With the US trade ban still in place and no respite in sight, Huawei has turned to Russia for support. Huawei is the largest technological company in China, which is allied with Russia. It is only natural that Huawei plays a greater role in this friendship. Huawei has utilized this opportunity to build inroads into Russia with the development of 5G technology and smartphone sales. The company further plans to significantly expand its research and development operations in Russia and partner with local universities in this regard.
This partnership could not have come at a better time for Russia, which is currently out-of-favor with the US. Huawei is bringing some much-needed foreign investment while helping Russian tech specialists upgrade their skills. Ken Hu, Huawei’s Vice Chairman, announced earlier in October that the company plans to invest nearly 500 million rubles (~$7.8 million) to promote 5G technology in Russia and train 10,000 specialists by 2025.
Back in June 2019, Huawei had signed a deal with Russian telecom service provider MTS to jointly develop 5G infrastructure in the country. The project is going strong and MTS launched the first 5G test zone in Moscow last month. Huawei has slowly sealed its position as a trusted brand in the Russian smartphone market. Huawei, along with sub-brand Honor had successfully overthrown Samsung Electronics in sales during the third quarter of 2018. As of August 2019, Huawei along with its subsidiaries controls 37% of the Russian smartphone market.
According to Eldar Murtazin, Editor-in-Chief, Mobile Review, “Huawei’s success in Russia is partly due to the heavy investments made in establishing Honor. The Russian market was blown away with the relatively high-quality smartphones from Honor at below-average prices that the competition was either unwilling or unable to match. No other company went head-to-head with Huawei in this price war as it is difficult to continue working when the initial sales are down”.
While Huawei’s reputation has been tainted in the West on allegations that they could be spying for the Chinese government, such rumors hold no precedent in Russia. “Moscow considers Huawei a law-abiding corporation that does not engage in international espionage since the allegations have not been proved” Murtazin added. On a broader note, Russian analysts are of the opinion that personal data is susceptible to leaks and there is no unique threat to Huawei users.
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Some people are less concerned about China gaining access to Russian user data as opposed to the US since the former is a close ally. According to Vladimir Rubanov, Executive Manager at Rosplatforma, a Russian IT company “A common joke among the Russian IT community goes ‘If you are using Apple, Washington listens to your calls. If you are using Honor, Beijing is listening’. Which one do you prefer?”
The rising tension between Washington and Beijing has forced Huawei to turn to the Kremlin for innovation. The company announced its plan to triple the size of its Research and Development wing in Russia within the next six years. Huawei plans to open three new R&D centers in the country by the end of 2019, making Russia its third-largest R&D center outside China.
Huawei is also strengthening ties with leading Russian technological universities and research institutions by funding studies that benefit the Chinese company and inviting them for joint projects. Huawei is utilizing Russia’s dedicated young workforce to maintain its innovative edge, despite mounting pressure from the US. Not many countries have an abundance of programmers and tech analysts. Although Russia is not the only nation with the talent and workforce, it is a strong contender in the area.
Huawei came prepared with very deep pockets to attract Russian talent. Over the years they persuaded several stalwarts in the Russian IT industry to sign up, by doubling their salaries. According to Rubanov, “Moscow is looking at the benefits of this partnership with Huawei. Apart from pumping foreign currency into the Russian economy, Huawei is also helping tech specialists develop their skillset. The company is spending their own resources to train Russian citizens in advanced technology and giving them an opportunity to participate in world-class product development”.
Specialists trained at Huawei’s facilities will eventually move on to start their own companies. Thus, fueling the Russian IT entrepreneurship. As Huawei continues to spread its wings in Russia, its success in the future will definitely come at the expense of American companies. Huawei’s strategy is simple. Since they cannot expand their business in America, they are investing heavily in Russia. This is a conscious effort to squeeze out American infrastructure companies in Russia and bleed them commercially by offering better contracts and projects to their employees.
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