Growing Chinese telecoms giant is keen to share its cool new toys with a wary world

Telecoms giant Huawei is keen to show the world that it can be trusted with sensitive security issues

Huawei is on the verge of becoming a genuine global IT giant. photograph: kiyoshi ota/bloomberg via getty images

Huawei is on the verge of becoming a genuine global IT giant. photograph: kiyoshi ota/bloomberg via getty images

 

The Huawei campus in Shenzhen in southern China is a model of openness and industry as 40,000 mostly young employees happily patrol the 2sq km of the networking giant’s headquarters.

Huawei is on the verge of becoming a genuine global IT giant. It sells products to more than 140 countries and by the end of last year served more than one-third of the world’s population. The company had revenues of 113.8 billion yuan (€13.83 billion) in the first half of the year and is on track to increase revenues by 10 per cent this year in the full 12 months. It expects to grow by 10 per cent every year without mergers or acquisitions.

“Many people here keep camp beds under the desks and have a sleep after lunch. There are 3,200 apartments on campus, and, of the 40,000 here, about 70 per cent are working in R&D,” said Huawei spokesman Joe Kelly, who comes from Letterkenny in Donegal. This is a committed labour force.

The White House
Inside the building known as the White House, eager technicians display technology for dealing with extreme temperature drops, for expanding mobile networks in cities and for making smartphones faster, slimmer and better looking.

There is a certain irony about the choice of the White House as a name. Last year, a report by the House Permanent Select Committee on Intelligence in the US claimed that using Huawei’s equipment posed a threat to national security.

In July, the former head of the US Central Intelligence Agency (CIA) and National Security Agency (NSA), Michael Hayden, said he believed Huawei Technologies was a significant security threat to the US, that it had spied for the Chinese government and that intelligence agencies had hard evidence of its activities.

In October, Australia’s federal government decided to confirm a ban on Huawei supplying equipment to that country’s national broadband network.

During a recent visit, the company went out of its way to introduce us to senior executives and to show us around the campus, including the R&D facility and other centres. The Chinese networking giant is trying to make itself more transparent in an effort to convince the world that it’s not spying on global communications for the Chinese government.

There are demonstrations of cutting- edge technology, such as a container data solution where a company or a local government or an organisation can set up an entire data management system using solutions carried in containers.

“This really cool container data solution goes from soup to nuts. Within three months, we can deploy 10,000 desktop clouds,” said Kelly, pointing to a small box that sits on a desktop.

“You can guarantee your data, even if it’s stolen, as all the resources are in the data centre. This is important for governments and R&D departments,” said Kelly.

Then there is big data storage, the Cloud Engine 12800, that can ship 64 terabytes of data per second. “This is our star,” said Kelly. Huawei is currently number two in server shipments in China.

Then there is an intelligent video surveillance system where you can read the sign on a building 2km away.

This is the slightly creepy side of the business that raises hackles in the West, but Huawei is hardly unique in providing this kind of equipment. The suspicions surrounding Huawei are not plucked out of the air however.


PLA connection
In 2001, for example, the company said it had supplied equipment for the People’s Liberation Army’s (PLA) first national telecoms network, which it reportedly maintained and upgraded.

Huawei’s critics suspect it is a front for the PLA and believe that its equipment can be used to spy on other countries. The company’s founder, Ren Zhengfei, a Communist Party member since 1978, was formerly a PLA engineer. Until last May, he had never given interviews to the media. Then he spoke to a group of New Zealand journalists and said that intense scrutiny from the US over Huawei’s contracts with the Chinese government and the military was partially due to jealousy about the company’s success.

The 68-year-old firmly denied any espionage links. “Huawei has no connection to the cyber-security issues the US has encountered in the past, current and future . . ,” he said.

“Huawei equipment is almost non-existent in networks currently running in the US. We have never sold any key equipment to major US carriers, nor have we sold any equipment to any US government agency.”

In the lobby of the White House, there is a sign for guidelines on dress with instructions to avoid hot pants and too-short skirts and generally encouraging modesty. This is a clean facility in so many ways.

Grungy beginnings
It’s a far cry from the grungy apartment building in the Wanyou district of downtown Shenzhen where the Chinese telecom equipment firm began its life in 1987. There, a grubby pair of voluminous underpants is hanging out to dry, drawing chuckles from the visiting journalists.

Yet in some ways it is symbolic of the efforts to become transparent. This is Huawei’s past and it’s leaving its dirty laundry behind.

When Ren Zhengfei started here, there were 10 employees and its first product was a PBX telephone system.

The company admits that it has had a problem with secrecy, but a key move towards changing that perception was bringing in Scott Sykes as head of international media affairs.

