Huawei founder urges shift to software to counter US sanctions

Huawei founder Ren Zhengfei's note said the software push would depend on finding the right business model.
Huawei founder Ren Zhengfei's note said the software push would depend on finding the right business model.PHOTO: REUTERS

SHENZHEN (REUTERS) - Founder of Chinese tech giant Huawei Technologies Ren Zhengfei has called on the company's staff to "dare to lead the world" in software as the company seeks growth beyond the hardware operations that US sanctions have crippled.

The internal memo seen by Reuters is the clearest evidence yet of the company's direction as it responds to the immense pressure sanctions have placed on the handset business that was at its core.

Mr Ren said in the memo the company was focusing on software because future development in the field is fundamentally "outside of US control and we will have greater independence and autonomy".

As it will be hard for Huawei to produce advanced hardware in the short term, it should focus on building software ecosystems, such as its HarmonyOS operating system, its cloud AI system Mindspore, and other IT products, the note said.

Former US president Donald Trump put Huawei on an export blacklist in 2019 and barred it from accessing critical US-origin technology, impeding its ability to design its own chips and source components from outside vendors.

US President Joe Biden's administration has given no indication it will reverse Mr Trump's sanctions.

The blacklist also barred Google from providing technical support to new Huawei phone models and access to Google Mobile Services, the bundle of developer services upon which most Android apps are based.

Huawei's 2020 annual report did not break down how much of its 891.4 billion yuan (S$184.4 billion) revenue was from its software.

Open source approach

Mr Ren's note also said the software push would depend on finding the right business model and that the company should adopt an open source approach, calling on staff to "absorb nutrients" through open source communities.

He said the company's Welink business communication platform had relied on traditional software licensing, which was unsuited to cloud computing and inferior to a rival product from tech giant Alibaba.

Given the difficulty of working in the US, Mr Ren's note said the company should strengthen its position at home and build up its territory with a view to possibly excluding the US.

"Once we dominate Europe, the Asia Pacific and Africa, if US standards don't match ours, and we can't enter the US, then the US can't enter our territory," it said.

Mr Ren's note confirms a direction implied by previous announcements from the company that hinted at a shift away from handset hardware.

Rotating chairman Eric Xu in April said the company would invest more than US$1 billion (S$1.33 billion) this year in its intelligent driving business.

It is also expanding its smart car partnership with state-owned Chongqing Changan Automobile to include the design and development of auto-use semiconductors, sources told Reuters earlier this month.

Apart from the pressure of sanctions, Huawei is known for its gruelling work culture and the note recommended the software teams should hire psychology professionals to help young recruits who might find the company emotionally challenging.

"Now some young people have high IQs, but their EQ might be low, and their mentality is not mature, and it's easy for them to get sick," Mr Ren said.