Battle for global 5G mobile phone technology the real reason for Huawei CFO arrest

https://youtu.be/0fDUgBJ8yfY https://youtu.be/0jnDXocDmRo

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 Quantum Technology will be used in 5G phone very soon. Europe and US are scared to death now because this technology is monopoly in nature

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https://youtu.be/6Pvp4Z07ftY
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Why did Canada arrest the CFO of Chinese tech giant Huawei? – Samsung surrendered its Chip IP right to US companies in order to survive

By Janus Dongye, Researcher at University of Cambridge

The detailed reason for this arrest has been revealed. Huawei CFO Wanzhou Meng is suspected of conspiracy to defraud multiple financial US institutions. The US Judiciary found that there was a company called Skycom that traded with Iran during 2011–2014 and Huawei was suspected to control the company Skycom at that time.

So the accusation is about the old Iran sanctions 7 years ago. And you might wonder why someone brought this up at this particular time.

There is something else that you need to know to understand this incident.

Global 5G Battle

5G is the fifth generation of cellular mobile communications. It succeeds the 4G (LTE/WiMax), 3G (UMTS) and 2G (GSM) systems. 5G is the new critical node for the future global supply chain. This is the ultimate technology that determines the communication/mobile networks in the next 10 years. Therefore this is a big cake that everyone wants to get a slice from it.

The whole 5G framework can be divided into two key technology: the modem chipset and router infrastructure. On one hand, the modem chipset is installed in your phones and other sensors that need to be connected to the Internet.

The current 5G modem chipset patent (IP) is held by:

Huawei (China), Qualcomm (US), Samsung (Korea), MediaTek (Taiwan), Intel (US), Apple (US) (rumoured). On the other hand, the router infrastructure is placed in base stations all over the buildings and towers. It directly talks to the 5G modem in your mobile phones and translates your 5G requests to the Internet.

The current 5G router patent (IP) is held by:

Huawei (China), Nokia (Finland), Ericsson (Sweden), ZTE (China) Surprise Hah?, Cisco (US), Samsung (Korea).

There are two hidden traps from this 5G technology that other people might not tell you:

The router and the modem chipset must be compatible, and therefore a standard must be settled in order for them to talk.

The modem chipset is deeply coupled into the system on a single chip with CPU and GPUs. The system is normally shipped as a package.

If you hold the 5G modem IP in a SOC (System-on-chip), you can also bind your CPU and GPU IP in a package. That means whoever controls the 5G IP would also control the whole market of the CPU and GPU intellectual property. If you hold the 5G router standard, you can also control the modem standard and then control the whole system standard.

For example, if the US were to allow Huawei to sell its 5G router devices to Verizon or AT&T, then Huawei could make all of its base stations to only support its own modem standard. Then you could end up with the whole system package delivered by Huawei as well. Then the US might have to buy more devices made by Huawei in order to use 5G.

That’s how Qualcomm rose from a small company to the top simply based on its 3G patents. And you can see that Huawei and Samsung is the dominant player here that they both control the modem and router patents.

However, owing to the pressure of the US government, Samsung surrendered its chip IP right to US companies. This is the fundamental difference between Samsung and Huawei. Because the South Korean market is so small and therefore Samsung has to surrender to the US in order to survive.

Samsung Galaxy S10 Comes with Qualcomm Snapdragon 855 SoC and 5G Service – Tech News Watch

You might wonder why Samsung does not use its Exynos processors in US but it has to use Qualcomm one? That is the pressure from the US government.

Meanwhile, Huawei gets the full cultivation in the Chinese market and does not fear the US government. It never intends to go to the US market as well. What it focuses on is the adoption in China and the rest of third-world countries. If you read the following recent news, you can get a feeling that China is really leading the global 5G battle in all three fields: technology, adoption and market.

Chongqing launches first 5G trial network

‘World’s first’ 5G call completed by Vodafone and Huawei

China Mobile and China Unicom to start 5G trials | TelecomLead

Briefing: China’s mobile operators granted nationwide 5G licenses · TechNode

The Chinese government said it would perform nationwide 5G adoption using Huawei technology around March 2019. Please note that this is a market of 1.4 billion people that is US population and Europe population combined. And the Chinese government is pushing this really hard, unlike the US stuck in legislation as you can imagine.

