The Impact of US Sanctions on Huawei and Apple's Unexpected Benefit

Key Insight

The Trump administration's sanctions against Huawei in May 2019, alleging security threats and ties to the Chinese government, inadvertently provided an unexpected boon for Apple. These unprecedented measures deprived Huawei of critical Google services—including the Play Store, Gmail, and YouTube—and disallowed American companies from shipping 'fifth-generation cellular chips' to the group, severely crippling Huawei's smartphone business outside of China and impacting its early lead in '5G phones.'

Huawei, which had been rapidly gaining market share and even surpassed Apple in global sales by 2019 with '238.5 million phones' shipped, experienced a dramatic collapse. Its market share in China plummeted from a peak of '29 percent' to just '7 percent,' and the company lost '$30 billion of revenue' in a single year, forcing it to spin off its sub-brand, Honor. This created a significant void in the premium 5G smartphone market, which Apple was uniquely positioned to fill.

As Huawei faltered, Apple's market share in China nearly doubled from '9 percent' to '17 percent,' regaining much of its lost ground. While initially apprehensive of Trump's anti-China rhetoric and threats of tariffs up to '25 percent' on Chinese imports, Apple CEO Tim Cook engaged in extensive diplomatic efforts, including frequent calls and factory tours, to secure tariff exemptions. This strategic navigation allowed Apple to avoid significant financial penalties and capitalize on its biggest rival's downfall, concluding 2019 with a record-high '$91.8 billion' in revenue.