Huawei knocks off Ericsson as world’s biggest telecom vendor

Huawei on Tuesday reported revenues of 102.7 million renminbi, or U.S. $16.1 billion, for the first six months of 2012. That would seem like a perfectly ordinary quarter for the giant and growing Chinese telecom vendor, but there is something particularly significant of about this earnings report. According to some quick calculations made by Light Reading’s Ray Le Maistre, Huawei’s sales have surpassed Ericsson’s(s eric), making the privately held company the largest telco infrastructure maker in the world.

Sweden’s Ericsson brought in $15.25 billion in the first half of the year, putting it $850 million shy of its Chinese rival. That may seem like a lot, but currency exchange rates differences between the Chinese yuan and the Swedish kroner have a big impact. The two also have different portfolios. Ericsson is still by far the largest cellular infrastructure maker in the world, while Huawei has sizable handset and enterprise businesses. Ericsson no longer has the revenues from its handset joint venture with Sony(s sne), but it did get a big sales boost this year from its recent acquisition of network systems vendor Telcordia.
Ericsson would surely argue it sells more actual telecom network gear than Huawei, but one thing is certain: this race isn’t over. Both companies are growing despite the poor global economy, and as they continue to land more contracts and currencies continue to fluctuate, they likely will keep leapfrogging one another. Huawei and Ericsson are both well ahead of their next closest competitors, Alcatel-Lucent(s alu) and Nokia Siemens Networks(s nok)(si).
The amazing thing is that Huawei has risen to global network prominence despite having almost no impact in the U.S., which along with China are the two most important infrastructure markets in the world. Huawei has some handset deals to sell carrier-rebranded smartphones – the biggest of which is for T-Mobile’s next generation of MyTouch phones – but it doesn’t have a single major network equipment contract to its name in the U.S. Meanwhile Ericsson has its fingers in every major network build of the Big 4 carriers – and most of the smaller contracts as well.
Huawei attributes this to ingrained prejudice in U.S. government circles against a Chinese vendor building the country’s sensitive communications networks. As a privately held company, Huawei lacks the transparency of its competitors, which all trade publicly on major global exchanges. Alleged links between Huawei and China’s People’s Liberation Army have led the U.S. government to block government contracts and acquisitions of domestic companies. Huawei has denied such links and has even invited a U.S. investigation to assuage any security concerns.
In a recent interview, Huawei external affairs VP in the U.S. Bill Plummer said those sinister perceptions of Huawei have cost it a huge amount of business in the U.S., even though European and Canadian carriers haven’t shied away from dealing with the vendor. Plummer said Huawei was on the verge of becoming the third supplier in Sprint’s(s s) LTE contract and CDMA network overhaul, but politics got in the way (the contract went to Samsung).
“We were the most competitive offering for Sprint in terms of technology and total cost of ownership, but non-market forces dictated the result,” he said.