As no longer a young engineer, but with connections in the Chinese government, he created a company that became one of the leaders in the global smartphone market.
While everyone is discussing the new iPhones, I propose to return to a series of stories about the stories of large Chinese companies. The site already had stories about LeEco, Xiaomi, Meizu, OnePlus and Lenovo. Now let's get to know the strongest player in the mobile market from China – the company Huawei.
How it all started
Huawei was founded by engineer Ren Zhengfei in 1987, when he was already 43 years old. There is an interesting moment in his biography – since 1974 he worked in the ranks of the People's Liberation Army of China (PLA) as a technical engineer. He did not have a military rank, but his position was equivalent to the head of a regiment. Ren Zhengfei's connection with the army and government of China will leave a big imprint on his biography and influence his history Huawei in the future, but more on that later.
In 1982, the Chinese government announced the disbandment of the PLA Corps of Engineers, then Zhen decided to resign from the army. After that, he worked for some time in the logistics department of an oil company from Shenzhen.
In 1987, Zhen quit his job at an oil company and opened his own company, he had 21 thousand yuan in his hands – at the exchange rate of that time, it was less than 6 thousand dollars. It is important to take into account the context here: in the 1980s, the telecommunications infrastructure was actively developing, and the Chinese government tried to support this direction, because at that time the country was completely working on imported equipment. At this time, four companies appeared in China at once, which in the future became large manufacturers of telecommunications equipment – little-known DTT and GDT, ZTE, more familiar to us, as well as Huawei, which we get to know better.
Love for the homeland and an important mission
Zhen supports the idea that technology should be developed domestically rather than joint ventures with foreign organizations. And he does not deny that without protection and assistance from the state Huawei she would not have survived. This is also an important part of the company's history. According to some reports, Huawei received a loan from a state bank in the equivalent of $ 8 million, but Zhen himself denies this.
In the early stages of her life Huawei she did not produce anything, but only was engaged in the resale of equipment purchased in Hong Kong. Параллельно с основным бизнесном, Жень активно вкладывался в отдел исследования и разработки (R&D), и уже в 1990 году компания начала создавать коммутаторы сама. At that time, about 200 similar companies appeared in China, which were engaged in the production of telecommunications equipment, so in Huawei they decided to create a unique product.
Despite the low level of development of the industry, competition in China was very high, and it was especially difficult for private companies. It was difficult to get a loan from the state, so Zhen Zhengfei was forced to take loans from private investors, often at high interest rates – 20-30%. В компании сумели правильно распределить деньги, опять же, вложив большую часть в R&D — в общем 100 миллионов юаней, в долларах тогда это было примерно 20 миллионов. As a result, it turned out that competitors in the production of network switches used foreign technologies, and at that time Huawei was working on her product from scratch.
Результатом работы стал первый коммутатор C&C08, рассчитанный на подключение сети до 10 тысяч устройств — на тот момент ни одна из других китайских компаний не могла показать что-то подобное. So Huawei received a contract for the supply of equipment for the national telecommunications network of the PLA. These supplies were not very profitable, but they were a great benefit to authority. Even this profit was enough to invest even more in development and start creating optical network equipment and mobile communications.
In the 90s, large cities in China were served by foreign companies – Ericsson, Nokia, Motorola and others. Therefore, Ren Zhengfei made a strategic decision to develop his business across the provinces. The leader was not afraid of aggressive measures and often resorted to schemes bordering on corruption when making deals. However, he did not break the law, at least he did not get caught.
By 1995 Huawei had opened new research centers in Shanghai and Beijing, the company focused on developing routers and mobile communications. The development of the industry in China did not allow completely abandoning foreign components, so many chips for equipment Huawei were bought from Motorola.
By this time, the Chinese government was interested in the company. Ren Zhengfei met with the President and General Secretary of the Communist Party, and Huawei became an example for the entire nation. Gradually, the company ceased to be limited to providing communications to the countryside and received contracts with the Chinese railway and major cities like Beijing. This opened the company's access to loans from the government through state-owned banks.
