Quiet China giant embodies technology aspirations

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Huawei says it is owned by its employees but has released few details about who controls it, fueling questions abroad.

“The place where they have the greatest trouble is the West, where they face a lot of suspicion about their origins. It’s clearly a handicap,” said Tarun Khanna, a professor at Harvard Business School.

Ren started the company after his engineering unit was disbanded and he left the army, according to Huawei’s February statement. He started with 21,000 yuan ($5,500 at the time) from his savings and a deal to sell phone switches supplied by a Hong Kong company. Demand boomed as Chinese carriers upgraded decrepit equipment at the start of reforms that would ignite China’s economic boom.

Song said Huawei got into developing its own products almost by accident, launching a research arm only after its Hong Kong supplier was acquired by a state-owned company in 1990.

Early gear targeted rural Chinese phone companies and included a switching unit in 1994 marketed as “mouse-proof” for carriers that suffered from gnawed cables.

“Our main goal was survival,” Song said.

Huawei spent a decade selling in China’s countryside and developing countries in Asia and Africa, then moving into Chinese cities. It made its first sale in Europe in 2004 to a Dutch mobile phone carrier.

Today, Huawei works with 45 of the 50 biggest phone carriers.

On the consumer front, Huawei’s latest gadget is the “MiFi” _ a portable wireless modem the size of a deck of cards that creates a local area network for a half-dozen laptop computers. As it expands in the U.S., Huawei is also looking at opportunities in fields from finance and government to health, transportation and “smart grid” management of power networks.

The company’s research-and-development staff has grown to 50,000 people and research spending is set at about 10 percent of sales, or $2.5 billion last year. It operates 12 joint development centers with partners including Vodafone Group, Deutsche Telekom, Japan’s NTT Docomo and Egypt’s Etisalat and has research ventures with Microsoft Corp., IBM Corp. and others.

Its corporate campus is a cluster of sleek, glass-and-steel buildings on a 325-acre (130-hectare) campus with an artificial lake. A training center where new employees spend six months was designed by star architect Norman Foster.

“They’re generally a pretty impressive story,” said Duncan Clark, managing director of BDA China Ltd., a Beijing research firm, who has followed the company for a decade.

“Some people in the United States see them as a creature of the government. But that’s unfair, because if you look at how they’ve grown, it’s almost despite the government, not because of them,” he said. “They get export credits and other things, but it’s wrong to dismiss them as a knockoff shop or a product of the army.”

In contrast to major Chinese state-owned companies, which do most of their business in China and benefit from monopolies and other official favors, Huawei says it made 70 percent of its sales abroad last year.

In another break with tradition, Huawei also looks abroad for senior managers. Its chief technology officer was recruited from BT in 2009. The former CTO of Canada’s Nortel Networks Corp. was hired last year to run research and development in North America.

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