Transcript for Ren Zhengfei’s interview with the Los Angeles Times

1, Norman Pearlstine, executive editor of the Los Angeles Times: It’s great to be able to talk to you again, because I can’t think of anything more important than the topics and stories we’re going to talk about next. After meeting you last time, I often thought about meeting you, and what happened to your family, Huawei’s business, and after the meeting.

Transcript for Ren Zhengfei's interview with the Los Angeles Times

Huawei colleagues told me that Huawei has received more than 3,000 Chinese andmedia visitors so far this year. Don’t know if you’re willing to share your feelings and how your life has changed over the time. In your opinion, is it worth the time you put in to meet visitors? What does this mean for you and for Huawei?

Ren Zhengfei: Earlier this year, the “sky” was basically dark, the U.S. sanctions triggered Huawei’s survival crisis, the community reflected a lot of negative, well-meaning people do not believe that Huawei can survive. Because the West has known so little about China over the years, Huawei has not refuted the descriptions of some biased politicians, giving some more misunderstandings. In the past, we thought that Huawei was trying to win the trust of our customers, to truly create value for our customers, and to make customers feel that Huawei needed huawei. Misunderstandings between the media and society will gradually dissipate. As a result, Huawei won’t focus on confronting politicians, including some media outlets that don’t understand Huawei, and huawei won’t mind too much.

During this time, especially after the United States put Huawei on the list of entities, people are very controversial about Huawei, Huawei needs to make some explanation to the community. These explanations make sense, and Huawei’s image has changed somewhat in some areas and in the minds of some people. Especially so many reporters come to Huawei, give Huawei a lot of opportunities to explain, we should thank them. They came here to see the real situation of Huawei, to enhance understanding, but also to enhance communication. We do not expect to solve any problems, but to enhance mutual understanding and transparency.

2. Norman Pearlstine: What impact has this had on the morale and working atmosphere of the company? More importantly, what changes does it bring to your business practices or focus, for example, you may now be more focused on areas that are different from what you used to be?

Ren Zhengfei: The u.S. entity list is actually helping Huawei, and Huawei employees really feel the crisis is coming. China has a fable is “the wolf came”, every day shouting the wolf came, but the wolf did not come, shout more, people do not believe that the wolf will come, idle will produce. This time the employees really feel that the crisis is coming, if not work well, not only Huawei will die, they will also “die”. Huawei’s business has been very good this year because all the staff are working so hard, and that’s a big change.

Norman Pearlsteine: There’s a similar argument in the U.S., and if someone keeps predicting a big threat, we say he’s shouting “Wolf is coming.” So I understand your point very well.

3. Norman Pearlstine: I’ve been watching some of the minutes you’ve given to other media recently, which reminds me of your interaction with me in March. You said at the time that you were worried that Huawei employees might become too rich, complacent, too material, and that if the situation at Huawei became more difficult, huawei could get back to where it was in its inception. In a later interview with other media outlets, You said Huawei was doing a good job compared to previous fears. You also said that 2020 will be the year to determine Huawei’s fate, Huawei will face the greatest risk. Now that this year is doing better than expected, why are you so worried about 2020? What’s worrying about 2020?

Ren Zhengfei: In fact, we are not too worried about 2020, we think there will be a certain scale of development. 2020 is our year-round survival under U.S. sanctions, which will give the world more knowledge that Huawei will survive very well under strong U.S. sanctions. Welcome reporters to see if we’re still alive next year. Huawei is now predicted to continue to grow in 2020, but not too much. Growth has fallen to 17% in October and is expected to be around 10% in 2020, which is probably the lowest estimate, and perhaps better.

I think we might start growing at scale in 2021, but the senior team thinks there’s a difference between me and the senior team to restore scale growth in 2022. I think they’re thinking more conservatively, so the document I’m issuing is to predict that the growth will start on a large scale in 2022.

4. Norman Pearlstine: Has Huawei’s business development drivers changed? Will Huawei’s overall business be very different from 2018 by 2022? For example, will Huawei rely more on the growth of the domestic market by 2022? Will Huawei’s growth be less dependent on U.S. suppliers than it does now? What are the drivers of Huawei’s subsequent recovery in scale growth? Will Huawei be different from Huawei now after scale growth?

