Over the past few decades, Huawei and ZTE—both founded in the late 1980s and initially peers in China’s telecommunications equipment industry—have followed sharply diverging paths. Since the mid-2000s, Huawei has steadily pulled ahead, evolving from a comparable competitor into a global leader with integrated “device–network–cloud–chip–software” capabilities across 5G, semiconductors, operating systems, cloud computing, and AI. ZTE, while remaining the world’s fourth-largest telecom equipment vendor, has largely retained a follower position, with notable gaps in core technology autonomy, penetration of high-end global markets, and ecosystem-building capacity. This contrast raises questions of strategic depth: why Huawei succeeded where ZTE plateaued, and what ZTE’s experience—set against Huawei’s—reveals about firm-level resilience, state–market interaction, and the broader dynamics shaping today’s U.S.–China technological competition.
Governance Design as a Determinant of Long-Term Technological Resilience
Corporate governance fundamentally shapes a firm’s ability to compete technologically over the long term. In industries where innovation cycles span decades rather than quarters, sustaining strategic investment over time becomes more important than short-term financial performance. The contrasting experiences of Huawei and ZTE illustrate how ownership structure, capital market exposure, and governance incentives can materially affect technological outcomes.
Huawei’s non-listed, employee-owned structure has shielded it from the short-term pressures typical of public markets. Freed from the need to meet quarterly earnings targets or respond to stock price volatility, Huawei has been able to prioritize long-term investments, especially in research and development. This governance model allowed the company to continue substantial R&D spending after the dot-com bubble in the early 2000s and to maintain annual R&D investment exceeding 140 billion yuan despite U.S. sanctions in 2019. Strategic patience is institutionalized rather than reliant solely on individual leadership, enabling Huawei to withstand external shocks while preserving technological continuity.
By contrast, ZTE’s status as a listed company—on China’s A-share market since 1997 and the H-share market since 2004—has made it far more vulnerable to capital market pressures. During the 2008 global financial crisis and again under U.S. sanctions between 2016 and 2018, ZTE had to focus on liquidity preservation, leading to cuts in R&D, layoffs of overseas teams, and asset sales. While these measures were rational within a capital-market framework emphasizing cash flow and compliance, they undermined the company’s long-term technological competitiveness.
The rise of Milton Friedman’s doctrine—that a corporation’s primary responsibility is to maximize shareholder profit—along with its popularization by executives like Jack Welch, entrenched a culture where boosting stock price and quarterly earnings became central strategic goals. The broader Anglo-American shareholder value culture has often been linked to short-termism, offshoring, erosion of skills and workforce stability, and weakened long-term R&D capacity. While the connection between shareholder primacy and short-termism remains debated among scholars, the idea that shareholder-focused governance promotes short-term pressures continues to influence discussions on corporate reform.
This contrast highlights a broader principle: technological competition is ultimately a competition over time horizons. External pressures—such as export controls and entity listings—are particularly effective against firms optimized for short-term financial metrics, supply-chain transparency, and regulatory compliance. Companies structured to maximize return on equity and liquidity perform well in stable environments but are vulnerable under prolonged strategic constraints.
For China, achieving technological self-reliance cannot rely solely on investor patience within conventional market structures. More resilient organizational models are necessary—ones that remain market-oriented but are not dominated by short-term capital market imperatives. Hybrid governance forms combining state-backed patient capital, employee ownership, and strategic investors may offer a viable path forward. ZTE’s experience as a state-owned yet publicly listed company underscores the persistent tension between short-term financial logic and long-term national technological goals. Ultimately, organizations designed for endurance and strategic flexibility, rather than immediate efficiency, are best positioned to succeed in sustained great-power technological competition.
