electronics market in China. The company is aggressively expanding its retail presence, posing a direct challenge to Apple Inc AAPL.
What Happened: Huawei has opened four flagship stores in China since December. These stores, located in major Chinese cities, are part of Huawei’s strategy to regain its foothold in the lucrative Chinese smartphone market, Reuters reported on Wednesday.
These stores, some of which are located near Apple’s flagship stores, are a significant shift from Huawei’s previous reliance on licensed distributors. The company is bouncing back from U.S. sanctions imposed in 2019, which severely impacted its smartphone business.
Apple currently operates 47 stores across mainland China, while Huawei, which opened its first flagship store in 2019, now has 11 stores in the region.
“I think they will open more than 20 of them. Then it will eventually catch up to Apple,” said Ethan Qi, associate director at research firm Counterpoint.
With the launch of these flagship stores, Huawei is aiming to boost sales beyond smartphones. The stores offer a wide range of products, including tablets, smartwatches, televisions, and electric vehicles made in partnership with Chinese automakers.
Why It Matters: The aggressive retail expansion comes on the heels of Huawei’s efforts to achieve tech self-sufficiency in the face of U.S. sanctions. The company’s latest high-end smartphone, the Pura 70 series, incorporates more components from Chinese suppliers, as revealed by a recent teardown analysis.
Meanwhile, China’s top chipmaker, Semiconductor Manufacturing International Corp, has seen its profit margin plummet to a 15-year low amid U.S. export controls. The company expects further decline as it expands its capacity to meet the growing demand from Huawei and other clients.
Apple, on the other hand, has been facing challenges in China. The company’s iPhone sales in China nosedived 19.1% in the first three months of 2024, with its market share witnessing a significant decline to 15.7% from 19.7% a year ago, according to data from Counterpoint Research. This is Apple’s worst performance since 2020, largely due to the impact of Huawei’s new product launches in the premium segment.
Moreover, the U.S. has revoked the export licenses of Intel Corp and Qualcomm Inc to sell chips to Huawei. This move has further complicated Apple’s position in China, as it faces a resurgent Huawei and a tightening of U.S. export controls.
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