Ren Zhengfei: What I’ve just said is that in the context of the non-lifting of u.S. entity list sanctions, and we’re ready for the U.S. never to withdraw the entity list, so that our growth is built on a solid foundation. Originally, Huawei did not have such a big growth determination and plan, but the United States sanctions, forcing us to fight. Some time ago, the staff won the battle to go back to buy a house, married wife, living emotions are rising, Huawei is fighting this kind of internal idleness, but we do not win the following. As a result of physical inventory sanctions that activate the entire organization, employees increase their efforts to advance, knowing that the result of non-effort is death.

In the past, our research and development spending was $15-20 billion a year, so large budget allocations could not be made centrally by headquarters and would need to be budgeted on a hierarchical scale. The middle and grass-roots budget will be speculative, quietly do some small products, on the surface is the world leader, the actual sale of these small products, and produce little value, but also occupy a large company, if we take the centralized direct control of the budget allocation, Bureaucracy may do more damage to business than empowering the grass-roots distribution. So our internal contradictions can not be resolved for many years, a catch on death, a release on the chaos. This time, Mr. Trump hit us hard, alerting the entire company, we managed to cut 48 percent of our departments and shut down 46 percent of unnecessary research.

Norman Pearlstine: Excuse me, you’re talking about 48% of the entire management structure that will become flatter or divest from the unimportant business?

Ren Zhengfei: After the reconstruction, we reduced our organization by 48%, closed 46% of our unnecessary product development, transferred those saved engineers to the main channel product sand, and enhanced the development capabilities of the main channel products, so our main waterway products were further competitive in the world. There are fewer internal departments and less bureaucracy.

5. Norman Pearlstine: Will Huawei be a truly multinational global company in the future? I remember Huawei now doing business in more than 170 countries and regions. Will the U.S. crackdown make Huawei more focused on opportunities in the domestic market?

Ren Zhengfei: Because of Trump’s crackdown, we have made a name for oursewith around the world, and customers around the world have greatly increased the incentive to buy our products. We will always be global companies, capable of competing around the world, so we will not give up globalization.

And in the supply chain, we are committed to globalization. If American companies are willing to sell us parts, we’ll try to find a way to use them in the system. If we do not use it, it is not conducive to the formation of a globalized resource system for the world. We will not narrowly follow the path of independent innovation and self-reliance, nor will we retreat to the Chinese market to be a “threshold monkey”.

6. Norman Pearlstine: The U.S. Secretary of State and Commerce often lobby around the world, including Japan, Australia, New Zealand and even the United Kingdom, to put pressure on these countries. What do you think of this? Is this series of actions effective? Has Huawei’s growth opportunities been curbed? Or has the public realized that the President of the United States and the United States Government are now thinking about their own interests in many cases, and that what they are doing is not in the interests of others?

Ren Zhengfei: U.S. Secretary of State He is very busy, he took blocking Huawei as a diplomatic, everywhere to help Huawei promote products. 5G is not necessarily so useful, but outsiders see that the United States is so afraid of this thing, must be too good to buy. Huawei is a small company, these small goods worth the United States such a large country’s secretary of state to manage? The point is that his pressure didn’t work. Is U.S. diplomacy a Huawei? He’s working too hard.

Norman Pearlsteine: In a way, I know you’re not really grateful to President Trump for making this decision, but from an objective point of view, it really helped Huawei.

Ren Zhengfei: Yes, objectively helped us, helpus us to promote internal rectification. Those who have been injured in the overhaul, let them hate Trump.

7. Norman Pearlstine: Analysts at some U.S. business intelligence professionals believe that the hardest part of Huawei’s ability to really deal with U.S. restrictions on Huawei is two folds: first, hard-to-make special chips; This has made developers willing to develop applications based on systems other than Android, because some of the applications on Android are not available to Huawei. Do you think these industry analysts’ analysis is relevant? Did the two points mentioned earlier be Huawei’s most difficult challenge, or is the impact on other products also a challenge that Huawei needs to address?

Ren Zhengfei: I think their analysis is more pertinent and accurate, which is exactly what our company needs to work hard to overcome. Are there any difficulties in the world that cannot be overcome? Think of the hundreds of thousands of years ago when humans lived in the woods, and they couldn’t walk upright, and certainly couldn’t verify that humans had no tails at that time, but now it has been proved that we don’t have tails and we don’t wear suits. Everything in the world is not absolutely unchanged, the world must move towards a win-win road of cooperation, otherwise it will force others to produce substitution, and ultimately hurt themselves.

