2014年5月8日 星期四

Huawei Aims High, Despite Obstacles to Growth 華為"公司"大作為的恐怖: TRON / 中興通訊跳水 question Huawei and ZTE

Huawei Aims High, Despite Obstacles to GrowthHuawei-2

Huawei is likely one of the least-known of China’s growing fleet of large multinational corporations — but it’s aiming to get much bigger in the coming few years. The global telecommunications equipment maker, which is based in the southern Chinese industrial city of Shenzhen, has gradually expanded its reach — first as a supplier of networking infrastructure to developing markets and most recently as a maker of smartphones — to become the second-biggest telecom equipment maker in the world. The company’s biggest claim to fame may be the uproar that ensued when it attempted to buy server technology firm 3Leaf Systems in the U.S. in 2011. Huawei ultimately abandoned the acquisition after a U.S. government panel moved to block the deal on national security grounds.

Huawei officials have said those concerns were unfounded, and are now pushing ahead with an ambitious plan to double the company’s revenue by expanding internationally as it advances into the market for tablets and other consumer goods over the next decade.
So far, Huawei’s biggest handicap has been its lack of brand name recognition, especially outside China. Huawei’s focus on consumer products is partly aimed at countering that problem, notes Scott Sykes, Huawei’s vice president for international media affairs. He says Huawei plans to expand the share of sales of consumer products as part of its total revenue to 25% by 2018 from the current 20%. The company also plans to increase its enterprise business, which sells equipment for use in corporate data centers in campus networks to 15% to 20% from the current 5%, while reducing its telecom equipment business revenue to 50% to 60% from the current 75%.

“We started two new businesses three years ago,” Sykes notes. “One is called the consumer business group, which designs smartphones, tablet computers and Wi-Fi devices, and [Internet-delivered television] boxes. It accounted for about 20% of our revenue mix, or $9 billion in 2012.” The enterprise business group is typical of Huawei’s origins as a supplier of network equipment in that it designs storage servers and transaction processing servers and makes communications platforms for corporate virtual private networks (VPNs) and switching technology for corporate campuses.

Despite the hurdles it faces in the U.S. market, Huawei is doing well, Sykes says. “We are a more than $35 billion company, and had an 11% increase in our revenue in 2013. We anticipate that in the next five years we will grow by a compound annual of 10%. If we achieve that, by 2018 we will be a $70 billion [revenue] company.

Huawei has no choice but to grow organically, unlike Lenovo which became the top personal computer maker in the world in 2013 after its acquisition of IBM’s PC business in 2005. Lenovo announced in January a proposed $2.91 billion purchase of Google’s Motorola Mobility handset business.
“M&A is challenging. Maybe one out of every 100 [mergers] is successful.” –Scott Sykes
“M&A is challenging. Maybe one out of every 100 [mergers] is successful,” Sykes says. “We think for us, our company, our style, and what will work well with us is to grow organically in the coming five years as we did in the last 26 years. Actually, in the next five to 10 years we will not do any major M&A activities.” Regardless of how it grows, Huawei is expanding quickly internationally. In 2012, revenue from outside China accounted for 66.7% of the firm’s total sales.

As it moves up the “value chain,” a shift from nuts and bolts telecom systems to higher margin consumer products like smartphones and tablets could help Huawei make a “great leap” in terms of brand recognition and profits, according to Benjamin Cavender, a principal and senior analyst on the electronics sector at China Market Research Group, based in Shanghai, “If they could make the consumer side of the business a lot bigger, I could see that kind of growth. They have a lot of room to grow with their handsets and tablets. They have a lot of room to grow with the network software side of the business,” he adds, noting that Huawei may be able to double revenue in the coming five to six years, though he views a goal of 14.5% annual growth as “a little bit optimistic.”

Lagging Behind
Despite Huawei’s aspirations in the smartphone market, the company lags way behind Apple and Samsung, though in some quarters of the past year it ranked number three in sales — from a start of zero sales in 2010. According to Sykes, the company’s smartphone sales jumped to 52 million units in 2013 from 32 million in 2012 and 20 million in 2011. “Our goal is to sell 80 million smartphones this year,” he says. While Huawei’s ability to take on competitors such as Lenovo and LG has been notable, the gap remains huge: Apply and Samsung are selling between 60 million and 80 million smartphones in a single quarter, which is more than Huawei has sold yet in a year.

