Upwardly mobile – Huawei
If Gan Qiang has his way, you may soon be able to smell the person calling your mobile phone. The Chinese engineer filed a patent last year for a “method for emanating different odours via communication terminal” for incoming calls, short messages or e-mails.
The patent is one of more than 1,500 filed on behalf of Huawei in 2008, making the Chinese telecoms equipment maker the world’s top international patent applicant, ahead of the likes of Panasonic, Philips, Toyota and Bosch.
It is just one of many records Huawei has established in the past two decades.
Founded in 1988 by Ren Zhengfei, a former officer in China’s People’s Liberation Army, Huawei started life as a humble reseller of network switches for a Hong Kong group. This year, it is poised to become one of the world’s top three telecom hardware makers, with revenues of $22bn.
“We forecast Huawei to surpass Alcatel-Lucent,” says Duncan Clark, chairman of BDA, a telecoms consultancy. “In the future there will be three big players left in the [telecoms equipment] industry, and Ericsson and Huawei are going to be two of them.”
Notably for a Chinese company, 75 per cent of Huawei’s revenue comes from overseas. It has achieved this by being both low-cost and nimble, and by successfully melding its natural cost advantages with advanced management techniques.
Zhu Beiguang, who produced a thesis on Huawei at Lund University in Sweden, says: “High performance/price ratio products and highly efficient services are Huawei’s primary advantages. These have also become the primary competitive weapons in Huawei’s international strategy.”
The extent to which Huawei competes on cost has provoked criticism from competitors, who have accused it of sucking margins out of the industry. An example is Huawei’s willingness to offer next-generation technology at this-generation prices. “Huawei helped 3G fly globally,” says Mr Clark, referring to the Chinese company’s contribution to making Europe’s main third-generation mobile standard faster and more affordable.
Huawei says it uses pricing mainly when it is trying to win new customers. In markets where it is already established, it does not necessarily compete on price, the company says.
Huawei’s cost advantage comes partly from its domestic research and development and engineering resources. Huawei spends $25,000 on each R&D employee per annum, one-sixth of European companies’ spending, according to Mr Zhu.
He also calculates that Huawei’s R&D staff work on average 2,750 hours per annum, compared with between 1,300 and 1,400 hours in Europe, which means Huawei can respond to customers’ needs faster.
Huawei has made this speed and flexibility the backbone of a strategy that has helped distinguish it from its rivals.
While larger competitors such as Ericsson and Nokia Siemens Networks normally sell standardised products, Huawei broke into many markets by offering customised solutions.
Huawei has had to convince potential customers of its worth, however, given that Chinese companies are better known for low-cost rather than high-tech manufacturing.
To help overcome such doubts, the company invites executives and politicians from key potential markets to its Shenzhen headquarters to see its high-tech campus and young, educated workforce. The company offers potential customers free trials of equipment before they purchase.
On top of this, a culture of perseverance, fostered by Mr Ren, is deeply rooted in the company. Huawei employees call it the ‘wolf spirit’. According to them, Ren likes to evoke the pack animal’s keen senses, habit of fighting in a group and unrelenting will in attack. “It is about wanting it a bit more,” says one finance professional who knows the company. “If you can make your staff work a bit harder and a bit longer to get that contract, you clearly have an advantage.”
When Huawei started offering its own products in 1992, China’s telecoms market was dominated by international companies, so Huawei concentrated on selling in rural areas, encircling the cities in a type of guerilla strategy.
Only in 1998 did Huawei enter metropolitan markets in China. Then, facing rivals head-on for the first time, the company moved quickly to hire Hay Group to develop its human resources strategy, PwC for advice on financial management, Germany’s Fraunhofer-Gesellschaft as quality control consultants and IBM to design supply chain and other processes.
The move into international markets followed the same pattern: Huawei first entered developing countries, where multinationals were less focused.
At the same time, Huawei expanded and internationalised its R&D by setting up centres in India, Sweden and the US. It also entered partnerships with multinationals in areas ranging from semiconductors to ethernet switches.
