Introduction
Huawei is an international telecommunications and technology corporation based in China which has experienced extraordinary growth to become a leader in providing various products and services. The company is characterized by its innovation and strong dedication to the consumer market. However, Huawei’s close ties to the Chinese government have resulted in the company being involved in political disputes and placed under sanctions, putting pressure on its business.
Corporate Structure
The company in essentiality is owned by its employees, a labor union that holds shares never available to the public. The privately-owned Huawei is a limited liability company. Employee shareholders elect the 115-member Huawei’s Representative Commission which serves as the ultimate authority. The Commission fulfills numerous business duties and decisions, including the 17-member rotating board of directors. Huawei’s founder and chief executive officer is Ren Zhengfei, who also owns 1.14% of the company and has some aspects of veto power (Tao, 2019). The Board of Directors and the Executive committee oversee various small departments in group functions such as human resources, finance, PR, support chain, corporate development, legal, and others. Furthermore, the company owns subsidiaries of its information and communication technology (ICT) business organizations overseen by the ICT Infrastructure Management Board. It consists of 5 separate business groups including carrier, enterprise, network products and solutions, cloud AI products, and consumer all of which also oversee regional organizations respectively (Huawei, n.d.).
Product Distribution
Huawei operates primarily in the telecom industry, offering 3 key components: telecom networks, services of operation, and products and devices. As part of its telecom networks the company offers technologies ranging from soft-switches and Internet-protocol-multimedia-subsystems to broadband. As part of its service model, Huawei works with telecommunication operators to provide infrastructure and build an operating mobile and internet networks while providing engineering and consulting services for various aspects of network integration and safety.
This is the largest division of Huawei and at which it exceeds, overcoming Sony Ericsson in 2012 to become the largest international telecom equipment manufacturer and provider in the industry. Most notably, Huawei has recently focused on development and implementation of 5G telecommunications technology, which has become the point of international concern. Finally, Huawei is most familiar to regular people for its consumer devices such as modems, routers, and mobile devices, which have gradually grown to compete with major smartphone makers such as Apple and Samsung around the world. Huawei has total revenues exceeding $105 billion with profits close to $9 billion in the latest fiscal year (Huawei, 2018).
Huawei and Apple in the China Market
Huawei and Apple are competitors on the international stage in the product category of smartphones and wearable devices. Apple has experienced tremendous growth and continuous profits of its smartphones in the last decade, holding anywhere from 10-q8% share of the global market (currently at 10% as of Q2 of 2019). Huawei has steadily grown in recent years, overtaking Apple as the second largest smartphone manufacturer by market share in 2018 (Chan, 2019). However, despite Apple’s close relationship with China and its manufacturing subsidiaries producing the majority of its devices in the country, it has struggled to significantly breakthrough in this regional market dominated by Huawei. Huawei has experienced a 66% annual growth in China sales, acquiring a 42% market share. Meanwhile, Apple experienced a staggering 28% decline in Q3 of 2019, holding a mere 6% share behind even other smaller Chinese smartphone makers such as Oppo and Xiaomi (Doffman, 2019). Apple needs the Chinese market, both from an economic and symbolic perspectives. China is one of the biggest and leading markets for consumer technology and smartphones, as well as being a tremendous manufacturing hub.
International Issues Concerning Huawei
In recent years, Huawei has come under fire for some of its practices and alleged political involvement, with two international business issues representative of the general concern for Chinese-related companies. The first is technology theft, which allowed it to grow so rapidly in a sector where companies initially spend years and billions in research and development. That is particularly relevant for its smartphone business where just a few years ago, Huawei was largely an irrelevant player, mostly focused on telecommunications. In order to operate in China, many Western firms are forced by law to partner with Chinese companies, and virtually revealing trade secrets and technological patents (Feng, 2019). Huawei and others have been accused of abusing this access to essentially copy or reverse engineer technologies, then implementing or selling them as their own for a much cheaper price due to low-wage labor in the country and unlike Western companies, they have little R&D costs to recoup through technology theft.
The second issue for Huawei is allegations that the company implements protocols and devices in its telecommunications infrastructure and network that can be used by the Chinese government to control and intercept information. It is an accusation of a serious cybersecurity breach which can endanger national telecommunications networks and potentially national security. Huawei is required by law to abide to the Chinese government and there are opinions of the close relationship between company leadership and the ruling Communist Party. The manner in which networks are constructed through separate parts of the supply chain and open-source software packages, provides numerous opportunities for foreign agents to install backdoors that offer unauthorized access and vulnerabilities in national network. As the world is on the verge of new 5G technology and developing such networks, Huawei has come under fire due to these allegations. Although no concrete evidence was offered publicly, the United States and other Western countries have placed sanctions on Huawei, disallowing U.S. companies to engage in business dealings with Huawei or purchase their telecommunications equipment (Schneier, 2019).
Representing China’s Strength
As mentioned earlier, Huawei’s close ties with the Chinese government and its origin story of growing into a global telecommunications giant has become a symbol in China and abroad of the country’s international business success. In fact, Huawei was left to follow its own development strategy with the government not initially believing that a Chinese firm would be able to succeed in a highly competitive and technologically sophisticated industry such as IT and telecommunications. Huawei represents in full the growth and innovation of China as a leader in even the most difficult to breakthrough sectors of the economy (Nolan, 2015). Despite officially the Chinese government having no investments or control of Huawei, the two have a symbiotic relationship, with the Chinese government often supporting and championing Huawei on the international stage. At the same time, Huawei’s tremendous impact and innovation in the telecommunications industry is used by the Chinese government as a pressure tool in diplomacy and the recent trade war with the United States.
Conclusion
Huawei is a highly successful global telecommunications corporation that has continued to expand in recent years. Its corporate structure and focus on innovation allowed it to become a leader in the industry and capture significant market share from its competitors both in telecommunications and smartphone production. Huawei’s origin and ties with China is both beneficial, demonstrating strong domestic support and sales, as well as a hinderance, involving the company in political affairs resulting in sanctions. At this moment, Huawei is solidly continuing to grow, but its long-term future is unclear and depends on global acceptance of the company’s Chinese connections.
References
Chan, E. (2019). Huawei overtakes Apple to become second biggest smartphone maker. Bloomberg. Web.
Doffman, Z. (2019). Apple faces new Huawei threat in China: 42% market share is not enough. Forbes.
Feng, E. (2019). Huawei accused of technology theft. NPR.
Huawei. (n.d.). Corporate governance overview.
Huawei. (2018). Huawei Investment & Holding Co., Ltd. 2018 annual report. Web.
Nolan, P. (2015). Re-balancing China: Essays on the global financial crisis, industrial policy and international relations. London, England: Anthem Press.
Schneier, B. (2019). Every part of the supply chain can be attacked. The New York Times.
Tao, L. (2019). Who controls Huawei? Here’s an explainer on its ownership structure. Tech in Asia.