According to January figures from IDC, a U.S. IT research firm, Huawei maintained its number three market share position in 2013 at 4.9%, up from 4% in 2012. Samsung claimed a 31.3% share and Apple had a 15.3% share, while LG and Lenovo controlled 4.8% and 4.5% of the market, respectively.
Despite that progress, Huawei is still working on some quality issues, Cavender notes. “They are like a lot of other Chinese smartphone companies, trying to figure out how to go from the cheap mass market to having premium products, too,” he says. “They put as much technology as they can put into the phones: a big screen, a fast processor, fast RAM. But the parts do not necessarily work well together.”

Given its lack of a track record and poor brand recognition, quality problems are doubly problematic for Huawei. “A lot of consumers say, ‘Why should we buy an expensive phone from Huawei if the quality is not that good? They should be selling cheaper phones…,’” Cavender notes.

But he adds that the company should keep working to get better rather than abandoning ship. In a few years, Cavender predicts that Huawei will manage to sort out the quality issue and be well placed to expand. Already, Huawei is strong in third or fourth-tier provincial cities in China, where consumers may lack the wherewithal to buy an iPhone or a Samsung Galaxy but still hanker after the latest gadgets. In those markets, “Huawei starts looking very good, because [consumers] can still get a phone with a big screen and Android applications. It becomes a pretty good low-cost alternative,” Cavender says.

In seeking to close the gap with the market leaders, Huawei is hiring talent from other global companies such as Nokia, according to Duncan Clark, chairman of the telecom investment advisory and consulting company BDA China Ltd., and a senior advisor to the “China 2.0″ initiative at the Stanford Graduate School of Business. “It is still a challenge to become a major consumer brand. It may take years, but do not underestimate Huawei,” he says.
One of the biggest difficulties Huawei faces is how it sells consumer products in the U.S. — for example, where the company’s smartphones must be purchased on the Internet, says Clark. “In the U.S., you get a phone along with the contract, so people only know what AT&T [or another cellular service provider] will sell them. That is where Huawei struggles a bit; they have not figured out how to do the marketing or retail side of it,” Cavender says.

