Heavy Reading Homes In on Huawei

While other major telecom equipment vendors are battling sales stagnation, Huawei Technologies Co. Ltd. appears to be bucking the trend, claiming to have registered a 45 percent increase in the value of contracts signed in 2007. (See Huawei Sets Bumper Sales Target.)

And according to reports, Huawei believes it can grow by a further 37 percent in 2008.

Historically, the Chinese vendor has been known for its rock-bottom pricing, making the most of a low cost base to deliver products at prices that its Western counterparts can't match. And it's also earned a reputation for dubious business practices. (See Police Raid Huawei Offices in Brazil , Will Spying Charges Hurt Huawei?, and Huawei Admits Copying.)

But the company also has many admirers, who say it has tremendous technical capabilities and is very fast to meet demands. As a result, Huawei, which now employs nearly 69,000 people (as of December 2007), 48 percent of whom are in R&D, has an impressive list of customers and says it now supplies technology to 35 of the world's top 50 operators.

As well as the domestic Chinese carriers, those customers include BT Group plc (NYSE: BT; London: BTA), Deutsche Telekom AG (NYSE: DT), Orange (NYSE: FTE), Telecom Italia (TIM) , Telefónica SA (NYSE: TEF), and Vodafone Group plc (NYSE: VOD), including many engagements with those carriers' international business units. (See BT Goes With Huawei for FTTH , Huawei Lands Deutsche Deal, Huawei Wins HSPA Contract, Huawei Racks Up Euro Wins, Huawei Wins Vodafone Deal, and Vodafone, Huawei Team.)

So where do Huawei's strengths, and weaknesses, lie? Light Reading asked a selection of analysts at Heavy Reading to assess the vendor in their areas of expertise.

Next-generation fixed access and IMS
Heavy Reading chief analyst Graham Finnie, who recently completed a major fiber-to-the-home (FTTH) report and who has spent a lot of time focused on IP Multimedia Subsystem (IMS) developments, says Huawei knows how to appeal to carriers' requirements for a full set of standards-based technologies. (See Report: EMEA Set for FTTH Surge.)

"Huawei ticks all the right boxes on standardized products, such as GPON (Gigabit PON) and Call Session Control Function (CSCF) [in an IMS], and then goes for the best price/performance ratio," says Finnie. (See Huawei Unveils T/bit GPON Gear.)

Where the Chinese firm isn't so good, reckons the analyst, is in services and support.

"I would say they don’t yet have a proven reputation as a systems integrator and provider of in-depth professional services and support, including a proven ability to partner, in established countries, though that is changing." Finnie adds that Huawei also has a reputation for sometimes promising what it can't deliver, "though even if that's true it would hardly be the only culprit in that respect."

Finnie also notes that rivals and industry watchers possibly don't have a firm grip on Huawei's global strategy. "One thing that isn’t always understood is that Huawei isn’t showing much interest in the U.S. and is focusing the biggest part of its marketing outside the conventional 'West' -- that is, North America, Western Europe, Japan, and so on. Instead, it is winning business everywhere else: in Asia, the Middle East, Eastern Europe, Africa, South America, and, of course, China."

The message there, notes Finnie, is that "vendors no longer need to be big players in the U.S. and the big European Tier 1s to be among the dominant players overall. The biggest growth opportunity is elsewhere."

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douaibei 12/5/2012 | 3:44:13 PM
re: Heavy Reading Homes In on Huawei Huawei is not following the industrial pace which innovation is king; actually most of the business requirement can be met by the technology invented years ago. why spend so much hard currency on innovation?

The industry do not against the innovation, but the innovation have to be aligned with the business requirement, strategic target, not for sake of innovation.

Huawei is a very good company to combine the proper technology and the cost/operation model. it's revenue model is not to the breed. but the best operation model and special deal with the developing country fueling the growth the company.

Huawei is trying to catch the latest technology in mobile, but trying to achieve the best return of investment in other industry like, routing, switch, fix network, optical, and even storage.

Hopefull this post will trigue some interest discussion regarding how to make money in the so called innovative telecommunication industry.

ibby8000 12/5/2012 | 3:44:12 PM
re: Heavy Reading Homes In on Huawei Huawei are good at what they do, they look at things simply and see what works well and what doesnt, one thing with Huawei is that they are not leaders in terms of development but take all of the good ideas of other vendors and develop these on to there platforms thus reducing there R&D overhead and spend thus making them achieve targets and goals quickly

one example of this is how the 3800 and 6800 optical platforms rather looks like a particular american optical vendors company products with ODU0 switching capabilities
eurichardson 12/5/2012 | 3:44:11 PM
re: Heavy Reading Homes In on Huawei
Isn't Huawei partly owned by the chinese government and by the chinese military? Recently Huawei tried to acquire 3Com, but the US Government blocked the deal. I think the European operators should think twice before buying telecom equipment from a company owned by the chinese government!
lite-brite 12/5/2012 | 3:44:11 PM
re: Heavy Reading Homes In on Huawei very interesting opinion, which appears to be true based on Huawei's growth! How can innovation and progression be based on curent 'models' and metrics everyone else is using? Progressiveness is doing something different to what everyone else is doing, as long as it makes money, even if it 'bucks the trend'.
dsb 12/5/2012 | 3:44:11 PM
re: Heavy Reading Homes In on Huawei With lower manufactoring costs, and cheaper engineers leading to lower R&D costs, Huawei is a juggernaught that I don't see any of the old telecom equipment companies being able to beat.
macster 12/5/2012 | 3:44:10 PM
re: Heavy Reading Homes In on Huawei How ignorant somebody is! Huawei is a private company totally owned by her employees!
All employees? Or Chinese employees only?
TelecomIdol 12/5/2012 | 3:44:10 PM
re: Heavy Reading Homes In on Huawei How ignorant somebody is! Huawei is a private company totally owned by her employees!
wfoster8560 12/5/2012 | 3:44:10 PM
re: Heavy Reading Homes In on Huawei Huawei is following a strategy of investing heavily in IMS while continuing to provide softswitch solutions for integrating PSTN and VoIP networks. There users know that if IMS becomes a reality, Huawei's customers will have an upgrade path.
februni 12/5/2012 | 3:44:10 PM
re: Heavy Reading Homes In on Huawei make me recall Clayton Christenson's book "The Innovator's Dilemma" ...
macster 12/5/2012 | 3:44:09 PM
re: Heavy Reading Homes In on Huawei What happens when these cost bases rise? If the other vendors move manufacturing to China, would this mean they an better compete with the mighty HW?
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