BSTR/523

IBS Center for Management Research

Can Huawei Overcome Roadblocks in its Quest for Global

Markets?

This case was written by Hadiya Faheem, under the direction of G V Muralidhara, IBS Hyderabad. It was compiled from published
sources, and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling
of a management situation.

Winner of the Nominated Case Award in the 2016 Global Contest of the ‘Best China Focused Cases’ co-organized by CEIBS,
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 2017, IBS Center for Management Research. All rights reserved.

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 BSTR/523

Can Huawei Overcome Roadblocks in its Quest for

Global Markets?
INTRODUCTION

In October 2016, Shenzhen-based networking and telecommunications equipment and services

company Huawei Technologies Ltd. (Huawei) unveiled its 14-port and 3-D Hexa-beam antennas
to address the challenges associated with the 4.5G and 5G era at the 5 th Annual Global Antenna
and Active Antenna Unit Forum held in Paris. Commenting on the launch, Zhang Jiayi, president
of Huawei’s antenna business unit, said, “Huawei focuses on satisfying the requirements of
operators in the MBB (mobile broadband) era.”1
Founded in 1987 in Shenzhen by Ren Zhengfei (Ren), a former military engineer in the People’s
Liberation Army (PLA) – the unified organization of the armed forces of China, Huawei started as
a sales agent for a Hong Kong-based company selling private branch exchange (PBX) switches.
Soon, the company innovated and started selling its own PBX switches. Having established its
domination over the Chinese telecommunications market, the company entered the global markets
of Russia and Africa in 1996 and later mature markets such as the US and Europe.
Even as Huawei was readying itself to build 5G wireless networking equipment, the US began
raising concerns over the company’s participation in building the US 5G wireless network after
American multinational telecommunications company AT&T Inc. (AT&T) announced in July
2016 that it had begun talks with several companies including Huawei, for creating global
standards to build the US 5G network. AT&T’s announcement came soon after the Federal
Communications Commission, an independent agency of the US government, approved a plan in
June 2016 for readying the US for 5G wireless networks.
Though nothing had materialized between AT&T and Huawei, US military and intelligence
agencies raised an alarm against Huawei’s participation in building the nation’s 5G wireless
networks. The US had suspected Huawei for over a decade of being an intelligence gathering arm
of the PLA due to Ren’s past association with the military. In addition to the US, the company
faced opposition from Australia and the European Union for its telecom equipment. Much like the
US, Australia alleged that Huawei had entered its establishments through the back door at the
behest of the Beijing government, giving China a better chance to spy on the Australia. Huawei’s
culture of secrecy, lack of openness and transparency, and Ren’s unwillingness to give pubic
interviews only fueled more suspicion against the company.
In October 2012, a US House intelligence committee report concluded that Huawei was a threat to
US national security. Similar concerns had led to the Australian government banning Huawei from
bidding as a supplier for the country’s National Broadband Network (NBN).
Huawei had consistently denied all espionage accusations and the allegations that it had links with
the military. The company fought relentlessly over several years to shed its image of a company
controlled by the Chinese state, despite its private ownership structure. Since Ren’s past
1
Ning Jiajun, “Factors that Set ICT Giant apart,” www.chinadaily.com, October 25, 2016.

1
 Can Huawei Overcome Roadblocks in its Quest for Global Markets?

experience in the PLA was often cited by overseas media and officials to suggest that Huawei was
collaborating with the Chinese government, Huawei took the help of global public relations firms,
advertisers, and strategic consultants to try and erase this impression. Despite spending a huge
amount of money on lobbying activities in the US from 2012, the company had to lower its
presence in the US telecom market.
Amidst past concerns over Huawei being a threat to national security, the domestic intelligence
and security service of the US, the Federal Bureau of Investigation, and the intelligence
organization of the US government, the National Security Agency (NSA), were examining the
national security implications for the US if Huawei participated in building the nation’s 5G
wireless network. The agencies believed that Huawei, owing to its close ties with the Chinese
military, might implant ‘microscopic beacons’ inside its circuits and routers enabling the PLA to
spy on the US government and military communication networks in real time.
While Huawei was at the forefront of telecommunication technology, it had to work out an
effective strategy to overcome the security concerns of countries to be successful in its quest for
global markets.

HUAWEI – FROM SHENZHEN TO GLOBAL MARKETS

The origin of Huawei Technologies Ltd. (Huawei) dated back to 1987 when Ren Zhengfei (Ren), a
former military engineer in the People’s Liberation Army (PLA), founded the company in
Shenzhen with the aim of making it the backbone of China’s communications industry.
The company started as a sales agent for a Hong Kong company selling private branch exchange
(PBX) switches with an initial investment of US$ 3400. 2 By 1990, it had acquired enough
resources to open its first research laboratory. In the same year, i.e. 1990, the company made its
own PBX and started selling the switches to hotel networks at prices lower than those of imported
devices (Refer to Exhibit I for Huawei’s Milestones).
From 1993, Ren’s investment in R&D and engineering personnel began to pay off when Huawei
introduced its C&C08 digital telephone switch, which had the largest switching capacity in China
at that time. Huawei’s technological breakthrough led to the government coming out in support of
the company. Thereafter, it monopolized the Chinese rural market. Soon after, with high product
quality and improved product development, it started competing with foreign enterprises in the
Chinese market.
The company’s expansion in China was inspired by the military strategy of Chinese Communist
revolutionary and the founding father of the People’s Republic of China, Mao Zedong’s (Mao) –
grow in the countryside and then expand to the cities. Huawei first targeted the rural areas
neglected by dominant domestic as well as international suppliers, expanded into lower-tier cities,
and finally covered the entire country. This strategy enabled the company to achieve a
commanding position in its home base within a short period. In the 1990s, the dominant position in
the Chinese telecom equipment market was held by Shanghai Bell 3. However, Huawei was able to
overtake leading companies in the Chinese market, including Shanghai Bell, through its ingenious
marketing strategies and advanced technology.
Huawei’s way of conquering the market against powerful multinational corporations (MNCs) and
International Joint ventures in China was known as the ‘wolf culture’. The term was used as the
company followed the tactics adopted by wolves. According to Ren, “In the battle with lions,
wolves have terrifying abilities. With a strong desire to win and no fear of losing, they stick to the

