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November 17, 2010, 4:09 AM EST
By Bloomberg News
(Adds comment from Bharti Airtel CEO in fourth paragraph.)
Nov. 17 (Bloomberg) -- Huawei Technologies Co., China’s biggest telecommunications-equipment maker, forecast it will beat Ericsson AB to become the top producer of gear for the next generation of mobile-phone networks.
“We have confidence we are better than others, we are better than number two,” Ying Weimin, president of closely held Huawei’s business devoted to the fourth-generation wireless technology known as long-term evolution, said in an interview in Hong Kong yesterday. “Globally, we believe we have the best market position.”
The comments underscore growing confidence among Chinese equipment makers challenging Ericsson and Nokia Siemens Networks in the $38 billion market for phone gear such as routers and switches. Huawei and Shenzhen-based ZTE Corp. are set to capture half of industry orders in five years, compared with about 30 percent now, because they’ve caught up with Western rivals in terms of technology, said Jim Tang, an analyst at Shanghai-based Shenyin Wanguo Securities Co.
“Huawei and ZTE are truly emerging powerhouses in the telecommunication arena,” Sanjay Kapoor, chief executive officer of Bharti Airtel Ltd., India’s largest mobile-phone operator and a Huawei customer, told the Mobile Asia Congress in Hong Kong today. “These are significant changes that are happening that need to be given some notice.”
Ying, 37, said global contracts for long-term evolution, or LTE, equipment will probably reach $10 billion in 2014 as mobile-phone operators double orders each year to meet soaring demand for faster wireless connectivity. His forecast exceeds the $6 billion estimate that Redwood City, California-based research company Dell’Oro Group made for the market in August.
Head Start
Huawei is likely to extend its market-share gains because of its head start, Ying said, declining to specify figures. The company has won 17 LTE contracts after it helped Sweden’s TeliaSonera AB start the world’s first 4G commercial network in Norway last year and “early, big investments” have resulted in 270 patents related to LTE with the European Telecommunications Standards Institute, he said.
“For the older generations of equipment, the global players dominated the market,” said Tang at Shenyin Wanguo. “Chinese players will have a more key role in the market for new equipment.”
Huawei increased research and development spending 27 percent to $1.95 billion last year across Asia, North America and Europe, according to data supplied by the company. Huawei, which describes itself as “100 percent owned by its employees” reported sales of $21.8 billion and net income of $2.7 billion last year.
IPhone, Android
Network-equipment makers are counting on Apple Inc.’s iPhone and smartphones that run on Google Inc.’s Android to drive demand for faster wireless connections.
Infrastructure-gear makers, set to generate sales of $38 billion this year, will probably have to wait until 2014 for industry orders to climb back to the record $43 billion set in 2008, according to estimates at Dell’Oro. The research company ranks Huawei third overall in mobile network equipment sales as of the second quarter, behind Ericsson and Nokia Siemens.
Ericsson has signed eight LTE contracts to date, and the size of the networks involved makes it the market leader, Minako Nakatsuma Olofzon, an Ericsson spokeswoman, said in an interview yesterday. She declined to provide the value of the orders.
Nokia Siemens has won 18 deals for LTE radio equipment and is “confident” it has an advantage because it can shift 200 operators from existing LTE-ready base stations with a “simple” software upgrade, spokesman Ben Roome said by e-mail. Alix Cavallari, a spokeswoman for Paris-based Alcatel-Lucent SA, didn’t immediately return a call seeking comment.
Security Concerns
Security concerns could hamper the ability of Huawei and ZTE to expand their share in key markets such as the U.S., according to analysts including Wilson Chai at Mirae Asset Securities Co.
“There is always the political issue,” Chai said. “They are probably going to see more difficulty in the U.S. and Europe. They have been trying to crack those markets for years but so far with very little success.”
In October, U.S. lawmakers asked the Federal Communications Commission to review the security risks of domestic companies ordering network equipment from Huawei and ZTE. That was at least the second time in the space of two months that U.S. lawmakers prodded the Obama administration to review the risks of buying Chinese telecommunications equipment after eight U.S. lawmakers on Aug. 18 warned that a Sprint Nextel Corp. contract sought by Huawei would “undermine U.S. national security.”
“We believe we need some time to win trust,” Huawei’s Ying said. “We will continue our efforts in the U.S. market to build better trust between Huawei and U.S. operators.”
International Sales
Huawei was founded by former army official Ren Zhengfei in 1988 as a sales agent for a Hong Kong manufacturer of private branch exchange switches and didn’t win its first contract outside China until 1997, according to the company. That order for a fixed-line network came from Hutchison Whampoa Ltd. in Hong Kong.
Huawei’s international sales exceeded $100 million in 2000, and the company won its first major European contract, valued at $25 million, in 2004, according to the company. International sales exceeded domestic contracts for the first time in 2005. In 2009, it deployed a 3G network in Canada.
“Before Huawei was a laggard, but now they are as good as the other guys and would be considered for global procurements,” said Paul Wuh, a Hong Kong-based analyst at Samsung Securities Co. “In the past, in markets like the U.S., they wouldn’t have even considered Huawei for a large tender on infrastructure.”
--Edmond Lococo, Diana ben-Aaron in Helsinki, with assistance from Matthew Campbell in Paris. Editors: Young-Sam Cho, Jonathan Annells
To contact the reporter on this story: Edmond Lococo in Beijing at elococo@bloomberg.net; Diana Ben-Aaron at dbenaaron1@bloomberg.net
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net
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(Adds comment from Bharti Airtel CEO in fourth paragraph.)
