There are few companies as ubiquitous and mysterious in equal measure as Huawei. What was originally founded in 1987 as a manufacturer of phone switches has over the decades grown enormously into one of China’s most prominent companies. A number of governments, including in the United States, Japan, and last summer Germany, have banned or restricted the use of Huawei’s equipment, citing concerns about the company’s ties to the Chinese Communist Party and China’s military, as well as unfair trade practices, sanctions violations, and other concerns. Nevertheless, Huawei continues to lead global markets in terms of 5G equipment sales.
When the company’s chief financial officer, Meng Wanzhou, was detained in Canada at the request of U.S. authorities in early December 2018, the secretive company’s founder – Meng’s father, Ren Zhengfei – began inviting Western journalists to the company’s headquarters outside Shenzhen. Meanwhile, Chinese authorities detained two Canadian nationals, Michael Spavor and Michael Kovrig, in an apparent retaliation.
In her new book, “House of Huawei: The Secret History of China’s Most Powerful Company,” Washington Post technology reporter Eva Dou charts Huawei’s development, starting with the man at its heart: Ren Zhengfei.
In the following interview with The Diplomat’s Managing Editor Catherine Putz, Dou dives into some of the details revealed in her book, from the vicissitudes of Ren’s upbringing and the nuances of doing business in modern China to the seemingly inscrutable relationship between Huawei and the Chinese state.
In what ways do you think Ren Zhengfei’s upbringing – particularly his family’s experiences during the Cultural Revolution – impact his professional trajectory and philosophy as a businessman?
Ren was born in 1944, the son of two schoolteachers. His early memories include the tumult of China’s Great Famine and the Cultural Revolution, which both impacted his family. His success with Huawei owes itself in large part to his keen sense of shifting political winds – his ability to get onboard with new policy directions early, while avoiding crackdowns and dodging political risk. He has often warned his staff over the years to be wary of “black swan” incidents, or unlikely disasters. One of Huawei’s notable feats is simply surviving all the rounds of political purges in China from the late 1980s to the present day.
Ren’s PLA connections get a lot of attention from Huawei’s critics, as has the company’s former chairwoman Sun Yafang’s alleged work with China’s intelligence agency. What do we know about Ren’s military service? How much (if at all) did that period impact his business?
Ren spent his early years assigned to help build a military aircraft production base in the hills of southern China, and he proceeded to rise the ranks as a military engineer. He was feted within the army construction corps for inventing a pressure generator that was useful in constructing textile factories. His time in the military was influential to him personally – people who met him years later would remark that he still carried himself with a soldier’s bearing, and he loved using military metaphor in his speeches. But having a military background for his generation of engineers was nothing special – academic institutions were widely shuttered during the Cultural Revolution, and the army was one of the few places where you could work as an engineer. His later business connections to Beijing arose largely because of Huawei’s key role in the nation’s technological aspirations.
One of the core concerns in the West about Huawei is uncertainty about the depths of its ties to the Chinese state. As early as the 1990s, you note in the book, Huawei had been subject to security demands from the Chinese government. What do we know about if and how Huawei rebuffed those demands? In the end, how would you characterized the connection between the company and the state?
Huawei has resisted becoming too intertwined with Beijing over the years, with Ren fearful the company would lose its competitive edge if it was subsumed into state bureaucracy. But the reality is that tech companies must cooperate with the national-security requirements of their governments – that is the case under the law in China, the United States, and countries around the world. We know through Edward Snowden’s leaks that U.S. companies have not been able to rebuff such demands from the U.S. government, and Chinese companies would likely have less ability to rebuff Beijing.
There’s a logic to why governments would want to use domestically made technology equipment. But in the globalized economy, it’s also impossibly expensive for most countries to build end-to-end systems entirely at home. So it’s a balance.
Many private companies in China haven’t made it without officials going to bat for them. And some prominent businessmen, such as Jack Ma, have found themselves at times on the outs with the state. What do we know about Huawei’s political backers early on?
Huawei has had government patrons since its early days, with local officials in the Shenzhen Special Economic Zone identifying it as a rising star and promoting it domestically. However, for the first part of its existence, Huawei was just one among many contenders. It didn’t even have the most prestigious political backers. As its competitors fell by the wayside, and it continued to rise year after year, Huawei became one of the unquestioned national champions, with broad support from senior officials in Beijing.
Another allegation often lobbed at Huawei relates to industrial espionage and/or IP theft. To what extent do you think such criticism are valid?
There’s a sliding scale in the business world between having sharp elbows and IP theft, and Huawei has been on various parts of this spectrum throughout its history. In its early days, when China’s IP law was still nascent, there were quite blatant cases in which it ripped off rivals’ products. Ren himself once admitted it in an internal speech. After Cisco sued in 2003, Huawei began putting much more effort into developing its own intellectual property, even as it remained a fast follower for technologies developed by its rivals. Huawei still faces IP complaints today, but is undoubtedly an R&D powerhouse in its own right, with engineering teams around the world.
Meng Wanzhou’s arrest in Canada in 2018, pending an extradition request from the United States, heightened focus on Huawei and U.S. concerns about the company. Soon after, Chinese authorities detained two Canadians, Michael Spavor and Michael Kovrig. Does the Meng and the Two Michaels episode tell us anything about Huawei’s relationship with the Chinese state?
That crisis really crystalized that this was more than just business anymore. Huawei was a crucial part of Beijing’s economic and geopolitical aspirations, and Beijing was willing to move mountains to get Meng back home and to ensure Huawei’s survival. If Huawei’s executives once thought that they could simply be citizens of the world, that dream was dashed. The mounting sanctions from the United States meant that Huawei had to rely more than ever on Beijing’s patronage and support.
Finally, what do you think is missing from popular discussions about Huawei?
Many people know of Huawei either as a smartphone brand, or a foreign firm with a history of intellectual property theft problems, but Huawei is more than either of those things. It’s a technology company that plays a major role in the political events of countries around the world, and that’s why policymakers care so much about it. We tend to see consumer gadgets in the spotlight, but it’s the unglamorous stuff in the background – servers and routers and fiber-optic cables and chips – that turn the gears of nations, determine the outcomes of wars, and that continue to be major preoccupations of policymakers, with good reason.