Huawei Strengthens Ties With the U.K.

China’s Huawei Technologies Co., the world’s second-largest supplier of telecommunications equipment, faces a harsh environment in the U.S., where it has been effectively shut out of the market due to national-security questions raised by local politicians.

But in the U.K., where Huawei already has a solid customer base, the situation is very different. U.K. Chancellor of the Exchequer George Osborne, who is in China this week on a five-day trip, is visiting Huawei’s headquarters in the southern city of Shenzhen on Wednesday to meet with company founder and Chief Executive Ren Zhengfei.

“I have every confidence in Huawei’s future in the U.K.,” Mr. Ren said in a statement on 

Wednesday. Huawei is hosting a delegation of U.K. technology companies at its headquarters during Mr. 

Osborne’s visit,  as part of its broader efforts to promote cooperation with the U.K. telecom sector.

Huawei also said it is investing $200 million to build a new research and development center in the U.K. The latest investment is part of the plans that Huawei announced last year to spend $2 billion over five years on R&D and component procurement in the U.K. In June, Huawei opened its new U.K. headquarters — a 140,000 square-foot complex in Reading.

Huawei already has a R&D office in Ipswich, where it employs over 80 engineers. The company said it expects its R&D engineering jobs in the U.K. to increase to 300 by 2017 with the addition of the new center.

In an interview with The Wall Street Journal last week, Chen Lifang, a Huawei senior vice president and board director, said that R&D investment is one of the company’s top priorities. Huawei hasn’t cut back on R&D spending even during periods of economic weakness, and that policy won’t change, Ms. Chen said. 

Huawei spent about $4.8 billion on R&D last year, or nearly 14% of group revenue. Currently, about half of Huawei’s workforce is engaged in R&D.

Huawei’s expansion in the U.K. has not been without challenges. In June, a U.K. parliamentary committee released a report saying Huawei’s strong presence in the country’s telecom sector could raise potential national-security issues.

Last year, a U.S. congressional report recommended that U.S. carriers avoid using Huawei’s equipment, saying there were concerns that the gear could be used by Beijing to spy on Americans. Huawei has denied such allegations.

In an interview with The Wall Street Journal in June, Li Sanqi, chief technology officer of Huawei’s telecom gear business, said that the company didn’t see any opportunities to sell network equipment in the U.S. for at least the next couple of years. By contrast, Mr. Li said that Huawei saw major opportunities in the U.K., where its customers include BT Group PLC and Vodafone Group PLC. “We are building our second home in Europe, and the U.K. is a major part of it,” he said.

Huawei, which generates about 70% of its revenue outside China, sells its network gear, such as routers, switches and antennas, to more than 500 carriers globally. Having outpaced many Western competitors in that market, the company is now closing in on industry leader Ericsson.

Source: Wall Street Journal by Juro Osawa