Tech Transformers

China's Huawei could overtake Apple this year in smartphones, top analyst says

Key Points
  • Huawei could overtake Apple in smartphone market share in 2017, IDC analyst Francisco Jeronimo said
  • Huawei has 11.3 percent market share, while Apple is just ahead with 12 percent
  • The Chinese firm has launched its own AI chipset called the Kirin 970 which could help it challenge rivals
Huawei could overtake Apple in smartphone business by 2018: Pro

Chinese device maker Huawei could surpass Apple in the smartphone market this year, according to an analyst from a top research firm.

In the second quarter of this year, Huawei held a 11.3 percent market share, shipping 38.5 million units, IDC data show. Apple meanwhile shipped 41 million iPhones and had a 12 percent market share in the same period.

"Huawei is today the biggest challenger to Apple and Samsung. Indeed they are growing very fast. They will probably overtake Apple in the smartphone business, either this year or next year," Francisco Jeronimo, research director for European mobile devices at IDC, told CNBC in a TV interview last week.

"And this is a huge challenge for Samsung because Huawei aims to become number one. And they are doing extremely well in terms of not just growing the number of units sold, but also in terms of value because for Samsung or for any smartphone maker, it's not about shipping boxes anymore, it's about making money. And we are seeing the prices going up and up."

Huawei has been aggressively investing in its smartphone business in the past two years and has seen impressive growth. It has managed to launch phones at different price points, as well as challenge Apple and Samsung in the high end of the market.

Jeronimo pointed to the recent launch of Huawei's own artificial intelligence (AI) chipset, known as the Kirin 970, as a reason why the Chinese firm could challenge the top two smartphone players.

Richard Yu, chief executive officer of Huawei's consumer business group, speaking during the launch of P10 & P10 Plus smartphones and Huawei Watch 2 smartwatch, ahead of the Mobile World Congress (MWC) in Barcelona, Spain, on Sunday, Feb. 26, 2017.
Chris Ratcliffe | Bloomberg | Getty Images

The Kirin 970 is the size of a thumbnail and supports on-device AI. That means the AI functions are processed on the smartphone rather than in the cloud, which could speed up processes. If Huawei can prove that its AI chipset has boosted its smartphone's capabilities, it could allow the Chinese firm to push prices higher and become number one in the market.

"This will give them (Huawei) an edge competing with other players because there are not many players that are able to launch their own AI chipsets. We think about Apple, Samsung, and Google have their own. All other vendors will have to rely on someone else," Jeronimo told CNBC.

"If Huawei didn't have this capability, they will be a few steps behind Apple and Samsung in a couple years. It's crucial for them to lead. If the experience is better compared to Samsung or an iPhone, then it will give them an advantage in the long term."

The company is holding an event on Monday in Munich, Germany, where it is expected to unveil new devices.

Huawei's ambitions appear to be ahead of schedule. In an interview with CNBC in February 2016, Richard Yu, the CEO of Huawei's consumer business group, said he hoped the company would be number two in the smartphone market within three years, and number one within five years.

Still, Huawei trails the likes of Samsung and Apple in terms of both profits and revenues in the smartphone market. Sales in Huawei's consumer business group, the majority of which comes from smartphones, hit 105.4 billion yuan ($16 billion) in the first half of 2017. In comparison, Apple saw iPhone revenue come in at $58 billion, while Samsung's mobile sales were $45.6 billion in the same period.

Apple and Samsung also collectively account for around 94 percent of profits made in the smartphone market in 2016, according to data from market research firm Strategy Analytics.