Decoding China's most enigmatic business tycoon

Huawei's enigmatic founder broke his silence at Davos last week. What did he say?

Ren Zhengfei, the founder of the world’s largest telecommunications equipment vendor Huawei Technologies, does not like to be interviewed. Throughout his business career, he’s spoken to the media only five times. The most recent one took place at the Davos World Economic Forum last week.

The soldier-turned tech entrepreneur answered a broad range of questions about himself, his company, as well as the alleged links between Huawei and the Chinese military. Some of the answers he gave would have made Huawei’s spin doctors very nervous. Not only did he reveal details about thousands of employees being disciplined for fraud, he also revealed that Huawei employees had sided with both sides in Libya’s deadly civil war.

  1. Is Huawei a Trojan horse for Beijing?

One of the biggest question marks over Huawei is its alleged links with the People’s Liberation Army. It is not hard to see why. China is waging an aggressive cyber-war against the United States. Edward Snowden just revealed a week ago that Beijing’s spooks managed to steal the designs of America’s latest fighter jet -- the Joint Strike Fighter. Huawei is the world’s largest maker of telco gears.

The fact that Ren served in the PLA as an officer is at the heart of the alleged nexus between Huawei and the Chinese government. At Davos, Ren explained once again about how he became an accidental soldier. There was a chronic shortage of fabrics when Ren was growing up in China during the 1960s and 70s. In fact, there was a shortage of everything. So the Chinese government imported German machinery to make polyester fabric and built factories at some remote locations.

Because they could not find skilled workers nearby, Beijing asked construction battalions from the PLA to build them. Ren joined the army at the time as a technical officer operating imported German looming machinery. He was demobilised in the 1980s when Beijing to decide to reduce the size of its standing army considerably to concentrate on building up the economy, which was on the verge of collapse.

Ren does not shy away from the fact that he supports the Chinese Communist Party. In fact, he says it repeatedly -- much to the chagrin of his ever-growing army of international PR doctors. “We are a Chinese company and we must certainly support the Chinese Communist Party and we love our country. But we will not harm other countries and we obey laws and regulations around the world,” he said.

The founder of Huawei also went on to explain the company’s shareholding structure. He vented his frustration over the persistent doubts about Huawei’s ownership. “We have over 80,000 shareholders and they are all employees and none of them is non-employee. I am the largest shareholder with 1.4 per cent and no one has more shares than I do,” he said.

“I don’t think it is necessary to spend more time explaining who we are. Our identity will eventually be vindicated. We cannot afford to abandon production, sales and making money. How would we survive?”

  1. Did Huawei ever spy on the United States?

The US House Intelligence Committee found Huawei and its fellow Chinese telecommunication company ZTE to be national security threats. Michael Hayden, the former American spy chief also publicly accused Huawei of spying for China.

Ren, who likes to speak in metaphors, describes Huawei’s role in the whole telecommunication infrastructure game as that of pipes carrying water. “The water inside the pipe is the Internet. All of the search is done by the Internet and we don’t really care about it,” he said, “we are paid to make pipes.”

  1. Who is Huawei’s biggest enemy?

Ren has a long standing love-hate relationship with the US and he is a big admirer of American technology and management know-how. At the same time, he has been bitter about Washington’s decision to lock Huawei out of the world’s most lucrative telecommunication market.

He says the US would be able to maintain its technological lead for the next few decades and it is impossible for Huawei to change that. One of the most revealing details he disclosed during the interview is about internal corruption within the company. About 4000 to 5000 employees confessed to committing anything from petty crimes to fraudulent reporting.

“Our biggest enemy is not anyone else but ourselves,” he said.

  1. Secret behind Huawei’s success.

The emergence of Huawei as a leader in the ultra competitive field of telecommunications is one of the great untold business stories. How does the company do it? There are many explanations ranging from state subsidies to stealing American IP rights. These accusations cannot explain Huawei’s huge success entirely.

What Ren told his audience at Davos offers some fascinating insights into Huawei’s corporate culture. When Japanese nuclear reactors were experiencing meltdowns after a tsunami, Huawei employees were told to march back into the disaster zone to fix up the telecommunication network. Ren said Huawei employees were moving in the opposition direction of fleeing refugees.

Sales in Japan increased significantly after Huawei demonstrated its ability to keep the network running amid an unprecedented natural disaster. Ren also shared two similar stories about how Huawei engineers kept the network going even during the deadly Libyan civil war as well as in the aftermath of the Chilean earthquake.

  1. Future Chinese economic growth

Ren remains upbeat about the Chinese economy and believes the pace of growth will pick up again after 2017. However, he thinks 2015 and 2016 would be two difficult years for the Chinese economy as it goes through an adjustment. “Economic growth is moving in a positive direction and it is not getting worse. A lot of previous investments were not productive and we just squeezed water out of these figures,” he said.

Despite the economic slowdown in China, Huawei’s sales and profits increased 20 per cent year on year.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles