Born in 1944, Ren Zhengfei graduated from Chongqing Construction Engineering College before joining the army as a construction engineer. After a 14-year military career, Ren landed a job in Shenzhen, as the vice president of a state-owned electronics company before leaving the company after a dispute over pay.
Along with five partners, Ren then founded Huawei in 1988 with just Rmb21,000 of capital. The company became an agent dealing in equipment that enabled offices to have a private telephone exchange.
Huawei was benefitting from the huge demand for telecommunications equipment, but Ren realised the agency model would not maintain higher profits over the long-term. So Huawei started to develop its own line of products.
The market became increasingly competitive, with multinationals entering China to sell their equipment. Having noticed that the competition was focused in the cities, Ren took to heart Mao’s combat tactics to ‘surround the cities from the countryside’ by growing fastest in rural areas. It boomed with the growth in mobile telephony in China and soon started doing business overseas as well. By 2005, revenues from abroad exceeded those at home.
Need to know
In 2010, Huawei’s sales amounted to Rmb185.2 billion, on a par with Ericsson. The most recent annual report was also signficant: it was the first in which Huawei – still a private company – revealed the identities of its board members and offered their profiles. This was in response to problems Huawei has had in the US.
The company has twice failed to complete acquisitions in America, due to concerns related to the company’s alleged links with the Chinese military. Ren will be hoping that by being more transparent, Huawei will be seen as less of a threat in foreign markets. It denies any military links (see WiC96).
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