2
“Huawei Aims High with Innovation, Entrepreneurship,” http://wap.chinadaily.com.cn, April 14, 2015.
3
Shanghai Bell is a Joint Venture between the business arm of the Military of Post and
Telecommunications and the French operation Alcatel and Julong. It was formed from 8 State Owned
Enterprises supervised by the Chinese military and key government ministries.

2
goal firmly, making the lions exhausted in every possible way.” 4 Ren described the wolf spirit as
comprising three qualities – a strong willingness to self-sacrifice, extreme resilience in the face of
failure, and sharp predator instincts. Taking a cue from these tactics, Huawei cultivated a wolf
culture at the company that enabled it to sensitively understand trends and opportunities in the
market, strengthen its ability against competitors, and work in teams.
Sensing that the huge competition would lead to saturation in the domestic Chinese
telecommunications market, Ren decided to enter the global markets in 1997. Huawei first entered
the emerging markets of Hong Kong, Russia, and Africa.
In 2001, having conquered the developing markets of Russia and Africa, Huawei entered the
developed markets starting with the US, followed by Europe and Australia. The advanced features
and low-cost products offered by the company impressed consumers in Europe. Soon, Huawei
received contracts from the Netherlands, Germany, and France.
Huawei’s international revenues increased by 210 percent in the first half of 2002 – an otherwise
dim period for equipment manufacturers.5
In 2004, 94 percent of Huawei’s international sales were to developing and transition economies.
Africa was Huawei’s biggest international market, accounting for one-third of its international
sales. Its sales to Nigeria were three times as large as its total sales to Europe.
Though the Chinese telecom market was dominated by foreign suppliers, four domestic companies
emerged as the most notable telecom companies in China – Huawei, ZTE Corporation (ZTE),
Datang Telecom Technology, and Great Dragon Telecom, collectively known as “Great China”.
According to market research firm, CRC-Pinnacle, domestic Chinese manufacturers had cornered
32 percent of the Chinese market by 2005. Of this, Huawei had a 13.5 percent market share and
was the market leader6.
In 2008, Huawei was included in Businessweek magazine’s inaugural list of ‘The World’s Most
Influential Companies’.
For the FY ended 2015, Huawei’s global revenues stood at US$ 60.83 billion (Refer to Exhibit II
for Huawei’s financial summary).

HUAWEI’S INTERNATIONALIZATION STRATEGY

In the mid-1990s, the Chinese domestic telecommunications networking equipment market was
dominated by giant international telecom equipment companies. Their dominance led to Huawei
having a relatively weaker position in China. Ren believed that the Chinese telecommunications
market was the largest and among the most open markets in the world attracting global
telecommunication giants to the country. As a result, he felt, “The best food has all been eaten up
by the global giants and what we can do is to have those leftovers.” 7 This prompted Huawei to
consider entering international markets. Commenting on its international expansion, Ren, said,
“We were forced to go into the international market for our very survival.”8

