Huawei’s love-hate relationship with the US

The Chinese telecommunication equipment maker Huawei is persona non grata in the US after its Congress labelled it a “national security threat". However, that won't stop the company and its enigmatic founder from admiring the US and the American way of doing business.

Ren Zhengfei, the founder of the world’s largest telecommunication gears maker, spoke to the Chinese media for the first time since he started the company 27 years ago. It is interesting that he invited Chinese journalists to attend Huawei's "operational excellence" award ceremony in honour of the 10 Whiz Kids of Ford.

The Whiz Kids were ten talented former young officers from the US Army Air Force who created a management information system that provided data on airplanes, personnel and munitions to help generals to make decisions. They were hired by Henry Ford II to revitalise the car giant and they were widely credited for transforming Ford. The most famous Whiz Kid is Robert McNamara, who became the president of Ford, the World Bank and the secretary of defence under John F Kennedy.  

Ren spoke highly of these American whiz kids and their contribution to the advancement of modern corporate management using a data-driven decision-making process. He emphasised the necessity to learn from advanced Western management practices, describing it as the synthesis of hundreds of years of corporate experiences of failures and successes and a treasure trove for humanity.  

"In the last twenty years, we have spent billions on importing Western management systems from the West," he told a gathering of Chinese journalists. "We must humbly and systematically learn it and it is not possible to innovate and to succeed without a modern management system. We can only march forward on the shoulders of giants."

Chinese journalists bombarded Ren for over an hour on issues ranging from public listing to succession planning at Huawei. China Spectator will examine the key issues raised at the conference below.

  1. What is Huawei’s succession plan?

Ren, the founder of Huawei, is already 71 years old, and there is a lot of speculation about succession planning at the world’s largest telecommunication gears maker. Ren hinted strongly that he would not be retiring any time soon, citing examples of Hank Greensberg, the founder of American Insurance Group and a personal friend, who was still running the insurance giant when he was 88 years old.

Ren also made it clear during the interview that his family members, including daughter Cathy Meng, who is the chief financial officer of Huawei, would not succeed him at the company. The company has a so-called rotating emperors system of three chief executives taking terms to run the company. 

  1. Ren’s love-hate relationship with the US

There is little doubt that Ren is a big fan of the US and even a personal friend of John Chambers, chief executive of Cisco, Huawei’s arch-rival. He says the US is an example for Huawei to emulate.

"Its advanced institutions, flexible system, clearly defined property rights, basic respect and protection for human rights. Such a good business environment attracts the best talent from around the world and offers hundreds of millions of people the opportunity to innovate and to compete against each other, such power is enormous," he said.

IBM has played a key role in transforming Huawei’s management structure since 1998.

However, Ren didn’t mince his words when he was asked whether the US' decision to exclude Huawei from its market was politically motivated. Huawei has been largely excluded from the US market and the Congress has labelled the company a “national security threat.”

Ren, a former PLA engineer, believes Huawei is a victim of the power struggle between Washington and Beijing. “The US will push back on China as it gets stronger. The push back is not theoretical and it is carefully calibrated. The strike on Huawei is not about the company, it is about China, the Americans must find a point of attack [Huawei].”

  1. Why is Huawei so media shy?

Ren only offered three interviews recently to New Zealand, French and British media in light of the company’s increasingly global profile and its alleged link to the Chinese military and intelligence.

The unassuming business tycoon explains that although the company makes about $45 billion a year in revenue, its main customers, who are mostly large telco operators, number only 350. Segmented marketing makes better sense, he says.

"I have to face foreign media, because operating conditions abroad force me to do that. I don’t have problems at home, so I don’t have to see you [journalists] but I am afraid of offending you," he told an almost adoring group of Chinese reporters.

Ren believes the best advertising for the company is the fact that Huawei engineers soldier on during the Libyan civil war as well as the devastating earthquake at Fukushima nuclear plant.

  1. Will Huawei float on the stock market in the future?

One of the main black marks against Huawei is its opaque corporate structure and the company claims Huawei is collectively owned by 150,000 employees. US legislators and other commentators have suggested a public listing of Huawei as a possible way to address the allegation against its non-transparency.

Ren pretty much ruled that out as a possibility, at least in the foreseeable future.  He says the company has more than enough cash to bank-roll its growing R&D budget which is expected to be around $8 and $10 billion every year.

He believes the injection of new equity will seriously undermine the company’s management structure, which he thinks is still a work in progress. “If we change too fast, we stand the real possibility to lose everything that we have built so far. Therefore we will not go into the capital markets and diversify our shareholding,” he said.

China Spectator will bring you part two of Ren Zhengfei’s interview tomorrow.