The Peril of Strategic Myopia in Geopolitical Technology Competition
The divergent trajectories of Huawei and ZTE illustrate a fundamental truth of geopolitical competition: the gravest danger lies in assuming that tomorrow will resemble today. Ren Zhengfei’s leadership of Huawei was defined not by confidence in prevailing conditions, but by systematic preparation for adverse futures. From the early establishment of HiSilicon in 2004 as a long-term “backup plan,” to the creation of the 2012 Lab to develop foundational software and the later push into EDA tools, Huawei institutionalized the expectation that external dependencies could one day become existential liabilities. What appeared redundant or inefficient in times of stability proved decisive once the environment turned hostile.
Huawei’s approach was rooted in a philosophy of learning and anticipation. By benchmarking relentlessly against leading Western firms—adopting and localizing management practices from IBM, Hay, Mercer, and others—Huawei treated global leaders not as adversaries, but as reference points for continuous self-transformation. More importantly, it embedded “worst-case scenario” thinking into its organizational DNA: dual supply chains, geographically dispersed R&D, and sustained investment in low-return but high-resilience capabilities. When U.S. sanctions materialized, they were not a sudden shock but an accelerated arrival of risks Huawei had long assumed were inevitable.
By contrast, Hou Weigui’s stewardship of ZTE reflected a strategy optimized for continuity rather than disruption. ZTE excelled at cost leadership and rapid market follow-up within established technology cycles, but it avoided decisive bets on core technologies such as baseband chips and system-on-chip design. Even after repeated U.S. investigations and penalties signaled escalating political risk, ZTE failed to fundamentally reconfigure its supply chain and compliance architecture. The result was catastrophic vulnerability: once interdependence was weaponized, the firm nearly collapsed under a single administrative order.
The broader lesson extends beyond individual firms to national strategy. Catch-up logic works only in a benign environment; once chokepoints emerge, followers are the first to be strangled. In an era where technology and geopolitics are inseparable, resilience depends on the capacity to imagine and prepare for discontinuity. This requires institutionalized risk assessment, supply-disruption simulations, and sustained investment in foundational capabilities that markets alone will underprovide. Survival, in asymmetric competition, belongs not to those who optimize for the present, but to those who plan relentlessly for a future that may break from it entirely.
Organizational Capability as Strategy: Process Discipline, Flexibility, and the Depth of Globalization
Huawei and ZTE offer a revealing contrast in how organizational capabilities shape outcomes under conditions of geopolitical pressure and technological competition. Superficially, both firms participated in globalization and operated within international rules. In practice, however, they embodied two very different models: one combining strong process discipline with frontline flexibility and deep capability globalization, the other relying on hierarchical control and largely cosmetic internationalization. The divergence helps explain why Huawei strengthened its technological autonomy under pressure while ZTE proved structurally fragile.
Huawei’s organizational design blends standardized processes with high operational elasticity. After introducing IBM’s Integrated Product Development (IPD) system, Huawei built stable, repeatable mechanisms for managing complex products and global projects. Yet this process orientation did not translate into rigidity. Its “iron triangle” operating unit—account manager, solution expert, and delivery manager—empowered frontline teams to coordinate end-to-end decisions. The internal principle that “those who hear the gunfire can call for artillery fire” institutionalized rapid response and local discretion, allowing Huawei to remain agile even at massive scale.
More importantly, Huawei’s globalization penetrated core capabilities rather than stopping at market access. With more than half of its workforce overseas, Huawei localized research and development across disciplines: Swedish teams working on 5G algorithms, Russian mathematicians contributing to foundational theory, and French designers shaping product aesthetics. These contributors were integrated into the firm’s central knowledge system, not relegated to peripheral roles. Huawei thus globalized intelligence, not merely sales or delivery, achieving what might be called “global resources, integrated orchestration.”
ZTE followed a markedly different path. Its organization remained relatively hierarchical, with long decision chains and limited frontline autonomy. International operations focused on sales and engineering services, while core R&D stayed concentrated at home, resulting in shallow globalization. After the 2018 U.S. sanctions, ZTE strengthened compliance mechanisms, but this response was largely procedural. Compliance was treated as documentation rather than as an existential strategic risk, leading to excessive risk aversion, organizational “post-traumatic stress,” and a decline in innovation capacity.
