Tech giant Huawei is better prepared for US President Donald Trump’s second assault on China than it was for his first.
Rather than sanctions, the primary threat to the company’s sales and profits now appears to be the possibility of a tariff-induced recession. More than 70% of Huawei’s sales are now made in China.
Huawei’s total sales are nearly back to their pre-sanctions peak, supported by a switch to domestic procurement. Its sales in the US are negligible, leaving almost no direct exposure to Trump’s tariffs.
A large R&D budget has kept the company at the leading edge of the telecom equipment industry while supporting diversification into artificial intelligence (AI), cloud computing, autonomous driving and semiconductors. The balance sheet is sound.
Recall that, in May 2019, Trump banned US telecom carriers from using Huawei equipment and the Bureau of Industry and Security (BIS) of the US Department of Commerce put the company on its Entity List, preventing it from buying components and other products containing US technology without the department’s approval.
Over the next two years, these restrictions were tightened to cut off supplies of advanced semiconductors, most importantly those made for the company by Taiwan’s TSMC, the world’s leading high-end chip maker.
Huawei also lost access to Google’s Android operating system and Google apps, including Gmail and Google Maps. This caused Huawei’s 5G cell phone business to collapse, resulting in a 29% overall decline in sales in 2021 and sharp drops in its profits before asset sales.
Huawei’s share of the global cellphone market dropped from 18% in 2019 to about 2% in 2023 after the company sold its Honor budget brand to protect it from US sanctions.
But that was the bottom. Sales increased marginally in 2022, rose by nearly 10% in 2023 and jumped 22% in 2024, with sales of cellphones and other consumer products up 38%. Profits also increased in 2023 if sales of non-core businesses are excluded.
The regional breakdown of Huawei’s sales shows its rising dependence on the domestic Chinese market.
In 2019, the year the company was put on America’s Entity List, 59% of its sales were made in China, 24% in EMEA (Europe, Middle East & Africa), 8.2% in the Asia-Pacific, 6.1% in the Americas and 2.7% in other regions.
In 2024, the breakdown was China 71.4%, EMEA 17.2%, Asia-Pacific 5%, the Americas (now mostly Latin America) 4.2%, and other regions 2.2%. Russia accounted for 15%-20% of EMEA sales.
Domestic sales increased by 30.5% supported by the digitalization of the Chinese economy and industrial automation.
Strong demand for new model smartphones, telecom networking equipment, cloud computing, data storage, digital power and connected cars with self-driving functions drove growth across all of the company’s business segments.
Outside China, sales growth was highest in Russia, Saudi Arabia, the UAE, South Africa, Brazil and Indonesia.
Sales declined in India, Germany, the UK, Canada and Australia – all countries where sales of Huawei’s 5G telecom equipment have been restricted or banned.
Rebuilding and diversifying
Huawei rebuilt its cellphone business by turning to Chinese semiconductor foundry SMIC and developing its own Harmony operating system.
HarmonyOS, which runs on multiple devices, including smartphones, smartwatches, tablet PCs, TVs, electric vehicles and IoT (Internet of Things) devices, now ranks second in the Chinese market, behind Android but ahead of Apple’s iOS.
But it was Huawei’s Mate 60 smartphone, launched in August 2023, that revealed US sanctions to be more of an incentive for Chinese innovation than an insurmountable barrier.
Based on a 7nm processor fabricated by SMIC without using ASML’s EUV lithography, which cannot be sold in China, it was not supposed to be possible. Former Secretary of Commerce Gina Raimondo called it “incredibly disturbing.”
In 2024, Huawei overtook its domestic competitors and Apple’s iPhone to regain the top position in the Chinese cellphone market, with its market share reaching 18% in the fourth quarter. But Huawei’s worldwide market share is still only about 6%.
Huawei was also forced to develop its own ERP (Enterprise Resource Planning) software after the BIS ordered Oracle to stop providing it with software upgrades and technical services.
That took more than three years but resulted in an improved version without legacy complications that it has rolled out to its own operations worldwide and also supplies to Chinese state-owned enterprises, including PetroChina and China Mobile as well as BYD, Xiaomi and other private Chinese companies.
