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Huawei Plans 5G Smartphone Comeback by Year-End, Research Firms Say

Updated: Jan 5

Research firms reveal Huawei's strategy to re-enter the 5G smartphone market, leveraging domestic chip procurement and partnerships with Semiconductor Manufacturing International Co (SMIC).

Credits: Reuters

China's Huawei Technologies aims to make a triumphant return to the 5G smartphone industry later this year, despite the setback caused by the U.S. ban on equipment sales that severely impacted its consumer electronics business, according to industry experts.

As per three anonymous technology research firms specialising in China's smartphone sector, Huawei is expected to tap into its own semiconductor design tools and collaborate with SMIC for chipmaking, enabling the company to secure 5G chips domestically. These firms, which also include Huawei suppliers as their sources, shared their insights with Reuters under confidentiality agreements.

While Huawei declined to comment, SMIC did not respond to the request for comment.

After nearly three years of struggling in "survival" mode, a return to the 5G smartphone market would signify a significant achievement for Huawei. In 2020, the company's consumer business revenue reached its peak at 483 billion yuan ($67 billion) but plummeted by nearly 50% the following year.

Once a fierce competitor to Apple and Samsung as one of the world's leading handset makers, Huawei's access to chipmaking tools crucial for producing advanced models was curtailed by multiple rounds of U.S. restrictions starting in 2019. These restrictions were a result of security concerns raised by the U.S. and European governments, allegations which Huawei has consistently denied. Consequently, Huawei could only sell limited quantities of 5G models that relied on stockpiled chips.

The restrictions forced Huawei to rely on selling outdated 4G handsets, causing its global rankings to drop significantly last year. However, the company managed to regain a 10% market share in China during the first quarter of this year, as reported by consultancy firm Canalys.

5G Forecasts:

Research firms suggest that Huawei may employ SMIC's N+1 manufacturing process for 5G smartphones. However, due to a forecasted yield rate of usable chips below 50%, shipments are expected to be limited to 2-4 million units, according to one firm. Another firm estimates that shipments could reach 10 million units but did not provide further details.

In 2019, Huawei shipped 240.6 million smartphones globally, but the sale of its Honor unit, which accounted for nearly 20% of shipments that year, marked a significant change. Nonetheless, this month, China Securities Journal reported that Huawei raised its mobile shipment target for 2023 to 40 million units from the initial 30 million, without specifically mentioning a return to 5G devices.

Credits: REUTERS

The research firms assert that Huawei may introduce 5G versions of flagship models like the iPhone rival P60 this year, with further launches likely in early 2024. These predictions are based on information received from their contacts in Huawei's supply chain and recent company announcements.

Nevertheless, Huawei's appeal outside of China is limited due to the U.S. restrictions that cut off its access to Google's Android operating system and essential developer services for most Android apps.

Chip Design Tools:

In March, Huawei announced breakthroughs in electronic design automation (EDA) tools for chips manufactured at and above 14 nanometers (nm). EDA software is utilised by chip design companies to create chip blueprints before mass production.

The research firms, citing their own industry sources, believe that Huawei's EDA software, combined with SMIC's N+1 manufacturing process, could produce chips equivalent to 7 nm, the powerful semiconductors commonly found in 5G smartphones.

Although Washington banned SMIC from acquiring the critical EUV machine from Dutch firm ASML for making 7 nm chips, there are indications that SMIC has managed to produce 7 nm chips by modifying simpler DUV machines. These machines can still be purchased freely from ASML.

According to the second research firm, Huawei has requested SMIC to produce chip components below 14 nm this year specifically for 5G products.

Doug Fuller, a chip researcher at the Copenhagen Business School, highlights that the projected yield rate of less than 50% for 5G chips may lead to higher costs. He suggests that Huawei may choose to bear the cost but expresses doubts about the chips being price competitive.

  • Huawei plans to re-enter the 5G smartphone market by the end of this year, leveraging domestic chip procurement and partnering with SMIC.

  • After suffering a decline in consumer business revenue, Huawei aims to regain its position in the global market.

  • Restrictions on chipmaking tools forced Huawei to sell last-generation 4G handsets, resulting in a drop in rankings.

Source: Reuters

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