Samsung has long been the top smartphone vendor in the world but it was facing intense competition from Huawei. The Chinese telecommunications giant had a stated goal of overtaking Samsung to become the world's top smartphone vendor. The inability to break into the United States was one of the major reasons why Huawei couldn't exhibit the same growth in North America as it did elsewhere.
Just as it seemed that Huawei would finally catch a break, it got banned in the US last year. Naturally, its competitors rejoiced, and with Huawei's troubles mounting, there's another golden opportunity for Samsung to capitalize on.
The Trump administration put Huawei on an export blacklist in May last year, essentially banning the company from importing any hardware into the United States. It was said that this decision was made due to national security concerns. The US Commerce Department also added Huawei to an Entity List, which banned companies in the United States from doing business with it.
This put Huawei in a tough spot since it couldn't work with suppliers in the United States. This also meant that Huawei's access to Google's software and services was limited, putting it in a tough position since it only sells Android-powered smartphones. Good luck trying to sell phones outside China that don't have access to Google's services like Gmail and YouTube.
Some might have expected that Huawei would be freed of this ban during these uncertain times, but evidently, the administration wants to maintain pressure on the company. President Trump has extended the ban on Huawei for one full year until May 2021.
Huawei's network solutions business has already been feeling the pinch as the United States has not allowed carriers in the country to use its 5G equipment. It has even pressed on allies to shun Huawei's equipment. As one of the largest suppliers of 5G networking equipment, Samsung has benefited from Huawei's weak position in the market.
The extension of this ban also plays nicely into Samsung's hands. Huawei has already had to release two flagships without the Google Play Store and any of Google's native apps. They understandably didn't sell as well as the company might have hoped. Having access to Google's services meant it could remain competitive outside North America, where it couldn't compete with Samsung in the first place, but that's no longer possible.
Huawei has been talking about building an alternative to Android and while it may continue to work on such efforts, it's not going to be something that has the kind of familiarity among customers or the sheer developer support that Android does. So that strategy would work in China but phones that don't run Android OS would likely not do very well outside Huawei's home country.
The launch of Huawei's first foldable smartphone was also impacted by the ban and this allowed Samsung to position itself as a market leader in this niche despite the Galaxy Fold's initial stumbles. Samsung has already launched two foldable smartphones and is well on its way to launch another by August this year.
Seeing how rapidly Huawei was catching up to Samsung in terms of numbers of units shipped, the ban last year gave Samsung a leg up on one of its biggest rivals. With the ban being extended one full year, Samsung gets some much-needed breathing space in these very uncertain times.
The ongoing COVID19 pandemic is surely going to have a negative impact on smartphone demand, which means there will be fewer customers buying fewer handsets. With the size of the overall pie shrinking, Samsung wouldn't mind not having to actively compete with one of its biggest rivals.
Samsung's launch event for the Galaxy S20 took place before COVID19 was declared a pandemic. The subsequent lockdowns across the globe in the weeks that followed prevented its rivals from conducting their flagship product launches. MWC 2020 in Barcelona was also canceled, the event where many of its Chinese competitors would have launched new products.
That being said, the Galaxy S20 isn't performing as well in the market as Samsung would have hoped. There are some genuine concerns about the device that are hindering its sales. The biggest reason is the resulting economic devastation that the pandemic has caused. Millions of people are out of work across the globe which means that they're no longer in a position to scratch their itch of buying the latest flagship. Analysts now expect that the Galaxy S20 lineup will not be able to outsell the Galaxy S10.
Huawei would have certainly tried to outdo the Galaxy S20 lineup and comparisons between the two flagships would inevitably have been made. The extension of this ban on Huawei protects Samsung from losing some of its potential customers to Huawei, particularly if the blogosphere ended up agreeing that Huawei's flagship device was superior to the Galaxy S20.
The stars have aligned nicely for Samsung and the company will certainly do everything it can to create more of a gap between itself and Huawei. It will also relish the ability to challenge Huawei in the mid-tier segment of the market, where its Galaxy smartphones have often struggled to hold their own against the Chinese behemoth's devices.
What other advantages could Samsung gain from Huawei's ongoing troubles? Share your thoughts with us in the comments below.
