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Apple Faces New Challenge in China as Huawei Releases High-Speed Phone

WSJ - Aaron Tilley

Sep 8, 2023

“A phone like Huawei that’s suf­ficiently good enough and is now be­ing supported and en­cour­aged by the leadership of China will cer­tainly have an impact on Apple,” said Alan Ye­ung...

Apple is fac­ing a new com­pet­i­tive threat in China af­ter the coun­try or­dered some of­fi­cials not to use iPhones: Hard­ware gi­ant Huawei Tech­nolo­gies is sell­ing a smart­phone ca­pa­ble of ul­tra­fast data con­nec­tiv­ity.

The new Huawei phone, cou­pled with the ban, has the po­ten­tial to make a signif­i­cant dent in Apple’s sales and once again un­der­scores the risks global com­pa­nies face as geopo­lit­i­cal ten­sions be­tween the U.S. and China spill over into many in­dus­tries.

Apple is par­tic­u­larly vul­ner­a­ble, as most of its prod­ucts are as­sem­bled in China. Chief Ex­ec­u­tive Tim Cook for years has en­gaged in a del­i­cate dance to keep his com­pany from be­ing en­snared as the two coun­tries have dis­agreed over trade and tech­nol­ogy.

The U.S. tech com­pa­ny’s shares fell 3.2% Thurs­day, adding to the stock’s de­clines since The Wall Street Jour­nal re­ported Wednes­day that China or­dered of­fi­cials at cen­tral gov­ern­ment agen­cies not to use Apple’s iPhones or bring them into the of­fice.

The iPhone maker has dom­i­nated China’s high-end phone mar­ket in recent years af­ter tough U.S. sanc­tions lim­ited chip sup­plies, and Huawei ear­lier aban­doned plans to make phones with 5G, a cel­lu­lar stan­dard that en­ables far-speed­ier con­nec­tions. Mil­lions of smartphone users around the world have up­graded their de­vices as so-called fifth-gen­er­a­tion cel­lu­lar technology held the prom­ise of faster and bet­ter connections and other new po­ten­tial uses.

Now Huawei is fight­ing back, re­leas­ing a new phone in China with 5G-like speeds and ca­pa­bil­i­ties. The ini­tial batch of the phone—the Mate 60 Pro, priced at $960 for pre­sale—sold out within hours, mak­ing a splash on Chi­nese so­cial media. Other buy­ers have placed or­ders for de­liv­ery later. The early fer­vor suggests Huawei could re­claim buy­ers it lost in China to Apple, which is due to un­veil its lat­est iPhone next week.

“The gov­ern­ment ban and the new Huawei phone will be ma­te­r­ial events for the iPhone,” said Mar­tin Yang, an an­a­lyst at in­vest­ment firm Op­penheimer. “The two com­bined will drive more An­droid users to up­grade to the Huawei, or iPhone users go­ing back to Huawei.”

Yang says Apple could lose 10 mil­lion iPhone ship­ments in 2024 be­cause of the new Huawei phone. The com­pany shipped 224.7 mil­lion iPhones in 2022, ac­cord­ing to Coun­ter­point Re­search, so that fig­ure would amount to about 4.5% of to­tal iPhone ship­ments.

Apple is ex­pected to re­lease the iPhone 15 next week, and the com­pany in recent years has re­lied on high-end device sales for out­size growth and profitabil­ity.

It re­mained un­clear Wednes­day ex­actly what prompted China to re­strict iPhone use, but some an­a­lysts sug­gested that a sim­i­lar ac­tion in Rus­sia might have helped prompt Bei­jing.

While the or­der hasn’t been pub­licly announced, it could pose rep­u­tational risks to Apple in China. In­di­vid­ual users be­yond cen­tral gov­ern­ment em­ploy­ees, such as lo­cal gov­ern­ment of­fi­cials or those who work with the gov­ern­ment in China, could be prompted to avoid Apple prod­ucts, said Xi­aomeng Lu, a direc­tor at risk con­sult­ing firm Eura­sia Group fo­cus­ing on geopol­itics and technol­ogy.

While Huawei isn’t call­ing its new de­vice a 5G phone, tests by Chi­nese consumers and do­mes­tic test­ing agencies show it could reach a maximum down­load speed of 500 to 800 megabits a sec­ond. Such a speed would al­low con­sumers to down­load a movie in high de­f­i­n­i­tion within a minute and far sur­passes the speed limit of about 300 megabits a sec­ond for 4G net­works. 

Huawei has also high­lighted fea­tures such as satel­lite com­mu­ni­ca­tions that al­low users to con­nect in ar­eas with­out tra­di­tional mo­bile cov­er­age, a ca­pa­bil­ity that is sup­ported for calls—un­like Apple, which can only sup­port mes­sag­ing. The prod­uct’s boxes say “satel­lite mo­bile ter­mi­nal,” in­stead of “digi­tal mo­bile device,” the phrase that was used for earlier phone prod­ucts.

