The Real Huawei Story and the 5G Era

The Park Place Economist Volume 27 Issue 1 Article 18 2019 The Real Huawei Story and the 5G Era Chevy Luo Illinois Wesleyan University, [email protected] Follow this and additional works at: https://digitalcommons.iwu.edu/parkplace Recommended Citation Luo, Chevy (2019) "The Real Huawei Story and the 5G Era," The Park Place Economist: Vol. 27 Available at: https://digitalcommons.iwu.edu/parkplace/vol27/iss1/18 This Article is protected by copyright and/or related rights. It has been brought to you by Digital Commons @ IWU with permission from the rights-holder(s). You are free to use this material in any way that is permitted by the copyright and related rights legislation that applies to your use. For other uses you need to obtain permission from the rights-holder(s) directly, unless additional rights are indicated by a Creative Commons license in the record and/ or on the work itself. This material has been accepted for inclusion by editorial board of the Park Place Economist at Illinois Wesleyan University. For more information, please contact [email protected]. ©Copyright is owned by the author of this document. The Real Huawei Story and the 5G Era Abstract Huawei Technologies Co., Ltd, a Chinese telecommunication technology company and the second largest telecommunication equipment company in the world by revenue, is about to become the largest and the leader in the newest 5G telecommunications era (Sin 2017). For the past year of 2018, Huawei has been reported widely in the media for the detainment of its CFO Meng Wanzhou, who is being suspected of stealing technology from United States companies and illegally trading devices to Iran. However, Huawei's true story of development remains unheard among the controversies and conspiracy theories around Meng's detainment. This article will not expand on those controversies but will use this opportunity to unveil Huawei's incredible path of growth, from being a marginal player to becoming one of today's frontier companies in the telecommunications industry, as well as how Huawei will impact the industry's future with its 5G technology. This article is available in The Park Place Economist: https://digitalcommons.iwu.edu/parkplace/vol27/iss1/18 Luo The Real Huawei Story and the 5G Era Chevy Luo Huawei Technologies Co., Ltd, a Chinese tele and trading the domestic market share for technol communication technology company and the sec ogy, China allowed international telecommunication Ǧ Ǧ ond largest telecommunication equipment company Ǧ infrastructures. Companies like Alcatel, Ericsson, ϐϐ est and the leader in the newest 5G telecommunica ǡ Ǧ Ǧ ǡ ǡ ǯ Ǧ competition of advanced technologies, unlike other ȋʹͲͳ͹ȌǤ ʹͲͳͺǡ Ǧ ȋ ȌǤ suspected of stealing technology from United States on importing foreign technology, Huawei decided ǡ ϐ companies and illegally trading devices to Iran. How to develop a more complicated switch system on its ever, Huawei’s true story of development remains Ǧ unheard among the controversies and conspiracy come one of Huawei’s core strategies (Ahrens 2013). Ǥ ǡ Ǧ theories around Meng’s detainment. This article will ͳͻͻ͵ǡ ϐǦ tract directly from the PLA. In the early 90s, due to ƬͲͺǦ Ǧ the gaps in technology, the domestic market of China ǯ one of today’s frontier companies in the telecommu ǡ nications industry, as well as how Huawei will im government was a typical Chinese way of securing Ǧ Ǥ pact the industry’s future with its 5G technology. a foothold in the domestic market for the Chinese Ǧ I. WINNING THE CHINESE MARKET ϐǤϐ (1987-1996) Ƭ Ren Zhengfei, the founder and the current CEO Other than developing its own technology, Huawei Ǥ also targeted its sales on Chinese rural areas where most IJV ignored. Ren Zhengfei quoted Mao Zedong ǡǯǦ Corporation in 1983. At the end of 1987, Ren started ȋȌ ǲ mestic market share of switch system had increased ǤǡǦ ǳǤ ͳͻͻ͸ǡ ǯ Ǧ technology (Ahrens 2013). In the 1990s, under Re to 20%, standing right next to the IJV Shanghai Bell. ϐ ǣ Ǧ ǦǦǦǡ Ǧ policies, including encouraging foreign investments in Shanghai. This move indicated Huawei’s success ǯ ͳͻͻͷǡ Ƭ The Park Place Economist, Volume XXVII 72 Luo market. Also, Huawei’s success in the domestic mar ϐ ǡǡ ket provided an example of a growth model for other Ǧ Ǥ ʹͲͲ͵ʹͲͲͷǡ Ǧ ̈́ʹͲ ϐȋʹͲͳ͵ȌǤ ǡ̈́ʹͲͲ Ǧ II. EXPANDING TO INTERNATIONAL ȋʹͲͲ͸ȌǤ MARKETS: COMPETITIVE PRICING AND marketing efforts in developed countries. As a new ʹͲͲͳ ϐ ǯ CUSTOMER-ORIENTED ATTITUDE (1996-2006) Ǧ ǡ ǡ market, Huawei