Huawei CEO Speaks Up
Since the arrest of its CFO Meng Wanzhou, Huawei has been increasingly ostracized as a global ICT vendor to provide telco infrastructure in many countries worldwide.
Huawei CEO and Meng’s father Ren Zhengfei spoke candidly at an international media roundtable last month where much was shared.
Ren spoke in attempt to dispel perception of Huawei secretly being a hand puppet of the Communist Party of China (CPC), by downplaying his past military association with it. He reiterates that customer-centricity is the Huawei’s highest mantra with statements such as ‘The only reason Huawei exists is to serve our customers’, ‘siding with customers’, and ‘never harming the interest of our customers’…peppered throughout.
The Huawei CEO admits opening that the organization looks up to Apple in emulating customer privacy (and handling government requests for cooperation in criminal cases); that Huawei is a just a tiny ‘sesame seed’ caught up in the US-China trade war and backhand political tussle; his personal father-daughter relationship; as well as some interesting personal insights ie. ‘…I still believe he (President Trump) is a great president’ that almost echoes the POTUS’ constant MAGA cry; Huawei’s supportive involvement in many natural disasters of tsunamis and earthquakes over the recent years; a chance encounter with Cisco’s John Chambers at the airport during the height of the 2003 Cisco-Huawei litigation; and many, many other explanatory background stories that shape some of the existing perceptions of Huawei today.
Its full transcript (edited for space) as shared with Huawei with EnterpriseITNews here. Questions put forth by the various international media are in Bold. ~ TTLee, EITN Publisher
1. Please share how your experience in military shapes your management style; and now that Huawei is under wa bit of scrutiny worldwide, how are those ties impact Huawei’s future as it continues to grow?
Mr. Ren: I joined the military during China’s Cultural Revolution. At that time, there was chaos almost everywhere, including in agriculture and the industry. The country was facing very difficult times. These difficulties were reflected in people’s diets and clothing. I remember that, back then, at the most difficult of times, every Chinese person was allotted only one-third of a meter of cloth. That amount could be used only for patching. So I never wore clothes without patches when I was young.
The central government hoped that every Chinese person could get at least one decent piece of clothing every year, so they decided to introduce the most advanced equipment from a French company called Technip Speichim and build a large synthetic fiber factory. This was used to produce some synthetic fibers with the hope that every Chinese person could be given synthetic fabric clothes. The factory was situated in a northeast city called Liaoyang, which is along a river called the Taizi River. The conditions there were very harsh. Back then, China was in complete chaos, and the central government was trying to mobilize local engineering teams for the construction of that factory. However, no team answered the call. Therefore, the government had to mobilize military teams to build the factory.
It was a very advanced set of equipment from the French company, and the engineering capabilities of the military were not up to the task. I had been to college, and people like me could play a role in that project.
When we just arrived at the site, it was dozens of square kilometers, and there was no housing at all. So everyone slept on the grass. Later, the factory got some funding and built some shabby housing that provided little shelter from the rain and wind. It was minus 20-something degrees Celsius outside. You can image how harsh the conditions were. If you ask me how I felt back then, I would say: First, we had been given access to the world’s most advanced technology. That French company had a very high level of automated controls that no Chinese companies had. This was the first time that I had learned what the world’s most advanced technology looked like.
Second, we learned to endure hardship. Our housing was very shabby, so we constantly felt cold as it couldn’t protect us from the wind. Just imagine, the temperature could drop to minus 28 degrees Celsius. China was facing huge economic challenges at that time. The supply of meat and cooking oil was very limited. For ordinary people living in Northeastern China, their monthly supply of cooking oil was around 150g. There was no supply of fresh vegetables at all, so we had to pickle some vegetables like cabbages and radishes we got in autumn in large concrete pots, and rely on pickled foods for six months at a time. Our staple food was sorghum. It was far from delicious. So in a nutshell, we learned from the world’s most advanced technology while living a life that could be seen as primitive. That’s how I felt back then.
But I was happy then, because if you read too many books in other parts of the country, you could get criticized. The factory was probably one of the few places that people could read. We had to read to understand how this modern equipment worked. At the time, I was a technician of a company in the military, and then I became a deputy director of a small construction research institute with just twenty plus people. That’s actually a title equivalent to a deputy-regimental level. My dream back then was to reach the military rank of Lieutenant-Colonel before China disbanded its military forces. Unfortunately, that did not happen. So I’m just a veteran without a military rank.
2. It is reported that you participated in the National Congress of the Communist Party of China back in 1982. Why did you attend that conference, and what is the relationship between Huawei and the Communist Party of China today?
