Without the US market, Huawei's challenge to Apple and Samsung is an uphill battle

Summary: The P20 range takes the battle to the big two, but overthrowing Apple will be tough

Huawei has launched two new flagship smartphones with a big emphasis on their cameras as the company tries to take the fight to Apple and Samsung.

In Paris it unveiled the P20 and P20 Pro which promise to boost the quality of photos taken by using AI and -- in the case of the P20 Pro -- a three-lens camera set up.

It's been a tough time in the smartphone market recently, but Huawei has continued to grow, closing the gap on Samsung and Apple during 2017. While both Apple and Samsung saw their market share slide in the last quarter of the year, Huawei managed to grow again thanks to the introduction of new phones including the Mate 10 Lite, Honor 6C Pro, and Enjoy 7S.

Separate figures from analyst IDC show that while Huawei dropped market share in the fourth quarter of 2017, it was still up significantly for the year. Huawei shipped 153.1 million units, up 9.9 percent from the 139.3 million units it shipped in 2016, with the Mate series and Honor brand driving volume.

Image: Gartner

While Huawei is the world's third-largest smartphone vendor after Samsung and Apple, it has struggled to find a foothold in the US market. Its smartphones aren't currently sold by any US networks: a deal with AT&T that was expected to be announced in January apparently fell through because of political pressure, as did a potential deal with Verizon. More recently, electronics retailer Best Buy decided to stop selling Huawei products too.

The reception Huawei has had in the US is down to a combination of security concerns and also increasing political concerns about the US-China trade imbalance.

In February, US intelligence chiefs including the heads of the CIA, FBI, and NSA advised consumers to avoid buying phones made by Chinese manufacturers Huawei and fellow Chinese brand ZTE, citing security risks.

The US government is "deeply concerned about the risks of allowing any company or entity that is beholden to foreign governments that don't share our values to gain positions of power inside our telecommunications networks," FBI director Christopher Wray told a Senate Intelligence Committee hearing. The intelligence agencies provided no evidence to back up the warning, and both companies rejected the claim.

Huawei has long faced similar concerns when trying to sell its networking equipment in the US with critics citing the same security concerns; a recent leaked paper from US president Donald Trump's national security team floated the idea of the US government building its own 5G network in order to counter the risk of Chinese spying.

But elsewhere in the world the picture is very different. In Australia, Huawei was banned from National Broadband Network but is part of the part of the Australian government's 5G working group.

In the UK, Huawei is a major supplier of networking equipment for fixed and wireless networks for a dozen years and is involved in 5G trials and Internet of Things research. It recently announced plans to spend £3bn in the UK over the next five years.

However, the UK government does still keep a close eye on Huawei technologies: it uses the Huawei Cyber Security Evaluation Centre to provide a security evaluation of any Huawei products used as part of the UK's critical national telecoms infrastructure.

Nonetheless, being effectively shut out of the US market will make it harder for Huawei to overtake Apple and take the number two spot in the smartphone market.

"When you ship over 150 million smartphones a year, your days of being described as a challenger are numbered. So while Huawei's ambitions to surpass Apple and Samsung might seem bold, its heavy investment in research and development suggests there's real depth to what it wants to achieve," said Dominic Sunnebo, global director at Kantar Worldpanel ComTech.

"I do think they can gain more share in Europe and displace some of the smaller vendors like Lenovo, Sony, Alcatel (TCL), HTC and LG retaining this number three spot. There is no other vendor who comes close to that," she said.

"But [to] displace Samsung and Apple is a long shot. I'd say they can get closer to Apple and Samsung in Europe. But the US market is a big issue and if US retailers now start to dismiss Huawei and carriers are not even a question, this is a lost market. Huawei does have strong volumes also in emerging markets like Latin America and EMEA so they should focus on Europe and those regions," she said.