Wednesday, 24 April 2013

Not interested in the US anymore ?

So says Huawei. Really ?? No, not really. They are very interested in the US. Its just that they have realised that the doors to the US are simply shut for them. There has been a spat going on between the US politicians and Huawei for some time. It looks like the politicians have won.  And it begs the bigger question - can any company in the world be exclusively in one country or region (however big that might be) and hope to be a major player in the world.

Huawei is a telecoms company. They sell networking equipment significantly cheaper than say Cisco. They used to be crappy ( Cisco would snigger at the mention of their name). Not any longer. Same quality, half the price. In an uncomplicated world, companies  should be falling over themselves to buy from them.  But then, the world is not an uncomplicated place.

Huawei is a Chinese company. So what, you might ask ? Huawei's founder and leader was formerly in the Chinese army. Still so what ? Well, the ties with the Chinese government/army/party (same thing) never go away and its quite possible that Huawei will do whatever the Party in China asks it to. Huawei is not a transparent company. It largely refuses requirements that it be so.  And cyber espionage and hacking are weapons that the Chinese government uses against other countries constantly.The world's chief bugger (if you will pardon the bad pun) is China.

So Huawei is a pariah right. Wrong ? The US, and possibly every other major country does the same thing. Except that Obama cannot order Cisco to spy on his behalf while Xi Jinping can so order Huwaei. But then there is enough regulation and oversight in the US to prevent that from happening, or at least knowing that it is happening. And its not at all certain that Huawei would do anything major in the spying arena - its a $35 bn company. If its shown that it is doing something underhand, overnight, it would be expelled from the entire wold. But pompous Senators have repeatedly blocked Huawei from winning major deals in the US. Huawei has tried hard, but has won nothing. In frustration, they have simply given up. The beacon for capitalism and freedom, of course, does not think of the US consumers' interests (of getting things cheaper) and, of course, Cisco and other US competitors have been scrupulously fair , have never lobbied to stall Huwaei and surely windbag Senators have only the national defence of the US at heart.

Begs a question - why is only the US so paranoid. Every country in Europe has no problems dealing with Huawei . Even India, normally a completely paranoid country has plenty of Huawei here. The Chinese brass of Huawei in India go around with names like Ashok Li and Sundar Zhang. By the way, I have to recommend that Ramamritham Liu and Rajalakshmi Wang would also be worthy additions to their team. The only offense they have done to India is to start a Chinese canteen of their own on the grounds that what goes for Chinese food in India is unrecognisable by them and surely Gobi Manchurian is an abomination !

So what will happen to Huawei. They have admitted that they will have to revise their growth plans downwards. Without being truly global, no company can aspire to the big league. 

Or is that really true ? Could a company that's almost exclusively in one country be the largest in the world in its field ? We'll examine that in the next post.


  1. Huwei = Dodgy! I rest my case

  2. @kiwi - Maybe maybe, but really THAT "dodgy" ????

  3. I remembered that it was thanks to a blog post of yours sometime ago that I even knew about Huawei. So, the nerd that I am, I looked up that old post--it was in the context of Gangnam style ... it is your fault that you prepped me for this response ;)

    I hate to side with the dirty, rotten, scoundrels--the US senators, that is--but I am also uncomfortable with the telecom equipment supplier from China, from where there is extensive hacking attacks, and with the company's founder's close military ties ... it is not kosher, yes, to simply link these together. But, it is not that easy as you write to simply wipe these concerns off ...

    The comforting advantage with, say, Cisco, is that there seems to be enough daylight between the company and the government. Appearances can be deceptive, yes. But, the Cisco-government setup is any day less worrisome than the intricate ties that seem to bind Huawei with the Chinese government/army/Party ...

    I agree with your bottom-line: with China being a huge country, with a rapidly growing economy, not only Huawei but a lot more companies can become some of the largest corporations, but be pretty much only "Chinese companies" ... seems like China, Inc. has a really, really huge branding problem to deal with ;)

  4. @sriram - I can understand the nervousness about Huawei, but one of the things that foxes me about US opinion is that it sometimes can be completely opposite everybody else's in the world. Think of gun control where you lot are from another planet. Huawei operates in almost every other country. I can understand that you don't want to give a defence contract to Huawei, but not allowing Sprint to buy routers from them for example ????

