Huawei is coming back to the high-end smartphone game

Advancements in the latest flagship phones made by Chinese company Huawei, as well as growing sales, signals that the Chinese smartphone company is coming back in the high-end smartphone game. However, reaching further technological advancements amid US sanctions will be challenging.

Ever since the US started to impose sanctions restricting Huawei's access to advanced chips in 2019, the company has had a difficult time selling and manufacturing its high-end devices. Even though in 2020, Huawei briefly surpassed Apple and Samsung in smartphone shipments due to successful sales in China, in 2021, the company witnessed its first annual revenue decline.

Export controls, the pandemic, and allegations that the company may use its 5G equipment for spying led to smartphone sales declining at a time when its competitors, Apple and Samsung, were on the rise.

However, since then, the company, with a strong push from the Chinese government, has been able to get back on its feet both in terms of smartphone sales and its technological capabilities.

According to data from Counterpoint Research, Huawei smartphone sales in China grew by 70% in Q1 2024. This was bad news for Apple, with the competition directly affecting the US company. Its own China sales slumped by 19%.

Smartphone sales fueled by a wave of patriotism

Domestic Huawei sales were fueled by the company's use of 7nm process technology in its flagship device, the Mate 60 Pro – a milestone some thought might take years to reach.

The launch of the cutting-edge devices was followed by a wave of support and patriotism from Chinese consumers, who eagerly swept them off the shelves.

The Mate 60 Pro is the company's first 5G smartphone in nearly three years. Previously, it couldn't manufacture 5G phones due to restrictions on equipment.

In March, Huawei launched another flagship device, the Pura 70. A teardown of this phone also confirmed that it was running on an advanced, home-made processing chipset called Kirin 9010.

The company has used chips made by SMIC, a partly Chinese-state-owned company. According to Bloomberg, the chips were made using US equipment that was obtained before export controls.

This year, SMIC plans to deliver 5nm chips for Huawei and has already put together new assembly lines. The company's latest advancements will also help it compete in the global A.I. race. SMIC is also planning to produce Ascend 920 chips, akin to the high-end ones offered by Nvidia.

While the Chinese are trying to catch up with the Western countries, the United States is trying to slow down Chinese growth by imposing further restrictions. In May, the Biden administration revoked licenses that allowed Intel and Huawei to supply chips to Huawei with semiconductors for Huawei's laptops and smartphones.

Challenging but possible

SMIC's plan to mass-produce chips using 5nm process technology by the end of the year is ambitious yet doable, says Chuck Warren, host of the podcast Breaking Battlegrounds, which also covers US-China relations.

According to him, despite stringent export controls and technology blockades, SMIC has consistently progressed in improving its manufacturing capabilities.

"It is not clear if success can be achieved through innovation within constraints or whether such a feat would require obtaining alternative advanced lithography supply chains as well as relying on indigenous know-how," he says.

However, it might be possible due to massive investments. The National Semiconductor Association estimates that China is planning to invest $142 billion in chip production. Chinese investments will likely be bigger than those of the US, Bloomberg estimates.

According to Warren, some slowdowns might occur due to export regulations, but China's strategic focus on autonomy in technology and ongoing research will probably result in advances in areas needed for AI training, among others, within the semiconductor industry.

Not only chips

Huawei will likely use more domestic components in future high-end phones, not just the latest chips.

A teardown of Huawei's flagship Pura 70 indicated that the company also used a NAND memory chip.

According to Warren, the domestic manufacturing capability of NAND flash memory indicates that China has reached an advanced stage in mastering sophisticated fabrication processes.

Warren expects that there will be many more home-based inputs for other parts, including DRAM and OLED displays.

Adhiran Thirmal, a cybersecurity solutions expert at Security Compass, says that in the future, Huawei's flagships might use its own battery technology and displays. The country is a major player in battery materials and production and is making moves in display technology.

We’re could also see Chinese-developed camera technology.

"As with the displays, the domestic market is maturing, although the major incumbent players, such as Sony, might have an advantage over newer entrants," Thirmal explains.