Author: Li Gou

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Reprinted from "Huawei and ZTE have been fighting for 15 years: Ren Zhengfei and Hou Weigui's grievances and grievances". You may be able to find the answer to the title of the article in this article. There is a saying in the industry that "Huawei is a wolf and ZTE is a cow." . The wolf wants to eat meat and the cow wants to eat grass. There seems to be no conflict. However, since the first confrontation in 1996, the two sides have been fighting fiercely for 15 years. Under the premise of not anonymizing names, reporters from "Business World" had in-depth exchanges with Huawei and ZTE insiders, revealing the tacit and ongoing secret war between the two parties for more than ten years... Huawei's strategy In early 1985, the 40-year-old Hou Weigui came to Shenzhen in his early years and started a processing business of electronic watches and electronic keyboards. He earned 350,000 yuan in one year. This was the original ZTE. The following year, Hou Weigui used the money he earned to set up a research and development team, specializing in the field of switches, and eventually developed the first domestic digital program-controlled switch with independent intellectual property rights. He entered the communications field and was out of control. While Hou Weigui was concentrating on developing switches, Ren Zhengfei, a retired soldier, boarded the train heading south to Shenzhen. In 1988, he and several people jointly pooled 100,000 yuan and established Huawei Technologies Co., Ltd. in a residential building. At first, he acted as an agent for the user switch products of a Hong Kong company, and began to sell telecommunications equipment. After two years of accumulation, Huawei established its own sales network in coastal areas. Ren Zhengfei also began to do research and development and launched his own digital program-controlled switches. With the established sales network, Huawei successfully entered the ranks of telecommunications equipment suppliers. , standing on the same starting line as ZTE. The first time they met, the two sides got along well. It is said that Hou Weigui and Ren Zhengfei were sympathetic to each other at that time, and the two discussed privately many times how the national communications industry could rise. However, the general trend of the world will inevitably separate if it stays together for a long time. ZTE and Huawei cannot escape this fate, not to mention that they are in an industry with huge potential and fierce competition. In 1996, Hou Weigui decided to break through the singleness of the original product structure and expand into diversified fields such as switching, transmission, access, video, power, mobile, and optical communications; coincidentally, Ren Zhengfei also formulated a development plan for Huawei in the same year The product structure of ZTE is almost the same as that of ZTE, with at least 70% of its products overlapping. For the first time, the brothers from the same city showed signs of tit-for-tat confrontation, which started the fierce melee between the two sides for the next 15 years. Immediately, both sides began to arrange their troops in full swing. Ren Zhengfei, who was born with "wolf nature", formed a group of extremely aggressive sales teams to attack everywhere to compete for the market; while Hou Weigui used price as a weapon to win people's hearts with low prices. Should we continue to fight independently, or should we directly fight against each other? Ren Zhengfei analyzed that compared with ZTE, Huawei has certain advantages in market share, sales channels and sales scale. In 1996, Huawei's sales were 2.6 billion yuan. , and ZTE only has 680 million yuan. If it takes the initiative, Huawei has a great chance of winning. Ren Zhengfei decided to give Hou Weigui a blow, catching him off guard. In 1998, at the switch bidding meetings in Hunan and Henan provinces, Huawei submitted a special bid. In this bidding document, Huawei made a detailed comparison between its own products and ZTE's products, and euphemistically stated that Huawei's performance is far superior to ZTE's. However, what Ren Zhengfei did not expect was that on the second day of the bidding meeting, ZTE followed suit, tit for tat, and completely replaced the bidding document to attack Huawei, and finally won a large order. Will Ren Zhengfei give up? Of course not. He quickly took up legal weapons and sued ZTE in the Henan High Court and Changsha Intermediate People's Court, accusing it of making a misleading comparison between "ZTE Power Supply" and "Huawei Power Supply", which attracted various media outlets to rush to report the truth. Many people thought that ZTE was competing maliciously, and Huawei preemptively started a brand protection war. Subsequently, Hou Weigui fought back and held court in Zhengzhou and Changsha, hoping that the "tit for tat" method would work again. In the end, each side won half of the lawsuit. Huawei was required to compensate ZTE for economic losses of 1.805 million yuan, and ZTE was required to compensate Huawei for economic losses of 890,000 yuan.

