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I recently wrote how smartphone price wars may be claiming one of their first major victims in ZTE (OTCPK:ZTCOY), and now we're getting word that crosstown rival Huawei may also be getting crunched in the ongoing battle for supremacy at the low end of the market. The latest reports cite Huawei's mobile device chief saying the company is formally ducking out of ultra low-end smartphones in its home China market, in what can only be seen as a major retreat for one of China's biggest tech companies.

China's smartphone market soared last year to become the world's largest, surpassing the US, boosted by a flood of cheap new models often costing less than $100. Driving that surge was a field of domestic players that have recently entered the space, including China's big 3 of Huawei, ZTE and Lenovo (OTCPK:LNVGY). They were fighting for share alongside the fast-rising Xiaomi and other mid-sized players including Coolpad and Oppo. Rounding out the mix were a number of new more niche-oriented players with names like OnePlus and Smartisan.

The resulting flood of new players and models touched off a price war that has been raging for the better part of a year now, with each company trying to undercut its rivals in a bid to gain market share. No one was saying how much money they were earning or losing from the business, but I suspect that most of the big names were either barely breaking even or more likely losing money in the battle.

One of the first victims of the war appeared to be ZTE, after new data released last week showed the company failed to earn a spot in the global top 10 for smartphone makers in this year's second quarter. (previous post) Its absence on that list came after separate data showed it fell out of the top 5 smartphone makers for China by the end of last year, after making an appearance on the list earlier in the year.

By comparison, the second-quarter global smartphone figures surged for Huawei, whose sales doubled during the period as its market share rose more than 2 percentage points to nearly 7 percent - behind only Samsung (OTC:SSNLF) and Apple (NASDAQ:AAPL). But now it appears that Huawei may be preparing to sacrifice some of that newly gained share as it seeks a longer-term formula for profits in the business.

In a new interview, Huawei's mobile device chief Yu Chengdong said his company intends to stop working with mobile carriers to supply them with big volumes of ultra low-cost smartphones. (Chinese article) That move will see Huawei cut a whopping 80 percent of its smartphone models from its product portfolio by the end of the year, leaving it with less than 10 models focused on the mid- to higher-end aimed at competing with Samsung and Apple.

Industry watchers will recall that Samsung recently reported one of its worst quarters in years, citing stiff competition in China as one of the reasons. I suspect that Lenovo will also report that it took a hit from its smartphone division when it reports its latest quarterly results next week. (earnings calendar) It's possible we'll see Lenovo also announce a scale-back in its low-end business, though I sense that it's more committed to the lower end than Huawei or ZTE.

This latest bloody price war looks similar to what happened nearly a decade ago in China with low-end PCs. In that instance, the big global companies ultimately abandoned the low-end space, most of China's domestic names completely left the PC sector, and Lenovo ended up the big winner. Perhaps history will repeat itself in this instance, giving Lenovo an important victory though hardly moving it towards its final aim of competing directly with Apple and Samsung.

Bottom line: Huawei looks set to become the newest victim of fierce price wars at the low end of China's smartphone market, setting the stage for Lenovo to emerge as the potential victor.

Disclosure: None.

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