The tech firm wants some of iPhone's market share but some claim it is too close to China's government to achieve this.
Ever heard of Huawei – pronounced “hu-wa-way”? Quite possibly not. But the Chinese company (whose formal name is Huawei Technologies) is making an aggressive push into the consumer electronics space, marketing its new smartphones and tablet PCs in glitzy Beijing malls and even a Milan fashion show as it seeks to emerge from decades of obscurity.
Huawei is betting on the Google Android operating system for its smartphones, aiming to grab market share from Apple’s iPhone and Samsung Electronics’ Galaxy range, in a move that is pushing the private company to open its once closed doors to the outside technology world.
After repeated requests, Huawei recently granted Reuters corespondents rare access to a research & development centre in China’s electronics boom town of Shenzhen, putting on display its new approach and its entry into the consumer space.
They found the building dotted with evidence of Huawei’s drive for innovation: on one floor, the R&D team displayed an array of products still in the works – a 4G network card, a smartphone with a wireless charger and a snazzy smartphone with a see-through case.
Having built itself into the world’s second-biggest network equipment provider (after Sweden’s Ericsson), having passed Alcatel-Lucent and Nokia Siemens Networks. It plans to nearly quadruple revenues to 0bn (£60.8bn) in 10 years, analysts are banking that Huawei is up to its newest consumer market challenge.
“I cannot predict if Huawei has the makings to be Asia’s next Samsung, but I would definitely not count it out,” said Matt Walker, principal analyst at research firm Ovum.
Huawei now hopes to double its cell phone shipments to 60m this year, including 15m smartphones. “We hope to become the world’s No 3 in cell phone shipments and the world’s No 5 in terms of revenues within five years,” Victor Xu, chief marketing officer of Huawei Devices, said as he played around with a Huawei IDEOS smartphone.
Under Huawei’s previous direction, consumers weren’t “able to see our brand on the things we make,” Xu added, occasionally slipping into his pocket to grab his personal phone – an iPhone – when it rang. “But now we’re changing our strategy.”
Yet some questions linger over Huawei among western strategists: principally, can a company so closely tied to China and its government be completely trusted? The US government has vetoed the use of Huawei equipment in some sensitive systems, especially telecoms systems, and in February forced it to reverse out of the m acquisition of a US startup company, server technology business 3Leaf Technologies. Similarly, in February 2008 its bid to buy network equipment company 3Com stalled in the face of US political opposition.
Chief of Huawei, Ren Zhengfei, 66, is a former director of the telecoms research arm of China’s People’s Liberation Army (from 1979 to 1983). He set the company up 24 years ago with just 21,000 yuan (£1,970 at current conversion rates; probably less then).
The company is aware of these tensions; so much so that in April it revealed its board members and overseas sales figures for the first time. Looking at the biographies, you wouldn’t find any obvious links with the Chinese military or government – and certainly not on its chairwoman, Sun Yafang, who joined the company in 1989. That’s odd, given that Chinese news reports suggest she once worked in China’s Ministry of State Security. IDG News noted this; Huawei never responded to its query about the apparent omission.
Instead, the company is trying to be – or appear – more open, with moves such as giving Reuters exclusive access to its R&D centre. The corridor walls had rows of paper with hand-drawn sketches of mobile phone and tablet PC designs. Just around the corner was an unusual 3D printer spewing out plaster-like handset models for the R&D staff to have a look-and-feel of their designs.
Visitors and staff at the centre are barred from carrying cameras and flash memory cards to ensure new designs are kept under wraps.
“I’ve noticed a lot of interesting innovations going on in Huawei,” said Hagen Fendler, chief design director of handsets, who moved from Germany last year to join Huawei after working for Siemens. “Twenty years ago, virtually no one has heard of Korea’s LG Electronics in Europe, but now it’s a big brand. I think Huawei will be able to achieve the same in China,” he said. Fendler is one of many foreign R&D staff Huawei has hired globally to strengthen its technology and designs.
While Huawei’s network equipment has had success globally, one destination remains elusive – the US. It hopes smartphones and tablet PCs will help it capture that market.
With its network gear business plateauing in some markets, such as China, Huawei hopes to cash in on fast-growing mobile devices. Selling at about 1,500 yuan, Huawei’s smartphones have been sold in markets from Australia to Kenya.
Global smartphone shipments exceeded PC shipments for the first time in the fourth quarter of 2010, with the mobile phone market expanding to 1.4bn by 2015 and smartphone sales contributing to three-quarters of that, industry figures showed.
Setting up its own marketing channels instead of relying on distributors is another area Huawei has to work on.
“Huawei needs to create a brand that consumers can identify with and it will need its own marketing channels instead of relying just on distributors. From what we see, distributors aren’t that keen on selling Huawei’s handsets,” said Ji Yongqing, author of the Chinese-language book “Huawei’s World”.
Huawei’s spectacular growth and global standing have boosted its profile, but its ambitious overseas expansion plans have previously hit roadblocks over those suspicions that the company maintains links with China’s military – ones which are almost impossible to disprove without making all the code for its equipment open source, which could undermine its business model.
In the latest edition of Fortune magazine, Ren was ranked the fifth most powerful businessman in Asia, just behind Samsung Group’s chairman Lee Kun-hee.
Underscoring the company’s transitive phase, a source says that Ren, a former member of the People’s Liberation Army, owns two phones – one Huawei; the other, an Apple iPhone 4.
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