September 26, 2019, Shenzhen
Christine Tan, Anchor, Managing Asia, CNBC: Welcome to another session of A Coffee with Ren. Today we're talking about a very interesting topic: Innovation, Rules, and Trust. We will focus on innovation simply because there are so many changes happening in the world of technology and such huge impacts that new technology can bring. We will also look at rules and how to manage risks and disputes when it comes to new technologies. This is without mentioning the issue of trust, which has become very critical as we explore new technologies, as has the prospect of a global framework that can really govern new technologies, and what this means for everyone.
Let me introduce today's panel to you. The man himself, Ren Zhengfei, CEO and founder of Huawei. And with him, two celebrated scientists and futurists on my left from the US – Jerry Kaplan also a futurist, best known as a pioneer in pen computing and tablet computers. Welcome Jerry. Please also welcome Peter Cochrane, fellow of the Royal Academy of Engineering, winner of the Queen's Award for Innovation, and the former CTO of British Telecom. And last but not least, we have President of Corporate Strategy Department, Zhang Wenlin. Thank you all for being with us.
Let me start with Mr. Ren.
01 Christine Tan: Mr. Ren, this is a discussion about innovation. How do you see the future? What new technologies do you see evolving?
Ren: I believe that society is on the eve of another explosion of new theories and technologies. Electronic technologies will evolve towards being three nanometers or even one nanometer in size and won't stop there as Moore's law approaches its limits. It's just that technology will continue evolving in a manner that we cannot predict yet. In the past, we thought graphene would be this evolution. However, we don't know for certain if that's still true until today.
Significant breakthroughs will be made in genetic technology over the next two to three decades, which will help trigger huge breakthroughs in life science, biotechnology, and nanomedicine. We are not sure how these breakthroughs will change people's lives. If our electronic technology is reduced to one nanometer precision and to a level that can be combined with genetic technology, what new scenarios will emerge? What surprises will be in store for society? This is beyond our imagination. Today, science and technology are so advanced that we can use molecular technology to synthesize materials that never existed before. An endless stream of new materials and technologies are constantly being discovered. We can't tell what the trends of the future will be.
AI will certainly start being applied on a large scale. But still, we cannot envision how it will drive society forward or create more wealth. The breakthrough and penetration of quantum computing will trigger the explosion of the information society. Although we know the impact will be significant, it won't be the same as we thought, not to mention the extensive application of optical technologies... During this period, breakthroughs in a single discipline will present us with a dizzying variety of new opportunities. The reverberations from breakthroughs in interdisciplinary studies will hugely shock us all. Any breakthroughs will be accompanied by the explosive growth of data traffic. We can't foresee what demands there will be in terms of computing, storage, transmission, and processing of this super large amount of data.
All these new technologies, which will be applied on a large scale, are likely to generate breakthroughs over the next 20 to 30 years. How will we usher in a new era in the face of these opportunities? I have no ready answer to this question.
This new era will open an enormous window of opportunity for us. We need to work even harder and join the forces of scientists and engineers from around the world to welcome this new era. This is what we expect. Despite this, we don't need to feel uneasy about the unpredictability. Instead, we should embrace this new era with great courage.
Christine Tan: Let's talk about AI, which is artificial intelligence. A lot of people have been focusing on artificial intelligence and worry that it might displace jobs. How do you see this?
Ren: AI will just create greater wealth and generate higher efficiency for society as a whole. This greater wealth and increased efficiency will then address the employment issue in a new way. AI will be the core variable that will influence and shape a country's future capabilities and bring disruptive changes to that country. This means AI will fundamentally change how the international community develops. The development of a nation depends on its basic capabilities. Basic capabilities are about education, talent, industry maturity, algorithms/computing power, and infrastructure. With support from infrastructure that includes supercomputers, super-large storage systems, and ultra-high-speed connectivity, humanity will welcome a new level of prosperity.
As for jobs, I believe this raises new requirements for each society and each country. We've already been through the industrial revolution. At that time, each worker was a good fit for society as long as they had received secondary education. In the AI era, we must improve the education and sharpen the skills for all population. Every country should endeavor to do so. To succeed, they don't have to be a big country. Thanks to AI, many small and middle-sized countries will be able to significantly boost their production capacities. As long as these countries are capable of creating more wealth, they will offer their people more opportunities.
Christine Tan: You're an expert in AI. Do you agree with what Mr. Ren just said?
Jerry Kaplan: First of all, it's an honor to be on the panel with such a prominent entrepreneur who is respected around the world, so thank you very much for having me. Following Mr. Ren, he's made such an eloquent explanation, I feel a little bit like I'm being asked to talk after Shakespeare though. So I'm not sure that I'll have too much to add.
You also want us to be a bit argumentative on the panel. So, there are a couple of things that are important to understand. AI is not magic. It's not really about intelligence at all. It's simply a new wave of automation. To understand what's going to happen with AI, you simply have to look at previous waves of automation. And then you can understand how it will affect labor markets and what is likely to happen.
