Huawei reported a net profit of 37.1 billion yuan (US$5.1 billion) for the first half of 2025, down 32% year-on-year, but recovering from a loss in Q4 2024.

Revenue for the January to June period rose 3.9% to 427 billion yuan (US$59.6 billion).

The company’s Ascend AI chips gained momentum as US export curbs limited Chinese access to Nvidia’s advanced chips.

Huawei became China’s top smartphone vendor last quarter with 12.5 million shipments, its first lead in over four years.

The company has also restructured its cloud business to prioritize AI and computing, and expanded its smart driving technology, reporting 10,000 pre-orders for its Maextro S800 sedan with Anhui Jianghuai Automobile Group.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Export restrictions created captive market demand for domestic alternatives

Huawei’s return to profitability demonstrates how geopolitical tensions can inadvertently accelerate domestic innovation and market capture.

The company’s Ascend chips became China’s “national standard” due to Washington banning exports of Nvidia’s most advanced chips to China, while Beijing simultaneously encouraged local companies to reduce reliance on Nvidia products1.

This created a market environment that favored domestic alternatives. Chinese AI developers like Alibaba adopted Huawei’s technology when building new models following DeepSeek’s breakthrough.

The result was immediate revenue impact for Huawei, with the company benefiting from increased demand that directly contributed to reversing its fourth-quarter losses.

This example shows how export controls, intended to limit technological advancement, can sometimes create domestic markets that support local competitors’ growth and market share.

2️⃣ Massive R&D spending can overcome manufacturing process disadvantages

Huawei’s competitive positioning illustrates how companies can close technological gaps through significant investment, even when facing manufacturing limitations.

Despite using a less advanced 7nm manufacturing process compared to Nvidia’s H100 chips built on 4N technology, Huawei has reportedly invested heavily in R&D, with some reports suggesting three times Nvidia’s budget to develop competing products23.