The deeper lesson is that technological self-reliance does not emerge from isolation. Huawei’s experience shows that true technological sovereignty arises from a paradoxical combination: maximum integration into global systems alongside self-reliance and controllability at critical nodes. By learning Western management practices, employing global talent, and adhering to international standards such as 3GPP—while retaining independent control over key architectures and “switching points”—Huawei built antifragility within globalization itself. ZTE’s failure illustrates the danger of “pseudo-globalization,” where firms participate in value chains without mastering meta-capabilities like standards, architecture design, or foundational tools. In an asymmetric international system, rule-following without organizational power buffering is not prudence; it is vulnerability.
R&D Structure and Basic Research Intensity as the Source of Long-Term Technological Power
In 2023, Huawei and ZTE both maintained substantial R&D spending, yet the structure and strategic intent behind that investment diverged sharply. Huawei invested approximately €16.47 billion (around RMB 130 billion) in R&D, ranking among the world’s top corporate R&D investors and allocating 23.4% of its revenue to innovation. This level of intensity reflects a deliberate strategy to prioritize long-term technological accumulation over short-term financial optimization. ZTE, by contrast, spent RMB 24.1 billion on R&D, with an intensity of 17.6% of revenue—respectable by global manufacturing standards, but significantly lower than Huawei’s, signaling a more conservative balance between innovation and profitability.
The most consequential difference lies not in absolute spending, but in R&D composition. Huawei is estimated to devote at least 15% of its R&D budget to basic research. Through institutions such as the 2012 Lab, academicians’ workstations, and deep collaborations with leading universities, Huawei systematically invests in foundational domains including mathematics, materials science, algorithms, and computing architecture. These efforts are explicitly designed for 10–15 year horizons and often lack immediate commercial output, but they create a pipeline for disruptive breakthroughs and future standards leadership. ZTE’s basic research share, estimated at below 5%, reflects an R&D model centered on engineering development, incremental improvement, and rapid product iteration—effective for near-term competitiveness, yet limited in generating original, cross-generational technologies.
This structural contrast is mirrored in patent assets and standard-setting influence. By 2023, Huawei held over 140,000 valid authorized patents and ranked first globally in 5G standard essential patents, granting it substantial leverage in international standards and licensing negotiations. ZTE, with roughly 45,000 valid patents and a sixth-place ranking in 5G SEPs, maintains a solid defensive position but remains constrained in shaping ecosystems and future technological trajectories. The difference underscores how sustained basic research investment compounds into durable intellectual and strategic advantages.
The broader implication is that applied innovation alone is easily replicated, while fundamental innovation establishes generational barriers. Modern technological competition has shifted beyond end products to deeper layers—materials, tools, architectures, mathematical theories, and standards. Huawei’s prior willingness to fund non-commercial research enabled it to rebuild technology stacks and retain bargaining power even under severe external constraints. ZTE’s historically rational, product-focused R&D model performed well in stable markets, but proved vulnerable when chokepoints emerged outside the product layer.
At a national level, this contrast highlights the need to reform research evaluation and funding mechanisms. For critical bottleneck domains, long-cycle basic research without immediate publications or products must be institutionally protected; high-risk, high-failure “seed funds” for disruptive technologies should be normalized; and leading enterprises should be encouraged to anchor mission-oriented research platforms. Ultimately, firms and nations that neglect investment above and below the product layer risk becoming structurally dependent on those that do not.
From Hardware Supplier to Platform Architect: The Strategic Importance of Ecosystem Building
The evolution from an equipment vendor to a platform company is defined not by isolated technological breakthroughs, but by the ability to construct and sustain a coherent ecosystem. Huawei’s transformation exemplifies this shift. Through its “1+8+N” full-scenario strategy—anchored in mobile devices and extended to PCs, vehicles, wearables, and a broad range of third-party hardware—Huawei has built cross-terminal collaboration capabilities based on HarmonyOS. This is reinforced by Huawei Mobile Services (HMS), now deployed in over 220 countries, and by a vertically integrated AI and computing stack spanning Ascend chips, MindSpore, ModelArts, EulerOS, and GaussDB. Together, these elements form a tightly coupled system that allows Huawei to operate as a platform architect rather than a mere hardware supplier.