National Security or Protectionism?
One way to counter this problem would be to bring in more foreign expertise, especially for marketing, observers note. Although Huawei’s telecom equipment business is global, and about a quarter of the company’s 140,000 employees are foreigners, the firm has no non-Chinese on its board of directors or in other senior posts. “We are still new in terms of international expansion, which began 16 years ago,” Sykes states.
Huawei is “like a lot of other Chinese smartphone companies, trying to figure out how to go from the cheap mass market to having premium products, too.” –Benjamin Cavender
Not all analysts agree on the importance of having non-Chinese top executives. “I think Huawei is a real global company because it has spent a lot of time and money on research and development,” notes Ryoji Nakagawa, a professor at Ritsumeikan University in Kyoto who specializes in the Chinese IT industry and economy. “They are one of top companies in terms of applied new patents. Most of Toyota’s board of directors is Japanese and there are mostly Koreans with Samsung. If you say that you have to have multinational top management to be a global company, Toyota and Samsung are not global companies.”
Huawei’s identity is something like a split personality, says Cavender. On the IT infrastructure side, for companies building networks or storing data, people know Huawei, he notes. “But if you are a consumer, you would not think of it as a global company, mainly because of what they are doing with their consumer products, since they are much stronger in China than in other markets.”
Gaining a foothold in the all-important U.S. consumer goods market could help Huawei surmount its difficulties with selling telecom equipment. “Once they are accepted more as a consumer brand, it will be much more difficult for the U.S. Congress or anybody to say Huawei should not be here, or they should not be doing this here or they cannot have this contract, because people will look at them as being more like Sony, Samsung, Apple or another consumer electronics company,” Cavender points out.
The company’s most damaging setback came in 2012, when a U.S. House Intelligence Committee report encouraged U.S. companies not to partner with Huawei. Chairman Mike Rogers, a Republican from Michigan, cited serious concerns about Huawei and ZTE, another telecom equipment company based in southern China, and their alleged connections to the Chinese government. Some U.S. lawmakers called Huawei a potential national security threat and recommended that U.S. telecom carriers avoid using the Chinese firm’s equipment. “They are in the communications industry. [Information technology] is always very sensitive, and [Huawei] lacks transparency,” says Wharton management professor Marshall Meyer.
Huawei has made no secret that its founder and CEO, Ren Zhengfei, was a former People’s Liberation Army (PLA) official. “He was a construction engineer with no military rank and he was in the PLA for nine years, from 1978 to 1983,” explains Sykes. “The PLA disbanded the engineering core, so he was laid off. He has never since had any connection with the PLA.” Given the military service records of other prominent CEOs, Sykes notes that the concerns over Ren’s background appear to be a “double standard.” Tomoo Marukawa, a professor at the Institute of Social Sciences at Tokyo University, agrees. “I think that the U.S. uses the fact that CEO Ren had military experience as a security concern is groundless. South Korea has a draft system, and if you applied the same logic, all South Korean companies could have security issues,” adds Marukawa, a Chinese industry and economics specialist.
Sykes says the issue with Huawei is more one of politics and fear of rising Chinese power. “We are still present in the U.S. and we are available and willing to serve telecommunication companies in the U.S.,” Sykes states. “We are present in 140 countries in the world and serve 500 telecom operators. We have been in business for 26 years and there has never been a security issue of any kind regarding our telecom equipment. The challenges we face about the network equipment business in the U.S. is about trade protectionism and geopolitics. It is not about our equipment because we have an impeccable track record.”
Bad Timing
Against the background of recent reports of U.S. National Security Agency (NSA) surveillance through telecom networks around the globe, the Huawei issue appears overblown, experts and analysts say.
“It is still a challenge to become a major consumer brand. It may take years, but do not underestimate Huawei.” –Duncan Clark
“The NSA case weakened the case against Huawei somewhat,” Clark notes. “I do not think it is a network infrastructure company we need to worry about, but it’s more about the network operators. I think it is harder to make a case for a global conspiracy about Huawei.” If anything, attention should be focused on Internet companies or telephone or satellite operators, he adds. “That is where you tap. For me it would be like complaining to the pipe maker about water pressure.”
According to Cavender, firms like Huawei — whether or not they had ties with the government or the PLA — “get dragged into [politics] because they are high profile tech companies.” Huawei’s decision to locate its U.S. headquarters next to an American naval base was poorly considered, though, he says. “It is more like a timing and perception issue. The timing was bad because China and the U.S. were already having a back-and-forth about other topics, so they were kind caught in the middle.”
Even if the security issues are disregarded, though, Huawei faces other challenges in selling to the U.S. The company’s Chinese share-ownership program, available to the 74,000 Chinese nationals employed at Huawei, could be viewed as an unfair trade advantage in that it helps keep wage costs low, says Meyer. “Why are their costs so low and their prices so competitive?” he asks. “They borrow money from the China Development Bank and other Chinese banks, but they borrow from the CDB heavily. The combination of the two gives them access to low-cost funds and their cash cost of operations is well below those of their competitors.”
Huawei officials contest that view, saying the firm’s wage regime and borrowing conditions differ little from other major companies. Huawei’s share options program is in addition to wages and bonuses, which are competitive, notes Sykes. Employees have to buy the shares, he adds. As for financing, 25 of the 35 banks Huawei works with are located outside of China, and the company also funnels profit back into research and development. “We take normal commercial loans from the biggest banks in the world, on normal payment terms and at the normal Libor rate,” Sykes states. “We also take loans from Chinese banks but they are normal loans at normal rates; nothing special, no advantage.”
Sykes also disputes complaints that Huawei is not transparent about its ownership structure. “We are a 100% employee-owned company, and even though we have no regulatory obligation to disclose anything because we are a private company, we do it anyway because it is important to be open and transparent,” he says. Since 2000, Huawei has been reporting its annual results, and its annual reports are similar to those of any public company, he adds.
While it struggles to expand its business in the U.S., Huawei is bound to continue growing quickly both in emerging markets and developed countries, Cavender says. In the developing world, telecom networks remain a big seller, while Huawei will keep trying to sell network solutions in Western Europe. Still, the company will also be pushing hard on the consumer side, he says. “What we are going to see is a lot more aggressive product iterations. Whereas in the past they did four or five new phones a year, they might increase that amount and have a faster development cycle and focus on more premium products as well,” Cavender notes. “That is where you will see a big push for consumer products in some of Asian counties, such as India, Vietnam, Cambodia and Laos, and the U.S., Europe and the Middle East. That is where we are going to see the big growth. It is possible to see 30% to 40% growth on the consumer side per year.”
To achieve that, though, Huawei needs to work on its marketing, Cavender says. “Both Apple and Samsung can put together a very nice-looking package. They understand how to market to consumers and they are able to develop not just hardware but also software.” Huawei’s experience in China, where consumers are less focused on software because they often only use pirated applications, puts the firm at a disadvantage in competing in that area, he adds. A bigger challenge will be in achieving the sort of catchy, alluring designs that a company like Apple has cultivated over many years. “Will Huawei be able to create dominant design products, which would change the existing concept of the product?” asks Nakagawa of Ritsumeikan University. For now, the question stands unanswered.


