The Chinese behemoth Huawei has broken a five year record with over $28 billion (30%) for the first half of financial year 2015-2016; thanks to the core smartphone and network infrastructure. The last time it reported comparable growth was in 2008 when anual sales revenues rose by one third in a year. The smartphone growth (87%) rocketed with high sales demand in 4G networks by the carrier segment of the business. The company now holds more than 19 per cent of Chinese smartphone market.
In the late 1980s, the Chinese government planned to modernise its underdeveloped telecommunications sector. Several research groups endeavored to acquire and develop the technology through joint ventures with foreign companies. However Ren Zhengfei, former deputy director of the People’s Liberation Army engineering corp, founded Huawei in 1987 in Shenzhen and focused on indigenous research and development to produce switches instead. At that time, 100% of China’s telecommunications technology was imported from overseas.
Huawei has had close encounters of infringement related issues with Cisco, Ericsson, ZTE, Nokia and Siemens Network in the past. Motorola is reportedly paying an undisclosed sum to Huawei for intellectual property now. In the US, Huawei has come under scrutiny because of its alleged close ties with the Chinese government. In the UK, the Conservative Party raised concerns about security over Huawei’s bid for Marconi in 2005, and the company’s equipment was mentioned as an alleged potential threat. Huawei has also been banned from broadband projects in the US and Australia over espionage fears. In 2001, it was alleged that Huawei India had developed telecommunications equipment for the Taliban in Afghanistan. Last year Iranian based seller of Huawei (Soda Gostar Persian Vista) tried to sell embargoed American antenna equipment. As per the consumer market in the West, Huawei has yet to produce a smartphone to be remotely as good as the top of range handsets, such as HTC M9, iPhone 6 or Samsung Galaxy 6.
Huawei’s smartphone sales exceeded 10 million a month, starting in May and are predicted to be selling 100 million handsets by the end of this year. Ren Zhengfei has ambitious plans to invest $600 million in the future to develop 5G network. In 2014 it has increased research and development spending by one third in an effort to be ahead of trends, such as connected cars and the internet of things. In May it revealed an operating system designed to work exclusively with internet connected objects, which it predicts will number more than 100 billion by 2025. Huawei has confirmed that it is working closely with Google on a new Nexus smartphone.
With the recent turmoil of HTC, maybe Google’s Android should take up this opportunity as a double-edged sword; a Premium Nexus smartphone (missed opportunities by Google), and a way to enter the Western market for Huawei with top spec smartphone.
Regardless of Huawei’s success with Google, this behemoth is already en-route to becoming a truly global, tier one player in the foreseeable future.