Motorola bets on Huawei

Bruce Einhorn

While Motorola has been on a roll in many other parts of the world, the company has still been struggling in China. A few years ago, Nokia grabbed the No. 1 position that Motorola had long enjoyed in China and now has a solid lead over the American company. China is the world’s biggest cell-phone market, with over 400 million Chinese people using mobile phones, so closing the gap in China is surely a big priority for Motorola. That’s one reason the company’s announcement today of a partnership with Huawei Technologies is so interesting. The two companies plan to work together to develop 3G infrastructure (using the UMTS 3G standard), and they’re going to set up an R&D center in Shanghai as part of the deal. Moto’s press release quotes company executive Greg Brown, president of the Networks & Enterprise division: “This agreement enhances our technological innovation while also creating cost savings for our business.”

Lots of companies partner with Huawei, the big telecom equipment maker based in Shenzhen that is probably the leading Chinese tech company. And the deals don’t always pan out; Nortel’s alliance with Huawei fizzled recently, for instance. (See Nortet-Huawei, RIP, in the Asiatech blog last month, for instance.) Huawei made its name selling Cisco-like routers at unCisco-like prices, but more recently has been branching out into more consumer products such as cell phones. That’s what makes the alliance with Motorola surprising: The Huawei phones are for 3G, which hasn’t even launched yet in China, but when 3G services finally do get up and running in the country, Huawei will be competing with Motorola in one of the American company’s core businesses. But as the leading telecom equipment maker in China, Huawei gives Motorola in edge in developing UMTS equipment, since UMTS is the 3G standard preferred by operators that use GSM for their 2G network. GSM isn’t popular in the U.S. but it’s big in Europe – and it’s huge in China, where state-owned China Mobile operates a GSM network that has something like two-thirds of the total cellular market. The Chinese telecom regulator hasn’t gotten around to awarding 3G licenses yet, but lots of people expect that to happen by the end of year, with operators then spending big money to have the networks up and running in time for the 2008 Olympics in Beijing. Teaming up with Huawei gives Motorola a better shot at landing some of that business.

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