Huawei’s smartphone rivals in China are quickly divvying up the market share it has lost over the past year.
92.4 million units of smartphones were shipped in China during the first quarter, with Vivo claiming the crown with a 23% share and its sister company Oppo following closely behind with 22%, according to market research firm Canalys. Huawei, of which smartphone sales took a hit after U.S. sanctions cut key chip parts off its supply chain, came in third at 16%. Xiaomi and Apple took the fourth and fifth spot respectively.
All major smartphone brands but Huawei saw a jump in their market share in China from Q1 2020. Apple’s net sales in Greater China nearly doubled year-over-year to $17.7 billion in the three months ended March, a quarter of all-time record revenue for the American giant, according to its latest financial results.
“We’ve been especially pleased by the customer response in China to the iPhone 12 family,”
said Tim Cook during an earnings call this week. “You have to remember that China entered the shutdown phase earlier in Q2 of last year than other countries. And so they were relatively more affected in that quarter, and that has to be taken into account as you look at the results.”
Huawei’s share shrunk from a dominant 41% to 16% in a year’s time, though the telecom equipment giant managed to increase its profit margin partly thanks to slashed costs. In November, it sold off its budget phone line Honor.
This quarter is also the first time China’s smartphone market has grown in four years, with a growth rate of 27%, according to Canalys.
“Leading vendors are racing to the top of the market, and there was an unusually high number of smartphone launches this quarter compared with Q1 2020 or even Q4 2020,” said Canalys analyst Amber Liu.
“Huawei’s sanctions and Honor’s divestiture have been hallmarks of this new market growth, as consumers and channels become more open to alternative brands.”
China’s plan to introduce its digital currency is getting a lot of help from its tech conglomerates. JD.com, a major Chinese online retailer that competes with Alibaba, said Monday that it has started paying some staff in digital yuan (since January), the virtual version of the country’s physical currency.
China has been busy experimenting with digital currency over the past few months. In October, Shenzhen, a southern city known for its progressive economic policies, doled out 10 million yuan worth of digital currency to 500,000 residents, who could then use the money to shop at certain online and offline retailers.
Several other large Chinese cities have followed Shenzhen’s suit. The residents in these regions must apply through selected banks to start receiving and paying by digital yuan.
The electronic yuan initiative is a collective effort involving China’s regulators, commercial banks and technology solution providers. At first glance, the scheme still mimics how physical yuan is circulating at the moment; under the direction of the central bank, the six major commercial banks in China, including ICBC, distribute the digital yuan to smaller banks and a web of tech solution providers, which could help bring more use cases to the new electronic money.
For example, JD.com partnered with the Industrial and Commercial Bank of China (ICBC) to deposit the digital income. The online retailer has become one of the first organizations in China to pay wages in electronic yuan; in August, some government workers in the eastern city of Suzhou also began getting paid in the digital money.
Across the board, China’s major tech companies have actively participated in the buildout of the digital yuan ecosystem, which will help the central government better track money flows.
Aside from JD.com, video streaming platform Bilibili, on-demand services provider Meituan and ride-hailing app Didi have also begun accepting digital yuan for user purchases. Gaming and social networking giant Tencent became one of the “digital yuan operators” and will take part in the design, R&D and operational work of the electronic money. Jack Ma’s Ant Group, which is undergoing a major overhaul following a stalled IPO, has also joined hands with the central bank to work on building out the infrastructure to move money digitally. Huawei, the telecom equipment titan debuted a wallet on one of its smartphone models that allows users to spend digital yuan instantaneously even if the device is offline.
Updated the article to clarify the timeline of the digital salary rollout.
Elon Musk famously said any company relying on lidar is “doomed.” Tesla instead believes automated driving functions are built on visual recognition and is even working to remove the radar. China’s Xpeng begs to differ.
Founded in 2014, Xpeng is one of China’s most celebrated electric vehicle startups and went public when it was just six years old. Like Tesla, Xpeng sees automation as an integral part of its strategy; unlike the American giant, Xpeng uses a combination of radar, cameras, high-precision maps powered by Alibaba, localization systems developed in-house, and most recently, lidar to detect and predict road conditions.
