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Huawei – Keep An Eye On This Chinese Tech Firm

Huawei, China’s waking tech giant

From a nation recognized by the West as no-name factories and ‘shanzhai’ copied devices, Huawei (Huawei Technologies Cos.) is ramping up activity and looking to build up its own brand in the consumer devices market, competing against companies such as Apple Inc.

Headquartered in Shenzhen, China, Huawei is China’s largest telecommunications equipment maker, and is a major equipment supplier to phone carriers across Asia, Europe, and Africa with $28 billion USD in sales in 2010, 70% of which was made abroad. Huawei’s beginnings started in 1987 by Ren Zhengfei, a former Chinese engineer for the People’s Liberation Army, who made a business selling imported phone switches after his engineering unit was split apart. In 1990, Huawei opened up its first research arm and began developing its own switching units and products targeted at rural Chinese telecom companies and continued to expand to other developing countries in Asia and Africa. Since then, Huawei has become a major supplier to top global carriers around the world, alongside suppliers such as Nokia Siemens Networks, Cisco, Ericsson AB, and Alcatel-Lucent SA.

 

Recent highlights of of Huawei’s growth

2005

  • Vodafone selected Huawei as their preferred telecoms equipment supplier
  • British Telecom appointed Huawei as their preferred supplier for its Network to provide network access components, and optical transmission equipment

2007

  • Huawei established partnerships with all major operators in Europe, such as: T-Mobile, Vodafone, O2, Orange

2009

  • Huawei deployed the nationwide 3G network in Canada for TELUS and Bell Canada
  • Huawei deployed the world’ s first LTE commercial network for TeliaSonera in Oslo Norway

Source: Huawei


Pushing the low-cost smartphone trend

Huawei hasn’t stopped there and is continuing to push the fold on developing their own products, investing billions on R&D, spending approximately 10% ($2.5 billion USD) of its sales revenue on R&D in 2010, and also has a total of 12 partnered joint-development research centers around the world, with firms such as Vodafone Group, Deutsche Telekom, NTT Docomo (Japan), and Etisalat (Egypt), along with research ventures with Microsoft and IBM.

With their move to adopt Google’s Android mobile OS platform on their mobile devices, Huawei has managed to jump onto the forefront of developing low-cost smartphones and devices. At CES 2011 in January, Huawei announced their high-end Ideos X5 smartphone with a retail price of $365.00, undercutting all Android devices of similar specifications by almost 20%, a perfect fit for the Chinese market where the minimum wage in China’s first-tier cities is around $189USD (1226RMB) per month. This trend of lower-cost smartphones is putting pressure on the entire smartphone marketing, and Apple, widely known for their ‘luxury’ high-end devices by Chinese consumers, is also rumored to be working on a cheaper version of the iPhone targeted at customers in developing countries.

Huawei Ideos X5: $365.00

Samsung Nexus S: $412.00

HTC Desire Z: $499.99

iPhone 4 16GB Unlocked: $649.00

Prices from CNET and Apple

 

International difficulties for Huawei– Trust and transparency

However, there are hurdles of trust and transparency to overcome as Huawei moves forward internationally in the consumer market. In 2003, Cisco sued Huawei over intellectual property infringement, claiming that Huawei had stolen portions of Cisco’s router and switch source code, along with Cisco’s command-line-interface and documentation materials. Cisco eventually dropped the lawsuit in exchange for Huawei’s promise to modify their product lineup. However, the incident has only deepened the Western perception that Huawei may just another company from China that disregards intellectual property rights.

In addition, Ren Zhengfei’s previous involvement with the Chinese People’s Liberation Army has red-flagged Huawei internationally, and the company’s lack of transparency is causing foreign governments to suspect possible remaining ties to the Chinese government. Time and time again, foreign governments have stepped in to block Huawei’s international merger and acquisitions of telecommunications companies on the basis of security concerns: 3Leaf systems (US) in 2010, 3COM Corp (US) in 2008, and Marconi (UK) in 2005.

Despite where Huawei has built itself up from as merely a telecommunications equipment supplier, the journey is long before their brand will be recognized as a major consumer devices manufacturer, and unless it is able to prove its independence from the Chinese government and play by international business standards which recognize intellectual property rights, the road will be road will be a rocky one.

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Duncan is the content manager of mobiSights. Follow Duncan Leung on Twitter: @leungd