Huawei becomes top telecom gear maker

Huawei Technologies Co Ltd has become the world's biggest manufacturer of telecom equipment, after its first-half revenue beat that of Swedish rival Telefon AB LM Ericsson.

Huawei reported late Tuesday that its first-half revenue was 102.7 billion yuan ($16.07 billion), up 5.1 percent year-on-year.

The figure is $850 million more than that of Ericsson's first-half revenue.

However, analysts said that Ericsson is still by far the largest cellular infrastructure maker in the world. The Stockholm-based company has developed a business portfolio different from that of Huawei and is strengthening its position in the telecom service market.

"Ericsson holds the No 1 position in mobile network infrastructure and telecom services," Melody Li, a spokeswoman for Ericsson China, told China Daily on Wednesday. She said that Ericsson's market share in the mobile equipment market reached 38 percent with $34.9 billion in 2011, twice as big as its closest competitor in the segment.

Huawei held 16.5 percent of the world market for mobile network infrastructure in 2011, bringing in $13.5 billion in revenue, according to Gartner Inc.

"The situation did not change much this year, which means Ericsson still dominates the market," said Xiang Ligang, a telecom expert in Beijing. He added that Ericsson gained an upper hand over Huawei because it has full access to the North American market, while Huawei was blocked from this profitable region due to security concerns by the US government.

Ericsson also drew back from the mobile phone business after selling its 50 percent stake in Sony Ericsson Mobile Communications AB, a 10-year-old mobile-phone joint venture with Sony Corp, back to Sony in October 2011.

By contrast, Huawei has sizable handset and enterprise businesses. Huawei's smartphone shipments soared 500 percent to 20 million units in 2011. Total mobile phone shipments hit 55 million units, according to its annual report.

Yu Chengdong, CEO of Huawei Consumer Business Group, said in an interview in May that the company expects its sales of consumer devices to reach $9 billion this year, up more than 32 percent from the $6.8 billion in 2011.

However, there is something in common in both Huawei's and Ericsson's half-year financial reports, as well as in that of other major telecom gear makers - almost all of them suffered significant profit drops, or forecast big profit decreases.

Huawei announced a 22 percent decline in its first-half operating profit to 8.79 billion yuan. Ericsson posted a 64 percent drop in its second-quarter earnings, while France's Alcatel-Lucent SA warned it would miss its 2012 earnings forecasts.

ZTE Corp, another major telecom equipment maker based in Shenzhen, has predicted that half-year earnings will drop 60 percent to 80 percent, to between 154 million yuan and 308 million yuan.

"The eurozone crisis was a heavy blow to us," Liu Peng, vice-president of ZTE, said.

Many of ZTE's contracts in Europe are for several years, but at fixed exchange rates. The company stands to lose when the euro depreciates against the yuan, he said.

In addition, the global economic turmoil and slower spending of worldwide telecom carriers are also having a negative impact on the telecom market.

"The peak of 3G network construction has passed, while the new wave of 4G network deployments is yet to arrive. With a sluggish economy, the whole year prospect of the world's telecom industry is not optimistic," said Ji Chendong, an analyst with the research firm Frost & Sullivan.

shenjingting@chinadaily.com.cn

(China Daily 07/26/2012 page15)