China SMIC

Huawei’s Profit Doubles as Made-in-China Chips Break Through US Sanctions

The Shenzhen-based company revealed a stunning 118% surge in net profit, totaling 26.4 billion yuan (approximately $3.6 billion), in the September quarter.
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Introduction

In a remarkable turnaround, Huawei Technologies Co. has reported a substantial increase in profits, exceeding expectations during the quarter when it unveiled its made in china chip technology.

This development marks a pivotal moment for the Chinese tech leader as it navigates the turbulent waters of US sanctions that have significantly impacted its operations.

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Huawei’s Profits Soar due to made in china Chip


The Shenzhen-based company revealed a stunning 118% surge in net profit, totaling 26.4 billion yuan (approximately $3.6 billion), in the September quarter.

This positive financial performance also included a modest uptick in sales, reaching 145.7 billion yuan.

These figures were computed by Bloomberg News based on results released for the nine months leading up to the announcement.

Notably, these results incorporated the initial sales of the immensely popular Mate 60 Pro, which commenced shipping in late August.

Read More: Did an ASML Employee Leak Trade Secrets to Huawei?

Huawei’s Resurgence due to made in china Chip


Huawei, once considered a dominant player in the smartphone market, was severely impacted when the US imposed restrictions on its overseas suppliers in 2019.

However, the company is now making a stunning comeback. It created waves in the chip industry by introducing the Mate 60 Pro, which houses a 7nm processor produced by Semiconductor Manufacturing International Corp (SMIC).

This revelation sparked celebrations in China and raised accusations in the US that their efforts to thwart China’s technological advancement had faltered.

The Mate 60 Pro proved to be an instant success, with high demand, hinting at the possibility of rejuvenating Huawei’s fortunes and potentially challenging Apple Inc.’s position in the Chinese market, especially considering the underwhelming reception of the iPhone 15.

Analysts, including Jeff Pu from Haitong International Securities, estimate that Huawei may manufacture up to 70 million smartphones using its own Kirin chips by 2024—a significant number when compared to Apple’s annual shipment of approximately 220 million iPhones.

Read More: How Huawei Could be a Winner in US Ban of Nvidia GPUs?

Unstoppable Technological Progress


Experts, such as Burn J. Lin, a former vice president of Taiwan Semiconductor Manufacturing Co. (TSMC), believe that the US cannot impede Huawei and SMIC’s progress in chip technology.

Lin asserts that SMIC is well-positioned to advance to the next generation of 5-nanometer chips, thanks to the machinery from ASML Holding NV at its disposal.

This progress is reminiscent of the lithography technology revolutionizing chip manufacturing that Lin championed at TSMC.

Read More: China to Challenge ASML with a better technology than EUV

Cost-Cutting and Margin Optimization of Made in China Chip


Before the debut of the Mate 60 Pro, Huawei bolstered its margins through a series of cost-cutting efforts.

The company also benefitted from one-off gains resulting from the sale of the Honor smartphone business and a server unit in 2020 and 2021.

Huawei has expressed its commitment to refining its management systems, improving operational efficiency and quality, and enhancing its sales strategy and product offerings. These strategic actions have had a profoundly positive impact on profit margins.

Read More: 3 Unconventional Design Making Huawei SoC a Tech Marvel

Challenging Times for Competitors


A resurgent Huawei poses not only a challenge for Apple but also for local brands like Xiaomi Corp., Oppo, and Vivo, all vying for sales in a shrinking market.

The third quarter saw Chinese smartphone shipments decline by 6.3%, primarily due to local vendors, as reported by research firm IDC.

However, the market may be approaching a turning point, with expectations of year-on-year growth in the fourth quarter, driven by intense competition and a favorable comparison base, according to IDC analyst Will Wong.

Read More: Huawei Kirin is A Nightmare for Apple and Qualcomm

Conclusion

Huawei’s revival, driven by impressive profit gains and innovations in chip technology, underscores the company’s resilience. With ongoing efforts to enhance operations and sales, the Chinese smartphone market is gearing up for increased competition, making it an intriguing arena to monitor.

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