Meanwhile, the first adoption of 5G belongs to South Korea, which is four months ahead of China:

South Korean carriers set surprise commercial 5G launch for December 1 And compared to the US government, both Chinese and Korean government are very efficient in promoting 5G infrastructures. In this manner, US companies are really lagging behind. This could firstly cause wide-spread fears among the US companies. It is very likely that those companies would lobby the US Congress to ban Huawei at first. The arrest happens just before the Huawei 5G technology is going to be adopted commercially in China.

It is very likely that some people wanted to disrupt the growth of Huawei. Everyone talks about the Huawei arrest. But no one is talking about who initiated the investigation against Huawei and who filed the case in the US juridical system in the first place?

Another interesting side note during the incident:

Cisco temporarily bans employees from China

I suspect CISCO could be the one who actually filed the case to ban Huawei.

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American economist Jeffrey D. Sachs says Canada is doing the Trump administration's bidding in its handling of the Huawei case. To read more: https://www.cbc.ca/1.4947966


Nobody is supposed to win any war, and the US is anxiously proving that true in skirmishes with China over IT, trade and ‘national security’.

CHINA will not have Ivanka Trump arrested if she were to transit through Hong Kong airport, even now.

Beijing does not have the intent or capacity for that – nor the recklessness required for it, particularly in the throes of a trade war.

But US authorities had Sabrina Meng Wanzhou arrested while transiting through Vancouver airport. Ivanka and Sabrina are prominent businesswomen, but there are also differences between them. Ivanka is the daughter of President Donald Trump. In China and elsewhere, Sabrina is the daughter of modern China and its historic rise.

Critics of Sabrina’s arrest call it a kidnapping. The charges against her are unclear, the intent lacks transparency, and the action itself is unprecedented even for US double standards and a maverick president.

British politician George Galloway condemned Sabrina’s arrest as piracy, a death wish and an act of war. Prof Jeffrey Sachs calls it almost an act of war on China’s business world exposing Washington’s “supreme hypocrisy.” He finds the official pretext lacking credibility. Sachs says that in the past nine years alone, the US penalised 25 other companies from almost as many countries for violating unilateral US sanctions on doing business in third, fourth or fifth countries.

Yet in all these cases the US held the company responsible rather than an individual officer of the company. The case against Huawei had taken an unprecedented and disturbing character from the start.

Jack Ma says the trade war itself is only part of the complicated and now troubling relationship between the US and China. It is so messy that he sees any resolution only in another 20 years.

At one level, today’s US phobia about doing business with China relates to what Washington calls security concerns. Huawei founder and Sabrina’s father Ren Zhengfei was reportedly an elected official of the Communist Party of China (CPC) in 1982.

What would that mean for Ma of Alibaba, confirmed only two weeks ago as a current card-carrying member of the CPC? Nobody outside Washington seems too bothered.

Business, especially international trade, is supposed to be above petty political differences in a very diverse world. But apparently, pettiness matters in a trade war scenario veering towards a cold war. The trade war mindset and the persecution of Huawei are situated within global superpower and geopolitical rivalry between the world’s two biggest economies.

China is still a developing country despite its many achievements, and is determined to press ahead with more growth to develop its poorer regions. Huawei is in the forefront of this national resurgence.

The US remains the world’s technology leader and sole superpower – and intends to stay that way. Since a hyper-competitive international environment does not always favour it, it has resolved to block any challenge while complaining about trade with China.

Owing to China’s population size, significant GDP growth per capita would mean development on a massive scale. And because of reliance on international markets and global supply chains, connectivity makes infrastructure and IT vital.

The current US position on China consists of the phobias and manias of senior administration officials around Trump.

Among the most prominent is economics hawk Prof Peter Navarro, head of the White House National Trade Council. The author of Death By China was conspicuously left out of Trump’s cordial visit to China last year.

Since then, Navarro has moved closer to the Oval Office. So have other hawks circling China.

