Huawei Technologies allocated more than 25 percent of its revenue to research and development (R&D) during the first half of 2024, underscoring its focus on long-term technological self-reliance amid ongoing pressures on profitability. According to figures submitted to the Shanghai Clearing House, the Shenzhen-based company’s R&D spending rose 25 percent year on year to 121.4 billion yuan (approximately HK$141.57 billion) for the six months ending in June.
This substantial increase in R&D investment, combined with rising costs for components, contributed to a 36 percent decline in net profit, which fell to 23.8 billion yuan from 37.2 billion yuan in the same period last year. This marks Huawei’s second consecutive year of lower first-half earnings. Additionally, the firm experienced a sharp downturn in net operating cash flow, which swung from a positive 31.2 billion yuan in the first half of 2023 to a negative 39.9 billion yuan.
Despite these challenges, Huawei’s overall revenue grew by 9.55 percent to reach 467.8 billion yuan, supported by a rebound in smartphone shipments and increased demand for its artificial intelligence (AI) processing units. Huawei maintains its position as leader in China’s smartphone market, capturing a 22.6 percent share in the second quarter. This market strength was bolstered by a 19.4 percent increase in shipment volume, according to data from research firm IDC.
Huawei was unique among the top 10 smartphone vendors in China in registering quarterly growth, while competitors such as Oppo, Vivo, Xiaomi, and Honor experienced notable declines. Part of Huawei’s competitive edge came from a more cautious approach to price increases compared with rivals. However, the company acknowledged that sustained rises in memory chip costs could soon necessitate higher prices industry-wide. Richard Yu Chengdong, chairman of Huawei’s consumer business group, warned last month that surging memory prices could force manufacturers to raise smartphone prices to avoid losses.
Beyond the smartphone segment, Huawei continues to expand the adoption of its domestically developed Ascend AI chips, which serve as an alternative to foreign products restricted under U.S. export controls. Several Chinese AI companies, including DeepSeek, Z.ai, and iFlyTek, are deploying Huawei chips to run and train their AI models. Industry analysis from TrendForce projects that Huawei and other domestic chip makers could capture nearly 80 percent of China’s AI server market in 2024, putting further pressure on international competitors like Nvidia.
In response to U.S. sanctions limiting access to advanced semiconductor technology, Huawei introduced in May a new chip architecture and scaling law aimed at producing chips with capabilities equivalent to a 1.4-nanometer processing node by 2031 without reliance on cutting-edge lithography equipment. The upcoming launch of the Cambricon 2026 chip, based on Huawei’s LogicFolding architecture and expected to power the firm’s flagship Mate smartphones this autumn, is being closely watched by the technology sector.