Huawei, a rising Chinese tech firm, aims to penetrate the U.S. market
Post Date: 01 Aug 2011 Viewed: 494
When technology giants Cisco and Juniper recently issued gloomy outlooks, analysts attributed some of their pain to a little-known Chinese company called Huawei.
If you’ve never heard of it, you’re not alone. The company, China’s largest phone equipment maker, has remained a relative unknown in the United States despite its reputation as a rising star in the global market, with $28 billion in annual sales last year.
"We’re the biggest company you’ve never heard of," said William Plummer, vice president of external affairs at Huawei (pronounced "wah-way").
That may soon be changing. Over the past few years, the Shenzhen, China-based company has made an aggressive effort to expand into the American market, making a small dent with more than a dozen offices and research centers in locations like Atlanta, Chicago and San Diego. U.S. revenues since 2006 have doubled almost every year, to $765 million last year, according to company figures.
On Friday, Huawei unveiled its newest R&D facility in Bridgewater, where its East Coast offices are located, in a broader push to develop cutting-edge telecom products that will finally put the company in the American spotlight.
"Huawei reminds me of Nokia in the 1990s — young, exciting and kind of dysfunctional," joked Plummer, who previously worked at Nokia. "Watch this space."
The Bridgewater facility — located in the same corporate park as the offices for big-name companies like Pfizer, Oracle and Infosys — currently houses 110 employees, about half of them on the R&D team. The company aims to double the size of that team in the next three years.
One of the company’s goals is to evolve from low-end to high-end handsets, and to expand beyond smaller carriers like MetroPCS and Leap, where its phones are currently sold.
"We’ve hired a bunch of people, and we’re working on great projects," said Miguel Dajer, vice president of the company’s U.S. wireless R&D division.
Dajer, who joined the company last year after spending 25 years at Alcatel-Lucent in Murray Hill, said he was drawn by Huawei’s potential. With 42,000 square feet of space in Bridgewater, researchers will have plenty of room to work on new products, he said.
"I had the opportunity to build something from the ground up," Dajer said. "Basically, this was my little place to play."
One of the dilemmas plaguing the industry, for example, is how to resolve "signaling storms" — a term to describe localized network overloads that occur when too many people simultaneously use their phones, such as at a soccer game when spectators all try to transmit photos of a goal from their smart phones.
"The problem is getting worse, we’re trying to find out how to solve it," he said.
And, because it is employee-owned, Huawei can look for such solutions without the pressure of pandering to investors’ whims and demands, Dajer said.
"One virtue we have as a company," he said, "is patience."
The new R&D center is a reminder of how far Huawei has come since it started in 1987, as an importer of landline phone parts from Hong Kong to mainland Chinese businesses. By the early 1990s, when its supplier was acquired by a state-owned company, Huawei had learned how to develop its own parts, Plummer said. A decade later, the company opened its first U.S. office in Plano, Texas.
Huawei has since expanded into telecom infrastructure, low-end mobile handsets and communication networks for businesses. The company said it now has 110,000 employees globally, operates in 140 markets, and works with 45 of the 50 top telecom operators in the world, including France Telecom, British Telecom and Vodafone.
Last year, Huawei’s sales nearly eclipsed that of global market leader Ericsson.
"It’s like an American success story," Plummer said.
Except it’s still lacking the American aspect. Notably missing from the company’s roster of telecom partnerships are the four biggest U.S. carriers: Verizon, AT&T, T-Mobile and Sprint.
Experts attribute the company’s difficulties in the United States to a general suspicion of Chinese technology companies and their ties to the government.
Outside the United States, Huawei has already become a leader, not only in developed regions like Europe and Asia, but also emerging markets like Thailand, Nigeria and South Africa. In some cases, its prices are 50 percent lower than competitors, said Boston-based telecom analyst Roger Entner.
But within the country, Huawei and fellow Chinese company ZTE have been confined to partnerships with smaller carriers, even as Korean handset makers Samsung and LG have been able to successfully break into the market, he said.
"Outside the U.S., Huawei is the company that came out of nowhere and really beat everybody up," Entner said. "The U.S. is the market where they have the most problems in the world."
Not that the company hasn’t tried. When Huawei submitted a bid to supply Sprint with equipment last year, a group of eight Republican senators demanded the Obama administration investigate the company, citing "a concerning history." In a four-page letter, the senators pointed out that CEO Ren Zhengfei is a former member of the People’s Liberation Army, and that the company had sold equipment to Saddam Hussein’s regime.
Ultimately, Sprint excluded Huawei and ZTE from the contract, even though they submitted lower bids than their competitors, Ericsson, Alcatel-Lucent and Telefon.
"The concerns from the American government come from the possibility that Chinese state security could build in some kind of surveillance," Entner said. "It’s not Huawei they have a problem with, it’s China."
Huawei concedes it could have been more transparent in the past but insists that some of the perceived bias against the company stems from a fear that successful Chinese ventures divert jobs and investment away from the United States.
"We take responsibility for not being terribly communicative in the past," said Huawei’s Plummer, who is also a former diplomat. "But there’s a perception that the success of a Chinese company is to the detriment of a U.S. company."
Rather than view Huawei as a threat, Americans should see the company as a "21st-century multinational with a Chinese heritage in an industry that has no borders," he said.
"Because of our heritage, we are sometimes viewed through a prism," he added. "But if you remove that prism, you see that what Huawei brings are jobs, investment and innovation."