Skilled workers, government support fast-track Huawei's "5G Ontario" expansion

By Debbie Lawes

Huawei's global leadership in fifth-generation (5G) mobile internet could be decided by the bench strength of its researchers and engineers in Ontario. Last month, the Canadian arm of the Chinese telecom giant announced it will receive up to $16 million from the Ontario government as part of a 2014 commitment by Huawei Canada to invest $212 million and create 250 new R&D jobs to drive its 5G Ontario initiative. The company has since boosted that initial investment up to $303 million over five years— though a company executive says the scale up is moving faster than expected.

"The province came to us and said they wanted to help speed this along," says Scott Bradley, VP, corporate and government affairs at Huawei Canada. "We spent six months negotiating how we can get to a point where we saw value in accelerating our investment and the province saw value in helping us get there. As a result, over the next 24 to 30 months, we will hit those targets that we thought would take us five years to get to … largely because we felt the opportunities and talent were here."

Bradley says the $16-million investment from Ontario's $2.7-billion Jobs and Prosperity Fund—which has its roots in premier Kathleen Wynne's 2014 trade mission to China—"locks in our commitment" to create those jobs at new laboratories in Markham and Waterloo and expanded facilities at its Canada Research Centre in Ottawa.

"When we sign the final agreement we get 20% on signing and there are benchmarks. So, as we hit our jobs targets we get a portion of those dollars allocated toward the company," he told RE$EARCH MONEY. "Effectively it's an incentive for us to achieve those numbers that we committed to publicly."

The research in Ontario will focus on "moving as much information as quickly as possible from A to B", says Bradley. This includes wireless and photonics research (Ottawa), data storage and computing power (Markham) and enterprise and mobile security (Waterloo).

Ultra-fast 5G networks will represent the biggest technological leap yet in broadband wireless. Expect data speeds 50 times faster than the most advanced Wi-Fi network, extremely low latencies and the ability to accommodate any type of connected device—from smartphones and wearables to cars, home appliances and medical devices. It will also drive digitization and connectivity in several industry sectors, including manufacturing, health, energy, automotive, media and entertainment.

Last October, Huawei announced a successful test of 5G in the field. Commercial service is on track to begin by 2020, eventually replacing today's high-speed (LTE or 4G) cellular technologies.

Huawei's total investment in 5G is projected to hit US$600 million by 2018. A significant portion of that investment will be made in Ontario, which Bradley describes as "one of the key leaders in 5G research".

The company's research into 5G began in 2009, a year after it opened its Canadian headquarters in Markham and just as it was setting up its Ottawa research centre. The company's $67-million investment at the time was supported by a $6.5-million Strategic Jobs and Infrastructure grant from Ontario.

But Bradley says the biggest incentive to doing research here was the concentration of highly skilled workers in wireless and photonics in Ottawa and the strength of several universities across Ontario and Canada.

When Nortel filed for bankruptcy in 2009, Huawei recruited three Nortel research stars: Wen Tong and Peiying Zhu, recognized global leaders in 5G research, and Peter Ashwood-Smith, who helps guide Huawei's 5G networking research and chairs an International Telecommunication Union body formed to identify gaps in 5G standardization.

"They have been very critical to the success of our Canadian operations," says Bradley, who worked at Bell Canada and Canadian Airlines before joining Huawei in 2011.

"What's interesting is that fifth generation wireless is being run out of Canada and Wen Tong is the VP responsible for that. This as quite a strategic move since a major part of Huawei's future is 5G," says Peter MacKinnon, an Ottawa-based business consultant who co-authored a report investigating the demise of Nortel (R$, April 16/15).

R&D SPENDING ON THE RISE

Huawei employs 650 people in Ontario, including 325 researchers, most of whom work out of the Ottawa facility—one of 16 Huawei R&D centres around the world. With these new investments, the company expects to have 500 researchers within two years and up to 900 employees overall by 2020.

Bradley says the Ontario operations are highly strategic as Huawei fights a fiercely competitive global race to become the first company to offer 5G networks to customers.

Since arriving in Canada, Huawei's R&D investments have more than doubled, from $21.6 million in 2011 to nearly $53 million by 2014, according to data compiled by Research Infosource Inc (R$, Nov. 16/15). Though the company has moved from #74 to #44 in the rankings, its research spend still lagged other telecom equipment companies in 2014, including Blackberry ($785 million), Ericsson ($315 million), Mitel ($131 million), Cisco ($104 million) and Sierra Wireless ($104 million).

The main difference, however, is that Huawei is increasing its R&D spending faster than other telecom gear makers. From 2013 to 2014, R&D spending increased more than 47%, a trend that could close the gap with Cisco and Sierra whose R&D investments have been relatively stable (Cisco) or dropping (Sierra) since 2011. Then there's Blackberry, which saw its R&D spending plummet from a high of $1,542 million in 2011 to $785 million in 2014, a drop of nearly 50%.

Bradley predicts Huawei's R&D expansion will continue for at least another five years. "Our investments will continue to accelerate at that same pace you've seen."

While Huawei sees itself as an anchor company with a long future in Ottawa, MacKinnon says don't expect it or any of its competitors to reach the scale of a Nortel anytime soon—if ever.

"I don't think we'll see that scale again in Canada for this sector," he says. "It's unlikely a foreign company would do that in Canada. More likely, they'll come to Canada for unique capabilities, like Huawei is doing with 5G. Remember, it took Nortel about 30 years to grow to scale."

Huawei currently collaborates with over a dozen universities across Canada and has invested more than $5 million to date on joint projects. Earlier this month, the company committed to invest over $3 million in research projects with the Univ of Toronto over the next three years.

"This new agreement with Huawei opens countless opportunities for collaboration beyond the areas of cloud acceleration and data-centre optimization, where we have long enjoyed strong partnerships," Dr. Ted Sargent, vice-dean, research, for U of T's Faculty of Applied Science & Engineering said in a release. "We look forward to exploring joint projects that build upon U of T Engineering's world-leading research strengths in biomedical engineering, materials science and other fields."

Huawei is also expanding its ‘Seeds of the Future" program from seven to 10 universities. Launched in March 2015, the program provides Canadian engineering students with the opportunity to work at the company's headquarters in China. It will send 20 students on exchanges this year.

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