Samsung could emerge as the big winner from Huawei's miserable week

Reuters

• Huawei is Samsung's biggest competitor in the worldwide smartphone market. But without Google's Android, it could be difficult for Huawei to expand outside of China.
• This could make Samsung's position at the top of the smartphone market all the more certain, leaving Apple as the only meaningful threat to its dominance.
• If Huawei's foldable smartphone, the Mate X, does not run on Google's Android, it could make the device noticeably less appealing - therefore leaving an opportunity for Samsung to emerge as a leader in the foldable phone market despite its rocky Galaxy Fold launch.
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The biggest winner in the US government's battle with China's Huawei could turn out to be Samsung's smartphones.

The South Korean tech giant has seen its perch at the top of the smartphone market threatened by Huawei's surging tide of handhelds. And Samsung's recent missteps in the rollout of its cutting-edge foldable phone, which was delayed because of quality problems, have added further uncertainty to Samsung's reign.

But the Trump administration's decision to put Huawei on a US trade blacklist could be just the helping hand Samsung needs to retain its status as the world's unrivaled smartphone superpower.

The blacklist has forced tech companies like Google and Intel to suspend business with Huawei. That means Huawei's future phones will not be able to run on Google's Android operating system, the most popular mobile software in the world.

While Huawei says it has built its own home-made smartphone operating system that will be ready by next year, there's no guarantee that consumers will buy Huawei phones if they have a new, unknown operating system, especially if that means the phones don't have system-level access to popular Google services like Gmail and Google Maps.

That's potentially good news for Samsung, which has been steadily losing market share to Huawei. In the first three months of 2019, Samsung accounted for 23.1% of the worldwide smartphone market, representing an 8.1% decrease from the year-ago period, according to the International Data Corporation. Huawei's position jumped 50% year-over-year, to claim a 19% share of the market in Q1.

Besides Huawei, no other smartphone maker comes close to Samsung in terms of the global market share. Apple trailed in third place with 11.7% of the market in Q1, whereas China-based smartphone maker Xiaomi ranked in fourth with 8% of the market.

If Huawei does see a dip in smartphone sales as a result of these new US government requirements, rivals like Apple and Xiaomi would still have a lot of catching up to do in order to endanger Samsung's spot at the top.

An Apple backlash in China

That's not to say it's impossible and that Samsung's position at the top is guaranteed. The smartphone market often fluctuates between quarters based on a variety of factors, with Apple and Huawei usually switching back and forth to place in second behind Samsung. In the fourth quarter of 2018, for example, Apple held 18.2% of the worldwide smartphone market, coming dangerously close to Samsung's 18.7% lead. Huawei placed in third with 16.1% of the market - although its share grew by 43.9% year-over-year while both Apple's and Samsung's declined.

Henry Nicholls/Reuters

Samsung Galaxy S10

But some analysts believe that the backlash against Huawei in the US could potentially hurt Apple's business in China. A team of analysts at UBS recently circulated a note citing the treatment of Huawei in the US as a potential risk to Apple, writing that nationalist sentiment has been known to sometimes impact foreign goods in China. People in China also recently called for a boycott of Apple's products following the Trump administration's decision to put Huawei on a trade blacklist, according to BuzzFeed News.

To be sure, Samsung's smartphones do not have a strong presence in China, according to data from Counterpoint Research, which doesn't even break out the Seoul-based tech giant in its ranking of the top smartphone vendors in the region.

But China is an important for Apple; it's the company's third largest market, and the iPhone accounted for 12% of China's smartphone market as of the fourth quarter of 2018 according to Counterpoint Research. If there is a boycott against Apple products in China, it could make it more difficult for the company to broaden the iPhone's reach and catch up to Samsung's global market share.

The Folding Phone debacle

There's another key way Samsung could stand to benefit from Huawei's misfortunes when it comes to the smartphone space: foldable phones. Samsung's Galaxy Fold got off to a rocky start to say the least after small number of reviewers reported that the device's screen had broken, prompting Samsung to indefinitely delay the Fold's launch. Samsung still hasn't spoken out about when the phone will be released.

Reuters

Huawei Mate X

But the new restrictions Huawei faces when working with US companies could give Samsung's Galaxy Fold a second chance.

Huawei unveiled its Mate X foldable phone just days after Samsung debuted the Fold in February, showcasing an impressively designed device with a crease that appeared to be less noticeable than the one found on Samsung's phone. Huawei hasn't announced when the phone will be released yet, making it unclear whether or not it will be able to run on Google's Android software. The US government has granted Huawei a 90-day reprieve that will allow it to maintain and support its products until August 19. But we don't know if the Mate X will launch before then, although a report from GizmoChina suggested it could be released in June.

Losing Android would be a tough blow for Huawei, but it's especially damaging for a device as expensive as the Mate X, which will be priced at around $2,600 when it launches. For shoppers outside of China, not having Google's widely popular suite of services and its enormous app store could drastically lower the Mate X's value proposition should it not run on Google's software. There's also the concern as to whether or not the software on Huawei's Mate X will be as feature-rich and polished as foldable phones that run on Google's Android, considering the search giant has tailored the next version of Android to make it adaptable to foldable form factors.

Hollis Johnson/Business Insider

Samsung Galaxy Fold

Of course, Huawei and Samsung are not the only companies working on foldable devices. Xiaomi and Motorola are developing foldable phones of their own, but neither of those products seem as far along as those made by Samsung and Huawei. That could leave Samsung with an opportunity to own the nascent foldable smartphone market for a considerable amount of time should it re-launch the Galaxy Fold in the near future.

It's too soon to know precisely what will happen to Huawei as a result of the US government's recent trade sanctions. The company has said it's been working on its own operating system to replace Android, and the company's chief executive Ren Zhengfei recently told the Nikkei Asian Review that he expects the company's growth to slow only a little bit. But even if Zhengfei proves to be correct and Huawei's growth only mildly slows, that's still bound to be good news for Samsung's reign over the global smartphone market.

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