Huawei’s aggressive push pays off: Vendor: Now may be right time for big break in U.S.

In three to five years, a Chinese company could become the world leader in the mobile infrastructure market without a major presence in North America, according to a recent study by ABI Research.
However, Huawei Technologies Inc. is gearing up to tackle the U.S. market as it has increased its U.S. workforce from 200 to 500 employees in the past 18 months, said Charlie Martin, Huawei CTO of North America.
As Huawei attempts to break into the U.S. market, the company has seen considerable growth in Europe, the Middle East, Africa and China, the leading wireless market, said Nadine Manjaro, ABI Research senior analyst.
“They have made an aggressive push in a number of areas,” Manjaro said.
The 20-year-old company is emerging in a market that has been dominated by L.M. Ericsson, Nokia Siemens Networks and Alcatel-Lucent. As of the first quarter, Ericsson owns nearly 29% of the world’s cellular infrastructure market, followed by Nokia Siemens Networks at 23%, Alcatel-Lucent with 13%, and Huawei at 8%, according to ABI Research.
“Don’t be fooled by that disparity. Huawei is the vendor to watch, given its overall increase in market share over the last six quarters,” Manjaro said. “And squarely in its sights is the No. 3 vendor, Alcatel-Lucent.”
The Chinese employee-owned company saw substantial growth between 2006 and 2007, where contract sales increased from $11 billion to $16 billion, according to ABI.
In recent years, Huawei entered into agreements with European giants Telefonica S.A. and Vodafone Group plc. The company has also been aggressive in countries with emerging markets, such as India and Africa, Manjaro said. Huawei owns 44% of the market in Africa and the Middle East and is among the leaders in the Asia Pacific market.
Manjaro said Huawei’s place in the market will grow because the top three operators in China are planning to spend close to $80 billion on infrastructure in the next three years. She estimates Huawei will get 20% of the business.
“This, along with strong growth in India and Africa, may catapult Huawei in the lead within the next three to five years,” she said. “At the very least, Ericsson is not likely to be in any ‘comfort zone’ as it tries to face down the growing threat from the muscular Chinese giant.”
In North America, Huawei has 1% of the market. The leaders in North America are Motorola Inc. at 46%; Alcatel-Lucent with 21%; Nortel Networks Ltd. at 13%; and Ericsson with 10%.”
Martin said Huawei’s plan was to hold off in North America because of the maturity of the market and company officials knew it would be tough to penetrate. But the company feels now is the time to break into the U.S. market. The company has an agreement in place with Leap Wireless International Inc.
“We have greatly increased our concentration in North America,” Martin said. “We have been hiring lots of local leadership. We feel good about our prospects here.”
Martin said he has read through the study by ABI Research.
“We are pleased with the report,” he said. “It reflects our growth and future prospects.”
Manjaro said Ericsson will continue to hold a big share of the market.
“Ericsson is really good at reading the market,” she said. “If they see a change in one of their products, they are not afraid to shift gears. They will remain strong, but they are not being as aggressive as Huawei.”
Huawei’s lower labor costs are driving the company’s increased presence in the market, Manjaro said. Further, Huawei could emerge in the U.S. once a major carrier signs an agreement with the company.
“They will gain more acceptance into the U.S. market as there is more pressure put on the industry to lower prices,” she said.
Manjaro said the Chinese company has made some progress in Latin America where it has gained 10% of the market share.
The report also says that Alcatel-Lucent in the second quarter of this year suffered one of its worst quarters since the two companies merged nearly two years ago. For the first half of 2008, the company’s wireless infrastructure shipments decreased 63% when compared to the second half of 2007, according to ABI Research. Manjaro said Alcatel-Lucent offers strong products, but has struggled streamlining the operations of two companies.
“It is difficult to integrate the operations of two companies after a merger,” she said. “It takes its toll.”