Huawei: $6B Sugar Daddy for US Chipmakers

Huawei Technologies Co. Ltd. is doling out $6 billion in new chip contracts to three U.S. companies, the Chinese giant revealed Friday.

Avago Technologies Pte. , Broadcom Corp. (Nasdaq: BRCM) and Qualcomm Inc. (Nasdaq: QCOM) have been awarded three-year original equipment manufacturer (OEM) deals by Huawei, worth $6 billion in total. A spokeswoman for company told Light Reading Mobile that it won't reveal how the billions are split between the three contract renewals.

Qualcomm says that it will be supplying its Snapdragon mobile processors and multi-mode modems to Huawei. Avago says that it will be able to expand its mobile infrastructure portfolio with the new Huawei support. All three are all already silicon suppliers to the Chinese giant.

Why this matters
Huawei can't yet seem to get in on the action with major U.S. carrier infrastructure contracts, but it can splash the cash on American suppliers. The company says that since opening in the U.S. in 2001 it has partnered with 280 firms inking contracts worth more than $30 billion in all. 2011 marked an 8 percent increase in spending in the region year-on-year for the company.

For more
Read up on Huawei's recent North American moves:

— Dan Jones, Site Editor, Light Reading Mobile

Pete Baldwin 12/5/2012 | 5:42:12 PM
re: Huawei: $6B Sugar Daddy for US Chipmakers

Huawei's been going big with the U.S. PR, trying hard to show that it's contributing to the economy and being a good neighbor and all. They certainly have the cash to be persistent about it.

^Eagle^ 12/5/2012 | 5:42:09 PM
re: Huawei: $6B Sugar Daddy for US Chipmakers

They are certainly learning how politics work here.  Carpet bombing PR is one of the key ingredients.  Then the PR about we are making jobs in the USA....  This is a predictable pattern.  Eventually they will make a factory here to "assemble" some small % of their products here (but no real high end jobs that actually write the code, develop the chips, make the designs et al.  That will all be in China just like the Japanese auto factories in the south).  

This pattern is obvious especially with the influence of big money in our political system.

Show the right PR profile, "create jobs"... even though it is is a tiny fraction of what is really manufactured for sale here, get your partners to lobby (Broadcom, Qualcomm, et al), push push push to be able to import huge amounts of technology and products in return for creating those "jobs".  find ways to funnel money into various piles that eventually lead to lobbists and superpacs for politicians.  

Then finally pressure to allow our good friend Huawei to bid on open contracts for carriers and government agencies.  

NOTE: the discourse above is not meant to imply that I like the invasion by China, nor that I like the business ethics of many of the China companies.  But, pretty obvious they are following a well documented path and that they are playing the long game that creates big wins over time.   they are not just thinking next quarter numbers, but rather, working every angle.

you know what the Borg said: "....resistance is futile...."

I think the inevitability is one of the key messages Huawei is working to emplant.  Their rise is inevitable and therefore if we were wise, we would partner with them sooner and let them into our key national infrastructure because we all know "it will be good for everyone..."  Now if we all just repeat it enough times: "Huawei is inevitable, hauwei is inevitable, huawei is inevitable... resistance is futile...."

Of course, then there is the nasty little fact that Huawei is loosing it's pricing dominance bit by bit as wages and expectations of a middle class arise at home, so they really need to push the story and grab share over the next very few years.  Because behind Huawei is huge internal competition from ZTE and others, and rising external competition from Indian manufacturers.  (see the rise of Tejas Networks... growing much faster than Huawei was at the same place in the curve).

should be interesting to watch.  If Huawei can prevail and win some huge north american contracts before other events take away their advantages, then at least they are locked into some large revenues here for several years.  (big carrier contracts in USA run for 2-5 years normally, and often get extended far beyond that.  Look at how long Fujitsu has been able to ride, leverage and grow their north america business due to some early wins in SONET a couple of decades ago.).  Clear what Huawei is doing.  Trying to penetrate our markets in a major way and then lock in design wins at major carriers.  This will help preserve the growth story for Huawei for another decade.  Big stakes.  Clear Huawei sees the big picture and is trying to take steps to evolve to the next level and take more share while they still can.