The road has not been without setbacks. In 2003, Cisco sued Huawei for alleged theft of its intellectual property rights. The case was eventually settled out of court but resulted in major adjustments at Huawei.
“Huawei recognised the potential difficulties in the process of internationalisation more deeply,” say Xiao Yangao and Liu Ju from the University of Electronic Science and Technology of China, in a study on intellectual property management by Chinese companies. After the Cisco affair, Huawei attached more importance to the number of patents it owned and started seeing intellectual property as a means to beat the competition.
The company’s other big challenge is the suspicions it faces in some markets because of Mr Ren’s past as a PLA official. Huawei was last year unsuccessful in an attempt to take a stake in 3Com after US lawmakers raised national security concerns. North America accounts for only 1 per cent of Huawei’s revenue and the company has yet to win a sizable contract in the US.
Huawei claims that such concerns are groundless, saying that while the PLA is a customer, neither it nor the Chinese government controls the company. “Huawei is not a listed company, so maybe in the public’s perception Huawei is not transparent,” Eric Xu, then global head of marketing, told the FT last year.
Huawei declines to reveal details about its shareholders beyond saying it is owned by more than 20,000 employees. Mr Ren, it says, is still the largest shareholder, but with less than 2 per cent.
The company publishes revenue, contract sales and earnings figures on an annual basis and briefs market research analysts once a year. Analysts say one way to address the transparency issue would be to introduce new shareholders.
In a sign Huawei is listening, it has considered selling a stake in its handset business to a group of investors including Bain Capital, a move interpreted as the first step towards eventually going public.
The deal was aborted as the onset of the financial crisis drove prices down, but, asked whether the sale could be revived, William Xu, chief marketing officer, said: “These possibilities exist.”
..................................
Hard line: Huawei takes on Europe’s best
Huawei is an important supplier of the telecoms infrastructure that enables fixed-line and mobile phone calls, as well as internet access and other data services.
Analysts at Société Générale, who track infrastructure contracts awarded by mobile operators, estimate that Huawei’s global share of such deals has increased from 3.8 per cent in 2004 to 15.5 per cent last year.
The 2008 performance makes Huawei the world’s third largest supplier of mobile infrastructure after Ericsson and Nokia Siemens Networks.
Moreover, Huawei is succeeding with its strategy of expanding beyond selling equipment to fixed-line and mobile operators with businesses in emerging markets.
In Europe especially, Huawei has enjoyed some notable sales successes. This is particularly uncomfortable for the company’s major rivals, three of which are based in Europe.
Heading this trio is Sweden’s Ericsson. The other leading European telecoms equipment makers are Alcatel-Lucent, the company formed through the 2006 merger of France’s Alcatel and Lucent of the US, and Nokia Siemens Networks, the joint venture set up in 2007 between Finland’s Nokia and Germany’s Siemens.
These tie-ups were supposed to create stronger players in the telecoms equipment industry, but Alcatel-Lucent and Nokia Siemens Networks have yet to report an operating profit.
In public, Huawei’s rivals make polite and respectful comments about the Chinese company, acknowledging that Huawei makes telecoms infrastructure of a high technical quality. But privately, some of Huawei’s rivals question the company’s strategy for breaking into new markets. One rival, who paid tribute to Huawei’s rapid expansion in the telecoms equipment industry, expressed concern that the company may be able to offer cheap deals because it receives subsidies from the Chinese government.
Last year, Edward Zhou, Huawei’s European marketing director, denied that the company received financial support from the Chinese government.
William Xu, Huawei’s chief marketing officer, told the FT last month that Huawei was a private company, owned by its employees. He added that allegations that Huawei enjoyed state subsidies were “caused by insufficient understanding of many people about Huawei”.
Xu said Huawei enjoyed some cost advantages over rivals, notably in R&D, since much of that work is done in China.