By 1996, Huawei holds 20% of the Chinese communications equipment market and makes a profit of 2.6 million yuan per year. The company's ambitions have grown to expanding its business outside of China. Hong Kong was the first overseas market for Huawei – it was just because it was nearby.
In 1997 Huawei with the Korean company Beto Corporation opens a joint venture for the production of equipment in Russia – in fact, it is just an assembly shop. By 2001, she earned $ 100 million from foreign supplies Huawei. After that, the markets of Thailand, Brazil and South Africa are opened for the company. To maximize business expansion, it was necessary to conduct an aggressive pricing policy and sell equipment 30% cheaper than competitors. Here, too, it was not without the help of the government, for example, Zhen Zhengfei went to the deal in Ethiopia with the Deputy Prime Minister of China. Together they signed a $ 20 million contract.
Success in Russia and developing countries allowed Huawei to move to sales in Europe – in the Netherlands and Germany. Then the company helps the United Arab Emirates to build the first 3G network among other Arab countries. Then the Portuguese and British market opens.
Texas Office Huawei / usahuawei.com
In parallel with this, in 2001 Huawei it is trying to enter the US market, starting with the opening of an office in Texas. Even after three years, the company cannot find even one partner, but the Texas office becomes dominant over the remaining 12 offices and 7 development centers.
You can endlessly list the merits Huawei in foreign markets, but it's boring, so I'll save your time for more interesting facts. Just trust me – the company expanded its business very quickly all over the world. Huawei still occupies most of the global telecommunications equipment market, including in Russia, but we primarily know the company as a manufacturer of smartphones.
Huawei has achieved success in telecommunications not only in China, but also in the world, so the time has come to open a new direction – this is how Huawei Device appeared. In 2004, the division launched its first C300 phone. This is a classic 'handset' with a monochrome display, somewhat reminiscent of Nokia phones. After that, the company began mass production of phones, one by one.
In 2005, the company's first 3G phone Huawei U626 was released. It is a clamshell with two displays and even had an SD card slot. But in general, the model did not stand out from the rest, except that we can note the support of video calls via mobile communication.
I propose to skip the long gap and go straight to 2009 – Huawei at the MWC in Barcelona presents the first smartphone on Android. It was named U8220 and was originally released for the T-Mobile operator. By this time, the Huawei Device division had grown to an annual sales of 90 million devices. Also Huawei had an interesting model U9130 – Android – a smartphone with a physical QWERTY keyboard.
There were also experiments. For example, a SmartKit S7 smartphone tablet with a 7-inch display and an earpiece. Long before the Galaxy Note and all the iPhone XS Max.
In addition to smartphones and phones Huawei, it produced portable modems, Wi-Fi routers, tablets and even digital photo frames for ordinary consumers.
In 2012, the company launches a line of flagship smartphones with the Huawei Ascend P1 model. Not bad, but in many ways a typical flagship of the time. He stood out only by the name of the manufacturer, which had just begun to gain fame in Russia. And here is the flagship for a solid price – 20 thousand rubles!
You should also remember the Ascend D Quad XL smartphone, which became the first device based on the HiSilicon processor, a subsidiary of Huawei. So the Chinese company entered a number of chip manufacturers.
A year later Huawei shows its first smartphone on a young and promising system Windows Phone 8 – Ascend W1. In the same year, Ascend P2 is released, the company's first smartphone with LTE Cat4 support. Well, the end of 2013 could be remembered for the announcement of a subsidiary brand Honor, now it is a separate line. The new name creates additional competition not only for other companies, but also for itself Huawei.
I propose to skip a few announcements of the next smartphones and jump straight to 2015. September, Google unveils Nexus 6P co-built with Huawei. But this is where the collaboration with Google ended, like all interesting smartphones.
