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Huawei’s newest Mate 60 phone lineup– A historical moment?

Huawei's Mate 60 Pro lineup

The Chengdu J-20, China’s fifth-generation stealth air superiority fighter jet, had its first test flight on January 11, 2011, during a visit by the former US Defense Secretary Robert Gates. On August 29, 2023, history seemed to repeat itself as the Chinese tech giant Huawei announced the Mate 60 and Mate 60 Pro models – the newest line of its flagship phones during Secretary of Commerce Gina Raimondo’s visit to China for chip negotiations. The Mate 60 is the first-ever Huawei phone running on a Chinese-made chip – signifying that Huawei has conquered and survived the US sanctions in creating its own 5G capable, 8nm chip. Like the fighter jets, the Mate series’ sudden announcement is China’s show of muscle for advancements in the chip war.

Huawei’s Ups and Downs

The John S. McCain National Defense Authorization Act for Fiscal Year 2019 limits Huawei’s capabilities for services, equipment, or outreach to Western countries. Huawei can no longer work with companies such as Qualcomm, Google, and Intel, among many others. On the hardware end, semiconductor manufacturers can no longer provide chips to Huawei without the government’s registration. Furthermore, according to the Economist, various countries followed suit in banning Huawei’s telecom equipment, which had a leading 27% share globally back in 2019. Huawei’s relationship with Google and various other companies has made the brand uncompetitive and inconvenient to the Western consumer – as it lacks the essential functions and needs of a smartphone, such as Google services.

Such direct attacks from the world’s strongest country would prove devastating to any company. But as demonstrated by the launch of the Mate series, Huawei managed to hold on. In the editor’s opinion, Huawei’s survival is attributed to two main reasons: the changed business model and the company’s long history of research & innovation (R&D) emphasis.

The US sanctions, in combination with the arrest and extradition of Meng Wanzhou, the chief financial officer of Huawei and daughter of Huawei’s CEO, have sparked public outrage in mainland China. The US’s actions were seen as “bullying” and “hypocritical.” Huawei gained a great deal of publicity in China (and arguably globally) as the Chinese continued to purchase Huawei despite its decreased performance against competitors. Many Chinese believe their insistence is the key reason for Huawei’s survival. However, the true reason is its changing business model. Huawei has successfully reformed its business terms by decreasing its reliance on the smartphone industry rather than increasing revenue from overseas networking and the accessories market– growing by 50 and 30 percent, respectively. Huawei maintained a constant year-on-year growth despite sanctions and the pandemic. In 2021, Huawei lowered its debt ratio to 4.5 percent, a 57.8% decrease, allowing it to gain financial stability and thus further emphasis on research and development.

R&D seems to be a core component of Huawei’s ethics. Huawei has some 100,000 R&D employees, accounting for half the company’s workforce. By spending, Huawei is the fifth-largest R&D investor, only outrivaled by the trillion-dollar tech giants. Huawei’s R&D expenditure saw a 30% increase from 2018 to 2019 – drastically more than the 10-15% increase of previous years. As mentioned by Mr. Guo Ping, the Chairman of the Supervisory Board of Huawei during the 2021 announcement: “Huawei will continue to increase investments for research, experts, and a mindset of innovation, vowing to restructure the fundamentals of our technology in achieving breakthroughs.”

What doesn’t kill me makes me stronger.

In the short run, the sanctions successfully hindered Huawei’s place in the phone industry, virtually removing Huawei from Western markets. However, in the long run, Huawei’s phone arguably offered Huawei a chance for structural reform in decreasing the resilience of Western suppliers. Along with its individual 8-nanometer chip developments, a new generation of its own independent operating system, Harmony OS 4, was announced alongside the lineup. In other words, Huawei is now completely capable of continuous production and development regardless of US offenses.

The US’s inability to hinder Huawei’s footsteps could only mean Huawei’s return to its throne as the leading domestic phone brand in the Chinese market. On Chinese social media, there is an ever-growing surge of nationalism – netizens who associate “being Chinese” and “using Huawei,” if not other domestic brands. Any content praising Apple will be bombastic with such comments from the extreme nationalists. For Huawei – a brand that literally means “China is capable” (中華有為), it is an auspicious sign.

Huawei’s biggest rival, Apple, announced its iPhone 15 lineup two days ago. Unlike the craze for iPhones a decade ago, the hype for iPhones seems long gone. No longer are people lining up for hours to purchase an iPhone. The iPhone also receives fewer upgrades – using the same camera processor as last year’s unit. Huawei’s new launch, on the contrary, received wide public attention. The new Mate series is often out of stock.

On Chinese social media apps, Huawei’s new rise has been associated with a line from Li Bai’s poetry, which can be roughly translated as “amidst a myriad of mountain veils, a feather-light skiff has sailed” (輕舟已過萬重山). Indeed, Huawei’s downfall may have momentarily hindered its developments, but its breakthroughs allowed it to gain greater independence as a company and thus no longer challenged its supply source.

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