Huawei: Seeking its own path; A Chinese technology company that is steering clear of the stockmarket

Huawei: Seeking its own path; A Chinese technology company that is steering clear of the stockmarket

May 10th 2014 | From the print edition

ONE thing about Huawei is easy to understand: its ambition. In Paris on May 7th the Chinese telecoms company showed off the Ascend P7, a sleek smartphone compatible with the speedy fourth-generation mobile-phone networks being built in many countries. Huawei started pushing its own brand of smartphones only in 2011, but by last year it was the world’s third-biggest vendor. Though it is still far behind the leaders, Apple and Samsung, it hopes that phones like the P7 will help it close the gap. In its main business, supplying network equipment and services to telecoms operators, it is already a close rival of Ericsson of Sweden. Last year this part of its operations brought in about 70% of its revenue of 239 billion yuan ($39 billion).

Huawei’s ownership and management are less well understood. Some American politicians and competitors regard the company as little better than a front for the Chinese state, partly because Ren Zhengfei, its chief executive, was an engineer in the People’s Liberation Army before he founded Huawei in 1987. Its network equipment has in effect been shut out of the American market. Huawei has always denied being under the state’s thumb. It says that 84,000 Chinese employees own almost all its shares (Huawei is rolling out a long-term incentive scheme for foreign staff). Mr Ren has a personal stake of only 1.4%.

Unlike Alibaba and other Chinese technology companies that have sought stockmarket listings, Huawei has no such plans. Mr Ren made this plain when he spoke to journalists in London on May 2nd. “In reality,” he said through an interpreter, “shareholders are greedy, and they want to squeeze every bit out of the company as soon as possible.” Huawei’s system, he believes, fosters a longer-term view that has helped it overtake listed competitors. Nor does he think that going public would alleviate Huawei’s difficulties in America. “It might take ten or 20 years for the United States to know that Huawei is a company with integrity,” he said. Meanwhile, Huawei will put its energy into more welcoming markets.

Much less clear is who will succeed Mr Ren or how the next boss might be chosen. Huawei has a half-formed plan: as well as the founder it has three “rotating and acting” chief executives, who serve six-month terms. Mr Ren insists that they have a free rein. He has never used his right of veto over their decisions. “Ultimately we want to find a mechanism for succession,” he said. “But now we don’t know what this mechanism should look like.” As long as Huawei is growing quickly and Mr Ren, who is only 69 years old, remains hale and hearty, this may not matter, but eventually it will. Huawei’s peculiar form of capitalism retains much of its mystery.