A man at Huawei's booth at a telecommunication expo in Beijing. [Photo/China Daily]
Firm forecasts it will overtake Ericsson in gear manufacturing
BEIJING - Huawei Technologies Co, China's biggest telecommunications-equipment maker, forecast it will beat Ericsson AB to become the top producer of gear for the next generation of mobile-phone networks.
"We have confidence we are better than others, we are better than number two," Ying Weimin, president of closely held Huawei's business devoted to the fourth-generation wireless technology known as long-term evolution (LTE), said in an interview in Hong Kong on Tuesday. "Globally, we believe we have the best market position."
The comments underscore growing confidence among Chinese equipment makers challenging Ericsson and Nokia Siemens Networks in the $38 billion market for phone gear such as routers and switches. Huawei and Shenzhen-based ZTE Corp are set to capture half of industry orders in five years, compared with about 30 percent now, because they've caught up with Western rivals in terms of technology, said Jim Tang, an analyst at Shanghai-based Shenyin Wanguo Securities Co.
"For the older generations of equipment, the global players dominated the market," Tang said. "Chinese players will have a more key role in the market for new equipment."
Ying said global contracts for LTE equipment will probably reach $10 billion in 2014 as mobile-phone operators double orders each year to meet soaring demand for faster wireless connectivity. His forecast exceeds the $6 billion estimate that Redwood City, California-based research company Dell'Oro Group made for the market in August.
Huawei is likely to extend its market-share gains because of its head start, Ying said, declining to specify figures. The company has won 17 LTE contracts after it helped Sweden's TeliaSonera AB start the world's first 4G commercial network in Norway last year and "early, big investments" have resulted in 270 patents related to LTE with the European Telecommunications Standards Institute, he said.
The Chinese company increased research and development spending 27 percent to $1.95 billion last year across Asia, North America and Europe, according to data supplied by the company. Huawei, which describes itself as "100 percent owned by its employees", reported sales of $21.8 billion and net income of $2.7 billion last year.
Network-equipment makers are counting on Apple Inc's iPhone and smartphones that run on Google Inc's Android to drive demand for faster wireless connections.
Infrastructure-gear makers, set to generate sales of $38 billion this year, will probably have to wait until 2014 for industry orders to climb back to the record $43 billion set in 2008, according to estimates at Dell'Oro. The research company ranks Huawei third overall in mobile network equipment sales as of the second quarter, behind Ericsson and Nokia Siemens.
Shale gas lures oil majorsSecurity concerns in key markets such as the United States could prevent Huawei and ZTE from expanding their share, according to analysts including Wilson Chai at Mirae Asset Securities Co.
"There is always the political issue," Chai said. "They are probably going to see more difficulty in the US and Europe. They have been trying to crack those markets for years but so far with very little success."
In October, US lawmakers asked the Federal Communications Commission to review the security risks of domestic companies ordering network equipment from Huawei and ZTE. That was at least the second time in the space of two months that US lawmakers prodded the Obama administration to review the alleged risks of buying Chinese telecommunications equipment after eight US lawmakers on Aug 18 claimed that a Sprint Nextel Corp contract sought by Huawei would "undermine US national security".
"We believe we need some time to win trust," Huawei's Ying said. "We will continue our efforts in the US market to build better trust between Huawei and US operators."
Bloomberg News
