Chinese telecoms equipment maker Huawei is placing a massive bet on the future of a new technology which over the next few years threatens to turn their expensive proprietary hardware into a cheap commodity.

Ken Hu, the company’s chief executive, said in an interview that “software defined networks”, designed to give their customers a cheaper and more flexible system, “represents the direction of future network architecture evolution”.

He also conceded that the new technology meant large telecoms manufacturers such as Huawei would have to surrender some of their market power to the telecoms operators that buy their equipment.

In March, Huawei and Spain’s Telefónica announced a successful joint test of the technology, which will be rolled out across Europe next year. Mr Hu said the first ever commercial SDN network was installed in Beijing in 2013.

At stake are the tens of billions of dollars that operators such as AT&T, Verizon, Deutsche Telekom and BT spend each year on telecoms hardware.

The new designs have been developed mainly at the behest of the large operators who have seen their capital costs balloon amid a surge in data traffic. The new networks are designed to be vastly cheaper, run by cloud based software which knits together cheap, standardised telecommunications hardware.

That means that equipment from more than one maker could be installed in a network – which reduces the market power of the manufacturers like Huawei, who have a virtual monopoly on replacing equipment in the networks they have built for customers.

“No hardware maker is interested in seeing their hardware turned into a commodity” said Michael Howard, co-founder of Infonetics Research, a telecommunications research company.

While being one of the world’s largest telecoms equipment suppliers, Huawei has actively embraced a more standardised, cheaper hardware and has begun building SDN protocols into their routers and switches so that they can be controlled by software. “They see this as a competitive advantage if they get ahead of the other hardware manufacturers by embracing SDN,” said Mr Howard.

Mr Hu conceded that the new technology would give telecoms operators more choice and flexibility, but said: “We have become fully aware that SDN is going to become a core part of future network architecture, and we are a firm supporter of SDN.”

Mr Hu shares the top post at Huawei on a rotating six-month basis with two other leaders, following the decision by Ren Zhengfei, Huawei’s founder, to stand aside from day-to-day running of the company in 2012.

Get alerts on Huawei Technologies when a new story is published

Copyright The Financial Times Limited 2020. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article