Chinese company Huawei has long been mired in controversy, from its founder’s political past to accusations of breaching US sanctions against Iran. Yet while the company recently became the world's biggest smartphone manufacturer, growing government opposition is now a real threat to Huawei winning the global 5G race. With the court battle between the US and its Chief Financial Officer Meng Wanzhou heating up again, click or scroll through as we look at how a small telecommunications firm founded in a fishing village became one of the world's biggest and most (in)famous companies.
Huawei was founded back in 1987 by a former Chinese People’s Liberation Army engineer named Ren Zhengfei (pictured right) in Shenzhen. It was initially formed to distribute Private Branch Exchange (PBX) switches, before it went on to create its own. However, the fact that the firm was launched by a military tech expert has led to suspicions of espionage and security issues over the years. Shenzhen was just a fishing village when Ren launched the business with capital of 21,000 Yuan, which adjusted for inflation is the equivalent of just $13,840 (£10.6k) today. It would have seemed inconceivable at the time that the city would go on to become the Silicon Valley of Asia...
In 1990, the company opened its first research lab. The lab was partly funded by the Chinese government to manufacture switches for telephone exchanges, predominantly using the designs of foreign competitors. Large investments in research also boosted staffing levels at the firm to over 600. Ren met with the Communist Party of China in 1994 to inform Jiang Zemin, the president and leader at the time, that a country without its own telephone switch system is like a country without an army. On the basis of the meeting, Huawei was offered the contract to rebuild China’s own communications network.
In 1995, Huawei's sales passed 1.5 billion Yuan, equivalent to 2.6 billion Yuan or $373 million (£286m) in today's money, which mainly came from rural markets across China. This seems modest today, but further rapid expansion was on the horizon...
Hong Kong, in the same year it was handed back over to China from the UK, was the first place outside of the mainland to buy Huawei products in 1997. Today, Huawei remains the sole contractor providing equipment for the LTE mobile network in Hong Kong. But the world was calling, and by the turn of the millennium Huawei began operating across numerous international markets. The company established a research and development centre in Stockholm, Sweden in 2000, followed by another in the United States.
Over the course of 2003 and 2004, Huawei forged a partnership with Siemens to work on TD-SCDMA solutions – that's 3G technology to you and me – with the companies investing up to $100 million between them to establish a research centre in Beijing. And that's not all: Huawei also teamed up with manufacturer 3Com to focus more on enterprise data networking solutions. Working in tandem with other companies would become an intrinsic element of Huawei's future success.
The company started to develop a reputation for innovation, and it showcased China’s first-ever high-speed and high-capacity 3G mobile phone at the 3GSM Conference in Cannes, France in 2004. Just one year later its U626 phone scooped the prestigious Best 3G Smartphone award from Asian media company the Charlton Media Group.
Huawei continued to stay one step ahead of the market when it launched the E220, the world’s most compact and fastest HSDPA USB Modem in Singapore in 2006. The modem was used for wireless 2G, 3G and 3.5G network internet access. During the late 2000s, Huawei scooped numerous other awards for the excellence of its products, including Best Mobile Broadband Product at the 2008 Asia Mobile Awards, the Red Dot Design Award for the E270 phone and the IF Product Design Award for the E172.
In 2009, Huawei launched its first ever Android smartphone at the Mobile World Congress in Spain. The company also simultaneously announced a collaboration with European giant T-Mobile. Huawei saw a massive 30% increase in sales over the course of 2010. The growth was mainly fuelled by overseas sales in the US and other Western markets. Gartner reported that Huawei owned more than 15% of the global network infrastructure market at the time. In August of that year Huawei was shipping 100 million mobile broadband units.
Smartphones are just one part of the company's business model though. In fact, Huawei manufactures and supplies most of the equipment for the world’s telecom networks. With that in mind, perhaps it's not a surprise that Huawei became the largest manufacturer of telecom equipment in the world, overtaking the likes of Ericsson, in 2012.
In a bid to attract and engage a younger Western audience, Huawei became the official tour sponsor of the chart-topping American pop band the Jonas Brothers. The deal was geared to promote Huawei’s new Hero device to a younger demographic in the US. It also sponsored an array of big name soccer teams including Arsenal and Paris Saint-Germain.
The company reportedly generated sales revenue of $75.1 billion (£57.7bn) in 2016, according to a report by KPMG. This figure was a 34.5% increase in sales over the previous year. The firm shipped more than 139 million smartphones over those 12 months.
Ren’s daughter from his first marriage, Meng Wanzhou, joined the family firm in 1993 and rose through the ranks to Chief Finance Officer (CFO). She lived in Canada for most of the 2000s and it was there that she was arrested in December 2018, following a long-running American investigation into whether Huawei had stolen US technology and breached export sanctions against Iran.
Meng's arrest and trial, which is ongoing, is simply one aspect of a lengthy series of issues between Huawei and the US. These battles have been raging since 2012, when Huawei was first accused of violating US-led sanctions in Iran. But in recent years the US's accusations have also included alleged espionage for the Chinese government and intellectual property theft. Since Donald Trump became president in January 2017, his administration has consistently criticised the tech giant, warning its allies that cooperation with Huawei would present issues regarding cooperation with the US.
