“Isn't a 3nm process chip the core reason for consumers to buy a phone?”

Author | Wei Qiang

Editor | Lu Xucheng

On September 10, following Apple's autumn event (which took place in the early morning of September 10, Beijing time), Huawei unveiled its Mate XTUITIMATE DESIGN (hereinafter referred to as UITIMATE DESIGNXT) triple-folding screen phone, with prices ranging from 19,999 yuan to 23,999 yuan. In contrast, the starting price of the Apple iPhone 16 is 5,999 yuan. This represents a head-to-head competition between China's smartphone king and the US smartphone king.

Apple sells chips, Huawei sells triple-folding screens

The selling point of the iPhone 16 is its chip: The iPhone 16 and Plus models come equipped with the A18 chip, featuring a 3nm process, resulting in a 30% boost in CPU performance and a 40% increase in GPU performance compared to the iPhone 15. The Pro models utilize the A18 Pro chip, also with a 3nm process, offering a 15% improvement in CPU performance and a 20% boost in GPU performance over the A17 Pro. Meanwhile, the UITIMATE DESIGNXT is powered by the Kirin flagship 9010 series chip. According to public information, due to chip sanctions, Huawei can only achieve a 7nm process, lagging behind the iPhone 16's CPU chip by at least two generations (5nm and 3nm). However, this is not the primary selling point of the UITIMATE DESIGNXT.

In today's world where smartphones are increasingly used to capture and preserve precious moments, camera functionality is of great concern to consumers.

The iPhone 16 series introduces a dedicated camera shutter button located on the phone's frame. By simply sliding one's finger, users can adjust camera settings such as exposure and depth of field, switch between lenses, and use digital zoom for framing, enabling a camera-like experience when capturing photos or videos. This is a feature that Apple has yet to implement in the iPhone 14 and 15 series. The iPhone 16 models come equipped with a 48MP main camera and a 12MP ultra-wide-angle lens, offering up to 6x optical zoom.

(Screenshot from Apple's event)

The UITIMATE DESIGNXT, on the other hand, boasts a triple rear camera module consisting of a 50MP main camera with a large sensor, a 13MP ultra-wide-angle lens, and a 12MP 5x periscope telephoto lens. Compared to the iPhone 16, the main and ultra-wide-angle cameras offer an additional 2MP and 1MP, respectively, and include an extra 12MP telephoto lens, prioritizing maximum photography and videography capabilities. Of course, given the UITIMATE DESIGNXT's starting price is 14,000 yuan higher than the iPhone 16, the additional megapixels and camera lens are not unexpected.

(Screenshot from Huawei's event)

What truly propelled the UITIMATE DESIGNXT to surpass 4.2 million pre-orders from 12:08 AM on September 7 to 6:00 PM on September 10 was its positioning as the world's largest and thinnest triple-folding screen phone.

(Screenshot from Huawei's official website)

Touted as the world's first triple-folding screen phone, the UITIMATE DESIGNXT boasts a 10.2-inch display (comparable to the size of an iPad mini), which is 2.5 times larger than that of dual-folding screen phones. Huawei, an early entrant into the folding phone market, debuted its first folding phone, the Mate X, in 2019 and has since released over 10 folding phone models, covering various folding mechanisms.

According to the National Business Daily, the primary challenge with the UITIMATE DESIGNXT's triple-folding screen lies in the thickness when folded, the durability of the hinge, and the visibility of creases (which are still noticeable). In 2024, folding phone products on the market have achieved parity with flagship straight-screen phones in terms of thinness and weight.

As seen in some media unboxing videos, the UITIMATE DESIGNXT can be used as a single screen when unfolded externally (one logical screen), as a dual-screen device when folded inward (also one logical screen), and as a triple-screen device when fully folded, offering a large-screen experience. Its measured weight of 308 grams is lighter than earlier dual-folding phones.

From the on-site remarks made by Yu Chengdong, Chairman of Huawei's Device BG and Intelligent Automobile Solutions BU, the UITIMATE DESIGNXT achieves its triple-folding and ultra-thin (3.6mm) design through the use of Huawei's proprietary Tiangong hinge system (it remains unclear whether this is provided by Jingyan Technology, a leading domestic hinge supplier). This system enables both internal and external bending for the first time, utilizing a dual-track linkage mechanism. The embedded design compresses the hinge's movement space, significantly reducing its thickness. Samsung once had a monopoly on flexible AMOLED display technology, accounting for over 90% of the market. However, after catching up, Chinese companies like BOE have surpassed 50% market share in the first half of 2024, showcasing the cost-saving efficiency of Chinese firms. It is reported that BOE has entered Huawei's supply chain. Nevertheless, according to the National Business Daily, the cost of a triple-folding screen is at least double that of a dual-folding screen, contributing to the UITIMATE DESIGNXT's starting price of 19,999 yuan.

In terms of design and functionality, the UITIMATE DESIGNXT caters more to business owners and professionals, with a luxurious appearance and capabilities focused on reading, office work, finance/stock trading, and entertainment. In contrast, the iPhone 16 maintains its previous design, size, and even pricing, targeting Apple's loyal customers and general white-collar workers.

Amid the current AI craze, both Huawei and Apple have emphasized their AI capabilities. For instance, the UITIMATE DESIGNXT highlights AI-powered features such as editing, information consulting, translation, and photo retouching, all based on the Pangu large model and tailored for business professionals. Meanwhile, Apple's AI capabilities for the iPhone 16 will not be introduced until 2025, as its AI engine is still undergoing US English testing. Localized English versions are expected in December 2024, followed by Chinese, French, Japanese, and Spanish versions in 2025. Potential AI features may include AI-generated emails, texts, and documents, emoji creation based on text input, photo and video search, automatic organization of emails and apps with summary generation, and Siri's ability to perform hundreds of tasks.

