Huawei's UK investment to help secure talent, provide political cover in the U.S

Huawei plans to spend US$2 billion in investment and procurement in the U.K.

Huawei's plan to spend US$2 billion in the U.K. is expected to help the Chinese firm secure additional talent, and could even improve its political standing in the U.S., where company representatives are slated to appear before an upcoming congressional hearing, according to analysts.

The company announced its plan on Tuesday, with $1 billion planned for investment, and the other $1 billion for procurement over five years. By 2017, Huawei will also be increasing its employees in the U.K. to 1,500, up from the current number of 800 employees. Huawei did not immediately comment on the nature of the investment.

Huawei, whose core business has been in supplying networking gear, has been rapidly building up its research and development arm as the company vies to become a major vendor in smartphones and tablets, along with enterprise systems such as servers and storage. Last year, Huawei spent $3.76 billion on R&D, recruiting 11,000 new employees. This year, the company expects to raise that expenditure to $4.5 billion.

Although headquartered in Shenzhen, China, the company is expanding its research organization into other countries in order to recruit the limited pool of IT talent available in the world, said David Wolf, CEO of Wolf Group Asia, a Beijing-based technology consultancy.

"What they (Huawei) realize is that there's a limited number of very smart people in the mobile phone communication business that are going to create the future of the industry," he said. "But not all of them want to live in Shenzhen."

The investment also comes as governments across the world are paying greater attention to the potential security risks of the telecommunication equipment they are buying from vendors such as Huawei and its rivals, Wolf said. Governments will feel more comfortable buying the equipment, knowing that it's been developed in their home market, he added.

"The governments in the future will have to test this equipment, they will have to dig into the depths of it," he said. "It's the only way anyone is going to have comfort with it, especially as more of the (the networking equipment) is developed in China. Not just by Huawei, but by everyone."

Huawei's investment was welcomed by U.K. prime minister David Cameron, according to a company press release. But such warm sentiments toward Huawei have been absent among government officials in the U.S., where the company has faced ongoing opposition in its business activities.

Part of the concerns stem from Huawei's founder Ren Zhengfei previous job with the China's People's Liberation Army as an engineer. Some U.S. lawmakers are concerned that Huawei's telecommunication gear could be used to spy on U.S. activities. On Thursday, Huawei representatives are slated to appear before a U.S. government committee that is examining the security threats from Chinese telecommunication firms working in the country.

Matt Walker, an analyst with research firm Ovum, noted that Huawei has been successful for many years selling telecommunication gear in the U.K., which has close political ties with the U.S.

"Being able to point to widespread adoption in the U.K, should, in theory, help Huawei in its efforts to persuade American politicians and (telecommunication) carriers to give it a chance," he said in an email.

"Whether the timing is coincidental or not, it could help during the upcoming hearings," he added. "Having this U.K. news out there gives Huawei supporters some political cover during the hearings."

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Michael Kan

IDG News Service
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