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

In any case, the 3Com deal would hardly have been a big break for Huawei. Rather, the acquisition bid may have been a way for Huawei to get a stake back in 3Com's China-based division, which makes routers for wired networking. That division was once a 3Com-Huawei joint venture, before it was bought out by 3Com. Huawei is now a big customer of the division.

Lenovo Corp., which bought IBM Corp.'s PC division in 2005 to become the most visible Chinese company in the U.S. high-tech market, has also had to address security concerns from time to time.

Huawei first came to the attention of U.S. engineers when Cisco Systems Inc. sued it in 2003 for copying its routers, down to their programming bugs and technical manuals. Huawei agreed to settle the case and revise its products.

Now, the company is trying to build a reputation for innovation, and for standing on its own legs when it comes to design. Chen emphasized that of its 70,000 employees, half are in research and design.

From its base in China, Huawei is now using a deliberate, three-step strategy to breach the U.S. market: First get a foot in the door, then land some contracts, and last get accepted by the four Tier 1 cellular carriers: AT&T Inc., Verizon Wireless, Sprint Nextel Corp. and T-Mobile USA.

"Right now we're between steps two and three," said Chen. "We see more and more trust from our customers."

Customers of regional carrier Leap Wireless may already have had their calls connected by Huawei's gear. Two other regional carriers, MetroPCS Communications Inc., and Alltel Corp., sell its cell phones and data cards. It has a minor joint venture with Motorola Inc.

The company's eagerness to break into the core of the U.S. market was evident at the CTIA Wireless industry show in Las Vegas earlier this month. The company was one of the big advertisers at the show, with large banners, big-screen video ads in the keynote hall, and advertorials in trade publications.

X.J. Wang, vice president of Asia-Pacific research at analysis firm Yankee Group, said the company's technology is now world-class, and its relatively low-cost China-based staff means it can assign large numbers of engineers to solve problems for customers.

With all but 15,000 of its employees in China, Huawei can undercut established suppliers on price, said analyst Nadine Manjaro at ABI Research.