The report titled 'Huawei's Technological Resilience and Government Support in 2024' examines Huawei's strategic advancements and state-backed resilience in the face of stringent U.S. sanctions. It delves into key innovations, notably in smartphone and chip technologies, achieved in collaboration with SMIC, as well as the broader implications of the U.S.-China tech rivalry. Highlights include the resurgence of Huawei's Mate 60 Pro smartphone series, powered by the advanced Kirin 9000s chip, and the widespread adoption of HarmonyOS, which now powers 900 million devices. The report further discusses the semiconductor production increase in China and Huawei's fortified market position supplemented by substantial state support and strategic collaborations.
Huawei has made significant strides in smartphone technology despite facing stringent U.S. sanctions. The company's Mate 60 Pro smartphone series, launched in September, has contributed to a resurgence in the Chinese market. Premium smartphone sales surged by 72% in the first five months of the year. Huawei's focus on integrating its HarmonyOS operating system into its devices has played a crucial role in this growth, with 900 million active consumer devices reported. This integration helped Huawei overtake Apple's operating system market share in China during the first quarter of the year. Notably, the Ascend processors developed by Huawei are reported to be 1.1 times more effective in training AI models compared to some competitors' chips.
Huawei has seen major breakthroughs in chip manufacturing, particularly through its collaboration with China's leading chipmaker, SMIC. The Mate 60 Pro is powered by the Kirin 9000s chip, which employs advanced 7-nanometer processing technology. This collaboration has been crucial for Huawei, allowing it to continue innovating in the face of U.S. sanctions that have restricted access to modern U.S. technologies. Despite U.S. Secretary of Commerce Gina Raimondo's statement that the Kirin 9000s chip is not on par with advanced U.S. chips, this development was a significant accomplishment for Huawei.
The HarmonyOS operating system has been a cornerstone of Huawei's strategy to mitigate the impact of U.S. sanctions. By integrating HarmonyOS into a wide range of devices, including smartphones, watches, and TVs, Huawei has managed to amass 900 million active consumer devices. This integration strategy has bolstered Huawei's position in the Chinese market, allowing it to surpass Apple in operating system market share within China. Richard Yu, Huawei's consumer business chairman, emphasized the growing future of HarmonyOS during a developer conference in Dongguan, China.
The U.S. export controls have significantly impacted the global semiconductor industry, particularly targeting China’s technological advancements. Following a series of restrictions, the U.S. aimed to limit China's access to advanced semiconductor technology. Despite these measures, China increased its semiconductor production by 40% in the first quarter of 2024, reaching 98 billion units, with a record high of 36 billion units in March alone. This growth was driven by strong domestic demand and an expansion of semiconductor plants across China. Furthermore, Huawei's breakthrough in developing a 7-nanometer chip for its Mate 60 Pro smartphone in August 2023 highlighted China's progress in semiconductor technology despite the sanctions. SMIC managed to produce the 7nm chips using older lithography technology, albeit with reduced yields impacting margins.
In response to the U.S. sanctions, Huawei has actively pursued advancements in its chip and smartphone technologies. Huawei's collaboration with SMIC resulted in the development of the 7nm chips for its Mate 60 Pro, showcasing a significant step towards self-sufficiency. The company continued to innovate, releasing the Mate 60 Pro+ with an even more powerful processor and increased memory. By incorporating a higher percentage of local components, Huawei minimized its dependence on foreign technology. Additionally, the Chinese government has provided substantial support, launching a $47.4 billion chip fund to bolster its semiconductor industry, which is expected to promote further advancements and self-reliance.
The U.S. export controls and subsequent strategic responses by Chinese companies like Huawei have led to a distinct bifurcation in the global supply chain. Companies such as NVIDIA have reported significant impacts, with U.S. export sanctions leading to reduced revenues and increased inventory levels in China. The geopolitical tensions have driven medium- to long-term demand for non-Chinese chips from regions including Europe, the US, Japan, and South Korea. However, the push for technology independence may result in two parallel, and potentially incompatible, supply chains, which could hinder global tech sector growth. There are also concerns regarding the private sector, as businesses must navigate the complexities of complying with sanctions while maintaining market competitiveness.
