Huawei, with an eye on self-reliance, ploughs 25% of revenue into R&D at expense of profits

Huawei Technologies invested more than a quarter of its first-half revenue into research and development (R&D), putting long-term technological independence ahead of short-term earnings. The first-half profit for the Shenzhen-based giant fell 36 per cent to 23.8 billion yuan (US$3.4 billion) due to a surge in R&D costs, which jumped 25 per cent year-on-year to 121.4 billion yuan, accounting for over 25 per cent of total revenue.

Revenue for the period rose 9.55 per cent to 467.8 billion yuan, driven by strong smartphone shipments and growing demand for artificial intelligence processors. Despite the heavy spending on R&D, Huawei remains the dominant player in China's smartphone market, holding a 22.6 per cent share in the second quarter, with a 19.4 per cent jump in shipment volume.

The company warned that soaring component costs could force prices to rise across the board, as many Chinese brands, such as Oppo, Vivo, Xiaomi, and Honor, reported sharp declines in shipment volumes. Huawei's investment in domestic chip architectures, like its Ascend AI chips, aims to reduce reliance on US-supplied components amid trade curbs.

The company expects to capture nearly 80 per cent of China's AI server market this year, further challenging global rivals like Nvidia.