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Technological Resilience and Innovation of Huawei Amidst U.S. Sanctions

GOOVER DAILY REPORT June 28, 2024
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TABLE OF CONTENTS

  1. Summary
  2. Major Technological Advances by Huawei in 2024
  3. Breakthroughs in Chip Technology
  4. Impact of State Support on Huawei’s Growth
  5. Huawei's Competitive Position in the Market
  6. Implications for Global Trade and Technological Independence
  7. Conclusion

1. Summary

  • The report titled 'Technological Resilience and Innovation of Huawei Amidst U.S. Sanctions' focuses on Huawei's technological advancements and strategic responses in 2024 despite stringent U.S. sanctions. Key topics include Huawei's innovative breakthroughs in chip technology and significant product launches such as the Mate 60 Pro and the Pura 70 series. The report also highlights the supportive role of the Chinese government, Huawei's competitive market positioning, and the broader implications for global trade dynamics. Among the main findings, Huawei has collaborated with SMIC to advance chip technology, introduced the HarmonyOS operating system across 900 million smartphones, and significantly increased market share in China. Financial support and policy initiatives from the Chinese government have bolstered Huawei's resilience, leading to a marked increase in sales and profits.

2. Major Technological Advances by Huawei in 2024

  • 2-1. Introduction of Advanced Chips in New Smartphones

  • As of 2024, Huawei has made significant strides with its chip technology, despite stringent U.S. sanctions. The Huawei Mate 60 Pro, one of its flagship smartphones, has been a focal point of these advancements. This device boasts a 6.82-inch display, a pixel density of 440 ppi, and a powerful 50 MP camera. It runs on HarmonyOS, an in-house operating system developed by Huawei after it was placed on the U.S. trade blacklist in 2019. This proprietary operating system has enabled Huawei to maintain independent control of its core technology. HarmonyOS is reported to have over 900 million smartphones running on it, showcasing the widespread adoption and resilience of Huawei's technology.

  • 2-2. Launch of the Huawei MateBook 14 2024

  • In addition to advancements in smartphone technology, Huawei has expanded its product lineup with the new MateBook 14 2024. This laptop has been particularly noted for its strong performance and features that cater to both professional and personal use. The exact details of the hardware specifications were not outlined in the referenced materials, but its release signifies Huawei's continued innovation and presence in diverse tech markets.

  • 2-3. Notable Features of New Product Lines

  • The Huawei Mate 60 Pro is equipped with cutting-edge technology, including updates that enhance its camera, Wi-Fi, and Bluetooth functionalities. This smartphone is designed to cater to high-end market demands, directly challenging competitors like Apple's iPhone. Huawei's efforts have shown significant results; its smartphone sales increased by 72% in the first five months of 2024 compared to the preceding year. Furthermore, Huawei has made a surprising leap in market share in China, rising from 9.3% in 2023 to 15.5% in 2024, closing in on Apple's market share of 15.7%.

3. Breakthroughs in Chip Technology

  • 3-1. Collaboration with SMIC and Other Key Partnerships

  • Huawei collaborated with its foundry partner SMIC to start 5nm wafer production. This partnership marks a significant technological advancement for Huawei, especially amidst the constraints imposed by U.S. sanctions. The new TaiShan cores developed in collaboration with SMIC show substantial progress in performance and power efficiency.

  • 3-2. Development of Advanced Processors Despite Sanctions

  • Even with the tight restrictions from the U.S., Huawei has made notable progress in processor development. The new TaiShan cores are reported to be significantly more capable than the previous Cortex-A510 used in the Kirin 9000S. According to rumors, the new TaiShan cores achieve a single-core score of 350 in Geekbench 5, outperforming the Cortex-A510 by 175 percent.

  • 3-3. Implementation of Innovative Manufacturing Techniques

  • Huawei has adopted a style similar to Apple’s low-energy cores in developing its new TaiShan cores. These cores maintain extremely low power consumption while achieving higher performance levels. The innovative manufacturing techniques contribute to the efficiency and capabilities of these processors, which are expected to be featured in Huawei's upcoming Mate 70 flagship series and potentially a new 'Kirin PC Chip'.

