Huawei boss talks of transformation from the Cultural Revolution to a $125bn company

Ren Zhengfei.jpg

Huawei founder Ren Zhengfei, who set up the company in 1987, expects it to grow 20% this year to achieve sales of $125 billion.

Ren never talks to the media, I was told by a senior executive when planning my December 2018 visit to the company. But this week, six weeks later, he did finally speak to a round table of media people.

He was surprisingly frank about China’s Cultural Revolution, the period in the 1960s when Communist leader Mao Zedong purged opponents and built a personality cult. “At that time, there was chaos almost everywhere, including in agriculture and the industry.” There was a shortage of clothing. “Every Chinese person was allotted only one-third of a metre of cloth.”

China asked a French company to build a large synthetic fibre factory and Ren was part of a construction group that was attached to the military, because no civilian team could be persuaded to do the job. “China was in complete chaos. 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.”

The temperature was –28°C. “There was no housing at all. So everyone slept on the grass.” There was little food. People’s “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.”

Ren became “a deputy director of a small construction research institute with just 20-plus people” but without a military rank. He devised some test equipment for the fibre project. “My little invention was exaggerated into something really big and it was promoted in various media outlets, including newspapers, magazines, movies, etc.”

That meant he “was chosen to be a member of the National Science Conference”, but at that time “you had to be a Communist Party of China (CPC) member even to become the head of a cooking team in the military”. Ren “was not a CPC member”, because his father, an intellectual, had been labelled a “capitalist roader” during Mao’s Cultural Revolution. Because of his father, “there was no possibility for me at the time to become a CPC member”.

He did join in 1978, when Mao’s successor was trying to reverse the damage of the Cultural Revolution and looked for people who were young, professional, educated and revolutionary, said Ren. “I … was recommended to be a member of the 12th National Congress of the CPC. 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.”

He confessed that he’d not had a close relationship with his children, including Meng Wanzhou, the company CFO who is on bail in Canada fighting extradition to the US. “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. … When I started Huawei, I had to fight for the survival of this company, spending 16 hours a day in the office.”

Ren talked about the challenges facing the company today. “Huawei is an independent business organisation. 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.” He added: “Neither Huawei nor I personally have ever received any requests from any government to provide improper information.”

He held Apple as an example in terms of privacy protection. “We would rather shut Huawei down than do anything that would damage the interests of our customers in order to seek our own gains. … I believe I have made myself very clear: We will never harm the interests of our customers.”

Huawei shares are owned by its almost 100,000 employees, he said. “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.” The employees elect a Representatives’ Commission of 115, who are “the highest decision-making authority in Huawei”, and no shares are owned by any “external institution or government department … 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.” As an employee, Ren himself has 1.14% of the shares.

“Our annual R&D investment has reached $15-$20 billion. Over the next five years, we are going to invest a total of more than $100 billion into R&D. Public companies, however, are unlikely to do this, because they focus on making their balance sheets look good,” he said. “That puts Huawei in the top five position across all industries in the world in terms of R&D intensity. In total, we have been granted 87,805 patents. In the US, we have registered 11,152 core technology patents. … We have 2,570 5G patents.”

On embargoes and threatened embargoes he said little: “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.” He noted: “Our growth next year would be less than 20%, and I think our annual revenue for 2019 will probably be around $125 billion.” Nevertheless, asked what about any role Huawei might have in the US-China trade war, he said: “Huawei is not that important. We are like a small sesame seed, stuck in the middle of conflict between two great powers.”

Who will take over from Ren, who is now 74? “I don’t know exactly who my successor will be. … It’s not someone that I appoint. I am not a king.”