8, Norman Pearlsteine: I don’t know if you’re paying attention to some of the Democratic candidates in the United States who will run with Trump for the next president. Are there any concerns that President Trump has somehow made america more nationalist and anti-China? Recently, I’ve found that much of the rhetoric of Elizabeth Warren, Bernie Sanders and Joe Biden is full of nationalism and anti-globalization, one of the engines of global economic growth over the past 70 years.

Ren Zhengfei: From the beginning of the 1980s to the present, the United States has made tremendous progress, this progress should be the benefits of globalization to the United States. Globalization has also brought many benefits to China, but many of the benefits of globalization that China has received today are likely to be bubbles, and it will take a long time and a lot of effort for China to get rid of the bubble and further develop on the ground. The United States has shifted from the real economy to financial innovation in the past four decades, the volume of financial innovation in the United States has greatly exceeded the real economy, in the current world is a surplus of goods, people’s demand, where can finance find its value? China and the United States must cooperate with each other in order to eliminate their shortcomings, china and the United States decoupling not only lead to the loss of China’s interests, the United States interests will also suffer.

9, Norman Pearlsteine: Back to the question of Trump’s (campaign) opponent. It’s hard for us to work and live in the U.S. to predict the final outcome. Do you think there is any substantial difference between the two major political parties in the United States? Or is it just a stylistic difference? Or whoever ends up as president, the nationalist ism in the United States will continue? Will it spread to other countries?

Ren Zhengfei: Different parties may change for the American people when they are presidents, but not for China or Huawei. I have noted that the U.S. Congress has unanimously passed a bill to curb China, so we have to give up the illusion that whoever is president has not changed us, and I don’t care much about the U.S. election.

10. Norman Pearlstine: It’s been a while since we met in March. Or let’s take a longer time, and from the last few years to now, do you have any further evidence or ideas to explain what is the motive behind the U.S. harming Huawei, attacking Huawei, and demonizing Huawei? To some extent, there are always companies that the United States wants to unite against, such as Toshiba, Hitachi, Samsung and so on. But I’ve never seen the U.S. take such an organized approach and be so critical of Huawei. Do you think Huawei is a symbol or scapegoat for America’s fear of China? Or is there some kind of force that we don’t realize is at work?

Ren Zhengfei: In the face of U.S. government sanctions, we don’t spend a lot of time studying the u.S. government’s motivations and ongoing measures, but rather how we can do what we’re supposed to do under these conditions. We can’t change the rules of the world, we can’t change the external environment, but we can change the mechanism sway we can win in that environment. It’s extremely hard to change the mechanism and the social environment when you win.

11. Norman Pearlstine: How important is 5G? The U.S. realized that this was the first time in a long time that China, not the U.S., had taken the lead in a major technology field. I’m sure there are other examples, but it’s hard for me personally to think of similar examples over the past few decades. I also wonder if the U.S. is now targeting Huawei for fear of losing its lead, or is it important to be a leader in 5G. I’m asking this because I’m going to ask you the question in September about your willingness to license Huawei’s 5G technology to interested U.S. companies.

Ren Zhengfei: In fact, 5G is not as important as thought, it is politicians who exaggerate its role. 5G implementation of the application time, in fact, because of the early arrival of politicians’ propaganda, we first judged that 5G began to be valued and trialled by the community in 2020, and now in 2019, 5G in the world has begun to form a universal application.

In other areas of technology, America’s lead will not change for a long time. “The United States will surpass Huawei in two or three years” in India, and I believe he is saying that. The relevant export control regulations have no restrictions on U.S. companies, they can take full advantage of the fruits of U.S. technological innovation, can get the influence of the atmosphere of American theoretical innovation, and even over coffee to hear a small chat next to, greatly inspired, because the United States is full of talent.

We don’t have this atmosphere. They don’t have to worry about the U.S. government cutting off their supplies, not having to do spare tire and waste huge resources and manpower, and can focus on their main waterway, and it’s entirely possible to catch up soon. In the past, we not only had to comply with the relevant export control regulations, to comply with the use of some sensitive devices, but now even low-end devices and software are restricted, we have to be forced to do it ourselves, how can Huawei compete with the power of a country?

