Huawei No Longer Interested in U.S. Market

Eric Xu, executive vice president at Huawei

Eric Xu, executive vice president at Huawei

After months of allegations and denials regarding its potential as a threat to U.S. national security, Chinese telecommunications vendor Huawei Technologies Ltd. is giving up efforts to expand into the U.S. market and will instead focus on “the rest of the world.”

“We are not interested in the U.S. market anymore,” said Eric Xu, executive vice president and CEO of the world’s second largest telco gear maker, at an analysts conference in Shenzhen, China. “Generally speaking, it’s not a market that we pay much attention to.

“We now have a deeper understanding of the market,” said Xu, who scaled back his previous prediction that Huawei’s $ 2-billion enterprise division could reach $15 billion in annual sales in the next four years. “If we can achieve $10 billion by 2017, that will be good enough for me.”

“Don’t get me wrong, I’d love to get into the U.S. market,” Huawei CTO Li Sanqi told IDG News Service. “It’s a high-value market.

“We today face reality. We will focus on the rest of the world, which is reasonably big enough and is growing significantly,” Li added.

The announcement comes as U.S. federal regulators have been putting pressure on Softbank to steer clear of Huawei gear as a condition for approval of the Japanese wireless carrier’s proposed takeover of Sprint Nextel.

According to published reports, Sprint and SoftBank were prepared to promise that if the $20 billion buyout is approved, they will rid their systems of Huawei telecommunications equipment and give U.S. authorities – including national security officials — unprecedented visibility into any future network improvements.

Suspicions of Huawei’s trustworthiness were fanned in October 2012 when a U.S. congressional subcommittee issued a report citing Huawei and fellow China-based telecommunications company ZTE for secretive business practices and ties to the Chinese communist government and claims that its equipment could be used to spy on U.S. companies and government agencies. Other countries, including Canada, Australia and New Zealand, have expressed similar concerns and have banned Huawei, which was founded by a former Chinese military officer in 1987, from bidding on government contracts.

While the congressional committee’s report was damning, the White House had a different opinion. Sources say the White House conducted its own review of Huawei’s business practices and security threats and found no evidence of spying or the potential for espionage.

Although its forays into the U.S. market have been rocky, the British government has welcomed Huawei with open arms. The company is investing more than $2 billion in constructing a new U.K. headquarters outside London and developing a local ecosystem to propel growth in the British Isles. Huawei also has a huge footprint in Asia and a growing base in Europe and Latin America.

Huawei has been investing heavily to attract global partners in its effort to become a $100 billion company, according to officials. The vendor in February announced a new Dandelion Empowerment Program to spread the seeds of its products around the world to grow market share.

Through the Dandelion program Huawei is providing its global partners access to training on the latest information and communication technology (ICT) innovations and systems. The program includes partner-needs analysis, in which Huawei will help its solutions providers understand their capabilities gaps and undertake individual training plans.

Thusfar, The company reports recruiting more than 300 top-tier partners and 2,500 resellers in regions around the world.

Earlier this month Huawei reported stellar financial results, forecasting a double-digit compound annual growth rate over the next five years after a 2012 in which sales grew a robust 8 percent.

For the 2012 calendar year the Chinese giant’s revenue rose to $35.52 billion, up from $32.87 billion in the prior year. Net profit jumped 32 percent to $2.48 billion, equating to net margins of about 7 percent.

The company’s plans to exit the U.S. market do not seem to impact its plans to develop the Canadian market. In fact, has been told by several sources that the Chinese networking giant is currently growing its team in Canada. Although it has not engaged very deeply with Canadian solution providers to date, has been told that those hires include one name that is very familiar to the solution provider community.