Huawei Technologies announced a 36 percent decline in its net profit during the first half of this year compared to the same period last year. This represents one of the lowest profit figures for the company in recent years, primarily due to increased investments in research and development as well as rising component costs.
In its latest earnings report released on the Beijing Financial Assets Exchange website, the Shenzhen-based company disclosed a net profit of 23.8 billion Chinese yuan (approximately $3.5 billion) for the six months ending June 30. Revenue increased by 9.6 percent, reaching 467.8 billion yuan (around $69.6 billion).
The company’s R&D expenses surged 25 percent to 121.4 billion yuan, accounting for about 26 percent of total income, up from roughly 22 percent in 2024 and 23 percent last year.
A source close to Huawei explained that higher prices for components like storage chips have impacted profitability, while the significant boost in R&D spending has directly limited short-term earnings.
Over the past six years, Huawei has designed and mass-produced 381 different chip models as part of its technical development roadmap. The upcoming Kirin 2026 chip, based on its LogicFolding architecture, is set to be revealed this fall. The company expects that high-end chips built on this new approach will achieve transistor densities comparable to the 1.4-nanometer process by 2031.
Industry insiders suggest that companies focusing on innovative system design could outperform competitors relying on more expensive manufacturing technologies. This creates opportunities for Chinese startups working on Chiplet designs and advanced packaging solutions, especially those with strong system-integration expertise.
A semiconductor expert noted that Huawei’s strategy aims to deliver comparable performance through architectural and algorithmic innovations without access to the latest lithography technology. However, such a model cannot fully replace foundational hardware breakthroughs. Domestic and international chip developers operate under significantly different conditions, with overseas companies benefiting from advanced manufacturing capacities at facilities like Taiwan Semiconductor Manufacturing and Samsung Electronics. Chinese firms, on the other hand, must seek parallel advancements in software and hardware to remain competitive.
In the second quarter, China’s overall smartphone shipments declined by 4.3 percent year-over-year to approximately 66 million units, according to data from global market research firm IDC. Despite this decline, Huawei’s handset shipments grew by 19 percent, securing its position as the leading brand in the Chinese market with a 23 percent market share.