當不透明的企業遇到沒有根據的指責美國國會情報委員會本週一發表的一份調查報告,將中國電信巨頭華為和中興稱為“安全隱患”,認為對這樣的企業美國政府和經濟界“不可信賴”。 《南德意志報》的署名分析文章稱,報告不僅懷疑中國公司進行經濟間諜活動,而且認為它們與中國軍方關係密切,可能受到官方的操控。文章寫道:“有關調查是在共和黨議員麥克·羅傑斯的主持下進行的。保守派的評論人士高調稱讚這一調查報告。問題只是,人們拿不出證據,沒有可以證明羅傑斯議員所描述的可怕前景的根據。報告裡只有含糊的映射和幾處轉述一份不被公開的附件的內容,這份附件據說列出了華為工作人員'可能'違反了美國法律的有關事例。安全考量是一個屢試不爽的手段“對於貿易保護主義者來說,提出安全考量是一個屢試不爽的手段。打著所謂保護國家利益的名號,本土企業可以藉此把不受歡迎的競爭對手拒之門外。而消費者則要為由此造成的價格提升買單。華為作為全球最大的網絡設備生產商之一,供應價格低廉的高技術產品,讓像瑞典的愛立信和美國的思科這樣的同行企業陷入壓力。對後者來說,美國國會的報告正是求之不得。他們可以對自己的客戶提出這樣的理由:安全是要花價錢的。因此為了自身的利益,中國公司應該主動打消這些顧慮。“只有提高透明度才能有助於達到這一目標,但這套企業文化華為和中興還得慢慢學起來。……”





"华为迄今为止还没有义务做到透明。据该公司称,创建人任正非持有1.3%的股份,其余股份属于公司的65000名员工。上周有传闻说,华为计划上 市。业内人士对华尔街日报透露,华为向投资银行咨询了上市事宜,正在考虑如果在美国上市是否有利可图。华为对这一猜测不予置评。但可以肯定的是,在上市之 前,公司必须提交相关信息,而关于华为的许多信息至今不为人所知。然而这样就能打消美国有关部门的顾虑了吗?无论如何,对华为来说,美国仍是一个具有吸引 力的市场。该公司在网络装备领域的业务增长正在减弱,因此致力于投资开发新的赢利空间,例如视频会议系统和智能手机,这样就需要新的市场。
"在欧洲,这家中国公司作为供应商已经立稳了脚跟。移动电话服务商对华为的价格赞不绝口。对此,像诺基亚-西门子网络这样的竞争对手自然也有所察觉。在全 球市场,华为已成为继爱立信之后的第二大网络装备供货商。尤其在英国,华为的业务蒸蒸日上。该公司刚刚宣布,今后5年将在英国投资20亿美元。总裁任正非 还同英国首相卡梅伦会了面。后者显然没有安全方面的顾虑。两年前,华为在英国班伯里(Banbury)建立了一座网络安全中心,并与英国政府部门展开合 作,对网络装备和软件的安全性进行检测。"
iPhone 5的生产压力