Niche folding phones, Huawei's high-end opportunity

Overall, Apple continues to rely on Steve Jobs' legacy and brand momentum, making modest annual upgrades to maintain its market position in terms of scale and high-end phone (over $600) sales. Some research reports indicate that iPhone 16 shipments are expected to exceed 80 million units, with peak shipments anticipated in 2025.

According to Counterpoint data, Huawei shipped 11.7 million units and captured a 17% market share (with growth of approximately 70%) in China during Q1 2024, reclaiming the top spot. In Q2, its growth rate was 44.5%. According to Canalys data, Huawei held a 9% global high-end smartphone market share in Q2 2024, ranking second only to Apple and Samsung, with an 80% year-on-year increase. In China, it accounted for 30% of the high-end smartphone market, also ranking second to Apple, with an 82% growth rate. However, in Q1 2024, HiSilicon Kirin chip shipments totaled 8 million units (almost zero in the same period last year), insufficient to meet Huawei's demand, leading to the use of lower-process chips in some lower-priced phones.

Under these circumstances, Huawei prioritizes ensuring the supply of HiSilicon chips for its high-end Mate series phones. With chip supply constraints, Huawei has turned to folding phones, leveraging China's stronger supply chain (e.g., BOE), to carve out a niche market. Additionally, Huawei leads in folding phone sales. According to IDC data, Huawei accounted for 44.1% (820,260 units) of China's 1.86 million folding phone shipments in Q1 2024.

Huawei's focus on folding phones is also due to the niche nature of this market. According to IDC, China shipped approximately 7.007 million folding phones in 2023, a year-on-year increase of 114.5%, but these only accounted for 2.4% of the Chinese mobile phone market. According to iResearch, folding phones accounted for just 9% of China's high-end mobile phone market (> $600) in 2023. TrendForce projects global folding phone shipments to reach approximately 17.7 million units in 2024, slightly increasing their share of the mobile phone market to 1.5%, with an 11% growth rate. Samsung and Huawei are the primary players in the global folding phone market, accounting for 60.4% and 19.8% of the market, respectively, in 2023. With such a small global market share of 1.5% (2024) and a Chinese market share of 2.4% (2023), folding phones remain a niche product.

The small market share of folding phones is partly due to the high costs associated with hinges and flexible displays. According to Caijing, hinges and flexible displays account for the highest costs in folding phones, representing 22% and 34% of the total cost, respectively, for a combined 56%. According to Shanxi Securities, the median yield rate of folding phone hinges is only 50%-60%. OPPO has stated that each hinge for the OPPO Find N costs 800 yuan.

High costs and low yields contribute to the high prices of folding phones. For example, the starting price of the Huawei Mate X was 16,999 yuan in 2019, while the Mate X5 cost 12,999 yuan in 2023. Similarly, the Samsung Galaxy Fold started at 15,999 yuan in 2019, and its 2023 model was priced at 12,999 yuan. The UITIMATE DESIGNXT's starting price is even higher at 19,999 yuan. Naturally, only high-income individuals such as small business owners and senior white-collar workers can afford such pricey folding phones.

With other phone brands holding a small market share in folding phones (Apple doesn't even offer this type of phone), they lack momentum and scale advantages (over 1 million units shipped). Consequently, they are hesitant to invest heavily. In contrast, Huawei can share the above-market growth and profits of folding phones with Samsung. Furthermore, Huawei's high-profile entry into the triple-folding phone market bolsters its high-end branding, differentiating it from domestic competitors and maximizing profits. This, in turn, allows Huawei to invest more in breaking through key technologies like chips.

Conclusion

In 2013, the media outlet I worked for featured an cover story on Chen Ming, the founder of OPPO. I recall that OPPO, which started as an MP3 player manufacturer and was not a core player in smartphones, became one of China's top five phone brands within a decade. Its core product development strategy has never been focused on CPU performance (or even using the latest chips). Instead, it prioritizes delivering the best user experience in areas that consumers perceive most directly. For instance, addressing battery anxiety, OPPO introduced fast charging that allows for 2 hours of usage after just 5 minutes of charging. Similarly, each phone's design is visually appealing, catering to consumers' aesthetics. Combined with its extensive nationwide distribution network, OPPO has ensured its success.

Currently, there are few new hotspots in the smartphone market. As evidenced by the Apple iPhone 16, CPU performance, camera capabilities, and AI features struggle to differentiate products. Folding phones, however, offer a refreshing perspective. If Huawei can rapidly scale up its folding phone business, integrate upstream supply chains for hinges and flexible displays, and reduce costs, it may emerge victorious in the fierce competition against Xiaomi, OPPO, and Vivo.

Similar to AITO and Li Auto, instead of competing with BBA and Toyota in engine technology, these new energy vehicle brands prioritize features with high consumer perception and abundant domestic supply, such as luxurious interiors, massage seats, in-car entertainment, fridges, and automated parking. Despite using batteries supplied by CATL, which may not seem impressive, they have managed to position the AITO M9 as a luxury brand with prices exceeding 500,000 yuan, becoming the top-selling premium electric vehicle in China.

It's not that Apple phones are bad; rather, Chinese consumers' aesthetics and requirements have evolved.

As of noon on September 11, pre-orders for Huawei's triple-folding phone, UITIMATE DESIGNXT, had surpassed 4.9 million units, breaking records for a single folding phone model and rivaling the popularity of the Mate 60, which shipped over 20 million units in 2023. This has brought folding phones into the spotlight.

Will this trend encourage Xiaomi, OPPO, Vivo, Honor, and other phone manufacturers to increase their investments in folding phones, thereby making them more accessible to the general public?