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Mark O'Neill

Last month BT began offering voice-over internet protocol (VoIP) services in Britain using equipment produced by Huawei Technologies, China's largest telecommunications equipment maker.
The use of Huawei equipment by one of the world's biggest providers is a sign of the coming of age of a firm known more as an industry  copycat than a respected  player.
Huawei now has clients in more than 40 countries and research institutes in Dallas, Bangalore, Stockholm, Moscow, Shanghai and Beijing.
 The company puts 10 per cent of annual revenue into research and development.
 'It is not Haier or Konka that will become the national champion of China, but Huawei,' said one western telecoms analyst in Hong Kong.
 Its major foreign customers include SingTel, Hutchison Telecom, Telemar of Brazil, Rostelecom of Russia, Thai AIS and Telefonica, the biggest operator in the Spanish- and Portuguese-speaking world. In Britain, it has made the largest inward investment by a Chinese company.
 For many years, Huawei was accused of  mimicking and even thieving from its foreign rivals, attracting disputes and lawsuits over infringement of intellectual property rights.
 Like Japanese and South Korean companies 20 to 30 years ago, thousands of Chinese firms are copying, and often infringing, the intellectual property rights of foreign firms. While most of these cheap shops remain copycats, Huawei has evolved into a serious international competitor.  
 But reminders of its controversial business practices persist.
In January last year, Cisco Systems filed a lawsuit against Huawei for illegal copying of its software and numerous patent infringements, asking for substantial damages. Huawei was forced to withdraw products from the US and a bitter dispute between the two firms ended only last October, when Huawei agreed to modify its router and switch products.
 The western analyst said there was no doubt Huawei stole technology from Cisco, Alcatel and other vendors. As part of the Cisco deal, it fired people and admitted theft.
 'But now it does not need to copy,' he said. 'People want to be its partner. The relationship with BT is a breakthrough, a partnership with a major provider.
 'The head of technology at BT appeared at a Huawei news conference last month to praise them.
 'Every vendor is worried about them.'
 Exports last year, at US$1.05 billion, accounted for 27 per cent of Huawei's total annual sales of  $3.83 billion, and the company aims to increase that to  between $1.8 and $2 billion this year. It ranks seventh among the 100 biggest electronics companies in China.
 A stock listing, in Hong Kong and New York, is on the horizon.
Although it is a private company, it enjoys support from top government circles,  with its president, Ren Zhengfei,  sometimes accompanying national leaders on foreign trips.
 In a rare public statement  last year, Mr Ren said Wu Bangguo,  then a vice-premier and now the third-ranking member of the  Politburo standing committee, spent 30 minutes in Kuwait asking him how the state could help Huawei to develop the international market.
 In March, Huawei opened a European headquarters and R&D centre in the British city of Basingstoke, with plans to increase local staff to 300 people over three years. 
 'We have already built a strong presence in the Middle East, the former Soviet Union and in North Africa,' said company spokesman Li Jie.  'We are now expanding into European and Latin American markets. Sales in all these markets are expected to grow rapidly this year.'
 At home its biggest clients are China Telecom, China Mobile, China Netcom and China Unicom.
 It says that 10,000 of its 22,000 employees are involved in R&D and last year the company filed 1,400 patent applications in China, and thousands more abroad.
In February, it set up a joint venture with Siemens Mobile to promote China's TD-SCDMA 3G mobile communication standard. In March it released its first third-generation mobile phone,  based on the European WCDMA standard, and may put it into mass production as early as this June.
 But  Huawei faces formidable challenges.
 In a report  this year, MWL Consulting noted weaknesses including the lack of a transparent financial system, over-reliance on sales in China , high turnover among key employees and a limited track record in innovation.
 'It remains an insular company that, despite partnering with many global firms, operates by its own rules and appears to be more of a secret society than a global corporation ... Its financial health is, by most credible rumours, poor,' the report said.  Support from state banks and its influence on government standards and policies had played a key role in the company's success, it added.
Analysts also worry that the company may not be able to provide the service and support needed to run a global network of the most demanding customers.
 'It needs to provide 24-hour service, in English, send engineers on site and customise its products,' said one analyst. 'Will it be able to do this? Will it be overstretched?'  As a private company, it remains  secretive. Mr Ren, a former army officer, is said to be so low-key that, when he takes the lift  at company headquarters, most of his colleagues do not  recognise him. He never gives media interviews.




Huawei connects with top players