Mr. Ren: When we built the synthetic fiber factory, we ran short of a kind of instrument used to test the advanced equipment. One technician with the Shenyang Automation Research Institute told me that he saw similar instruments when he traveled abroad, and he described to me what they looked like.
Through mathematical inference, I was able to produce a design of the instrument in question. But I was not 100% sure if my mathematical inference was correct, so I went to consult a professor with the Northeastern University of China. His name was Li Shijiu. I wanted to confirm whether the inference made sense. The professor affirmed my inference. In the end, I invented that instrument.
That’s also the time when the “Gang of Four” was smashed and the country was trying to find readily available examples to demonstrate that science and technology were valuable. My little invention was exaggerated into something really big and it was promoted in various media outlets, including newspapers, magazines, movies, etc. And because of such massive publicity, luckily I was chosen to be a member of the National Science Conference.
If you are aware, that’s a time when you had to be a CPC member even to become the head of a cooking team in the military. I was selected to attend the National Science Conference, but I was not a CPC member. My supervisor felt that was really strange, so with the help of party organizations, I became a CPC member. The reason I was not a member was not because I didn’t do my job well enough. It was because of my family background.
My father was labeled as a “capitalist roader”. For this, he was actually locked up in a cow barn at one point in time. You know, for an educated person back then, an intellectual, his or her background or history would be much more complicated than that of a cadre among farmers and workers. It was because of such close scrutiny of my father that he was in such a difficult situation for over 10 years before his name was cleared. And because of this family connection, there was no possibility for me at the time to become a CPC member.
After I joined the party in 1978, China encouraged leaders to have “four qualities”: young, professional, educated, and revolutionary. I happened to meet the requirements, and was recommended to be a member of the 12th National Congress of the Communist Party of China. And in the end, I was selected. Unfortunately, I was too young to truly understand what the big reform was all about in that historical moment. That was really a pity. I was a complete technical geek back then. Today, I still love my country. I support the Communist Party of China. But I will never do anything to harm any other nation.
3. The security concerns raised by governments such as the US and Australia are not about the capabilities of Huawei’s technologies. These governments appear to be concerned that every company in China, fundamentally Huawei, is under the authority of the Communist Party of China. What assurances can you give foreign customers that Huawei can protect the safety of their networks and confidentiality of information? Under the legal circumstances of China, what can Huawei say to customers about the limits of its abilities to give assurances about that?
Mr. Ren: The first point I want to make is that over the past 30 years, our products have been used in more than 170 countries and regions, serving more than 3 billion users in total. We have maintained a solid track record in security. Huawei is an independent business organization. When it comes to cyber security and privacy protection, we are committed to siding with our customers. We will never harm any nation or any individual. Secondly, China’s Ministry of Foreign Affairs has officially clarified that no law in China requires any company to install backdoors. Neither Huawei, nor I personally, have ever received any requests from any government to provide improper information.
Pardon me. I’m not arguing with you. Any government, the United States or Australia, would say you are a company that sells networks. A customer has to trust a vendor with the most secret information about how a national telecommunications network operates. Suppose, for instance, the Ministry of State Security were to come to Huawei to ask Huawei to give information about a foreign country to the Ministry of State Security. Legally, there’s nothing Huawei can do to refuse. Huawei must obey. So what can and will Huawei do to reassure customers?
Mr. Ren: Can I sell Huawei to you?If you cannot afford [to buy Huawei], I would probably have to shut the company down. Customer-centricity has been at the very core of Huawei’s business operations since our founding. We will never do anything to harm the interests of our customers. Apple is an example we look up to in terms of privacy protection. We will learn from Apple. We would rather shut Huawei down than do anything that would damage the interests of our customers in order to seek our own gains.
4. About your daughter, Meng. It’s over a month since she was detained in Canada. How do you feel, knowing this was an[extradition]
request? Do you feel your daughter has been targeted because she is your family member and because of her position in Huawei?
Mr. Ren: As you must be aware, the case of Meng Wanzhou right now is in legal proceedings. So, we’d rather leave it to legal proceedings. I won’t provide much comment about it here.
As Meng Wanzhou’s father, I miss her very much. And I’m deeply grateful to the fairness of the Honorable Justice, William Ehrcke. I’m also much grateful to Prosecutor John Gibb-Carsley and Prosecutor Kerri Swift. I also thank the Alouette Correctional Centre for Women for its humane management.
I also appreciate the consular protection that the Chinese government has provided in safeguarding the rights and interests of Meng Wanzhou as a Chinese citizen. I trust that the legal systems of Canada and the United States are open, just, and fair, and will reach a just conclusion. We will make our judgment after all the evidence is made public.
