In the second quarter of 2025, Huawei reclaimed the number one spot in China’s smartphone market, shipping more than 12 million units for an ~18% share. That milestone mattered not only because Huawei returned to leadership, but because of what it didn’t use: no Qualcomm or MediaTek chips, and no reliance on TSMC foundry.
Instead, Huawei’s Mate and Pura flagships now run on in-house HiSilicon Kirin processors, fabricated domestically by SMIC at 7 nm. Combined with the rise of HarmonyOS — which overtook iOS as China’s second-largest mobile OS — Huawei has delivered the first proof that a China-only smartphone technology stack is viable.
The significance goes beyond one company’s resurgence. Huawei is the leading indicator of a much broader structural shift.
The Direction of Travel: Beyond Huawei
Huawei has been positioning itself not just as a device maker, but as an enabler for the rest of China’s phone ecosystem:
HarmonyOS access: Huawei has opened HarmonyOS software to other Chinese OEMs, including for use outside of China. That sets the foundation for a domestic OS standard.
Licensing as a bridge: Huawei has signed 5G cross-licensing agreements with Xiaomi and with vivo. This removes legal friction for peer OEMs to adopt advanced modem and connectivity IP domestically.
HiSilicon’s next role: Already a merchant vendor in AI, selling its Ascend processors to Chinese cloud providers, HiSilicon could become a merchant supplier of smartphone SoCs — a strategic pivot more valuable to China than simply copying Apple’s vertically integrated model.
Xiaomi’s XRING 01 SoC: Xiaomi launched its own ARM-based 3 nm processor. While the first generation will be fabbed at TSMC, the design autonomy itself is a step toward domestic independence.
Government push: Beijing is expected to set domestic processor adoption targets, paired with subsidies, to accelerate migration away from foreign suppliers — a playbook already seen in EVs and renewable energy.
Together, these signals point to a future where Xiaomi, OPPO, and vivo follow Huawei’s lead, using Chinese SoCs, Chinese modems, and Chinese OS software for their domestic models.
Capacity, Yields, and Policy
The barrier until now has been simple: foundry capacity and yields. SMIC’s 7 nm “N+2” process powers Huawei’s Kirin chips but remains yield-constrained. Moving below 7 nm without EUV is a structural challenge.
That’s why Huawei is building new production lines in Shenzhen, and why China’s semiconductor policy is doubling down on capacity build-out. The strategy: solve yield and capacity first, then mandate domestic adoption.
At the same time, the U.S. has been driving sanctions as well as tightening and revoking export licenses. That hardens the incentive for Chinese OEMs to localize, reducing their exposure to policy shocks from Washington.
Strategic Implications
This reshapes how to think about China’s smartphone industry:
For Huawei: The company’s resurgence isn’t just a comeback; it’s the proof case for a fully localized supply chain — achieved under pressure from sanctions and backed by state support.
For HiSilicon: Becoming a domestic merchant SoC vendor may matter more for China’s strategy than Huawei emulating Apple. A shared silicon base across OEMs makes Chinese autonomy scalable.
For Xiaomi, OPPO, vivo: Expect domestic SKUs in the next cycle that rely on a mix of ARM compute subsystems, Huawei-licensed modems, and gradually improving Chinese foundry processes.
For investors: The risks to Qualcomm, Mediatek and TSMC extend beyond Huawei. As more OEMs localize, China’s addressable market for foreign silicon shrinks. Meanwhile, domestic RF component vendors, chip design houses, and OS platforms stand to gain.
Bottom Line
Huawei’s Q2’25 victory shows that China can ship top-selling premium smartphones without foreign silicon or foundry reliance. That outcome was no accident. Huawei got there first because it had the scale, government backing, and urgency created by U.S. sanctions to localize faster than peers.
With HarmonyOS expanding, Huawei’s 5G IP licensed to rivals, HiSilicon potentially positioned as a future merchant SoC vendor, and Xiaomi already driving its own processor, the trend line is unmistakable. China’s smartphone market is localizing its entire stack — and Huawei proved it first.