John Bolton is a Bush-era neo-conservative savouring entry into Trump’s inner circle. That did not happen in the first year, but now he is National Security Adviser. Bolton is notorious as instigator of the Iraq invasion. Now he has focused his foreign aggression on a trade war, indicating he had more to do with Sabrina’s arrest than Trump himself.

US Trade Representative Robert Lighthizer is another hawk eager to target Beijing. He regards China as a “trade threat” and has grown personally close to Trump.

The Economist called US Commerce Secretary Wilbur Ross a protectionist, and he has submitted to the hawkish trend against China. His shares in some China companies are no longer an issue, especially after he has turned his China experience to serve US nationalist interests.

Yet for all their devices, the attack on China by targeting Huawei will not dampen – much less stop – China’s rise. It will teach China to be more vigilant about trade partners, steel it for future pitfalls, and redouble its efforts to grow stronger.

Already there are signs of Sabrina’s arrest being counter-productive, with other forms of blowback against US interests virtually assured.

First, Beijing’s support for Chinese firms like Huawei operating internationally will grow. Even greater state-industry collaboration in China’s national interests, particularly when abroad, can be expected.

Second, China’s corporate sector will offer even greater support for the Government and the CPC in return. As this happens at multiple levels, China’s international competitiveness can only heighten.

Third, public support in China for Chinese companies has also grown, fuelling the rise of Chinese nationalism. Even before Sabrina’s arrest, a nationwide survey found majorities in 300 Chinese cities would boycott US companies.

Fourth, public support for the Chinese state and the CPC continues to accumulate. Whenever the national interest is threatened, all sectors close ranks against the common foe.

Fifth, the action against Huawei has provoked China and triggered its people’s national pride. The extent to which this will multiply is still uncertain, but a clear sense of it is evident in social media.

Sixth, international support for China and its campaign for free trade are set to grow. This involves more than just companies fearful of similar actions for violating US sanctions, since the US has alienated itself from even its allies.

Seventh, the Chinese diaspora in Canada has come out in support of Sabrina and other unfortunate Chinese nationals caught in such a situation. It has become more than just a national or criminal matter.

Eighth, Chinese Americans may also feel the racist pinch of US policy and act similarly. Will they then become suspects to their own Government?

Malaysian entrepreneur and Harvard MBA Tan Hock Eng’s Singapore-based Broadcom was supposed to take over California-based Quallcom in the biggest IT deal in the world. But in March this year the US scrapped the deal in the name of “national security interests.” To many ethnic Chinese that was a racist move.

Ninth, while some countries may sympathise with China over Huawei, others may just be put off by the US action and attitude. The result would be a net loss for US standing and prestige.

To provoke a rising China and get away with it requires consistently deft handling and masterful strategies. Both are lacking in Washington.

Trump has not been focused enough to even make senior administration appointments after two years. Melania Trump has also been pressuring her husband to dismiss the Deputy National Security Adviser.

The departure of senior staff has already been peaking on its own, many for personal reasons. Then Robert Mueller’s continuing investigations and indictments will add further to the dismissals.

All this is what comes of a “trade war” that is about more than just trade, involving more than any conventional notion of war.

Behind The Headlines

By Bunn Nagara, a Senior Fellow at ISIS Malaysia.





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Made in China 2025: The domestic tech plan that sparked an international backlash

SupChina

https://youtu.be/E7Jfrzkmzyc https://youtu.be/DQe61RNOttI

According to media reports, China is drafting a replacement for the "Made in China 2025" plan, with a new program promising greater access to China's markets for foreign companies and playing down China's bid to dominate manufacturing.

The "Made in China 2025" plan is a key concern of the US. The high tech products made by Chinese companies have been targeted amid the US-provoked trade war against China.

All major industrial countries have their own industrial policy that aims to promote high tech development, such as Germany's "Industry 4.0" strategy.

The intent in drafting the "Made in China 2025" plan is obviously justifiable. The discontent and concern it has stirred among the US and other Western countries shows the plan has unique implications for those countries.