The Chinese government has provided substantial financial aid and supportive policies to Huawei amidst ongoing U.S. sanctions. This aid has been critical in ensuring the company's resilience and ability to innovate despite significant international challenges. These forms of support are part of broader government efforts to bolster domestic technology companies against foreign restrictions and maintain China's competitive edge in the technology sector.
Huawei has effectively leveraged collaborations with state-owned enterprises, including the Semiconductor Manufacturing International Corporation (SMIC). These partnerships have been instrumental in advancing Huawei's capabilities in chip manufacturing and smartphone technology. For instance, the collaboration with SMIC facilitated the production of sophisticated processors that power Huawei's latest Mate 60 Pro smartphone, which has gained significant market attention despite U.S. efforts to limit China's access to advanced chip technologies.
'Made in China 2025' has played a pivotal role in Huawei's strategic planning and technological advancements. This initiative aims to reduce China's dependency on foreign technology and promote self-sufficiency in high-tech industries. Under this framework, Huawei has accelerated its development of in-house technologies, including the Harmony OS, which now powers over 900 million smartphones. The initiative underscores the Chinese government's long-term commitment to fostering domestic innovation and supporting leading companies like Huawei in becoming global technology leaders.
In the first quarter of 2024, Huawei experienced significant growth in smartphone sales, resulting in the company securing the second position in China's smartphone market. According to IDC figures, Huawei's shipments increased by 110% year-on-year, resulting in a 17% market share. This growth allowed Huawei to move from previously being out of the top five into the second position, surpassing Apple, which fell to fourth place. Similarly, during the first five months of 2024, Huawei's flagship smartphone sales surged by 72% compared to the same period the previous year. Financially, Huawei posted an impressive net profit growth of 564% to $2.71 billion in the first quarter and a revenue growth of 37% to 178.8 billion yuan, equivalent to $24.7 billion.
Huawei has leveraged a sense of nationalist pride and confidence among Chinese consumers, which has been pivotal to its resurgence. The company’s Mate 60 Pro smartphone, launched in September, played a significant role in driving up sales. Huawei’s announcement of achieving 900 million active devices on its HarmonyOS further boosted consumer confidence. Despite stringent U.S. restrictions, Huawei has managed to tantalize its domestic market by emphasizing its technological independence and innovation, which resonate with national sentiment.
In a competitive landscape, Huawei's progress has impacted its rivals, most notably Apple and Xiaomi. According to Counterpoint Research, Apple’s market share in China dropped to 15.7% in the first quarter of the year from nearly 20% in the previous year, due in part to Huawei’s resurgence. Meanwhile, Huawei’s market share increased from 9.3% in 2023 to 15.5% in the first quarter of 2024. Additionally, while Xiaomi charges up to 50% on in-game purchases, Huawei introduced lower fees for in-app purchases on its HarmonyOS, offering a more attractive option for consumers and app developers alike.
Huawei's achievements in 2024 underscore its remarkable resilience amidst international challenges. With substantial financial aid and strategic partnerships, particularly with state-backed SMIC, Huawei has effectively navigated U.S. sanctions to advance its chip manufacturing and smartphone technologies. The company's notable comeback in the Chinese market, evidenced by increased sales and consumer confidence, highlights its adaptability and innovative capabilities. Despite the promising outlook, ongoing geopolitical tensions and the fragmentation of the global supply chain present persistent challenges. Future studies should monitor how sustained international pressures and internal market dynamics will shape Huawei's trajectory, emphasizing the interplay between technological innovation and geopolitical strategies.
Huawei Technologies Co., Ltd. is a leading Chinese technology company known for its telecommunications equipment and consumer electronics. Despite being subjected to stringent U.S. sanctions, Huawei has continued to innovate and maintain a strong market presence, particularly through its advancements in chip technology and smartphone development.
HarmonyOS is Huawei's proprietary operating system, designed to reduce reliance on foreign technologies such as Android. It has achieved significant adoption in China, featuring advanced integration in Huawei’s latest smartphones and achieving nearly one billion active devices.
Semiconductor Manufacturing International Corporation (SMIC) is a state-backed Chinese semiconductor foundry. It has played a crucial role in Huawei's chip technology advancements, overcoming international restrictions through innovative manufacturing processes.
'Made in China 2025' is a strategic initiative by the Chinese government aimed at enhancing domestic production in high-tech industries, including semiconductors. This policy framework has significantly supported Huawei’s drive towards technological self-sufficiency.