Huawei Swipes Optical Market Share

Analysts seem to agree: Huawei Technologies Co. Ltd. is the new top dog in optical networking.

This week, two different research houses released market-share data, and both concluded that Huawei was the No. 1 seed in the worldwide optical equipment market.

"If you go back to the beginning of 2007, Huawei has been growing at a 10 percent compounded annual growth rate (CAGR)," says Andrew Schmitt, directing optical analyst at Infonetics Research Inc. "The overall market has been flat for that period, which suggests that Huawei has been taking market share from everyone else."

"Also, the Asia Pacific region has been very strong in the last couple of years, and Huawei is the dominate vendor in that region," Schmitt says.

Table 1: Huawei's Total Revenues (USD $B)
2007 2008 2009 (Estimated)
$12.8 $18.3 $24.0
Source: Huawei, Heavy Reading

Also this week, Ovum Ltd. noted that the global optical networking market was down 8 percent to $3.6 billion worldwide in the first quarter of 2009, compared to the year-ago quarter. But Ovum's figures did say that Huawei stood out by booking around $790 million in optical-related revenue during the quarter, with growth in Asia and hardly any exposure to North America. Alcatel-Lucent, Ovum noted, "suffered from much of the opposite."

"Huawei is on a different growth path from the competition -- and it has been for some time," explains Heavy Reading analyst Sterling Perrin. "Owning the Chinese market in optical is one advantage, but it’s not the only one... In the first quarter of 2009, 40 percent of Huawei's optical revenue came from outside of Asia, with 32 percent of its total revenue coming from EMEA [Europe, Middle East, Africa].

"Clearly, in EMEA, Huawei is eating into Alcatel-Lucent and other European vendors that always counted the region as their stronghold," Perrin says.

— Phil Harvey, Editor-in-Chief, Light Reading

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DCITDave 12/5/2012 | 4:04:39 PM
re: Huawei Swipes Optical Market Share

they very well might... don't forget huawei has its eye on making a bigger dent in north america over the next few years:




HomerJ 12/5/2012 | 4:04:39 PM
re: Huawei Swipes Optical Market Share

When Verizon and AT&T finally cave and start buying from Huawei, ALU is screwed. Not to mention NT, Ciena, Fuji, etc.

gocowboys 12/5/2012 | 4:04:36 PM
re: Huawei Swipes Optical Market Share The value proposition for Huawei has been to produce cheap equipment and enter the market late. They are subsidized by the Chinese government and have a lock on their domestic market. I am not a huge ALU fan, but it seems as though there is a breakdown of fair trade on this one.

The only thing that has kept them out of the US is the fact that they do not understand how to develop and support equipment in this market. Large carriers such as Verizon will likely continue to buy from the name brands (ex: Fujitsu); but having Huawei in the mix drains the water from the pond for everyone. I see little good in this market to allow players such as Huawei to operate the way they do.
Riders in the storm 12/5/2012 | 4:04:35 PM
re: Huawei Swipes Optical Market Share Fully agree that they are being subsidized in a clever and indirect way (often via their Chinese customers who pay a heavy "premium" on the normal market prices for purchases in China(by the way, did the Western state-incumbents not play the same game not that long ago to support their domestic manufacturers?).

However, it would be too easy to solely use this fact to explain the success of Huawei. Also their product line is getting better by the day, and for many technologies Huawei is actually already now superior to the Western dinosaurs.

China simply managed to achieve in less then 5 years what Japan did in the early 50's: first copy and then improve (why bother about IPR's...). But they add state subsidies (both on prices and payment terms) on top of this... (and let's not talk about FCPA compliancy, please)

Unless the whole file is being treated like a political problem, rather a pure economic one, we will have tomorrow Chinese cars, Chinese planes, etc..all over the place.
The West is so naive in this respect....especially in Europe. (How come that the price-level in the US is higher then in Europe? At least the US government is treating telecom like a political file, de-facto blocking the entry of Huawei or ZTE on the US domestic market (as well as any other Chinese company - remember CNOOC's attempt in taking over a small US oil-company??))

I give therefore ALU and NSN another 2 to 3 years of meddling down... and it will be over..
Sad story indeed...
Stefan Sip 12/5/2012 | 4:04:34 PM
re: Huawei Swipes Optical Market Share

First of all, catching up is easier than to lead the pack.  As Huawei gets stronger and begin to penetrate tier-1 operators, its ability to lead and maintain cost advantages will be challeneged greatly.

Huawei and China took a lot more than 5 years to catch up.  What you see in Huawei and China is a function of political stability and sound economic policy.  Since the 1980s, both have become strong producers as well as consumers.  Huawei has benefitted from China's large domestic market both for revenue and technology test beds.  However, Huawei does not get rubber stamp business in China.  In China Mobile, it now has a tiny share due to its lack of TD-SCDMA.  In China Telecom, it has about a 30% market share on 3G CDMA.  Let's be honest, of the CDMA vendors out there (ALU, Nortel, Huawei, and ZTE), for Huawei to get 30%, it is hardly unfair.

Lastly, from a macro-economic prospective, China can afford to subsidze directly or indirectly its industries because is it now a producer country that feeds the world on a consumption binge.  If China wanted to do the same in the 1970s or 80s, it simply could not afford it.  No need to blame Huawei in getting support.  I see it as the Yankees getting the best players because they can afford it and people want to watch a better team.

gocowboys 12/5/2012 | 4:04:30 PM
re: Huawei Swipes Optical Market Share

I don't think that it is an issue of blaming Huawei; rather, the economic policy in this country does little to support or help foundation companies (albeit bail outs). Huawei operates with some advantages that domestic companies do not and no restrictions in the market. The Chinese market is partially open and partially closed. That gives Huawei an inherent advantage in many cases...not all.

My view is that our government should be helping the telecommunications companies in this country. Now you could say that the stimulus package will do that, however, the regulations governing the outlay of money are not clear. I have not seen any "buy American" requirement for the RUS money to be doled out. The other issue is that many companies are sitting on their hands waiting for stimulus money and not spending right now.

Huawei has not entered the NA market because they do not have the right formula. They do not understand the domestic carrier requirements or the requisite support. They have established FutureWei in the US, but that has not done much.

DCITDave 12/5/2012 | 4:04:29 PM
re: Huawei Swipes Optical Market Share There are always claims of Huawei being subsidized by the Chinese government. But where's the proof?
gocowboys 12/5/2012 | 4:04:28 PM
re: Huawei Swipes Optical Market Share

You need to read your own article:


"Huawei and ZTE were able to maintain this aggressive pricing strategy due to heavy government subsidies, which helped buoy their profit margins as they expanded internationally."

Gocowboys 1, LR 0


gocowboys 12/5/2012 | 4:04:27 PM
re: Huawei Swipes Optical Market Share OK, then read the testimony of March of this year of the US-China Economic Security Review Commission


This outlines all the ways that the government helps telecommunications companies. I do not believe that tax breaks for US companies compare. In many cases, US companies are not making any money...tax breaks are not the same as access to capital and subsidies.
DCITDave 12/5/2012 | 4:04:27 PM
re: Huawei Swipes Optical Market Share I read the report when it came out (12/06). It said the Chinese gov't was ending the de facto VAT tax subsidies and rightly raised the question of whether Huawei could compete outside of China. (By the way, big companies in the US don't get tax breaks from the US government, do they?) So my question is: In what ways is the Chinese government helping Huawei in 2009?
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