5. Your daughter has been treated like this; and you mentioned just now that you trust the legal proceedings. But is it because Meng is part of your family that she is being targeted by US and Canada? How do you feel?
Mr. Ren: You know, I certainly do not have access to the email correspondences between the American Department of Justice and the Canadian Department of Justice. Maybe in the future when they make this evidence public, I will see whether it is because Meng is my daughter that she is being targeted. We will wait to see more evidence that is made public in the proceedings that follow.
6. Earlier you referred to the case when Apple was asked to hand over evidence from an iPhone and they took it to court. Is that what you will do if there was a request from the Chinese government for data from the networks? Secondly, what kind of correspondence do you have with the US authorities around some of the other engagements that may let you back in the market?
Mr. Ren: We don’t have any channels for communicating with the US government, and, honestly, we don’t know much about each other. Regarding what would happen if the implied cyber-security case occurred, I believe I have made myself very clear: We will never harm the interests of our customers.
7. A couple of points have been raised already regarding issues which foreign nations may consider as causes of concern for Huawei, namely military background, affiliations with the communist party, etc. Another primary concern is Chinese government’s ownership for Huawei. If Huawei claims to be an employee-owned company, why do you keep the shareholding structure (information) private?
Mr. Ren: First, I think there are very few success stories where public companies become strong and big. Capital tends to be greedy. Whenever there is an immediate interest, capital tends to take it away, and that would certainly compromise the long-term pursuit of ideals. We are a private company, so we are able to remain committed to our long-term ideals.
Ever since we were a relatively small company, with just several hundred employees, we have focused all of our efforts in one direction. Even as we grew larger, to several thousand, tens of thousands, or even today with over 100,000 employees, we have maintained the same focus as we move forward.
Our annual R&D investment has reached 15 to 20 billion US dollars. Over the next five years, we are going to invest a total of more than 100 billion US dollars into R&D. Public companies, however, are unlikely to do this, because they focus on making their balance sheets look good. What matters more to Huawei is the future industry structure. Our decision-making system is different from public companies. It is very simple, and we are working hard to make the information society a reality.
Here, I also have a piece of information to share with you. We have 96,768 shareholding employees. On 12 January 2019, we completed the election of the new representatives of shareholding employees at 416 polling stations across over 170 countries and regions. The entire process of this election lasted about one year. We first communicated our Articles of Governance to all employees. Through those efforts, our employees became more familiar with how the corporate governance structure of this company works.
Then, we nominated candidates at different tiers of our organization. All candidates then gave some presentations to win the support of the constituency. At that time, they were only nominated, not yet elected. Then the list of nominated individuals was put together, and submitted to a higher-level department for review. Feedback from more shareholding employees was collected. After that, we had a certain level of convergence, meaning the list of individuals was narrowed down. And then that shortlist was subject to reviews, discussions, and deliberations at higher levels of the company, which also took into account the opinions of people around those individuals. The shortlist then got shorter. This list was reported to the Election Committee, then it was sent back again, further polished and narrowed down to a list of roughly 200+ individuals. This list was published on our internal information sharing platform to collect employee feedback, and then the list of candidates was finalized.
On January 12, we completed the voting – the election – of our shareholding employee representatives around the world. Over the past few days, our messengers around the world have been taking those votes back to Shenzhen. We are going to calculate the votes on our electronic platform, and audit the authenticity of those votes. Eventually, we will come up with 115 representatives for all shareholding employees. The Representatives’ Commission, consisting of these 115 employees, is the highest decision-making authority in Huawei, and the company is owned by our 96,768 shareholding employees.
Our shareholding employees are currently working at Huawei or are retired former employees who have worked at Huawei for years. There is no single individual that owns even one cent of Huawei’s shares without working at Huawei. There is no external institution or government department that owns our shares, not even one cent’s worth. We have a shareholding registry that lists the shares held by our shareholding employees. Journalists who are interested are welcome to take a look at it.
I myself am the founder of this company. At the time when I wanted to found Huawei, I did not have enough money. When I got demobilized from the military, my wife and I received a total of CNY3,000 as compensation from the military. At the time, a minimum of CNY20,000 was required as registered capital to start a company in Shenzhen. By pooling funds from different people, I managed to get CNY21,000 to register Huawei.
Today, the total number of shares that I personally have within Huawei is 1.14%, and the stake that Steve Jobs had in Apple was 0.58%. That means there is still potential for my stake to be further diluted. I should learn from Steve Jobs.
