Two tech giants officially announced their latest smartphones last week. Apple went first on Sept. 10, showing off an iPhone with AI features including writing tools, photo editing tools, and a better version of its voice assistant Siri. Hours later, Huawei followed up with its own phone: A tri-fold smartphone, featuring three screens.
Both phones go on sale Friday. But amid the hype, both brands face significant challenges in the world’s largest smartphone market.
There were over 6.5 million pre-orders of the Huawei Mate XT, the company’s tri-fold phone, since its announcement. (Pre-orders don’t require a deposit). But production hiccups could limit the number of phones actually sold.
Ninety percent of the Mate XT’s suppliers are based in mainland China, according to an investigation from Isaiah Research, a tech consulting firm. These suppliers provide components like the display panel, cover glass, the battery, and the processor.
Yet some of these suppliers may not be able to produce these parts at the scale needed. There are “yield issues” of key components like the panel, hinges, and cover glass, says Lori Chang, a senior research analyst at Isaiah Research.
“Main suppliers have reported that production volume remains below 500,000 units with no additional orders placed despite strong pre-order numbers,” Chang says, which means Huawei could struggle to fulfill all 6.5 million pre-orders by the end of the year.
Huawei did not immediately respond to a request for comment.
Huawei’s Mate XT uses the Kirin 9010 5G processor, the same as its Pura 70 series phone launched in April, Chang says. Huawei’s most recent models feature locally-made advanced processors, despite U.S. Sanctions barring chip sales to the Chinese tech company. Huawei’s Mate 60 Pro, released in late August was the first model to feature a domestically produced advanced chip, the Kirin 9000s; analysts at the time speculated that Huawei and its suppliers were relying on older chipmaking technologies that may not be as efficient at scale.
Will Wong, senior research manager at IDC’s Asia-Pacific client devices group, says that production issues are “not a surprise.”
“It’s not only because of the trade ban, but also because the product is at the forefront of foldable technology,” he says. “There will be challenges to fully meet the number of pre-orders.”
Apple’s challenge
Yet while Huawei may struggle with a lack of supply, Apple’s challenge could be a lack of demand.
In China, Apple’s iPhone 16 will go on sale without its highly-touted AI features. Instead, users will need to download them later as an update. Also, a Chinese-language version of Apple’s AI features won’t come until next year.
The U.S. Smartphone giant is also losing market share in China, thanks to the rise of domestic brands like Huawei. Independent research from firms like Counterpoint Research and IDC report that brands like Xiaomi, Huawei and Honor are eating up Apple’s market share in China; the U.S. Company fell out of the top 5 phone brands in China in the second quarter of the year, according to IDC research. (In May, Apple CEO Tim Cook claimed on an earnings call that the iPhone 15 and 15 Pro Max were the two best-selling phones in urban China, without providing details)
Apple’s Greater China revenue, which combines sales in mainland China, Hong Kong, and Taiwan, was $31.1 billion for the first six months of the year, a 7.4% year-on-year drop.
Even before the iPhone 16 went on sale, the South China Morning Post reported that online retailers like Pinduoduo and Alibaba were cutting the price of the newest model by as much as 11%, suggesting that these retailers could be anticipating softer demand.
