Long seen as the Wal-Mart of telecom equipment vendors, Huawei Technologies is shedding its reputation for cheap parts and cut-rate engineering and establishing its credibility as a low-cost supplier with premium quality.
Although it is landing contracts across Europe, Huawei has yet to score a major deal with any top North American operator. But analysts say that day isn't far off, as the U.S. market becomes a battleground for Long-Term Evolution (LTE) vendors.
"A few years back, [Huawei was] viewed as a technology laggard -- someone who did knockoffs of other vendors. That isn't true anymore, and I don't think people close to the industry share this opinion anymore," said Andrew Schmitt, directing analyst at Infonetics Research. "They are broadly considered to be a technology and financial double threat."
Like all telecom equipment vendors in the market, Huawei is hungry for U.S. next-generation network dollars, as wireless operators on every tier plan their LTE build-outs. Over the past few years, the Chinese supplier has quietly won a handful of 3G and 4G WiMax contracts with smaller North American operators, and it recently announced that it would add 600 employees in North America next year.
But would AT&T, Verizon Wireless, Sprint and T-Mobile go outside their comfort zones and gamble their North American 4G networks on Huawei? Possibly -- but not as their primary LTE vendor, according to market watchers.
"[Operators] are already taking them very seriously, but I don't expect Huawei is going to get a big win from one of the two major North American operators in 2010," said telecom consultant Tom Nolle, president of CIMI Corp.
"I think Huawei will get some wins in North America and probably some product deployments," he added. "Among big American operators, they won't be big wins but it'll be enough wins for operators to build a comfort level. In 2010, we'll start to see momentum in Huawei's direction."
Schmitt agreed that Huawei still has an uphill battle against incumbent LTE vendors in North America, but he said its small yet growing U.S. portfolio will enhance the telecom equipment vendor's credibility.
"North America is a tough nut to crack, as the major telcos have very high feature requirements relative to the rest of the world and are loyal to existing suppliers," Schmitt said. "That said, Huawei has made inroads into some smaller carriers."
Cultural gap still dogs this telecom equipment vendor
Although Huawei is growing its operations in North America -- it is expected to open research and development offices in Ottawa and Atlanta -- analysts said the telecom equipment vendor still appears to be struggling to become savvier at marketing itself beyond the technology and sticker price.
"Huawei's biggest problem is not that they don't have a strategy or that they don't have insights," Nolle said. "The problem is their articulation is weak. They've got a good idea. They've got a good technical understanding, but they can't talk the talk or walk the walk yet."
The Chinese telecom equipment vendor has helped its case by "hiring westerners to expand international sales and marketing and put a more global face on the company," Schmitt said. Huawei has also tailored products more for export markets -- such as gigabit passive optical network fiber to the home, which yields "modest" sales in China -- according to Schmitt.
But he also said the Chinese vendor lacked that je ne sais quoi and still "needed to climb the learning curve with respect to sales and marketing" in North America.
"One carrier I spoke with indicated they wrote a clause into their [request for proposal] that specifically restricted how many people an equipment vendor was bringing to a meeting because Huawei would show up with 20 people for a sales call, and people literally had to stand outside a packed conference room," Schmitt said.
A representative from Huawei did not return requests for comment.
Huawei adds customers despite ownership concerns
Bettina Tratz-Ryan, a research vice president at Gartner Inc., said U.S. telcos have been spooked by Huawei's refusal to disclose details about the telecom equipment vendor's private ownership, and the rumor mill that has resutled. There has been wide speculation that Huawei has connections to the Chinese government.
"The North American incumbent operators have, in general, security concerns about Huawei because they feel the ownership structure is not transparent," Tratz-Ryan said. "However, Huawei has garnered a WiMax contract with Clearwire, so the first step is done to showcase their ability."
Earlier this year, Huawei added Clearwire Corp. and Cox Communications to its North American portfolio with WiMax deals. Past customers have included Leap Wireless in 2006 and Cleartalk in 2004, with Huawei building 3G CDMA networks for the Tier 3 operators.
"Their superior technology and value was what stood out to us during the selection process," said Cox spokeswoman Jill Ullman. She said Cox had no qualms about Huawei's comparatively limited experience in North America. "Today's communication ecosystem is made up of global infrastructure providers, and economy of scale is a top business criterion for service providers like Cox."
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