In­dus­try watch­ers are de­bat­ing how the Chi­nese tele­com gi­ant pulled off such a tech­no­log­i­cal feat de­spite fac­ing sanctions that re­strict its ac­cess to U.S. chips and re­lated tech­nolo­gies. The privately held Chi­nese com­pany has stayed silent on the big­gest source of con­jec­ture: the phone’s core pro­ces­sor and other key mo­bile chips, which power crit­i­cal func­tions such as wire­less com­mu­ni­ca­tions and gen­eral computing. 

A state-owned news­pa­per af­fil­i­ated with Chi­na’s tech­nol­ogy reg­u­la­tor touted the com­ing phone as the company’s suc­cess­ful re­turn to the 5G smart­phone mar­ket, cit­ing anony­mous in­dus­try ex­perts. The pa­per called the Mate 60 Pro the prod­uct of Huawei’s two trump cards: its ad­vanced semiconduc­tor chip and 5G, adding that “Huawei has per­se­vered and to­day deliv­ered an im­pres­sive coun­ter­punch.” 

Tech­In­sights, a Cana­dian semiconductor-in­for­ma­tion plat­form, pub­lished a report Tues­day say­ing it found that China’s big­gest con­tract chip maker, Semicon­duc­tor Man­u­factur­ing In­ternational Corp., man­u­factured the core chip inside the Huawei Mate 60 Pro. Bloomberg ear­lier re­ported that find­ing.

It said China had made tech­ni­cal breakthroughs with­out us­ing the most ad­vanced chipmak­ing tools re­stricted by the U.S., but this could po­ten­tially lead to tighter re­strictions from Washing­ton.

The Jour­nal re­ported in Feb­ruary that the Biden ad­min­is­tra­tion was considering re­vok­ing ex­port li­censes issued to U.S. sup­pli­ers for sales of prod­ucts that went into Huawei goods us­ing technology older than 5G.

Huawei said the Mate 60 Pro fea­tures a new de­sign and com­pre­hen­sive improve­ments in com­mu­ni­ca­tions, without elab­o­rat­ing.

Wash­ing­ton has pro­gres­sively cut off Huawei from U.S. tech­nol­ogy and compo­nents since it was placed on the Com­merce De­part­ment’s trade black­list in 2019. Amer­i­can of­fi­cials and members of Con­gress have said Huawei’s prod­ucts posed a na­tional-secu­rity threat, claims that Huawei has de­nied.

The U.S.’s ac­tions led Huawei to sell off its bud­get-phone unit and hurt international sales. Huawei ex­ec­utives of­ten re­ferred to the set­back as a bat­tle for sur­vival.

China be­came the world’s largest iPhone mar­ket in the sec­ond quar­ter, over­tak­ing the U.S. and the en­tire North Amer­i­can re­gion for the first time, accord­ing to Ab­hi­lash Ku­mar, an an­a­lyst at Tech­In­sights. Main­land China accounted for 24% of all iPhone shipments in the pe­riod, com­pared with 21% for the U.S., ac­cord­ing to es­ti­mates from Tech­In­sights.

Apple doesn’t break out iPhone sales from China and didn’t re­spond to requests for com­ment. Cook, the compa­ny’s CEO, said on a call with investors last month that Chi­nese consumers switch­ing to the iPhone from a ri­val smart­phone plat­form were “at the heart of our re­sults there.”

The iPhone maker had a 65% share of Chi­na’s smart­phones priced over $600 in the sec­ond quar­ter, while Huawei counted for 18%, ac­cord­ing to re­search firm IDC. Be­fore the full im­pact of the U.S. sanc­tions, Huawei’s pre­mium market share ran close to that of Apple in the first half of 2020.

“A phone like Huawei that’s suf­ficiently good enough and is now be­ing supported and en­cour­aged by the leadership of China will cer­tainly have an impact on Apple,” said Alan Ye­ung, a former U.S. ex­ec­u­tive for iPhone assembler Fox­conn. “But it’s dif­fi­cult to say by how much.”

Mil­lions of in­ter­net users in China have viewed a Huawei video of its new flagship de­vice that is cir­cu­lating on a You­Tube-like plat­form, gen­er­at­ing more than 370,000 likes.

Jenny Chen, a 28-year-old pri­mary-school teacher, lined up in a Huawei store in cen­tral Shen­zhen on Sat­ur­day as con­sumers be­hind her jos­tled to see and test the phone’s func­tions and capa­bil­i­ties. 

Chen, cur­rently an iPhone 12 user, put down her name on the reser­vation list for a Mate 60 Pro.

“I want to show my sup­port for do­mes­tic prod­ucts,” Chen said, adding that she was at­tracted by the value-for-money propo­si­tion that Huawei’s smart­phone of­fered.

Qian­wei Zhang con­tributed to this article.

Write to Yang Jie at, Yoko Kubota at and Aaron Tilley at

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