Theft, espionage and accusations
Perhaps none of the stories of large companies is complete without dark moments. Usually they are the most interesting.
In 2003, Cisco Systems accused Huawei of stealing source code from its own products, copying documentation, and infringing five patents. The Chinese copied part of the competitor's router system code, but they didn't even get rid of the error lines. Cisco went to court, but the case did not come to a meeting, because the parties decided the issue themselves.
Now I propose to travel back to 2009 in order to remember another interesting case. In March, a spokesman for the Indonesian telecommunications company Excelcomindo publicly stated that one of the employees Huawei tried to steal internal documents from their office. The intruder was noticed when he tried to write data to a USB flash drive from one of the work computers. Huawei blamed everything on the employee and denied any connection to the incident.
In both cases, the company got rid of the accusations easily, but in 2008 things got serious. During the report to the US Congress, the military announced that the Chinese company Huawei cooperates with the People's Liberation Army of China and poses a threat to national security. This is where Zhenya Zhengfei's work for the Chinese army and his dubious relationship with the government surface. As a result, the equipment Huawei was no longer used in communication channels through which classified information is transmitted.
But this is only the largest scandals associated with Huawei, and far from the last. We will remember the rest later, but now we will pause for a story about the new business Huawei.
Photo as 'on a DSLR'
I want to recall two interesting cases. In 2016, an interesting flagship Huawei P9 comes out with a dual camera, which was helped by the famous company Leica. In the summer, the editor of the site Android Police notices an interesting post of the company Huawei on Google+ – a beautiful photo of a young girl. Signature under the snapshot:
Charming Ella and I caught a beautiful sunrise. The Leica dual camera in # Huawei P9 makes taking pictures in low light a pleasure.
But if you open the EXIF data of the image, you could find out what he did with a Canon 5D Mark III SLR camera. The company apologized for this and explained that it took this picture to inspire fans of the company, and not to show the capabilities of the smartphone. They promised in the future to more clearly formulate the captions to the photo.
I want to immediately recall a new example, quite fresh, and on this end with scandals. Again, an interesting shot and a very funny revelation. For Egypt Huawei is releasing an advertisement for an inexpensive smartphone Nova 3. In the video, a guy and a girl take a selfie and rejoice at the quality of the picture – nothing unusual.
After a while, the model girl from the advertisement publishes photos from the shooting on her Instagram, which show that these selfies were taken with a professional camera, and not with a smartphone.
Huawei occupies a leading position in the field of telecommunications worldwide. However, the company is now experiencing difficulties, again related to Zhen Zhengfei and his relationship with the Chinese government. It has long been no secret that the state helped Huawei to develop in the early stages and even gave loans, but we have no information about how strong this influence is. Therefore, almost every year the US government remembers this fact and tries to do something about it.
Очередная стычка началась в январе 2018 года, когда власти США помешали Huawei заключить сделку с AT&T, крупнейшим местным оператором. Again the company was accused of spying and transmitting data about Americans to the Chinese intelligence services. ZTE was also hit, but for different reasons. As a result, President Trump issued a decree banning the entire US government and structures close to it from using equipment Huawei and ZTE.
Despite a tough relationship with the US in telecommunications equipment, the smartphone business Huawei is doing well. At the end of the second quarter of 2018, the company took the second place in the supply of smartphones in the world, behind Samsung and ahead Apple. In numbers, this is 54.2 million units and 15.8% market share, according to IDC. In addition, Huawei ranks third in the smartphone market in terms of revenue, behind Samsung and Apple (Counterpoint data).
top 5 companies by revenue on smartphones
The story Huawei is perhaps the most controversial. It is a successful company in many respects, whose credibility is spoiled by incomprehensible relations with the government and the People's Liberation Army of China. On the other hand, even Zhen Zhengfei himself is confident that without the influence of the state, his company could not exist.
Everyone will decide for himself how he relates to the company. At the same time, I propose to share in the comments the experience of working with smartphones and other devices Huawei.