BEIJING-Huawei Technologies, based in China’s southern boomtown of Shenzhen, is poised to become a global player in the telecommunications field. Already China’s largest producer of telephone switches, the company is now branching out into the mobile field and aggressively moving abroad. While privately owned, Huawei retains strong links to the army, enabling it to pull a lot of strings in Beijing.
Huawei’s sales are rising fast, from US$1.5 billion in 1999 to US$2.66 billion in 2000 and projected sales of US$5 billion this year, of which 20 percent would be realized abroad. Overseas income is expected to increase to 40 percent in three to five years. Huawei has sales offices in 45 countries. The company’s Hong Kong subsidiary Huawei Tech Investment is said to be planning an overseas listing.
The company’s GSM equipment has been installed in more than 20 provinces in China and 10 countries abroad, totaling nearly 30,000 base stations and 10 million lines of mobile switching capacity.
In December last year, Huawei Technologies signed a US$10 million contract with Daewoo Unitel, the largest of four GSM operators in the Central Asian country of Uzbekistan. Also in December, China Mobile Communications selected Huawei as one of four suppliers for the first phase of its General Packet Radio Service (GPRS) project, which will cover 25 cities in 16 provinces with a network capacity of 409,000 subscribers.
Huawei will build GPRS networks in Shenyang and Dalian in the northeastern province of Liaoning and in Zhangzhou in southern Fujian province. The other selected suppliers are Ericsson, Motorola and Nokia, while Huawei beat world-renowned companies Siemens, Nortel and Alcatel.
In the middle of last year, Motorola (China) signed an agreement with Huawei to integrate Huawei’s M800 GSM switch with its own base station system. Texas Instruments, 3Com, Lucent, Intel, AT&T and IBM have all signed cooperation agreements with Huawei, which besides being a rival, has also become a strategic partner.
High-level support
Wu Bangguo, one of China’s vice-premiers in charge of the country’s state-owned enterprises (SOEs), suggested in 1996 that Huawei, which up to then only manufactured central office switches, should set its sights on developing GSM switches and handsets to break the monopoly of foreign suppliers. Wu is a member of the elite Politburo of the Communist Party and a hopeful to succeed Premier Zhu Rongji when he is expected to step down in March 2003. Backed by a 50 million yuan (US$6 million) loan, the company did as suggested by Wu.
Last year, Huawei received a string of powerful visitors, including President Jiang Zemin, Premier Zhu Rongji and the Minister of Information Industry Wu Jichuan.
Huawei also claims 40 percent of China’s 22 million Internet users access the Internet through its A8010 access server. In optical network products, its market share in China is 30 percent. Broadband metropolitan solutions have been implemented in more than 20 areas in China. The company said its Tellin intelligent network system is the first in the world to comply with the European Telecommunications Standards Institute (ETSI) CAMEL Phase II recommendation.
In 1999, Huawei Technologies set up an US$8 million software development center in Bangalore, India’s high-tech mecca. In mid-February, the company pledged another US$30 million investment to expand the center and to increase the number of its software engineers from 280 to 600 by the end of the year. The center will develop software for Huawei’s telecom and networking products. The company also has smaller development centers in the United States, Russia, Sweden, and of course, in its home base China.
Last year, Chinese companies, among which Huawei is one of the most prominent, produced telephone switches with a total capacity of 46.57 million lines and 52.1 million mobile phones.
Humble beginnings
Ren Zhengfei founded Huawei in 1988 together with 14 colleagues and a 70 million yuan (US$8.47 million) loan from a state bank. Until 1984, Ren was the director of the Information Engineering Academy of the Chinese Army, which he left to join Shenzhen Electronics. The company is owned by its management and staff, but its army connections offer it sufficient clout to compete with state-owned rivals, such as Zhongxing Telecom and Datang. Ren is still Huawei’s president.
Huawei is a prime supplier of the People’s Liberation Army’s Telecommunications Bureau, although Senior Vice President Fei Min told the Far Eastern Economic Review last December that military sales account for less than 1 percent of his company’s total sales. Another indication of its strong official backing, Huawei can count on loans from the Shenzhen branches of state commercial banks, which are generally still reluctant to offer credit to private companies.
The company started as a small reseller of imported equipment, but it is now among the world’s top 10 manufacturers of telecom switching equipment with its C&C08 central office switch and is becoming a major player in the mobile field.
