Telecom equipment producer Huawei Technologies Co., Ltd. cancelled its plan to set up a new factory in India due to weakening demand in the country, foreign media reported Tuesday, citing a top executive at Huawei's India branch.

Huawei is instead planning to work with Flextronics International Ltd.'s India unit to produce telecommunications equipment, the executive said.

India used to be Huawei's second largest customer after China. Huawei achieved US$2.616 billion of revenue in the Indian market in 2009, accounting for 12 percent of its total revenue.

India's telecom market is highly competitive, and most carriers have thin profit margins, said an engineer with Huawei's Indian operation. Over the past two years, telecom carriers have spent a fortune on spectrum and equipment, yet none of them has recovered their investment. "Under such circumstances, it's a smart move to cooperate with other companies," said the engineer. Huawei is counting on this partnership to develop its businesses in the Indian market.

Huawei announced a US$500 million investment plan in India at the beginning of 2010. "Huawei has started part of the construction. The company has already built a temporary cafeteria, but now we haven't heard any news about it," the engineer said.

China's business press carried the story above on Wednesday.