The PC market used to cater mainly to white-collar workers, with manufacturers relying mostly on HP and Dell. The traditional PC and handset assembly sector remains a stable supply chain with the US still being the largest market. Currently, Taiwan still accounts for 80% of the worldwide notebook manufacturing, and for servers, the percentage is even higher at 94%. With the business opportunity of datacenter growing rapidly, Taiwan makers' manufacturing bases in Taiwan are still the best places for their Internet service provider partners.
If the US-China trade war worsens, more ICT product manufacturing in China is expected to shift back to Taiwan or elesewhere.
Apple's smartphones are all manufactured by Taiwan-based companies such as Foxconn, Pegatron and Wistron, while smartphones from Samsung and Huawei also see some of their components supplied by Taiwan makers. Wistron has even cooperated with Apple to establish a new factory in India.
With the rise of the mobile communication era, demand was coming from every industry and consumers of all ages, generating more business opportunities and expanding the market beyond white-collar workers. However, the market was starting to see domination by a few brands with Apple taking over two thirds of all profits from the market. Samsung at its peak had 75% of profits coming from the smartphone business. For the other smaller vendors, the struggle was to keep operations from incurring losses.
The situation began to change in 2018 as Apple and Samsung were unable to come up with more innovations for their smartphones. China-based brands started to take center stage. At the moment, seven of the worldwide top-10 smartphone brands are based in China and these players have dominated the smartphone markets in emerging countries by flooding them with multiple models.
China brands' strategy focuses on expanding market share, which is expected to give Huawei a chance to surpass Samsung to become the largest smartphone brand worldwide in the second half of 2019.
Huawei and Xiaomi are both expected to become leading players in the upcoming 5G era. In addition to launching its 5G smartphones at about the same time as its top-tier competitors, such as Samsung, Huawei is also a major force in the 5G base station sector. Huawei is considered a necessary partner for almost any country deploying 5G networks.
Since 5G technologies not only present business opportunities, but also fuel data security concerns, the US government believes 5G would provide the best chance for China to break its global dominance, and therefore has been taking rather aggressive actions such as banning supply to ZTE and having Huawei CFO Meng Wanzhou arrested. Apparently the US will not sit idly in the face of China's growing ambition to fully control the 5G market.
In December 2018, South Korea claimed to have become the first nation in the world running a commercialized 5G network. The president of Korea-based telecom carrier LG Uplus, which has been the fastest in making 5G base station deployments in the country, previously stated that using Huawei's 5G base stations would not jeopardize national security. But its competitor, Korea Telecom (KT), responded by announcing that it would follow the US government's suggestions and would not adopt any 5G solutions from Huawei.
The two carriers' completely different attitudes about Huawei's equipment show that telecom carriers in South Korea, Taiwan and Japan will all also need to take sides at some point when it comes to buying 5G equipment.
In addition to the concerns about data security, some companies in the West are also wary of Huawei's strong patent portfolios for 5G technologies. US companies have relied on patents to dominate business opportunities, but the tide may be turning as China grows bigger and bigger in terms intellectual property.
(Note: This is part of a series of articles by Digitimes president Colley Hwang on the latest developments of the IT industry in the wake of the US-China trade war.)