Now, while it may seem technology is moving very quickly today, the people who study this, the academics, have surprisingly found that the rate of change in the past was actually faster than it is today. We are seeing an age in which technology and innovation is actually quite a bit slower. The invention of the railroad, the electric light, the computer, the television, all of these transformed society. And we haven't seen that kind of pace of transformation.
But I think that ultimately, Mr. Ren is correct, the future will be bright. While automation disrupts labor markets, it doesn't cause the jobs to disappear. New jobs will be created. As we become wealthier, demand will be created. We get a new middle class and new demands for goods and services. And in fact, automation will change the nature of labor, not put people out of work.
Christine Tan: Peter, I've got to ask you. On AI, who do you think is going to dominate in AI? Will it be China or will it be the West?
Peter Cochrane: I think that AI will decide. Right now, it's very task-specific in the same way that when Jerry and I and Mr. Ren first entered industry, if you bought a computer for the payroll and that's all it did. Nothing else! And right now, we've got general-purpose computing. We don't have general-purpose AI yet! But I would like to frame this against a bigger picture, a bigger ambition. What are we trying to do? First of all, we have to try and create sustainable societies. To do that, we have to get away from the idea that we can polish and improve what we've got. It won't work. Transformation demands biotech, nano tech, AI and robotics; and the Internet of Things.
Because anything we create for the future has to be recycled, repurposed, reused, and the only way we can orchestrate this is with the IoT. And there's a further thing that we have to achieve, and it's a big challenge. I don't know if Mr. Ren would favor this, but I would phrase it like this, we have to stop producing more and more for the few, and we have to start providing sufficient for the many. If we do not, we will never see a stable planet where people are living equitable lives.
There is sufficient on this planet to support every human, but with the technology we have right now, we stand to destroy our ecosystem. So we have to change the way we live and the way we do things.
02 Christine Tan: Innovation changes the way we do things and where we go. Another big word that has become very important is "trust". Mr. Ren, let me address this question to you, because Huawei has been under a lot of scrutiny as a leader in 5G. Why is there so much distrust around what you do?
Ren: Hundreds of years ago during the Industrial Revolution, some people did not trust the machines used in textile mills. Some, like the Luddites, even saw them as a symbols of devilry and tried to destroy the machines. Eventually though, people accepted the machines. Without these machines, the high-quality fabrics we use today wouldn't exist. Now some of the highest quality fabrics in the world are still produced in the UK. The emergence of these machines did not deprive textile workers of their rights, but improved the quality of their textiles. When the train was first created, it was ridiculed because it was slower than a horse-drawn carriage. Today, trains are widely recognized as one of the fastest ways to transport heavy cargo. When the train was introduced to China in the beginning of last century, people thought they were powered by ghosts, and couldn't figure out how they ran. Similarly, when China's high-speed rail began operation, an accident occurred on the Ningbo-Taizhou-Wenzhou line. At that time, almost everyone was against high-speed rail. But now no one complains about them at all. I think almost all people would say high-speed rail is a good thing.
Now AI is still in an early stage of its development. Advances in super computing, super-large storage, and super-fast connectivity technologies are creating opportunities for AI applications. Now people are very concerned about AI. They are worried that AI will cause unemployment, disrupt social structures, and distort our ethics. They worry too much. If we look back, our population is several times larger than it was a few decades ago. Before, huge swathes of the human race were hungry. Now though, we are in an era of excessive material abundance; we have more than we can consume. That's because advancements in technology have helped us create more wealth.
The emergence of 5G was something unexpected. 10 years ago, Turkish Professor Erdal Arikan published a mathematics research paper. Huawei came across this paper earlier than some others, invested heavily into that area, and kicked off our 5G. 5G itself is a tool, just like the ballast beds that train tracks are laid on. That's all it is about. Right now, there are heated debates around 5G, but only history will tell if 5G, AI, and other new technologies will create value for humanity.
In short, people should have more trust and tolerance towards new things. The most prominent feature of innovation is that it gives everyone academic freedom, allowing people to explore. With a little more tolerance in the world, Copernicus's theory of a heliocentric universe would have been accepted long before his death. People also suspect that genetic engineering has negative effects. But that can only be proved after experimentation. We should be more understanding of genetic scientists.
Christine Tan: Are you disappointed and sad that there's so much distrust around your 5G technology?
Ren: China used to be very poor and lag behind the rest of the world. People thought that China would never catch up. However, China turned out to be a crazy sprinter, able to catch up with everyone else. It's just like a train, which eventually runs faster than carriages. When new things are discovered, people don't trust them, but I think eventually the trust will grow.
Now, Europe still presents Huawei with a wide scale of opportunities. Actually we still see many opportunities all around the world. I think many people are quite tolerant of us, and that makes me happy. After all, we cannot expect everyone to understand us, at least not within a short period of time.
