Huawei’s Profit Doubles With Made-in-China Chip Breakthrough

[onebyone]

Bloomberg News
Fri, October 27, 2023 at 3:50 PM GMT+7·3 min read

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Huawei’s Profit Doubles With Made-in-China Chip Breakthrough​

(Bloomberg) -- Huawei Technologies Co.’s profit more than doubled during the quarter it revealed its biggest achievement in chip technology, adding to signs the Chinese tech leader is steadying a business rocked by US sanctions.

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The Shenzhen company reported a 118% surge in net profit to 26.4 billion yuan ($3.6 billion) in the September quarter, and a slight rise in sales to 145.7 billion yuan, according to Bloomberg News calculations from nine-month results released Friday. Those numbers included initial sales of the vastly popular Mate 60 Pro, which began shipping in late August.

Huawei, written off as a top smartphone player after the US cut it off from overseas suppliers in 2019, is mounting a comeback. It electrified the chip industry by unveiling the Mate 60 Pro housing a 7nm processor made by Semiconductor Manufacturing International Corp. That surprise revelation triggered celebration across China and accusations in the US that a campaign to contain the country’s technological ascent had failed.

The gadget sold out almost instantly, spurring expectations it could rejuvenate Huawei’s fortunes and potentially cut into Apple Inc.’s lead in China, given signs of a disappointing debut for the iPhone 15. Analysts including Haitong International Securities’s Jeff Pu have estimated Huawei could build as many as 70 million smartphones using its own Kirin chips in 2024 — not insignificant compared to the roughly 220 million iPhones that Apple ships annually.

The US won’t be able to stop Huawei and SMIC from making progress in chip technology, Burn J. Lin, a former Taiwan Semiconductor Manufacturing Co. vice president, told Bloomberg News. SMIC should be able to advance to the next generation at 5 nanometers with machines from ASML Holding NV that it already operates, said Lin, who at TSMC championed the lithography technology that transformed chipmaking.

In the run-up to the Mate 60 Pro’s debut, Huawei shored up its margins through a series of cost-cutting efforts. It also booked one-off gains from sales of the Honor smartphone business and a server unit in 2020 and 2021, it has said.

“We continue to optimize our management systems, improve the efficiency and quality of our operations, and refine our sales strategy and product mix,” Huawei said in a statement. “These actions have had a very positive impact on our profit margin.”

A resurgent Huawei would pose problems not just for Apple but also local brands from Xiaomi Corp. to Oppo and Vivo, all of which are fighting for sales in a shrinking market. Chinese smartphone shipments fell 6.3% in the third quarter led by local vendors, according to research firm IDC.

But the market could be bottoming out.

“The Chinese market is expected to see its first year-on-year growth in the fourth quarter after more than two years, mainly driven by more intense competition and a low comparison base,” said IDC analyst Will Wong.

(Updates with industry expert’s comment in the fifth paragraph)

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Huawei’s Profit Doubles With Made-in-China Chip Breakthrough

(Bloomberg) -- Huawei Technologies Co.’s profit more than doubled during the quarter it revealed its biggest achievement in chip technology, adding to signs the Chinese tech leader is steadying a business rocked by US sanctions. Most Read from BloombergHouse Speaker Mike Johnson’s First Big Bill...

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[Nan Yang]

If Huawei continue to refuse to collapse, United States will now have no choice but to bomb Huawei.

 

[lightning F57]

That didnt take long, there seems to be a decent amount of resilience by the chinese chip making industry. After 7nm chip maybe 4mn next.

 

[StraightEdge]

1 thing to consider is during 2020/21, many of their revenue/profit were from sales of Honor and their server division. In 2023, the revenue and profit is coming all from their operations. Mate 60 sales started late in Q3. It will reflect more in Q4.

Analysts including Haitong International Securities’s Jeff Pu have estimated Huawei could build as many as 70 million smartphones using its own Kirin chips in 2024

SMIC should be able to advance to the next generation at 5 nanometers with machines from ASML Holding NV that it already operates

Next couple of years could be very interesting.

 

[S10]

That didnt take long, there seems to be a decent amount of resilience by the chinese chip making industry. After 7nm chip maybe 4mn next.

