Huawei's strong momentum continues in China, negatively impacting Apple

Huawei's amazing turnaround started exactly one year ago tomorrow. That's when, for the first time since 2020, Huawei introduced a new flagship line powered by its own chipset. The Mate 60 series featured the Kirin 9000s which included support for 5G. Prior to the Mate 60 line, Huawei used Snapdragon SoCs tweaked to block 5G connectivity on the P50 series, the Mate 50 series, and the P60 line. Qualcomm received permission from the U.S. Commerce Department to ship those chips to Huawei.

The Kirin 9000s was manufactured by China's largest foundry, SMIC, using its 7nm process node. Because advanced lithography equipment cannot be shipped to China, 7nm is the best process node that SMIC could muster using Deep Ultraviolet (DUV) lithography. We continue to hear about amazing discoveries that will allow SMIC to create 5nm and even 3nm chipsets but so far none of these rumors have reached fruition.

Still, Huawei has been able to capture the momentum created by the Mate 60 line and use it to generate demand for the the Pura 70 flagship line. In the process, it has knocked the iPhone off the list of the top five smartphones shipped in China, the world's largest smartphone market. For the quarter ending in June, Huawei announced revenue of 239 billion yuan ($33.6 billion) in the June quarter. That translates into a rise of 33.7% year-over-year. This was the sixth straight quarter of top-line growth for Huawei.

The company was on the verge of reaching its goal of becoming the largest smartphone manufacturer in the world when the U.S. started placing sanctions on the company in 2020 forcing it to develop its own HarmonyOS operating system. The U.S. also forced Huawei to stop designing its own cutting-edge 5G Kirin processors.

Huawei's implied net profits for the second quarter were 35.5 billion yuan ($4.72 billion) and while that was an annual decline of 18.6%, last year the company reported one-time profits from divestitures. During Q2, Huawei said that its smartphone shipments rose 50% as it and other Chinese firms like Vivo and Oppo kicked the iPhone out of the top five smartphones being shipped in the country. Apple dropped to sixth. The top five, in order for the second-quarter, included:

Late this year Huawei will introduce the Mate 70 flagship series and the Mate phones are known for their cutting-edge features. It will be interesting to see what Huawei comes up with and the specs of the application processor that will drive the line.