By contrast, ZTE remains largely confined to the role of a communications equipment and hardware provider. Its dependence on Android, limited cloud service scale, and absence of a clear ecosystem “gravity center” constrain its ability to orchestrate developers, partners, and users around a unified platform. This comparison underscores a broader competitive reality: future rivalry in the technology sector is increasingly system-to-system rather than product-to-product. Companies that fail to control operating systems, developer frameworks, and service layers risk marginalization, regardless of their hardware capabilities.
The United States’ actions against Huawei, often framed as chip restrictions, are more accurately understood as an attempt to sever Huawei’s access to the global digital ecosystem—spanning GMS, ARM licensing, and the EDA toolchain. Huawei’s response has therefore not been a single-point substitution, but the deliberate construction of a parallel ecosystem: HMS in place of GMS, HarmonyOS in place of Android, and EulerOS in place of CentOS. This trajectory reveals a deeper lesson: true technological autonomy ultimately manifests as ecosystem autonomy—the capacity to define interfaces, data standards, and development paradigms.
China is beginning to cultivate such ecosystem-level capabilities in sectors including new energy vehicles and the industrial internet, with examples such as BYD’s integrated platforms and COSMOPlat. However, the persistent risk lies in the pattern of strong hardware, weak software, and fragmented protocols. To overcome this, public policy should prioritize “standards going global” and support enterprises in leading open-source communities, such as OpenHarmony. Only by translating technological strengths into rule-making and platform leadership can firms complete the transition from equipment vendors to enduring ecosystem leaders.
The Hidden Threat of Trauma-Induced Risk Aversion
In the aftermath of 2018, ZTE managed to survive, but its survival came at a steep cost. The company became over-compliant, imposed excessive internal controls, and suffered from innovation paralysis. The fear of repeating past mistakes stifled initiative, turning caution into a silent inhibitor of growth.
By contrast, Huawei faced similar external pressures but responded differently. Sanctions became a catalyst for acceleration, organizational pressure led to hardening, and crisis reinforced a strong corporate identity. Rather than being paralyzed by fear, Huawei transformed adversity into resilience and strategic focus.
The lesson is clear: in systemic competition, trauma-induced risk aversion can be more damaging than actual losses. Fear, if left unchecked, quietly undermines innovation, adaptability, and long-term competitiveness. Organizations that allow past trauma to dictate future choices risk self-inflicted stagnation.
Final Thoughts
ZTE’s experience demonstrates that what may appear as failure can, in fact, be a rational strategy under resource constraints. By prioritizing steady growth and market survival over geopolitical ambitions, ZTE achieved a net profit of 930 million RMB in 2023, remained competitive in government and enterprise networks, optical communications, and servers, and exemplifies how many Chinese technology companies navigate the tension between risk and sustainability. In contrast, Huawei adopted a high-risk, almost “irrational” approach—overinvesting in foundations, building redundancy, and assuming hostility—to secure long-term technological sovereignty, embodying the pioneering spirit of national champions. The ultimate lesson for Sino–U.S. competition is twofold: at the national level, institutional mechanisms should reduce the expected losses of enterprise innovation through risk-sharing, R&D incentives, supply chain safeguards, and talent mobility; at the enterprise level, companies must balance bottom-line security with open innovation, as seen in ZTE’s recent chip development and 5G-A cooperation with Huawei. China’s technological resilience depends not only on bold pioneers but also on capable craftsmen—ZTE’s steady path underscores the depth and durability of the country’s industrial system, forming a multi-tiered structure where Huawei reaches for the top, ZTE consolidates the foundation, and SMEs fill the gaps.