8. Last year, the African Union said there was infiltration from the Chinese side on their (Huawei) equipment based in Ethiopia. What is your comment on that? You have said that Huawei will never harm the interest of any customer or individual. Suppose someone did something illegal in China and they left some trace on their Huawei smartphone. Huawei, by law, supposed to cooperate with public security authorities. So would it? And if the crime is committed outside of China, what would be Huawei’s actions in those cases?
Mr. Ren: For Huawei employees, whether they are Chinese or non-Chinese, if they violate local laws, we’ll always cooperate with the investigations. We stand strongly against any behavior that violates laws and regulations. Within Huawei, we have a very sound internal and external compliance management system. The idea is to prevent those wrongdoings or bad things from happening. Those who commit violations will be disciplined by our compliance department. Huawei may grow even bigger in the future. In the cloud era, our society is becoming more and more complex. If we do not govern our behavior through discipline, we might get overwhelmed.
For the breach of equipment used by the African Union, it had nothing to do with Huawei.
9. On how Huawei implements its disciplinary actions, just last week, a member of Huawei’s staff was arrested in Poland on suspicion of spying. Huawei has fired that employee already without waiting for the trial. Whereas when Meng was arrested in December, Huawei stood by her and trust her innocence. Why the difference?
Mr. Ren: Both cases are in the judicial process, and I’m not in a position to make further comments other than the information available from our official statements.
10. My question is more related to Huawei’s business. In light of recent developments, especially where some European countries have also stopped using Huawei’s equipment based on the concerns on cyber security. What impacts will this have, what plans does Huawei, how should Huawei address this kind of situation and to sustain its business in those markets, like Europe, US, and other Five Eyes countries?
Mr. Ren: First, it has always been the case that some customers accept Huawei and others don’t. This is nothing new at all. If only a handful of congressmen decide that Huawei should not be accepted, then that does not represent the entire government. We can reach out to talk with the right stakeholders. If those individual opinions become orders coming from a government, then we may have to stop our sales there.
One of the major topics currently in question is 5G. If you look at 4G, I do not believe there was any controversy or debate about it. So, for products where there is no such debate, we will continue working to drive our sales. Some countries have decided not to buy equipment from Huawei. Therefore, we can shift our focus to better serve countries that welcome Huawei. We can build high-quality networks in those countries to prove that we are trustworthy. Therefore, it’s like a peaceful race from a technical point of view, and I think that’s fair.
11. The Chinese foreign minister arrested two Canadian citizens on national security charges. Yesterday, a court pronounced a death sentence for a Canadian who was accused of drug charges. Suggestions are that the Canadians were detained ‘as hostages’ in connection with the arrest of Meng, and the drug case might have been influenced by that case. How do you feel about talks that you are personally connected to Chinese government taking hostages to help you or that there might be some political influence on this drug case to help your company?
Mr. Ren: First, I don’t know the whole story about this case, and it is not related to Huawei in any way.
12. On the rollout of 5G networks in coming years – A number of countries seem to take the US’ lead to in putting on new restrictions on Huawei’s participation in 5G, and perhaps even more broad restrictions. Last week Polish officials stated they would like a unified position with NATO with regards to Huawei. How will Huawei contend with these restrictions knowing that it might be effectively locked out from a significant chunk of the world’s telecommunications networks in the future, both from a business sense and a reputational sense?
Mr. Ren: To start with, I’m not sure how far this proposal will go, and whether or not Poland is able to push it through. I think countries like France and Germany might have a greater say in NATO.
So I’m not sure if Poland can get its proposal accepted. Even if they get what they want, it does not matter so much to Huawei. Because, as you know, we are not a public company – we aren’t overly concerned about beautiful numbers, or a nice-looking balance sheet. If we are not allowed to sell our products in certain markets, we would rather scale down a bit. As long as we can feed our employees, I believe there will always be a future for Huawei.
As I mentioned, right now our R&D investment averages 15–20 billion US dollars per year. That puts Huawei in the top 5 position across all industries in the world in terms of R&D intensity. In total, we have been granted 87,805 patents. In the United States, we have registered 11,152 core technology patents. We are actively involved in 360+ standards bodies, where we have made more than 54,000 proposals.
So we are the strongest in terms of telecommunications capabilities. I believe people will make their own comparison in the end between countries that choose Huawei and countries that don’t work with Huawei. Of course, there is no way we can control their choice.
In terms of 5G, we have signed 30-plus commercial contracts today, and we have already shipped 25,000 5G base stations. We have 2,570 5G patents. I believe that, as long as we develop very compelling products, there will be customers who will buy them.
