Huawei Goes Underwater

Chinese vendor, with partner Global Marine Systems, unveils subsea subsidiary to take on AlcaLu, Tyco, et al.

December 11, 2007

4 Min Read
Huawei Goes Underwater

Having made its mark on terra firma, Huawei Technologies Co. Ltd. is turning its attentions to the growing Submarine Systems market with the launch of a new business, Huawei Submarine Networks. (See Huawei Submarine Networks Unveiled.)

The new company, a joint venture with partner Global Marine Systems Ltd. , is the result of an agreement signed by the two parties earlier this year. (See GMS, Huawei Team.)

It will open its doors in early 2008 and plans to capitalize on the growing demand for intercontinental capacity, with a view to becoming the specialist sector's No. 2 player in just three years, according to Ian Douglas, currently director of Asia Pacific at Global Marine Systems.

Huawei believes it can build on its existing strength in the long-haul optical sector to break into the submarine market, which is experiencing something of a mini-boom. Huawei was second only to Alcatel-Lucent (NYSE: ALU) in the long-haul DWDM market in 2006, according to research from Heavy Reading, and has already made an impression in the subsea market, having landed an equipment deal with submarine network operator Hibernia Atlantic . (See Long-Haul DWDM: Market & Technology Outlook and Hibernia Chooses Huawei.)Huawei Submarine's main target, though, is to win new, turnkey subsea network projects, where it can provide all the equipment -- Huawei's speciality -- and the marine infrastructure and services needed to lay and light new seabed cables, where Global Marine is a specialist. (See TransTelecom Cable Laid, Global Marine Plans Subsea Link, and Global Marine Wins Deal.)

Demand for new international capacity is growing quickly, and a number of new subsea network rollouts are planned. Douglas believes the market will boom in 2008, with up to 100,000 kilometers of new subsea network orders due to be placed. (See Carriers Plan $500M Transpacific Link, Telstra Picks ALU for Subsea, TIC Expands Subsea Capacity, Carriers to Connect China With $500M Cable, and Google's Building Unity Underseas.)

But the market, estimated to be worth about $1.5 billion in 2007 by subsea specialist Terabit Consulting, already has strong incumbents, including Alcatel-Lucent, which has announced a string of new submarine network deals in the past few weeks, including one Tuesday. Like Huawei Submarine, AlcaLu has both optical equipment and cable-laying operations. (See AlcaLu Wins African Subsea Deal, ALU Wins Orascom Subsea Deal, and AlcaLu Wires Greenland.)

Other major players include cable-laying player Tyco Telecommunications and subsea optical equipment vendors Fujitsu Ltd. (Tokyo: 6702; London: FUJ; OTC: FJTSY) and NEC Corp. (Tokyo: 6701). (See Fujitsu Scores Massive FLAG Deal, Tyco to Build VSNL Subsea Network , and NEC Brings Cable to India .)

So what does Huawei Submarine have to offer? Capacity to deal with the growing demand for one thing, says Douglas. "The bottleneck as the market grows is going to be ships" for cable laying and maintenance. "You need a fleet to be in business," adds Douglas, who says Global Marine has 12 of the market's 40 or so vessels.

Market leader AlcaLu, which believes it commands about 40 percent of the total subsea networks market, has six ships -- three for cable installation and three for maintenance -- while Fujitsu and NEC concentrate on the subsea optical equipment rather than the shipping fleets.

Huawei Submarine also believes it has developed a new approach to subsea capacity upgrades that makes it quicker, easier, and cheaper to add new capacity than with current systems. Douglas says this involves lighting all the optical system's capacity on Day 1 and then supplying new WDM cards when extra bandwidth needs to be deployed.

The company also believes it can offer carriers options whereby expensive landing stations do not need to be built, though that model does require an end-to-end Huawei optical deployment and a landside POP within 50 kilometers of the cable landing point.

The new company's main target markets will be Asia/Pacific, Africa, and Latin America -- "classic Huawei territory," says the Global Marine man.

But Douglas says Huawei Submarine will not be looking to win business, and achieve its target of being the market's No.2 player, simply by offering low prices.

"We aim to be competitive in upfront costs, but it's not our strategy to drive prices down to win market share. There's no need for us to do any loss leading," Douglas says.

— Ray Le Maistre, International News Editor, Light Reading

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