Saturday 24 March 2018

Huawei rules out acquisition of struggling smartphone maker HTC


Christopher Williams

Huawei, the Chinese technology giant, has rejected suggestions it could buy HTC or any other smartphone maker, following Microsoft’s £4.6bn acquisition of Nokia’s struggling mobile phone business.

Analysts have speculated that HTC is also ripe to be picked up as, like Nokia, it has seen its share of the smartphone sector dwindle and profit margin collapse in the face of Apple and Samsung’s dominance. It is expecting to record a loss in the third quarter, compared to a £100m profit a year ago, with revenues predicted to dip by as much as 30pc.

Huawei, which has a small share of the smartphone market but a strong financial position thanks to its growing telecoms equipment business, was seen as a leading contender to acquire the Taiwanese manufacturer.

However, Chen Lifang, a member of Huawei’s executive board, said the company had not considered a bid for HTC.

She said: “No, we have not considered it. We want to rely on ourselves. In manufacturing mobile phones we have made very good progress.”

The speculation was intensified by a report this summer that claimed Richard Yu, Huawei’s smartphone chief had suggested thwe company might seek growth through acquisitions. Ms Chen said his comments had been misunderstood because of a language barrier.

Huawei is mounting a big growth push in the smartphone market, aiming to increase awareness of its brand after it introduced a new flagship handset, the Ascend P6, this summer. Industry observers have suggested ownership of a better-known name such as HTC could accelerate the strategy, but Ms Chen, who is known within Huawei as Madam Chen in acknowledgement of her seniority, said the company had no plans to change its branding.

Ms Chen also rejected any suggestion of an approach for BlackBerry, the Canadian smartphone company that formally put itself up for sale last month after it too failed to keep pace with the market leaders. Any proposal from Huawei would in any case be highly unlikely to succeed because of concerns among BlackBerry’s large western government customer base about its alleged links to the Chinese state.

Ms Chen said Huawei’s consumer push was part of its effort to allay such fears. The company strongly denies its telecoms equipment, which is used by all the British mobile networks and BT, represents a cyber security risk.

Ms Chen said: “The relationship between Huawei and the Chinese government is the same as the relationship between a UK company and the UK government.”

The company has set up a testing centre in Banbury staffed by security-vetted engineers who work in collaboration with GCHQ to investigate potential spying or cyber attack vulnerabilities.

The Intelligence and Security Committee, a group of MPs who report to the Prime Minister, recently recommended, however, that the engineers should be directly employed by the government rather than Huawei to ensure their independence.

Ms Chen said: “Yes, the investment comes from Huawei including the salary for staff. Based on that, they can be fully engaged right from the R&D to the delivery of equipment, so it’s better.

“[But] as long as it is beneficial for the security of the products we’re willing to consider it. Currently there is no requirement coming from the UK government.”

Huawei has established close links to the Government, which earlier this year welcomed the company’s commitment to invest £1.3bn in its UK operation and create hundreds of hi-tech jobs. The MPs’ recommendations are currently being reviewed by Sir Kim Darroch, the Government’s National Security Adviser.

Huawei has forged stronger links to Britain by revealing it had extended its longstanding partnership with ARM, the Cambridge-based microchip designer. Huawei will join the top tier of manufacturing licensees, meaning it will be able to build its own microchips based on ARM’s latest architecture.

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