富士康面临iPhone 5的生产压力
"据中国劳工观察报道,郑州工厂的大约3000到4000名工人上周五罢工,导致多条生产线停摆。富士康没有对罢工的背景作出解释。据劳工观察称,造成员 工不满的原因有很多,包括工人被要求在国庆长假连续加班。该组织还批评富士康管理层和苹果公司提出严苛的质量要求,却不对员工进行相应的培训,致使工人达 不到要求的高水平。"
"iPhone5新上市带来的生产压力显然是苹果的代工企业富士康再次发生工潮的原因之一。该公司承认中国大陆一家工厂的工人和质检人员之间发生了纠纷。 对苹果来说,这一紧张势态来得不是时候。为了让iPhone5及时摆上全球各国的柜台,这家美国康采恩正在全力应付公司有史以来最大规模的供货战役。据专 家透露,苹果面临巨大的供货压力。"

  華為技術副董事長胡厚昆在深圳9月20日表示,2015年華為的全球銷售額要翻一番,達到700億美元。華為除了將在智慧手機領域力爭全球市場份額擠入前 3名之外,還將全面提供企業IT(資訊技術)服務。在日本的銷售額今年要增長6成,與NEC等企業的競爭將日趨白熱化。


       華為技術去年的銷售額為324億美元,其中手機基站和網路路由器等通信設備業務約佔70%。胡厚昆表示華為將在智慧手機等終端業務和企業IT服務這2大領 域加大投入力度,到2015年銷售額翻一番。在智慧手機領域,華為將改變此前以面向新興市場國的低價位產品為中心的戰略,今後將增加面向發達國家市場的高 功能機型。在日本,NTT DoCoMo將在秋季推出的機型中首次選用了華為產品。華為去年智慧手機的全球市場份額僅為5%左右,居第5位,到2015年將擴大至15%。力爭成為僅 次於南韓三星以及美國蘋果公司的3強之一。

       自去年起,華為開始進入雲服務和數據中心等企業IT服務領域。在日本自今年起已經全面開始開拓客戶。華為去年日本業務的總銷售額僅為6億美元,而到今年有 望增至1.6倍以上,達到10億美元。胡厚昆強調在技術方面和零件採購方面將加強與日本企業的合作,不過到目前為止,暫時未考慮投資和收購日本企業。

       在創立25年後,華為已躍居僅次於瑞典愛立信的全球第2大通信設備生產商,其原動力在於極為顯著的成本優勢和技術實力的提升。華為員工的平均年齡僅為29 歲。利用只有歐美企業數分之一的低成本,華為雇傭了數萬人規模的優秀中國技術人員。僅在去年,華為就投入了相當於銷售額12%的38億美元研發經費,今後 將繼續加大投資,以提高技術水準。

       華為在全球不斷提升影響力的同時,在歐美遭遇的排擠也非常突出。由於華為創始人任正非曾是解放軍,以及華為有從中國政府獲得補貼的嫌疑,歐美不斷有觀點反 對採用華為產品。胡厚昆針對華為產品存在安全問題的看法進行了反駁,稱有必要構建基於第三方機構的公平檢驗體系。

       華為在日本正逐步提升影響力。除了向日本eAccess等公司提供基站等通信基礎設施之外,智慧手機還首次入選了NTTNTT DoCoMo的秋季上市機型名單。長期以來,該公司以低價格為武器擴大了銷售網,最近數年來不斷縮小與日本企業在技術上的差距。


       有分析認為,在手機基站的銷售方面,對eAccess業務佔近一半份額,同時還與軟銀有業務往來。日本一家通信公司高管分析認為在日本國內基站市場中,華 為的市場份額還不到10%,但“通過積極招聘優秀日籍工程師,華為已經開始在技術方面不斷追趕日本企業”。

华为拟在英国投资13亿英镑 创造500职位

 House Panel to Question Chinese Telecom Firms
A House committee plans to question Huawei and ZTE during a rare public hearing next week about national-security concerns posed by the Chinese telecommunications companies' inroads into the U.S. market.



The company that spooked the world

The success of China’s telecoms-equipment behemoth makes spies and politicians elsewhere nervous