Sykes previously worked in media relations at Alcatel-Lucent, and before that had senior roles at Weber Shandwick and IBM. “In 16 years we have expanded from one country of operation, China, to 140, including the UK and Ireland, ” he said at an event in Hong Kong. “[Of] the 66 per cent of revenues from outside China, 35 per cent comes from Europe, Middle East and Africa.

“It’s important for people to know who we are and what our intentions are because of the two new businesses and because the relative strategic importance of telecoms has risen dramatically in the last decade,” he said.

Huawei could have used the NSA/Prism scandal to go on the rampage but the company has played it very cleverly, saying the NSA scandal hurts the whole industry, so it is not in its interests to gain political capital from it. “We’ve been careful not to comment directly on that,” said Sykes.

“On the one hand it has the potential to create a crisis in confidence in IT and telecoms equipment. We have done our best to be open and transparent. We publish what we think about cybersecurity. It’s right there.

“Because of our heritage and because of where we are headquartered, we’ve been challenged. The lack of trust is broadly about China, not specifically about Huawei, we get painted with that brush sometimes. We know that the bar is higher for us.”

Overseas revenue
Two thirds of Huawei’s revenue comes from outside China, he points out, so alienating overseas markets is not in the company’s interests.

Huawei has produced a technical paper, written by the company’s head of cyber-security, John Suffolk, who used to be the UK government’s chief information officer, called Cyber Security Perspectives: Making cyber security a part of a company’s DNA – A set of integrated processes, policies and standards.

The paper outlines the company’s information security program and structure, discusses its core governance principles and describes in detail how it oversees its suppliers, including its 400 US suppliers and thousands of international partners, that make up the supply chain.

Huawei is in the process of transforming itself from an original design manufacturer to serve its customers, to an original equipment manufacturer in order to build devices according to its own specifications and to capitalise on higher margins.

Consumer business
Huawei’s consumer business group is one of the group’s three business units and offers products including mobile phones, mobile broadband services, home devices, cloud services and consumer chip sets. Last year revenues in the consumer business group was 48.4 billion yuan (€5.88 billion), accounting for 22 per cent of overall revenues.

Within this group, the device unit is key. Shao Yang, the vice president of marketing for Huawei Device, detailed how the company has evolved from fixed networks to wireless, then to broadband services, and told of how he believes there is room for Huawei in an expanding market.

“We are building our brand globally. We provide innovation and quality. We hope that people want not only Apple and Samsung, but that people want more surprises from other brands,” said Shao.

“In Huawei, we have mostly three devices: phones, mobile wifi or dongle, or something like a box in the home. We are trying to bring all of this together and connect it with experience. In mobile devices our market share is 60 per cent,” he said. “We respect and admire what Apple and Samsung have done very much, but we also see there are some things they have not done very well,” he said.

Last year, the group shipped 127 million devices, including 52 million handsets, 50 million mobile broadband products and 25 million home devices. Total smartphone shipments were 32 million, up 60 per cent on the previous year.

Based on shipment numbers, Huawei Device was third among global smartphone vendors in the fourth quarter of last year and in the first quarter of this year.

Smart market
This year has seen the launch of the Ascend P2 at the Consumer Electronics Show (CES) , a global consumer electronics and consumer technology trade show that takes place every year. The smartphone has a five-inch high-definition screen. In June it launched the world’s slimmest smartphone: the 6.18mm Ascend P6.

When you listen to Shao make his arguments, it’s hard not to think that the US House of Representatives panels, or the Australian government, are ultimately fighting a losing battle.

This sector is very much the next big thing to come out of China.


Huawei calling: The Irish connection
Huawei employs 50 people in Ireland, over three quarters of them locally recruited, in three offices in Dublin, Athlone and Cork.

“We sold around 450,000 devices in Ireland last year, from smart phones to tablets, 3G dongles, domestic routers. That’s almost 1 in 10 Irish people bought a Huawei device last year,” said Joe Kelly, a spokesman for Huawei who lives with his family in Shenzhen, but is from Letterkenny originally. The former journalist joined Huawei from BT.

Beyond that, the majority of phone calls, text messages, emails and web surfing sessions carried out in Ireland touches infrastructure provided by Huawei.

In January, Huawei opened a new R&D centre spread across two sites in Cork city and Dublin. It will create jobs for more than 50 highly skilled research professionals who will contribute a broad range of skills and expertise to the company’s global operations.

Initially the centre will focus on Huawei’s next generation customer experience management product, SmartCare, supporting the company in providing customer services to telecoms operators in Ireland and internationally. Future expansion at the sites will extend R&D functions to cover a wider range of IT software projects.

Since 2009, Huawei has invested €400,000 annually in University College Dublin for R&D cooperation in wireless.

Kelly sees his position as trying to create understanding between the West and China. “I think that people seldom trust what they don’t understand. There is more to do for the West to understand China better and for China to understand the West better,” said Kelly.