4
“Learning from Wolves to Fight Lions,” www.chinadaily.com.cn, September 4, 2010.
5
S. Shajahan, “Management Information Systems,” New Age International, 2007.
6
Michael Hitt, R. Duane Ireland, and Robert Hoskisson, “Strategic Management: Competitiveness and
Globalization, Cases,” Cengage Learning, 2009.
7
Karl P Sauvant, Geraldine McAllister, and Wolfgang A Maschek, “Foreign Direct Investments from
Emerging Markets: The Challenges Ahead,” Palgrave Macmillan, 2010.
8
Peter Nolan, “Chinese Firms, Global Firms: Industrial Policy in the Age of Globalization,” Routledge,
2014.
Huawei approached the international market as it did its domestic market, attacking “soft” targets
first before moving into tougher markets. There were many underserved segments in these
markets, mostly clients with limited resources, who could not afford the products of established
MNCs.
Huawei’s first international customer was Hong Kong-based telecommunications company,
Hutchison Telecommunications (Hutchison) in Hong Kong in 1996 (Refer to Exhibit III for a
timeline of Huawei’s globalization). Hong Kong proved to be an excellent place for Huawei to
start its internationalization strategy as it was a well-developed telecom market and yet was close
to Shenzhen, where Huawei operated. In 1996, when Hutchison planned to foray into the Hong
Kong market, it had to fulfill the then novel requirement that consumers be offered number
portability. The requirement came in the way of its launching its services in Hong Kong. It was
Huawei that came to its rescue. The company offered to provide Hutchison a shorter
implementation period at a lower cost than the established suppliers. Subsequently, Huawei won
the contract and completed the task within three months.
From Hong Kong, Huawei moved to second and third tier markets including Russia, Vietnam, and
a large number of countries in Africa and South America. In 1997, the company formed a Joint
Venture with the Russian manufacturer of telecommunications equipment, Beto Corporation
(Beto), to produce switching equipment, primarily assembling Huawei’s switches in Russia. For
Huawei, Beto provided access to the Russian market, which would have been difficult for it to
penetrate on its own. Beto’s sales force, local environment knowledge, and its relationship with
government officials were essential for Huawei to make sales in Russia. For its part, Beto
cooperated with Huawei in a bid to gain access to the latter’s technology. Though the company
undercut international prices by 12 percent, it was able to impress the Russians with its after-sales
service. Huawei earned US$ 12 million in sales from the Russian market. 9
Having entered Russia, Huawei expanded to Thailand, Brazil, and South Africa. The company
adopted aggressive pricing tactics, often undercutting its competitors by 30 percent. 10 In November
2000, Wu Bangguo (Wu), a high ranking politician in the People’s Republic of China, traveled to
Africa with Ren, laying the foundation for several business deals for Huawei such as a US$ 20
million contract in Ethiopia in 2003, a US$ 200 million code division multiple access (CDMA)
project in Nigeria in 2005, and projects in Ghana, Morocco, Mauritius, Kenya, and Congo in 2006.
In 2001, Huawei entered North America launching an aggressive marketing strategy where it
priced its products 30 percent lower than Cisco’s products. The company also aired an
advertisement featuring Huawei products against the background of the Golden Gate Bridge in San
Francisco, which was Cisco’s logo. The message said, “The only difference between us and them
is price.” Corporate buyers were quick to recognize the high-quality performance of Huawei’s
routers and Cisco immediately realized the threat posed by the Chinese company. Cisco then
requested Huawei to give up its R&D in high-end products and not build its brand in the US. In
return, the former would give all its Original Equipment Manufacturers orders for low-end
products to Huawei. Huawei turned down the request.
In June 2002, at a trade show Supercomm, in Atlanta, John Chambers, CEO of Cisco, visited
Huawei’s booth as an unidentified visitor. Soon, Cisco planned a counterattack against Huawei. In
January 2003, Cisco sued Huawei for alleged infringement of its intellectual property rights (IPR).
The company said Huawei had copied its software.
According to Cisco, the copying was so ‘lavish’ that Huawei’s router software contained the
same bugs as Cisco’s. Cisco sought stiff penalties in the lawsuit, including the discontinuation
of the production of Huawei’s Quidway routers as well as impoundment and destruction of all

9
Xiaolan Fu, “China’s Path to Innovation,” Cambridge University Press, 2015.
10
Nathaniel Ahrens, “China’s Competitiveness,” http://csis.org, February 2013.
Huawei’s routers and manuals in the US. At the same time, Cisco launched a ‘cease and
desist’ order against Huawei’s UK distributor, Spot Distribution. Analysts observed that
Huawei’s steep discounting of Cisco’s products on its home turf, the US market, had prompted
the lawsuit, which was Cisco’s first intellectual property lawsuit despite its huge intellectual
portfolio. Huawei denied the allegations, asserting that as a company that invested 10 percent
of its revenues in R&D, it respected IPRs. It hired top lawyers in America to fight its case. In
addition to this, it announced a Joint Venture with 3Com, Cisco’s rival, to improve its
bargaining power in settling the lawsuit.
The company later acknowledged that it had “inadvertently” obtained a small amount of Cisco’s
source code and used it in its own products. Cisco finally dropped the lawsuit in July 2004 after
Huawei agreed to withdraw its Quidway routers and other related products from sale in the US and
also to change the software and documentation. Consequently, over the next several months, Huawei
withdrew most of its products from the US due to its settlement agreement with Cisco. In the midst
of the legal proceedings, numerous sales contracts that Huawei was trying to close got killed.
After these blunders, Huawei landed the first contract with a US wireless carrier in February 2004.
It subsequently secured several other contracts with small wireless carriers in the US. Commenting
that Huawei had serious intentions for the US market, Albert Lin, Huawei’s head of R&D for
North America, explained, “We need to present ourselves better. We also have to make it clear that
we are not just testing the waters in the United States.”11
Huawei stumbled again in June 2004, when its employee was caught taking pictures of the insides
of some high-tech equipment from Fujitsu in a Chicago trade show.
Even as Huawei was facing problems in the North American market, it was gaining a reputation
for itself in the emerging markets. The company was able to get a foothold in the Middle East for
its advanced 3G technology in direct competition with leading Western firms. In 2003, the
company won the 3G contract from United Arab Emirates (UAE)-based telecommunications
provider, Etisalat Telecommunications Corporation (Etisalat).
In 2004, Huawei pushed its internationalization strategy by getting access to extensive credit of
US$ 10 billion from the China Development Bank (CDB) and an additional US$ 600 million from
the Export-Import Bank of China. 12 With this robust backing, Huawei made a major global push.
In 2005, Huawei achieved two milestones in its international expansion. It was certified as a
qualified supplier to both British Telecom and Vodafone Group plc (Vodafone). The company was
selected as one of the four preferred suppliers to British Telecom’s US$ 19 billion project along
with the US-based Ciena Corporations and Lucent Technologies and Germany’s Siemens AG.
Huawei displaced Marconi as one of the suppliers of British Telecom’s massive contract for its
network. Even more significant was the fact that since 2005 Huawei had established itself as a
long-term supplier for Vodafone, the world’s biggest phone company.
In 2005, Huawei recorded sales of US$ 6.5 billion of which 60 percent came from international
sales.13
In 2009, Huawei in association with Norwegian telecom operator, Telenor, developed Norway’s
4G network, which was then considered to be Europe’s largest fourth-generation (4G) LTE 14
network.

