Could Huawei Go All the Way?

For the last few months, there's been a lot of talk about how the financial crisis will be an opportunity for strong emerging market companies with good balance sheets to undercut their Western competitors and gain global market share, ultimately building the sort of name brands that are still owned mostly by Western blue chips.

Huawei, China's most impressive multinational company, is one such candidate. It's already amongst the world's top three telecom equipment and service providers, with operations in over 100 countries, and over one billion users all over the world. The company's campus, out of Shenzhen in the Pearl River Delta, is a Silicon Valley-style marvel, with a gorgeous canteen turning out gourmet food, and beautiful architecture, including the requisite Norman Foster-designed headquarters. English seems to be the de facto language in the hallways. All this may be run of the mill stuff for a Western blue chip, but in China, it really sets them apart. And since a Chinese engineer costs about 1/6 to 1/10th of what an American or German one does, Huawei has no problem out-pricing their US and European competitors.

So, does all this mean that China, led by companies like Huawei, is on the verge of turning out its first real global brands? That's long been the hope, because creating these kinds of companies is key to moving towards more sustainable growth. But after visiting Huawei's campus this week, which was indeed impressive, I think China's not quite there yet. For starters, though the Western press often refers to Huawei as a global brand, it's not a consumer retail operation – these guys service other businesses, and not very sexy ones at that. Sure, they occasionally put their name on some mobile handsets, but more often than not, they are happy to slap their customers' brands on products that they make in China. They have no plans to change this anytime soon, because being the tech geeks behind big brands like the UK's Vodafone makes them a lot of money in the here and now. (For more on the ins and outs of Huawei's business, check out this excellent piece from a few years ago on the company's rise).

The reason Huawei has succeeded is because they capitalize on what China does really, really well – making cheap, good products – and don't worry too much about snazzy marketing or branding campaigns. They don't have to, since they are selling mainly to other businesses. As an executive at Huawei told me, there are really only about 500 decision makers in the world that they have to influence. It will take the Chinese a lot longer to figure out how to master the art of the sexy consumer marketing campaign and sell to millions.

That said, Huawei is a model for what China can be in the sense that its workers own 100 percent of the company, enjoy luxurious (by Chinese standards anyway) health benefits and pensions, and work in pleasant and stimulating environments, rather than in low-end sweatshops. In that sense, it already is a banner company.