BANBURY, a little English town best known for a walk-on part in a nursery rhyme and as the eponymous origin of a fruitcake, is an unlikely fulcrum for the balance of power in the world of telecoms. But the “Cyber Security Evaluation Centre” set up there by Huawei, a Chinese telecoms giant, in 2010 marks a new way of persuading purchasers, and the British government, that equipment from the manufacturer that runs it can be trusted. It operates in close co-operation with GCHQ, Britain’s signals-intelligence agency, located conveniently just over the Cotswolds in Cheltenham. Its security-cleared staff, some of whom used to work for GCHQ, are responsible for making sure that the networking equipment and software that the Chinese firm wishes to sell to British telecoms companies are reliable, will only do what customers want them to do and cannot be exploited by cybercriminals or foreign spies—including Chinese ones.
Over the past ten years or so, Chinese telecoms firms such as Huawei and ZTE, another telecoms-equipment provider, have expanded from their vast home market to become global players. This is a worry not just for the rich-world incumbents under threat but also for those responsible for the integrity of critical infrastructure such as phone systems. They fear that the companies’ networking gear and software could be used by China’s spooks to eavesdrop on sensitive communications, or that it might contain “kill switches” which would allow China to disable the systems involved in the event of a conflict. “I think it’s ridiculous to allow a Chinese company with connections to the Chinese government and the People’s Liberation Army (PLA) to have access to a network,” says Dmitri Alperovitch of CrowdStrike, a web-security outfit.

Several big Chinese firms, including ZTE and China Mobile, a giant mobile operator, have attracted scrutiny. But thanks to its size and its international reach it is Huawei that gets most attention. This July the firm’s revenues outstripped those of Ericsson, for some time the world’s largest supplier of telecoms equipment; Huawei clocked up 103 billion yuan ($16 billion) in the first half of 2012 (see chart 1) compared with the Swedish firm’s SKr106 billion ($15.5 billion). Because Huawei’s sales as one of the world’s ten largest mobile-phone manufacturers (a business Ericsson has left) account for about a quarter of that income, Ericsson is still the biggest supplier of network infrastructure. But probably not for long.
The question of whether to trust this new giant divides the world. In Africa Huawei is everywhere, and welcome almost everywhere; in India it has found itself under attack by government and media as both a security threat and an unfair competitor. In Canada and New Zealand it has won meaty contracts for work on big new networks; in Australia in March the government blocked it from taking part in a new national broadband system.
The doubts run deepest in America. Huawei has worked on networks for a number of smallish mobile operators there, but its repeated attempts to buy American tech firms have been scuppered by official opposition. The Intelligence Committee of the House of Representatives is taking an interest in both Huawei and ZTE. Last year the Committee on Foreign Investment in the United States, chaired by the treasury secretary, Timothy Geithner, opposed Huawei’s purchase of assets from 3Leaf, a server-maker that had gone bankrupt, on the basis of unspecified security concerns. Huawei abandoned the attempt.
Even in America, though, opinion is divided. One former member of the joint chiefs of staff dismisses the fears about Huawei as China-bashing; another says, “We’d be crazy to let Huawei on our networks, just crazy.”
A Maoist approach to markets
The giant causing all this angst rose from humble roots. Although the company is not as forthcoming as it might be about the background of Ren Zhengfei, its founder, he is not the princeling scion of an elite family. He attended the Chongqing University of Civil Engineering and Architecture in the 1960s and served in the PLA’s engineering corps, reportedly in its information-technology research unit. Huawei says he rose to the position of deputy director, but did not hold military rank. After cuts to the armed forces he left the army in 1983 and moved to Shenzhen, a boomtown near Hong Kong.
Mr Ren set up Huawei in 1987 with just 21,000 yuan, a bit more than $5,000 at the time. It mostly sold telephone-exchange equipment imported from Hong Kong. Five difficult years later, the firm made its first breakthrough with its C&C08 digital telephone switch, which had a greater capacity than any other on the Chinese market. That positioned Huawei perfectly to ride the wave of China’s telecoms-infrastructure boom of the 1990s.
Excluded from China’s lucrative coastal markets, which were reserved for the better-connected, Mr Ren put to new purpose Mao’s strategy of using the countryside “to encircle and finally to capture the cities.” He encouraged his salesmen to undercut competitors in markets deemed minor. Huawei went on to use a similar approach overseas, initially targeting peripheral markets. It priced competitively: in Africa it undercut Ericsson and Nokia by 5% to 15%, according to a report by Wharton Business School. It also showed tenacity and daring. Its engineers soldiered on through civil wars and natural disasters; by 2006 sales in Africa were over $2 billion.