If your products are not good, no matter how strong you go for publicity, nobody will buy them. So what matters to Huawei more is working to streamline our internal management, improve our products, and improve our services. I think that’s what we should work on to address the challenges of this changing world.
There are only several companies in the world working on 5G infrastructure equipment, and not many companies are engaged in microwave technology. Huawei is the only company in the world that can integrate 5G base stations with the most advanced microwave technology. With that capability, our 5G base stations don’t even need fiber connections. Instead, they can use superfast microwave to support ultra-wide bandwidth backhauls. This is a compelling solution that makes a lot of economic sense. It works best for sparsely populated rural areas.
We should not presume that rural areas are poor. A lot of villa districts in the US tend to be in the countryside. Without fiber, how can they enjoy an 8K resolution TV experience in the future? If Huawei is not involved in this, these districts may have to pay very high prices in order to enjoy that level of experience. By then, things might become very different. Those countries may voluntarily approach Huawei and ask Huawei to sell them 5G products rather than banning Huawei from selling 5G systems. We are a company that is customer-centric; therefore I think it is possible that we will sell our equipment to them.
13. Earlier you said if there was a request by the government to access data, to create backdoors and networks, then Huawei would deny it. Considering that you are a member of the Communist party, how can you not comply? Do you mean you have to actually fight against such request from the Chinese government? How do you assure your customers that if there was a request for something (along those lines), that you would actually be able to fight it?
Mr. Ren: We are a company, and we are a business entity. The values of a business entity are such that it must be customer-centric and the customer always comes first. We are a business organization, so we must follow business rules. Within that context, I can’t see close connections between my personal political beliefs and the business actions we are going to take as a business entity. I think I already made myself very clear earlier. We will certainly say no to any such request. After writing this quote in your story, maybe 20 or 30 years down the road, if I am still alive, people will consider this quote and check my behavior against it, as well as the behavior of our company.
Like you mentioned, Apple went to court against the government. Is there a system here such that you can take the government to court to fight such requests?
Mr. Ren: If I or Huawei deny those requests, I think it should be the government in question that files litigation against Huawei, not the other way around. Whether or not the government would file such litigation, I don’t know.
14. The trade war developing with the US seems to have moved beyond just a trade war, and the term “cold war” has come up a bit. Looking at the technology camps – GSM and CDMA, what are your thoughts on the two technology camps? Do the US and China lead these camps in technology, which is facing tailwinds similar to what we see in mobile platforms like Android and iOS?
Mr. Ren: I want to use the example of railways to answer this question. We once had diversified standards, with a narrow track, standard track, and wide track. This added many difficulties to the transportation industry throughout the world. Similarly, in the area of communication, we also have gone through a period where different standards coexisted. That also increased the deployment costs of the networks. We have seen that for 3G and 4G. In order to unify communications networks, we have worked hard to come up with a unified global standard. I think the 5G standard serves as a very good foundation for humanity to move toward an intelligent world. Arbitrarily dividing technology into two different camps will only harm the interests of the world. I believe the ideals of the technological community and scientists, as well as the wisdom of political figures coming together, will determine the future of humanity. Personally, I strongly support unified global standards.
15. On the case of the detained Canadians and the one sentenced to death – some of these cases don’t have anything to do with Huawei, but the perception is that they do have a connection to Huawei. Do you think this hurts Meng’s chances for her release? Also, how does your personal relationship with your daughter translate at the workplace at Huawei?
Mr. Ren: Personally, I don’t see any connection between those cases and the case of Meng. In Meng’s case, I believe we just need to leave the outcome to the proper legal proceedings.
As far as the relationship between me and Meng as father and daughter, I would say, it’s a close relationship in some aspects and not so close in others.
Why do I say it’s not so close? Throughout her childhood, I was in the military, which means that each year I was away for 11 months, spending one month with my family. Meng had to go to school, and after school, she had to do her homework. Therefore, our connection during her childhood and adolescence was not that strong. In addition, when I started Huawei, I had to fight for the survival of this company, spending 16 hours a day in the office. I have one son and two daughters, and I do not think my relationship with them was very close. As a father, I feel indebted to them. I once talked to all of them, asking if they would prefer we spent more time together as a family. The alternative I gave them was that I would build a platform upon which they could grow. Their response was, alright, we would choose a platform for our professional development.
Within Huawei, Huawei’s management system is one based on processes. Processes are cold things, and I do not directly supervise Ms. Meng’s responsibilities, so we don’t have a strong connection in the workplace, either. Of course, maybe after my retirement in the future, I will try my best to compensate for these things.
