Volte Face

The global telecommunication solutions provider, Huawei Technologies, has been making headlines in the global media definitely on the positives in the recent past. The biggest of all is related to one most important factor that Huawei or any Chinese company, for that matter, is generally not known for quality.

Huawei has witnessed a phenomenal growth in the last few years and has a significant presence in Europe, apart from its Asian presence including in India and China. The huge difference of about 60% price differential between Huawei and Ericsson might be a factor for this growth, while other biggies were struggling for a sustained growth. Its revenue from Apac market is 45%, and the rest is from Europe, Middle East, and North America.

But the company understands that the magic wand called 'cost advantage' alone is not sufficient to make strong foot print in other markets like North American market where it still has relatively smaller presence, though in 2008, Huawei's sales there increased by 58%.

The Deadly Combo: Cost Advantage + Quality

According to a survey results from market research firm Infonetics Research, Huawei is fast improving its image globally from a provider of cheap products to a provider of quality products with cost advantage, with its focus on innovation to offer cutting-edge technology while offering strong value for money. "Based on our recent mobile infrastructure service provider survey, market share reporting, and other carrier surveys, one message is clear: Huawei has really improved its global image," reported the market research firm.

As part of its research methodology, Infonetics collected views from a mix of incumbents (comprising 80%) and competitive (20%), that together represent 14% of the world's carrier revenue.
Huawei is overtaking Alcatel-Lucent on many fronts, and is now en route to attacking NSN's market position in the mobile infrastructure space. And watch out, because another Chinese telco equipment maker ZTE is on the rise as well, said Stéphane Téral of Infonetics. The service providers surveyed rated five mobile infrastructure vendors Alcatel-Lucent, Cisco, Ericsson, Huawei, NSN on a range of criteria including technology, product roadmap, security, management, price-to-performance ratio, pricing, financial stability, and service and support.

So it's pretty clear that Huawei is focusing on innovation on technology front, and is continuously attracting R&D talent. At present, about 43% of the total staff globally is engaged in R&D activities.

Some of the major global contracts it won in this year are from Hutchison CP Telecommunications, Jazztel, Telenor; Comfone, Sferia, etc. In Americas, it won from Bell, Mediacom Communications, Telefónica, Cricket Communications, etc. A closer look at all these contracts reflect that quality of its technology and its capability to reduce opex for operators have been the key selling points.

A Huawei spokesperson says, "Apart from forming strong win-win partnerships to achieve common business goals and sharing benefits with stakeholders, Huawei constantly delivers a superior value proposition by responding to customer needs rapidly and providing a comprehensive solutions portfolio at a lower opex for customers. This has enormously contributed to our growth trajectory.

India Story

In India, Huawei grew by more than 100% last fiscal and the company is targeting to record a similar growth this year as well. India is the largest market for Huawei outside China. In the ongoing fiscal, it has won major orders from TATA DoCoMo for GSM network and managed services for 14 circles; Aircel - South Circle for managed services; Uninor in 3 year equipment deal; and Reliance Communications for GSM network in 22 circles.

However, in India the company has time and again faced allegations of its equipment not being secure. Recently the DoT requested the domestic telecom companies to refrain from buying Chinese telecom equipment. It is not just in India, Huawei faced a similar problem elsewhere as well. In early 2008, Huawei came under scrutiny of a US congressional investigation following suspicions over its links to China's military and intelligence agencies.

British intelligence had also cautioned Britain against a possible threat from China as it might have acquired the ability to halt the country's operations by restricting its telecommunications network. The concern was because of a new communications network deployed by Huawei for British Telecom.

Besides, the company suffered a major setback with the BSNL cancelling the equipment purchase order. BSNL's extreme step came in the wake of the Chinese vendor's conditional supply of equipments.

To further its growth in India, the India R&D center had evolved as a key platform/component development and delivery center of Huawei for the local and international markets. Huawei vice president Weimin Yao says that Huawei has now decided to hire another 2,000 people in the next 18-24 months in India, as it plans to set up a manufacturing plant, either through a joint venture or through an acquisition to become an integral part of the local industry.

For any company to survive and improve its market position, the company constantly needs to add values to its product offerings to the existing customers and the new ones, particularly at a time when service providers look for avenues to cut spendings. Going forward, the company would need to focus more on innovation to continue its growth trajectory.

kannan@cybermedia.co.in