That is way too optimistic. SMIC was able to produce 7nm chips using repeated exposure technique on DUV machines purchased from ASML. It will need EUV for further die shrink. China's own domestic lithography can only get to 28nm at this moment, and that's still experimental.

5nm is at least 10 years away for China.

 

[jhungary]

This is a over simplified count....and it is not really a good news for Huawei

Using OP's own graph,

The "doubling" is due to all time low reporting on Q1 2023, if you look at pre-sanction Revenue, it's north of 250 billion yuan and now it's roughly 200 billion with even a doubled growth. which mean Huawei would need to be doing better than double in the simplest term to have a chance to go back to pre-sanction level revenue, which considering this is probably a very hard feat to grow more than 100% revenue for any non-startup company, Huawei will probably never going back to pre-sanction level of revenue.

It's not undoable, just very, very hard to growth more than 100% if a company is already established

and finally, Revenue is not exactly Profit.

 

[ChineseTiger1986]

That is way too optimistic. SMIC was able to produce 7nm chips using repeated exposure technique on DUV machines purchased from ASML. It will need EUV for further die shrink. China's own domestic lithography can only get to 28nm at this moment, and that's still experimental.

5nm is at least 10 years away for China.

The 28nm DUV was experimental on January 2023, but it will be ready to mass produce by the end of 2023.

And China has already successfully built the ultraviolet source for the EUV in this year, so the EUV should be ready between 2025-2027.

 

[beijingwalker]

Huawei’s Profit Doubles With Made-in-China Chip Breakthrough​

Bloomberg News, Bloomberg News

Source: Huawei and Bloomberg calculations

(Bloomberg) -- Huawei Technologies Co.’s profit more than doubled during the quarter it revealed its biggest achievement in chip technology, adding to signs the Chinese tech leader is steadying a business rocked by US sanctions.

The Shenzhen company reported a 118% surge in net profit to 26.4 billion yuan ($3.6 billion) in the September quarter, and a slight rise in sales to 145.7 billion yuan, according to Bloomberg News calculations from nine-month results released Friday. Those numbers included initial sales of the vastly popular Mate 60 Pro, which began shipping in late August.

Huawei, written off as a top smartphone player after the US cut it off from overseas suppliers in 2019, is mounting a comeback. It electrified the chip industry by unveiling the Mate 60 Pro housing a 7nm processor made by Semiconductor Manufacturing International Corp. That surprise revelation triggered celebration across China and accusations in the US that a campaign to contain the country’s technological ascent had failed.

The gadget sold out almost instantly, spurring expectations it could rejuvenate Huawei’s fortunes and potentially cut into Apple Inc.’s lead in China, given signs of a disappointing debut for the iPhone 15. Analysts including Haitong International Securities’s Jeff Pu have estimated Huawei could build as many as 70 million smartphones using its own Kirin chips in 2024 — not insignificant compared to the roughly 220 million iPhones that Apple ships annually.

The US won’t be able to stop Huawei and SMIC from making progress in chip technology, Burn J. Lin, a former Taiwan Semiconductor Manufacturing Co. vice president, told Bloomberg News. SMIC should be able to advance to the next generation at 5 nanometers with machines from ASML Holding NV that it already operates, said Lin, who at TSMC championed the lithography technology that transformed chipmaking.

In the run-up to the Mate 60 Pro’s debut, Huawei shored up its margins through a series of cost-cutting efforts. It also booked one-off gains from sales of the Honor smartphone business and a server unit in 2020 and 2021, it has said.

“We continue to optimize our management systems, improve the efficiency and quality of our operations, and refine our sales strategy and product mix,” Huawei said in a statement. “These actions have had a very positive impact on our profit margin.”

A resurgent Huawei would pose problems not just for Apple but also local brands from Xiaomi Corp. to Oppo and Vivo, all of which are fighting for sales in a shrinking market. Chinese smartphone shipments fell 6.3% in the third quarter led by local vendors, according to research firm IDC.

But the market could be bottoming out.

“The Chinese market is expected to see its first year-on-year growth in the fourth quarter after more than two years, mainly driven by more intense competition and a low comparison base,” said IDC analyst Will Wong.