His daughter's arrest, and the controversy surrounding his company, led Ren to give a rare public interview in January 2019. He came out to defend Huawei’s reputation, disputing espionage claims and allegations the company is working with the Chinese government. Ren told CBS This Morning journalist Bianna Golodryga that in 30 years of operation Huawei has never given its users’ personal information to Chinese intelligence agencies.
More than a year in the making, the first phase of Meng Wanzhou’s trial took place between 20-24 January this year in the British Columbia supreme court in Vancouver. Based around the US charges that Huawei misled the US about its relationship with two subsidiaries in order to do business with Iran, in May the court decided that these arguments also constitute a crime in Canada, which means that she is one step closer to extradition to the US. Huawei released a video statement on its social media platforms during the first day of the hearing, saying that it trusted in the Canadian judicial system “which will prove Meng’s innocence”. Despite the court ruling from May, Meng's lawyers are now looking to have the case thrown out on the basis of "grossly misleading" evidence.
The legal process looks like it's about to get much longer. On 28 September, Meng's lawyers accused the US of cherry-picking evidence, arguing that the official record of the case created by the US authorities omitted two slides from the PowerPoint presentation which proved Meng had not misled the US. Now, Meng's lawyers have launched an attack on the US extradition request. They claim that comments made by Donald Trump, proving that he was looking to use the case to bargain in trade negotiations with China, are an abuse of the process.
Despite these legal issues, in 2019 Huawei generated record revenues of $122 billion (£93.8bn), although growth was slightly slower than expected. In 2018, it overtook Apple to become the second largest mobile phone manufacturer in the world after Samsung, a position which it held onto in 2019. In the second quarter of this year it became the largest smartphone manufacturer in the world, although this is largely down to sales in China as its international business suffered due to US sanctions. When it comes to 5G, though, Huawei can't be beaten – it was the top 5G vendor last year, with a market share of around 37% according to research firm Strategy Analytics.
Samsung's incredible story: from grocery store to tech titan
Huawei has come a long way from its humble beginnings. The Huawei headquarters remain in Shenzhen, but now the company is housed in a 13.45-million-square-foot techno-park that comes equipped with European castle-like buildings. The facility has its own university to train promising talents to propel the firm into the future, as well as a vintage train that circumnavigates the entire grounds of the estate over a 10-minute ride.
These headquarters offer more than just a place to work for the 50,000 people who work there. There are eight canteens, and staff get one and a half hours for lunch. They even have mattresses under their desks in case they need to take a nap. Why? To encourage employees to remain efficient throughout the day. This military-style efficiency is often attributed to founder Ren Zhengfei, who has been known to work through illness.
But the desire to get as much as possible out of its employees is actually in their best interests as Huawei is an employee-owned company. If you work for Huawei for four or more years, you will become a part owner in the company and receive shares. Ren only owns 1.4% of shares in the company, despite being one of the richest people in China, because the firm is largely owned by its staff.
The world’s biggest tech firms and governments are now gearing up for a 5G race. The new technology will see a worldwide network of sensors, robots and autonomous vehicles become connected through artificial intelligence (AI), and it’s thought that 5G will first take off in Asia. Huawei officially launched its first 5G foldable smartphone, the HUAWEI Mate X, at the Mobile World Congress in Barcelona in early 2019. At this time, the US warned its intelligence allies in the Five Eyes alliance – the UK, Canada, Australia and New Zealand – to boycott Huawei's 5G technology. Australia banned the technology in August 2018.
Even during the coronavirus pandemic the 5G controversy rumbles on as yet more warnings have emerged. In June former Google boss Eric Schmidt (pictured), who now chairs the Pentagon Defence Innovation Board, said that there is “no question” that Huawei has engaged in some practices “not acceptable in national security” during an interview with BBC Radio 4. Schmidt claims that the company feeds data directly into the Chinese government – a sentiment strongly denied by Huawei’s UK chief Victor Zhang. Whether true or not, Schmidt says that the multinational tech company is a challenge to US leadership, and that segregated platforms such as Huawei pose a dangerous threat to security across the world.
Despite warnings from the US, on 28 January 2020 British prime minister Boris Johnson (pictured) announced that the UK would allow Huawei to help establish its 5G networks. But the company was not allowed to supply equipment to “sensitive parts” of the 5G network – known as its “core” – and could only account for 35% of a network in the periphery. The decision, while going against multiple US warnings, did not result in a major row at the time. However, after the US introduced sanctions on Huawei products, the UK reversed its decision and has banned UK mobile providers from using Huawei 5G equipment from 31 December 2020. UK networks must be free of Huawei 5G equipment by 2027, but this decision does not apply to Huawei's 2G, 3G and 4G kit.
Huawei may be facing challenges, but its commitment to innovation, with over $15 billion (£11.5bn) spent on research and development in 2018 alone, has kept it one step ahead of the competition, and is one of the key reasons that it is managing to weather the current storms. Despite the opposition it faces, Huawei shows no sign of going away quietly.
Now read about the companies which are facing a make-or-break 2020