11
Michael Hitt, R. Duane Ireland, and Robert Hoskisson, “Strategic Management: Competitiveness and
Globalization, Cases,” Cengage Learning, 2009.
12
Roman Boutellier, Oliver Gassmann, and Maximilian Von Zedtwitz, “Managing Global Innovation:
Uncovering the Secrets of Future Competitiveness,” Springer, 2008.
13
“Huawei Aims for $100 Billion in Revenue within 10 Years,” www.bloomberg.com, April 27, 2011.
While Huawei achieved success in most of the global markets it entered, in 2012, its telecom
equipment was banned in the US telecom market amidst security concerns. The US government
feared that Huawei through its telecom equipment could be spying for the Chinese government.
The Australian government also banned Huawei from bidding for the National Broadband
Network in 2012. The company faced security issues in the UK market too.

CHALLENGES IN THE GLOBAL TELECOM MARKETS

The US
Though Huawei achieved huge success in several global markets, the US was a different story
altogether. Despite bidding several times since the company first entered America, Huawei failed
to win a single big contract from top-tier carriers such as AT&T, T-Mobile, and Verizon. The US
telecom companies had had long relationships with home-grown suppliers such as Lucent,
Motorola, and Cisco. Moreover, the US telecom majors felt that while the telecom equipment
manufactured by Huawei was fine for emerging markets, it was not reliable or suitable for the 24/7
service required by networks in the US. Though by 2011, Huawei had developed some of the most
innovative and fastest equipment in the telecom industry, it continued to face resistance in the US.
It was reported that Huawei was also blocked from acquiring US firms. For instance, in 2007,
Huawei in association with investment banking firm, Cain Capital, failed in acquiring leading
American computer network infrastructure products manufacturer, 3Com, a company making anti-
hacking software for the US military. The company had to give up the 3Com deal after the
Committee on Foreign Investment in the US examined the national security risks of the deal. For
similar security reasons, Huawei failed to acquire American software supplier, 2Wire, in 2010;
Motorola’s mobile network infrastructure unit in 2010; and American Technology Company,
3Leaf Systems, in 2011.
Huawei was not only prevented from acquiring US-based firms, it was also not allowed to bid for
telecom infrastructure projects in the US. For instance, in November 2010, when Huawei bid for a
contract from one of the top US telecom operators, Spring Nextel, for the supply of network
infrastructure, the US government intervened and the then-Commerce Secretary, Gary Locke,
asked Dan Hesse, CEO, Sprint Nextel, to reject bids from Huawei. Though the contract with
Huawei could have saved Sprint Nextel at least US$ 800 million of its existing costs in its first
year of operation alone, it did not choose Huawei as members of the US Congress 15 led by Senator
Jon Kyl, Republican from Arizona, urged it not to include Huawei. The US$ 5 billion contract was
bagged by Ericsson, Alcatel-Lucent, and Samsung. 16 Amidst security concerns, in April 2011,
some lawmakers in the US sent a letter to the then US President, Barack Obama, to pressure the
telecom major to forego its contract with the US Agriculture department.
The US regulators speculated that Huawei could be used for spying for the Beijing government.
There were also unverified assertions that the company could be linked to the Chinese military.
The charges were largely based on the fact that Ren had once served in the PLA as a telecom
technician and was a military and government contractor in China. According to James Lewis
(Lewis), cyber-security expert at the Center for Strategic and International Studies (CSIS), a public
policy research institution in Washington, “The context of all this is, China is very active in
espionage, as are we. The national security community in the U.S. is united in its opposition to
14
Long-Term Evolution is a standard for wireless communication of high speed data for data terminals and
mobile phones.
15
The US Congress represents the US federal government and comprises the US Senate and the House of
Representatives. The powers of the Senate are described in the US Constitution.
16
Sheridan Prasso, “What makes China Telecom Huawei so Scary?” http://fortune.com, July 28, 2011.
Huawei.”17 Stating that Huawei was not open and transparent, Lewis added, “Huawei has
transparency problems. Is it acting on the behest of the Chinese government? If the answer is
mumbling, the Americans will assume the worst.”18
Huawei denied all allegations against it and started making efforts to win over consumers in the
US. The company hired executives from western companies such as Cisco, Intel Corp., Ericsson,
Nortel, and Sun Microsystems and engaged the lobbying firm of William Cohen, former Defense
Secretary. The company also hired former UK government chief information officer, John Suffolk
(Suffolk), to serve as its first global cyber security officer in 2011. In addition to this, in February
2011, Huawei published an open letter inviting the US government to investigate the company’s
business practices. In a bid to alleviate security concerns, Huawei volunteered to reveal its source
code. In addition, Huawei started an aggressive PR campaign in the US, hiring lobbyists in a bid to
boost the company’s image. The company also invited congressional staffers to visit the Huawei
factories while they made their official trips to China.
Since the US regulators complained of Huawei having a secret culture and lacking transparency, in
April 2011, Huawei invited reporters to its annual conference for the first time. On the company’s
website, Ken Hu, Deputy Chairman, Huawei, called claims against Huawei ‘falsehoods [that] have
had significant and negative impact on our business activity.’
Despite Huawei’s response, in 2011, the US Congress launched an investigation into Huawei and
its smaller Chinese counterpart, ZTE. In October 2012, the US House of Representatives’
intelligence committee drafted a report which alleged that Huawei and ZTE could pose a possible
threat to US national security and therefore should be cut off from the US market. The report’s
bottom line was that ‘China has the means, opportunity, and motive to use telecommunications
companies for malicious purposes’ and ‘may seek cooperation from the leadership of a company
like Huawei.’ Mike Rogers (Rogers), Committee Chairman, urged the US Government and the
private sector to boycott both the companies. He also issued a blunt warning to the US telecom
companies stating, “Find another vendor if you care about your intellectual property, if you care
about your consumers’ privacy, and you care about national security.” 19 Charles Ding, senior, vice
president, Huawei, vehemently defended the company saying, “Huawei has not and will not
jeopardize our global commercial success nor the integrity of our customers’ networks for any
third party or government or otherwise. Ever.”20
One of the recommendations from the intelligence committee was that the Committee on Foreign
Investment21 in the US (CFIUS) bar Huawei and ZTE from acquiring companies in the US. For
Huawei and ZTE, the implications were long term and wide ranging. There could be trade action;
they might be blocked from acquiring companies in the US; and they might even not be able to bag
smaller contracts with regional operators in the US.
Some analysts believed that the charges against Huawei were baseless. According to Tomoo
Marukawa, a professor at the Institute of Social Sciences at Tokyo University, “I think that the
U.S. uses the fact that CEO Ren had military experience as a security concern is groundless. South
Korea has a draft system, and if you applied the same logic, all South Korean companies could

