Huawei CEO admits US ban will cut into lead over rivals, objects to retaliation against Apple

Huawei Technologies co-founder Ren Zhengfei said that his company had the capability to devise its own solutions to the United States' export curbs, given time.
Huawei Technologies co-founder Ren Zhengfei said that his company had the capability to devise its own solutions to the United States' export curbs, given time.PHOTO: AFP

BEIJING (BLOOMBERG) - Huawei Technologies co-founder Ren Zhengfei struck a defiant tone in the face of United States sanctions that threaten his company's very survival.

In an interview with Bloomberg Television, the billionaire founder of China's largest technology company conceded that Trump administration export curbs will cut into a two-year lead Huawei had painstakingly built over rivals like Ericsson and Nokia.

But the company will either ramp up its own chip supply or find alternatives to keep its edge in smartphones and 5G.

The US on May 17 blacklisted Huawei - which it accuses of aiding Beijing in espionage - and cut it off from the US software and components it needs to make its products.

The ban hamstrings the world's largest provider of networking gear and No. 2 smartphone vendor, just as it was preparing to vault to the forefront of global technology.

It is rocking chipmakers from America to Europe, as the global supply chain comes under threat. The ban could also disrupt the roll-out of 5G wireless globally, undermining a standard that is touted as the foundation of everything from autonomous cars to robot surgery.

Mr Ren maintained that Huawei had the capability to devise its own solutions - given time.

 
 
 

It has been designing its own chips for years, which it now uses in many of its own smartphones. It is even developing its own operating software to run phones and servers.

The chief executive officer however deflected questions about how quickly Huawei can ramp up those internal replacement endeavors. Failure could dent the fast-growing consumer business and even kill emergent efforts such as cloud servers.

"That depends on how fast our repairmen are able to fix the plane," said Mr Ren, who appeared at ease in a white jacket over a pink shirt, making light of questions about his company's plight.

"No matter what materials they use, be it metal, cloth or paper, the aim is to keep the plane in the sky."

Mr Ren has gone from recluse to media maven in the span of months as he fights to save the US$100 billion (S$138 billion) company he founded.

The 74-year-old billionaire emerged from virtual seclusion after the arrest of eldest daughter and chief financial officer Meng Wanzhou as part of a broader probe of Huawei.

He has since become a central figure in a US-Chinese conflict that is potentially the most important episode to shape world affairs since the collapse of the Soviet Union.

As Mr Ren said in January, when the world's biggest economies battle for dominion, nothing in their way will survive. His company is a "sesame seed" between twin great powers, he said.

 
 
 

Mr Chris Lane, an analyst at Sanford C. Bernstein & Co, said: "This may bring one of China's national champions to its knees.

"If China shut down all the Apple plants, the US would get very upset. This is a similar kind of move."

Mr Ren has had much to deal with of late. His company finds itself increasingly under fire, besieged by a US effort to get key allies to ban its equipment. The US assault helped crystallise fears about Huawei's growing clout in areas from wireless infrastructure and semiconductors to consumer gadgets.

Then came the blacklist. Huawei appears to have anticipated this possibility since at least mid-2018, when similar sanctions threatened to sink rival ZTE Corp. Huawei is said to have stockpiled enough chips and other vital components to keep its business running for at least three months.

"We have made some really good chips," said Mr Ren, a legendary figure in his home country thanks to the way he built Huawei from scratch into a global powerhouse.

"Being able to grow in the toughest battle environment, that just reflects how great we are."

Last week, US President Donald Trump said Huawei could become part of a US-Chinese trade deal, stirring speculation it was a bargaining chip in sensitive negotiations.

But Mr Ren said he wasn't a politician.

"It's a big joke," he scoffed. "How are we related to China-US trade?"

If Mr Trump calls, "I will ignore him, then to whom can he negotiate with? If he calls me, I may not answer. But he doesn't have my number".

In fact, Mr Ren pulled no punches in going after a man he labelled "a great president" just months prior.

"I see his tweets and think it's laughable because they're self-contradictory," he quipped. "How did he become a master of the art of the deal?"

Beijing itself isn't without options. Some speculate China might retaliate against the ban of Huawei - which may widen to include some of its most promising AI firms - by in turn barring America's largest corporations from its own markets. Apple could relinquish nearly a third of its profit if China banned its products, Goldman Sachs analysts estimate.

Mr Ren said he would object to any such move against his American rival.

"That will not happen, first of all. And second of all, if that happens, I'll be the first to protest," Mr Ren said in the interview.

"Apple is my teacher, it's in the lead. As a student, why go against my teacher? Never."

At the heart of Mr Trump's campaign is suspicion that Huawei aids Beijing in espionage while spearheading China's ambitions to become a technology superpower.

It has been accused for years of stealing intellectual property in lawsuits filed by American companies from Cisco Systems and Motorola to T-Mobile US. Critics say such theft helped Huawei vault into the upper echelons of technology - but Mr Ren laughed off that premise.

"I stole the American technologies from tomorrow. The US doesn't even have those technologies," he said.

"We are ahead of the US. If we were behind, there would be no need for Trump to strenuously attack us."

Mr Ren's easy demeanor belies the way he has consistently shunned attention. The army engineer-turned-entrepreneur has this year turned in a command performance in the public spotlight, particularly for someone who has rarely spoken to foreign media since he created Huawei.

The re-emergence of the reclusive CEO - who before January last spoke with foreign media in 2015 - underscores the depth of the attacks on Huawei, the largest symbol of China's growing technological might. Mr Ren again waved off speculation his company is in any way beholden to the Communist Party, though he has declared his loyalty ultimately lies with the country's ruling body.

US lawmakers aren't convinced. That's why the US Commerce Department cut off the flow of American technology - from chips to software and everything in-between.

An iconic figure in Chinese business circles, the billionaire remains a uniquely placed voice in a conflict that will help define the global landscape. Mr Ren, who says he survived the chaos of the Cultural Revolution thanks in part to his much sought-after expertise in high-precision tools, remains a big believer that Huawei's technology will win the day.

His company today generates more sales than Internet giants Alibaba Group Holding and Tencent Holdings combined.

In 2018, Huawei overtook Apple in smartphone sales, a triumph that burnished his tech credentials. His quotes adorn the walls of the food court at Huawei's sprawling campus on the outskirts of the southern metropolis of Shenzhen, and employees still speak of him in reverent tones.

The company's 2018 report shows he has a 1.14 per cent stake, giving him a net worth of US$2 billion, according to the Bloomberg Billionaires Index.

Mr Ren, who survived Mao Zedong's great famine to found Huawei in 1987 with 21,000 yuan, said Huawei will do whatever it takes to survive. It will ignore the noise while doing its business the best it can. Meanwhile, the pressure is bound to take a toll.

At one point during the interview, Mr Ren's unflappable demeanor cracked - if only for a minute.

"The US has never bought products from us," he said, bristling.

"Even if the US wants to buy our products in the future, I may not sell to them. There's no need for a negotiation."