🔒 How Huawei took over the world – The Wall Street Journal

JOHANNESBURG — As a former tech journalist, I read this piece on The Wall Street Journal with great interest. It was only a few years that there basically two major players in the smartphone space: Apple and Samsung. (And long before that it was BlackBerry and Apple.) But in recent years, a Chinese company called Huawei started climbing up the charts. It first started with cheaper and relatively more basic smartphone devices. But it’s R&D department has developed in such leaps and bounds that its flagship devices today are regarded as the best smartphones in the world – bar Apple’s iPhones. Huawei has also overtaken Apple in terms of total smartphone shipment numbers and now stands just behind Samsung. But what makes Huawei more interesting than both Apple and Samsung is that the Chinese company also makes the cell towers and peripherals that power our mobile connectivity. In South Africa alone, you’ll see Huawei branded bakkies driving around urban areas connecting up our cities. The US is trying to stop Huawei’s global march, but it’s probably too late now… – Gareth van Zyl

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Founded in 1987 by former army engineer Ren Zhengfei, Huawei Technologies Co. is a Chinese colossus. The world’s largest supplier of telecom equipment and the No. 2 maker of mobile phones, its technology touches virtually every corner of the globe, and its massive R&D budget has made it a leader in 5G technology. Yet it has long faced scrutiny. Here’s how it found success.

Dialing Up

Huawei’s carrier business—which supplies the nuts and bolts of the telecommunications market to networks around the world—has always been the company’s heart and soul. Its enterprise business, which includes cloud computing, and its consumer businesses, selling smartphones and other gadgets, are growing fast.

Long Distance

The company got its start supplying telecom gear to rural areas of China, which remains its biggest market. Huawei later spread to other developing markets before capturing a significant share of Europe’s telecom market. A security center that scrutinizes its telecom equipment helped win over U.K. authorities, but it remains effectively locked out of the U.S., where it is considered a security threat, which Huawei denies. It still operates in more than 170 countries and employs 180,000 people.

Big Spender

In its early days, Huawei was accused of stealing technology, including by Cisco Systems Inc. in a 2003 lawsuit, which Huawei settled without admitted wrongdoing. Now it has the biggest R&D budget of any tech company in China, pouring $13 billion last year into developing its own technologies, outpacing Intel Corp. and spendingalmost as much as Google parent Alphabet Inc. Huawei says that 80,000 people—45% of its employees—work on R&D. They make chips, design phones and work on 5G technology.

Catching Up
Telecom equipment market share by revenueSource: Dell’Oro Group*Includes acquisitions of Siemens Networks and Alcatel LucentNote: 2018 data through third quarter; other acquisitions are accounted for in the years theyoccurred.
%ZTECiscoEricssonNokia*Huawei2007’08’09’10’11’12’13’14’15’16’17’18020406080100

In 2015, Huawei became the world’s biggest maker of networking equipment—gear like base stations, routers, modems and switches. Its rise has alarmed some officials in Washington, who say its products could be used to spy on Americans and allies. Washington has never proved the claims and Huawei has long denied them.

Phoning It In

Not only does Huawei dominate in telecom equipment—it wants to sell you the phone that connects to that equipment, too. Earlier this year, it surpassed Apple Inc. to become the world’s No. 2 vendor of smartphones world-wide, behind only Samsung Electronics Co.Devices like the P20 feature top-of-the-line photography, helping shake the image of Chinese-made gadgets as cheap knockoffs.

Who Owns Huawei
Chinese President Xi Jinping is shown around Huawei’s offices in London by its president, Ren Zhengfei, on Oct. 21, 2015.
Chinese President Xi Jinping is shown around Huawei’s offices in London by its president, Ren Zhengfei, on Oct. 21, 2015. PHOTO: MATTHEW LLOYD/PA WIRE/ZUMA PRESS

Huawei’s ownership structure has long attracted scrutiny. The company is privately held, and Huawei says it is owned by its employees, with Ren Zhengfei controlling a 1.4% stake and the rest distributed among 81,000 employees. U.S. officials have said the arrangement is opaque and leaves unclear whether Beijing has a hand in the company’s operations, which Huawei denies.

Huawei and the World
Huawei’s stand at the Cebit digital fair in June 2018.
Huawei’s stand at the Cebit digital fair in June 2018. PHOTO: HAUKE-CHRISTIAN DITTRICH/DPA/ZUMA PRESS

Huawei’s ascent has been aided by partnerships with a slew of Western companies. It’s a huge buyer of chips from Intel, with whom it researches 5G technology. International Business Machines Corp.has been a key consultant. In 2012 a Huawei official said that without IBM, “We could not have had the Huawei of today.” Huawei’s first big break overseas was its 2005 contract with U.K. carrier BT Group PLC and it maintains a big presence there.

5G R&D

A huge R&D budget means Huawei develops many of its own advanced technologies. HiSilicon, its chip-design firm, is the seventh-largest in the world. Just a fraction of the semiconductor components inside Huawei’s top-of-the line P20 smartphone come from American suppliers, in contrast to rivals who use far more U.S. chips in their phones. Analysts say Huawei’s self-reliance could insulate it from further U.S. action aimed at cutting off its access to American parts.

Write to Dan Strumpf at [email protected]

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