In the first confrontation, Huawei lost the lawsuit and paid the money but won the brand and market. From 1998 to 2000, ZTE's annual sales increased from 4.1 billion yuan to 10.2 billion yuan, while Huawei's annual sales increased from 8.9 billion yuan to 22 billion yuan. Huawei has established itself as the king in one fell swoop. ZTE’s Counterattack In the spring of 1998, due to unresolved intellectual property issues with Qualcomm, China Unicom’s first CDMA95 bidding project was aborted, and the time for another bid was undecided. Should we continue to retain the CDMA95 project, or shift our focus to other areas? ZTE and Huawei, who are planning to bid at the same time, must make strategic choices. Ren Zhengfei believes that it will be difficult for China Unicom to launch a CDMA project in the short term. Even if it launches this project in a few years, it will not choose the relatively backward CDMA95, but should directly choose the more advanced CDMA2000. Therefore, Ren Zhengfei quickly removed the original CDMA95 team and switched to CDMA2000. At the same time, the experience of many confrontations with ZTE over the years has taught Ren Zhengfei that ZTE is accustomed to following Huawei's lead, and this time will be no exception. This seemingly impeccable decision bought the opponent time to counterattack. The opportunity was fleeting! At that time, there were only about 20 million CDMA users in the world. Regardless of technical advantages or market share, all manufacturers were at the same starting point. If ZTE can successfully win the CDMA market, it will not only make up for the regret of lagging behind Huawei in the GSM field for many years, but also give Huawei a severe blow. What was left to Hou Weigui was a multiple-choice question of whether to go left or right. If you choose the right one, everyone will be happy. If you choose the wrong one, everything may be lost. Hou Weigui calmly analyzed the CDMA market at that time: China Unicom will definitely launch a CDMA project, and the CDMA95 standard is not inferior to GSM. From the perspective of security performance, it is impossible for mobile networks to jump directly to CDMA2000 without passing the test of the CDMA95 stage, and even if it turns to research and development of CDMA2000 It also requires the accumulation of CDMA95 standards. In the end, Hou Weigui decided not to follow Huawei, but continued to focus on the research and development of the CDMA95 project, while investing a small amount of resources in researching the CDMA2000 standard. In May 2001, China Unicom once again formally invited bids for the first phase of CDMA, and the final standard selected was precisely the enhanced version of CDMA95! ZTE, which had no competitors in the country, naturally won the bid easily, winning 7.5% of the total in 10 provinces. share. Then, relying on the advantages of the first phase, ZTE won another Class I main equipment procurement contract from 12 provinces with a total amount of 1.57 billion yuan in China Unicom's CDMA second phase construction bidding at the end of November 2002. ZTE's strong counterattack caused Huawei to receive nothing from its two bids, which made Ren Zhengfei, who always strives to be the first in everything, very depressed. However, what made him even more depressed was yet to come. After the PHS technology that was popular in Japan was introduced into the country by UTStarcom, it quickly set off a craze across the country. Network operators believe that it is fast to build networks and requires low investment; users think that it is economical and convenient. Compared with mobile phones, they only spend 20% of the money to enjoy 80% of the services. At the same time, a big discussion started in the industry about whether PHS technology was lagging behind. After conducting research on PHS technology for a period of time, Huawei concluded that this technology was relatively outdated and would be eliminated in less than five years. At the same time, the telecommunications authorities’ policies towards it were unclear, so they chose to give up. Coincidentally, just a few days after Huawei announced that it would abandon the PHS business, Hou Weigui told all ZTE employees that ZTE's main product in the future market would be PHS. ZTE once again picked up where Huawei left behind and intensively cultivated the market. Hou Weigui did not make such a decision out of impulse. He believed that at that time, the mobile business of China Mobile (Weibo) was developing rapidly, while the fixed-line business of China Telecom (Weibo) was growing slowly. China Telecom had always wanted to build a mobile network, and PHS was just the right one. is a good choice. By the end of 2004, the number of PHS users had reached 60 million, and they were basically dominated by UTStarcom and ZTE. When Huawei suddenly woke up, ZTE had not only made considerable profits from it, but also established strong customer relationships. It was difficult for Huawei to get in. After winning the CDMA and PHS markets, ZTE is going more and more smoothly on the road to market expansion. In 2003, ZTE's annual sales reached 25.1 billion yuan, while Huawei's annual sales were 31.7 billion yuan. The gap between ZTE and Huawei is getting smaller and smaller.

