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Tue, Oct 07, 2003 - Page 12 News List

Huawei's rapid rise makes Beijing happy, rivals nervous

COMMUNICATIONS GIANT The company expects to almost double its international sales this year to US$1 billion, but its business practices have raised questions

NY TIMES NEWS SERVICE , SHENZHEN, CHINA

On the outskirts of Shenzhen, the headquarters of Huawei Technol-ogies (華為技術), is a testament to the firm's confidence and ambitions.

With dozens of sleek stone and glass buildings that would not look out of place in Silicon Valley, the expanding campus houses many of the 10,000 engineers working to establish Huawei as China's first international player in the communications-equipment business.

Among the makers of the equipment that knit the Internet, telephone systems and computer databases together, Huawei still stands deep in the shadows of industry heavyweights like Cisco Systems Inc and the Nortel Networks Corp.

But in a tough market, its domestic sales grew by a third in the first half of the year, and analysts expect international sales to grow from US$550 million last year to US$1 billion this year and US$1.4 billion next year.

Huawei's rapid expansion has brought it plaudits from China's top leaders, who are eager for the country to establish itself as a high-technology power and not just a factory floor for the world.

Outside China, Huawei's rise has been a source of anxiety and accusations. Most conspicuously, Cisco filed a lawsuit early this year in Texas charging that Huawei stole its computer coding for data routing equipment. On Oct. 1, the two companies agreed to suspend the lawsuit and seek private adjudication.

In the past, Huawei faced accusations of deals with former Iraqi president Saddam Hussein's government. Some critics say the company continues to have close ties to China's military. Industry analysts, though, say that such accusations are unlikely to derail Huawei.

And they see the Cisco lawsuit as a sideshow that will not seriously hinder Huawei's plans. They said the company's research and strong inroads into markets abroad would make it a formidable player.

"Huawei is one of China's most promising businesses," said Allen Chen, an analyst with Norsom Consulting in Beijing.

"We feel they're working hard to globalize, and may have the strength to succeed," he said.

Along the way, the company must make some tough transitions that will test its resilience. Apart from moving from secure domestic markets into volatile international ones, Huawei also faces uncertainty over how long its present leadership will continue in place and the challenges of floating its first stock offering. How Huawei fares may act as a litmus test for other Chinese high-tech companies hoping to grow into international powerhouses.

Cisco's accusations brought into the limelight a company long used to the low-key ways of its founder and president, Ren Zhengfei (任正非).

Ren, 59, started the company 15 years ago after a career as an army engineer and then brief stints at an oil company and as a failed electronics salesman. He generally refuses interviews and declined to talk for this article.

Started on an investment of US$1,000, Huawei began by selling imported telephone call switchers before turning to making them itself. Huawei grew rapidly by first focusing on the poor, rural regions ignored by larger companies and then, taking advantage of China's rapid upgrading of its communications infrastructure, entered more lucrative cities like Shanghai and Beijing.

"Because the development here has been so rapid, there have been many opportunities for us to develop new products," said Xu Wenwei, the executive vice president for international marketing.

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