Surge at Huawei Flagship Store in China Signals Intensifying Showdown with Apple

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Huawei opened four such stores in major Chinese cities between December and February, an aggressive marketing blitz by a company that had largely relied on licensed distributors and is rebounding from U.S. sanctions imposed in 2019 that had crippled its smartphone business for four years until it could source domestic replacement parts.

Huawei is revamping its retail strategy and aggressively opening flagship stores in China, with some just a stone's throw away from Apple (AAPL.O), shops, as it seeks to retake the premium electronics throne in the world's biggest smartphone market.

Situated directly across from Apple's Shanghai flagship store, Huawei's recently renovated shop spans three floors of a famous heritage architecture building in the financial hub's busy shopping district and includes a coffee shop and a gym.

Huawei opened four such stores in major Chinese cities between December and February, an aggressive marketing blitz by a company that had largely relied on licensed distributors and is rebounding from U.S. sanctions imposed in 2019 that had crippled its smartphone business for four years until it could source domestic replacement parts.

"The Huawei flagship store is very nice. It looks much brighter inside compared to the Apple Store across the street," said Amy Chen, a 27-year-old physiotherapist who visited the Shanghai store this week to switch to Huawei's top-end Pura 70 Ultra from the iPhone 15 Pro in hopes of better mobile reception.

Apple has 47 stores in mainland China. Huawei, which did not open a flagship store until 2019, now has 11 of them.

"I think they will open more than 20 of them. Then it will eventually catch up to Apple," said Ethan Qi, associate director at research firm Counterpoint.

It marks a stark contrast to 2021 when the company's licensed stores were shuttered across China due to product shortages caused by the U.S. sanctions.

Huawei has since developed its own chips, introduced highly popular 5G-capable products and, according to sources, has started aggressively recruiting dealers in recent months.

"As Huawei now manages to ship in large quantities, given the good profit margin they could provide, (distributors) have become willing to purchase Huawei devices again," Qi said. "Previously, many couldn't get stock and their 4G devices didn't sell well."

Huawei has been actively bargaining with distributors, touting the above industry average profit margins of its phones and sometimes demanding exclusionary clauses to turn them into its exclusive partners, according to two industry sources.

More than 5,200 stores licensed to sell Huawei products sprang up through the first 10 months of 2023, with more than half of them in third and fourth-tier cities, according to market research firm GeoQ, helping Huawei expand its army of distribution partners nationwide.