[AUDIO] CTP Podcast: Huawei’s Failure to Crack the US Market

China Talking Points Podcast: The Huawei Challenge by ChinaTalkingPoints

Chinese telecommunications manufacturer Huawei is 0-2 in its bid to acquire American technology companies that begin with the letter “3.”  Their first attempt was back in 2008 when Huawei moved to acquire the struggling networking company “3com.” That $2.2 billion deal was scuttled by U.S. legislators on the grounds it presented a security threat if a Chinese company that once had (or may still have) ties to the PLA and an opaque relationship with the central government in Beijing would acquire sophisticated American networking technology. Roll the clock forward to 2011 and it’s “deja vu all over again.”  Huawei’s latest efforts to build a foundation in the US market was rejected by the US government on similar grounds. Huawei sought to buy the California-based cloud computing company 3Leaf yet once again the Committee on Foreign Investment in the United States (CFIUS) determined that it would be too risky for 3Leaf’s technology to be acquired by a Chinese company that allegedly has ties to the PLA.

So what went wrong?

In a recent interview on the new “China Policy Pod” podcast, lawyer and China Hearsay blogger Stan Abrams explains how the CFIUS review process is highly political.  That suggests then that Huawei’s is not eternally condemned to be shut out of the US market but rather that it must refine its approach. “It boils down to a question of strategy. Firms simply have to do a much better job of understanding America’s political climate, its investment-review system, and how to navigate both successfully,” explained Adam Goldberg and Joshua Galper in a recent Wall Street Journal opinion piece.

“Chinese companies must understand that legal box-ticking is only part of their challenge. Improving the political climate arguably is even more important. Western businesses long ago realized this, and expend considerable resources to educate policy makers about business concerns and to inform the public debate on business issues. It’s called lobbying and public affairs, and Chinese companies could benefit from doing these themselves.” – Adam Goldberg and Joshua Galpern

Interestingly, Huawei and other Chinese companies appear to fail at taking their own advice about how to enter new markets. It is now common knowledge that US and other foreign companies that seek to enter the China market must do massive due diligence to find the right partners, understand the evolving legal environment, establish the necessary relationships within the appropriate governing ministry and put a finger to the wind to understand the prevailing political climate. It is that public affairs piece that Huawei and other mainland Chinese companies are failing to effectively execute. Huawei transform its public image in the United States from being the type of company featured in a Richard Gere movie about “the evil Chinese corporate empire” to one that is “building communities in America and jobs for Americans.”  Huawei has steamrolled its way into developing markets in Africa, Asia and South America on the merits that its technology is more affordable and, in many cases, the only option available. That hard-nosed approach obviously does not work in the United States.

The Taiwan Example

Mainland companies, Huawei in particular, may want to look to Taiwan as an example of how to make friends in Washington.  For decades, Taipei has been among the most effective foreign governments that operate in Washington, successfully lobbying on behalf of the island’s political and corporate interests.  All that time and money has paid significant dividends over the years and now offers Huawei the ideal template on how to build an effective public policy agenda on how to succeed inside the DC-beltway.

Tags: , ,

Leave a Reply

You must be logged in to post a comment.