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Episode 59: China’s Five Year Plan and Huawei with Kitty Fok

With Kitty Fok (Country Manager, China) from IDC, we discuss the Chinese government’s five year plan specifically on their ambitions on technology, innovation and digital infrastructure for the next 5 years. In the same conversation, we analyse Huawei, one of China’s top technology companies where they are now growing in three important segments: (a) carriers in the telecommunications industry, (b) enterprise and (c) consumer where they have beaten Xiaomi in market share and sought to dominate in other markets. With an in-depth discussion on Huawei (which is a private corporation), we discussed how they are innovating and growing as one of the top Chinese companies leading globally along with the Baidu-Alibaba-Tencent (BAT) Axis.

Here are the interesting notes and links to the discussion (with timestamps included):

  • Kitty Fok (@kittyfokLinkedIn, IDC), Managing Director (China) for IDC, & Winner of the Patrick J. McGovern Award for IDC Country Manager of the Year for 2014.
  • The career of Kitty Fok [0:40]
    • How did you begin your career in technology? [0:46]
    • You have worked from a research analyst from Gartner to become the country manager for China in IDC, what are the lessons you have learnt in understanding the ever-changing nature of technology business? [1:20]
    • How do you handle the major transitions in technology? [2:10]
    • What are the areas of coverage in China that you are focusing on in IDC China? Kitty discussed the importance in understanding the Chinese government and their role in shaping the technology space with the private sector. [3:40]
  • China 5 year plan [5:10]
    • What is the China’s 5 year plan in technology starting from 2016? [5:20]
    • What are the five important goals to accomplish for this 5 year plan specific to technology? [7:54]
      • Smart Cities: Building the infrastructure to empower  [8:15]
      • Internet Plus: Adding the web services and platforms above the infrastructure [8:44]
      • Made in China 2025: Moving from basic manufacturing to high end production centre with innovation, similar to the German industry 4.0 plan involving robotics, internet of things and 3D printing [9:10]
      • Globalisation: One belt and one row – focus on Europe, Asia Pacific and Africa [9:55]
      • Cyber Security and secure control of the digital environment by the Chinese government [10:25]
    • Can you share some examples to how they will achieve their targets pertaining to broadband, technology development and ecommerce? [11:15]
    • How do you see the smartphone market segmentation changing in China? The smartphone market is directly related to the Internet Plus initiative for China 5 year’s plan. [13:58]
      • The mobile phone as the equivalent of a personal computer for Chinese users to do personal stuff and run their businesses [14:30]
      • How does the smartphone segmentation work in first tier to second, third or fourth tier cities in China?  [16:35]
      • The upcoming 5G network in China and the Chinese government’s efforts to accelerate it. [18:48]
  • Huawei [19:17]
    • The story of Huawei as a huge privately own corporation beginning with network equipment from the start: @Huawei, Google Finance, Wikipedia and Bloomberg. [19:35]
    • Market Data on Huawei:
      • Headquartered in Shenzhen, Guangdong, 140K employees with an investment of US$5B in research and development.
      • Kitty has kindly shared the following data: The breakdown of the Huawei business is 67% in the carrier business, 26% in the consumer sector and 7% in the enterprise business. The growth in the last year is 16.4% for the carrier business, 27.3% for the enterprise business and 32.6% fo the consumer business. In total (in Yuan Billions), the total revenues & YoY growth for Huawei from 2013 to 2014: carrier business running 192.1B (=US$30.1B) & 16.4% YoY growth, enterprise business running 19.4B(=US$3B) & 27.3% YoY growth and consumer business running 75.1B (=US$11.8B) & 32.6% YoY growth (based on the exchange rate on 13 Sep 2015).  
    • Corporate Structure: How does the corporate structure of Huawei works? Ren Zhengfei – President of Huawei, and his board comprising of rotating CEOs and Huawei staff. [20:50]
    • What’s Huawei’s current strategy in the market from your opinion? [21:52]
    • How is the company organized in the form of consumer, enterprise and carrier divisions with a corporate strategy team that is run by the former head of enterprise? [22:00]
    • How does the company generate its revenues from the consumer, enterprise and carrier businesses? Which are the significant revenue streams? [22:57]
    • Huawei Consumer team and Smartphone market share in the world:
      • On consumer, Huawei has reached 6.7% of the global smartphone market share & beat Xiaomi at 4.6% and have a YoY change of 40.7%. Why have they been successful in the smartphone market given that they are in the enterprise and carrier space for so long? [25:08]
      • Is Huawei’s innovation model similar to Samsung where they are building their consumer products based on their understanding and integration with critical components? Huawei acts an OEM for Orange before they launched their own brand of smartphones. [28:00]
      • LeTV as a content company coming in building their own smartphones now [28:50]
      • Huawei has adopted Xiaomi’s strategy with Huawei Ascend series, and received many positive reviews from the market. What’s the story behind? What are their implications and also lead to a smartphone market being commoditised like the way how the PC industry had in the past? [29:20]
      • Is the current strategy for most Chinese smartphone makers like Xiaomi focusing on Southeast Asia, India and Africa instead of going to the US direct? Kitty provided counter-examples of ZTE and Lenovo with their presence in the US. [30:30]
      • In Kitty’s perspective, what’s the future for Huawei? Given that it’s similar like Intel in the past, where will it grow towards? [32:10]
      • Is Huawei moving in the same direction as Xiaomi in the focus towards smartphones and home automation? With its success, does it make Huawei similar to Apple while Xiaomi is like Google (given the founders are focused on software)?  [34:20]
    • What are the most interesting questions that excite Kitty in her coverage of China? [36:05]

Podcast Information:

The show is hosted by Bernard Leong (@bleongcw) and are sponsored by Ideal Workspace (Twitter, Facebook and LinkedIn) and Linkcious (and check out their other product, Chiibi). Also check out Ideal Workspace’s new standing desk, Aspirus and sign up for their mailing list.

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By | 2015-09-13T06:46:47+00:00 September 13th, 2015|Analyse Asia Podcast, Podcast Shows|

About the Author:

A pragmatic idealist in technology, media & entrepreneurship.