So I’m not worried about Huawei’s ability to survive the U.S. attack, but about whether Huawei will continue to lead in three or five years. If we want to stay ahead, think about how difficult it is, maybe we really don’t have time for coffee.

12, Norman Pearlsteine: I think the U.S. is actually worried that U.S. companies can’t catch up and don’t have a national policy to drive innovation. This does raise the question of whether the US has introduced these restrictions because it is worried about Huawei or because it is more worried about China. So when our president said that he might drop his extradition to his daughter if he could reach the trade deal he wanted, it made me question the motives of the U.S. government.

Ren Zhengfei: This shows that The situation of Meng’s late boat is not a crime, can be used to do a transaction. The United States with national strength to support scientific research, not the path of liberal capitalism, but the path of state capitalism, then renege on your politics. American politics is free capitalism, how can it come to another doctrine? We should not turn the competition of science and technology into road competition and ideological competition, because the natural science itself has nothing to do with the ideology of the country and the road of the country.

We haven’t received financial support from the Chinese government, and the financial reports audited by KPMG for more than a decade can be seen, but our companies are heavier in taxes than U.S. companies. Therefore, there is no dispute between the two social systems, the most important thing is that Huawei has made more efforts.

Norman Pearlstine: Another reason Huawei can get to where you are today may be because you’re a capitalist yourself?

Ren Zhengfei: Our external environment is socialism, the company is employee capitalism, we have absorbed the rational impetus of capitalism internally, and obtained the socialist balance environment from the outside. We abide by the laws and regulations of the state, change ourselves and make ourselves triumph under such rules.

13, David Pierson, Los Angeles Times Southeast Asia Reporter: How much of Huawei’s inclusion on the “entity list” has accelerated the process of Huawei’s self-research chip and building Huawei’s mobile platform software ecosystem?

Ren Zhengfei: There is a promotion, but the extent of the promotion is uncertain.

David Pierson: Can you tell us something about Huawei’s chip strategy? There are reports that Huawei is hoarding chips to ensure the continued supply of mobile phones. Can you tell us about Huawei’s current chip supply and its plans to further promote the development of mobile phone business?

Ren Zhengfei: Can the chipman get the software? I haven’t heard of it. The development of our chips has never stopped, nor has we changed, and we have been moving steadily forward. The operating system and ecosystem of mobile phones are software, and when we improve our software capabilities, we don’t say we want to cut back on hardware capabilities.

David Pierson: Before Huawei was added to its “entity list,” did Huawei hoard a lot of chips from its own chip suppliers? Does Huawei ensure a continuous supply of semiconductors to support the continued growth of its mobile phone business after the “physical list” has caused difficulties?

Ren Zhengfei: Huawei’s sales revenue this year is very large, if you want to store chips to ensure supply, need tens of billions of dollars, Huawei has so much money to hoard? The supplier won’t sell so many things to us. Therefore, we do not develop by hoarding chips. The problem now is that there is no supply to the market, why the market is snapping up, because we can not produce so many things, chips are not available, especially TSMC production is not enough to meet large demand. Therefore, it is not possible to use storage. What if it’s out of date, what about these stocks? The accumulation of materials is still a traditional mode of thinking.

14. Norman Pearlstine: Do you think Harmony OS will be another operating system outside of Android and Apple?

Ren Zhengfei: Harmony OS itself is used for the Internet of Things, the most important large bandwidth, low latency, driverless, automated production requires low latency. If we do not get the supply and security, will these things be turned around to do the mobile phone operating system, can not be opened as this system, it is not yet certain whether there is this ability.

15. Norman Pearlstine: Over the years, Huawei has established long-term and many win-win relationships with many U.S. companies. As you mentioned earlier, Huawei admires IBM, Huawei and Qualcomm have established long-term relationships, and even google has certainly had many people within The company that has developed a close relationship with Huawei over the years. Did Huawei’s friends in the U.S. business provide advice to Huawei on how to deal with the U.S. government, or provide Huawei with explanations to help Huawei better understand why the U.S. is launching an unprecedented attack on such a successful company?