    Huawei is actually a pretty much global company. My next post will deal with a virtually China only company.

  5. Anonymous25/4/13

    "eyes opened much later" this was my thought when i saw the title. Us is no more an attractive market.

  6. Huawei are not easy to collaborate with.(I speak from experience).

    Also, the whole communications industry in the US is so tightly (and very badly) controlled. You can't walk into a store and buy a phone at a decent have to sign a contract. You can't order any internet connection u like....only a couple would be serving your area (and if you live in a home it's usually the most pricey providers). A simple thing like text messages (without a smartphone app) is still so darn expensive....bringing in companies like Huawei into the communications industry would break this controlled environment which would mean doom for so many US companies n providers. I might be wrong....have not been into the communications area for a while now...and this is purely my personal perception without much online reading on the topic.

  7. @Ramesh: One of the few cases where I can contribute with my business experience. Fears about Chinese industrial espionage have to be seen in the context of how telecommunications infrastructure has evolved.

    The next generation of telecom infrastructure is built around two concepts: Software Defined Networking and Software Defined Radio. While these sound like buzzwords, they will have a real and meaningful impact on daily life. Essentially, instead of big radio transmitters, there will be lots of small ones. Each of them will not be pre-set to transmit in one particular way (like GSM was), but the transmitting power, antenna tilt and beam density will be dynamic based on demand. Every phone is an IP endpoint and traffic will be dynamically routed from each endpoint to each endpoint. The amount of bandwidth etc is dynamically allocated by the software running the infrastructure.

    Any Cisco jocks will recall that dynamic allocation was the idea behind many iOS innovations that have now become mainstream. Even then, bugs in IOS could trip a network or cause dynamic allocations to fail.

    Since the media flow is now essentially IP traffic (whether voice or data is irrelevant) software-enabled disruption is also easy. This is what the Americans are afraid of. Remember what they did to the Iranian nuclear waste purification facility with the Stuxnet virus on Siemens centrifuges.

    Huawei has only itself to blame for its troubles. Look at how Lenovo has responded to the needs of an international marketplace.

  8. @Shachi - True - the comms industry, at least at the consumer end is a bit complicated to say the least in the US. There is also a lot of turf defending. Doesn't shine as the beacon of free markets !

    @ Ravi - The expert speaks. Possibly as you say, but I wonder why most other countries in the world do not seem to have the same level of discomfort. If any, the most paranoid country should be India. And yet ........

  9. @Ramesh: Good question. One, our telecom market is cut-throat, so anyone offering very low prices wins. Two, the 3G experience has shown that there is very little incentive to innovate and migrate to LTE. My opinion is that these fears related to Huawei are not valid as long as our telecom traffic is 2G or 3G. Even in the case of LTE, your question still remains valid. Is Huawei guilty without having committed a crime?

  10. @Ravi - Perhaps time will tell.

  11. Time does tell? ;)

    "The former head of the CIA and the National Security Agency in the US has said he is aware of hard evidence that Huawei Technologies has spied for the Chinese government, the Australian Financial Review newspaper reports.

    Michael Hayden said in an interview with the paper that Huawei had "shared with the Chinese state intimate and extensive knowledge of the foreign telecommunications systems it is involved with"."

  12. @sriram - Firstly, anything coming from a NSAer whether current or former is to be held in deep contempt. Secondly, by this logic, surely Google, Microsoft and the like should be banned elsewhere in the world.

  13. When a news item about Cosco being affected by the NSA snooping, I was reminded of your post on the Chinese company, which was kept out of the US for the same reason!
    "Cisco has seen a huge drop-off in demand for its hardware in emerging markets, which the company blames on fears about the NSA using American hardware to spy on the rest of the world." ...
    "if NSA spying keeps American companies from dominating the market at an early stage, it could mean that in the long run they’ll simply be locked out of these markets while competitors like Huawei and ZTE reap the benefits."

    Isn't real life the best possible entertainment!!!

  14. @Sriram - Yes, the NSA affair is one big mess and has diminished America in the eyes of the world in a big way. Nobody seems to care in the US, other than enlightened souls like you, which is an even bigger tragedy. Companies like Google, Microsoft, etc will all suffer, as there is no way a government contract is going to them in a foreign country


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