16. You talked about retirement. Do you have any plan right now to retire?
Mr. Ren: To your first question, the timing of my retirement will depend on when Google can invent a new medicine that will allow people to live forever. I’m waiting for that medicine.
You mentioned earlier that you do not have access or channels to talk to the US government. But right now we have so many foreign media outlets and journalists – what is your message that you want to communicate through us to the US government? Trump tweeted that he could intervene in Meng’s case if that would serve the trade negotiations with China. What would you say about that? And how do you feel about Donald Trump as a person?
Mr. Ren: The message to the US that I want to communicate is collaboration and shared success. In our high-tech world, it is increasingly impossible for any single company or even any single country to do the whole thing.
In the industrialization era, maybe one nation alone would have all the capabilities needed to produce a complete textile machine, a complete train, or a complete ship. We are in a world of information. In an information society, interdependence between one another is very significant. And it is these interdependencies that drive human society to progress even faster. The information society we are going to see will be massive. And for any single market opportunity, it cannot be sustained or supported by any single company. Instead, it calls for the concerted efforts of thousands or even tens of thousands of companies working together.
As for your third question, for President Trump’s comment that he might intervene in the case of Meng Wanzhou, we need to wait and see whether he acts upon this. Right now I can’t make a judgment about that.
And then for President Trump as a person, I still believe he’s a great president, in the sense that he was bold to slash taxes. I think that’s conducive to the development of industries in the U.S.
With the increasing adoption of AI in industry and also in the management of companies, traditional challenges like trade unions, social welfare issues, and possible strikes might be mitigated.
Reducing taxes is conducive to encouraging investment. It is like digging a trench in the ground, which makes it easy for water to flow into that trench. However, it’s also important to treat all countries and all companies – which are potential investors – nicely, so that they will proactively invest. Benefits from increased investment can offset loss of revenue from tax cuts for the government.
If countries or companies are frightened, let’s say, by the detention of certain individuals, then those potential investors might be scared away, and the favorable environment created by tax cuts will not perform to expectations.
17. The suspicion around Huawei’s 5G in Europe and the United States is not all about technology; it’s about politics as well. Some people even argue that Huawei perfectly embodies the cold war going on between China and the US. What do you have to say about that?
Mr. Ren: First, I would say Huawei is not that important. We are like a small sesame seed, stuck in the middle of conflict between two great powers. What role can we play? The trade conflict between China and the US has not had a major impact on our business. We are expected to continue our growth in 2019, but that growth won’t be greater than 20%.
Second, some people in the West believe that Huawei’s equipment is stamped with some sort of ideology. That’s as silly as people smashing textile machines back during the industrial revolution, as they thought advanced textile machines would disrupt the world. We only provide equipment to telecom operators, and that equipment doesn’t have an ideology. It is controlled by telecom operators, not by Huawei. So I definitely hope that people do not go back to the old days of the industrial revolution when textile machines were being smashed.
18. Earlier you spoke about the need for the telecom industry worldwide to be integrated and be interconnected. Let’s look at what happened to your state-owned rival ZTE last year when sanctions of America shut down the company’s production. Are you worried that it would stifle Huawei’s business if the US were to impose sanctions?
When Huawei was just still a manufacturer of telephone switches, you told Jiang Zemin at a meeting that telephone switches are related to national security, and that a country without its own telephone switches is a country without its own military. What did you mean by that? Do you still think domestically producing telecoms equipment is vital to China’s national security?
Mr. Ren: We have been investing heavily in R&D for years, and we have extended great effort. We are a company that is different from ZTE. What has happened to ZTE, I believe, will not happen to Huawei. On top of that, we have made it clear in our corporate policy and fundamental business principles that we must abide by all applicable laws and regulations in the countries where we operate, including all applicable export controls and sanction laws and regulations of the United Nations, the United States, and the European Union. We are committed to building and improving our compliance system.
If this type of situation did happen to Huawei, it would impact Huawei, but I think the impact would not be very significant. That is because I believe telecom operators around the world would continue to trust us.
Let me give you some examples. One example is the tsunami that happened in Japan. There was nuclear leakage in Fukushima. People were evacuated from the affected areas, but Huawei employees went to the affected areas to restore telecommunications equipment. Huawei employees risked their lives and restored 680 base stations within two weeks. That was a really important lifeline, especially in those difficult times. Meng Wanzhou also flew from Hong Kong to Japan during that time. There were only two passengers on that flight. Huawei is a company that does not run away in the face of disasters. Instead, we march toward those disaster-stricken areas.