Mr Xu agreed with suggestions that Huawei had an aggressive pricing strategy in new markets, but said other telecoms equipment makers do the same.
source
The patent is one of more than 1,500 filed on behalf of Huawei in 2008, making the Chinese telecoms equipment maker the world’s top international patent applicant, ahead of the likes of Panasonic, Philips, Toyota and Bosch.
It is just one of many records Huawei has established in the past two decades.
Founded in 1988 by Ren Zhengfei, a former officer in China’s People’s Liberation Army, Huawei started life as a humble reseller of network switches for a Hong Kong group. This year, it is poised to become one of the world’s top three telecom hardware makers, with revenues of $22bn.
“We forecast Huawei to surpass Alcatel-Lucent,” says Duncan Clark, chairman of BDA, a telecoms consultancy. “In the future there will be three big players left in the [telecoms equipment] industry, and Ericsson and Huawei are going to be two of them.”
Notably for a Chinese company, 75 per cent of Huawei’s revenue comes from overseas. It has achieved this by being both low-cost and nimble, and by successfully melding its natural cost advantages with advanced management techniques.
Zhu Beiguang, who produced a thesis on Huawei at Lund University in Sweden, says: “High performance/price ratio products and highly efficient services are Huawei’s primary advantages. These have also become the primary competitive weapons in Huawei’s international strategy.”
The extent to which Huawei competes on cost has provoked criticism from competitors, who have accused it of sucking margins out of the industry. An example is Huawei’s willingness to offer next-generation technology at this-generation prices. “Huawei helped 3G fly globally,” says Mr Clark, referring to the Chinese company’s contribution to making Europe’s main third-generation mobile standard faster and more affordable.
Huawei says it uses pricing mainly when it is trying to win new customers. In markets where it is already established, it does not necessarily compete on price, the company says.
Huawei’s cost advantage comes partly from its domestic research and development and engineering resources. Huawei spends $25,000 on each R&D employee per annum, one-sixth of European companies’ spending, according to Mr Zhu.
He also calculates that Huawei’s R&D staff work on average 2,750 hours per annum, compared with between 1,300 and 1,400 hours in Europe, which means Huawei can respond to customers’ needs faster.
Huawei has made this speed and flexibility the backbone of a strategy that has helped distinguish it from its rivals.
While larger competitors such as Ericsson and Nokia Siemens Networks normally sell standardised products, Huawei broke into many markets by offering customised solutions.
Huawei has had to convince potential customers of its worth, however, given that Chinese companies are better known for low-cost rather than high-tech manufacturing.
To help overcome such doubts, the company invites executives and politicians from key potential markets to its Shenzhen headquarters to see its high-tech campus and young, educated workforce. The company offers potential customers free trials of equipment before they purchase.
On top of this, a culture of perseverance, fostered by Mr Ren, is deeply rooted in the company. Huawei employees call it the ‘wolf spirit’. According to them, Ren likes to evoke the pack animal’s keen senses, habit of fighting in a group and unrelenting will in attack. “It is about wanting it a bit more,” says one finance professional who knows the company. “If you can make your staff work a bit harder and a bit longer to get that contract, you clearly have an advantage.”
When Huawei started offering its own products in 1992, China’s telecoms market was dominated by international companies, so Huawei concentrated on selling in rural areas, encircling the cities in a type of guerilla strategy.
Only in 1998 did Huawei enter metropolitan markets in China. Then, facing rivals head-on for the first time, the company moved quickly to hire Hay Group to develop its human resources strategy, PwC for advice on financial management, Germany’s Fraunhofer-Gesellschaft as quality control consultants and IBM to design supply chain and other processes.
The move into international markets followed the same pattern: Huawei first entered developing countries, where multinationals were less focused.
At the same time, Huawei expanded and internationalised its R&D by setting up centres in India, Sweden and the US. It also entered partnerships with multinationals in areas ranging from semiconductors to ethernet switches.
