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PRD pioneers: Huawei Technologies

Are you a striver or a labourer? That was the question being posed in the media three years ago following speculation that Huawei, a leading maker of telecoms infrastructure equipment, wanted its staff to sign a ‘Striver Declaration’.

According to the reports, Huawei’s managers were asking staff to choose between the two categories. Strivers were promising to give up paid leave and overtime pay, but there was more likelihood of promotion and a better chance of a year-end bonus in return. Those who opted for labourer status (i.e. the wrong answer) would keep their holiday benefits, but their career prospects were likely to be viewed more dimly.

Huawei's headquarters in Shenzhen

Huawei’s headquarters in Shenzhen

The news item seemed typical of the hard-charging style that had helped Huawei to grow rapidly since 1998, when Ren Zhengfei, a former engineer in the People’s Liberation Army (PLA), started the company as a third-party reseller of telecom devices in Shenzhen.

70%

Growth in Huawei’s smartphone revenues last year

Ren, who rarely grants media interviews, queries his enigmatic reputation. “I am not mysterious at all,” he complained at a rare public appearance at Davos last year. “I know nothing about technology and I know nothing about finance. If you don’t know much, you’d better not show up, otherwise people might see the back of your pants are dirty.”

Ren’s military background has also proved a hindrance in some of Huawei’s overseas markets, especially the United States, where there are suspicions about its relationship with the Chinese military. Huawei refutes any link to the army but the allegations have been enough to stymie some of its commercial progress. Like ZTE, its Shenzhen-based rival, it has been blocked from selling its heavier-duty network equipment in the US since 2012, when the House Intelligence Committee accused both companies of spying for the Chinese authorities.

Huawei’s response has been nimble-footed, focusing on selling networks, routers and switches in countries less concerned by the allegations of military ties, and moving into consumer products like smartphones, which have the benefit of avoiding similar scrutiny from regulators.

This dual-pronged strategy has helped Huawei to become one of the Pearl River Delta’s great success stories and probably its most influential brand outside China. Revenues for its smartphone business grew by nearly 70% last year to more than $20 billion, after shipments of 108 million phones. Huawei’s network-building division is still the larger business, however, underpinning the company’s plans for ‘end-to-end’ solutions for connected homes and offices via the so-called Internet of Things.

Huawei caters for more affluent customers with premium handsets that the Financial Times tech reviewer Jonathan Margolis has become a big fan of. “Ten years ago, Huawei’s products were clunky and imitative. Now it’s a world player, making beautiful phones under its own name.” In March he tested the Huawei W1, a smart watch he described as “the most fun and – I think – stylish”.

Although it has yet to make more of a breakthrough in the American market, Huawei had climbed to third place in the global rankings by the end of last year in handset volumes, just behind Samsung and Apple. Despite being less than 20 years old, it earns revenues of just over $60 billion, and reports a “solid increase in profits and cashflow” annually.

With its own designs in chipsets and handsets and network communication technology, Huawei seems set to mount a further challenge to its more recognised rivals. “Four years ago, no one knew who we were. Even in China”, Richard Yu, the head of Huawei’s mobile devices business, told an industry conference in February. Now it expects to become the number two smartphone seller by 2019 and the number one just two years later. “Before, we were taking share from smaller players, but with time, we will get market share from Apple and Samsung,” Yu promised.

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