The Huawei Ban: Adversity or Opportunity?
Germany is among some countries not banning Huawei from 5G networks. (Photo: Reuters)
By Yu Fu

The Huawei Ban: Adversity or Opportunity?

Apr. 11, 2019  |     |  0 comments


Huawei Technologies Co. Ltd. is a global information and communications technology solutions provider headquartered in China. After the US called for its boycott over espionage concerns, several countries have since blocked telecoms companies from using Huawei gear in next-generation 5G mobile networks. This has made Huawei an on-going hot topic since 2018. However, based on the company’s development history, the ban on Huawei may work more as an opportunity than as a challenge.

 

As a private enterprise, Huawei faces competition at home and abroad. At the domestic level, Huawei has long faced competition from a number of strong ICT companies like Xiaomi, ZTE, vivo and OPPO in mainland China. In 2018, although it was under boycott, Huawei acquired a clear edge over its domestic competitors. According to an IDC report, Huawei ranked first in both shipment and market share in the Chinese mobile phone market in 2018, achieving a year-on-year growth of 15 percent. At the same time, Xiaomi, OPPO and other companies except vivo have seen various degree of decline in both shipments and market shares.

 

On the one hand, the Huawei incident has connected enterprise development with national interests, making the Chinese government a strong backup force for the company. On the other hand, Huawei has raised fierce nationalist sentiment in China, gradually turning itself into a symbol of patriotism. Huawei has drawn more attention from government agencies, universities, private sectors and ordinary civilians than ever before. More than 20 million people registered themselves as members of the Chinese-language official fan club of Huawei (Huafen club) from June 2018 to December 2018, making the total number of Huawei fans surpass 100 million at the end of 2018.

 

At the international level, the blocking of Huawei by the United States, the detention of Huawei’s CFO Meng Wanzhou and Huawei's lawsuit against the United States, have expanded the popularity and influence of Huawei worldwide and work as an efficient brand promotion. Huawei’s product quality and a number of its technological innovation patents have made it the focus of global attention. To some degree, the myth of America’s unsurpassable technological prowess is gradually shattered, and the prestige of some US brands like Apple has been undermined.

 

Among the new smart phones released at new product launches in March 2019, Huawei P30’s amazing low-light camera was described as “magic” by some foreign electronics buyers. An unboxing video of Huawei P30 released on Youtube garnered more than 200 million hits within 5 days (mainland Chinese has no access to Youtube). In Huawei’s annual report of 2018, the company’s revenue rises by 15.1 percent in Asia Pacific, 21.3 percent in Americas and 24.3 percent in EMEA (Europe, the Middle East, and Africa).

 

The blocking of Huawei intensifies the competition between enterprises to the level of international relations, and makes Huawei a part of the confrontation between the US and Chinese governments. Against the background of the Sino-US trade war, the blockade of Huawei further strengthens the US’ image as an anti-globalization and self-interested power. With the international reputation of the United States and the Trump’s administration affected by the grounding of Boeing 737 max 8 planes, more and more countries, especially those which attach great importance to their cooperation with China, choose to approach the Huawei incident based on national interests and refuse to follow the US blindly. The European Union has reviewed the 5G risks but ignored the US’ call for a ban. Germany does not want to ban Huawei from its 5G networks. Countries in Southeast Asia, for example, Indonesia’s Telkomsel has signed MOU with Huawei to build a fully connected digital country, Thailand is launching Huawei 5G test bed while the Philippines’ Globe Telecom is launching 5G services in cooperation with Huawei. Even India whose telecom industry has become the world’s most competitive and one of the fastest growing telecom markets, is unlikely to ban Huawei from selling 5G equipment in the country.

 


In the fourth quarter of 2018, Huawei replaced Samsung as the best-selling smartphone brand in Russia.



In fact, the current situation is very much in line with Huawei’s development plan. For a long time, the whole Oceania and the Americas occupy a secondary position in Huawei’s overseas markets. The EMEA and the Asia-Pacific regions are the actual backbones of Huawei’s overseas development. By December 2016, Huawei held a market share of over 20 percent in 22 countries, half of which were in Europe. In 2017, Huawei earned CNY 163,854 million from EMEA while it only earned CNY 39,285 million in the Americas. Besides its domestic market in China, Huawei has the most profit in the EMEA region, followed by the Asia-Pacific region and finally the Americas in 2018. Thus, the boycott campaign has in fact helped Huawei to define its development blueprint and consolidate its current customer base.

 

Huawei’s regional development pattern shows the extraordinary wisdom and deep insight of its founder Ren Zhengfei. The expansion of Huawei’s international business has always been closely related to China’s and the international situations, which was reflected in the case of Huawei’s first overseas stronghold, Russia. In 1996, Russian President Boris Yeltsin paid a state visit to China and announced that the two countries would develop a “strategic partnership of coordination of equality and trust oriented towards the 21st century”. Ren immediately grasped the business opportunities hidden in this change of international relations and accelerated Huawei’s cooperation with Russia, even though Siemens, Alcatel, NEC and others were pulling out as Russia’s economy was shrinking at that time. The BETO-Huawei Joint Stock.Co., which provided access for Huawei’s switches into the Russian market, was established in 1997. Huawei did not get any orders for four years but Ren insisted his preference for Russia. Then, Huawei’s business in the Russian market grew quickly after 2000, becoming one of Huawei’s most important overseas market. In 2003, Huawei achieved a sales volume of more than USD 0.3 billion in Russia and the surrounding markets.

 

Ren’s emphasis on Russia in important within the framework of international relations, according to the book The Truth of Huawei, a collection of interviews with Huawei’s leaders and partners. In his article “Across the boundary between Asia and Europe”, Ren concluded: the US will never want China and Russia to be strong, as the Russian people already know. Both China and Russia are under great pressure from the US because of issues like the NATO expansion, the Diaoyu/Senkaku islands and China’s and Taiwan’s cross-Strait dispute. Such pressure from the West has brought about a closer Russia-China relationship, providing Huawei with a chance to explore the Russian market. The judgement of Ren proved sagacious by the situation playing out currently. In the wave of prohibitions on Huawei products since 2018, Huawei has held its ground and even makes progress in Russia. Huawei typically ranks third among Russia’s most popular phone brands, behind Apple and Samsung. However, in the fourth quarter of 2018, Huawei replaced Samsung as the best-selling smartphone brand in Russia. Although smartphone sales in Russia fell sharply in 2019, the number of Huawei sold increased by 70 percent in January compared with the same period in 2018.

 

Huawei will not perish from the containment of the United States, not only because Huawei has a sensible development plan based on its leader’s reflections on international situation, but also because the US’ accusation is not valid without evidence. Huawei’s identity as a private company does reduce the transparency of the company, but it also enables Huawei to be more focused in technological research and development, and thus able to attract more customers with highly competitive products.

 


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