Are you familiar with the Chinese company, Huawei? If you asked me that question six months ago, I would have responded, "Know the name, but nothing else about them."
Some relevant facts and figures, taken from Huawei's most recent annual report (PDF):
- Year founded: 1987
- Revenue: $60.1B, in 2015
- Operating profit: 25 percent in 2015
- Growth rate in 2015: 35 percent
- Employees: 170,000+
- Employees in R&D: 80,000
- Current annual R&D expense: $9 billion, with plans to increase
- Business groups: Telecom carrier, enterprise, consumer
Although Huawei remains a private company, it provides financials and an annual report as if it were public. KPMG is the auditor.
To learn more about Huawei, I accepted an invitation to attend the company's fourth European Innovation Day. The event, held in Paris, brought together executives, customers, and researchers with academics and other market influencers. As a demonstration of Huawei's importance, France's Minister of Education, Thierry Mandon, delivered the opening keynote.
The event theme was Beauty of Tech. To Huawei, beauty in this sense goes beyond physical appearance to encompass the inevitability of core truths that shape society and relationships among people.
The President of Huawei's Western European consumer business group, Walter Ji, commented: "After everything has been made intelligent, a digital world parallel with physical society will be formed."
Similarly, the President of Huawei's Wireless Marketing Operations, Heng Qiu, characterized the company with the metaphor of a horseshoe. According to Qiu, horseshoes are the most basic element on which a galloping horse depends, possessing the quality of being customer-centric with perseverance and reliability. Qiu presented this image, saying, "we are proud to be the best horseshoe." Although the metaphor reflects imagery that Americans may not appreciate, it offers clues into the mindset of this large global company.
During a small group meeting with Qiu following the main event, I asked about the impact of 5G wireless service on Huawei's future revenue. He explained that making customers successful is their priority, with money being the "natural outcome" that arises when customers are happy. In a subsequent private conversation, he reiterated this point as a strongly held belief.
Huawei gave design an important role during the innovation event. The company's Chief Designer, Mathieu Lehanneur, described Huawei's investment in product design, particularly for consumer products such as phones and watches. Along these lines, Huawei has a partnership with iconic camera maker, Leica, to enhance the camera capabilities of its smartphones. The new P9 phone has received excellent reviews for its camera. A senior executive from Leica told me that both the camera hardware and software are a collaboration between the two companies.
Based on the "pipe strategy" illustrated below, Huawei's telecom business is expanding into both the enterprise and consumer domains:
The company anticipates dramatic growth as a result of the global conversion to 5G wireless services. 5G offers the promise of data rates up to 10 Gbit/s and latency of 1ms. Huawei and others believe these capabilities will change society in areas such as education, Internet of Things, connected cars, and manufacturing to name a few. The company's growth strategy relies on the growth of 5G services during the next decade and beyond.
Huawei's story and growth trajectory are impressive, but the company faces mistrust because of U.S. accusations it has close ties to the Chinese government; those concerns have not been proven. In a reverse twist, the Edward Snowden leaks revealed attempts by the U.S. government to penetrate Huawei equipment and gain access to Chinese systems.
The bottom line. Despite doing very little business in the U.S., the company's investment in innovation, combined with a focus on meeting customer needs, has generated both size and growth, They are patient and willing to invest significant capital in R&D activities with a lengthy time horizon. Relationships with academic institutions around the world are an important part of this strategy.
To understand Huawei, recognize they are playing a long game, measured in years and decades, to achieve dominance in telecom infrastructure, related enterprise technology, and consumer mobile phones.
Disclosure: Huawei paid most of my travel expenses to their innovation conference.