Nov. 17 (Bloomberg) -- Huawei Technologies Co., China’s biggest telecommunications-equipment maker, forecast it will beat Ericsson AB to become the top producer of gear for the next generation of mobile-phone networks.
“We have confidence we are better than others, we are better than number two,” Ying Weimin, president of closely held Huawei’s business devoted to the fourth-generation wireless technology known as long-term evolution, said in an interview in Hong Kong yesterday. “Globally, we believe we have the best market position.”
The comments underscore growing confidence among Chinese equipment makers challenging Ericsson and Nokia Siemens Networks in the $38 billion market for phone gear such as routers and switches. Huawei and Shenzhen-based ZTE Corp. are set to capture half of industry orders in five years, compared with about 30 percent now, because they’ve caught up with Western rivals in terms of technology, said Jim Tang, an analyst at Shanghai-based Shenyin Wanguo Securities Co.
“Huawei and ZTE are truly emerging powerhouses in the telecommunication arena,” Sanjay Kapoor, chief executive officer of Bharti Airtel Ltd., India’s largest mobile-phone operator and a Huawei customer, told the Mobile Asia Congress in Hong Kong today. “These are significant changes that are happening that need to be given some notice.”
Ying, 37, said global contracts for long-term evolution, or LTE, equipment will probably reach $10 billion in 2014 as mobile-phone operators double orders each year to meet soaring demand for faster wireless connectivity. His forecast exceeds the $6 billion estimate that Redwood City, California-based research company Dell’Oro Group made for the market in August.
Head Start
Huawei is likely to extend its market-share gains because of its head start, Ying said, declining to specify figures. The company has won 17 LTE contracts after it helped Sweden’s TeliaSonera AB start the world’s first 4G commercial network in Norway last year and “early, big investments” have resulted in 270 patents related to LTE with the European Telecommunications Standards Institute, he said.
“For the older generations of equipment, the global players dominated the market,” said Tang at Shenyin Wanguo. “Chinese players will have a more key role in the market for new equipment.”
Huawei increased research and development spending 27 percent to $1.95 billion last year across Asia, North America and Europe, according to data supplied by the company. Huawei, which describes itself as “100 percent owned by its employees” reported sales of $21.8 billion and net income of $2.7 billion last year.
IPhone, Android
Network-equipment makers are counting on Apple Inc.’s iPhone and smartphones that run on Google Inc.’s Android to drive demand for faster wireless connections.
Infrastructure-gear makers, set to generate sales of $38 billion this year, will probably have to wait until 2014 for industry orders to climb back to the record $43 billion set in 2008, according to estimates at Dell’Oro. The research company ranks Huawei third overall in mobile network equipment sales as of the second quarter, behind Ericsson and Nokia Siemens.
Ericsson has signed eight LTE contracts to date, and the size of the networks involved makes it the market leader, Minako Nakatsuma Olofzon, an Ericsson spokeswoman, said in an interview yesterday. She declined to provide the value of the orders.
Nokia Siemens has won 18 deals for LTE radio equipment and is “confident” it has an advantage because it can shift 200 operators from existing LTE-ready base stations with a “simple” software upgrade, spokesman Ben Roome said by e-mail. Alix Cavallari, a spokeswoman for Paris-based Alcatel-Lucent SA, didn’t immediately return a call seeking comment.
Security Concerns
Security concerns could hamper the ability of Huawei and ZTE to expand their share in key markets such as the U.S., according to analysts including Wilson Chai at Mirae Asset Securities Co.
“There is always the political issue,” Chai said. “They are probably going to see more difficulty in the U.S. and Europe. They have been trying to crack those markets for years but so far with very little success.”
In October, U.S. lawmakers asked the Federal Communications Commission to review the security risks of domestic companies ordering network equipment from Huawei and ZTE. That was at least the second time in the space of two months that U.S. lawmakers prodded the Obama administration to review the risks of buying Chinese telecommunications equipment after eight U.S. lawmakers on Aug. 18 warned that a Sprint Nextel Corp. contract sought by Huawei would “undermine U.S. national security.”
“We believe we need some time to win trust,” Huawei’s Ying said. “We will continue our efforts in the U.S. market to build better trust between Huawei and U.S. operators.”
International Sales
Huawei was founded by former army official Ren Zhengfei in 1988 as a sales agent for a Hong Kong manufacturer of private branch exchange switches and didn’t win its first contract outside China until 1997, according to the company. That order for a fixed-line network came from Hutchison Whampoa Ltd. in Hong Kong.
Huawei’s international sales exceeded $100 million in 2000, and the company won its first major European contract, valued at $25 million, in 2004, according to the company. International sales exceeded domestic contracts for the first time in 2005. In 2009, it deployed a 3G network in Canada.
“Before Huawei was a laggard, but now they are as good as the other guys and would be considered for global procurements,” said Paul Wuh, a Hong Kong-based analyst at Samsung Securities Co. “In the past, in markets like the U.S., they wouldn’t have even considered Huawei for a large tender on infrastructure.”
--Edmond Lococo, Diana ben-Aaron in Helsinki, with assistance from Matthew Campbell in Paris. Editors: Young-Sam Cho, Jonathan Annells
To contact the reporter on this story: Edmond Lococo in Beijing at elococo@bloomberg.net; Diana Ben-Aaron at dbenaaron1@bloomberg.net
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net
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