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Company’s Profile: Huawei

Can Chinese company become worldwide strong force in storage?

In China there are two and only two big companies in storage,
Lenovo and Huawei, but not really comparable:

  • the first,  traded on the Hong Kong Stock Exchange, is mainly counting on IBM that continues to develop storage products for its partner; formerly it acquired Iomega from EMC but LenovoEMC business seems to be stopped;
  • the second, much bigger, develops its own high end products under the brand name of OceanStor with a strong R&D team.

Founded in 1987 by Ren Zhengfei, who was an officer in the People’s Liberation Army, to sell telecommunications equipment, Huawei, based in Shenzhen in a huge campus, offers ICT solutions, products and services used in 170 countries and regions, serving one-third of the world’s population.

It’s an enormous private company fully owned by its employees, the founder owning less than 2% of the shares. That’s why Huawei prefers the adjective ”collective” rather than ”private”. When we were on the company’s campus in Shenzhen, the firm, being financially successful, decided to give a bonus of $1.000 to each of its 170,000 employees worldwide.

Storage is a tiny part of the telecom company with sales of $534 million in 2004 or a mere 1% of global revenue at $46.5 billion (with $4.5 billion net profit), or 16% of enterprise business at $3.3 billion. The company claimed 4,000 storage customers and 100,000 boxes shipped in the world.

The Chinese firm is far to the top one but it records a phenomenal growth to be compared to the decline of about all main competitors.

Most growing big company in high-end storage
CAGR was 29% since 2011. From 2013 to 2014, it accelerates at 55.6%. Gartner stated that Huawei has been number one in revenue growth rate for 13 consecutive quarters in global worldwide external storage market.

Look also at these figures recently published by the same US analyst company:

WW external storage market share growth revenue by vendor, 2Q15

Company Growth
Huawei* 58.0%
HP 0.0%
Dell -15%
HDS  -7.0%
EMC -3%
Oracle  -14%
IBM -13%
NetApp  -15%
Fujitsu 3%

* For the equivalent of around $100 million according to Huawei’s representative.

IDC report that the Asian firm was number one in revenue growth worldwide with 79.3% in 1H15 and, of course, number one in China for sales, shipments volume and capacity.

And the trend is supposed to continue as the company expects revenue not far from doubling in 2015 to reach one billion with the goal to be finally profitable.

To get theses results, as much as $2 billion has already been invested since the beginning in storage activity in 2002. Currently ”much more” than 10% of revenue is dedicated to R&D.

A big push in storage was the formation of Huawei Symantec, a Hong Kong-based joint venture established by Huawei and Symantec in 2008, but finally Huawei acquired Symantec 49% stake in the venture in 2011 for $530 million.

Main competitors in China are IBM, HP and EMC.

China represents around 60% of the sales of Huawei, and then 20% coming from Europe and a dramatically low of less than 1% in USA.

Non-existent in USA
Why such a poor figure in the biggest country in term of storage?

Huawei Symantec introduced NAS and SAN in North America through Condre Storage in 2010 and the year later Huawei launches its own U.S. enterprise business through channels, including storage. Without success.

It’s not a question of products as Huawei’s hardware and software is as good and sometimes better than competitors’ offering. Fan Ruiqi, 52, president, IT storage product line, Huawei, also said: ”Storage requirements are about the same in China compared to Europe and USA.” No, if US people accept to buy cheap consumer products from China, it’s not the same at all for high-end storage where big American organizations are reluctant to acquire Huawei infrastructure for ”national security reasons” even if it’s more cost-effective. They refuse to store critical data on Chinese storage systems at any price. The Chinese firm was banned in 2013 from bidding for US government contracts because of concerns over espionage. Il will take several years to change this mentality as also Huawei lacks support in USA.

Huawei’s capability centers are located in HQs in Shenzhen, and in Xi’an, Beijing, Hangzhou and Chengdu. They comprise 3,200 storage engineers including 30 in USA – where CTO and head of US R&D Storage Lab, Cameron Bahar, former CTO and chief strategist at HDS – is one of the few CTO in the industry not based on HQs but in Palo Alto, CA), 20 in Israel and 10 in Russia. Huawei claims 800 patents in storage only.

We visited the Huawei’s R&D Center in Chengdu, the capital of southwestern China’s Sichuan province, and saw there one of the biggest storage center in the world. This interoperability lab is supposed to be the largest one in Asia and as much as $200 million has been invested there in hardware and software. You can see there high end storage systems from Huawei, EMC, IBM, HDS, NetApp, etc. Just to simulate data replication, there is in this center 300km of fiber optics in several rolls.

In conclusion, Huawei is very ambitious for its storage business with apparently unlimited money to spend to succeed. If growth continues at the same speed, with $2 billion in 2016, Huawei will enter into the club of the ten worldwide storage companies.

The company has today excellent high-end products that could rival with the best other ones and intends in the future to enter into lower systems and even components, recently announcing SSDs with its own controller.

But the Chinese firm will have to resolve some problems, its difficulties to be present on the US market, and ameliorates globally marketing an communication to be more on par with US firms. The name of Huawei is not a great one to sell in the Western hemisphere and the – excellent – brand name OceanStor has rather to be pushed. We note also that there is much to do to ameliorate the productivity inside the company. Workers there have a tendency just to do only what is asked without collaboration with other employees.  

Note: Huawei covered editor’s travel between Paris, Shenzhen and Chengdu for this article.

 

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