Huawei rising

Economist: "A report based on a survey of over 100 telecoms operators worldwide, carried out by Heavy Reading, a market-research firm, found that Huawei ranked eighth among wireline-equipment suppliers, up from 18th last year. (Cisco came top.) Most strikingly, Huawei ranked fourth in service and support. The report calls Huawei's ascendancy “astounding” and says it has already surpassed several incumbent vendors in perceived market leadership.

As a result, incumbent western firms should be “very scared” of Huawei, says Jean-Charles Doineau of Ovum, a consultancy. Huawei's reputation as a low-cost vendor is only the visible part of the iceberg, he says. Below the waterline, the company has high technical standards, though it is not known for its ability to innovate. It also has a 30% share of the vast Chinese market, equivalent in size to Europe's. Having developed products at the behest of its demanding domestic customers, Huawei can then sell them elsewhere.

Initially, Huawei concentrated on developing countries, but it is now gaining traction in the developed world, in Europe in particular. Last week it was named a key supplier by COLT, a British operator, and also won a $100m broadband contract from Optus, an Australian firm. Huawei has yet to win the endorsement of a first-tier operator, but its gear is being evaluated by BT, Britain's incumbent operator, and by Vodafone, the world's largest mobile operator. BT is expected to announce the suppliers for its new “21st Century Network” soon, and Huawei is on the short list. Arun Sarin, Vodafone's boss, says his firm is watching Huawei closely.

Much of Huawei's competitiveness derives from its low labour costs. Richard Lee, a company spokesman, says Huawei can pay its senior engineers a quarter of the going rate in the developed world, and junior engineers just an eighth."

I don't see any shortage of engineers in China, with over 400K science and engineering degrees awarded each year! (Several times the US figure.) See here for a rough calculation suggesting a larger population of science and engineering PhDs in China than in the US by 2020.

See also this survey of China and India development trends.