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China's Huawei smartphone shipments are falling as U.S. sanctions persist

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A woman wearing a face mask as a preventive measure against the COVID-19 coronavirus speaks on her smartphone in front of a mall at a Huawei store (rear) in Beijing on April 1, 2020. (Photo by NICOLAS ASFOURI / AFP) (Photo by NICOLAS ASFOURI / AFP via Getty Images)

Nicolas Asfouri | AFP | Getty Images

HANGZHOU, China – Huawei phone shipments declined in the third quarter as U.S. sanctions continued to hurt the Chinese tech giant while domestic rival Xiaomi managed to capitalize on them, new data shows.

In the three months to the end of September, Huawei shipped 51.7 million smartphones, according to a Canalys report released Thursday, a 23% decrease from last year.

Another company, Counterpoint Research, announced Thursday that Huawei had shipped 50.9 million smartphones, a 24% decrease from the same period last year. According to Counterpoint, the Chinese company's market share fell from 18% in the third quarter of 2019 to 14%.

Overall, global smartphone shipments reached 348 million units in the third quarter, a 1% decrease from a year earlier but a 22% increase from the second quarter, the Canalys report showed.

Huawei lost its crown as the world's largest smartphone maker after winning the title in the second quarter of the year.

Samsung overtook Huawei. Shipments from the South Korean giant totaled 80.2 million, up 2% year over year, Canalys said.

The US campaigned against Huawei as part of the wider trade war with China. Considered one of China's national champions, Huawei is key to the country's ambitions in next-generation technologies like 5G, the next-generation cellular networks that offer super-fast data speeds.

Washington has imposed a series of sanctions on Huawei that continue to take their toll. Last year, Huawei was put on a US blacklist known as the Entity List. This prevented American companies from doing business with the Chinese giant. This meant that Huawei was no longer allowed to use licensed Google Android software on its smartphones.

This isn't a big deal in China, where Google services are effectively blocked anyway. However, in international markets, which are vital to Huawei's growth plans, consumers are used to using Google Apps. Huawei's latest smartphones don't have a licensed Google Android and this is affecting the company's device sales.

The decline in international markets continues for Huawei, but the company also saw shipments in China decline 15% in the third quarter. This comes from another IDC report released Thursday.

Further uncertainties regarding the future of the Huawei smartphone business persist. In May, Washington changed a rule aimed at excluding Huawei from critical chip shipments. The Taiwanese company TSMC, which manufactures Huawei's smartphone chips, is no longer allowed to supply these components to the company.

Xiaomi confiscates Huawei shipments

Meanwhile, Chinese rival Xiaomi is filling the void.

"Xiaomi was executed with aggression to confiscate shipments from Huawei," said Mo Jia, an analyst at Canalys. "There was symmetry in the third quarter, as Xiaomi added 14.5 million units and Huawei lost 15.1 million. In Europe, a major battlefield, Huawei shipments fell 25% while Xiaomi increased 88%. "

According to Canalys, Xiaomi's smartphone shipments for the quarter ended September totaled 47.1 million, up 45% year over year. It became the third largest smartphone player by market share for the first time, overtaking Apple, which took fourth place, shipping 43.2 million iPhones in the same quarter.

The IDC numbers were slightly different. Data from the research firm showed that Apple shipped 41.6 million iPhones in the third quarter of 2020, down 10.6% year over year. According to IDC, the decline was expected as the next-generation iPhone 12 series was delayed.

The Cupertino giant announced the iPhone 12 range later than mid-October. Some devices won't be available until next month.

"Regardless, the iPhone 11 series has done exceptionally well, contributing most of the Apple volume, followed by the SE device," IDC said. "Going forward, we expect Apple to grow in the coming quarters with strong early iPhone 12 demand and robust trade-in offers from major vendors, particularly in the US."

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Katherine Clark