Both sides suffer. Seeing that ZTE is doing well in the domestic CDMA and PHS fields, Huawei is as anxious as an ant on a hot pot. Although the product structures of the two companies are very similar, Huawei has always had an absolute lead in any field. Now ZTE has left Huawei far behind in these two fields. How can this be Ren Zhengfei? What can be tolerated! At that time, the domestic CDMA market had been completely divided by ZTE and foreign giants, and Huawei still held the CDMA2000 product line that it had invested heavily in building. The chickens were raised, but they could only watch and not lay eggs. Ren Zhengfei had to find another way out, and this time he targeted overseas markets. Historically, the vast majority of the global communications market has been dominated by European and American companies, such as Ericsson, Nokia Siemens, Motorola, and Alcatel. Over the years, they have been fighting in the north and south, causing the entire European, North American, and East Asian markets to be eroded. If Huawei wants to expand overseas, the only gap left is developing regions such as Asia, Africa and Latin America. In order to cooperate with the upcoming overseas strategy, Ren Zhengfei began to recruit a large number of troops. In 2001, out of a graduating class of more than 40 people majoring in telecommunications at Chongqing University of Posts and Telecommunications, 39 people were recruited by Huawei; out of a graduating class of 30 people majoring in radio at Southeast University, 25 people joined Huawei. This kind of predatory recruitment of entire classes is common. Performed in various colleges and universities. With all the troops in place, Ren Zhengfei began to make the second round of preparations for his global dominance: training a group of sales staff with a keen sense of smell and who would not give up until the goal was achieved. In order to make these front-line warriors willing to seize the market at all costs, Ren Zhengfei formulated a series of It has an attractive incentive mechanism, and it is rumored that its commission ratio is about 5 points higher than the industry average. Everything is ready, and with the advantage of high-quality and low-priced equipment, Huawei will soon set up camp in these places. In 2002, Huawei's overseas market revenue reached 1.05 billion yuan, accounting for about 5% of total revenue. Hou Weigui, who was far away in Shenzhen, was worried. Although the domestic PHS market is booming, with considerable growth in sales and profits, and contributed 22.89% share to ZTE in 2002, rumors that PHS may have a development crisis are also becoming more and more intense. Hou Weigui knew in his heart that if ZTE loses its PHS advantage, it will become farther and farther away from Huawei. Moreover, Huawei now has overseas battlefields, and the situation is not optimistic. He decided to resume the following strategy for many years, follow Huawei overseas, and start a new round of competition. In 2003, in a bidding process for the Indian company MTNL, Huawei and ZTE simultaneously participated in the project competition through local Indian partners. Huawei's bidding price was 3.45 billion rupees, and ZTE's price was slightly higher. After several days of competition, among all the companies participating in the bidding, ZTE ranked second, followed by Huawei. There was almost no suspense about ZTE's winning bid. In the end, MTNL unexpectedly abandoned ZTE and chose Huawei. Hou Weigui was very unconvinced by this result, and he quickly found a counterattack point. There is this line in MTNL's bidding document: Companies participating in the bidding for this project must have a supply record of at least 200,000 lines of CDMA equipment anywhere in the world before they can participate in the bidding. Hou Weigui was ecstatic. Huawei's previous projects in the Asian, African and Latin American markets were relatively small, and there was no record of supplying 200,000-line CDMA equipment. Why should it compete with ZTE? Immediately, Hou Weigui sent someone to prepare a plan for China Unicom's CDMA network construction Statistical data of the company that won the bid for the project, and clearly stated that Huawei did not meet the relevant conditions, intending to win back the orders Huawei received. Although Hou Weigui's wishful thinking ultimately came to nothing, MTNL sent an investigation team to Huawei after receiving the information from ZTE, which made Ren Zhengfei very angry. In this battle, the two sides fought to a draw, and neither had any intention of stopping. In 2004, ZTE was determined to attack the Nepali market. Looking at Huawei's overseas layout at that time, Nepal was the earliest, most time-consuming, and most heavily defended market for Huawei to enter. If ZTE could open exports here, its strategic significance would be extraordinary. For a long time, Hou Weigui has pursued the concept of technology first, resulting in ZTE not having a vigorous sales team. Sales is not ZTE's strong point. Hou Weigui asked himself, what are ZTE's strengths? Technology and products! If the price of a product with technical advantages is still very low, how will the market react? Hou Weigui is determined to fight to the death, and his trump card is low price. At the bidding meeting, he not only did not allow ZTE's bidding price to be higher than Huawei's, but also allowed it to be at least twice as low! The winner is the one who grabs orders and the market, and it doesn't matter if he loses money.