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[Nan Yang]

This is a over simplified count....and it is not really a good news for Huawei

Using OP's own graph,

View attachment 965848

The "doubling" is due to all time low reporting on Q1 2023, if you look at pre-sanction Revenue, it's north of 250 billion yuan and now it's roughly 200 billion with even a doubled growth. which mean Huawei would need to be doing better than double in the simplest term to have a chance to go back to pre-sanction level revenue, which considering this is probably a very hard feat to grow more than 100% revenue for any non-startup company, Huawei will probably never going back to pre-sanction level of revenue.

It's not undoable, just very, very hard to growth more than 100% if a company is already established

and finally, Revenue is not exactly Profit.

Well ..Huawei did spin off Honour so the drop in revenue.

 

[jhungary]

Well ..Huawei did spin off Honour so the drop in revenue.

Revenue is not calculated that way.

It wouldn't matter if Huawei sold off or separate Honour series. Since it counted average sales prices with the number sold. It look at the operation as a whole, not just individual line. In fact, some may think this Huawei spinning them off is good for their revenue as they also seperated associated cost with that line of product.

On the other hand, profit is what you get from sales - cost. Again, you can move the figure both way (both on sales and cost) to off set the balance, which mean that value are more pronged to be manipulated.

 

[Nan Yang]

Kyle Chua
Jan 312 min

Honor Records Growth Amid Decade-Low China Smartphone Shipments in 2022​

Only one major smartphone brand managed to record growth amid China's historically low shipments in 2022 – Honor.​

Credit: TechSpot
According to the International Data Corporation (IDC), the former Huawei Technologies Co. sub-brand saw shipments grow 34.4% year-over-year in 2022, while competitors like Vivo and Oppo both slumped by more than 25%. The IDC attributes Honor's growth to a low comparison base year and its aggressive product portfolio development.

Apple and Xiaomi, which round out the top five smartphone brands in China, were similarly down in 2022 compared to the year prior. However, Apple did manage to maintain a seasonal quarter-on-quarter growth, with the iPhone assembly facility in Zhengzhou returning to normal production operations and a boost in sales during the Singles’ Day online shopping festival.

Huawei sold Honor to a state-backed consortium in 2020 in a bid to keep part of its smartphone unit alive as the U.S. levelled sanctions against it. The spinoff brand last year tried to secure expansion capital ahead of a potential initial public offering.

China shipped 285.8 million smartphones in 2022, the first time shipments fell below 300 million in a decade. The number is down 13.2% compared to last year.

“The historically low shipments raise an alarm bell for smartphone vendors to rethink how to build a more sustainable business model and a more targeted marketing strategy,” said Will Wong, Senior Research Manager for Client Devices at IDC Asia.

Credit: Reuters
The IDC said the strict quarantine measures which kept consumers out of the streets and the slowing economy were among the primary factors that led to the slump in smartphone shipments. But with the country now relaxing restrictions, the market has a chance to bounce back, though the IDC believes it would take some time, with the majority of consumers prioritising spending on leisure and services over consumer electronics.

The relatively low smartphone shipments in 2022 have also hit major chipmakers like Samsung. The chip downturn has reportedly started eating away at the South Korean tech giant's profits. But instead of slowing down, it's keeping capital spending at the same level as last year at about US$39 billion, as Bloomberg reported.

The move would put more pressure on its smaller rivals who have decided to cut back spending in 2023 at the expense of profitability. As to how it'll play out for Samsung remains to be seen. The company does expect the chip market to recover within the second half of the year, though it doesn't expect the same for the smartphone market.

---

• Only one major smartphone brand managed to record growth amid China's historically low shipments in 2022 – Honor.
• The former Huawei Technologies Co. sub-brand saw shipments grow 34.4% year-over-year in 2022, while competitors like Vivo and Oppo both slumped by more than 25%.
• China shipped 285.8 million smartphones in 2022, the first time shipments fell below 300 million in a decade.
• The strict quarantine measures which kept consumers out of the streets and the slowing economy were among the primary factors that led to the slump in smartphone shipments.

Huawei spin off must be generating billions in revenue.

 

[StraightEdge]

Huawei is not publicly traded, otherwise the recent news would have made it's shares go boom

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