Stumped in the West, Huawei Targets Emerging Markets

Now that {complink 2430|Huawei Technologies Co. Ltd.} has felt the wrath of suspicious Western nations that have limited its business opportunities and raised questions about the alleged security threat that the company's products and business connections pose, it should come as no surprise that Huawei is setting its sights on other markets.

A recent announcement positions the company to take advantage of a continent where smartphones only account for about 10 percent of the total phones in the market. Huawei will team with {complink 3426|Microsoft Corp.} to offer a phone dubbed the Huawei 4Afrika, which is the first in a series of smart devices being custom developed for the continent and released as part of Microsoft's sweeping new 4Afrika Initiative.

As Huawei and Microsoft set their sights on providing smartphones to consumers living in seven countries — Angola, Egypt, Ivory Coast, Kenya, Morocco, Nigeria, and South Africa — these new markets will provide fresh prospects and new opportunities to counterbalance the suspicions and lost opportunities that Huawei faces in the West.

Undoubtedly, Huawei is still smarting from the October 8, 2012, report of the US House of Representatives’ Intelligence Committee, which identified Huawei and ZTE Corp. as companies that have ties to the communist party and shouldn't be given the right to sell their telecommunications equipment in the US. Doing so, Congress alleged, could provide Chinese intelligence services the opportunity to tamper with US telecommunications networks for the purpose of spying.

The US wasn't the first country to show the cold shoulder to Huawei. In March 2012, Australian authorities announced that security concerns were behind their decision to block Huawei from bidding on contracts in the lucrative $38 billion Australian National Broadband Network.

Britain has taken a mixed view of the company, in part because the country needs investment as its economy grinds through a slump. Late last year, Huawei said it would invest $2 billion in Britain, which will go toward new technical centers that are expected to create 700 jobs. Huawei already operates a research center in Ipswich and employs 800 workers in Britain. However, Huawei is also the subject of an investigation by Britain's Intelligence and Security Committee, which consists of parliamentarians who report to the Prime Minister. The committee is investigating whether Huawei represents a threat to the UK's cyber-security.

While its networking and telecommunications equipment business faces headwinds in Western nations, Huawei is adjusting by focusing on its mobile phone, tablet, and enterprise businesses. Reports are that in a New Year's message to staff, Guo Ping, Huawei's acting CEO, estimates that the company's earnings will increase by 29 percent to about $2.4 billion, on revenue of $35 billion.

Much of the expected revenue increase will come from smartphones. In January, another bit of good news was release by IDC, which showed Huawei for the first time in third place behind Samsung Electronics and Apple in the global smartphone market.

According to IDC:

    Huawei suddenly finds itself among the top three smartphone vendors in the world, a first for the company. The company had previously been a Top 10 vendor. To reach this milestone, Huawei has courted both the mass market with its simple and inexpensive smartphones and the high-end of the market with its Ascend-branded product line. Along the way, the company has demonstrated its innovative skills, having released the world's thinnest (6.68 mm) smartphone last year, the Ascend P1s, and this year it announced the upcoming Ascend Mate, the first smartphone with a 6.1-inch display. At the same time, Huawei has brought its own software innovations, including Magic Touch, Guiding Wizard, Smart Reading, and Floating Windows.

Huawei's story may prove that Western sanctions don't hurt companies in the way they used to. Today, as new markets open up, and a growing middle class in Asia, Latin America, Africa, and other emerging economies clamors for affordable consumer products, winning new customers and greater market share can shield companies like Huawei from the pinch of Western sanctions.

7 comments on “Stumped in the West, Huawei Targets Emerging Markets

  1. prabhakar_deosthali
    February 12, 2013

    The days when the Allies were sure that the whole world was under their political and economic control are gone now.  The openness of the world economy and the fast growth of the markets in the third world means there is more business outside US & Europe  if suitable products are offered

    Huawai seems to have understood this better than anybody else.

  2. _hm
    February 12, 2013

    Huawei provides good alternatives to consumer and service provider at much lower cost. Security risk due to potential compromise in mobile network is very limited as compare to other risks. However, Huawwei must play by other rules.

  3. elctrnx_lyf
    February 12, 2013

    Huawei is aggressive with their product pricing and with strong support from chinese government they can definitely become no 1 seller in african market. Recently many big companies of different sectors are identifying Africa as a place for strong growth and the companies are bullish about the market also.

  4. mfbertozzi
    February 12, 2013

    @elctrnx_lyf: well, they are a big player in that region, no doubts; by the way quite recently, some issues on products' quality are raised from local authorities in several countries (India, for instance), ever heard about?

  5. bolaji ojo
    February 12, 2013

    Are Western governments justified in being wary of engaging with Huawei in these vital areas or are they simply trying to protect local businesses? It's hard making the case for option No. 2 since “Made in China” has become the norm. What exactly are the reasons for being careful in allowing Huawei to get contracts in the West?

  6. Brian Fuller
    February 14, 2013

    What's difficult to determine from our perch is just what the truth is. Are western governments suspicious of companies like Huawei because of intellectual property-theft concerns? Or are they suspicious (and protective) for market-share and economic reasons?

    The answer can be both.


  7. t.alex
    February 14, 2013

    Targeting new markets like Africa is a smart move. Sooner or later Huawei will dominate Africa mobile phone markets and who knows other products as well. We see a lot of routers from Huawei nowadays in every household.

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