Huawei’s R&D Management Transformation

In 2012, Huawei overtook Ericsson and became the largest telecommunications equipment manufacturer in the world. Its strong technological capabilities, which allowed it to attain this leading position, did not come about quickly but were built through long-term investments and continually evolving R&D management structures and practices. Five years after it was founded in 1987, Huawei started to place an emphasis on conducting R&D, and it began to invest at least 10 percent of its annual sales revenue R&D every year (in most years, more than 10 percent). This strategy was also enshrined in the constitution of the firm, which was enacted in 1998 as the Huawei Basic Law and has been in effect ever since. Huawei’s R&D expenses totaled 101,509 million CNY in 2018, accounting for 14.1 percent of the company’s annual revenue. In terms of its workforce, Huawei continually allocates no less than 43 percent of total employment to R&D positions, which emphasizes how important R&D is to the firm. In 2018, the number of R&D personnel was more than 80,000, accounting for around 45 percent of its total employees (Huawei, 2019). When the rival firm Cisco sued Huawei for infringing on a Cisco patent in 2003, Huawei realized even more the need to develop its own intellectual property through R&D. As the scale of R&D efforts increased, Huawei continually encountered problems with its organization of R&D and felt that it was necessary to transform how it conducts R&D. This chapter focuses on the transformation of Huawei’s R&D management, which underwent three major accomplished transformations from 1991 to