4. Impact of State Support on Huawei’s Growth

  • 4-1. Financial Aid and Tax Breaks

  • Huawei has received substantial financial aid and tax breaks from the Chinese government. These forms of state support have been critical in buttressing the company’s financial stability and growth amidst the pressures of U.S. sanctions. The effectiveness of such support is evident in Huawei's reported profit of 19.6 billion yuan ($2.7 million) in the first quarter of 2024, marking a 564% increase from the previous year. Additionally, sales surged by 37% to 178.8 billion yuan within the same period.

  • 4-2. Policy Initiatives and Strategic Collaborations

  • The Chinese government has implemented several policy initiatives aimed at reinforcing Huawei’s technological capabilities. A key aspect of this is the strategic collaboration with top Chinese chipmaker Semiconductor Manufacturing International Corp. (SMIC). This collaboration led to significant technological achievements, such as the development of the Kirin 9000s chip, which uses advanced 7-nanometer processing technology. This chip powers the Mate 60 Pro smartphone and represents a notable advancement given the ongoing U.S. sanctions that restrict access to modern U.S. technologies.

  • 4-3. Alignment with China’s Technological Ambitions

  • Huawei's growth trajectory is closely aligned with China's broader technological ambitions. The company’s success is part of a larger effort to achieve technological self-sufficiency. This alignment is reflected in Huawei's innovative breakthroughs and the expansion of its HarmonyOS operating system, now installed on 900 million active consumer devices. Despite U.S. sanctions, Huawei’s premium device sales rose by 72% in the first five months of 2024. These achievements underline the pivotal role of state-enterprise partnerships in driving China’s technological progress.

5. Huawei's Competitive Position in the Market

  • 5-1. Consumer Adoption and Sales Performance

  • According to PaySpace Magazine, Huawei achieved a notable growth in its flagship phone sales, witnessing a 72% increase in the first five months of 2024 compared to the same period in 2023. Furthermore, the company’s net profit for the first quarter of 2024 amounted to $2.71 billion, a 564% increase from the previous year's figure. This resurgence was primarily driven by the impressive performance of the Mate 60 Pro, which debuted in 2023 and was equipped with the advanced Kirin 9000S processor.

  • 5-2. Comparison with Competitors Like Apple and Samsung

  • Huawei's market dynamics reveal a compelling story of resilience. Despite U.S. sanctions, Huawei has maintained a competitive edge in the market. As noted by Phones Canada, Huawei’s technological innovations, such as producing 5G-capable phones independently, put it in direct competition with global leaders like Apple and Samsung. Meanwhile, Counterpoint Research data cited by PaySpace Magazine indicates that Huawei's share in the Chinese smartphone market increased from 9.3% in Q1 2023 to 15.5% in Q1 2024. Conversely, Apple's market share in China dropped from 20% to 15.7% over the same period.

  • 5-3. Market Dynamics and Strategic Positioning

  • Huawei's strategic positioning has been significantly impacted by global geopolitics. The U.S.-led sanctions have barred American companies from supplying essential technologies and software to Huawei, hindering its global operations. Despite these challenges, Huawei has shown resilience through innovation and state support. As indicated in the U.S. Lawmakers Look to Bar CHIPS Act Winners article, the creation of China’s largest semiconductor investment fund, Big Fund III valued at $47.5 billion, is designed to support a standalone Chinese supply chain. Additionally, Richard Yu of Huawei highlighted their technological independence, noting their Harmony OS running on over 900 million smartphones, which underscores their sustained innovation despite the restrictions.

6. Implications for Global Trade and Technological Independence

  • 6-1. Reactions to U.S. Sanctions and Trade Policies

  • In response to U.S. sanctions, which have significantly impacted Huawei, the company has demonstrated resilience and adaptability. Huawei's adoption of its in-house operating system, Harmony OS, is a noteworthy example. Introduced after Huawei was placed on the U.S. trade blacklist, Harmony OS now powers over 900 million smartphones. The ban forced the company to pivot from using Google's Android OS, showcasing the strategic shift Huawei had to undertake to survive and maintain market presence. Furthermore, Huawei has expanded into new businesses, such as electric vehicles, and ambitious ventures in AI technology. These measures highlight the company's efforts to counteract the heavy restrictions imposed by the U.S. Additionally, Huawei's Mate 60 Pro smartphone, equipped with sophisticated chip technology, has pushed the U.S. to reconsider its sanctions strategies as the Chinese firm continues to innovate despite these challenges. Entegris, a U.S. chip manufacturing supplier, underscores the impact of U.S. sanctions on global trade as its sales to Huawei were halted due to Huawei's advancement in chip technology using materials from Entegris.

