Meet Huawei, the not so hidden dragon

I’ve just spent a fascinating two days with Huawei in Shenzhen. If you haven’t heard of the firm you will soon – it’s the world’s number two manufacturer of telecoms kit, powering all the UK mobile operators and BT, Talk Talk and Virgin Media’s fixed line operations.

It’s also number six in the mobile devices market globally, with its eyes on a higher position, and has entered the enterprise IT space where it sees big growth potential.

The trip was a chance to see and be impressed by Huawei HQ, a sprawling campus in a suburb of Shenzhen in the south of China next door to Hong Kong, rather than have an opportunity to quiz senior execs on the firm’s roadmap.

The firm has been spending rather a lot of money to show rather a lot of journalists the same thing – well, it can afford to, having made around $32bn last year.

The reason is that despite its best efforts it’s still not winning a huge amount of enterprise custom, its devices don’t have great brand recognition and, most irritatingly for the firm, it’s the subject of a high profile US Congressional investigation into links with the Chinese government.

The US has regarded Huawei with great suspicion and reckons it may have links to the PLA and the Communist Party (via its founder Ren Zhengfei) which make the firm’s products a potential risk to national security.

Needless to say, Huawei’s PR team were more keen to focus on the less contentious part of its story. And it is a very impressive story. Ren apparently founded the firm with a few thousand pounds and today, 25 years later, it has 140,000 employees, makes billions, operates in 150 countries and the average age of employees is just 29.

Yup, not really the impression many might have of the company. Due to its unique corporate structure which makes it wholly employee-owned, staff can retire at 45 if they’ve spent more than eight years with the firm with their share dividends providing a handsome retirement fund.

The analysts are in agreement that it has great technology, bags of patents and huge potential, so is the US just being protectionist?

Well, yes and no. Huawei may open up some of the source code of its products for investigators to scrutinise but apparently the big sticking point is info on how the firm is run, and past a certain point Huawei will not divulge that, so it may be deadlock for some time yet.

Ren is still a member of the Communist Party and for anyone who’s read the book The Party by Richard McGregor, this will be a cause of concern to some foreign governments – although it must be said not to the UK, which has welcomed the firm’s investment with open arms.

Now, I’m not saying I fully agree with all of the book but McGregor speaks very convincingly of the Party as acting “like a large magnet that makes iron filings suddenly cling together as it moves into position above them”, making them “stand to attention when it focuses its attention on them”.

In the end, both the West and Huawei are learning to cope with one another. We’re just starting to understand the firm a bit better and it is beginning to understand the greater level of media scrutiny, demands for more transparency and need for a more media friendly executive board – all of which are pretty alien to Chinese companies.