Huawei seeks to shake off cut-price supplier image

Stuart Corner
Thursday, 09 July 2009 04:34

IT Industry - Strategy

Chinese telecoms equipment maker Huawei has posted spectacular growth in recent years and the widely held view is that it has achieved this growth through significantly undercutting the prices of its major competitors but it claims this is not the case.

Charles Huang, the company's president of global marketing, told iTWire: "We never position ourselves and we never see ourselves as a company that wins any contract only on low price... I have been working in Europe for three years and in many contracts I have been involved in other suppliers prices have been lower."

Only last week the CFO of Nokia Siemens Networks, Luca Maestri, was reported in Canada's Globe and Mail saying: "It is quite obvious to us that we cannot compete on cost with the Chinese. Where we believe we have a really strong story is on services."

Huang countered this by saying: "In May in a media interview in China the CMO of Nokia Siemens said that Huawei is not a low cost supplier and he admitted that in many cases NSN prices are lower than Huawei's...We know that in many markets we are not the lowest priced provider."

While analysts still cite the undercutting of competitors as one of the keys to Huawei's success, they do note that low cost pricing will not be a sustainable strategy for Huawei, According to Ovum, rising costs and a stronger Chinese currency have chipped away at this edge and competitors have responded by shifting R&D and production to the same low cost countries.

Commenting on the company's prospects in the LTE market, Gartner said: "We expect the economic downturn to hasten Huawei's ascent as it maintains an aggressive pricing strategy, so its percentage share of the LTE market is likely to be even greater than it has achieved with earlier technologies."

CONTINUED Page 2