Huawei's Smartphone Pivot Exposes China's Chip Gamble
Huawei is betting big on smartphones with homegrown chips as its EV business stalls. The move reveals how China is closing the semiconductor gap — and why it matters globally.
The Pivot That Wasn’t Announced
Huawei didn’t need to hold a press conference to signal what was happening. The company simply launched the Mate 90 series on October 1st — China’s National Day — featuring its own LogicFolding chip, and went quiet on the electric vehicle front.
The contrast is stark. Huawei’s EV business, built through partnerships with carmakers like Seres and Chery, posted deliveries of just under 37,500 units in September. That marks a third consecutive monthly decline, down 29 percent from a year earlier. Meanwhile, the smartphone maker ramped up a product launch wrapped in patriotic timing, complete with promises about chip sovereignty and overseas expansion.
This is not a retreat. It is a recalibration of where Huawei believes it can win — and where it still needs to conquer.
The Numbers Behind the Shift
Richard Yu, Huawei’s executive director, told foreign reporters — his first appearance before international press since 2019, the year U.S. sanctions cut Huawei off from Google’s Android and TSMC’s chips — that the company shipped more than 240 million smartphones before the restrictions hit. The goal that year was 300 million. Today, Huawei sells only a few million phones outside China annually.
Consumer business revenue tells part of the story. After crashing to roughly $34 billion in 2021 from the shock of sanctions, it rebounded to an estimated $51 billion in 2025, representing 39 percent of Huawei’s total revenue. But the company is now choosing to double down on that segment even as China’s overall smartphone market contracts with double-digit year-on-year declines in August and September, according to Counterpoint Research.
On the automotive side, the situation deteriorated faster than most expected. China’s auto market is on track for its worst year since 2021, with sales down more than 20 percent across the first three quarters. New energy vehicles — the category where Huawei competes — fell 13 percent over the same period. BYD, the market leader, sold well above 400,000 units per month. Leapmotor maintained rapid growth, topping 100,000 monthly since July. Huawei’s HIMA alliance delivered less than a tenth of BYD’s volume in a single month.
Seres, Huawei’s key automotive partner, saw its Shanghai-listed shares drop more than 60 percent this year. The two companies signed a five-year renewal on October 1st, but the math is unforgiving.
What LogicFolding Actually Means
The term “LogicFolding” appeared in Huawei’s launch materials without technical elaboration. Independent analysis of the chip has yet to emerge in detail. What is clear is that the Mate 90 series represents Huawei’s most advanced domestically produced smartphone to date, built without access to the most advanced U.S.-made components that fueled earlier Huawei flagships.
The deeper implication comes from Yu’s remarks about HarmonyOS expanding overseas within one to three years, and the hope that China’s chip manufacturing capacity will eventually enable global sales of devices powered by self-developed chips. That second point is the one Western analysts are underweighting.
Reports of China-made EUV lithography tools have circulated in Chinese technical journals and state media for months. Whether those claims reflect production-ready equipment or early-stage prototypes is unresolved. But the direction is unmistakable: Huawei is investing in the full stack, from operating system to silicon to manufacturing tooling, because the alternative — dependence on foreign supply chains — proved existential in 2019.
Who Wins, Who Loses
In China’s smartphone market, Huawei gains shelf space and narrative dominance. Consumers who wanted a premium phone without relying on Google services now have a viable option. For Apple and Samsung, Huawei’s domestic comeback means fighting for market share against a competitor that no longer needs their components.
Globally, the stakes are different. Huawei’s overseas smartphone presence remains marginal. But if HarmonyOS launches internationally and pairs with domestic chips, it creates a parallel ecosystem — one that does not require Google Mobile Services, does not run on ARM-derived architectures designed by British firms, and does not depend on TSMC’s foundry capacity. That ecosystem would serve countries and companies looking to diversify away from U.S.-aligned technology supply chains.
The EV business is where Huawei loses most directly. The partnerships are real — HIMA’s five vehicle lines span Chery, Seres and others — but the volume gap is enormous. BYD sells more cars in a week than Huawei’s automotive alliance does in a month. Huawei’s model of providing software and driver-assist systems without manufacturing the vehicles themselves limits its control over pricing, scale and margin.
What Happens Next
The most important timeline to watch is the next 18 to 24 months. If Huawei’s HarmonyOS expansion reaches meaningful overseas markets and the company can pair it with domestically produced chips at scale, the implications extend far beyond smartphone shipments. It would represent the first credible alternative to the Android-iOS duopoly backed by a hardware ecosystem that does not rely on Western semiconductor infrastructure.
If the LogicFolding chip remains a domestic proposition and HarmonyOS stays China-bound, Huawei’s consumer business stabilizes around a smaller but profitable base — still significant, but contained.
The EUV question hangs over everything. Claims of China-made extreme ultraviolet lithography tools, if validated, would compress the timeline for semiconductor independence by years. If they do not hold up, Huawei and its partners remain constrained to mature-node manufacturing for the foreseeable future, which limits what LogicFolding and future chips can achieve in performance per watt.
One thing is certain: Huawei chose October 1st to make its statement. The company that once dominated global smartphone sales is now playing a longer game — one measured in chip fabs, operating systems and supply chain sovereignty rather than quarterly shipment numbers.