The rise of Huawei

Huawei founder Ren Zhengfei may seem like a quiet Silicon Valley executive at first glance. But his company's global influence is far greater than that simple appearance suggests. The mobile networks of countless countries around the world - which carry our daily voice calls, messages, and data - rely on Huawei equipment. In many places, it is almost impossible to get mobile phone service without using Huawei's network.

But Huawei's success story is more like that of South Korea's Samsung than that of companies like China's Alibaba or Tencent. Samsung founder Lee Byung-chul built his company using three strategies: strong political connections, copying Western technology - but making better products at lower prices, and aggressively expanding into global markets. Ren Zhengfei has followed the same path.

Ren Zhengfei was born into a rural family in Guizhou province. After earning an engineering degree, he joined the Chinese military. In the 1980s, he moved to Shenzhen, a city that was then emerging as a new hub for foreign investment.

Ren started his business with a small capital of just $5,000. Although he initially imported telecom switches from Hong Kong, suppliers stopped supplying him when they saw that Ren was making good profits. This forced Ren to decide to make his own switches. By the early 1990s, Huawei had hundreds of engineers working on telecom equipment. As voice communications merged with digital data, Huawei quickly moved to keep up with the pace of change.

Huawei’s rapid rise, however, was not without controversy. They have been repeatedly accused of intellectual property (IP) theft. In 2003, Huawei itself admitted that some of the code in one of its routers was a copy of Cisco's code. However, it is not possible to build such a large empire by stealing IP alone. This requires efficient production, competitive prices in the market, strong customer service, and, most importantly, huge investments in research and development. Huawei spends about $15 billion on research and development every year, which is equivalent to global companies like Amazon or Google.

Ren Zhengfei quickly realized that not only technology, but also advanced management knowledge is the key to success. In 1997, he visited large technology companies like HP, IBM, and Bell Labs in America with high-ranking officials. Then, from 1999, they hired IBM's consulting team and completely overhauled their supply chain, marketing strategy, and management structure. At one time, 100 IBM employees worked inside Huawei! Ren successfully combined this modern management style learned in the West with his own military-style strict internal culture.

Huawei has also received special benefits from the Chinese government. Cheap land from the Shenzhen municipal government, huge loans from state-owned banks, and tax breaks have given them their strength. According to a report in the 'Wall Street Journal', Huawei has received the equivalent of about $75 billion in government benefits. The United States has long viewed Huawei with suspicion due to Ren's military background, the company's opaque ownership structure, and the leadership's close ties to the Communist Party. But Huawei's success has undoubtedly strengthened China's geopolitical position.

Despite US caution, Huawei has spread around the world. Western telecom companies have started to back down one by one. Nortel went bankrupt, and Nokia bought Alcatel-Lucent. Huawei then entered the smartphone market and by 2019 had established itself as the world's second-largest smartphone maker after Samsung.

In the 2010s, Huawei not only made phones but also started designing chips for itself. They realized that over-reliance on foreign suppliers, especially for key semiconductor components, was dangerous. From this realization, their chip design arm, HiSilicon, was born. The arm quickly began designing world-class smartphone processors, which became a major challenge to the US-dominated chip design industry.

(Adapted and abridged from Chris Miller's groundbreaking book, Chip Wars, Chapter 46, "The Rise of Huawei")

Author: Mahmud Hossain, a BUET graduate, has over three decades of leadership experience in Bangladesh’s telecom and ICT sectors. He played a key role in introducing mobile technologies in the country. He now serves as a Commissioner at BTRC, following senior leadership roles in several national and multinational industry-leading companies.