Thu, Mar 29, 2012 - Page 9 News List

China’s Huawei seeks out a global role

For Huawei to make good on its ambitions to break into the US market, the company may have to learn to be a bit more open

By juliette garside  /  The observer

Beginning in Africa and Russia, the company has moved successfully West. Only the US has blocked its advance. Efforts to expand have been repeatedly neutralized by Washington. Offers to acquire Motorola’s wireless division and a broadband software group were quashed after the sellers were informed that regulatory approval would not be forthcoming.

A contract to modernize mobile operator Sprint Nextel’s network was kyboshed, and the US Department of Commerce last autumn barred Huawei from an emergency services contract.

A British executive whose company buys from Huawei said US politicians are using espionage as a scare tactic to protect domestic businesses.

“What the Americans are really trying to do is stop Huawei getting the business they know they could get if they opened up their equipment market to them.”

Huawei’s stated ambition is to become as big as Cisco or IBM, with annual revenues of US$100 billion in 10 years’ time. Nordstrom said this is unlikely without conquering the US: “This is an industry where you need to be truly global to have a future.”

Observers say the most serious threat to Huawei’s ambitions comes from within. As Ren approaches his 68th birthday in October, the company he founded is facing a succession crisis.

In aletter published in last year’s annual report, Huawei’s charismatic chairwoman Sun Yafang (孫亞芳), thanked the staff for re-electing her, saying: “I am sincerely grateful for our employees’ trust and confidence in me.”

It was a short statement that masked an internal power struggle. While Ren, who does not give interviews, has been criticized in the Chinese press for a lack of transparency, Sun is increasingly being seen as Huawei’s public face, a networker who was among corporate China’s most senior representatives at Davos this year.

However, in October 2010, a report in Meiri Jingji Xinwen (Daily Economic News) suggested Sun had been offered 1 billion yuan to leave Huawei so that Ren could prepare the ground for the appointment to the 13-member board of his son, Ren Mengping (任孟平), who is customer relationship management director and is said to have spent time in the US.

The company denies this. Whatever the truth, Sun survived in a post she has held since 1999 and Ren Mengping did not join the board.

However, the Ren dynasty holds sway at Huawei; Ren’s daughter Cathy Meng (孟晚舟) is chief financial officer. According to a report in Zhengquan Ribao (Securities Daily) from April last year, she is married to fellow director William Xu (徐文偉), although the company denied this.

Meanwhile, Ren Shulu (任樹錄), the founder’s younger brother, is a member of the five-strong supervisory board that oversees the directors.

Gary Liu, a professor at the China Europe International Business School in Shanghai, said Ren’s determination to find a successor from within his family stems from 2000 when his then-second-in-command Li Yinan (李一男), left to start a rival company, Harbour. Ren fought and eventually bought Harbour, but the experience, said Liu, destroyed his trust in non-family members.

Succession is not just an issue at Huawei. China’s first generation of entrepreneurs at Lenovo and white goods maker Haier are also nearing retirement.

“These companies’ futures hinge on how effectively the incumbents manage leadership transitions. Indeed, the choices the founder CEOs make may well reshape their companies as well as the Chinese economy,” said Liu.

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