And huawei is taking strategic moves to help develop and grow some technology advantages including steps like buying CIP.  Look for other key component company buys over the next few years.  small companies that can be bought under the radar's of regulatory agencies in both EU and USA, but which have very interesting technology that can be leveraged by Huawei.  Huawei is also developing some of its' own internal components via their big operation in Wuhan.  All to try to differentiate before they loose their pricing advantage over the coming decade.

as stated, they are playing a long game.   


yeahright 12/5/2012 | 5:42:09 PM
re: Huawei: $6B Sugar Daddy for US Chipmakers

Huawei, a sugar daddy?. Please survey the sales/marketing guys at these semi companies. Ask their ASP to Huawei and Cisco (some other US companies) for the same part. Then write if Huawei is a sugar daddy or in anyway helping the US semi market.  Huawei sucks all the IP from the US semi companies for the fraction of the R&D spent by Cisco & others. The semi companies sell half the ASP to what they sell to Cisco hoping to get a share of their inflated reveneue forecast.

At the end US, as a economy looses. 6B$ ?, if Huawei buys 6B$ worth of chips from these companies, they would be bigger than Cisco, Jnpr and Alcatel combined ( @ Huawei ASP).

photon2 12/5/2012 | 5:42:08 PM
re: Huawei: $6B Sugar Daddy for US Chipmakers

This is a huge marketing advantage Huawei is after, as sailboat says, it doesn't matter what you think or want them to be doing, it's a clever move at the right time for them to make.  They've come a long way in the marketing arena, you have to give them credit on that.


ninjaturtle 12/5/2012 | 5:42:07 PM
re: Huawei: $6B Sugar Daddy for US Chipmakers

At the end of the day we r all whores. We should never sell components to Huawei. Sad that companies do. They will see that it will backfire. I don't trust the Chinese regarding any technology trades. It's a one way street to hell.

Soupafly 12/5/2012 | 5:41:58 PM
re: Huawei: $6B Sugar Daddy for US Chipmakers

Noted what everyone has posted.

I worked with the chinese for 4 years in their super-growth period. From 2007 when they were just an annoying background buzz to 2011, when they are a major force.

In November 2008 they were planning and tactically aligning there resources for a co-ordinated assalt on the continental mainland US market. The US is strategically important to Huawei for many reasons. My guess on the current top 3, in no particular order, is that it might look like this.... (and there are many more & they will change over time & be influenced by market forces. Buy my consulting services and we can go deeper. ;-)

1) Momentum; The USA is the 1 country in which Huawei has very little momentum, and only a handful of customer wins. Despite a local presence of over 6 years & modest strategic investments.

2) Competition; A-L, Ericsson, Juniper and the daddy Cisco. They want market share off all of these guys (and in some cases to crush them completely!) and if you examine the accounts of these guys they have 1 market in common that is strategic and to date, un-touched by Huawei. Anyone wanna guess the market??

3) Innovation; The USA is still the hub of global innovation in technology. Huawei has BIG global ambitions in ICT and software development. In 2007, their core aspiration was just to be a network box shifter/ vendor and gain market share. Now they are in a far more advanced position with much bigger aspirations. The USA has key technical breadth AND depth in key innovation areas, that china wants access and control over.


There are many more comments and insights that I could post, but I wont.

I will say that (based on my direct experience and knowledge) from 2009 onwards Huawei sent a significant proportion of there brightest and their best brains to the USA to help support and deliver breakthroughs, market share and recruit, mentor/support western technical talent.

So watch out USA. Huawei would like you to think they mean business and they are here to stay. The good news is that they have soo much deadwood on the chinese side, its unreal! Key staff lack depth, breadth and exposure. They have hunger and that can disguise allot of acne spots.

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