Huawei Technologies started life as a small agency with only 20,000 yuan ($2415.46) of registered capital. Now, 17 years later, it is the top telecom equipment and services provider in China, with annual sales of 31.7 billion yuan ($3.83 billion). It is also one of the few pioneers in the country that had the vision and courage to advance into the international arena, even before the domestic market has been fully exploited.

Huawei first entered the market of developing countries in the mid-1990s, but its products can now also be found in high-end developed markets. As shown by a global sales and services network company report, it is selling products and services to more than 40 countries and regions throughout the world. Their offerings range from traditional equipment to emerging technologies including 3G (Third Generation) and NGN (Next Generation Network).

Worldwide Coverage

In April 2004, the British Telecom (BT), one of the largest telecommunication operators in Europe, began to use equipment produced by Huawei to provide voice-over internet protocol (VoIP) services, and in France, the company took responsibility for a long-distance optical network with French fixed-line carrier LDCom, providing coverage in Paris, Lyons, and Switzerland's Geneva. In Eastern Europe, Huawei became the main telecommunications equipment supplier years ago, realizing hundreds of millions of sales every year.
 
"Some China-made products, represented by Huawei, break with the convention that Chinese products are advantageous only in their low price," commented Fu Jun, head of Huawei's media department. "Chinese companies are showing that technology is also a competitive advantage, which enables them to share the market which used to belong solely to Western giants."

Heavy Reading, an independent market research organization, echoed this in its study of global telecommunications operators. They reported that evidence is mounting that Huawei Technologies will be a huge force in the telecom hardware business, with prospective customers already recognizing Huawei as a supplier of low-cost products.

In the field of mobile communications, for example, Huawei provides network solutions and products to over 80 companies and 20 million clients worldwide. In traditional switches and access network, for another example, the company has kept a leading position in world sales.

Last year, however, was not a good year for Huawei. The outbreak of the deadly SARS epidemic during the first half of 2003 damaged the business connection between China and the outside world. Huawei, expectedly, lost some of its potential orders. In early 2003 Cisco Systems sued the company for alleged illegal copying of software and patent infringements. The bitter dispute ended only last October when Huawei agreed to modify its router and switch products.

Gigantic Growth

Despite all the difficulties, Huawei still presented a "balanced development in technological advance, global market exploration, client services, and management reform," said the company's 2003 annual report. The global sales reached 31.7 billion yuan ($3.83 billion), a 42 percent growth compared with 2002. And 27 percent of Huawei's total revenues came from overseas sales, which had a 90 percent year-on-year growth to $1.05 billion.

Information from independent research agencies showed similar results. According to Dittberner, the renowned telecommunication consultant, Huawei's next-generation network solution, named U-SYS, have been used in over 10 countries and regions, earning 13 percent of the global market share.

Based on a report from Gartner, an IT research company, Huawei has been the second largest market player in the digital subscriber line (DSL) deployments. According to statistics from RHK, a consultant providing telecom advisory services, Huawei ranked first in the second quarter of 2002 in Asia-Pacific's optical network market and the fourth in the world market.

Huawei's partner list is expanding and now includes 3Com.com, a network solution provider, Microsoft, Qualcomm, and Panasonic.

Huawei and its top management are fully aware that an international strategy will not stand long and firm unless the company has also got competent international employees on its payroll.

"Our global vision does not only exist in market exploitation. Huawei wants to be a world class telecom equipment and services provider," said Fu Jun. "International professionals and cross cultural team cooperation are an important goals we are working on."

Research and Development

In 1998, 10 years after its own establishment, Huawei set up a research center in Bangalore, the Silicon Valley of India. The center now has over 700 employees and is one of few organizations that are evaluated to reach the highest level of Capability Maturity Model for Software. Huawei has research centers in America, Russia and Sweden as well.
 
The company is also concerned about how to achieve international management. Since 1997, Huawei has been working with Hay Group, an America-based human resource services firm, to establish a modern human resource management system based on clear job division and efficient performance measurement. Huawei's organizational structure, employee competency and compensation system are all believed to be much improved through this association.

But the way to the international market is not easy, especially for pioneers. Back in 1994, Huawei had just developed its own digital switching equipment and promoted it to the domestic market. That was also the year when the company first participated in an international telecom exhibition in Beijing. Huawei's top management was convinced that China's telecom market would finally slow down after some 10 years of rapid development. The trend was reconfirmed by statistics from the China Certification & Inspection Group. From 2000 to 2002, the annual growth rate of fixed asset investment in telecom dropped to 2.1 percent from the 24.9 percent during the period 1996 to 2000. By the end of 2002, Huawei had taken a large portion of the telecom market with its main products, like switches and access network, but the question it was asking was, where to go next?

Huawei is not a listed company yet, but many experts predict that there will soon be a listing in either the Hong Kong or U.S. stock market. Actually, as a company highly owned by its staff, Huawei has such a complicated ownership structure that some doubt that is the real reason for its reluctance to a public listing. Some critics even think that a crisis will be unavoidable when the financial information of Huawei is fully revealed.

Fu Jun opposes the rumors. "I know only one firm that has a different financial consultant and auditing firm. That is Huawei. KPMG audits our annual reports and PriceWaterhouseCoopers gives financial advise. We do all this to make sure that our financial data are accurate and transparent."

Although they didn't have a clear timetable for overseas listing yet, Fu Jun added, they did have the goal that revenue from international markets should take up 40 percent of the total revenue in 2004.

(Beijing Review June 25, 2004)