Leading Chinese telecom equipment manufacturers, Huawei Technologies Co Ltd and ZTE Corporation, have launched an aggressive ‘Indianisation’ drive. The two companies are replacing Chinese nationals with Indians on their board of directors.
The move is seen as an attempt by the companies to change the public perception in India, where Chinese firms are often viewed with suspicion. This would also make it easy for the firms to do business in India and ward off intense government scrutiny.
Last week, Huawei decided to appoint an Indian as the chairman of its wholly-owned subsidiary in India and replace its eight-member board of directors with mostly Indian faces. The company is also setting up an advisory board of eminent Indians. The advisory board would advise the board of directors. A team has been set up to scout for Indians who could be taken on board the advisory panel.
“Chinese companies, like us, are late comers in their attempt to go global and might not have the management bandwidth as Koreans and Japanese, but we recognise, and we will do everything it takes, to localise our management and operations and support local industry and set up manufacturing base in India,” Huawei Technologies India Executive Director Yao Weimen told Business Standard.
Despite enjoying a substantial share of the Indian telecom equipment market, Chinese firms have found themselves under increasing scrutiny of the Indian security agencies, who often view their activities with suspicion.
Recently, state-owned Bharat Sanchar Nigam Ltd (BSNL) cancelled a mega-GSM contract awarded to Huawei.The Chinese firm was given the contract after its bid was adjudged the lowest, but BSNL cancelled it later, citing security issues.
Since then, the government has further tightened its rules, making it mandatory for all state-owned and private operators to seek a security clearance for equipment ordered by them.
More important, Chinese telcos operating in India, who import equipment into the country, are supposed to transfer the technology within three years, if they wish to continue work in India.
Huawei’s competitior, ZTE, also plans to revamp its five-member board in India. The company is keen to have at least three Indians on the board, against one at present. The restructuring would be done within a year.
Also in order to leverage Indian management talent, ZTE has decided to convert India into a “management hub” and use the talent pool for its global operations across the world.
“Like most MNCs (multi-national companies), Indian management talent will be used by ZTE to run operations across the globe,” said managinging director D K Ghosh.
As part of its strategy to get in more Indians at the senior management level, ZTE has formulated a dual system of management under which an expatriate Chinese, as well as an Indian, is appointed in the same position for a similar operational role. The plan is that once the hand-holding is done, the expatriate would go back and the Indian manager would be taking over sole responsibility.
The Chinese companies are also reducing their dependence on expat Chinese across all management levels. In the next two years, Huawei targets to increase its employee strength in India from 6,000 currently to between 8,000 and 10,000.
“Currently about 85 per cent of the employees are Indians. This is targeted to go up to 95 per cent in two years,” said Weimen.
Similarly, 87 per cent of ZTE’s employees in India are Indians. The company aims to raise this to 97 per cent in two years. ZTE, which recruited over 300 Indians recently, is sending them to China for three months to an year for training and to get an understanding of the Chinese way of working.
“The two problems Indians face is communications (they don’t know Chinese), and also there is a cultural gap between the two. By going there, Indians will appreciate their work styles (for instance, why they take an afternoon siesta),” said Ghosh.
In an attempt to make communication easier, the ZTE headquarters has decided that all documentation would be in Chinese as well as English and those in touch with international operations must speak in English.
Also, Chinese companies are working out modalities to set up manufacturing units in the country in their effort for localisation.
Weimen said the company already procured a third of its equipment (worth $400 million) from over 4,000 local vendors. The plan was to raise localisation by 10 to 15 per cent a year.
“We are actively considering setting up a manufacturing centre and India and we have no issues of transferring technology at all,” adds Weimen. Avers Ghosh: “We might go in for a joint venture model, however with competition growing we have taken a call that we need to manufacture in India”.