ShenzhenShenzhen. For months, world leaders have been discussing the use of Chinese telecoms technology and its associated risks. Now Huawei's founder Ren Zhengfei is speaking out and harshly criticizes the US. „Unfortunately, the US sees 5G as a strategic weapon. For them, it's kind of a 'nuclear bomb',“ said Ren Zhengfei in an interview with Handelsblatt and Wirtschaftswoche.
Ren even warned against a new Cold War. Especially the „American trade war“ could lead to a more radical and less balanced world. If the West does not want such a conflict, „it needs to stay open and accept the rise of other countries“, said the head of the Chinese telecommunications company. But the Chinese CEO also expressed admiration for the policies of the US president. „President Donald Trump is great because he cut tax rates in such a short period of time - in a democracy no less.“ He said that he hoped for substantial tax reductions in China, too.
Regarding the spy allegations, Ren offered to sign a „no-spy agreement“ with the German government in order to ameliorate Berlin's security concerns. Germany is currently holding an auction of 5G spectrum. The EU recently expressed that, in principle, it remains open to using Chinese technology in the roll out of their 5G mobile networks.
The US in particular had recently called on the European countries to exclude Huawei. They claim that that the company could use its telecoms products to monitor or compromise networks. So far, no evidence has been made available to prove these accusations. Huawei has repeatedly denied these allegations.
Read the full interview below:
You recently praised Donald Trump as a great president because of his economic policy. Shouldn’t he be your worst enemy?
Businesses worldwide suffer from a heavy burden. If this burden doesn’t get relieved, businesses will have no breathing space. President Donald Trump is great because he cut tax rates in such a short period of time - in a democracy no less.
Are you saying that Trump is a role model for the world?
His purpose should be to attract foreign investment. But if he keeps intimidating other countries and foreign businesses, then they won’t want to invest in the US, and hence his tax cut policy will be much less effective. In fact, I hope that China will substantially reduce its heavy tax burdens.
The high tax rates in China are based on the relatively lower labor costs China had in the past. Now labor costs in China are very high. Not reducing the tax rates will hurt China's development, in my opinion.
President Trump has been trying to intimidate Huawei. The US has been trying to persuade its allies, Germany included, to no longer employ Huawei technology or to at least reintroduce security checks. Has the US boycott against Huawei already affected your business?
No, it hasn’t. Our business grew by 30.6% year-on-year in the first quarter of 2019 and profits grew by 35.4%. Therefore, I would like to thank all those US politicians who have called on others to boycot us around the world.
The US actions so far have not actually helped them achieve their goals. In fact, it's done the opposite. The current debate has made people think: Has the US ever been afraid of anyone? So why are they currently afraid of Huawei, a little rabbit? This 'little rabbit' must be making some really good products.
So the US are running ads for Huawei... In your opinion, why do the US take action against Huawei?
Unfortunately, the US sees 5G as a strategic weapon. For them, it's kind of a „nuclear bomb“. But this is not the case. In my opinion, our technology is more like a water tap from which the data packets go into circulation, meaning into the network. The 5G water tap is simply bigger and wider than the 4G one.
You make 5G technology sound so harmless...
Had the US not been so fixated on 5G, then it wouldn’t have developed so fast. In
fact, before the US started making such 5G into such a big deal, I personally was a bit concerned for its future. At the time, I thought the pace of 5G research was too fast and that many commercial applications didn’t require 5G yet.
Do you think the action of the US has been politically motivated, because they fear for their technological supremacy?
Yes, the US doesn’t want to be overtaken. Even though the industry that we are in is not that important, they still don't want to see us outperforming US companies. They want to suppress us.
Is Huawei possibly the most prominent victim of the US-China trade war?
I wouldn’t say it like that. We’ve always had virtually no sales in the US market. So the only impact we might be seeing right now is taking place in other Western countries that have a good relationship with the US.
But hasn't your reputation also been damaged? After the warnings from the US government, confidence in Huawei technology has diminished worldwide.
Our customers, including those from the West, have been building their trust in us over the past 30 years. That trust isn't going to go away just because a few influential people say something. While the whole world is paying attention to this topic, we should take a step back and ask: what contributions has Huawei made to society as a whole.
Do you have any examples of this?
Huawei has contributed about 90.000 patents worldwide. Those are all new patents related to network technology. Second, not only have we connected three billion people around the world, we have also facilitated connections between all sorts of business sector like for example the finance industry. Huawei’s disappearance would be a threat to the world.
Donald Trump fears that China is emerging as a superpower that is contesting America’s status as the world’s number one. Is this perhaps more than „just“ a trade war. Is the world possibly faced with a new Cold War?
I worry about that. The American trade war is making the world more radical and less balanced. Some Western countries like to take sides on certain issues. If China and Russia were to start doing the same, then another Cold War could come about again, indeed.
How can this be prevented?
If the West doesn’t want another Cold War, then they need to stay open and accept the rise of other countries. We should put our focus back on economic development and make peace. If, for example, Europe were to increase its trade with other countries, then the trade volume could grow by maybe 1 trillion US dollars. There would be less conflict. Also, European countries would have more income that could help them address some of their internal problems.
