At the height of its success, Huawei was the fastest-growing smartphone company in the world. It competed with global giants like Samsung, surpassed Apple in market share, and was forecasted to become the world’s largest smartphone company.
However, their success became an almost overnight disaster after the U.S. restricted all U.S.-based companies from doing business with the Chinese tech giant in 2019. As a result, the company’s revenue fell sharply, and there was fear of Huawei’s survival.
Fast forward to 2024, Huawei has emerged as China’s biggest phone company and the world’s largest 5G technology supplier. The company has seen many ups and downs during these years, and now they are being hailed as one of the most resilient tech companies in the world.
The U.S. sanction
The U.S. placed Huawei on the Entity List in 2019, barring U.S.-based companies from supplying critical components and software, cutting off access to essential technologies. The aim was to dissuade allies from collaborating with Huawei on 5G infrastructure, citing national security concerns.
Losing access to Google’s Android ecosystem was particularly damaging. Huawei’s smartphone sales plummeted globally because it could no longer offer the complete Android experience that global customers expected.
Although the sanctions were reportedly imposed on the allegations of breach of user data security, many allege the actual motive was to thwart Huawei’s breakthrough in 5G technology, as U.S. technology was at least five years behind Huawei’s. This meant that the U.S. would lose a potential 500 billion dollar market to one company, something the superpower could not afford to live with.
The impact was immediate. Huawei’s consumer business revenue—its smartphone division—declined significantly. By 2021, its total revenue fell to CNY 636.8 billion, with a drastic 49.6% drop in consumer business sales compared to the previous year. In just two years, Huawei went from being poised to become the world’s largest smartphone manufacturer to facing serious questions about its survival prospects.
Strategic response
Huawei diversified its product line, boosted research and development, developed a proprietary operating system, expanded into new business domains, and strengthened domestic supply chains.
Huawei expanded its product lineup beyond smartphones. The company introduced PCs, tablets, wearables, and smart home devices to capture new consumer electronics markets, helping the company fill the revenue void left by declining smartphone sales.
Products like the MateBook laptop, Watch series, and other smart home products allowed Huawei to leverage its technological capabilities in areas less affected by U.S. sanctions. They aimed to create its own ecosystem, like Apple, where users would find 360-degree tech solutions from one company.
Huawei responded to the U.S. technology ban by doubling down on R&D. The company knew that developing its own solution was the only way out. Huawei’s R&D budget to revenue ratio was already higher than that of Apple and Samsung before the sanctions, but after 2019, it increased its focus on R&D even more. In 2023, Huawei allocated 25% of its revenue to R&D—an unprecedented commitment by industry standards.
This allowed the company to fast-track its proprietary technologies, particularly semiconductor design, artificial intelligence, and telecommunications. The company wanted to reduce its reliance on foreign suppliers and insulate itself from further geopolitical risks.
Development of HarmonyOS
One of Huawei’s landmark moves was creating its operating system, HarmonyOS, as an alternative to Google’s Android. Initially developed for smart TVs and IoT devices, HarmonyOS was later adapted for smartphones, tablets, and wearables.
This allowed Huawei to build an independent ecosystem. While HarmonyOS had a limited impact outside of China, it helped the company maintain a foothold in the domestic smartphone market. Huawei recently announced a completely revamped HarmonyOS, which is expected to incentivize app developers to bring more apps into the Huawei ecosystem.
More diversification
Anticipating that it could no longer rely on consumer electronics as its primary revenue source, Huawei pivoted to emerging tech sectors. The company ventured into cloud computing, digital power, and intelligent automotive solutions. Huawei’s cloud division saw impressive growth, with revenue increasing by approximately 22% to CNY 55.3 billion in 2023.
Meanwhile, the digital power business grew by 3.5%, contributing to a more diversified revenue stream. Huawei now provides comprehensive digital solutions in medical care, mining, shipping, and various other businesses in different countries.
Huawei also sought to develop a self-sufficient supply chain. It partnered with local companies, particularly in semiconductor manufacturing. Collaboration with China’s Semiconductor Manufacturing International Corporation (SMIC) allowed Huawei to produce a domestically designed 7nm chip featured in the Mate 60 Pro.
Huawei’s design is still 4-5 years behind the most advanced chip tech available, but this also means that Huawei is now a completely vertically integrated company, where they have their self-designed chip, operating system, and app store, much like Apple. The main challenge for Huawei now is to produce chips on a mass scale.
Automotive and 5G technology
In the automotive field, Huawei’s intelligent automotive solutions unit began large-scale deliveries, positioning itself as a serious player in the electric vehicle (EV) component market. Companies like Mercedes and BMW partnered with Huawei to provide software support for their EVs in the Chinese market, as China has strict restrictions on using Android-based apps.
Huawei’s investment in cloud computing also paid off, as enterprises and government entities increasingly adopted its cloud services for digital transformation projects.
Today, Huawei’s resurgence challenges its Western counterparts, particularly in 5G and digital infrastructure, where the company continues to lead in global market share. Even in the West, such as in the UK, Huawei signed a 1.2 billion dollar agreement to provide the country with its latest 5G technology. Many countries are willing to license Huawei’s 5G tech as a cost-effective measure to avail of cutting-edge technology.
As of 2024, Huawei’s financial performance has rebounded remarkably. The company reported a 34.3% year-on-year revenue increase in the first half of 2024, reaching CNY 417.5 billion. Smartphone shipments in China grew by 55%, and the automotive business generated more revenue in the first half of 2024 than in the previous two years combined. Huawei’s net profit margin stood at 13.2%.
Huawei’s turnaround is a story to tell. Countries that aspire to become self-reliant while navigating geopolitical waters carefully can get inspiration from this tech giant.
Fardeen Kabir is currently working on a diplomatic mission. He previously worked at the Center for Policy Dialogue (CPD), a Bangladeshi think tank, and the European Union in Bangladesh.
