Huawei Says Apple’s China Experience Teaches Supply Chain

Photographer: Forbes Conrad/Bloomberg

The Huawei Technologies Co. research and manufacturing campus in Shenzhen, Guangdong Province, China, in 2011. Close

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Photographer: Forbes Conrad/Bloomberg

The Huawei Technologies Co. research and manufacturing campus in Shenzhen, Guangdong Province, China, in 2011.

Huawei Technologies Co., China’s largest maker of telecommunications equipment, said Apple Inc. (AAPL)’s experience in the world’s most populous nation shows the importance of supply chain management.

“We can learn from the issues that Apple has faced in China,” Zhang Hao, director of corporate sustainability for Huawei, said at a press conference in Beijing. “Supplier management is a very key part of our brand management. We will never let supplier issues tarnish our brand.”

Apple (AAPL) Chief Executive Officer Tim Cook joined the Washington-based Fair Labor Association last year following the suicides of at least 10 workers at Foxconn Technology Group, the assembler of iPhones and iPads. Foxconn has resolved 98 percent of the 360 issues raised by the group last year, yet faces a “challenging” task to meet a July deadline for cutting work hours to legal limits, the association said this month.

Foxconn, whose flagship is Hon Hai Precision Industry Co. (2317), cut work hours to a maximum of 60 per week, making “significant progress” in meeting Apple’s standards, the FLA said. It committed to reaching China’s legal limit of 40 hours a week plus an average of nine hours of overtime by July 2013.

“Violation of overtime limits is a common problem with suppliers in China,” Zhang said, declining to provide details on how Huawei suppliers fare in complying with the rules.

Supplier Audits

Huawei carried out on-site audits of 101 suppliers last year, 16 percent more than a year earlier, the company said in its 2012 Sustainability Report released today.

An unnamed electronics manufacturer had “multiple issues” including blocked safety exits, insufficient firefighting equipment and excessive overtime, the report said. The supplier wasn’t allowed to enter into contracts with Huawei until those were addressed and it passed a second audit, the report said.

Zhang declined to say how many suppliers had been disqualified by Huawei’s audits.

Huawei seeks 10 percent compound annual revenue growth in the next three to five years by expanding beyond mobile-network equipment and into smartphones, tablets and cloud computing. Sales last year rose 8 percent to 220 billion yuan ($36 billion), helping boost net income to 15.4 billion yuan.

Huawei is fighting concerns over cybersecurity in markets from the U.S. to Australia after American intelligence agencies and security companies traced web attacks to China. A U.S. congressional committee in October said Huawei and ZTE Corp. (763) (763) provide opportunities for Chinese intelligence services to tamper with telecommunications networks for spying.

Huawei, which ranks behind only Ericsson AB (ERICB) in sales of equipment for phone networks, was founded by Ren Zhengfei in 1987, about four years after he retired from the Chinese military. Huawei is employee-owned, with about 74,000 of the total 155,000 workers holding shares, according to its annual report released in April.

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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