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Chinese manufacturer Huawei seeks to become a tech powerhouse

October 24, 2011|By John Boudreau
  • Workers head to the cafeteria at Huawei headquarters in Shenzhen, China. Huawei's employees, whose average age is just 31, are known for working long hours to increase the value of their stake in the company.
Workers head to the cafeteria at Huawei headquarters in Shenzhen, China.… (LiPo Ching, San Jose Mercury…)

Reporting from Shenzhen, China — The intensity of this nation's tech ambitions are apparent on the sprawling campus of Huawei Technologies Co., whose youthful employees play hard on basketball courts after working hard to create telecommunications technology for what they hope will be China's first major global company.

Started 24 years ago as a reseller of low-end telephone equipment, Huawei has evolved into the world's second-largest provider of telecom and Internet technology, and Chinese authorities consider it a national champion. Although suspected of having ties to the Chinese military by some American national security officials, and accused by others of getting unfair assistance from the Chinese government, the tech conglomerate has become a competitive threat to Silicon Valley giants Cisco Systems Inc., Juniper Networks Inc. and Hewlett-Packard Co.

Although it has so far failed to land a big deal in the United States because of pressure from Washington, Huawei has become a major force in the global telecom market and is developing high-end Internet technology and other products, such as videoconferencing systems, for businesses and governments.

Cisco Chief Executive John Chambers recently described Huawei as "a very tough competitor over the long term."

Industry observers believe Huawei, an employee-owned company that reported revenues of $28 billion last year, still lacks the innovative edge of Cisco and other leading tech companies, but there is no doubt the Chinese company seeks to become a dominant global player. Nearly half its 120,000 global employees — including about 500 in Santa Clara, Calif. — focus on research and development.

Huawei, which landed $2 billion in enterprise contracts in 2010, expects to double that this year and reach $15 billion to $20 billion a year by 2015. It is tripling its enterprise unit workforce to 30,000 in three years.

It also has carved out a significant share of the market for handsets and tablet computers, and expects to sell 20 million smartphones globally this year.

"Huawei has an excellent chance of becoming the first truly Chinese brand to be a household name around the world," said Richard Brennan, a Palo Alto native who is an executive in the company's industry standards department.

Huawei's headquarters is a far cry from the typical Chinese assembly-line operations like nearby Foxconn, the maker of such things as iPhones and laptops. It's a cross between a university campus and a resort with living quarters for thousands of workers, as well as swimming pools, basketball courts, a large outdoor karaoke stage and other well-maintained recreational facilities. Employees, whose average age is just 31, are known for working long hours to increase the value of their stake in the company, which is ranked as one of China's best employers.

"When we started this company, we had nothing. We could only rely on ourselves," said Daniel Zhong, a manager in Huawei's global testing center. "We will keep innovating and exploring new markets."

Huawei has come a long way in less than a decade. In 2003, Cisco filed a lawsuit accusing it of copying Cisco's software and violating patents, although the dispute was quickly settled because the San Jose company did not want to damage relations with the Chinese government, analysts say.

"They even copied their bugs, for God's sake," said Ray Mota, managing partner at ACG Research, a telecom business consulting and services company. "Their products were very, very low quality. But over the years, they have gotten better and better. They are not quite there yet, but it's a matter of time. It's a scary proposition if you are Cisco, Juniper, Alcatel-Lucent."

Fairly or not, Huawei is viewed by some as a proxy of China's Communist government. Media-shy founder and Chairman Ren Zhengfei was an engineer in the People's Liberation Army 25 years ago. Huawei, facing a wall of opposition from some members of Congress and former Commerce Secretary Gary Locke, now the American ambassador in China, has yet to win a contract with top U.S. telecom carriers, even though it supplies equipment to 45 of the world's top 50 telecoms. U.S. regulators have blocked it from making acquisitions and early this year pressured it to retreat from plans to buy the assets of Santa Clara cloud-computing company 3Leaf Systems.

"Huawei has transparency problems," said James A. Lewis, a cyber-security expert at the Center for Strategic and International Studies in Washington. "Is it acting on the behest of the Chinese government? If the answer is mumbling, the Americans will assume the worst."

Critics say the company has benefited greatly from behind-the-scenes assistance from the government, although Huawei fiercely denies that.

Boudreau writes for the San Jose Mercury News/McClatchy.

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