Fitch: Huawei's loss could be rival Samsung's gain

SEOUL, May 27 (UPI) -- Samsung could be the big winner in a China-U.S. trade spat that has led to sanctions against Chinese smartphone giant Huawei, according to a statement Monday from Fitch Ratings, the New York-based global credit ratings and research firm.

"Turmoil from the U.S.-China trade dispute brings Samsung an opportunity to strengthen its position in the structurally weakening smartphone market," the statement said.

Amidst an ongoing trade war with China, the Trump administration placed Huawei, the Chinese telecommunications equipment and electronics giant, on an "entity list" that severely restricts it from doing business with any American company.

The Commerce Department has accused Huawei of being an arm of the Chinese government, saying it is "engaged in activities that are contrary to U.S. national security or foreign policy interest."

Following the blacklist, Google revoked Huawei's license of its Android operating system. Other major technology suppliers such as Britain-based ARM, which supplies the underlying architecture for Huawei's chipsets, have also cut ties, according to reports.

Last week, Washington gave Huawei a 90-day reprieve from the sanctions, but uncertainty still swirls around the company's prospects.

The restrictions on U.S. companies providing hardware, software and components to Huawei's smartphone business "could stir up the smartphone industry by pausing Huawei's positive momentum," the Fitch statement said.

Huawei is the number two smartphone maker in the world, with a 19 percent global market share in the first quarter of 2019, according to a recent report from International Data Corporation, following on the heels of Samsung's 23.1 percent.

The Chinese giant was the only global smartphone maker to see volume growth in a market that has otherwise seen shipments on the decline.

"Consumers used to the Android operating system are likely to consider buying other smartphone brands than Huawei, and Samsung could restore market share especially in regions where Huawei has shown strong recent growth," the Fitch statement said, citing Europe, South America and parts of Asia outside of China.

The United States actions against Huawei may also give Samsung the lead in newly developing segments of the market such as 5G and foldable phones, Fitch said, depending on how long sanctions last.

"U.K. and Japanese companies have followed suit in delaying the launch of Huawei's 5G smartphones, which could help boost the sales of Samsung and LG Electronics, two of a few 5G handset makers with ready-to-market products -- at least in the short term," the statement added.

Fitch expects the challenging outlook for smartphone manufacturers to continue due to saturation in developed markets and longer replacement cycles. Overall shipments fell 6.6 percent in the first quarter of 2019, according to IDC. Samsung's volume dropped by 8.1 percent, while Huawei's grew by 50 percent.