17
Sheridan Prasso, “What makes China Telecom Huawei so Scary?” http://fortune.com, July 28, 2011.
18
John Boudreau, “Chinese Manufacturer Huawei seeks to become a Tech Powerhouse,”
http://articles.latimes.com, October 24, 2011.
19
Charles Arthur, “China’s Huawei and ZTE Pose National Security Threat, says US Committee,”
www.theguardian.com, October 8, 2012.
20
Charles Arthur, “China’s Huawei and ZTE Pose National Security Threat, says US Committee,”
www.theguardian.com, October 8, 2012.
21
CFIUS is a multi-agency regulatory panel chaired by treasury secretary Timothy Geithner, and screens
foreign investment proposals for potential national security threats.
have security issues.”22 On the other hand, some critics opined that no company or government
agency would want to risk giving potential enemies the means to access its network by buying
vulnerable equipment.
Australia
Huawei faced similar security concerns in the Australian telecom market. In September 2009, five
months after the then Australian government led by Kevin Rudd as Prime Minister announced the
country’s US$ 37 billion national broadband network (NBN), the Australian, Australia’s daily
newspaper, covered a front page story on Huawei claiming that the Australian Security
Intelligence Organization had investigated reports of senior Huawei officials frequently meeting
officials of the Chinese government at the Chinese embassy in Canberra. The report also stated the
company employed a security controller who monitored emails and other communications across
the company. Huawei denied all the allegations.
In March 2012, the Australian government led by then Prime Minister, Julia Gillard, announced
that Huawei could not bid for the country’s NBN citing security issues. 23 The announcement came
as a shock to Huawei as the Australian government had not stopped the company from bidding on
corporate contracts such as the rebuilding of Vodafone’s 2G and 3G mobile networks across
Australia. The company also said it had never faced such allegations though it had worked for
eight of the world’s nine NBNs – British Telecom in Britain, New Zealand’s Ultra-Fast Broadband
(UFB) project, Camtel in Cameroon, CMC in Benin, Telekom Brunei, Nucleus Connect in
Singapore, TM Malaysia, and Qtel in Qatar. Reportedly, Huawei was also working with 45 of the
world’s top-50 Telco operators and all of Australia’s big Telcos.
Much like in the US, Huawei made efforts to change its image in the country. In 2012, the
company signed a sponsorship deal with Australian professional rugby league football club,
Canberra Raiders, in a bid to build its brand.
Europe and the UK
In December 2012, a telecom report published by the European Union (EU) described Huawei’s
dominance in the European telecom market as a “major security risk”. As of December 2012,
Huawei controlled a quarter of the EU’s telecom equipment market, winning more than half of all
the contracts for 4G infrastructure technologies throughout Europe. The company also supplied 4G
technology for EE, the company that controlled T-Mobile and Orange. It had similar deals with
other UK-based telecom majors such as 3UK and 02. It also held a major contract with British
Telecom for its fiber-optic broadband network. Its other clients included satellite television
company, British Sky Broadcasting, Vodafone, and UK-based fixed and mobile telephone, and
broadband and internet services company, Virgin Media plc. Therefore, it was likely that Huawei’s
products were present in most of the British households. A senior source close to the National
Security Council, the cabinet committee with responsibility for overseeing security and
intelligence co-ordination, stated that if malware or spyware was found in any of Huawei’s UK
operations “then the Government will blacklist it.” 24 Huawei, however, denied all the allegations.
Following concerns raised by the US government over national security threats in deploying
telecommunications equipment manufactured by Chinese vendors, the UK initiated an
investigation to “review the whole presence of Huawei” in its national infrastructure. The UK
National Security Advisor called for tighter oversight of the vendors’ cyber security center in the
country – The Huawei Cyber Security Evaluation Center, which analyzed equipment for
identifying potential security vulnerabilities and examined over 30 types of products provided to
UK customers.