The "Made in China 2025" plan emphasizes support to State-owned enterprises (SOEs) and the investment of huge amounts of capital. China's private enterprises have faced difficulties for quite some time and there has been talk of a trend known as "the State advances while the private sector retreats." Therefore, it has become necessary and urgent to create an environment that provides fairer competition between SOEs and private firms.

The objections to the "Made in China 2025" plan made by the US have been beyond China's expectations.

Drafting the plan is a matter of China's sovereign right and China can totally ignore the attitude of the US and focus on its own decision. But China is now deeply intertwined with the world and there are practical reasons to mutually coordinate China's interest and those of Western countries including the US. Expanding areas of common interest is an important way that China has adopted to continuously move forward its reform and opening-up.

China will likely adjust its future industrial plan and policies accordingly while insisting on its right to develop the country's high technology sector.

The major direction of the adjustment could be granting the market a bigger role and creating an environment for fairer competition between enterprises with different forms of ownership.

Regarding whether or how China should adjust its industrial plan, we would like to analyze the key changes of the overall environment and the principles China should stick to in adapting to these changes.

First, the external environment of China's development and the dynamic of internal and external economic interactions have undergone major changes since the beginning of this year. We need to adopt a pragmatic attitude toward these changes and respond actively.

Second, external pressure has always been a driving force for China's domestic reforms. The more open China is, the more it needs to respond to external demands. China's interaction with the outside world is a result of the need to better realize national interests, rather than being pushed to make humiliating concessions in which sovereignty is oppressed. In the 21st century, China should no longer hold the belief that being tough and confrontational is more politically correct than making concessions.

Third, China's development must lead to win-win results for the world. This is the lifeline of our peaceful development and cannot be a mere slogan. China needs to be more open to the world, increase its momentum of development through expanding foreign cooperation, and bring more benefits to the world.

Fourth, China should not fear taking economic or political risks in further expanding its opening-up policy. Fair competition between all types of companies will force SOEs to reform. In fact, many SOEs are not short of funds, but lack a competitive management mechanism. By unleashing the vitality of various enterprises, China's technological innovations will usher in a new chapter. If a more robust development is achieved, we will have more resources to maintain the political cohesion of the country, avoiding greater ideological risks.

Reform and opening-up is the only path China should follow. We have achieved successful results over the past 40 years, as will we do in the future. We must effectively emancipate our minds and resolutely overcome all the difficulties on the road to success - this should be the motto of Chinese society from generation to generation.- Global Times

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Risk of rising McCarthyism warned amid China-US spat

Photo: VCG

China’s business people, researchers, scholars say they ‘feel the chill’ in US

Growing China-US tensions have affected technology cooperation as Chinese scientists and researchers in cutting-edged sectors such as big data and artificial intelligence have seen rising obstacles in working with US counterparts this year.

Tensions have intensified after Canada announced the detention of Huawei Chief Financial Officer Meng Wanzhou at the request of the US.

This move is believed to be part of the US' intentions of dampening Chinese companies and investment, which aroused worries that McCarthyism is back in Washington.

"Some open-sourced platforms developed by American firms, such as in the machine learning algorithm sector, have started to limit access or charge fees for tapping into those platforms," a senior scientist in a Shenzhen-based AI company, who asked for anonymity, told the Global Times on Thursday.

"Some Chinese scientists were denied visas this year when they planned to attend academic meetings in the US, and the US' cautious attitude toward Chinese engineers has become more obvious," he said.

The Chinese academic community has felt the chill in relations since the beginning of this year, and the recent arrest of Meng has escalated conflict between the US and China. Some industry representatives even deemed the arrest as a long-term plan by the US to curb China's rise in high technology.

Meanwhile, the effects of the tension have also expanded to business. Hong Kong political risk consultancy SVA said they noticed a remarkable increase in inquiries from US-based companies about potential problems of traveling to China after Meng's detention for fear of China's retaliation, the Japan-based Nikkei Asian Review reported on Tuesday.

A Hong Kong-based financial technology company also moved two investor meetings from Shanghai to Manila to avoid being affected by Meng's case in consideration of its US co-founder, according to the Nikkei report.

The Trump administration has been restricting visas for the Chinese academic community studying in sensitive research fields to one year since June 11, reflecting its efforts to stop alleged intellectual property theft and hinder China's push for technological supremacy, the New York Times reported in July.

