The British company, which came close to collapse four years ago, admitted yesterday that it was in talks with a number of companies "about potential business combinations".

Reports in Hong Kong said that rival Asian manufacturer ZTE Corporation had tabled a bid for the business, while European rivals Alcatel in France and Siemens in Germany are also rumoured to be interested.

Shares in Marconi rose 39.25p to 306.25p, valuing the business at £640m.

Huawei is expected to be the front runner to buy out Marconi, which was forced to hoist the for sale sign three months ago when it missed out on a crucial network contract with BT as it already has a marketing deal with the firm.

Union leaders fear that any acquisition of Marconi by Huawei will lead to job cuts and the loss of crucial research and development expertise. Last year the Department of Trade and Industry ranked Marconi as the eighth most important British-owned research firm.

Marconi employs about 4,000 people in Britain with 1,500 at its largest site in Coventry. Huawei is likely to be most interested in the company's sales and marketing force rather than its research arm, which it can duplicate much more cheaply in China.

"There is an issue for government in terms of the company's strategic options," said Amicus national officer Peter Skyte. "If it becomes clear that Marconi is going to be sold, whether it is to the Chinese or someone else, we shall expect the government to look very closely at that under the mergers and acquisitions framework. Despite its troubles it's still a key company in terms of research and development in the UK."

A spokesman for the DTI refused to comment on the case, but the government does have the power to prevent intellectual property considered critical to national security from foreign ownership.

The most important objections to any deal between Huawei, which last year received $10bn of loans from the state-sponsored China Development Bank to help its overseas expansion, and Marconi are likely to come from the US.

During the dotcom boom Marconi bought US rivals Fore Systems and Reltec. As a result, Marconi's Pittsburgh-based data networking business, created from these firms, counts the US federal government among its biggest clients, supplying secure networking to clients including the Department of Defence.

The Committee on Foreign Investments in the US (CFIUS), set up to look into foreign acquisitions of US firms, is expected to investigate any takeover of Marconi. CFIUS refused to comment yesterday. Huawei has had a previous brush with the American legal process. In 2003 the company was sued by networking giant Cisco which accused the business and two US-based subsidiaries of copying parts of Cisco's technology and infringing at least five of its patents.

The dispute was eventually settled out of court for an undisclosed sum but did little to dispel the impression among some in the industry that Huawei was an upstart with little care for other's intellectual property.

Since then Huawei has invested heavily in its own research and development, a process which culminated in its winning part of BT's 21st century network contract.

A spokeswoman for BT said yesterday that the company investigated Huawei's background before awarding the contract. "Ethical standards were part of our selection criteria and all the successful companies either met or exceeded those standards."

Decline of a giant

The history of Marconi is the story of two businesses - Guglielmo Marconi's wireless group and the General Electric Company.

Hugo Hirst and Gustav Byng founded GEC in 1886, nine years before Marconi sent the world's first radio message. They floated their business in 1900, three years after Marconi set up his firm.

Marconi's Wireless Telegraph Company was taken over by English Electric in 1946. In 1968 English Electric merged with what was then called GEC. Under the 33-year tenure of Arnold, later Lord, Weinstock, GEC flourished. He built up a cash pile that was spent by George Simpson, who took over in 1996. With his sidekick, finance director John Mayo, he spent more than £4bn buying US businesses Fore Systems and Reltec at the height of the dotcom boom. In July 2001 the company warned on profits and its shares collapsed. Mr Mayo was ousted. Lord Simpson followed two months later.

Mike Parton took over as the company struggled to negotiate a way out with its banks. Slumping sales holed a possible refinancing and Marconi was forced into a £4bn debt for equity swap that wiped out shareholders.

New Marconi started trading in 2003, but was plunged into chaos in April when it failed to secure a contract with BT. The company effectively put itself up for sale as a result.