Apple Inc. (AAPL) iPhone Sales Fall Flat, China’s Huawei Grabs Market Share

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IDC's Q1 2017 smartphone sales numbers are out. It shows an unexpected growth in global smartphone demand, but the top two manufacturers were left out. Apple Inc. (NASDAQ: AAPL ) saw just a minor bump in iPhone sales compared to last year, while Samsung Electronics Co Ltd (OTCMKTS: SSNLF ) was completely flat. However, Chinese smartphone manufacturers were on a tear, led by Huawei , which continues to gain ground on AAPL.

Apple Inc. (AAPL) iPhone Sales Fall Flat, China's Huawei Grabs Market Share

Source: Huawei

According to IDC's Worldwide Quarterly Mobile Phone Tracker data , the global appetite for smartphones rose 4.3% in Q1 2017. That's stronger growth than expected in a market that has largely matured. And that growth is not being driven by the two top players.

Apple iPhone Sales Underperform the Market

AAPL's iPhone sales were nearly flat, up just 400,000 units compared to Q1 2016, totaling under 1% growth. IDC says that number was helped by pent up demand for the iPhone 7 Plus (which had seen stock shortages after its launch), a refreshed iPhone SE and the special edition (PRODUCT)RED iPhone 7 .

Samsung saw no increase in smartphones sales, but is back on top with 22.8% of the market. That performance was predictable, given the hit the company took over the Galaxy Note 7.

Huawei: Chinese Smartphone Makers Are On a Tear

The big story was the double-digit growth of Chinese smartphone manufacturers. Third place Huawei posted 21.7% year-over-year growth, OPPO was up 29.8% and vivo 's smartphone sales increased by 23.6%.

Those numbers, combined with zero growth by Samsung, put Huawei's third-place marketshare at 9.8%, inching closer to AAPL's 14.9% second place. IDC points out that the trio of Chinese smartphone makers continue to dominate the Chinese market, but that they are continuing to expand into other Asian, Middle Eastern and African countries. They also have a presence in Europe, but have yet to crack the U.S. in a meaningful way.

The Real Battle Is Coming

Huawei has big ambitions. In February, company executives speaking to Fortune said: "We are going to take [Apple] step by step, innovation by innovation," while predicting they would surpass iPhone sales in 2018 . The goal is to topple Samsung from its number one position by 2021. Huawei's smartphones are seen as premium quality devices, able to withstand direct comparison to flagships from Samsung and Apple. And the company is determined to crack the U.S. market, where the real profit margins - through sales of those premium smartphones - are waiting.

Huawei has a toehold in the U.S., with online sales through retailers like Wal-Mart Stores Inc (NYSE: WMT ) and Best Buy Co Inc (NYSE: BBY ), and through direct sales from its website. According to Fortune , that amounted to 153,000 smartphone sales in Q3 2016.

If Huawei can ink a deal with one of the four big U.S. carriers - something it's working on and hopes to achieve in the next year - that could spell trouble for Apple and Samsung.

Apple notched iPhone sales of 51.2 million this quarter, compared to Huawei's 28.1 million. At this point, AAPL still has a cushion, but if Huawei continues its pace of global expansion and is successful in breaking into the U.S. market with a carrier deal, Apple's second place position could be in jeopardy.

We've seen Chinese smartphone giants flame out before. Xiaomi , a company that was once the world's third-largest smartphone manufacturer - and pegged to be a very big thorn in Apple's side - has dropped out of the top five altogether. There's no guarantee that Huawei will succeed where Xiaomi has stumbled, especially if it fails to crack the U.S. market. But the threat from the surging Chinese manufacturer is yet another reason AAPL needs the 10th anniversary iPhone 8 to be a success that drives iPhone sales to new levels.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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The post Apple Inc. (AAPL) iPhone Sales Fall Flat, China's Huawei Grabs Market Share appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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