ZTE Commits to US, Huawei Hesitates 中兴“死磕”美国市场华为略有收手

By newsdoug on June 20, 2012

ZTE reaffirms US commitment We’re seeing some interesting new signs coming from troubled telecoms equipment giants ZTE (HKEx: 763; NYSE: 000063) and Huawei in the US, with the former reaffirming its commitment to the difficult market even as the latter reportedly scales back its presence there. These latest signals reflect not only the many obstacles that both companies have faced in the US lately, but also challenges they are seeing in many western markets where governments worry that the pair are simply spying arms of Beijing.

Both companies are currently being investigated in US over concerns that their equipment could pose a security risk (previous post), and also in Europe, where the European Union is investigating whether the pair receive unfair financial support from Beijing. (previous post)

Both Huawei and ZTE have made a number of moves over the past year to try to improve their image in the US, including hiring big-name lobbyists and making other goodwill gestures, but none of those efforts seem to be having the desired effect.

In its latest PR move, ZTE’s top US executive has made a high-profile speech in which he affirmed his company’s commitment to the market with plans to continue boosting its investment there by 10 percent annually over the next few years. (company announcement) The executive also highlighted the large amount of buying ZTE does from US suppliers like chip makers Qualcomm (Nasdaq: QCOM) and Broadcom (Nasdaq: BRCM), and he made his remarks at a conference in the city of Atlanta at a venue significantly named after former President Jimmy Carter.

Despite the US setbacks in its core telecoms equipment business, ZTE is making recent new pushes to diversify into less controversial products like smartphones and most the teleconferencing business. (previous post) For this reason, it still sees the US as a potentially big market for these more consumer-focused products and thus needs to continue this kind of PR offensive despite the more high-profile setbacks.

Meantime, Chinese media are reporting that Huawei has laid off 50 employees in the US at its Texas offices, again reflecting the difficulties the company has faced in that market. (Chinese article) Huawei has declined to comment on the reports, except to say that it is engaging in a “consolidation” of its global workforce. Chinese media have been reporting for several weeks now that Huawei is eliminating thousands of jobs worldwide due to a slowdown following its rapid build-up over the last few years. (previous post)

In Huawei’s case, I don’t really see these US layoffs as a sign that it’s preparing to abandon the market, but instead they are probably just part of its global workforce reduction. Still, the fact that it’s eliminating what’s probably a fairly significant part of its US workforce certainly reflects its realization that it still faces many challenges in that market.

As they increasingly understand that fact, I wouldn’t be surprised to see both Huawei and ZTE quietly abandon their hopes for selling telecoms equipment in the US and instead focus on less controversial products like cellphones.

Bottom line: ZTE and Huawei’s latest US moves reflect reduced hopes for selling telecoms equipment in the market, and both companies are likely to focus on consumer products there going forward.

Enjoy this blog? Please spread the word :)