More to meets the eye with Huawei

I had to laugh this week when I saw a headline in an online posting on Techetye.net: "Huawei finds new third world country". The "third world country" it referred to was, in fact, the UK, after the Chinese telecom group announced it was about to invest $2 billion expanding its operations in Britain.

According to the announcement, the company intends to create around 700 new jobs in the UK over the next five years, in addition to the 800-plus people it already employs there.

It's quite obvious why Prime Minister David Cameron is delighted with the decision by Huawei. Apart from anything else it will give a much needed shot in the arm to Britain's ailing economy, as the national feel-good factor generated by the London Olympics is already starting to wear off.

In the fatuous way that politicians the world over are often renowned for talking without actually saying anything worthwhile, Cameron's reported one-liner was "this investment demonstrates that the UK is 'open for business'" – whatever that means! He also added that "the British government values the important relationship with China… both countries have much to offer each other and the business environment we are creating in the UK allows us to maximize this potential."

Meanwhile, further platitudes spouted forth from Huawei's founder and chief executive Ren Zhengfei, when he too met the Prime Minister. "The UK is an open market, which welcomes overseas investment. I am, therefore, very pleased today to be announcing the $2 billion investment and procurement plan, promoting the development of openness and free trade," he said.

Although Huawei is a household-name company in China and across Asia, being one of the largest telecom companies in the world, it's probably true to say that most people in the West have never heard of it, even though millions of people in Europe and the US rely on the company's equipment every day. Its networks underpin the services provided by many of the world's best-known mobile phone service providers and in the UK alone its customers include BT, Everything Everywhere, O2, Orange, TalkTalk, Virgin Media and Sky.

Set up in 1987 servicing rural China, Huawei was generating revenues of about $250m within a decade. In 1999, it set up its first R&D center outside China, in Bangalore, India. The next year it set up in Sweden and a year after that in the US. By 2002, sales outside China had hit $500m. Last year, turnover hit $32bn, and the company now employs more than 140,000 people across the world.

But platitudes aside, there is probably a much more important agenda behind Huawei's decision to "invest in Britain". It already operates on a close level with the UK's intelligence agency GCHQ, and even employs a former British chief information officer as its global cyber-security officer. And it has won significant contracts in Canada and New Zealand.

According to Reuters, Huawei has also been actively hiring UK executives - including former government officials and industry figures - in various parts of the company, including senior positions and in R&D.

The reasons are two-fold. Although its HQ is in Shenzhen, Huawei is expanding its research into other countries in order to attract the limited amount of telecom engineers available across the globe who are at the cutting edge of the industry. Shenzhen, it has to be said, is not on the A-list of places in which to live for many of the world's top engineers.

But there is another, perhaps even more important reason. Huawei has its eyes on expanding in two of the most important markets – the US and Australia – but both countries are resisting its efforts, owing to concerns about cyber-security. Earlier this year, the company was not allowed to bid for a new nationwide broadband installation in Australia. And in February last year, a US security panel rejected Huawei's purchase of American computer company 3Leaf systemswhich was not the first time that the company had been denied such approval. Many in the US appear paranoid that Huawei will install spy software on its telecommunication platforms in order to eavesdrop on behalf of the Chinese government.

So the fact that the UK, including its Government intelligence services, has been working very closely with the company will, it is felt, make the Americans feel more comfortable buying Huawei's equipment, knowing that it's been partly developed in the UK – one of America's closest allies.

And surely, only a cynic would suggest that the timing of this announcement of Huawei's investment in third-world-Britain is anything but coincidental, coming as it does in the run up to the next congressional hearings into whether to allow Huawei in with a chance to work with the American telecoms carriers.