22
“Huawei Aims High, Despite Obstacles to Growth,” http://knowledge.wharton.upenn.edu, May 2, 2014.
23
David Wroe, “Huawei Hits back at NBN Deal Rejection,” www.smh.com.au, October 25, 2012.
24
James Cusick, “China Telecoms Giant could be Cyber-security Risk to Britain,” www.indepedent.co.uk,
December 2012.
In January 2014, the UK government banned Huawei’s videoconferencing equipment over its
alleged links to the Chinese government. Ministerial departments were asked to refrain from using
equipment developed by Huawei and ZTE due to potential “vulnerabilities”. Huawei described the
ban as misleading and said it was based on inaccurate information.
A China Daily report citing the opinions of industry analysts stated that the ban on Huawei was
unnecessary because revelations by National Security Agency’s whistleblower Edward Snowden
clearly demonstrated that cyber security threats were not dependent on equipment, but people’s
actions. In the report, Xiang Ligang, a Beijing-based telecom expert, said, “Huawei has been shut
out of the U.S. market for the same reason, but from the Edward Snowden case, we see that the
U.S. government, which doesn’t use Huawei’s products, was monitoring their own citizens,
foreign diplomats, and other countries’ officials.” 25 He Maochun (Maochun), director of the
Economy and Diplomacy Research Center at Tsinghua University, added that to drop Chinese
networking products based on fear rather than facts was unjustified. Maochun added, “Many
Chinese telecom companies such as Lenovo, ZTE, and Huawei are treated unfairly in Western
markets for similar reasons. And the cases are likely to appear when Chinese telecom products are
entering their markets on a large scale.” 26 He added that Chinese companies should improve
transparency on information security and encourage foreign markets to have more confidence in
their products. Maochun noted, “Industrial associations and the Chinese government should try to
support the companies to pursue more legal measures to protect the rights they deserve.”27
To tackle its security concerns in the UK market, Huawei requested the UK government to
investigate the processes in Huawei’s Cyber Security Evaluation Center in the UK. An audit by
Ernst & Young found “no major concerns” about the way the center was being run. The
investigators looked at the processes for budgeting and assigning bonuses from Huawei in addition
to seeing the staff clearances inside the building. The Oversight Board carrying out the review in
its report, concluded, “In the year 2014/15 (the Center) fulfilled its obligations in respect of the
provision of assurance that any risks to UK national security from Huawei’s involvement in the
UK’s critical networks have been sufficiently mitigated.”28

THE CHALLENGES CONTINUE…

While Huawei was making several efforts to crack the global telecom markets, in July 2015,
Malcolm Turnbull, Communications Minister, Australia, stated that amidst security threats,
telecom companies in Australia had been barred from using equipment from Huawei and ZTE.
This meant that Huawei would lose its existing business in Australia since it provided equipment
for consumer devices and backend networks for Vodafone and Optus. There could also be more
trouble in store for Huawei with the Pentagon and the US military announcing plans in October
2015 to ban the use of Huawei equipment.
Some analysts stated that despite Huawei making several efforts to deal with the allegations related
to cyber security issues, it might be too late for the company to shed its image. They said early in
its development, Huawei had concentrated on overseas expansion, but had not proactively
addressed media speculation about the close ties between Ren and the PLA. According to Kaiser
Kuo, head of international communications for Baidu, “Chinese companies are tarred with the

25
Zhao Yanrong, “UK moves away from Chinese Telecom Equipment,” http://usa.chinadaily.com.cn,
January 15, 2014.
26
Zhao Yanrong, “UK moves away from Chinese Telecom Equipment,” http://usa.chinadaily.com.cn,
January 15, 2014.
27
Eileen Yu, “Huawei: UK Ban ‘Misleading’, Based on ‘Inaccurate’ Data,” www.zdnet.com, January 15,
2014.
28
Nick Summers, “UK Report Concludes Huawei’s no Threat to National Security,” www.engadget.com,
March 27, 2015.
brush of ‘Brand China’. They need to aggressively hire local talent for high-profile positions and
give them real decision-making authority. Emphasize the true extent of localization. Make sure to
clearly communicate your brand, value, and mission.” 29
Industry experts pointed out that Huawei had not made an aggressive push to tackle it woes in the
US telecom market. Some analysts suggested that Huawei should develop relationships with the
policy makers in the US at the federal as well as the state levels. They said that to turn around its
US fortunes, Huawei would have to invest properly in a US-based marketing and PR operation.
Some experts felt that Huawei should also lobby the way Americans did. For instance, according
to OpenSecrets.org30, in 2015, while Huawei spent US$ 575,000 on lobbying and US$ 70 on
political donations, its competitor, Cisco spent US$ 26,90,000 on lobbying and US$ 12,58,334 on
political contributions.31 Industry observers pointed out that given the negative perception of
Huawei among the US executive leadership and the Congress, the company’s lobbying expense
should be more than its US competitors.
Some experts opined that Huawei and other Chinese companies facing national security concerns
should aggressively engage the American public and the media. They should be transparent and
give accurate information about the company to the US officials and the media so that their
corporate credibility was not undermined.

LOOKING AHEAD

In November 2016, when the US telecom market announced its plans to build the nation’s 5G
wireless network, Huawei was also gearing up to roll out its 5G wireless network by 2020. Though
Huawei had earlier stated that it had given up on the US market, Ren hinted that the company had
not given up on the country permanently and that it planned to make a “glorious” return to the US.
However, Huawei stated that it would not focus on the US market currently but would concentrate
on other global markets. According to Ken Hu (Hu), Huawei’s CEO-in-rotation, “For our 5G
strategy, we currently focus on markets like China and Japan among others. In the US right now,
we’re not making significant progress and we don’t have big plans for that market.” 32
Though Huawei was blocked in several major global telecom markets, Ren remained optimistic
about the company’s future. He believed that if his company’s products were good enough people
would use them despite concerns over national security.
However, the question remained whether Huawei’s efforts were adequate to address the security
concerns and whether the company could successfully overcome the roadblocks it faced in its
global expansion. It was felt that the company would have to reinvent itself if it had to negotiate
these obstacles.

