China's Huawei jumping into US market one step at a time

But a handful of large Chinese companies are trying to establish their own brands in the United States, including Huawei Technologies Co. While the maker of cell phones and equipment for telecom carriers hasn't hit the big time yet, it's determined to get there, overcoming early missteps with products that copied another company's designs, and a recent hurdle in the shape of U.S. national security concerns.

With the Chinese economy blossoming, Huawei could be a forerunner of a wave of Chinese companies bringing cheap products and competition for incumbent manufacturers in Huawei's case, companies like Alcatel-Lucent, Cisco Systems Inc. and Nortel Networks Corp.

Much like Japanese companies that entered the U.S. in the 1980s, Chinese firms are quickly ramping up their investment in the U.S. There are now 3,500 Chinese investment projects in the U.S. and Canada, more than double the number five years ago, according to an estimate by Maryville University professor Ping Deng.

But getting into the U.S. high-tech industry can be tough for a newcomer. In an interview, Charlie Chen, Huawei's senior vice president for marketing and product management in the U.S., said his company consciously saved the huge U.S. market for last, to give it time to polish its products and build a reputation.

"U.S. operators have very high requirements," Chen said.

Founded in 1988, Huawei became one of the biggest telecom gear suppliers in China before launching into emerging countries, where low prices are the key to sales. It then entered Europe, where it has landed orders with top carriers like BT Group PLC, also known as British Telecom, and Vodafone Group PLC.

The U.S. government raised an obstacle earlier this year, blocking a deal that would have Huawei buy a stake in 3Com Corp., a Marlborough, Mass.-based maker of networking equipment that supplies the Defense Department.

Chen said the deal, which involved Bain Capital as the main acquirer, was beset by "rumors and misunderstandings" about Huawei: That it was owned by the Chinese military and that it had strong connections to the Chinese government.

In fact, Huawei is fully owned by its Chinese employees, Chen said, under an Employee Stock Ownership Plan similar to the one used by some U.S. companies. Its founder is a former officer of the Chinese army, but owns less than 2 percent of the company.