Huawei's startup story and its early ties with Hong Kong

November 27, 2019 11:10
Huawei has released promotional videos wherein founder Ren Zhengfei speaks of the firm’s journey from small beginnings into its current status as the world’s largest telecoms equipment firm. Photo: Reuters

Chinese technology giant Huawei has hired BBC's commercial arm to make promotional videos on the "The Real Story of Huawei". The video series features founder Ren Zhengfei describing how Huawei grew from a small company into a global smartphone and telecommunications behemoth.

Two episodes -- "The Startup" and "Double or Nothing" -- have already been released in the material created by the BBC's sponsored content team. Interestingly, these episodes revealed Ren’s ties with Hong Kong in the early days.

The first episode talks about how Ren started his business.

After leaving the army in 1987, Ren created Huawei at the age of 44. Initially, the startup resold affordable telecom switchboards to small city hotels after buying the equipment in Hong Kong.

Noticing strong demand in the mainland market, the Hong Kong counterparty suddenly stopped dealing with Huawei and began selling directly to potential mainland Chinese clients.

The painful lesson brought home to Ren the risks involved in depending on outside suppliers.

He gathered several engineers in Shenzhen and virtually locked them up in the office for a whole month to build an own product. That’s how Huawei started to manufacture telecoms equipment.

In a certain sense, this experience shaped Huawei’s strategy of relying on in-house research for core technology.

This could also explain why Huawei is not devastated when the US banned sales of chips and mobile operating systems to the company.

In fact, such ban would simply encourage Huawei further to innovate on its own and become more independent from US firms. Huawei has always been prepared for such possibilities.

The second episode tells the behind-scenes story of how Huawei tackled management issues as the company kept expanding.

Ren made a key decision, bringing in IBM to help the company transform its integrated product development and supply chain.

“Each IBM consultant was paid US$680 per hour, but my monthly salary was less than 5,000 yuan back then,” Ren recalled. The company set up a project in Hong Kong called ‘checks and balances’ to push the transformation.

This episode also touches upon another major stumble of Huawei in the 90s.

Huawei had made heavy investment in 1X CDMA technology but in the end, this standard was not chosen by the government. Huawei could not recuperate the cost and was faced with the looming threat of bankruptcy.

The setback at home forced Huawei to set sights on global markets.

Ren took his product to Hong Kong and got his first big break with Hutchison Telecommunications. The unit owned by Hong Kong business tycoon Li Kai-shing agreed to try out Huawei’s products.

Huawei won the business, which set it on the path of getting other overseas orders.

Now, let's wait and see what the next episode will talk about.

This article appeared in the Hong Kong Economic Journal on Nov 26

Translation by Julie Zhu

[Chinese version 中文版]

– Contact us at [email protected]


Hong Kong Economic Journal columnist