There's a lot of buzz around Apple's (AAPL +1.36%) new iPhone, and it is anticipating that the enthusiasm translates into sales. The company's own reports and data from research firm Gartner, suggests that Apple has failed to move the needle so far this year, as sales to end users have remained flat in the first half of 2017.
This has allowed Chinese powerhouse Huawei to cut Apple's lead in the smartphone space. In fact, the 17% year-over-year jump in Huawei's smartphone sales during the second quarter of 2017 has increased its global market share to 9.8%. Meanwhile, Apple's flat sales performance diminished its worldwide market share from 12.9% to 12.1% at the end of the second quarter.
But the situation could get worse for Apple, according to Counterpoint Research's latest findings. The research firm claims that Huawei sold more smartphones than Apple in June and July, and was on track for another beat in August.
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Many analysts expect that Apple's new iPhone line-up will help swing some momentum in its favor. But the rising popularity of Huawei in the global markets and its stronghold over the crucial Chinese smartphone industry should give Apple CEO, Tim Cook, some sleepless nights.
Huawei is targeting global growth
Huawei's focus on improving product quality has allowed it to make inroads into global markets such as Europe. In fact, the Chinese smartphone giant sold more smartphones than Apple in Central and Eastern Europe last year, while it is among the key drivers of smartphone demand in Western Europe as well.
By offering budget smartphones online the company has built a name for itself in Europe, Africa, and Latin America. Now Huawei wants to make a dent in markets where it hasn't been a significant player before.
Recently Huawei rolled out 17 service centers in India, looking to build upon its 1.5% market share in the country. Additionally, the company is building an offline retail sales channel in India, to target growing smartphone penetration in Tier 2 and Tier 3 cities. In the long-run, this could be a good move by Huawei, as smartphone demand in India's smaller cities is growing at a greater pace than in large metropolitan areas.
India could be an important stepping stone to Huawei's global success; a Euromonitor International report forecasts that smartphone sales in India could hit 231 million in 2021, up from 102 million last year. Huawei's focus on doubling its sales in India this year, through offline sales and its budget Honor brand, is in comparison to Apple's efforts in the country. It has struggled to crack the Indian smartphone space, missing its sales target by a wide margin in the last fiscal year.
Huawei is now looking to hit Apple where it hurts the most -- premium smartphones. The company's high-end Mate 9 smartphone, introduced in November last year, clocked five million units in sales during the first four months of launch. Sales of the new device outpaced its predecessor's by a massive 36%.
The company took another big step earlier this year by launching the Mate 9 in the U.S. The smartphone comes loaded with features such as a dual-lens camera setup, fast charging, and Amazon's Alexa voice assistant. Huawei will take things a step further when it launches its new flagship products -- the Mate 10 and the Mate 10 Pro -- next month.
The new devices could help Huawei make inroads into the U.S. market; the company has reportedly teamed up with AT&T as a carrier partner. AT&T was said to be testing Huawei's smartphones earlier this year for network compatibility, which makes it likely that the company's phones will be competing with iPhones in Apple's home market soon.
Technological advances will make Huawei's phones attractive
Huawei needs to deliver cutting-edge features to make an impact in developed smartphone markets such as the U.S. The company has already delivered to some extent on this front, as the features on the Mate 9 indicate.
Huawei will reportedly equip the upcoming Mate 10 phone with artificial intelligence (AI). The company's Kirin 970 smartphone processor will come embedded with a proprietary technology called the Neural Processing Unit (NPU), which can learn a user's habits in order to make suggestions and launch applications. Huawei claims that this will boost the performance of its next flagship while increasing the battery life by 50%.
The Foolish takeaway
Apple and Huawei are engaged in a close fight for the second place in the smartphone industry. The Chinese company currently enjoys the upper hand; its smartphone sales are growing at an impressive pace, while Apple's sales have stalled lately. But Apple's new releases could change all this.
The bottom-line is that Huawei's product development shouldn't be discounted: It can make a strong comeback with its next flagship, haunt Apple in the premium smartphone market, and gain more share.