The second example is a tsunami that happened in Indonesia. 47 Huawei employees restored 668 base stations in affected areas within 13 hours, supporting the disaster relief efforts.
Another example is the 9.1-magnitude earthquake that happened in Chile. Three Huawei employees were out of touch at the epicenter of the earthquake. The local team sought my opinion when they were about to send a rescue team. I thought there could be subsequent earthquakes and I feared that there would be even greater losses if we were to send the rescue team. We decided to wait patiently. Finally, those three individuals managed to contact their supervisor. That supervisor told them where microwave equipment was broken. And then those three individuals returned to repair the microwave equipment. We then shot a short movie based on their experience. Afterwards, I went to Chile and talked with those employees. The richest man in Chile gave me a box of very good wine as a gift. I gave it to the three employees.
The other example is Africa. In a lot of African countries, there is not only war, but also very serious disease. A lot of Huawei employees have contracted malaria. A great number of Huawei employees often go to war- or disease-affected areas to do their job. We have pictures to prove it. If you are interested, we can have our public relations staff send them to you.
We’re able to do these things partly because we are not a public company, so we can work truly for our ideals, and for the greater good of society. Public companies tend to focus more on their financial numbers. So no matter how harsh the conditions are, we have committed ourselves to working for the bigger ideals of human society.
I also visited a village near Mount Everest at an altitude of 5,200 meters, as well as the base stations nearby. I told everyone that, if I’m personally afraid of death, how could I motivate my people to charge forward?
If Huawei were a public company, I think a lot of behavior that I shared with you just now would not have been possible. Over the past 30 years, Huawei has made very admirable contributions to the progress of people around the world, especially people living in poor and remote areas. Some of our people have even sacrificed their lives. Those people should never be forgotten. Likewise, we should not forget the contributions that Huawei has made to human society. More importantly, we shouldn’t allow suspicion to confuse the facts.
For your second question, President Jiang Zemin once came to visit Huawei. That was a time when Huawei was very, very small, and the floor, made of cement, was still wet, not even dry yet. President Jiang did not give any specific instructions. I have never heard of what you mentioned just now. But he did encourage us to work harder.
19. Who do you have in mind to succeed you as the CEO of Huawei? About your role in setting Huawei’s culture, which is known for, it’s very aggressive, with high standards, and is described by people as “wolf culture”. What’s your role in shaping Huawei’s culture?
Mr. Ren: The only reason Huawei exists is to serve our customers. Authority is the propellant and lubricant that drives our shared values. Those who will succeed at the highest levels of leadership and those who will hold the authority in their hands will serve as the propellant and lubricant for driving our shared values forward. If authority is not tempered by constraint, it will hinder or even destroy our shared values. Therefore, our Articles of Governance are designed with the idea of realizing a division of authority, shared progress, and checks and balances. This will ensure that the authority flows in a closed loop, and renews itself with every circulation.
The company cannot place its future squarely on the shoulders of any single individual. If this person runs into trouble, then wouldn’t that mean our company’s operations would halt? In light of the future uncertainties in the environment where we survive and thrive, we must stick to collective leadership so that we can overcome one difficulty after another, and continually achieve success.
The vitality and continuity of this collective leadership mechanism will be achieved through orderly succession. As I mentioned earlier, we completed an election that was attended by 96,768 employees across 170 countries and regions. This whole governance structure is meant to form a new institution of authority. Therefore, it is the succession at an institutional level that we are looking at and using to guarantee that our shared values, essentially customer centricity and customer value creation, are safeguarded and inherited.
We have several layers of different governance bodies. For each level of governance, the roles and responsibilities are focused and clear. There are divisions of authority, while at the same time checks are conducted and balance is maintained. That will help prevent authority from becoming too concentrated.
In addition, this helps prevent authority from being used without constraint and stops it from being abused. For example, one governance body within Huawei is what we call the Core Elite Group. The members of the Core Elite Group used to be board members and members of the Supervisory Board. The Core Elite Group is intended to safeguard the long-term interests of Huawei, and also is entrusted with the authority to select governance leaders. We drew inspiration from a famous European management guru, Fredmund Malik, when we designed this governance structure. We also draw inspiration from the governance structure of other established companies throughout Europe and around the world.
Board members are selected based on meritocracy. Their responsibility is to grow more crops or increase the fertility of our soil. They are supposed to lead the company forward. Seniority does not matter when we select board members. Members of the Supervisory Board are selected based on integrity. They oversee the performance of the board members and other senior executives. This is what we mean by authority flowing in a closed loop and renewing itself through every circulation.