The road has not been without setbacks. In 2003, Cisco sued Huawei for alleged theft of its intellectual property rights. The case was eventually settled out of court but resulted in major adjustments at Huawei.
“Huawei recognised the potential difficulties in the process of internationalisation more deeply,” say Xiao Yangao and Liu Ju from the University of Electronic Science and Technology of China, in a study on intellectual property management by Chinese companies. After the Cisco affair, Huawei attached more importance to the number of patents it owned and started seeing intellectual property as a means to beat the competition.
The company’s other big challenge is the suspicions it faces in some markets because of Mr Ren’s past as a PLA official. Huawei was last year unsuccessful in an attempt to take a stake in 3Com after US lawmakers raised national security concerns. North America accounts for only 1 per cent of Huawei’s revenue and the company has yet to win a sizable contract in the US.
Huawei claims that such concerns are groundless, saying that while the PLA is a customer, neither it nor the Chinese government controls the company. “Huawei is not a listed company, so maybe in the public’s perception Huawei is not transparent,” Eric Xu, then global head of marketing, told the FT last year.
Huawei declines to reveal details about its shareholders beyond saying it is owned by more than 20,000 employees. Mr Ren, it says, is still the largest shareholder, but with less than 2 per cent.
The company publishes revenue, contract sales and earnings figures on an annual basis and briefs market research analysts once a year. Analysts say one way to address the transparency issue would be to introduce new shareholders.
In a sign Huawei is listening, it has considered selling a stake in its handset business to a group of investors including Bain Capital, a move interpreted as the first step towards eventually going public.
The deal was aborted as the onset of the financial crisis drove prices down, but, asked whether the sale could be revived, William Xu, chief marketing officer, said: “These possibilities exist.”
..................................
Hard line: Huawei takes on Europe’s best
Huawei is an important supplier of the telecoms infrastructure that enables fixed-line and mobile phone calls, as well as internet access and other data services.
Analysts at Société Générale, who track infrastructure contracts awarded by mobile operators, estimate that Huawei’s global share of such deals has increased from 3.8 per cent in 2004 to 15.5 per cent last year.
The 2008 performance makes Huawei the world’s third largest supplier of mobile infrastructure after Ericsson and Nokia Siemens Networks.
Moreover, Huawei is succeeding with its strategy of expanding beyond selling equipment to fixed-line and mobile operators with businesses in emerging markets.
In Europe especially, Huawei has enjoyed some notable sales successes. This is particularly uncomfortable for the company’s major rivals, three of which are based in Europe.
Heading this trio is Sweden’s Ericsson. The other leading European telecoms equipment makers are Alcatel-Lucent, the company formed through the 2006 merger of France’s Alcatel and Lucent of the US, and Nokia Siemens Networks, the joint venture set up in 2007 between Finland’s Nokia and Germany’s Siemens.
These tie-ups were supposed to create stronger players in the telecoms equipment industry, but Alcatel-Lucent and Nokia Siemens Networks have yet to report an operating profit.
In public, Huawei’s rivals make polite and respectful comments about the Chinese company, acknowledging that Huawei makes telecoms infrastructure of a high technical quality. But privately, some of Huawei’s rivals question the company’s strategy for breaking into new markets. One rival, who paid tribute to Huawei’s rapid expansion in the telecoms equipment industry, expressed concern that the company may be able to offer cheap deals because it receives subsidies from the Chinese government.
Last year, Edward Zhou, Huawei’s European marketing director, denied that the company received financial support from the Chinese government.
William Xu, Huawei’s chief marketing officer, told the FT last month that Huawei was a private company, owned by its employees. He added that allegations that Huawei enjoyed state subsidies were “caused by insufficient understanding of many people about Huawei”.
Xu said Huawei enjoyed some cost advantages over rivals, notably in R&D, since much of that work is done in China.
Mr Xu agreed with suggestions that Huawei had an aggressive pricing strategy in new markets, but said other telecoms equipment makers do the same.
source
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