"The consensus of curbing China's influence has been forged inside the US government, and Chinese companies should be well prepared for confrontation in the long term," Sun Qingkai, partner of the major Chinese AI firm CloudWalk, told the Global Times on Thursday.

Sun's remarks are echoed by the tendency of Americans to habitually doubt anything related to China, particularly to Huawei at this moment.

The Brookings Institution, a Washington-based think tank, released a report in October 2017 on safe cities. The report, supported by Huawei, speaks highly of a new policing technology implemented in the Kenyan capital of Nairobi and the Chinese city of Lijiang but failed to mention that the technology was provided by Huawei.

An opinion piece of The Washington Post published on December 7 listed financial support from Huawei to Brookings and interactions between the writer of the report, Darrell M. West, who is also Brookings vice president, and Huawei founder Ren Zhengfei.

It then said that such relationship raises doubts over West's scholarship practices and represents "a worrying example of China's influence on one of America's leading think tanks" without providing any hard evidence.

China's cooperation with other countries was also negatively affected, especially those in high-tech sectors. An example is the Japanese government's recent ban on Huawei and ZTE from official contracts. The move followed an earlier warning from the US about security risks involved in using Chinese-made equipment, Washington Post reported on Monday.

McCarthyism warning

The current US strategy of blaming China for its own domestic economic and social problems reflects the country's anxiety and myopia facing these problems, which would only worsen the situation, Zha Xiaogang, a research fellow at the Shanghai Institute for International Studies, told the Global Times on Thursday.

Zha warned that although it seems impossible for the US to return to the McCarthy-era "red scare," when the anti-communism campaign penetrated all aspects of US society, such risks remain if the situation continues to escalate.

"There is already a dire ripple effect from the US-China trade war, which will hurt the US itself and global technology collaboration," said the Shenzhen-based senior scientist.

However, technology companies have been urging more cooperation instead of confrontation, which would hurt global advancement in this sector.

Major tech giants such as US firms Google and Apple, and China's Huawei have highlighted the importance of global collaboration, which will be the driving force for technology advancement.

Google Vice President Jay Yagnik told the Global Times in an earlier interview in September that technology has been a greater "uniter" globally from a historical view. Instead of thinking about competition, companies should think about it in terms of bringing the world together and taking society to the next level.

It is in everyone's best interest that the US and China reach an agreement on trade and future intellectual property and technology collaboration, Chris Dong, global research director at International Data Corporation, told the Global Times on Thursday.

"A more open market with less government intervention, and with mutual respect and reciprocity, will benefit not only a healthier US and China trade relationship, but also the talent and knowledge exchanges," Dong said.- Global Times

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• Ren is the son of school teachers and grew up in a mountainous town in southern China's Guizhou Province.
• Ren held technician posts in China's military and worked for Shenzhen South Sea Oil before establishing Huawei with the equivalent of $3,000 in 1987.
• Huawei today does business in more than 170 countries with 180,000 employees.

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Mr Ren Zhengfei survived Mao Zedong's great famine and went on to build a telecom giant with US$92 billion in revenue that strikes fear among some policymakers in the West.PHOTO: EPA-EFE

HONG KONG (BLOOMBERG) - At the sprawling Huawei Technologies campus in Shenzhen, the foodcourt's walls are emblazoned with quotes from the company's billionaire founder and chief executive Ren Zhengfei.

Then there's the research lab that resembles the White House in Washington. Perhaps the most curious thing, though, are three black swans paddling around a lake.

For Mr Ren, a former People's Liberation Army soldier turned telecom tycoon, the elegant birds are meant as a reminder to avoid complacency and prepare for unexpected crisis. That pretty much sums up the state of affairs at Huawei, whose chief financial officer, Ms Meng Wanzhou, who's also Mr Ren's daughter, is in custody in Canada and faces extradition to the United States on charges of conspiracy to defraud banks and violate sanctions on Iran.

The arrest places Huawei in the cross-hairs of an escalating technology rivalry between China and the US, which views the company, a critical global supplier of mobile network equipment, as a potential national security risk.