This extremely gambling market action caused Huawei to stumble several times in a row. Ren Zhengfei was so angry that he even used political means to submit an indictment to the Chinese Embassy in Nepal, accusing ZTE of repeatedly using unfair competition methods. However, it is still difficult to change The fact that ZTE has taken away the market. This kind of war that "gets worse first and then gets bigger" burned from India to Russia, and finally spread to the entire overseas market. However, this fierce price war regardless of cost also left both parties mentally and physically exhausted. In 2003, Huawei's net profit margin was 14%. By 2007, this number dropped to 4%, while ZTE's net profit margin in 2007 was less than 4%. 3G Decisive Battle Around 2008, Chinese communications equipment manufacturers ushered in the most sensitive period - the eve of 3G. According to the development trend of the global communications industry, there is basically no suspense about China entering the 3G era. However, what is causing headaches for equipment manufacturers is that the Ministry of Information Industry has not issued licenses, making standard selection a major problem. How to choose between the three major standards of WCDMA, CDMA2000 and TD-SCDMA? In the face of the unknown, many equipment manufacturers have to stick to three standards, and ZTE and Huawei are no exception. Both parties have invested in the three major standards. Ren Zhengfei believes that WCDMA is a European standard, in line with GSM, and must be the biggest cake in the 3G market. For this reason, he has invested tens of billions of dollars and a research and development team of thousands of people to specialize in WCDMA, which is quite a gamble. If WCDMA finally gets the advantage in terms of licenses, Huawei will undoubtedly once again distance itself from ZTE. However, Hou Weigui also has his own bargaining chips. After successfully listing on the A-share market in 1997, ZTE once again launched a capital strategy to enter the H-share market in 2004, raising a large amount of overseas funds for itself. ZTE has the capital to calmly respond. Faced with Ren Zhengfei's big gamble, Hou Weigui chose the golden mean to deal with it: don't give up on WCDMA and invest moderately; rely on the large-scale commercial foundation of the CDMA95 standard to make a smooth transition to CDMA2000; in terms of TD-SCDMA, win over Datang Telecom, a national brand in the industry, *** Together with the drafting of TD-SCDMA international standards, we seek government support. In July 2008, China Telecom took the lead in issuing a 27 billion yuan CDMA network bidding order. This was China Telecom's first action after taking over C Network. Faced with this feast, ZTE and Huawei are at war with each other. At that time, the C network industry chain structure was about to be reshuffled. Huawei, which had missed the development opportunity of C network, hoped to use this battle to re-establish its position as the king. ZTE, which held a 30% share of the domestic C network market, hoped to expand its market share in 3G. Make the plate bigger before it comes and don't give Huawei any opportunities to take advantage of it. While both sides were arranging their troops, some "sneak attack" battles that were not on the table were also secretly staged. Just the day after Huawei and ZTE competed fiercely for a large CDMA order in Beijing, Guotai Junan issued a report saying that Huawei would give away equipment on a large scale across the country. "Huawei has close to zero share in the domestic CDMA market. Therefore, the behavior of large-scale gifting is understandable, but it needs to be emphasized that giving away equipment may not necessarily gain market share.” It seems that in order to cooperate with this report, in the afternoon of the same day, the market began to rumor that Huawei actually offered a "hell price" of 690 million yuan in this equipment bidding of more than 10 billion yuan, which was only the price of Alcatel-Lucent, the highest bidder. 1/20. On the day the news came out, ZTE’s A-share and H-share markets fell across the board. Hou Weigui knew that Huawei's trick was to blow the market and form a public opinion offensive, but Huawei's more bizarre tricks were yet to come. According to an industry insider who participated in the bidding at the time, ZTE had to choose to lower the price and change the bid documents in the face of Huawei's aggressive moves. However, the staff sent out to deliver the tender documents early in the morning missed the time for delivering the tender documents. "Actually, Huawei sent people halfway. Creating an accident and intercepting people." In the first round of competition, Huawei successfully increased its domestic CDMA market share to 25%. At the beginning of 2009, China Unicom, which had been waiting for the WCDMA standard 3G license, quickly issued bidding instructions. Huawei, with its R&D and market advantages, was sure to win this bidding. In the early stage of the bidding, the two sides began to compete. Not only did they lay off layoffs and try to suppress the other party with public opinion, ZTE also resorted to an even more shocking price butcher knife: "0" quotation! But unfortunately, ZTE's performance in the WCDMA field was really mediocre. In the end, It only gained 20% of the market share, while Huawei received 31% of the orders. Huawei was avenged by two wars. The 3G trend has been decided, and Hou Weigui has no intention of fighting. He once again followed Huawei and extended its tentacles to Europe to seize the data card business.

Of course, Hou Weigui did not forget to bring a low-price butcher knife, setting off a price war in the European market, reducing the original price of 200 euros for data cards to 17 euros, causing Huawei to lose 1 billion US dollars. Not only that, ZTE's high-profile behavior also triggered the EU to launch a "three antis" investigation into Chinese companies including Huawei, which almost caused Huawei to lose its right to continue to stay in the European market. Out of nowhere, on April 28, 2011, Huawei suddenly announced that it would formally file legal proceedings against ZTE in Germany, France and Hungary in the name of infringing the company's data card, LTE (fourth generation mobile communication system) patent and trademark rights. . How should ZTE respond to such a confrontation on the table? 20 hours later, ZTE issued a counterclaim statement saying that ZTE also filed legal proceedings against Huawei in the country in the name of infringing on several important LTE patents. In fact, in the communications industry, it is a rule for equipment manufacturers to exchange patents with each other. Huawei and ZTE are making such a fuss this time, but they are actually trying to compete for the 4G market, which has more potential after 3G. In this battle, whether Huawei will have the last laugh or whether ZTE will succeed in sneak attack is yet to be revealed. The brothers, who have been fighting each other for 15 years, still don’t want to stop