(Yicai) Sept. 1 -- Huawei Technologies reported that its net profit tumbled 36 percent in the first half of this year from a year ago, a relative low for the Chinese tech giant in recent years, mainly due to record research and development investment and rising component costs.

Net profit was CNY23.8 billion (USD3.5 billion) in the six months ended June 30, the Shenzhen-based company said in an earnings report released on the Beijing Financial Assets Exchange website yesterday. Revenue rose 9.6 percent to CNY467.8 billion (USD69.6 billion).

Huawei’s R&D spending jumped 25 percent to CNY121.4 billion, the company noted. The figure was equal to around 26 percent of its income, up from around 22 percent in 2024 and 23 percent last year.

“Higher prices for components such as storage chips have weighed on profits, while the steep increase in R&D outlay has directly squeezed short‑term earnings,” a source close to Huawei told Yicai.

Huawei has designed and mass‑produced 381 chip models over the past six years under its technical roadmap, the company said. The Kirin 2026 chip, built on its LogicFolding architecture, will debut this fall, with high‑end chips built on the new approach expected to deliver transistor density on par with the 1.4‑nanometer process by 2031, it added.

Companies that deliver system design innovations stand a chance to outperform rivals that rely on pricier cutting-edge manufacturing processes, a senior semiconductor industry insider told Yicai. This opens new opportunities for firms with robust system‑integration capabilities, with a host of Chinese startups working on Chiplet designs and advanced packaging solutions, the person pointed out.

“Huawei’s technical approach pursues equivalent performance through innovations in architecture and algorithms without access to state‑of‑the‑art lithography machines, but this model cannot replace fundamental hardware technological breakthroughs,” a semiconductor industry observer said to Yicai. Chinese and foreign chip developers operate under vastly different conditions, with those overseas able to tap into cutting‑edge manufacturing capacity from Taiwan Semiconductor Manufacturing and Samsung Electronics, while domestic firms must secure parallel breakthroughs in software and hardware, the person noted.

China’s smartphone shipments fell 4.3 percent to about 66 million units in the second quarter of this year from a year earlier, according to data from global market intelligence and advisory firm International Data Corporation. However, Huawei’s handset shipments rose 19 percent, securing the top position in the Chinese market with a 23 percent share.

Editor: Martin Kadiev