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Apple iPhone X in Face-Off as Huawei’s Mate 10 Launches

Apple iPhone X in Face-Off as Huawei’s Mate 10 Launches

 

SHENZHEN, China—Ahead of shipping its most anticipated smartphone in years, Apple Inc. AAPL +0.00% faces a fresh challenge from a rival in a market where it has lost ground: China.

Huawei Technologies Co., the Chinese telecom giant established three decades ago by former People’s Liberation Army engineer Ren Zhengfei, is launching a new flagship smartphone that it hopes will help cement its grip as the top phone maker in China and raise its profile as a premium phone maker elsewhere.

Apple has been losing ground in China to domestic competitors such as Huawei for the past 2½ years. The company needs its latest flagship, the iPhone X, to dazzle Chinese buyers when it officially goes on sale next month.

Huawei is betting with its new Mate 10 flagship that consumers will be swayed by a phone that offers similar features to the  iPhone X—including a full-screen OLED display and artificial-intelligence abilities like image recognition—at a slightly lower price.

In June and July, Huawei unseated Apple as the world’s second-largest smartphone maker by sales, according to Counterpoint Research. The dip coincided with a slowdown in Apple sales ahead of the iPhone X launch. The research firm said it is unlikely Huawei held on to the spot through the third quarter, saying Huawei’s sales likely slowed while Apple’s picked up in the quarter’s latter half.

However, Apple’s market share in China has fallen to an estimated 10% this year from 14% in 2015, says Counterpoint. Huawei’s has risen to 18% from 14% in that period.

“For Huawei we [have gone] in the last five years from a nobody-knows brand to top three in the world,” said Richard Yu, the head of Huawei’s consumer products business, in an interview. Now, he said, “we want to win in the premium segment.”

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Huawei officially unveiled the Mate 10 at an event in Munich on Monday, saying the device will start at 699 euros (826 dollars) in Europe. A higher-end “Mate 10 Pro” will be priced at 799 euros (942 dollars). Prices for China and other markets will be released later, the company said. The iPhone X is selling in the U.S. between 999 dollars and 1,149 dollars. In China, it is being sold from a base price of 8,388 yuan (1273 dollars).

The company has been expanding in the handset market in the past few years after dominating the market for telecommunications equipment, where it competes with Ericsson AB and Nokia Corp.

Mr. Yu, Huawei’s brash-talking product chief, set a goal in 2016 of becoming the world’s top seller of smartphones globally in four or five years. He has since toned down his ambitious pledge and says the company is more focused on competing in the high-end segment.

Huawei has had some success edging into the premium segment long dominated by Apple. The company shipped more than 6 million of its prior flagship, the P10, in the first half of the year. The average sales price of its phones has been rising, while phones costing more than 500 dollars are making up a bigger share of total sales, according to Canalys.

Apple still holds a commanding position in China’s market for premium smartphones, a segment coveted because it is the most profitable for phone makers. In the first half of this year, Apple controlled 61% of China’s premium market—defined as the market for phones 400 dollars and up—versus 16% for Huawei, according to Counterpoint. In the latter half of 2015, Apple controlled 86% of China’s premium market.

But Apple still faces pressure on several fronts. Early reports indicate tepid demand in China and elsewhere for the iPhone 8, while the iPhone X has been hit by production snags, fueling worries about potential product shortages ahead of its early-November launch. Apple declined to comment for this article.

Those stumbles come at a difficult time for Apple in China. It now sits in fifth place, having lost ground to domestic firms such as Huawei and newer companies like Oppo Electronics Corp. and Vivo. Analysts say those firms have been more responsive to local tastes, offering similar technology at lower prices and better integrating Chinese-specific web services, like the social-media platform WeChat .

With the exception of Huawei, Chinese vendors have yet to mount a serious challenge to Apple in the high-end market. And in the case of Huawei, its success has been greatest in markets where it has longstanding relationships with carriers, such as certain markets in Western Europe, said Peter Richardson, research director at Counterpoint.

Huawei sells a tiny number of devices in the U.S., where its networking equipment is effectively banned due to security concerns—though Huawei has long called those concerns unfounded.

Huawei has been taking pot shots at Apple. Last month it released a Facebook video poking fun at the iPhone X’s face-based unlocking feature, which hit a very public snag during its unveiling by Apple in September. The video called the Mate 10 “the real AI phone.”

Huawei is touting AI abilities as a major selling point for the Mate 10. It says its new phone will contain a chipset developed in-house and containing a so-called neural processing unit, engineered to handle AI tasks such as image recognition. Huawei says the phone’s AI will do tasks such as tailor the camera’s settings to the objects in a photo—for example, tweaking the lighting based on whether it sees faces or a landscape.

The iPhone 8 and X offer similar AI features, said Mr. Richardson, of Counterpoint. “Huawei and Apple are the only guys that will have this for the time being,” he said.

But while Huawei’s grip is tightening in China, it is likely to pose only a narrow challenge to Apple in locales outside of its home market, Mr. Richardson said. “In terms of a challenge for Apple, maybe in China, but probably nowhere else really.” 

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