SHENZHEN, China -
"I am so proud of my company," says Li Jian, also known as Amit Li, as he shows
off the headquarters of Chinese telecommunication equipment maker Huawei, in
Shenzhen. Li is a graduate of the Hindi department of Beijing University and
has spent the past year based in Gurgaon, on the outskirts of Delhi, working as
a public relations manager for Huawei's Indian subsidiary.
His pride in Huawei is understandable given that in the span of 20 years the
company has gone from minnow to mammoth in one of the world's key industries:
telecommunications gear. For long dismissed as an upstart with few sustainable
prospects, Huawei has defied predictions, broken the virtual monopoly of
Western firms in the sector and is today counted amongst the top five
players in the industry.
At a time when established names like Ericsson and Alcatel-Lucent are reporting
losses or plummeting profits, Huawei is aggressively expanding, its
well-established position in emerging markets such as India proving to be an
advantage.
Huawei's rise is a window into the aspirations of Chinese companies in the
global market place. Not satisfied with China's emergence as the low-cost
factory of the world, cultivation and support of selected "national champions"
to compete against multinational firms is one of Beijing's stated objectives.
However, it has not been easy going.
Huawei's growth has thus been dogged by accusations of murky finances, military
links, and intellectual property rights violations. The company has been
charged with opaque accounting and too-close government connections and
support.
In India for example, the company's expansion plans have been regularly blocked
by intelligence agencies on the grounds of potential security risks. Huawei
India was also barred for a while from bidding for contracts from state-owned
companies.
But after almost 10 years in the Indian market, George Huang, the chief
operating officer of Huawei's research and development center in Bangalore, the
company's largest outside of China, says that Huawei's troubles are a thing of
the past. "Security is no longer an issue. It's never mentioned by our
customers or even by the government any more."
Today, Huawei India boasts US$600 million in revenues. The Bangalore center
employs 1,600 people, only 40 of whom are Chinese. The company has won
multi-million dollar contracts with Reliance, and Tata Indicom in addition to a
$150 million third-generation phone-network rollout for Bharti Airtel in Sri
Lanka. Its relationship with public sector enterprises BSNL and MTNL is also
improving. Huawei is in the running for securing a BSNL tender for 93 million
GSM lines.
"In terms of market, India has the biggest potential in telecom and we want
India to become our biggest market outside of China," says Huang. He adds, "We
want our India research and development center to support our global
operations, leveraging India's English-language skills and software expertise
to our advantage globally."
Huawei's Bangalore center is one of the few tangible examples of the much
touted, but rarely realized, potential for the coming together of Indian
software with Chinese hardware. At the center, Indian engineers develop
software for use in Chinese hardware, demonstrating "how Indian and Chinese
comparative advantages can be combined for use globally", says Huang.
Given Huawei's relentless ascent on the global stage, this is not an empty
boast. "I would say Huawei is China's most successful multinational; it is on
the leading edge of China going international," says Duncan Clarke, head of
Beijing-based telecommunications consultancy BDA.
Calling the company the "Wal-mart of global telecom" given its emphasis on
volume and price, (Huawei has been known to undercut the price of competitors
by as much as 70%) Clarke says he likes "the impertinence" of Huawei. "The
sector needed shaking up and that is what Huawei has achieved."
Clarke attributes recent merger activity in the industry, such as the creation
of Alcatel-Lucent and Nokia-Siemens networks, in part to competition from
Huawei. The Chinese heavyweight today has a presence in over 100 countries,
having recorded $16 billion in contract orders in 2007, over 70% of which were
generated from international markets
Clarke says Huawei is still some five years away from being able to count
itself as part of the exclusive top tier in the sector, given that it remains
relatively weak in the area of network management and other more high-end
tasks. Its inability thus far to break into the United States market is another
handicap as is the lack of internationalization of its top management.
At the company's Shenzhen headquarters, Ross Gan, Huawei's global spokesperson,
admits that many challenges remain to be overcome. He lists increasing
transparency as one of them. Huawei's founder Ren Zhengfei, a former People's
Liberation Army soldier, is noted for never having given an interview to a
journalist.
But Gan rejects accusations of Huawei's "suspicious" government links. "Less
than 0.5% of Huawei's total business is conducted with the Chinese government,"
he says.
Clarke concurs. "I think far from being beholden to the state, Huawei in many
ways sees itself as above the state." He adds that Beijing's fingerprints are
far stronger on Huawei's main domestic competitor, ZTE Corporation, as well as
on other emerging Chinese multinationals, such as computer-maker Lenovo, which
is partly owned by the Chinese Academy of Social Sciences.
Anxious to rid itself of a reputation for copyright violations - in 2003 Cisco
sued the company for copying computer codes - Huawei's primary focus today is
to invest in constant innovation. As a result, it spends 10% of revenue on
research and development and almost 50% of it's more than 68,000 employees are
engaged in research and development (R&D)activities. By the end of 2007,
Huawei had applied for 26,880 patents of which 4,256 had been approved.
Back in Shenzhen, it is lunch time and employees come streaming out of the
state-of-the art R&D facility that bears a distinct architectural
resemblance to the White House. Among the hungry crowds that head for the
cafeteria are dozens of Indians, the bulk of whom trot towards a special Indian
canteen that serves up daal (dried bean) sand rajma chawal (kidney
beans and rice.)
A short drive away from the R&D center, the Norman Foster-designed Huawei
University rubs up against the company's European style employee housing
complex, all of which Amit Li points out with visible satisfaction.
Later in the day, the boom town of Shenzhen recedes as Li's car speeds towards
the airport. But very soon, Li will be in another boomtown: Gurgaon. "I feel
equally at home in Shenzhen and Gurgaon," the young Huawei employee says
chattily, wearing the mantle of his pioneering "Chindian" identity lightly.
Pallavi Aiyar is the China correspondent for the Hindu and author of
Smoke and Mirrors: An Experience of China (Harper Collins India, May 2008).
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