Huawei to focus on Europe market

Business there is growing; V-P also stresses firm not pulling out of US

CHINESE telecom gear maker Huawei Technologies has said it will focus more on the European market even as it strives to make inroads in the United States, where it is facing obstacles over cybersecurity concerns.

Responding to recent news reports that the company was pulling out of the US, Mr Scott Sykes, Huawei's vice-president and head of international media affairs, said the company will expand in Europe, where its business is growing.

Last year, Europe accounted for 13 per cent of Huawei's total revenue of US$35.4 billion (S$43.6 billion), he said, while the US accounted for only 4 per cent.

"We will invest where our business is growing," he told The Straits Times at Huawei's corporate headquarters in Shenzhen.

Huawei will soon build a second "home", probably in Dusseldorf, Germany, where it has a regional office. It aims to increase headcount in various European markets from 7,000 to 12,500, in the next five years. Apart from Dusseldorf, Huawei also has a regional office in Warsaw, and 10 research and development centres across Europe.

But Mr Sykes stressed that "Huawei is not pulling out of the US market".

"The reality is that we never had a large business since we started an office there in 2001. We'll continue to engage US customers and government agencies. It will take a longer time for us to gain acceptance. We're not closing our office or cutting headcount."

Last month, Mr Eric Xu, one of Huawei's three rotating chief executive officers, expressed exasperation at American lawmakers' allegations that the company's equipment could be used to spy on US corporations.

Mr Xu said Huawei was not paying much attention to the US although he admitted that the company would like to expand its market share there.

Analyst Christopher Mines of Forrester Research dismissed reports about Huawei's indifference to the US market as being "overblown".

"Huawei is realising that success in the US is going to take longer than it originally thought and is scaling back its expectations for growth as a result."

Mr Mines, Forrester's senior vice-president and research director, added that Huawei understands the US market remains important because companies that succeed there "set the global standard for IT sophistication", which will help win over new customers in the country and the rest of the world.

Mr Ian Foo, director of Huawei's data centre's products and solutions based in California, said yesterday that many US customers are taking a pragmatic approach to Huawei.

"As long as we meet their requirements, they're willing to look at us based on our merits."

Among the customers that are receptive to Huawei's products in the US are those in non-security-sensitive sectors like retail, manufacturing and education, Mr Foo added. In January, Huawei inked a deal to supply data centre equipment to the Massachusetts Institute of Technology.

Huawei, which counts major customers such as Vodafone, Telekom Malaysia, Nucleus Connect and StarHub, said the American government has made it difficult for it to do business there.

Last October, the US House Intelligence Committee issued a report that discouraged American companies from buying Huawei gear over cybersecurity fears.

The death of American researcher Shane Todd, who was found hanged in his Singapore apartment in an apparent suicide last June, has also put Huawei in the media spotlight.

The parents of Dr Todd - who quit his job at the Singapore Institute of Microelectronics (IME) just prior to his death - have alleged that their 31-year-old son was murdered over a project that he was working on, which purportedly involved both the IME and Huawei. Both the IME and Huawei have said the project did not go beyond preliminary talks.

Mr Sykes said: "Last year, we grew 8 per cent over 2011. We operate in 140 countries. Out of the 150 LTE (long-term evolution) installations in the world, we've deployed half of them. Our equipment connects one-third of the world's population and we're doing this in a competitive industry.

"We've never had any security issue of any kind anywhere in the world. If there are, we would be out of business... If we're doing anything on behalf of the Chinese government, then it would be corporate suicide."

Huawei's office in Singapore sells telecom gear and related software and mobile phones. It has about 800 staff and recently opened a customer service centre at Central, near Clarke Quay.

To alleviate cybersecurity concerns, governments should work together with equipment providers and telecom firms, Mr Sykes said.

"We agree that cybersecurity is important but to block Huawei solves nothing."

Huawei has a cybersecurity evaluation centre in England and has been supplying equipment exclusively for the national broadband network there for the past seven years.

"We've government-cleared security personnel to look at our source code, to examine if everything is secure," he said.

Last year, Huawei announced a US$2 billion investment in England over the next five years to boost its R&D activities and staff strength there from 800 to 1,500.

Huawei is a transnational company with a global supply chain, Mr Sykes added, with 70 per cent of its equipment components made outside China. In contrast, other telecom equipment manufacturers, such as Alcatel-Lucent, make most of their gear in China.

The US Congress' concerns revolve around Huawei founder and chairman Ren Zhengfei, who was previously a civil engineer in the People's Liberation Army. The Congressional Intelligence report said Huawei failed to address concerns that there were digital backdoors that could allow the Chinese government to snoop on American companies and citizens.