Hardliners in President Donald Trump's administration are especially keen to prevent Huawei from supplying wireless carriers as they upgrade to 5G, a next-generation technology expected to accelerate the shift to Internet-connected devices and self-driving cars.

Mr Ren is a legendary figure in the Chinese business world. He survived Mao Zedong's great famine and went on to build a telecom giant with US$92 billion (S$126 billion) in revenue that strikes fear among some policymakers in the West. Huawei is the No. 1 smartphone maker in China, and this year eclipsed Apple to become second maker globally, according to research firm IDC.

Though it has a low profile compared with China's Internet giants, Huawei's revenue last year was more than Alibaba Group Holding, Tencent Holdings and and Baidu Inc combined. About half of its revenue now comes from abroad, led by Europe, the Middle East and Africa.

The company's high-speed global expansion has come under fire for years, starting with the Committee on Foreign Investment in the US' derailing of an acquisition in 2008. More recently, Australia, New Zealand and the US have blocked or limited the use of Huawei gear.

The arrest and prosecution of Ms Meng in US courts comes amid a far bigger US-China struggle for technology dominance in the decades ahead - and could have huge, and potentially severe, consequences for Huawei. Mr Ren declined an interview request from Bloomberg News.

"It gives Trump a bargaining chip," said Mr George Magnus, an economist at Oxford University's China Centre. "She's the daughter of the CEO, Ren Zhengfei, himself a former PLA officer, and Huawei's alleged dealings with Iran are just the latest in a string of concerns."

An outright ban on buying American technology and components, should it come to that, would deal Huawei a crushing blow. Earlier this year, the Trump administration imposed just such a penalty on ZTE Corp, also a Chinese telecom, and threatened its very survival before backing down.

Both Huawei and ZTE are banned from most US government procurement work.

A full-blown, commercial ban in the US would not only apply to hardware components, but also cut off access to the software and patents of US companies, Mr Edison Lee and Mr Timothy Chau, analysts with Jefferies Securities, wrote in a report.

"If Huawei cannot license Android from Google, or Qualcomm's patents in 4G and 5G radio access technology, it will not be able to build smartphones or 4G/5G base stations," they note.

The company's legal troubles in the US may also spill into other markets.

"Government telecommunication infrastructure requirements are essentially locking out the Chinese supplier in critical growth markets," noted Morningstar Research equity analyst Mark Cash in an e-mail. "Additionally, telecom providers without government imposed restrictions may start limiting their usage of Huawei equipment for their 5G network build-outs."

If there's a Darth Vader in the minds of Chinese national security hawks in Washington worried about China's rising tech power, it's Mr Ren. In China, though, he's feted as a national hero, who rose from humble beginnings to the pinnacle of wealth and status in Chinese society.

His grandfather was a master of curing ham in his village in Zhejiang province, which afforded Mr Ren's father the chance to become the village's first university student, according to a 2001 essay by Mr Ren about his upbringing, which was published on a website linked to the Chinese Academy of Social Sciences.

His father, Mr Ren Moxun, was a Communist Youth League member, who later worked as a teacher and an accountant at a military factory, but who kept up his rebel fervour under the Kuomintang by selling revolutionary books.

After moving to rural Guizhou province, he met his wife Cheng Yuanzhao and gave birth to Mr Ren Zhengfei, the oldest of two sons and five daughters.

The family lived on modest teaching salaries. In one of Mr Ren's speeches, he remembered how his mother read him the story of Hercules, but withheld the ending until he came home with a good report card.

Famine Years

During the Great Leap Forward campaign that started in the late 1950s, a famine came to his home town after Communist Party industrialisation and collectivisation policies went off the rails. Mr Ren recalled in his essay how his mother stuffed into his hand each morning a piece of corn pancake while asking about his homework. His good grades gained him entry to the Chongqing Institute of Civil Engineering and Architecture.

After graduation, he worked in the civil engineering industry until 1974, when he joined the PLA's Engineering Corps as a soldier, and worked on a chemical fibre base in Liaoyang. Huawei says he rose to become deputy director, but did not hold military rank. He does, however, often pepper his speeches with military references.