But the US government and the EU have accused China of not being open enough. Many sectors are closed off to foreign investors.
China has been opening up more and more every day already. According to the Foreign Investment Law that was just approved by the National People's Congress in March, German enterprises, including machinery and car manufacturers, can set up fully-owned businesses in China. That could expand the potential market for German businesses while reducing their costs. And it would bring Germany even more economic prosperity.
But if a new Cold War were to come about, then the world economy would suffer, as would companies like Huawei, Daimler, Siemens etc. Do you fear a new era of protectionism in the world?
I don't think a new wave of protectionism will last for a long time. Large Western companies, not us, are the ones who are the most concerned about protectionism. Their balance sheet and stock prices would suffer and their market would be hit hard if they couldn’t sell their products to China's 1.3 billion people.
Research and innovation could also be affected...
Indeed. Some small innovative companies have been developing cutting-edge products. If the US prohibits them to sell their products to China, they can either move to China or to Germany. No company can survive they they cannot sell their products.
A Cold War also has intelligence operations. Chinese law states that companies have to provide assistance in cases that are related to national security. How do you deal with that?
At the Munich Security Conference, State Councilor Yang Jiechi made it very clear that Chinese companies have to abide by the laws and regulations of the countries in which they operate. There is no Chinese law that requires companies to install backdoors or spy on foreign entities. Premier Li Keqiang also reiterated this message at the latest session of the National People's Congress. Hasn't the Chinese government stated their stance clearly enough?
Ren was born in 1944 as the oldest of seven children in the South-Chinese province of Guizhou. Just shortly before the Cultural Revolution Ren was able become an architecture student at the university of Chongqing in 1963 while self-teaching himself engineering through books. In 1947 he became a technician in the People's Liberation Army. He was then allowed to join the communist party in 1978, before trying to make it as a businessman.
Huawei was founded by the then 43-year-old in 1987 in Shenzen as an import-company for network parts from Hongkong to the main land. After a couple of years Ren started to invest in the development of his own gadgetry. Huawei was profiting from a governement program at that time, that supported the re-establishment of local networks. Today Huawei employs 180.000 people around the world, 40 percent of which are working in research and development.
The US has accused Huawei of using its technology to help the Chinese government commit espionage. Has the Chinese government ever asked you for a special favor?
No, it has never asked for a special favour. We have been trying very hard to prove who we truly are, but the US government doesn't believe us. Now, they need to provide facts and evidence to support their accusations against Huawei.
Have you never installed backdoors in your equipment?
If Huawei had ever acted maliciously, like implanting a backdoor in our equipment, in any country, then we would have risked losing our markets in over 170 countries. All our employees could lose their jobs. That would be worth than death for me. Therefore, how could I possibly agree to installing backdoors?
So what the Americans are talking about is just a fairy tale? It's not true?
Certainly a fairy tale.
But it's a fact that Huawei employees stole technology. In 2014, Huawei had to pay a fine of millions of US dollars to T-Mobile, the subsidiary of Deutsche Telekom, because two of its engineers were using the arm of a test robot.
Just as we take the protection of our own intellectual property rights seriously, we also fully respect others' intellectual property rights.
Has Huawei not engaged in industrial espionage?
There have been isolated cases where individual employees have failed to comply with company policies. After all, Huawei has over 180,000 employees. Those who violate company rules will be disciplined. Our success can be mainly attributed to our focus on our own research, which has taken us ahead of our competitors. This is why the US is coming after us.
Do you trust US tech companies like Google, Amazon, and Facebook in terms of data security?
Complete security is virtually impossible to achieve in all technologies. The costs would be enormous if we attempted to build an information network that guarded against absolutely every risk. Our networks are supposed to guard only against hostile competitors and malicious attackers. We have no hostile competitors amongst Western companies, so we don't guard against Western companies. We also don't guard against the US government, the German government, the Chinese government, or any other government. They will not forward information about us to our competitors.
The lack of trust in Huawei technology might be a cultural thing, too. Data protection is a central principle for people in Europe. In China, data protection is not so important. Do you understand the concerns of the European citizens and politicians?
Of course, I do. Huawei adheres strictly to the GDPR. But please bear in mind: Huawei is only an equipment provider. The networks are owned and run by telecom operators and internet service providers. We provide water taps; but others are responsible for the water flow (data traffic).
Chancellor Merkel just spoke out against an exclusion of Huawei from Germany. Has Huawei held talks with either Beijing or Germany on that matter?
I think German Chancellor Angela Merkel is great. I don't know what the Chinese government is thinking. They don't tell me.
Last month, we had talks with Germany's Federal Ministry of the Interior and expressed our willingness to sign a no-spy agreement with the German government, in which we promise that Huawei networks contain no backdoors. I'm also willing to push the Chinese government to sign a no-spy-agreement, that also obliges Beijing to comply with the GDPR.
In your view, what is a good solution for Germany?
European countries certainly do not want to have their data transmitted to China. They definitely don't want to have their data transmitted to the US, either. Germany has proposed to build its networks with equipment from multiple vendors. We support this approach.
