Huawei is an influential inward investor into the UK and a major player in the telecoms market, so why have so few heard about the company?
Huawei is the largest inward investor into the UK from the Chinese mainland. It’s been here for 13 years. It provides network infrastructure for big players from BT to Vodafone.
And it’s part way through a five-year investment plan that will see it spend £1.3bn in the country. Yet, outside its customer base, the ICT firm remains relatively unknown.
Talking to its UK chief executive, Victor Zhang, you get the sense that this is because it has gone quietly and studiously about its own business, focusing on its clients’ needs to “deliver the best product at the best value”.
We are going to be more open and transparent and have more communication with all stakeholders
But concerns over cyber security have raised suspicions about the Chinese company, fuelled – as ever – by the media, to the extent that its planned expansion into the US was cut off at the pass. As a result, Huawei is on a mission to open its doors and raise its profile.
“We are going to be more open and transparent and have more communication with all the stakeholders, governments, the media and the public,” says Zhang, who admits there are “some challenges” and that a “lack of communication causes some misperceptions”.
But he adds: “We are very confident because our customers trust Huawei, because they know Huawei, they understand Huawei.”
Zhang is keen to emphasise that Huawei is a global company, rather than a Chinese one – with 14 regional headquarters and 150,000 employees of more than 150 nationalities. “At Huawei globalisation is one of our top strategies,” he says. “As is localisation.
For example, in the UK more than 70 per cent of our employees are local recruits. And, more importantly, most of the members of the top management team are local. So this reflects the fact that Huawei tries to be a business that relies on local resources and that builds a relationship with the local community as well.”
Huawei is also 100 per cent private, owned by 70,000 of its employees. Nevertheless, as part of its drive towards transparency, it still releases financial data (audited revenue for 2013 was $39.5bn, with UK sales orders totalling nearly $1bn).
And, interestingly, as part of its goal to demonstrate good corporate governance, its founder Mr Ren Zhengfei now shares the role of CEO of the board with three other executives, who each spends six months in the post.
The telecoms player also offers up a compelling argument against the prevailing opinion that “the Chinese copy stuff”. The company spent over $25bn on research and development in the 10 years to 2013 and $5.4bn last year alone.
The UK is one of the most open and free countries to do business in, and we’ve received a lot of support from the government
Half of all its employees are dedicated to it. Zhang himself worked in R&D at Huawei’s Shenzhen headquarters for six years before he came to the UK in 2004. In total, the company has submitted nearly 45,000 patent applications in China and 16,200 outside it – and last year alone it submitted more than 1,000 to the European Patent Office.
Those figures are only likely to increase with the investment Huawei is making in the UK. In January 2012, it acquired the Centre for Integrated Photonics from the East of England Development Agency, which had in turn rescued it from closure when its US owners were pulling out.
When George Osborne visited Shenzhen in October 2013, Huawei announced it was building a £200m UK R&D centre to focus on optoelectronics, device design and software development, with 300 high-tech roles to fill.
Two months later, when the prime minister led a trade mission to China, it announced a £10m research fund to be shared by six universities, including Cambridge and Imperial College. It will be working with the University of Surrey on 5G mobile technology, for example.
These are all part of the £1.3bn investment announced in 2012. Half of this is being spent on bringing the number of its UK centres of excellence up to 10 (these include centres for cyber security, design and, more recently, global finance) and doubling staff numbers from 700 to 1,500 (it currently has more than 920).
The remaining £650m will be spent on procuring software, components and services from UK firms, including ARM Holdings.
“We’re investing in the UK because we are confident in this market,” says Zhang. His praise extends beyond the country’s world-class universities and its technical and IT talent, and he puts the company’s over-achievement against its plans to date down to the UK’s enabling business environment.
“We found that the UK is one of the most open and free countries to do business in, and we’ve received a lot of support from the government, from institutes and also from our customers.”
He explains, for example, that the government has helped ensure it can bring in experts from its other R&D centres around the world when it needs to – although no doubt Zhang will be watching changes in the visa regime closely.
But he reserves most of his respect for the customers Huawei works with, in the UK and elsewhere. Although Huawei has enterprise and consumer divisions, its bread and butter is the carrier networks. Across the world, Huawei works with 45 out of the top 50 telco operators, reaching a third of the world’s population.
Huawei has helped BT to achieve broadband bandwidth of more than 100MN on its existing copper-wire infrastructure
Its first major client in the UK was BT – and Huawei is the main partner behind the superfast broadband rollout.
Their relationship has included establishing a joint innovation centre in Ipswich, where Zhang worked for his first three years in the UK and at which Huawei has helped BT to achieve a broadband bandwidth of more than 100MB on its existing copper-wire infrastructure.
Huawei also has a joint innovation centre with Vodafone, where it is working on a SingleRAN (radio access network unit) or base station that can support all the technologies from 2G to 4G and all the frequencies from 900Mhz to 2.68Ghz. “This can protect their investment for the long term,” says Zhang. “In all our innovation, the number one target is to provide the customer with more business benefit for less investment.”
Customer-focused innovation provides a big business benefit for Huawei too. “The partnership between Huawei and our customers actually gives us a lot of confidence and plenty of guidance regarding the business direction,” explains Zhang.
It is further evidence that Huawei’s business structure is not all that Chinese. Zhang explains that most of its resources are focused on the customer engagement and support teams. “It’s a very frontline organisation,” he says. “And the company gives the customer team full authority to meet with and deliver solutions quickly to their clients.” Even big decisions won’t necessarily make their way back to China.
But Huawei UK is far from shaking off its Chinese heritage. It’s taking its role as the biggest China-mainland investor into the UK seriously, and is already working with UK Trade & Investment (UKTI) to improve ties between the two countries.
Last June, it worked with the UKTI to host the first SME programme in Shenzhen, where it introduced UK participants both to companies in its own supply chain and to different industries to help them to access the Chinese market.
It is also sharing its experience with other Chinese companies in an effort to persuade more to invest over here. Zhang also wants more of them to join Huawei’s undergraduate student scheme, now in its fourth year, which will have funded work-experience placements in China for 63 second-year students by the end of 2014.
And reflecting Zhang’s sentiment that Huawei wants to build a relationship with the local community, it co-hosted the CBI’s inaugural Chinese New Year dinner in London in February.
“Because we have received the support from the community, from the government here, we need to try to find a way to give back and return this support,” he says.
The consumer business is the 27-year-old firm’s youngest division, but it’s one that is growing fast. Last year, it achieved revenues of nearly $9bn globally, ranking it number three in the industry, on that basis, after Samsung and Apple.
It’s gone from being a white-label manufacturer to a brand name in its own right – although it will take time for that name to stick. Last year it launched the Ascend P6 in London, the slimmest smartphone in the world.
Asked how it planned to challenge the dominance of Apple and Samsung, Zhang replies: “Our strategy is not to challenge someone. Our challenge is to provide our customers with the best product and the most cost-effective offers.”
He is confident that its focus on the quality of what it offers will automatically attract consumers, but adds that Huawei will work with the carriers to build its footprint in the market. It did, however, embark on its first marketing effort last year and, perhaps rather suitably for its “global, local” positioning, it has signed as Arsenal FC’s smartphone partner.
The Zhang CV
2011 - Named chief executive, Huawei UK.
2010 - Appointed general manager & chief operating officer, Huawei UK.
2004 - Moved to Huawei Europe, working closely with BT as head of solution & strategy for Huawei UK & Ireland.
1998 - Joined Huawei Technologies in an R&D role, after attaining an MBA from Northwestern Polytechnical university, Shaanxi Province.