In 2024, Huawei’s performance by product division was as follows:
ICT infrastructure: sales up 4.9% to account for 42.9% of the total. Products include base stations, antennas, other mobile telecom network hardware and software; optical fiber and other fixed-line network equipment; enterprise switches and routers; 5G solutions for mining, seaports, and other specific industrial applications; and AI predictive maintenance.
Government spending and widespread use in industrial, logistics and social infrastructure applications support demand for 5G networking equipment in China. These factors, plus a relative lack of enthusiasm for 5G among European and American consumers, have pushed up Huawei’s share of the global market for RAN (radio access network) products from 31% in 2023 to an estimated 35% in 2024.
In addition, China leads the world in deployment of 5.5G (5G-Advanced) telecom services and is investing heavily in 6G, both of which should keep orders flowing to Huawei. South Korea, Japan, Finland, the EU and the US are also working on 6G, but China has the most supportive government and largest potential market.
In an interview with China Global Television Network (CGTN) at the Global 6G Conference in Nanjing on April 10, China Mobile technology officer Liu Guangyi said:
“When we first designed 5G about a decade ago, we didn’t anticipate the explosive rise of artificial intelligence. The focus then was mainly on improving communication speed and efficiency. But in doing so, we overlooked the potential of integrating other capabilities.
“Think about robotics, intelligent connected vehicles, and intelligent hardware. 6G networks can help make these technologies more lightweight, compact, and low-cost, making mass adoption more feasible and accelerating the intelligent transformation of society.”
Consumer products: Sales were up 38.3% to account for 39.3% of the total. Products include smartphones and HarmonyOS; laptop and tablet PCs; smartwatches and fitness trackers; and smart home systems.
Market research organization Counterpoint reports 36% growth in Huawei’s smartphone shipments in 2024, with a higher average selling price boosting the value of sales.
Cloud computing: Sales were up 8.5% to account for 4.5% of the total in 2024. Products include infrastructure-as-a-service, including servers and data storage; large language models for manufacturing, logistics and finance; AI model training and security; database services; and software-as-a-service, including video conferencing in competition with Zoom and Microsoft Teams.
Huawei was the second largest provider of cloud services in China last year, with a market share estimated at 22% versus 34% for Alibaba and 18% for Tencent, according the market research organizations and industry sources. Worldwide, Huawei ranked fifth, with a market share of about 5%.
Digital power: Sales were up 24.4% to account for 8% of the total in 2024. Products include inverters, battery storage, AI efficiency optimization and power grid integration for solar energy; data center power supplies and cooling systems; electric vehicle charging systems and motor/powertrain design; mobile telecom base station power supplies; lithium-ion batteries for telecom, renewable energy and microgrids; cloud-computing energy management systems.
For remote and severe environments, Huawei makes prefabricated modular data centers housed in dust-, water-, extreme temperature- and shock-proof metal containers the size of a shipping container. Dozens of these modular data centers have been deployed in Saudi Arabia.
Automotive solutions: Sales were up 5.7 times to 7.1% of the total in 2024. Products include systems and components for autonomous driving up to Level 4, including the Pangu AI model for urban and highway driving; a mobile data center computing platform; on-vehicle lidar, radar and cameras; integrated motor/inverters; and HarmonyOS for vehicles.
These are provided to several Chinese automakers. Market research organizations and industry sources estimate Huawei’s share of China’s autonomous vehicle technology market at 25%-30%.
Other products: Sales were up 70.0% to 5.8% of the total in 2024. Medical devices, industrial sensors, 5G modems for use with robots and drones, augmented reality glasses and displays, and other products that do not fit conveniently into other segments.
Since 2021, Huawei’s R&D budget has amounted to more than 20% of its sales, up from 15%-16% in the previous two years.
The figure for 2024 as a whole was 20.8%, but in Q4 it jumped to 25% as the company spent heavily on advanced semiconductor technology, the HarmonyOS NEXT mobile operating system, 6G and quantum computing.
In addition, it recorded expenses related to the replacement of imported components with Chinese alternatives and the cancellation of contracts in Europe due to sanctions, wrote down 4G inventory, and cut prices to compete with Apple, Alibaba and Tencent.
As a result, net profit dropped to zero in the fourth quarter of the year. Nevertheless, full-year results were in line with management’s expectations and the financial decks were cleared for what is looking like a difficult 2025.
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