Huawei's Nexus 6P. Image source: Alphabet.

Huawei sold more handsets in China than any other company in the third quarter, according to research firm Canalys. It was the first time Huawei held the top spot in its home market as its sales surged a massive 81% on an annual basis, topping key rivals Xiaomi and Apple (NASDAQ:AAPL). Huawei is increasing emerging as a key partner for Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), and if its recent growth continues, it could become one of Apple's fiercest competitors.

High-end hardware at affordable prices
Like other Android vendors, Huawei offers a variety of different models at various price points. Huawei sells its phones under several different product lines, including the Mate, the Honor, and the P-series. Huawei has released several phones so far this year, including the Mate S in September, the Honor 7 in July, the P8 in May, and the Honor 6 Plus in February. All of Huawei's handsets run Alphabet's Android operating system, but include its Emotion UI, which adds a number of user interface improvements. Owners of newer Huawei phones can open specific apps by drawing letters on the screen with their knuckle.

Most of Huawei's handsets are equipped with solid hardware, but are offered at affordable prices. The Honor 7, for example, is priced around $300 to $400, and offers many features common to flagship smartphones. It sports a 5.2-inch HD display, a snappy processor, a 20 MP camera and 3 GB of RAM. Huawei's most recent phone, the Mate S, is much more expensive (on par with Apple's iPhone 6s), but includes features you won't find on other Android handsets, such as a copycat of Apple's 3D Touch.

American buyers interested in these handsets have had to import them. Huawei sells a handful of models on its website, but has no relationships with U.S. carriers or retailers. Still, its popularity in China and Europe has made it one of the world's largest handset vendors. According to research firm IDC, Huawei was the third-largest smartphone vendor in the world during the third quarter, shipping 26.5 million handsets. Apple shipped nearly twice as many phones, and Samsung more than three times as many, but Huawei enjoyed more sales growth than any other vendor. Its 60.9% rise in annual shipments was the largest by a sizable margin (Apple came in second place, with 22.2%).

The best Android phone
Huawei seems poised to continue that rapid growth as it enters new markets. Last month, Alphabet began shipping its latest Nexus handset, the Nexus 6P, to U.S. buyers. Although the phone is sold under Alphabet's Google brand, it's manufactured by Huawei, and it carries the latter's logo. Nexus phones have never been big sellers, but the Nexus 6P has been widely praised. The Verge dubbed it the best Android phone on the market. There's been no official announcement, but it seems likely that Huawei will follow with other Android phones.

Apple remains insulated from competition to some extent, owing to its exclusive use of iOS -- buyers who want iOS have no choice but to stick with an iPhone. Apple continues to enjoy strong customer loyalty and high satisfaction. Still, Huawei's improving hardware could eventually entice some iPhone owners to make the switch.

Huawei's recent growth certainly makes it among the most exciting firms operating in the handset space. If it can replicate its Chinese success in other markets, it could become a dominant player.

Sam Mattera has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.