29
Joel Backaler, “China goes West: Everything You Need to Know about Chinese Companies Going
Global,” Palgrave Macmillan, 2014.
30
The Center for Responsive Politics is a nonpartisan research and non-profit group that tracks the effects
of lobbying and money on public policy and elections. It maintains a public online database of
information on its website, OpenSecrets.org.
31
Jason Bloomberg, “Huawei: US Enterprise Strategy Hobbled by Chinese Tunnel Vision,”
www.forbes.com, September 5, 2016.
32
Tony Yoo, “Chinese Mobile Challenger Huawei Admits it won’t be Focusing on one of the World’s most
Important Markets,” www.businessinsider.com, November 25, 2016.
 Exhibit I
Huawei’s Milestones
Year Milestones
2016 Huawei announces its plans to roll out 5G wireless network by 2020.
2015 Pentagon and US military block Huawei and its telecom gear in the US.
2014 Huawei records sales revenues of US$ 46 billion.
Huawei sets up the Financial Risk Control Center (FRCC) in London for
managing global financial risks and ensuring that its financial operations remain
efficient, secure, and standard-compliant.
2013 Its European Logistics Center is put into official operation in Hungary, covering
countries throughout Europe, Central Asia, the Middle East, and Africa.
Huawei’s commercial 400G router solution gets recognized by 49 customers and is
put to large-scale commercial use.
Huawei steps up investments in Europe, invests more in the UK, establishes a new
R&D center in Finland, and sets up local boards of directors (BODs) and advisory
boards in France and the UK.
The company partners with customers in 33 countries in cloud computing and
2012 builds the world’s largest desktop cloud, which is used by approximately 70,000
employees for work every day.
It launches middle-range and high-end flagship smartphones, such as the Ascend
P1, Ascend D1 Quad, and Honor, with sales soaring in developed countries.
It builds 20 cloud computing data centers.
2011 It ships approximately 20 million smartphones.
The company establishes the 2012 Laboratories.
Huawei deploys over 80 Single RAN networks among which 28 are commercial
LTE/EPC networks.
2010 It establishes its Cyber Security Evaluation Center in the UK.
The company signs a Voluntary Green Agreement with the China Ministry of
Industry and Information Technology (MIIT).
It ranks No.2 in global market share of radio access equipment.
2009 It launches the world’s first end-to-end 100G solution from routers to transmission
system.
Huawei is ranked No. 3 by Informa in terms of worldwide market share in mobile
2008 network equipment.
The company is ranked No. 1 by ABI in mobile broadband devices, having
shipped over 20 million units.
It establishes a joint venture with Global Marine to provide end-to-end submarine
2007
network solutions.
It divests a 49 percent stake in H3C for US$ 880 million.
2006 Huawei establishes a Shanghai-based joint R&D Center with Motorola to develop
UMTS technologies.
 Year Milestones
The company’s international contract orders exceed domestic sales for the first
2005
time.
It establishes a joint venture with Siemens to develop Time Division Synchronous
Code Division Multiple Access (TD-SCDMA) solutions.
2004
It achieves its first significant contract win in Europe valued at over US$ 25
million with Dutch operator, Telfort.
Huawei establishes a joint venture with 3Com focusing on enterprise data
2003
networking solutions.
2002 The company’s international market sales reach US$ 552 million.
It divests non-core subsidiary Avansys to Emerson for US$ 750 million.
2001
It establishes four R&D centers in the United States.
It establishes R&D center in Stockholm, Sweden.
2000
Huawei generates US$ 100 million from international markets.
It establishes an R&D center in Bangalore, India, which achieves CMM level-4
1999
accreditation in Year 2001 and CMM level-5 accreditation in Year 2003.
1998 The company expands into metropolitan areas of China.
1997 It launches wireless GSM-based solutions.
1995 It generates sales of RMB 1.5 billion from rural markets in China.
1992 It initiates R&D and launches rural digital switching solution.
Huawei embarks on independent research and commercialization of PBX
1990
technologies targeting hotels and small enterprises.
It establishes itself in Shenzhen as a sales agent for Hong Kong company
1987
producing Private Branch Exchange (PBX) switches.
Source: “Huawei,” http://huawei.com.
 Exhibit II
Huawei’s Five-Year Financial Summary
2015 2015 2014 2013 2012 2011 2010
(in US$ (in CNY (in CNY (in CNY (in CNY (in CNY (in CNY
million) million) million) million) million) million) million)
Revenue 60,839 395,009 288,197 239,025 220,198 203,929 182,548
Operating profit 7,052 45,786 34,205 29,128 20,658 18,796 31,806
Operating
11.6% 11.6% 11.9% 12.2% 9.4% 9.2% 17.4%
margin
Net profit 5,685 36,910 27,866 21,003 15,624 11,655 25,630
Cash flow from
operating 7,595 49,315 41,755 22,554 24,969 17,826 31,555
activities
Cash and short-
19,284 125,208 106,036 81,944 71,649 62,342 55,458
term investments
Working capital 13,711 89,019 78,566 75,180 63,837 56,996 60,899
Total assets 57,319 372,155 309,773 244,091 223,348 193,849 178,984
Total borrowings 4,464 28,986 28,108 23,033 20,754 20,327 12,959
Owner’s equity 18,339 119,069 99,985 86,266 75,024 66,228 69,400
Liability ratio 68% 68% 67.7% 64.7% 66.4% 65.8% 61.2%
Source: “Huawei Annual Report 2015,” www.huawei.com.