We currently have three rotating chairmen. Each of these takes turns to be in charge for six months. During those six months, that individual is the highest leader in Huawei. But this highest leader is also subject to the law of our company. The law is our Articles of Governance, and the authority of the Rotating and Acting Chairman is also subject to our collective decision-making mechanism. In other words, the Rotating and Acting Chairman has the right to propose a motion. These motions are then subject to discussion among the three rotating chairmen before they can be presented to the Executive Committee of the Board of Directors.
The Executive Committee consists of seven executives. They will vote, and a majority must be achieved before any motion can be then presented to a plenary session of the Board of Directors. During a plenary session of the Board of Directors, we also follow the principle of majority. No motion can become a board resolution until it passes voting or a decision is made at the plenary session.
Apart from the rotating chairmen, we also have a Chairman of the Board. The Chairman of the Board chairs the Representatives’ Commission to ensure rules set out in the Articles of Governance are followed by the Executive Committee and the whole Board of Directors
We also have the Supervisory Board, which supervises the behavior of board members. So to your question, I don’t know exactly who my successor will be. Successors will naturally appear during this circulation, and this process of renewing authority. It’s not someone that I appoint. I am not a king.
20. What is your business outlook for 2019? How much is at the front of your mind, given that some of your European competitors like Ericsson, are struggling. Would you diversify and what is your revenue outlook for this year?
Mr. Ren: In 2019, we might face challenges and difficulties in the international market. That’s why I said earlier that our growth next year would be less than 20%, and I think our annual revenue for 2019 will probably be around 125 billion US dollars. We will not take advantage of the difficulties that our peers like Nokia and Ericsson are facing, in order to seize their market shares. I also think that the macro environment is in their favor, because there are restrictions on Huawei in some countries, but there are no restrictions on those companies. Therefore, I believe they may have more opportunities than Huawei.
21. What is the relationship between Madam Sun Yafang (EITN: Huawei’s Chairwoman) and Chinese Ministry of State Security (EITN: aka People’s Liberation Army ‘PLA’)? What is your business collaboration with the PLA, or PLA-related institutions? What type of products do you provide to them? Third, is there any R&D collaboration or partnerships between Huawei and PLA-affiliated institutions?
Mr. Ren: For thefirst question, the biography of Madam Sun Yafang is available on Huawei’s website. Second, we are probably selling a small amount of civilian products to the PLA, but I don’t know the exact number, because it is not our major customer. Third, we don’t have any R&D collaboration or partnerships with the PLA-affiliated institutions.
22. On President Trump and the investment environment in the US. What are your views on the issues of trade war which is the access of American companies to the Chinese market? Currently foreign investment in Cloud, where Huawei is involved, is quite restricted. Do you think China should open up the access for foreign companies and what impacts will this have on Chinese technology companies?
Mr. Ren: I’m a person that always advocates open policies; however, I’m not the one who is making decisions.
I can share several stories with you. In 2003, there was litigation between Huawei and Cisco that drew wide attention at the time. Back then, Huawei was still a fairly small company. That was, I would say, an overwhelming case that we had to deal with, and I personally felt enormous pressure, which was mainly attributable to a lack of experience. However, even back then, I didn’t try to win the case by inciting nationalistic sentiments against Cisco. Several years later at an airport meeting that I had with John Chambers, he told me that he was aware of Huawei’s attitude towards Cisco at the time. This is because we believe that China, as a nation, would only have hope once it opens up and implements reform. The country should not close its door simply because of one company, Huawei.
When unexpected huge incidents happened, like US companies that suddenly decided to stop buying Huawei phones, some people in China said we should do the same to Apple’s iPhones in China. My opinion was that the Chinese government should not take similar measures against Apple in China. The national interests or policies around economic reform and opening up cannot be sacrificed for the benefit of Huawei. Even in light of the recent setbacks we encountered in some Western countries, we still support China, as a country, to become even more open. I think China can become more prosperous only when it becomes more open, and continues to press ahead with its reform agenda.
Wrap-up by Mr. Ren: I want to thank every one of you for spending so much time listening to me. I know I do not always speak very precisely, but I think this has been a fantastic opportunity for us to get to know each other better.
I also believe there will be future opportunities for us to meet with each other. Maybe we can deep dive into some of your questions in the future. I think today we covered a lot of topics, and by asking broader questions, I think you have done me a favor. I’m usually more concerned about interrogation-type questions with many follow-up questions. After our meeting today, I think we can drink coffee together some time and have some more casual talks. However, please don’t make those casual talks into headlines. I believe we will have more heart-to-heart talks. Once again, my sincerest thanks to all of you.