Bangalore: Chinese telecom equipment maker Huawei Technologies Co. Ltd, with revenues of $16 billion (Rs64,000 crore) in 2007, is looking at the Indian market to boost its growth. Last year, its revenues from the Indian operations grew to $600 million from $186 million in the previous year. It is aiming to double its business in 2008 and hopes to cross $1 billion in revenues this year selling equipment to telecom service providers such as Bharat Sanchar Nigam Ltd, Bharti Airtel Ltd and Reliance Communications Ltd.
The company in the last two years has increased its sales team in the country to 700 and its research and development (R&D) team to 1,500. Even as India adds more than eight million new users every month, overtaking China to become the fastest growing telecom market, Huawei is hoping to replicate the success it has had in its domestic market.
Analyst Romel Shetti of consulting firm KPMG, who tracks the telecom sector, feels that equipment vendors such as Huawei are heading for boom time in India over the next two-three years as the second round of licensing will see operators making huge investments in capital expenditure as they roll out operations.George Huang, chief operating officer, Huawei, spoke to Mint about the work being done in the R&D centre as well as the potential of the Indian market. Edited excerpts:
How has Huawei been doing in the Indian market?
At Huawei, we treat (India) as one of the...biggest markets. We are not satisfied with our performance here and feel that we could have done much better. From 2007, we have put much more efforts into the Indian market. Not just here in India, but also those in the headquarters are focusing on India. In the past, we may have given off-the-shelf products, but now we realize Indian customers need customized products. Indian needs are special and unique. Our CDMA equipment have some features just for Indian customers that can prove more competitive in terms of cost and are easier to maintain and manage.
Huawei is generally perceived as a price warrior in the market...
George Huang, COO, Huawei
Actually, it is not true. It is just a perception. In lot of bids that we have won, we were not the lowest bidders... Our biggest strength is that we can provide solutions to meet customer requirements. We can provide fast response to our customers’ requirement and cost is just one of the factors. Customers actually do not look (at) cost alone, but faster roll-out and long-term support.
What kind of revenue did Huawei have in the Indian market last year? There has been talk of you crossing $1 billion in sales in 2008...
Actual sales in 2007 stood at $600 million, up from $188 million in 2006. On the ($1billion revenue front), while it is possible, I don’t have a formal announcement to make. Our goal is not only revenues from the India market, but ensure that R&D here supports growth of both our local and global business.
What kind of work is the India R&D centre doing?
We have lot of platforms and components developed in India, which have been used in our routers and soft switches and a lot of these have been deployed around the world. Most part of the IP (Internet protocol) platform has been developed in the R&D centre here. Our soft switch system is in the first place in the world.
More than 100 million people around the world use the IP. More than 200 patents have been filed from our R&D centre here. Huawei itself (globally) has been granted 2,000 patents, while I don’t have a corresponding figure for patents granted in India. Of the 2,000 patents filed (last year), at least 40-50 patents have been filed from (the) India centre.
There were a lot of apprehensions about Huawei’s operations in India over the alleged close relationship with People’s Liberation Army. Do customers still raise those issues?
Actually, we don’t see any apprehensions from our customers now. When we talk to them, they want to know whether we can provide the solution that they want. None of the operators have raised any concerns and we don’t see any issue. ...In the contracts that we have won both from the government and private players, we don’t see any issue being raised by our customers.
What are the recent wins by Huawei in India?
Recent wins include the $300 million GSM expansion deal from Reliance and $200 million deal from Airtel in Sri Lanka to supply network for managed services.
The recent joint bid by Bain Capital Partners and Huawei for 3Com fell through. Will that have any kind of impact on the Huawei’s technology progression?
I think that the deal with 3Com is just a commercial deal and is not part of our technology road map. So, I don’t see any impact on the technology road map.
What’s the update on your manufacturing facility in India?
In principle, according to a commercial situation, if customers require, then we may consider setting up the facility. If manufacturing facility can help us to provide more competitive support, we will do that. If that doesn’t help, we won’t do it. However, we are not ruling out the possibility of a manufacturing facility in India.
You were planning to set up an integrated campus in Bangalore. What’s the status on that?
Work on our campus is an ongoing process. It has been slightly delayed due to lot of processes. We have acquired some 20 acres (of land) and plan to build a seating facility of 2,000 in the first phase.
Our cumulative investments in India till date stand at $100 million for R&D centre. We are investing another $100 million in the campus, which will be operational by 2010.
We currently have around 1,500 people and plan to add another 500 by the year-end.
Is the Bangalore R&D centre working on any new technologies such as the fourth generation networks?
IP, New Generation Networks, optical transmission software and mobile handset software, value-added software: these are the technologies we are working on. Fourth Gen is in pre-research stage and still not commercial. Software radio is not done in India, but in China. Now we have a few R&D centres around the world, which focus on different technologies and areas. For India, we mainly focus on software development, while in Europe, we focus on wireless technologies.
Have you stopped outsourcing to Indian vendors such as Wipro Ltd and Infosys Technologies Ltd?
No, not fully. We are still looking to work with Indian software companies. As requirements change and customers seek total solutions that include various products from different vendors, we look forward to partnering with different companies to provide total solutions. We are in talks with several companies for offering solutions, where customers want to integrate their equipment with packages such as ERP (enterprise resource planning) and CRM (customer relationship management), among others.
How do you see the cost pressure from operators as they roll out new services?
Pressure is always there and I feel it might be a good thing. If you can overcome that pressure and do better, you’ll win.
How do you see the competition from European players?
Compared to them, we have our own strengths. People costs in China and India are much lower than Europe or the US. We have 70,000 (people) in Huawei, about half of them in R&D. In Europe, you cannot imagine having 35,000 people for R&D alone.