Huawei’s customers now serve several billion people in over 140 countries (see chart 2). Its revenues in 2011 topped $32 billion, up nearly 12% on the previous year and ten times what they were a decade previously. It is involved in over half the rollouts of super-fast 4G mobile networks so far announced in Europe. In the past few years, the firm has consistently been one of the world’s leading generators of intellectual property, and has filed for some 47,000 patents. It led the way on “dongles” for connecting laptops to phone systems, and on software that allowed operators to run different wireless standards cheaply and flexibly. “The company’s equipment is now world-class,” says Jim Lewis of the Centre for Strategic and International Studies (CSIS), an American think-tank, who has studied Huawei’s rise.

It has over 140,000 employees, and says 44% are in R&D, many of them in its shiny corporate campus in Shenzhen. The site boasts a buzzing “Tower of 10,000 engineers”, meeting rooms designed as Zen gardens and an espresso bar with first-class baristas. Just across the road is the massive factory complex where Foxconn makes Apple’s iPhones and iPads—and some of Huawei’s equipment, too. Though it could manufacture its own kit in-house, Huawei, like the Western giants with which it now competes (see chart 3) outsources much of its manufacturing to specialists. It sees itself as the new face of Chinese technology: an innovator, a sales force and a global brand.
Back-door imbroglios
Critics are convinced that there is more to Huawei’s rise than strategy, guts and Mr Ren’s devotion to innovation. They think it has stolen vast amounts of intellectual property and that it has been heavily subsidised in its expansion by the Chinese government, eager to use it as a Trojan horse with which to infiltrate itself into more and more foreign networks. Huawei rejects all these allegations.
John Chambers, the boss of Cisco, an American supplier of network equipment, recently claimed that Huawei does not always “play by the rules” on intellectual property; many in America are convinced that Huawei stole the design of one of its early products from Cisco, though the Chinese company hotly denies this. Cisco settled a lawsuit it had brought against Huawei in 2004 in a way that both sides spun as vindication.
Then there is the question of whether China’s government bankrolled Huawei’s undercutting of its rivals. In 2011 Huawei acknowledged that its customers did benefit from access to $30 billion in potential “export financing”, though apparently only a fraction of that has been used. Pressed for details, the firm says that “in 2011, the financial support that Huawei provided to customers came to 5.86% of total contract sales,” a figure not specified.
At the end of June, Chinese and European officials met in a bid to avert a trade war over subsidies. Avoiding a formal confrontation may suit all concerned. Pierre Ferragu of Sanford C. Bernstein, an investment bank, reckons that Huawei’s rivals have used the same sort of inducements. He adds that everyone will do it less in the future, because customers who can buy only if subsidised are poor prospects for future earnings: “You can’t up-sell higher-margin follow-on work to them later because they can’t afford it.”
This leaves the most troubling criticism: that the firm might be a creature of China’s security services. Mr Ren’s past in the PLA fuels such suspicions, as does a reasonable perception that privately held Chinese companies are often in cahoots with the powers that be. The firm’s dealings with unsavoury regimes such as Iran, where its salesmen boasted that their equipment makes it easier to spy on potential troublemakers, are taken as supporting this view.
Such dealings are not unknown in the world of telecoms. An investigation by Wired magazine found Cisco’s salesmen making similar claims in efforts to win contracts with a repressive government—ironically, that of China. And American telecoms-equipment companies have a degree of cosiness with America’s national-security apparatus; the former head of the National Security Agency, America’s GCHQ, sits on the board of Motorola Solutions, a telecoms-equipment provider. But such symmetry hardly means there is no need to worry about Huawei. American fears may be based on the fact that its leaders know from experience that telecoms companies can be helpful espionage assets. American officials have in the past demanded the installation of “back doors” in some exports, through which the devices can be accessed on the quiet.
Huawei clearly might do such things; the question is whether it does. Evidence was presented at DefCon, a big hackers’ convention held in July, of security vulnerabilities in a couple of Huawei’s smaller routers. But such flaws are common. Several years ago, the American government gave warning of similar vulnerabilities found in kit made by Cisco and other Western firms. Years of intense scrutiny by experts have not produced conclusive public evidence of deliberate skulduggery, as opposed to mistakes, in Huawei’s wares. BT, a British telecoms company that buys products vetted in Banbury, says it has not had any security issues with them (though it rechecks everything itself, just to be sure).
Huawei seems open to such scrutiny, at Banbury and elsewhere. “Believe no one and check everything,” is the right attitude for dealing with Huawei or anyone else, says John Suffolk, now Huawei’s global cyber-security officer, previously the British government’s chief information officer. Huawei equipment for America and Canada, he says, is independently vetted by Electronic Warfare Associates, an American defence contractor well supplied with security clearances and experience.
But absence of evidence is not evidence of absence; flaws in telecoms gear, whether put there deliberately or accidentally, are hard to find. “Most security problems we encounter are due to very subtle bugs in code that even the original programmers may miss,” says Steven Bellovin of Columbia University. “Identifying back doors in hardware is also a really, really hard challenge.” So doubts remain.
The charmless offensive
Part of Huawei’s problem is that it gets lumped in with its rival, ZTE. America’s FBI has investigated whether that firm illegally sold American technology to Iran and then lied about the matter, something Huawei is not accused of. Back doors that might have allowed remote access appear to have been found on some ZTE mobile-phone handsets. Huawei itself is suing ZTE for stealing intellectual property (perhaps with the caution of the poacher-turned-gamekeeper, it takes piracy very seriously now it is a technology leader).
Huawei is also in part the author of its own misfortune. The China head of a Western management consultancy insists that Huawei is not controlled by the PLA, and deserves to be treated as the private-sector firm that it is. But because of the secretive way Mr Ren has run it, it is hard for others to be so sure. Belatedly, and under pressure from outsiders, the firm is trying to modernise and open up, embarking on what it thinks is a charm offensive. It has hired lobbyists and public-relations consultants, and assembled well-paid advisory bodies of the great and the good in important countries. It is even publishing something resembling an annual report.
This has not yet paid off. The firm talks of corporate-governance reforms, for example, but remains murky to the core. Its handling of its leadership succession is revealing. Mr Ren reportedly wanted his son to take over from him, but in April he was forced instead to agree that three colleagues should share the chief-executive job with him on a rotating basis. The chairman of a big Western firm with intimate knowledge of Huawei quips, “it looks like how the Communist Party frequently rotates bosses among state-owned industries.” The congressional committee has asked the company to clarify its links with the Chinese Communist Party—including the role of an internal “party committee”. If Huawei wants to win America’s trust, argues Claude Barfield of the American Enterprise Institute, a conservative think-tank, it should list on an American stock exchange and embrace international guidelines on state aid and trade.
Moving towards openness would leave Huawei better positioned to work on a new set of international rules and guidelines for sourcing telecoms networking gear and code—something that many industry insiders think is sorely needed. In a paper published last year two Microsoft executives, Scott Charney and Eric Werner, called for governments and companies to come up with much better standards for supply chains, to mitigate all sorts of risks including some that pertain to security.
Mr Charney acknowledges that governments will not find it easy to trust stuff designed and deployed by firms from countries considered adversaries. But knee-jerk nationalism could have dire consequences. Simply banning stuff on the basis of a firm’s nationality “could blow global trade away and balkanise the world of IT,” he says.

