Huawei plans $600M investment in '5G,' rules out M&A

Huawei said it will invest at least $600 million (€444 million) in research for so-called "5G" technology over the next four years, as the Chinese vendor outlined a growth strategy based on R&D strength and a strong consumer business rather than on acquisitions.

Eric Xu

According to the Financial Times, Huawei's deputy chairman and rotating CEO, Eric Xu, has ruled out any acquisitions of weaker rivals such as Alcatel-Lucent for its network business and BlackBerry for devices, saying the vendor is on track to meet its revenue targets through further investment in its own product lines.

Reuters noted that Huawei has a 10 per cent revenue growth target for 2013 and 2014, and plans to achieve this primarily through an expansion of its smartphone business. Huawei generated around 73 per cent of its 220.2 billion yuan ($36.1 billion) sales last year from network equipment sales, while 22 per cent came from consumer devices. Nearly three-quarters of revenue is earned outside China.

"We're not expecting an explosive development of our smartphone business, rather we want to grow that business step by step," Xu told reporters in London, Bloomberg reported. "Ultimately we want to be the leading brand worldwide in smartphones, but it will take a while to get there."

IDC ranked Huawei No. 3 in the global smartphone market after the company shipped 12.5 million units in the third quarter. Samsung Electronics and Apple occupy the top two positions. Smartphones have become increasingly important to the Chinese company as it fights cybersecurity concerns that have restricted its access to the U.S. and Australian markets.

"We don't know if we can keep that spot next quarter and we don't care much about being No. 3 at any given quarter," Bloomberg quoted Xu as saying. "We want to be an athlete in the long run and grow step by step."

R&D will provide the foundations for its future growth, Xu said in a statement.

"While we continue to evolve our existing 4G network capabilities, we plan to invest a minimum of $600 million over the next five years on research and innovation for 5G mobile network technologies to ensure that we are meeting the consumers' demands for increasingly faster and better connections," said Xu.

Xu added that this figure does not include investment to productise "5G" technologies. Huawei predicts that the first "5G" networks will be ready for commercial deployment starting in 2020 and will deliver peak data rates of over 10 Gbps, 100 times faster than today's fastest LTE networks.

Meanwhile in separate reports, Samsung said it would pursue more international acquisitions to seek growth beyond its core consumer electronics business.

"Going forward, we will expand our mergers-and-acquisitions strategy beyond a few target areas to pursue opportunities across a wide range of fields," CFO Lee Sang Hoon said the company's analyst conference in Seoul, its first since 2005,  Bloomberg reported. The company wants to "enhance the competitive edge of our current businesses and capture new chances for future growth," Lee said.

Lee added that Samsung will spend $14 billion on research and development by the end of this year, compared with $8 billion in 2010, Bloomberg said. The company is targeting annual sales of $400 billion in 2020.

Finally, Ericsson said it expects to see steady growth in the telecoms equipment and services market in the coming years, Reuters reported. The company predicts 3-5 per cent growth in the network equipment market to 2016, while the market for related services is forecast to grow by 5-7 per cent.

For more:
- see this release
- see this Reuters article
- see this Bloomberg article
- see this FT article (sub. req.)
- see this separate Bloomberg article
- see this separate Reuters article

Related Articles:
Huawei to open $200M R&D centre in UK
Huawei opens Enterprise Exhibition Center as part of Euro push
Huawei wins TDC LTE deal away from Ericsson
Huawei expects to double European R&D over next 5 years
Huawei exec rules out smartphone acquisitions

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