“Lidar will provide the 3D drivable space and precise depth estimation to small moving obstacles even like kids and pets, and obviously, other pedestrians and the motorbikes which are a nightmare for anybody who’s working on driving,” Xinzhou Wu, who oversees Xpeng’s autonomous driving R&D center, said in an interview with TechCrunch.
“On top of that, we have the usual radar which gives you location and speed. Then you have the camera which has very rich, basic semantic information.”
Xpeng is adding lidar to its mass-produced EV model P5, which will begin delivering in the second half of this year. The car, a family sedan, will later be able to drive from point A to B based on a navigation route set by the driver on highways and certain urban roads in China that are covered by Alibaba’s maps. An older model without lidar already enables assisted driving on highways.
The system, called Navigation Guided Pilot, is benchmarked against Tesla’s Navigate On Autopilot, said Wu. It can, for example, automatically change lanes, enter or exit ramps, overtake other vehicles, and maneuver another car’s sudden cut-in, a common sight in China’s complex road conditions.
“The city is super hard compared to the highway but with lidar and precise perception capability, we will have essentially three layers of redundancy for sensing,” said Wu.
By definition, NGP is an advanced driver-assistance system (ADAS) as drivers still need to keep their hands on the wheel and take control at any time (Chinese laws don’t allow drivers to be hands-off on the road). The carmaker’s ambition is to remove the driver, that is, reach Level 4 autonomy two to four years from now, but real-life implementation will hinge on regulations, said Wu.
“But I’m not worried about that too much. I understand the Chinese government is actually the most flexible in terms of technology regulation.”
Musk’s disdain for lidar stems from the high costs of the remote sensing method that uses lasers. In the early days, a lidar unit spinning on top of a robotaxi could cost as much as $100,000, said Wu.
“Right now, [the cost] is at least two orders low,” said Wu. After 13 years with Qualcomm in the U.S., Wu joined Xpeng in late 2018 to work on automating the company’s electric cars. He currently leads a core autonomous driving R&D team of 500 staff and said the force will double in headcount by the end of this year.
“Our next vehicle is targeting the economy class. I would say it’s mid-range in terms of price,” he said, referring to the firm’s new lidar-powered sedan.
The lidar sensors powering Xpeng come from Livox, a firm touting more affordable lidar and an affiliate of DJI, the Shenzhen-based drone giant. Xpeng’s headquarters is in the adjacent city of Guangzhou about 1.5 hours’ drive away.
Xpeng isn’t the only one embracing lidar. Nio, a Chinese rival to Xpeng targeting a more premium market, unveiled a lidar-powered car in January but the model won’t start production until 2022. Arcfox, a new EV brand of Chinese state-owned carmaker BAIC, recently said it would be launching an electric car equipped with Huawei’s lidar.
Musk recently hinted that Tesla may remove radar from production outright as it inches closer to pure vision based on camera and machine learning. The billionaire founder isn’t particularly a fan of Xpeng, which he alleged owned a copy of Tesla’s old source code.
In 2019, Tesla filed a lawsuit against Cao Guangzhi alleging that the former Tesla engineer stole trade secrets and brought them to Xpeng. XPeng has repeatedly denied any wrongdoing. Cao no longer works at Xpeng.
While Livox claims to be an independent entity “incubated” by DJI, a source told TechCrunch previously that it is just a “team within DJI” positioned as a separate company. The intention to distance from DJI comes as no one’s surprise as the drone maker is on the U.S. government’s Entity List, which has cut key suppliers off from a multitude of Chinese tech firms including Huawei.
Other critical parts that Xpeng uses include NVIDIA’s Xavier system-on-the-chip computing platform and Bosch’s iBooster brake system. Globally, the ongoing semiconductor shortage is pushing auto executives to ponder over future scenarios where self-driving cars become even more dependent on chips.
Xpeng is well aware of supply chain risks. “Basically, safety is very important,” said Wu. “It’s more than the tension between countries around the world right now. Covid-19 is also creating a lot of issues for some of the suppliers, so having redundancy in the suppliers is some strategy we are looking very closely at.”