Ross Anderson, a professor of security engineering at Cambridge University, points out that banning equipment from Chinese firms would give a false sense of security: equipment from everyone else has Chinese components anyway. Bryan Wang of Forrester, a consultancy, notes that Alcatel-Lucent makes nearly its full range of products in China, except for some high-end routers, and that Nokia Siemens Networks makes its mobile base stations and its switches there.
Greater international co-operation in another area could help to defuse the tension. One reason that Huawei and other Chinese firms are being scrutinised so closely is that study after study has shown that many of the cyber-attacks mounted on Western companies and government departments originate in China. If China’s government were to commit itself to identifying the perpetrators, and to confound sceptics by actually shutting hacking operations down, American attitudes towards firms such as Huawei might improve.
And it might be in China’s interests in other ways. The Chinese are as worried about digital Trojan horses as the Americans are. As a statement that came out of a recent meeting convened by CSIS, the American think-tank, and the China Institutes of Contemporary International Relations, an influential Chinese counterpart, put it: “Both [countries] believe that the other will seek to exploit the supply chain to introduce vulnerabilities into networks and infrastructures.”
“We need to drain the swamp,” says Mr Anderson. If China wants Huawei to become truly global it should take the lead on the clean-up effort. If it does so, America would have an incentive to welcome Huawei—and no more reason to vilify it.