Huawei Puts Brakes on India Drive 华为印度建厂计划推迟

By newsdoug on January 13, 2012

Huawei cancels India factory plans Telecoms equipment maker Huawei Technologies, which hit numerous roadblocks ast year in its drive to enter the US, has hit another obstacle in the fast developing and important India market as well, indefinitely postponing plans to build a major factory there. (Chinese article) The decision comes a couple of years after a major flare-up between China and India that saw the latter ban the import of telecoms equipment from both Huawei and Chinese rival ZTE (HKEx: 763; Shenzhen: 000063) for several months over security concerns. This latest move by Huawei, which probably would have involved an investment of $100 million or more, looks more related to a series of government corruption scandals that has gripped India’s telecoms industry in the last year, paralyzing new development. Reports in the Chinese media cite a Huawei official saying the new plant was designed to localize more of the company’s production and also address some of India’s security concerns, but that recent sputtering demand in light of the industry’s paralysis has made such new investment unnecessary. That kind of explanation is probably true, but also means that both Huawei and ZTE will take a hit in their India business this year, which is one of their most important Asian markets. It also shows that Huawei and ZTE will continue to face numerous obstacles as they try to expand in overseas markets, where concerns run high that their equipment may contain security loopholes designed for Beijing to use for spying purposes. Huawei has met with repeated resistance in the US due to such concerns, and with the presidential election coming there this year I wouldn’t expect the company to make its first major deal in the market until 2013 at the earliest. That reality, combined with the latest problems in India and weakening demand in Europe as it struggles with its ongoing debt crisis, means that 2012 could be a bleak year for both Huawei and ZTE in terms of telecoms equipment sales, with no relief in sight until 2013 at the earliest.

Bottom line: Huawei’s plans to delay construction of a major new factory in India reflects recent difficulty in the important market, and augers a difficult year for the company in 2012.

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