But there are still some doubts. Unlike Germany, China is neither a democracy nor market economy. There are many state-owned enterprises in China. How close is Huawei to the Chinese government?
I don't know what the Chinese government is thinking. They don't tell me about it. Huawei is a private company, abides by the laws in China, and pays taxes to the Chinese government.
You're one of the most famous business leaders in China. There is usually a close relationship between people like you and the government. When was the last time President Xi received you?
That was in 2015 in the UK. President Xi was visiting our UK office, so I accompanied him during that visit.
In a recent interview with CCTV, you said that you declined Beijing’s invitation to attend a ceremony celebrating the anniversary of China's 40 years of reform and opening. How does one decline such an invitation?
I want to focus entirely on Huawei. It’s possible to decline these kinds of invitations nowadays. Beijing is changing and becoming more open.
You claim to have no special relationship with the government. But New Zealand recently instituted a boycott against Huawei. Shortly afterwards, the Chinese government started to put huge pressure on New Zealand. Is there no connection?
We will no longer do 5G in New Zealand or Australia. The Chinese government didn't understand our intentions and their efforts might be in vain.
Some weeks ago, you sent out an invitation to a Huawei event to some US-journalists. The Chinese embassy in Washington sent out the same invitation. Is there no connection here, either?
We published an open invitation letter to the media. Reports that the invitation was issued through the embassy are false.
At the beginning of the US attacks against Huawei, your daughter was arrested in Canada. What is your comment on that case?
I think the US must present their evidence. Should they fail to present sufficient evidence, then I have reason to believe that she is being held as a political hostage. I think what really matters in the court are facts and evidence.
How often do you talk with your daughter?
We call each other whenever we want to talk. Those Americans who have to listen in on our calls must be working really hard. They don't know when we might make a call, but they have to be ready all the time and wait around.
You have sued the US government in response to the US boycott. Do you think you can actually win this case?
We still believe in the American principle of Separation of Powers, in the independence of their judicial system, and in the strength of their legal system. We believe that we will win.
What if Huawei loses the case?
If Huawei wins the case, it will prove that the US has a great judicial system. If Huawei loses the case, but the US still fails to present solid evidence for their charges against Huawei, it will also prove our innocence.
What are you doing now to improve your image in the US?
The US has been campaigning against Huawei. We have no plans to increase our market share there. We have no choice but to defend ourselves in court.
Huawei is a leading technology company. Your philosophy is to be modest, passionate, diligent, and to be willing to improve oneself every day...
Hold on. There are many people who work diligently every day, but they can't necessarily create wealth. To me, the most important thing for a company is direction, a direction that creates value for customers. Wealth belongs to our customers. If we just took it but didn’t do anything with it, then we would be thieves. The only way a customer will happily give you their money is if you create value for them. That is a fair exchange.
Huawei also creates a lot of value for itself and invests 10% to 15% of your annual revenue in research and development. What will be Huawei’s next big innovation?
I think our future innovation will still focus on connecting people around the world with each other. But it's also important to let researchers do their thing. Our latest smartphone, the P30, can photograph objects from one kilometer away. It can also be used as a night-vision device. One can wonder: do normal users really need this?what is the point of these functions is. But this is what our scientists have been dreaming of, and we at Huawei understand.
How important will AI be in the future for Huawei?
It will be very important, and even more important for Germany.
Because production in Germany is already highly automated and supported by information technologies. I think Germany is well positioned to turn industry 4.0 into reality. If AI is widely adopted in Germany, one person will be able to do a job that currently requires ten people. If that becomes a reality, Germany's working population of 45 million will be equivalent to that of 450 million, making it an even greater industrialized nation.
Should German companies therefore invest more in AI?
Yes, they should. Using AI does not necessarily mean that AI has to be
manufactured in Germany. No matter the origin of the technology, German companies should embrace it, as long as it can create wealth for Germany. Currently, the US is the strongest in AI. Germany needs to overcome its labor shortages if it wants to boost its industrial development.
Do you have any new investment plans in Germany?
Yes, we do. We have established a lot of research centers in Germany and purchased a factory in Weilheim to produce high-performance equipment. We're going to gradually move our manufacturing facilities for cutting-edge products to Europe. We also recently bought 513 acres of land in Cambridge for the production of optical chipsets. And some of our production facilities for 5G base stations may be located in Europe.
How important is Germany to Huawei?
Germany is one of our preferred locations. In addition to our investment in Germany, many technologies and equipment used here in China are also from Germany. Our software primarily comes from Siemens and Bosch. Huawei's collaboration with Leica is a perfect example of our investment in Germany.
May I ask you a personal question? Right now you have reached the age of 74 years. How long are you planning running Huawei?
That depends on how soon Google can come up with a medicine that helps people to live forever.
We have spoken at length about the trade war, a Cold War, European politics, and Chinese politics. Could you ever imagine becoming a politician in the future?
I'm a businessman and will always remain a businessman. I would never go into something related to politics.
Right now, a lot of employees of Huawei own shares of the company. Do you have any plans to go public?
No, we have no plans for now, but maybe after 3,000 years. If you're patient enough, you are welcome to buy our shares then.