Chapter 33 Huawei's Global Strategy

Under the situation of rapid development, Huawei began to cooperate with IBM.At that time, IBM was also in the process of transformation. It was transforming from a large-scale computer company with first-class sales capabilities to a global consulting company, tailoring technical solutions and international market strategies for each company.In addition to IBM, Huawei has also established joint ventures with Texas Instruments, Lucent Technologies and Motorola. By the end of the 1990s, Huawei's total revenue at home and abroad had exceeded US$1 billion.However, Mr. Ren Zhengfei, the founder and president of Huawei, never gives interviews to the media.Huawei's performance in China's domestic and international telecommunications equipment markets is very prominent, but its corporate culture is not well understood by the outside world, and the outside world does not know the relationship between Huawei and the Chinese military.Huawei's technology is consistently high-quality, but its products are priced lower than most market competitors, including ZTE, one of its main domestic rivals.In short, the company Huawei has become a major force in the market without anyone knowing how it works.

The development of China in the past 20 years is exactly the same as the growth of Huawei.Much of the Chinese Communist Party's decision-making process is unknown to the outside world, and probably never will be.While China's corporate leaders do not all avoid media interviews like Ren Zhengfei, they do not often or publicly express their views.The inside story of most of Huawei's dealings and decisions has never been made public, and likely never will be.There is no reporter like Bob Woodward in the Chinese media, and no one writes memoirs to disclose the whole truth. Business books discuss corporate strategy, and sometimes there are some idealized biographies published, but they do not involve Inside scoops and scoops.The rapid and mysterious development of Huawei is not unusual in China.

After cooperating with IBM, Huawei's sales in the international market have increased significantly. IBM has turned its business focus to the global market and got rid of its dependence on the US market. A similar strategy is also applicable to Huawei.As the demand for wireless and network communication equipment in the international market has grown exponentially, Huawei has worked hard to become a low-cost producer of similar products from other companies, especially Cisco.Cisco's equipment is closely related to the modern network era, and its router and switching equipment products have always been an integral part of the development of global communications.However, the price of Cisco's production line is too high for developing countries to afford.Huawei, on the other hand, can offer similar products to developing countries at much lower prices.

Thousands of Huawei engineers in China have received higher education and training. Measured by Chinese standards, their salaries are very high. However, if compared with the American managers in Silicon Valley, their salaries are very low. meager.The income of Huawei's sales staff is also very high in the local area, but compared with their counterparts in the UK, France or Germany, their income is still far behind.In short, Huawei can make a similar product that sells for much less, and make huge profits from it, which it then reinvests in product development.From 2001 to 2004, Huawei's international equipment sales rose from around $250 million to nearly $2.5 billion.Revenues from markets in Africa, Central Asia, Russia and the Middle East have helped Huawei internationalize.Huawei is starting to win contracts from traditional multinationals in these markets and globally, including big players like British Telecom and IBM.

In 2003, Huawei and 3Com established a joint venture. 3Com Corporation is an American telecommunications manufacturer that was a major force in the U.S. market in the 1990s.But after 2000, the company faced severe challenges due to a sharp decline in sales in the telecommunications equipment market.The purpose of the cooperation between the two parties is to revive 3Com and enable Huawei to enter the lucrative US market.That poses a challenge to Cisco, which dominates the telecommunications equipment market.During the cooperation negotiation between Huawei and 3Com, Cisco filed a lawsuit against Huawei in the United States, claiming that Huawei's products are not just low-cost substitutes for Cisco products, but a large number of infringements on Cisco's knowledge through illegal software piracy. Cheap commodities copied from the behavior of property rights.

In the negotiations of China's accession to the World Trade Organization, the issue of intellectual property protection has always been a focus.Western companies have long complained that while the Chinese market is hugely attractive, it comes at a price.In China, although there are laws expressly stipulating that infringement of intellectual property rights is an illegal act, there are still companies producing pirated products.Film and record companies complain that there is a lot of manufacturing and selling of pirated discs in the Chinese market, a fact that most Western tourists to China are aware of, and some are still making their first run in American and European cinemas. Movie DVDs, which they might buy while visiting the souks.But the problem doesn't stop there.Companies from Microsoft Corp. to Oracle Corp. to video game makers face long-term challenges when it comes to software piracy.When companies invest in setting up factories in China, they worry that once their production lines are completed, other companies will use them to produce the same products with different labels and sell them in the local market.

Intellectual property is a major source of value for many businesses.For example, most of Qualcomm's revenue comes from patent royalties for its wireless mobile communication technology.In the past 10 years, the company has effectively moved away from making phones, chips and communication equipment, and turned to technology research and development, profiting from patent royalties.The same may be true of other technology and communications companies, whose profitability depends on legal guarantees that they will be rewarded by patent rights and contracts when their designs are used by others.

Although the World Trade Organization has established relevant provisions to protect intellectual property rights, foreign companies operating in China often encounter problems with products being pirated.Usually, when these companies bring lawsuits to the district court, the court often takes a long time to hear the case, or when the judgment is made, the infringing company has been engaged in illegal sales of pirated products for many years.Many technology companies in China act as "original equipment manufacturers" for multinational corporations, assembling various components into finished products (such as Dell computers) for sale.Usually, these companies do not blatantly steal the product technology of multinational companies, but reverse engineer the product.For companies in the United States and Europe, product reverse engineering is already a common thing, and some companies have become notorious for it. Although they will not technically copy the products of market competitors, they will change them And then to the market.In the case of Cisco suing Huawei for infringement of its intellectual property, it may be more accurate to say that Huawei engineers took apart Cisco products and found a way to make similar products.

Of course, Huawei may indeed have as many outstanding engineers as it claims, and Chinese companies are also capable of producing complex high-tech equipment like European and American companies.If Cisco does not agree with this, it will be suspected of insulting Chinese companies and racial discrimination.At the same time, the timing of Cisco's lawsuit against Huawei has also aroused doubts from the outside world. What Cisco is really worried about is its intellectual property rights, or whether Huawei will compete with 3Com in the US and European markets after cooperating with 3Com. What about similar products undermining its market share?

At the end of 2003, Cisco withdrew the lawsuit and reached an agreement with Huawei.Huawei has dominated the joint venture with the rapidly weakening 3Com.The details of the agreement between Cisco and Huawei have not been disclosed, but the outside world believes that Huawei promised to pay Cisco appropriate patent royalties for certain products except for products sold in the Chinese market.Since then, Huawei has continued to develop unabated, further consolidating its position as a global enterprise. Three years later, Huawei sold all its shares in the joint venture back to 3Com, intending to acquire the entire 3Com company for $2 billion.At the time, the rise of Chinese companies in the U.S. market had become increasingly evident.In less than 20 years, Huawei has grown from a small local Chinese company to a large global company that is seen as a threat to US global dominance.The success of Huawei is not only due to its wisdom and creativity, but also due to the application of technology in the world.

It is not just high-tech enterprises that are plagued by intellectual property protection issues.Textile and apparel manufacturers also face the challenge of having their product designs pirated and sold.The question facing foreign companies operating in China is: How can they continue to survive when their products are being infringed and copied?Having said that, we can lead to the story of Nike and Yao Ming.