Huawei ‘not interested in the US any more’
By Kathrin Hille in Shenzhen and Paul Taylor in New York
©Bloomberg
Huawei has given up its quest to conquer the market for telecom network equipment in the US, where the Chinese company’s sales efforts have been repeatedly blocked by security fears.
“We are not interested in the US market any more,” Eric Xu, executive vice-president, said at the company’s annual analyst summit on Tuesday. The world’s second-largest supplier of network gear by revenue has shifted the focus of expansion away from the US over the past year.
Huawei’s decision ends an aggressive push for business in the world’s largest economy. US security officials and politicians have repeatedly identified Huawei as a threat to US national security – an allegation the Chinese company has consistently denied.
Although Huawei has done business with 45 of the world’s top carriers, it failed to get contracts from any leading operators in the US. Last month, Sprint Nextel, the third largest US mobile network operator, and its Japanese suitor, Softbank, both gave assurances to the House intelligence committee that they would not use Huawei equipment.
In October, a US congressional report officially branded Huawei and ZTE, its smaller Chinese peer, a threat to national security. At the time, Representative Mike Rogers, chairman of the House Intelligence Committee, called on the US government and private sector companies to shun Huawei and ZTE.
Despite its success in other markets, including the UK, Huawei has struggled in the US for years because of concerns among politicians and security officials about the military background of its founder Ren Zhengfei, a former People’s Liberation Army officer.
In 2008, Huawei retracted a bid for 3Com, a US technology company, after it emerged that the proposed deal would not gain regulatory approval in Washington. Two years later, Huawei bid for a multibillion-dollar contract to supply network infrastructure to Sprint Nextel, one of the top US operators, but lost after the US government intervened. It also failed to win bids for other US telecom assets and, in 2011, was forced to unwind a $2m deal to buy patents from a US company.
In response to these setbacks, Huawei launched a major US lobbying campaign. It hired a number of senior executives from ailing rivals such as Nortel and Motorola, in an effort to build a big research and development presence.
Ken Hu, a senior Huawei executive, also wrote a passionate open letter calling on the US government to launch a formal investigation, which he believed would clear his company.
But October’s congressional report made it even more difficult for the company to do business in the US, Huawei executives say. As a result, it has halted its expansion there. While Huawei still employs 1,400 people in the US, its R&D headcount has dropped from 800 to 500, and the sales team has shrunk too.
Executives at the company’s consumer and enterprise business-groups said they no longer consider the US to be a strategic market.
Huawei on Tuesday also revised downwards the long-term outlook for its enterprise business, its youngest but fastest-growing division. William Xu, the unit’s chief executive, said its goal of generating $15bn in revenues from the business by 2017 – a target set just last year – was “too optimistic”. The company is now aiming for just US$10bn. But Mr Xu still expects the unit’s revenues to grow 45 per cent this year, up from 25 per cent growth in 2012.
