Huawei Technologies, a Chinese company, announced a 36% decline in first-half net profit on Monday due to higher R&D expenditures and skyrocketing input costs outpacing revenue growth.

While revenue increased 9.6% to 467.82 billion yuan as it continued to recover from U.S. sanctions, the Shenzhen-based software and telecom behemoth reported that net profit for January to June plummeted to 23.81 billion yuan ($3.54 billion), accelerating from a 32% decline in the same period a year earlier.

The findings highlight the expense of Huawei’s efforts to increase its AI computing and chip capabilities and lessen its need on foreign technology following years of export restrictions from the United States. Profitability at its consumer business sector, which includes smartphones, has also been impacted by rising memory chip prices.

Huawei reported that as it increased investment in AI, communications technologies, smart devices, and intelligent automotive solutions, research and development spending increased 25.2% to 121.38 billion yuan, or 25.9% of revenue.

The company’s manufacturing costs surged by 12.4%, outpacing the growth in revenue, and its administrative expenses also increased significantly.

Due to increased input prices and external uncertainty, the business noted that while its first-half results were in line with its projections, its full-year outlook was still under review.

A breakdown of sales by business segment was not provided by Huawei, a company that manufactures smartphones, AI processors, and telecom equipment. It reported that in the first half of the year, all of its businesses saw an increase in revenue.

Since U.S. sanctions and export restrictions limited its access to cutting-edge semiconductors and Google’s Android operating system, which contributed to a 29% decline in yearly revenue in 2021, the company has had a robust revenue rebound.