Richard Yu Chengdong holds the newly released Huawei MateX2 series at a launch event on Monday Photo: Courtesy of Huawei

Despite the latest news that more than 3 million people have pre-ordered to buy Huawei's latest foldable handset MateX2, its mobile phone sales in the fourth quarter plunged more than 40 percent and Huawei dropped out of the top four in quarterly sales for the first time. 

Analysts said that the outlook for Huawei's mobile phone business will depend on chip supply - crucially, how the Biden administration will deal with chip ban when Huawei and other Chinese tech firms can develop and produce high-end chips.

As of 4 pm on Tuesday, 176,997 customers have submitted pre-orders to buy Huawei MateX2 at Huawei's flagship store on e-commerce platform Taobao and some 675,000 people have made reservations on JD.com. On Huawei's own online shop, the booking surpassed 2 million.

Huawei launched the new foldable MateX2 handset series on Monday. The phone will go on sale on Thursday with a price starting from 17,999 yuan ($2,785.23), carrying its self-developed Kirin 9000 5G SoC chipset.

"Huawei's MateX2 is probably the most expensive mobile phone on the market today. The pursuit of higher added value is Huawei's strategy to make its mobile phone business profitable in the face of a shortage of 5-nanometer chips," Wang Peng, an assistant professor at the Gaoling School of Artificial Intelligence at the Renmin University of China, told the Global Times on Tuesday.

Global smartphone sales plunged 12.5 percent year-on-year to 1.35 billion units in 2020, and the sales in the fourth quarter declined 5.4 percent to 385 million units, according to the latest data released by consulting firm Gartner.

Huawei was in the fifth place, dropping out of the top four in sales for the first time. 32 million phones were sold in the fourth quarter, plunging more than 40 percent on a yearly basis. Huawei's sales have fallen by almost a quarter in the past year.

The launch of MateX2 is a signal to the outside world that Huawei has not given up on its mobile phone business. The value of the signal far outstrips the commercial value of the foldable phone itself as MateX2 is unlikely to be mass-produced given the current chip shortage, said Guo Yuxuan, researcher at Beijing Kandong Research Institute.

At the company's annual work meeting for 2021, founder Ren Zhengfei emphasized that Huawei should maintain the market position of its core industry while high-end mobile phone business must also continue.

"In the future, Huawei will distribute high-end chips on high-end handsets. It is not clear when Huawei will solve the chip problem, at least for now. But the optimistic estimate is within 18-24 months," Zhou Xibing, a financial writer who follows Huawei closely, told the Global Times on Tuesday.

Zhou also said that Huawei may work with European chip companies to be de-Americanized, or continue to invest in China's own chip contract manufacturers, so as to achieve chip self-sufficiency. Of course, it takes a long time.

"As for Huawei's chip ban, on the one hand, China-US relations have eased somewhat and both sides have maintained relative restraint, giving Chinese companies some room to maneuver. On the other hand, Huawei's research prowess is at the heart of the solution to the chip crisis. Huawei has been recruiting research personnel since last year, but it still takes a long time to develop high-end chips," Wang added.

Although the chip development has a long way to go, the sales of MateX2 seems to be a positive sign for analysts on Huawei's high-end handset business.

By releasing its MateX2 phone as scheduled, Huawei has stepped into the folding screen industry worth more than 100 billion yuan, said Zhou.

Wit Display estimates that about 8 million foldable mobile phones will be shipped in 2021 and the market size is expected to reach 50 million in 2025. Foldable phones are still high-end phones and unlikely to be popular in the short term, Lin Meibing, chief analyst of Wit Display, told the Global Times on Tuesday.

According to Ming Shuliang, founder of Shenzhen Zhiwu Technology Co, the MateX2 will be the first foldable phone to sell more than a million sets in China.