Who Really Owns Huawei? Their Carrier Customers (3 of 3) (Tech Strategy)


The US government claims Huawei is tied to the Chinese government. Huawei says it is a private company, overwhelmingly owned by its employees. And the international press has lots of fun digging into the legalese of Huawei’s organizational structures.

My take is pretty simple. It doesn’t really matter who owns Huawei. What matters is:

  • How the economic value of the enterprise is distributed?
  • Who makes the decisions?

This is what people actually care about. And ownership is usually just a proxy for these.

In Part 2, I gave my take on how the economic value of Huawei is distributed, with their ESOP being the main mechanism for this. Which leaves the question of who are the main vs. ultimate decision-makers at Huawei?

And I think this is what people are really arguing about. Who makes the decisions? Is it the owners? The government? The managers?

Before I give my take on this, it is worth pointing out that this situation is often unclear, even at lots of Western companies. A couple of examples:

Western Tech Company Founders Have Become Outsized Decision-Makers.

In recent years, Western tech company founders have become enthralled with dual class share structures that give them long-term control, regardless of their ownership or performance. They argue this lets them operate with a longer-term focus. Others (including myself) argue it gets them authority without much accountability – and this inevitably leads to problems.

Plus iconic founders can often have significant control beyond their ownership. When Steve Jobs took over again at Apple, he didn’t own any shares or technically have a job. He just sort of showed up and started giving orders. Iconic founders can be important decision-makers regardless of titles or shares.

Sometimes Shareholders Can be Powerful Decision Makers.

This is definitely true when venture capitalists and private equity companies are involved. And especially when the company needs capital. Softbank became the main decision-maker at WeWork once the IPO was pulled. Because the company needed a lot of cash.

Shareholder activists like Carl Icahn are famous for challenging management (usually through proxy fights). Icahn targets management teams (and Boards) he thinks are acting in their own interests and/or making bad decisions. And, interestingly, he has been increasingly targeting management at tech companies like PayPal and Yahoo.

Sometimes Employees and Government are the Key Decision-Makers.

Uber and Airbnb are famous for being the world’s largest mobility and hotel companies without owning any cars or rooms. It makes their scalability and balance sheets really impressive. But it also makes Uber’s drivers and Airbnb’s renters significant decision-makers. Uber and Lyft’s chronic unprofitability has a lot to do with how frequently their drivers switch platforms.

And government can absolutely be a major decision-maker in many companies. This can be via direct regulation like with utilities. Or it can be indirect. Which is really common in the big tech companies.

Often Nobody is Really in Charge.

Finally, it’s worth pointing out that businesses are frequently dysfunctional. CEOs come and go quickly. An entrenched bureaucracy can have its own interests or can subsume any ability to lead. Decision-making at companies can often be broken and dysfunctional. Or via shifting coalitions within complicated organizational structures. Sometimes nobody is really making the decisions in any coherent fashion.


Ok. Back to Huawei. So who makes the decisions? My answer is the following three points.

Point 1: Customers, Especially the Non-China Carriers, Are the Dominant Decision-Makers.

The ultimate decision-maker for most companies is usually the customer. It’s not the shareholders or the banks or the CEOs.

In most cases, management teams aren’t really in charge of that much in practice. They have to give customers what they want or they switch fairly quickly. And most of the big resource allocations decisions are pre-determined by the direction of the market. Management usually has very little ability to not give the customers what they want.

Telecommunications equipment is a global business. You do not want to be just be a China or US telco equipment company. You have to be a global company in order to achieve the scale to compete. You have to continually win carrier contracts around the world to stay a leader in the game.

Huawei’s telco business has included +1,500 networks, most of which are outside of China. The company is very dependent on what foreign carriers want – and how much they trust Huawei as a long-term partner. International carriers are arguably the key decision makers in all of this.

Think of what would happen if there was any serious real or perceived infiltration of Huawei’s telco equipment by a government or outside actor?

This would devastate the trust of their carrier customers around the world. They would likely shrink to a mostly China or Asian business. And they would then be at a serious scale disadvantage to global telco equipment makers Ericsson and Nokia.

Their other businesses (consumer, enterprise) would likely also be weakened over time as they depend on the carrier business for scale in technology, resources and financial stability. Huawei Former Chairman Liang Hua has mentioned multiple times how critical the trust of foreign carriers (and their local governments) is to the company.

And to its credit, Huawei management has made an extensive effort over the past years to maintain the trust of carriers around the world. They have been meeting with carriers continually. They have been coordinating with governments around the world. They have had literally thousands of press visits their campus. They have opened oversight centers for local governments in Europe. And they have recently announced their intention to open / license their 5G technology around the world – which, in theory, would make it completely transparent.

This has been overwhelmingly successful.

My first take-away is that international carrier customers are overwhelmingly the key decision-makers for what happens at Huawei. And they are big supporters.

That said, there are other important decision-makers.

Point 2: Huawei Has an Evolving Management Team for Decision-Making.

In Chinese companies and especially Chinese bureaucracies, it is often hard to know who is really in charge and how decisions are made. Even Jack Ma, China’s most famous tech founder, launched his company with 17 co-founders.

Management control in Chinese institutions (including universities) is often through teams that evolve over time. These teams can be informal with people in key positions or with critical resources under their control. Or they can be more explicit. It can be pretty complicated. The organizational charts of Chinese SOEs, in particular, can be a nightmare to figure out.

Huawei is not that too complicated in this regard. But it is definitely a Chinese company and they do have a rotating CEO structure, which is not something you see in the West. Plus there is their famous founder. And there are the employee shareholders via the ESOP.

So it’s a bit complicated. But the evolving management coalition at the top is making day-to-day decisions. And that group is obviously important.

Point 3: Governments Are Big Decision-Makers in Telco.

Communications networks are becoming both pervasive and increasingly intelligent. They used to connect people. Now they are starting to connect everything to everything. And they are becoming intelligent. Networks are increasingly running our lives, businesses and government services.

Unsurprisingly, telco has become very political in the world’s major economies. All the major powers (US, Europe, China, Japan) have important government interests in telco. And any international telecommunications manufacturer has to deal with most all of the them and their interests. This is not terribly different than banks, data services, energy and other industries with government interests.

I don’t think outright bans on any telco company are going to be common. But I don’t think blanket access is either. I think you are going to see a lot of risk mitigation, which appears to be Europe’s stance. Countries will evaluate the components for potential and source accordingly. Some of the core network equipment will be deemed critical and will be sourced locally or from specific vendors. Other equipment, like say the batteries for base stations, will be sourced globally.

So local government interests and international carrier customers will remain the primary decision-makers.


I think so much of this discussion about Huawei’s ownership is about the wrong questions.

Yes, telecommunications have become more politically sensitive. But because this is a global business, foreign customers are a big limitation on this. I think the more important questions are:

  • How do you stop bad actors? Why do thieves robs banks? Cause that’s where the money is. Well, telco networks is where the data is. Bad state and non-state actors will always want to access telco networks regardless of where the equipment is from.
  • What are the sensitive vs. non-sensitive components within a network? How is this evolving over time?
  • What services (banks, corporate, etc.) will require a separate private network? What services can use a less secure, public network?

That’s my take.

Cheers, jeff


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