Huawei eyes US enterprise market despite political challenges

Huawei wants its enterprise business to drive the company's future growth

Past political trouble in the U.S. isn't stopping Huawei Technologies from selling its enterprise services in the country.

The Chinese company, which was labeled a U.S. national security threat in 2012, has been effectively blocked from selling telecommunication gear to U.S. carriers. Government officials there are concerned about Huawei's alleged ties with the Chinese government, even as the company has repeatedly denied the claims.

Huawei, however, hopes it can still attract U.S. customers to its enterprise products, which include servers, storage and IT services.

"We hope that in every market, vendors will be treated fairly," said David He, the company's president of marketing for its enterprise group. Huawei executives have also talked with U.S. customers and partners, and they all welcome a new player to enter the market, he added.

"The U.S. represents a large market. We are continually working to expand in this market." He said at a press conference on Wednesday.

The optimism comes as Huawei is betting it can steadily build its presence in the enterprise IT space. The Chinese company makes nearly all its revenue from selling networking gear and consumer products such as smartphones. But in the future, Huawei wants its enterprise business to drive much of its growth.

Last year, it made about US$3.2 billion in revenue from enterprise products, but by 2019, Huawei wants that figure to reach $10 billion.

Originally, Huawei hoped to reach the $10 billion number in 2018, but pushed the target date back a year.

On Wednesday, Huawei played down the change, and said it would take time for customers to recognize its products. "Now we think we have a better understanding of the different markets," He said.

"I think in every region, our market share is very, very low," he later added. "We hope that in every country we can maintain a fast growth."

Earlier this week, Huawei revealed one way it could expand in the enterprise sector. In July, the company is launching a public cloud service in China, although it declined to offer details.

China has been a key driver for its existing sales, according to analysts. Huawei has been selling over half of its storage products in its home market, said Jimmie Chang, an analyst with research firm Gartner.

Huawei established its enterprise business group in 2011, and has since introduced in the market technologies that can rival those of its competitors, according to Chang.

"But if they want to reach the $10 billion figure, the Chinese market won't be enough," he added. In addition, global demand for certain enterprise IT products isn't exactly growing. Last year, for instance, the storage market only grew by 1 percent year over year, Chang said.

IDC analyst Matt Eastwood said Huawei's best chance to expand is to target emerging markets. In many of these countries, the company already has strong relationships with local mobile carriers through its networking business.

As for the U.S., Huawei probably won't have an easy time finding customers.

Certain sensitive U.S. industries, such as government, aerospace and defense, will prefer to buy from U.S. companies, Eastwood said. However, there are plenty of other industries such as retail, hospitality, and wholesale services, that are focused on buying IT products with the best value.

The greater challenge for Huawei is trying to surmount existing competition from the likes of Cisco and EMC. "Enterprise IT users are slow to change brands," he added.

U.S. trade relations with China also remain testy. Earlier this year, the U.S. blocked Intel from selling chips to Chinese supercomputing centers, claiming that the processors were being used for nuclear testing.

"If anything, the situation is worsening, not improving," Chang said. "The U.S. political climate could change, but right now it's still hard for Chinese companies."

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Michael Kan

IDG News Service
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