There’s been a sea-change at the top of the telecom equipment vendors market; Chinese manufacturer Huawei posted more sales revenue than Ericsson through Q1 and Q2 of 2012.
Huawei posted first-half sales revenue figures of CNY 102.7bn (£10.4bn), which was a 5% increase from this time last year.
In comparison, Swedish vendor Ericsson posted revenue figures of 106.3bn kronor (£9.85bn) for the first two quarters of this year.
Meng Wanzhou, Huawei chief financial officer, spoke of “moving forward to ensure more effective growth” and said: “We are relatively optimistic about our operating performance and profitability for the remainder of 2012”.
Note the word ‘relatively’.
Part of this slightly wavering optimism may be due to the big black cloud which has overlooked Chinese telecoms this year catching the prime hitters, Huawei and ZTE, in its grasp. This has been due to the general economic downturn and weak spending, ensuring the telecoms industry’s struggle.
Aside from sales revenue figures, Huawei reported a 22% decrease in operating profits, down to CNY 8.79bn (£886m).
Yet Huawei’s growth has been, up until this point, near unprecedented.
Their global success has been down to a number of factors. Most prominently, Huawei cut down on price to ensure market spend in the emerging late 1990s telecom infrastructure markets.
Their business model of solid yet not extortionate pricing combined with plenty of research and development (R&D), as well as utilising nascent devices and formats such as iDevices when appropriate has led to continued growth.
Pivotally though, Huawei and ZTE have both been recently embroiled in the ‘anti-dumping’ scandal with the European Union, in which Dr Lin Sun, TelecomsTech Beijing correspondent, described the two companies as “aggressive price cutters, with or without government financing”.
Both companies stand accused of putting forward illegal subsidies in order to undercut rivals.
ZTE posted grim news last week with the report that their profits were significantly down, as well as fears that up to 12,000 jobs were being shelled as part of a localisation strategy.
However ZTE was quick to dispel any lay-off rumours, claiming that they will be hiring thousands of college graduates, as well as continuing to bring on experienced local staff.
Despite the rocky news from Huawei, in line with global trends for the telecoms industry, it does appear that they are faring a bit better than ZTE.
Do Huawei and ZTE just have to ride out this current period of turbulence, or are these reports more serious than that? Let us know in the comments…
