The Huawei Way: The telecom giant is either a security menace or a real comer

Companies like Cisco, Nokia, Alcatel-Shanghai Bell (Alcatel’s ownership is 50%+1 share), Huawei, South Africa’s MTN and many others are in vigorous competition for market share in a telecommunications market that is continues to heat up.

From the International Edition of Newsweek back on 16 January 2006 comes an interesting story that is a must read on Chinese moves into Africa:

So why do some Western politicians and business executives furrow their brows when [Huawei] comes calling? Perhaps because Huawei, like many fast-growing Chinese companies, is a little too close to the Chinese government, and a little too obsessed with acquiring advanced technology. While Huawei already has an R&D operation in India, for instance, the Foreign Investment Promotion Board has been sitting on its application for a $60 million expansion in Bangalore to develop software for its equipment for months. At the same time, Huawei has applied for a license to bid as an equipment supplier for large-scale Indian telecom projects run by state-owned service providers MTNL and BSNL. But the Telecom Ministry, likewise, has blocked that application. According to press reports, India's Intelligence Bureau suspects that Huawei has ties to China's intelligence apparatus and military, and even performs the debugging sweeps for the Chinese Embassy in India. (Huawei says that's not true.)

More important is the easy line of bank financing Huawei and other companies receive. In 2004, Huawei got a $10 billion credit line from the state-owned China Development Bank and $600 million from the Export-Import Bank of China to fund its global expansion. That, analysts say, has helped Huawei undercut competitors' bids by as much as 70 percent and offer vendor-financed loans. In April, the consulting firm MWL reports, Nigeria received $200 million in loans from the China Development Bank to buy Huawei equipment. "Beijing sees that Chinese high-tech [firms] are weak compared with larger Western corporations," Beijing consultant [Li] says, "so they want to help." Adds [Duncan Clark] of BDA: "It's a Wal-Mart vacuum-cleaner approach. They're just sucking up the market."

Some industry insiders accuse Huawei of catching up by infringing on copyright and stealing industrial secrets. In addition to the IP dispute with Cisco, Huawei came under fire in 2004 when an employee was caught taking photographs of circuit boards inside Fujitsu networking equipment afterhours at a Chicago trade show. Huawei's [Xu Zhijun] calls the incidents "misunderstandings," and adds that they are "all about how Westerners and Americans view China. They think that China can't create this technology. They think the only way we could do it is by stealing." But experts say copying is part of China's corporate culture. "There was reverse engineering [at Huawei] in the beginning," BDA's Clark points out, though he notes that if Huawei's transgressions were widespread, more competitors would have sued. And with newer technologies like optical telecom transmission, adds Duncan, "everyone is starting in the same place."

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