"Our managers and experts need to act like generals, carefully examining maps and meticulously studying problems," Mr Ren said in a speech posted on a website for Huawei employees.

Mr Ren's Communist Party credentials aren't as deep as his father's. He attended the 12th National Congress of the Communist Party in 1982, and once cited the party's dogma of "a struggle that never ends" when defending the company's tough work hours.

But Mr Ren was a bookworm as a child and was denied acceptance into the Communist Youth League, according to the book Huawei: Leadership, Culture And Connectivity, a book co-authored by David De Cremer, Tian Tao and Wu Chunbo.

He didn't become a Communist Party member in the PLA until late in his military career. However, a 2012 House permanent Select Committee on Intelligence report on Huawei asked why a private company had a Communist Party Committee, which has become common among China's Internet giants.

Mr Ren retired from the army in 1983, and joined his first wife to work at a Shenzhen company involved in the city's special economic zone. It was around then that he had to sell off everything to pay a debt related to a business partner, and lost his job at Shenzhen Nanyou Group, as well as his first marriage, according to Ren Zhengfei And Huawei by author Li Hongwen.

Comeback Play

After a period of sleepless nights while living with family members, Mr Ren saw an opportunity. When China began its economic opening under Deng Xiaoping, the telephone penetration rate was lower than the average rate in Africa, or 120th in the world. He founded Huawei with four partners in 1987 with 21,000 yuan in initial working capital, just above the minimum threshold required under Shenzhen rules.

Huawei started out as a trader of telecom equipment, but the company's technicians studied up on switchboards and were soon making their own. Workers put in long hours in Shenzhen's swampy heat with only ceiling fans. Mr Ren kept up morale with subtle gestures, like offering pigtail soup to workers putting in overtime.

The company became known for its "mattress culture" in which workers would pass out on office mattresses from exhaustion. In 2006, a 25-year-old worker Hu Xinyu, who had made a habit of working into the wee hours and then sleeping at the office, died of viral encephalitis. Some Huawei employees subsequently committed suicide.

The deaths triggered a revision of the company policy on overtime, and the creation of a chief health and safety officer role.

It wasn't the only move Mr Ren made to stabilise morale. He used to pay his workers only half their salaries on payday, but eventually decided to convert the other half of employee salaries and bonuses into shares. The company's 2017 report shows that he has a 1.4 per cent stake, giving him a net worth of US$2 billion.

Wolf Culture

Huawei struggled for market share, with foreign companies using so-called "wolf culture" of aggressive salesmanship, which sometimes materialised in the form of Huawei employees flooding sales events with several times more salespeople than competitors.

The company ventured into international markets in the 2000s, with telecom equipment that was more affordable than products of competitors such as Cisco Systems. Huawei later admitted to copying a small portion of router code from Cisco and agreed to remove the tainted code in a settlement.

Mr Ren since stepped up the company's research and development. Of its 180,000 employees, about 80,000 are now involved in R&D, according to the company's 2017 report, and the company has been known to recruit some of China's top talent out of universities.

The company recently refocused on existing markets after the US government called Huawei a national security threat, and cited concerns over its possible control of 5G technologies. Mr Trump signed a Bill banning government use of Chinese tech including Huawei's, and has even contacted allies to get them to avoid using Huawei equipment.

Collectively owned by its employees, the company is known for a culture of discipline, in which no one, Mr Ren included, has their own driver or flies first class on the company dime. Lately, Mr Ren has been warning employees against using fake numbers or profit to enhance performance. The company set up a data verification team in 2014 within the finance department, which was overseen by Mr Ren's daughter.

In a recent speech posted on the Huawei employee network, however, he called for patience with critics, but rejected foreign intervention. "We will never give in or yield to pressure from outside," he said.

That maxim is going to be soon put to the test by the US Department of Justice.


Source: Bloomberg

Related:

Huawei CFO 'unlikely' to be extradited

Meng Wanzhou, the chief financial officer of Chinese tech giant Huawei, who was granted a $7.5 million bail, is unlikely to be extradited to the US because she is charged for political reasons, analysts said.


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