Huawei and ZTE in Malaysia: The Localisation of Chinese Transnational Enterprises

ABSTRACT

While much research has been undertaken on firms’ internationalisation, much less has been written on internationalisation’s other side, localisation. Yet with the rise of emerging economies, especially Chinese transnational corporations, localisation has become an increasingly significant. This article examines the localisation experience of two Chinese telecommunications enterprises – Huawei and ZTE – in Malaysia. By holding these factors constant (the ceteris paribus assumption), several dimensions of localisation are revealed. They are product, workforce, technology, organisation and management. Firm-specific factors matter both in accounting for inter-firm similarities and differences in the manner they localised. Enterprise ownership is also important in explaining firm performance and host countries’ perception of these firms. Leadership styles of these enterprises’ founders also matter. Together, these factors affect the differential pace of firms’ internationalisation and localisation.

KEYWORDS:

• Huawei
• ZTE
• Malaysia
• localisation
• internationalisation
• transnationalisation

Disclosure Statement

No potential conflict of interest was reported by the authors.

Notes

1. In an early article, Sugiura (1986, 319), examined Honda’s globalisation strategy and referred to the company’s approach as “internationalisation through localisation.”

2. Mourdoukoutas (2013) noted that such a trade-off may not exist, since all transnational economic activities embody varying proportions of global and local characteristics. The extent of localisation would depend on the extent to which the local is significant.

3. The first interpretation, even if argumentatively sound, adds too little to the understanding of globalisation and localisation. The march of technology will ensure that globalisation continues. It may moderate, but will not reverse. Arguments that globalisation is reversing generally misinterpret what globalisation is about such as Ng misidentifying globalisation as offshoring.

4. Strategic sectors considered crucial to the country’s national and economic security included financial, mining, steel, telecommunications, transportation, utilities, oil, and military-related production. These enterprises came under the purview of the State-owned Assets Supervision and Administration Commission (SASAC) established in 2003.

5. In 2003, Cisco Systems sued Huawei for infringement of the former’s intellectual property (IP), forcing Huawei to withdraw its products from the US. In 2011, the US also scuppered Huawei’s attempt to buy server-maker 3Leaf. In March 2012, the Australian government blocked Huawei’s bid to participate in the country’s new broadband system.

6. This strategy is not unique to Huawei. China’s Haier, the world’s largest white goods manufacturer, successfully used this strategy to displace GE from the latter’s position as the top supplier of wine coolers in the US.

7. Ahrens (2013, 31) noted that Huawei is vital to China’s drive to build a domestic telecommunications industry, and its internationalisation accord with Chinese foreign policy objectives.

8. The NEP was launched in 1971 in the aftermath of race riots in 1969. Originally designed with the twin objectives of poverty alleviation and “restructuring of society” (to eliminate economic disparities between Malaysia’s ethnic groups, it has become a policy of affirmative action in favour of the majority “Bumiputera” (indigenous people – primarily Malays).

9. The Multimedia Development Corporation is a government agency which advises to the government on legislation, policies and standards for information and communication technologies as well as multimedia operations.

10. Examples of its home-grown technology are its multi-mode phones that work on several systems (including GSM/WCDMA and GSM/TDSCDMA) simultaneously, and its Gogo technology for mobile broadband internet, developed with Qualcomm, that is in use on most airlines today (Fan and Gao 2016, 229).

11. In June 2014, news media reported that ZTE Malaysia’s country manager was being investigated for attempting to bribe a Malaysian telecommunications company executive to accept ZTE’s contract offer. The ZTE executive was reportedly sent back to China on company orders and demoted (Malay Mail, June 2, 2014).

12. TechinAsia (September 6, 2013) has reported on Huawei’s efforts to build a platform for Chinese tech companies to expand globally.

Additional information

Funding

This work was supported by the University of Malaya [High Impact Research Chancellery Grant UMC/625/1/H];