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Huawei, ZTE's Mobile Network Equipment Development Strategies

December 07, 2006 / China Research Team

30 Page, Topical Report

US$1,680 (Single User License)

Abstract

In 2005, Huawei was selected as a preferred supplier by Vodafone, Europe's largest mobile operator, and by 2006, Huawei had signed a contract to supply equipment to Vodafone in Europe. ZTE has been following hard on Huawei's heels, with a major effort to develop overseas markets that began in 2005. ZTE has already achieved impressive results in its development of emerging markets such as India, Pakistan, and Africa, and is now targeting the European market. Both Huawei and ZTE have been major players in the fixed-line network equipment market; they are now starting to make their presence felt in the mobile network equipment market. This report will analyze the development of Huawei and ZTE's mobile network equipment businesses.

List of Topics
Huawei and ZTE's development in the mobile communications network equipment market, including their R&D activities, product development strategies, customer portfolio, partnership, and marketing strategies.

3GPP, Alcatel, Arobase Telecom S.A, AZ COM, BTC, CAT Telecom, CDG, Celcom, China Mobile, China Unicom, Cingular Wireless, Cisco, DSLF, DVCOM, eMobile, Emtel, Ericsson, Etisalat, ETSI, FSAN, Fujitsu, HP, Huawei, IEEE, IETF, Intel, ITU, ITU-D, ITU-R, ITU-T, Iusacell, Kasapa Telecom, KPN, Leap Wireless, Lucent, Maroc Connect, Microsoft, Motorola, Movilnet, Mundo Startel, Mutil-Media Telephony, NEC, Nepal Telecom, Nigerian Telecommunications, Nokia, Nortel, NTS, OMA, Oman Telecommunications, P4, Qualcomm, Siemens, SkyTel, Sotelma, Sprint Nextel, Starcomms, Sunday, Suntel, TDTech, Telecom Argentina, Telecom Namibia, Telefonica, Telefonica Argentina, Telekom Baltija, Telfort, TM, TMF, Verizon, Vietnam Power Telecom, Vodafone, Zamtel

List of Figures
Figure 1 Huawei's Annual Revenue and R&D Spending as Share of Total Revenue, 1999 - 2005

Figure 2 Huawei's Chinese and Overseas Contracts Value, 1999 - 2005

Figure 3 Huawei's Contracts Share by Region

Figure 4 Huawei's Manpower Structure in 2005

Figure 5 Huawei's 3G R&D Workforce in 2005

Figure 6 Huawei's Mobile Communications CO Equipment Development

Figure 7 ZTE's Annual Revenue and R&D Spending as Share of Total Revenue, 1999 - 2005

Figure 8 ZTE's Revenue by Product Type, 1999 - 2005

Figure 9 ZTE's Chinese and Overseas Revenue, 2000 - 2005

Figure 10 ZTE's Manpower Structure in 2005

Figure 11 ZTE's 3G R&D Workforce in 2005

Figure 12 ZTE's Mobile Communications CO Equipment Development

List of Tables
Table 1 Huawei's Collaboration with Leading International Vendors on Mobile Communications

Table 2 Huawei's Mobile Network Equipment R&D Facilities

Table 3 Huawei's WCDMA/HSDPA Equipment Contracts as of August 2006

Table 4 Huawei's CDMA 2000 1X EV-DO Equipment Contracts as of August 2006

Table 5 ZTE's Mobile Network Equipment R&D Facilities

Table 6 ZTE's Collaboration with Leading International Corporations on Mobile Communications

Table 7 ZTE's Collaboration with Leading International Vendors in WiMAX

Table 8 ZTE's CDMA 2000 1X EV-DO Equipment Contracts as of August 2006

The support provided by upstream component suppliers has helped both Huawei and ZTE to close the gap on their competitors in terms of mobile communications technology. One of the main reasons why Huawei has been able to become a major supplier in the European mobile communications market within just a few years is the behind-the-scenes assistance that Huawei has received from Qualcomm. The Chinese equipment makers have also been helped by their decision to concentrate resources on either WCDMA or CDMA 2000, and by the many years of experience that they had accumulated in the production of fixed-line network equipment before expanding into the mobile communications market.

The adoption of a low-price strategy, together with support from the government, has also helped new entrants such as Huawei and ZTE to develop the mobile communications network equipment market. Both Huawei and ZTE have consistently maintained a low-price strategy. They have been able to do so due to the abundant supply of cheap R&D and manufacturing manpower in China and the Chinese government's policies to help Chinese companies develop the export market, including tax drawback and export loans. Lobbying on their behalf by the Chinese government has also constituted an important resource for Huawei and ZTE in their development of overseas markets, particularly in the African market, where China enjoys close relations with many African governments.

Despite the parallels in terms of the rapid development of their mobile communications network equipment businesses over the past few years, there are also significant differences between Huawei and ZTE. Huawei has set its sights on becoming a leading player in the global mobile communications equipment market, whereas ZTE is still more oriented towards the Chinese domestic market. This difference in orientation can be seen in the two companies' R&D, product development, and market development strategies. Huawei bases its planning on demand in the global market, such as the growing importance of 3G products, while ZTE continues to focus mainly on the Chinese market, as evidenced by its continued allocation of resources to PHS equipment development and its aggressive development of TD-SCDMA equipment.

Appendix

List of Companies

3GPP
Alcatel
Arobase Telecom S.A
AZ COM
BTC
CAT Telecom
CDG
Celcom
China Mobile		中國移動
China Unicom		中國聯通
Cingular Wireless
Cisco
DSLF
DVCOM
eMobile
Emtel
Ericsson
Etisalat
ETSI
FSAN
Fujitsu
HP
Huawei		華為
IEEE
IETF
Intel
ITU
ITU-D
ITU-R
ITU-T
Iusacell
Kasapa Telecom
KPN
Leap Wireless
Lucent		朗訊
Maroc Connect
Microsoft
Motorola
Movilnet
Mundo Startel
Mutil-Media Telephony
NEC
Nepal Telecom
Nigerian Telecommunications
Nokia
Nortel
NTS
OMA
Oman Telecommunications
P4
Qualcomm
Siemens
SkyTel
Sotelma
Sprint Nextel
Starcomms
Sunday
Suntel
TDTech
Telecom Argentina
Telecom Namibia
Telefonica
Telefonica Argentina
Telekom Baltija
Telfort
TM
TMF
Verizon
Vietnam Power Telecom
Vodafone
Zamtel

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