Xpeng could have easily tapped the flurry of autonomous driving solution providers in China, including Pony.ai and WeRide in its backyard Guangzhou. Instead, Xpeng becomes their competitor, working on automation in-house and pledges to outrival the artificial intelligence startups.
“The availability of massive computing for cars at affordable costs and the fast dropping price of lidar is making the two camps really the same,” Wu said of the dynamics between EV makers and robotaxi startups.
“[The robotaxi companies] have to work very hard to find a path to a mass-production vehicle. If they don’t do that, two years from now, they will find the technology is already available in mass production and their value become will become much less than today’s,” he added.
“We know how to mass-produce a technology up to the safety requirement and the quarantine required of the auto industry. This is a super high bar for anybody wanting to survive.”
Xpeng has no plans of going visual-only. Options of automotive technologies like lidar are becoming cheaper and more abundant, so “why do we have to bind our hands right now and say camera only?” Wu asked.
“We have a lot of respect for Elon and his company. We wish them all the best. But we will, as Xiaopeng [founder of Xpeng] said in one of his famous speeches, compete in China and hopefully in the rest of the world as well with different technologies.”
5G, coupled with cloud computing and cabin intelligence, will accelerate Xpeng’s path to achieve full automation, though Wu couldn’t share much detail on how 5G is used. When unmanned driving is viable, Xpeng will explore “a lot of exciting features” that go into a car when the driver’s hands are freed. Xpeng’s electric SUV is already available in Norway, and the company is looking to further expand globally.
Huawei’s struggles amid U.S.-China trade tensions are driving it to seek opportunities in other smart devices, setting itself up against a raft of hardware makers at home and abroad.
The Chinese tech giant recorded sluggish revenue growth in 2020, climbing just 3.8% to 891.4 billion yuan ($136 billion), as its net profit grew 3.2% to 64.6 billion yuan. The results were in line with Huawei’s forecasts, the company said Wednesday at its annual report day in Shenzhen, a rare occasion to get a glimpse into the private entity’s financials.
The slowdown in 2020 was primarily due to a slump in Huawei’s overseas smartphone sales after U.S. export controls cut the firm off core chipsets and Google services critical to consumers. But the challenge has also sped up the firm’s pace to diversify and offset losses from its phone business.
For the past two years, Huawei’s has been ratcheting up efforts in a multitude of smart devices, including AR/VR headsets, tablets, laptops, TVs, smartwatches, speakers, headphones and in-car systems.
Huawei’s foray into the automotive industry has in particular attracted much limelight as the global smart vehicle industry booms. Reuters reported recently that Huawei would be producing its own branded cars, which the company denied. At today’s event, the firm’s rotating chairman Ken Hu reiterated that Huawei would play to its own strengths and only be supplying certain car components and services, such as the in-car operating system and smart cockpit.
Huawei’s matrix of connected products is reminiscent of Xiaomi’s IoT strategy built around its smartphones and operating system, with the difference being that Huawei is also a telecom infrastructure supplier.
Despite moves by a few countries, such as the United Kingdom, to exclude Huawei from their 5G rollout plans, Huawei’s carrier segment in 2020 generated revenues on par with the year prior. The COVID-19 pandemic was a boon to the bsuiness, Hu said, which saw global demand in network solutions rise as people worked and learned from home.
Huawei’s IoT push has shown some early traction but competition is fierce. Smartwatches, it said, was one of its major revenue drivers from last year.
Globally, Apple held onto its leading position in wearables with 34.1% of the market in 2020, according to research firm IDC. Huawei ranked third at 9.8%, trailing its domestic rival Xiaomi which accounted for 11.4% of total shipments last year.
Overall, Huawei was leaning heavily on its home market to sustain growth in 2020. China accounted for 65.5% of its total revenues, growing by 15.4% year-over-year. Meanwhile, revenues fell 12.2% in Europe, the Middle East and Africa and was down 8.7% in the rest of Asia and down 24.5% in the Americas.