Huawei Talks Tough, ZTE Tries India
China’s top 2 telecoms equipment makers appear to be losing their patience with growing hostility from the west, with Huawei making unusually frank remarks about its frustrations as ZTE (HKEx: 763) announces a major new initiative in the friendlier India market. I’m not surprised at all by this latest turn of events, as both companies are probably realizing they won’t be making any major inroads into the US networking equipment market anytime soon. To make matters worse, both are facing growing resistance in the lucrative Western European markets as well, where Huawei had previously made strong progress.
Let’s start with Huawei, whose latest remarks are some of the bluntest I’ve seen from a company that has tried to be polite in the past each time it received a new setback. Both Huawei and ZTE hit a major roadblock in their global expansion about a year ago, when Washington formally banned them from selling their networking equipment in the US due to national security concerns. More recently, several British politicians have added their voice to the debate by expressing their own similar concerns.
A top Huawei executive made headlines earlier this year when he was quoted at an event saying his company had given up on the US networking equipment market due to its ongoing frustrations. Now another Huawei executive has come out and told western critics to “shut up” if they can’t provide evidence that the company’s networking equipment has problems.
The full quote, delivered in an email statement, has Huawei’s global cybersecurity officer John Suffolk saying, “our customers have the right to know what these unsubstantiated concerns are.” Suffolk then adds, “It’s time to put up or shut up.” (English article; Chinese article) The shift in Huawei’s tone indicates the company may be getting more aggressive in its protests over the US ban and growing opposition in Europe. But I suspect this new tactic won’t stop the opposition by western governments, and may only end up making the situation worse.
Compared with Huawei, ZTE has maintained a lower profile in the ongoing dispute so far. The company has less at stake in Western Europe, where it has yet to make major inroads. It has also made major progress in the US market for its low-cost smartphones, and probably doesn’t want to jeopardize its position for that product.
But ZTE was also showing its frustration more passively with its announcement of a major new launch for its smartphones in India. (company announcement) Under the initiative, ZTE is rolling out 6 new smartphones and 4 data cards for the India market, with more to come in the months ahead. From a purely strategic point of view, this move looks like a smart one since ZTE’s low-cost smartphones are more suited to cost-conscious emerging markets like India rather than mature markets like the US.
While ZTE makes no mention of its frustrations in the west, the subtext to this latest announcement certainly seems to underscore the fact that friendlier emerging markets will remain one of its biggest sources of growth for the foreseeable future. Look for more focus by ZTE on these emerging markets in the months ahead, as it continues to take a low-key approach in the ongoing conflict with the west and lets Huawei do most of the tough talking.
Bottom line: Huawei’s latest tough talk and ZTE’s new India smartphone launch reflect their growing frustration with western resistance to their networking products.
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