started to put its eyes on interna Ǧ tional markets. However, expanding to international ented and especially paid attention to quality stan Ǧ Ǥ Ǧ Ǧ Ǧ Ǥ ʹͲͲͳǡ ϐ Ǧ station that complied with multiple communication ϐ ͻͲ standards. Huawei designed this station after no Ǧ ϐ Ǥ Ǧ Ǧ ϐ ǡ ǲǦǳ petitors (Ahrens 2013). Ren Zhengfei provided ex ǲǳ Ǧ ȋ Ƭ ȌǤ ϐ ǯ Ǧ Ǧϐ Ǥ ǡ ϐ in targeting customers’ demands and executing its ϐ ϐ ǡ ǲ Ǧϐǳ for cheaper prices, accordingly, Huawei offered very overtaken the most dominant IJV Shanghai Bell and Ǥ Ǥ ǡʹͲͲʹǡ ϐ low prices with nearly 30% off from its original sale nications. By the end of 2005, Huawei had had even ͳʹΨ Ǧ rapport for the long run. This has helped Huawei Ǧ Ǧ credited to low prices and good customer service Ǥ ǡǡ ȋ ʹͲͲ͸ȌǤ ϐ ϐ ǯ ȋ ʹͲͲ͸ȌǤ III. FROM “MADE IN CHINA” TO “INNOVATED ̈́ͳʹǡͲͲͲ services, Huawei was eventually rewarded. By 2001, IN CHINA” (2006-2016) Ǧ Huawei’s sales of its switch system in Russia had in Ren Zhengfei knew that simply offering low pric Ǧ Ǧ ̈́ͳͲͲȋ ʹͲͲ͸ȌǤ ǡ While providing its products to meet customers’ ǡǦ Ǥ ȋȌǡ up with new technological trends. According to the Ǥ Ǧ ǡ ǯ ǡ The Park Place Economist, Volume XXVII 73 Luo Figure 2: Sales Growth of Huawei (rightmost) and other top international players in ǯ ǡʹͲͲ͵ʹͲͲ͸ǡ 2007-2011 Ǧ ǣ2003, July: partment Ǧ 2004, February: ǯϐ 2005, June: ͵ ǡ ǯϐ͵ ǡ the Charlton Media Group ͸ʹ͸ǡǮ͵ ǯ 2006, June: Huawei launched the world’s fastest hurt Huawei’s sales growth, the company still main ϐ ʹͲͲ͹ʹͲͳͲ Access USB Modem, the E220, in Singapore. Ǧ Ǧ Ƭ Ǥ ǣ2007: nology in its own house at its core after receiving ǡ Ǧ Ǧ ǡ outperformed Shanghai Bell in the 90s. Huawei Design Award for the E172 ϐ ʹ͹Ͳǡ stayed with this strategy even during the economic 2008, November: Huawei E180 was named the Figure ǡ ǣ 1: R&D Spending of Huawei (rightmost) ǲ ǳ 2009, February: and other top international players in droid smartphone and announced its cooper 2006-2011 ϐǦ Ǧ gress in Spain ǦǦ 2010, August: Total shipments of Huawei’s mo Ǧ units ͳͲͲ 2010, September: ϐ ǲ ǳ ǯʹǤʹ 2011, August: Ǥ cial crisis from 2007 to 2010, Huawei’s sales growth ǡϐǦ Ǧ remained positive and moved closer to those of the ǡ ǯϐ ǦǦ ǡ ȋ ȌǤAlong with the technological leaps, Huawei also innovated its own style of management which is Ǥ ǣ The Park Place Economist, Volume XXVII 74 Luo er technology companies, Huawei does not issue ǲ ǳǤ Ǧ ʹͲͳ͸ common stocks. Instead, the shareholders of Hua Ǥ Ƭ Ǧ wei are Ren Zhengfei and his employees. Based on total of 74,307 patents and 48,758 of them were au Ǧ ȋʹͲͳ͸ȌǤǡ internal documents from Huawei, Ren Zhengfei Ǧ owns 1.4% of the total shares and the 82,471 em third next to Samsung Electronics Co Ltd and IBM Ǥ Corp in 2017 (Huawei Technology Inc. 2017). Those Ǧ accomplishments indicated Huawei’s transforma ͻͺǤ͸Ψȋ rectly from company’s growth and thus were moti Ǥ ʹͲͳͶȌǤ ǡ Ǧ Ǧ Ǧ ǲǳǲǳǤ Ǥǡ ϐ Ǧ ǡ Ǥ shareholders, which is commonly seen in companies IV. EMBRACING THE FUTURE: 5G NETWORK issuing common stocks. Here, Huawei again sets an (2017- Present) other example for a model for management. While Ǧ ǡ ǡ Ǧ companies like Apple, Samsung and Huawei. Some ϐ ǡ sources and human power to accomplish its goals. may argue that every successful company is marked ǡ ǡǦ its positive sales growth and research and develop ǡ Ǥ ǡǡ the newest generation of data communication and Ǧ ϐ technology designs. The newer one emerges as a Figureϐ ʹͲͳͲǤ 3: Huawei’s R&D Spending (2012-2016) ǣ Ǧ Ǥ ous leader as of now, the one who offers the solution Ǧ for the next generation’s telecommunication needs is the upcoming 5G era. As IEEE Spectrum Ǥ compared to our 4G, 5G telecommunications has ǡ ϐ ʹͲͳͲ A. Millimeter Wave. Millimeter waves use high industry, then Huawei was one of the unicorns that ǣ ϐ er frequencies than the radio waves commonly used Ǧ Ǥ spending had reached a historical peak with equiva Ǥ Ǧ ϐ͵ǡʹͲͳ͸ǡ ǯƬ B. Small Cells ǯ Ǥ Ǧ Ǥ ͳͳǡ͹͹ͷǤ͹ͻǤϐ The Park Place Economist, Volume XXVII 75 Luo to the limited length of the article, only a few salient or so throughout cities. Thousands of these stations ʹͷͲ can prevent signaling from failing. ǯ C. Massive MIMO. Ǥǡ as the most important assets and putting technolog ǦǦ ϐ ǯ and receive signals from many more users at once, Ǥ ͷ Ǧ Other than the uniqueness of its culture, Huawei ϐ Ǥ tor of 22 or greater. Ǧ D. Beam Forming. It reduces communication in Ǧ Ǧ ǣ ation and the technology, there are several ways for ǤǦ 5G networks to implement it.

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