Huawei Technologies and ZTE pledge to invest in manufacturing plants to retain telecom equipment contracts in India
May 12, 2010

Top officials from China’s Huawei Technologies and ZTE will meet with Indian Home Ministry officials in New Delhi today and tomorrow to allay fears of Chinese security threats to India’s telecommunication networks and to pledge investing in a manufacturing plant in India.

The telecom equipment manufacturer which has been supplying base stations to a majority of Indian telecom vendors is hoping the big-ticket investment will demonstrate to the Indian government its serious intent on India. India is currently Huawei’s largest overseas market.  The US$23 billion company has been growing 100 percent year-on-year in India since the past three years. Last year, its India revenues stood at US$1.3 billion (around Rs.6,400 crore), which it proposes to double again this year. With this, it would contribute over 10 percent to Huawei’s global sales.

Five years ago, Huawei Technologies had applied to set up a manufacturing unit in India but was rejected by the government on security grounds. Now that 100 percent FDI in telecom manufacturing is permitted under the automatic approval route, the company is hopeful of investing deeper into India. Huawei already has a R&D center in Bangalore.

Besides Huawei, ZTE another telecom equipment manufacturer which has also been denied contracts with Indian telecom vendors has also recently expressed its intention to set up a manufacturing plant in India.

Both Huawei Technologies and ZTE which have until now been run by Chinese at the helm, are also considering wooing India by hiring additional Indian talent, appointing an Indian CEO and heads of businesses and strengthening ties with Indian telecom companies.

Huawei Technologies, which had a tumultuous entry into India during the early 2000’s, has recently come under intense pressure by India’s home ministry following security fears. Huawei was started by a Ren Zhengfei a senior Chinese military technologist with the People’s Liberation Army’s research institute in 1988.

India however, isn’t the only country to have security issues with Huawei. The Chinese telecom equipment manufacturer has also been the target of investigations in the US, the UK and Australia. In fact, due to the companies close links with the Chinese military and government, its merger with 3COM was annulled in 2009 after the US Congress learnt that the 3COM- Huawei merger would undermine US national security. Similar concerns were raised in the United Kingdom in March 2009, when the country’s top intelligence officers told lawmakers that China may have gained the capability to shut down Britain by crippling its telecommunications capabilities.

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