Huawei Takes Refuge in India 华为在印度寻找避风港

By newsdoug on June 26, 2012

Huawei looks to India Telecoms equipment giant Huawei, facing hostility on nearly ever major front in the West, is turning to India as it looks for a friendly face, with the announcement that it will spend some $2 billion on a new global product development center in this neighboring BRICS country. As a longtime Huawei watcher, I find this latest move somewhat ironic, as India was actually one of the first countries to launch an investigation due to security concerns into Huawei and crosstown rival ZTE (HKEx: 763; Shenzhen: 000063).

Industry watchers will recall that Delhi’s investigation around 5 years ago resulted in tense relations with Beijing, which accused India of using the investigation to try to lock 2 of China’s most promising exporters out of its market. The 2 sides ultimately settled their disagreement when Huawei and ZTE both agreed to show India their source codes to prove their equipment couldn’t be used for spying.

But western governments, most notably the US, remain unconvinced, and have largely locked Huawei and ZTE out of their markets for new network construction due to security concerns. (previous post)

Let’s look at this latest news, which has media reporting that Huawei plans to spend the $2 billion over the next 4 years to set up a global product development center. (Chinese article)

While Delhi will clearly welcome this commitment, the decision appears to be based on the simple reality that India is one of the few global markets that offers big potential for Huawei, as the country builds out advanced 3G networks and also starts to build next-generation 4G ones. The reports say Huawei has won $1.5 billion in business from Indian network operators in 2011-2012 alone, and now controls half of the market.

India has been a tough market for Huawei and global rivals like Ericsson (Stockholm: ERICb) and Nokia Siemens Networks over the last 3 years, as an unrelated corruption scandal at the country’s telecoms regulator cast a chill over new network construction for much of that time. But with the effects of the scandal now fading, Huawei seems to be betting with this new big investment that India will become one of its top markets in the next few years as it searches for ways to maintain growth in its core telecoms equipment business.

The positive developments in India would contrast sharply with big recent setbacks in just about every other major market being targeted by Huawei. The US is already investigating Huawei equipment for security concerns, and last week new reports emerged hinting a new anti-dumping investigation could also be coming. Such an investigation would come as the European Union conducts a similar probe into whether Huawei and ZTE receive unfair support from Beijing in the form of policies like export rebates and low interest loans. (previous post)

With all that hostility in the West, it’s not really so surprising that Huawei is turning to India as one of the few major friendly markets willing to buy its products. Of course the danger now is that India could find another new excuse to attack Huawei and ZTE, since China and India have historically not always had the smoothest relations. But for now at least, look for Huawei to focus not only on India, but perhaps other BRICS countries and developing markets as it slowly resigns itself to a long and difficult road ahead in the west.

Bottom line: Huawei’s $2 billion investment in India reflects a shift in its focus toward developing markets following numerous recent setbacks in the west.

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