Exhibit III
Timeline of Huawei’s Globalization
Joint Internal
Time Location Events M&A
Venture Develop
1987 Shenzhen Established originally as a sales agent
1990 Shenzhen Embarked on independent research and
commercialization of PBX technologies
1997 Hong Kong Obtained its first overseas contract
1997 Russia Set up a joint venture Beto-Huawei with
Russian Beto Konzern and Russia +
Telecom
1998 Algeria Established an office in Africa +
1999 India Established an R&D center in
+
Bangalore, India
1999 Brazil Established the first office in Latin
+
America
2000 Sweden Established an R&D center in
+
Stockholm, Sweden
 Joint Internal
Time Location Events M&A
Venture Develop
2001 US Established four R&D centers in the US +
2001 US Established North American
+
headquarters in Texas
2003 US/CN Established a joint venture with 3Com +
2004 Germany Established a joint venture TD Tech with
+
Siemens
2004 Netherlands Achieved milestone contract win from
Dutch operator, Telfort
2005 International contract orders exceeded
domestic sales
2005 The UK Selected as a preferred supplier and
signed global framework agreement with
Vodafone
2005 The UK Selected as a preferred supplier by
British Telecom
2006 Shanghai Established a joint R&D center with
+
Motorola
2007 UK Established a joint venture with Global
+
Marine
2007 US Failed in acquiring American company
–
3Com
2007 Chengdu Established a joint venture with
+
Symantec
2008 Australia Developed a mobile innovation center
+
with Optus
2010 Belgium Acquired Belgian chipmaker M4S +
2010 US Failed in acquiring American software
-
supplier, 2Wire
2010 US Failed in acquiring Motorola’s mobile
-
network infrastructure unit
2011 US Failed in acquiring 3Leaf Systems -
2011 Hong Kong Acquired Symantec’s shares in Huawei
Symantec at US$ 530 million
+ success. – fail, otherwise not applicable.
Source: Michael-Henry Bouchet, “Overcoming the Challenges – Globalization,” SKEMA Business School,
November 2014.
References and Suggested Readings:

1. Tony Yoo, “Chinese Mobile Challenger Huawei Admits it won’t be Focusing on one of
the World’s most Important Markets,” www.businessinsider.com, November 25, 2016.
2. Ning Jiajun, “Factors that Set ICT Giant apart,” www.chinadaily.com, October 25,
2016.
3. Jason Bloomberg, “Huawei: US Enterprise Strategy Hobbled by Chinese Tunnel
Vision,” www.forbes.com, September 5, 2016.
4. Xiaolan Fu, “China’s Path to Innovation,” Cambridge University Press, 2015.
5. “Huawei Aims High with Innovation, Entrepreneurship,” http://wap.chinadaily.com.cn,
April 14, 2015.
6. Nick Summers, “UK Report Concludes Huawei’s No Threat to National Security,”
www.engadget.com, March 27, 2015.
7. “Huawei Annual Report 2015,” www.huawei.com.
8. Peter Nolan, “Chinese Firms, Global Firms: Industrial Policy in the Age of
Globalization,” Routledge, 2014.
9. Joel Backaler, “China goes West: Everything You Need to Know about Chinese
Companies Going Global,” Palgrave Macmillan, 2014.
10. Michael-Henry Bouchet, “Overcoming the Challenges – Globalization,” SKEMA
Business School, November 2014.
11. “Huawei Aims High, despite Obstacles to Growth,”
http://knowledge.wharton.upenn.edu, May 2, 2014.
12. “Tumultuous Times of Huawei and Ren Zhengfei, from 2001 to 2014,”
www.jianshu.com, March 11, 2014.
13. Eileen Yu, “Huawei: UK Ban ‘Misleading’, Based on ‘Inaccurate’ Data,”
www.zdnet.com, January 15, 2014.
14. Zhao Yanrong, “UK moves away from Chinese Telecom Equipment,”
http://usa.chinadaily.com.cn, January 15, 2014.
15. Adele Ferguson and Peter Cai, “It’s the Biggest Company that no one has Heard of,”
www.smh.com.au, April 27, 2013.
16. Nathaniel Ahrens, “China’s Competitiveness,” http://csis.org, February 2013.
17. James Cusick, “China Telecoms Giant could be Cyber-security risk to Britain,”
www.indepedent.co.uk, December 2012.
18. David Wroe, “Huawei hits back at NBN Deal Rejection,” www.smh.com.au, October 25,
2012.
19. Charles Arthur, “China’s Huawei and ZTE Pose National Security Threat, says US
Committee,” www.theguardian.com, October 8, 2012.
20. John Boudreau, “Chinese Manufacturer Huawei seeks to become a Tech Powerhouse,”
http://articles.latimes.com, October 24, 2011.
21. Sheridan Prasso, “What makes China Telecom Huawei so Scary?” http://fortune.com,
July 28, 2011.
22. “Huawei Aims for $100 Billion in Revenue within 10 Years,” www.bloomberg.com,
April 27, 2011.
23. Karl P Sauvant, Geraldine McAllister, and Wolfgang A Maschek, “Foreign Direct
Investments from Emerging Markets: The Challenges Ahead,” Palgrave Macmillan,
2010.
24. “Learning from Wolves to Fight Lions,” www.chinadaily.com.cn, September 4, 2010.
25. Michael Hitt, R. Duane Ireland, and Robert Hoskisson, “Strategic Management:
Competitiveness and Globalization, Cases,” Cengage Learning, 2009.
26. Eric Harwit, “China’s Telecommunications Revolution,” Oxford University Press, 2008.
27. Roman Boutellier, Oliver Gassmann, and Maximilian von Zedtwitz, “Managing Global
Innovation: Uncovering the Secrets of Future Competitiveness,” Springer, 2008.
28. S. Shajahan, “Management Information Systems,” New Age International, 2007.
29. “Huawei CEO breaks Silence, says they’re not Connected to US Cyber-threats,”
http://m.tech.firstpost.com.
30. “Huawei,” http://huawei.com.