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Huawei: Enter the dragon

By Patrick Pilcher, Fri 12 Dec 14
FYI, this story is more than a year old

Huawei might not be one of New Zealand’s well known brands, but on the global telco stage they’re bigger than huge. Huawei are currently building out nearly half of the world’s 4G networks, and this is a potent indicator of their scale and reach.

In New Zealand, Huawei equipment powers 2Degrees’ mobile network, Spark’s 4G network, and will soon be upgrading the existing 3G network. Huawei also supply expertise and equipment for Vodafone’s DSL copper broadband and about 30% of the UFB network with partners Ultra Fast Fibre and Enable Networks.

This said, they're not without controversy. In the past I've written about how the US government cited national security concerns around Huawei. Thanks to Edward Snowden, stories soon surfaced of the US spying on Huawei.

All this was on my mind as we headed across the border, freshly jetlagged off a flight from New Zealand to Hong Kong. We were on our way to check out Huawei’s HQ in Shenzhen.

Only a few decades ago, Shenzhen was an obscure tiny fishing village. That all changed in 1980 when China made it a special economic zone. Shenzhen has since transformed beyond all recognition, and is now a sprawling metropolis of 15 million people.

We drive through Huawei’s campus. Calling it a campus is a bit like calling a city a college. The campus spans two square km and is a small city in its own right. Its manicured park-like surroundings give no hint that a global telecommunications giant lurks here.

About 40,000 people work on the campus and 1,000 live in an on campus apartment complex that offers rent at about half the going rate in Shenzhen. 

Wandering around these apartment facilities I’m surprised at how well appointed they are. We’ve all heard horror stories about Foxconn (who are also in Shenzhen) - I was expecting things to be pretty grim and was looking out for suicide prevention nets on the roof to catch distraught workers as they jumped. Instead things looked pretty luxurious. There’s a large pool complex, basketball courts and a gym. Ping-Pong tables were also present (this is China after all).

The sheer scale of Huawei is just nuts compared to the story of their beginnings.

Ren Zhengfei (whose parents were teachers in the remote mountainous region of Guizhou) formed Huawei. Ren studied at the Chongqing Institute of Civil Engineering and Architecture, joining the Military Engineering Corps in 1974. He left in 1983, spending five years at Shenzhen South Sea Oil Corporation. Deciding to strike out on his own, he set up Huawei with just $4,000 working capital.

Huawei started small and distributed imported PABX’s (small phone exchanges used by businesses).

Ren’s timing couldn’t have been better.

Back then, urban China had one phone line for every 100 households. Rural China only had one phone line for every 1,000 households. As China became more and more affluent, demand for everything grew, including phones and PABXs.

Huawei also grew. They now have over 150,000 staff in 170 countries. An estimated one third of the world’s population also communicates using Huawei technology. Huawei’s 2013 revenues hit the US$39.5 billion. Not half bad considering it all began with just $4,000.

Size may be one thing, but staying at the top of the heap in the ultra competitive telco market is another altogether. R&D remains a big priority for Huawei. A staggering 70,000 Huawei staff work in R&D (that’s half of Huawei’s total number of employees) - their 2013 R&D investment was a boggling US$5.4 billion.

I pondered this as we wandered into an exhibition hall showcasing Huawei gear.

An improbable amount of gear is on show. The exhibits range from micro cell sites that'll boost 4G coverage to data centre equipment that can simultaneously handle thousands of users.

One data centre rack housed two petabytes of storage. That’s a whopping 2,000 terabytes or a massive 2,000,000,000,000,000 bytes. My five terabyte NAS drive suddenly seemed pretty inadequate.

We move on to another rack. One of the big headaches (or ear aches) with data centres is the sheer din created by racks full of equipment.

Not with this rack. It uses the same technologies as noise cancelling headphones. The rack is dead silent until I open its door. My eardrums are hit with the roar of dozens of cooling fans going full tilt.

This mightn’t sound all that exciting, but in practice it could be a game changer.  Network equipment could be housed in offices instead of expensive noise proofed rooms. This could also save on office heating bills.

Several metric tonnes of smartphones were on display, including Huawei’s latest, the Ascend Mate7. Sporting a 1080 HD 6” LCD screen and a brushed alloy body, the Mate7 has a finger print sensor on its rear, just below its camera. Tapping this unlocks and wakes the phone. It’s a good-looking piece of hardware.  Watch this space for a review.

Prototype 5G cell stations are also present. Once 5G goes live (at around 2020), gigabit UFB-like mobile data speeds with next to no latency could be on offer. 5G may still be some time away, but it’s shaping up to be a real game changer.

Before long my head is spinning. The sheer volume of tech on display is boggling.  The tour soon concludes and we head back to our hotel. On the way back I try to make sense of it all, wondering just what Kiwi start-ups aspiring to greatness could learn from Huawei. Two things leap out at me:

Starting small doesn’t mean you can’t think big. Huawei built a multi-billion dollar business off the back of a tiny amount of working capital and some big ideas. It might be difficult, but if Huawei shows us anything it is that growth isn’t impossible.

The rise and rise of Huawei might have a sprinkling of good timing, but is also a lot to do with being future focused. Any doubts about this were also dispelled by the fact that Huawei are investing a whopping US$600 million in 5G research over the next four years. A little forward thinking goes a hell of a long way.

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