Wang Xiwei/ChinaFotoPress/ZUMA Press
Huawei
Location: Shenzhen, China
Industry: Information Technology
Annual Sales: $12.6 billion
Most people outside China have never heard of Huawei. But the Shenzhen-based maker of networking equipment, cellular handsets, and other telecommunications gear is making the world pay attention to China in a new way. Although controversial and hard to pin down in terms of finances, the company has become a role model in how to gain global clout. Instead of competing solely on cost, Huawei invested early on to move into higher-end products. Rivals say it has also proven a master at using connections in Beijing to extend its global reach.
But most of its success has come from offering customers top quality products at a low cost. That has forced multinationals such as Nortel, Alcatel-Lucent, and Cisco to compete on its terms with razor-thin margins and an ever improving product mix. Ericsson CEO Carl-Henric Svanberg describes his mainland rival as “pretty brutal” on pricing and innovation. Adds Cisco Executive Vice-President Wim Elfrink: “When we compete with Huawei, we compete with China Inc.”
Founded 20 years ago by former army officer and current CEO Ren Zhengfei to import foreign telecom equipment, Huawei quickly moved to make its own products. It became a top supplier to Chinese businesses and drew scrutiny for doing business with Iraq. Five years ago, Cisco charged it with stealing intellectual property. Cisco dropped the suit and, tellingly, CEO John T. Chambers later said he would love to partner with Huawei. He’s not the only one: On Dec. 10, Huawei announced it will be teaming up with the Google-backed Open Handset Alliance to launch an Android phone in 2009.
Targeting America
The private company’s finances remain opaque, but Huawei says 70% of revenues come from outside China. The company now serves more than 1 billion users through 35 of the world’s top 50 telecom operators, including Vodafone, BT, and France Telecom. Next up: trying to make gains in the U.S., where equipment sales last year totaled just $100 million. “We are at a starting phase,” says Charles Huang, Huawei’s president for global marketing.
Xiang Bing, dean of the Cheung Kong Graduate School of Business in Beijing, says Huawei’s success shows mainland firms how “you can make a jump and be a big player.” One sign of heft: being forced to drop a proposed $2.2 billion takeover with Bain Capital of Marlborough (Mass.)-based 3Com amid concerns about Huawei gaining access to sensitive U.S. technology. A setback, perhaps, but unlikely to dent Huawei’s growing power base.
