Huawei Technology Co Ltd (SHE:002502) made its name selling telecom equipment, and specializes in building the routers and switches needed for national communication systems. But it’s been unable to crack the U.S. hardware market, with several attempts falling foul of regulators.
Huawei’s ultimate goal was to sell its equipment to American providers like AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ)– a lucrative business with the potential to boost profits.
However, Trade protectionism and phobia pushed Huawei Technology Co Ltd (SHE:002502) to reduce its focus on the U.S. market earlier this year, which has proven to be a “commercial disappointment” for the Chinese telecoms equipment manufacturer noted in ZDNet.
Opportunities For The Chinese Telecoms Equipment Manufacturer
According to Scott Sykes, Huawei’s vice president of international media affairs, the decision to move away was not a reflection of the company’s changing commitment to the U.S. market, but of a commercial reality that there were no opportunities for the Chinese telecoms equipment manufacturer in the foreseeable future.
Sykes was commenting on an April announcement by Eric Xu, the company’s executive vice president, who declared Huawei Technology Co Ltd (SHE:002502) was “not interested” in the U.S. market anymore and had decided to shift its focus to Europe.
Less Competition In The U.S. Market For Broadband Services
Sykes attributed the reduced focus in the country to trade protectionism, phobia, and politics on the part of the U.S. government. He added that moves to ban Huawei Technology Co Ltd (SHE:002502) from participating in the U.S. market would not benefit U.S. consumers, who pay two to three times more for broadband services compared to other consumers in other parts of the world.
This has led to less competition in the U.S. market for broadband services and consumers have to pay more for lower quality broadband services, he noted.
Continue To Deploy Company’s Strategy
This does not mean, however, the Chinese telecoms equipment manufacturer is pulling out of the U.S. market, Du Juan, branding and marketing operations director at Huawei’s enterprise business group told ZDNet. Its enterprise business division, for example, is still active in the market, she pointed out.
“The U.S. is still a big market, and we continue to deploy our company’s strategy and focus on the basics in the market,” she said.
Analyst View On Huawei
Pranabesh Nath, research manager for ICT at Frost & Sullivan Asia-Pacific, said Huawei Technology Co Ltd (SHE:002502) cannot afford to ignore the U.S. as a market, but noted the Chinese vendor would have increasingly limited options as sentiments against the company continue to grow.
“The best strategy for Huawei at this stage, over the next one to two years, is to continue to lobby the government and industry groups, as well as try to improve its image among average citizens through community outreach programs,” Nath said.
Nath noted that this is a “tough” position for Huawei since IT vendors are aware of the importance of the U.S. market for short-term growth strategy. The analyst said he expects Huawei Technology Co Ltd (SHE:002502) to continue to insist on the quality of its products and services in meeting the needs of American customers.