  • 6-2. China's Push for Domestic Technological Advancements

  • China has significantly amplified its efforts to achieve technological self-sufficiency, particularly in response to U.S. sanctions against major tech corporations like Huawei. The Chinese government has supported Huawei through substantial state aid, helping the company to achieve independent control over its core technologies. Huawei's breakthrough in developing its own AI frameworks through Ascend processors is a testament to these efforts. Furthermore, the Chinese government has invested heavily in domestic semiconductor output to reduce reliance on foreign technology. This push is evident in the development of products like the Mate 60 Pro, whose processor's sophistication underscores China's growing capabilities. The state's backing of companies like Huawei is a strategic move to empower domestic industries and ensure the country's technological independence amidst global conflicts.

  • 6-3. Long-term Prospects for Huawei and Similar Entities

  • The trajectory of Huawei under persistent U.S. sanctions points to a long-term shift in the global technological landscape. Huawei's ability to bounce back with significant smartphone sales and the introduction of groundbreaking AI technology demonstrates the company's strong market positioning. The company saw a 72% rise in smartphone sales during the first five months of 2024 compared to the previous year. This recovery has allowed Huawei to impact competitors like Apple, taking a substantial share of the premium smartphone market in China. These developments are not isolated; they signal a broader movement towards a more self-reliant technological ecosystem within China. With continued state support and strategic innovations, Huawei is poised to maintain and potentially strengthen its position in the global market, setting a precedent for other Chinese tech firms to follow.

7. Conclusion

  • Huawei's achievements in 2024 underscore a significant period of resilience and innovation amid U.S. sanctions. The launch of flagship products like the Mate 60 Pro and Pura 70 series, combined with pioneering advancements in chip technology through partnerships with SMIC, highlight Huawei's capability to overcome international trade restrictions. State support has been instrumental in Huawei's success, evident in substantial financial growth and a strong market comeback, especially in China. The uptick in market share and technological advancements indicate a meaningful shift toward technological self-sufficiency and a challenge to existing market leaders like Apple and Samsung. However, the report acknowledges the limitations posed by continued sanctions and the need for further R&D to maintain momentum. Looking ahead, Huawei’s trajectory suggests increased global technological competition, with the potential for Huawei and similar entities to further disrupt the market by setting new standards in tech innovation driven by state-enterprise collaboration.

8. Glossary

  • 8-1. Huawei [Company]

  • Huawei is a major global technology company that has shown remarkable resilience and ability to innovate, especially despite significant challenges such as U.S. sanctions. The company is a leader in telecommunications and consumer electronics, particularly noted for its advancements in smartphone and chip technology.

  • 8-2. SMIC (Semiconductor Manufacturing International Corporation) [Company]

  • SMIC is a key partner for Huawei, pivotal in advancing Huawei’s chip technology. The company has been instrumental in enabling Huawei to innovate despite international trade restrictions. SMIC's role in producing advanced chips highlights China's efforts toward technological self-sufficiency.

  • 8-3. HarmonyOS [Technology]

  • HarmonyOS is Huawei's in-house operating system, designed to reduce reliance on foreign technology and provide a seamless user experience across devices. The OS is currently used on over 900 million smartphones, demonstrating significant market penetration and consumer acceptance.

  • 8-4. Kirin 9010 [Product]

  • The Kirin 9010 is an advanced processor developed as a result of Huawei's collaboration with SMIC. It is notable for its cutting-edge technology and has been implemented in flagship products like the Pura 70 series, signifying a major leap in Huawei's technological capabilities.

  • 8-5. Made in China 2025 [Policy]

  • This is a strategic initiative by the Chinese government aimed at achieving technological self-sufficiency, enhancing domestic production capabilities, and reducing dependence on foreign technologies. The policy plays a crucial role in supporting companies like Huawei in their innovation efforts.

9. Source Documents