Ren Zhengfei: To solve the relationship between Huawei and the U.S. government, it may be a very difficult problem, we do not know who can play a role, this person has no time to Huawei to see. We particularly welcome dissenting members like Mr Rubio to visit Huawei, because only by getting to know each other can there be a basis for solving the problem. American politicians don’t know enough about China, and hope the media can play a little role.

Norman Pearlstine: As you know, we’re almost as likely to be attacked by the media as Huawei, and we’re finding that a lot of politicians don’t know much about the media.

16. David Pierson: Is there any company that has offered to get a 5G technology license from Huawei?

Ren Zhengfei: We are sincere about 5G licensing, but no company has yet approached us. In fact, this is a big project, we are also thinking of how U.S. companies can undertake, we have a company leader said, unless Huawei dialed a large number of employees to give it, it will be possible to take on the next. Mobilizing employees to work for U.S. companies now can be very difficult, because it’s not the same as when I heard that we could go to the U.S., everyone was flocking to the U.S., and now we’re not even willing to go to the U.S. for business, so it may be very difficult to mobilize a large number of employees to join U.S. companies. Do U.S. companies weigh up the possibility of accepting 5G licenses? I think they’re thinking about it carefully, and we’re waiting for them to think about it.

Norman Pearlstine: Just over lunch, we learned that a European company had a big 5G contract in China, didn’t it, didn’t it? Does this mean that the first huawei 5G license may not be american, but European or North Asian?

Ren Zhengfei: European companies have their own technology, and we have cross-licensing intellectual property rights with European companies, so they don’t need additional licenses. For North Asia companies, if the market size is too small, there is no profit base, long-term survival is still difficult. So, we analyze that only the United States has this need.

17, Norman Pearlstine: You were very generous today and gave us a lot of time to do the interview. I have one last question. Over the past year or so, you seem to have become an expert in a number of areas under the U.S. legal system, including the Extradition Act, the Contract Act, and the unique way different courts operate. Similarly, many Westerners need to know more about the obligations of Chinese companies to the state under Chinese law. Before the difficulties, you personally said that you would respect the rule of law. What I want to ask is, have your views on the U.S. and Chinese legal systems changed over the past few years?

Ren Zhengfei: On China’s legal system, former Security Council President Ma Kai-soo has a speech, he looked at the changes in China’s legal reform from a vertical perspective, think that China has made great progress, you can send you a video.

It should be said that we came through the old system, know that at that time China’s legal system is not sound, people’s freedom is very limited. But from a vertical point of view, China has undergone dramatic changes in the past few decades, and the legal system has made great progress. You look at China from a horizontal perspective, and china in general is not doing enough. After all, we live in this land, every day feel that China’s legal system is progressing, and the Chinese government’s slogan is to move towards “rule of law, marketization”, is a little bit in the open, a little bit in the change, we are satisfied with this progress. The United States is based on the centuries of legal progress of the perspective of the horizontal, there are many areas of dissatisfaction, this is the gap between the two.

Norman Pearlsteine: Do you think the American legal system is more unfair and worse than you think? Or is it that the American legal system is dwarfed by China’s increasingly sophisticated legal system?

Ren Zhengfei: The U.S. legal system is generally relatively sound, such as the protection of property rights, are the basis of the U.S. innovation momentum. The law is not about its provisions, but about the extent of law enforcement. Therefore, we believe that the U.S. legal system is relatively sound, so dare to fight a lawsuit in the United States, if the U.S. legal system is not sound, litigation is useless, we can not win.

Norman Pearlstine: Finally, I can’t help but ask if you’re in touch with your daughter. How’s she doing? Can you communicate with her? Do you think her matter will be resolved in Canada as soon as possible?

Ren Zhengfei: Her mother and husband accompanied her in Canada, and her mood was generally calm. She knew how difficult it would be to solve the problem and expected Canadian law to be fair, just and transparent.

Norman Pearlstine: Thank you very much for the opportunity to meet you again, thank you for having so long talked to us. Hopefully, in the months and years ahead, we will be able to continue to understand and solve the many challenges we face together. For most countries and regions around the world, 2020 is destined to be an extraordinary year. I wish Huawei all the best in 2020!

Ren Zhengfei: Welcome you to come again this time next year, sincerely welcome you to come again at any time.

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