Zhang Wenlin: For what we see about distrust, I think that was caused by a lack of knowledge about 5G and the industry. For those that have a sufficient knowledge of 5G and the industry, such as telecom carriers, industry partners, standards organizations, and the governments of countries seeking economic and industrial development, they generally trust us. That's why our 5G business is developing very well despite all the noise and obstacles.
03 Christine Tan: Actually you offered to license all your 5G technology to western companies for a one-off fee. You put the proposal out there. Any interest so far?
Ren: First, we don't intend to license our technology to all Western companies. We'll license it to only one Western company. We'll give it an exclusive license, so that there will be a large market for them. We think this company should be a US company. Europe already has its own 5G technology, so do South Korea and Japan. They just need to make some improvements and adjustments to its development. Since the US doesn't yet have any 5G technology, we should exclusively license it to a US company. With our 5G technology, that US company will be able to compete with us worldwide, not just in the US market. Of course, competing on Mars, the moon, and the sun, is another story. But we can compete anywhere on the earth. Our aim is to start from the same place with the rest of the world in this new race. I believe we'll still be able to win on that new horizon.
5G is not that amazing; its power is exaggerated by politicians. AI will have an even brighter future. I hope we will not be added to the Entity List again in the AI era. Anyway, that would be unlikely, because AI is a software-based technology and we will probably surpass other companies in this area. Hopefully, we won't run into any new conflicts over this. We want to work together to serve humanity and the new digital society.
Peter Cochrane: I think it's totally distorted. There's no distrust between the engineers, the scientists, the managers or the company.
Christine Tan: Then what is the issue?
Peter Cochrane: The issue is political. It has nothing to do with the technology or the people working on it. It is political. The technology fear factor is normal; it happened with 3 and 4 G. But there's a subtle difference, social networks are now distorting perceptions. People associated truth with quantity. And if the social networks do anything, they generate quantity!
A single blog can generate 20 million postings it just keeps going. And so, there's been no concerted effort by the industry to allay people's fears. We should be doing that. There is no proven problem with any of these technologies. If there were, we would have policemen queuing at the hospital with brain cancer. We've had mobile technology a long time. We've been using military radios with far more power in close proximity to human beings with no difficulty at all. There's no proven problem.
There are problems such as influenza or gun-shot wounds. But there's no proven danger with 5G. In the U.K, for example, the number one concern is that everybody wants service but nobody wants to see towers or masks.
Christine Tan: Mr. Ren, a follow-up, very quick, in terms of licensing out your 5G to one US company, what would that package look like? Would it be, hardware? Software? Codes? What would it involve essentially?
Ren: First, we'll license all our patents to this partner on fair, reasonable and non-discriminatory (FRAND) terms. Second, we'll license them everything related to 5G network technology, including software source codes, hardware designs, production technologies, as well as network planning and optimization and testing solutions. If they need, we can also license our chip design technology to them. We just hope that we'll be able to start on an equal footing with companies from Europe, Japan, South Korea, and the US, so that we can continue to contribute to humanity together. We are confident that we will win the race, so we're open to offering the license.
Christine Tan: But essentially this opens up the opportunity for another Western company to be a giant competitor to you. Are you willing to accept the fact you might lose your 5G leadership? Is that something you're willing to accept?
Ren: First, we will get a lot of money from the licensing. That will be like adding firewood to fuel our innovation on new technologies. It will mean that we will have a better chance of maintaining our leading position.
Second, we will bring in a strong competitor. This will prevent our 190,000 employees from becoming complacent. They'll know that if they sleep on the job, they might wake up and find they have lost their jobs. It is simply not enough for me to keep pushing our employees to work hard every day. Sheep become stronger when they are chased by wolves. I don't worry that a strong competitor will emerge and drag Huawei down. In fact I would be happy to see that, because this would mean that the world is becoming stronger. The slower sheep from a herd will be eaten by wolves. Therefore, if we think of Huawei like a herd, it doesn't need to lay off its slow-moving employees, as they will be eaten by "wolves". This is not a bad thing. I don't think a competitor poses a threat to us; instead, it will push us to move forward.
Christine Tan: Jerry, how do you think this would sound to a US company and is licensing a way to rebuild that trust?
Jerry Kaplan: Let me address the trust issue. First of all, in this conversation we're conflating two issues. Peter is talking about trust and fear about the technology. Mr. Ren is talking about trust and concern about suppliers. Trust in English is a fraught word. It's an emotional word, like you don't trust me. It's about emotions. The truth is you don't need trust to do business; what you need is predictability to do business. Those are very different things. It's just like marriage. You don't need love to be married; it helps. But you need respect to have a good marriage.
So the issues are the same here. What we need is a better expression of mutual respect, which, to be frank, the United States at a political level is not doing and therefore is not able to engage in a productive dialogue. Licensing is just one possible approach to this. There's a whole variety of technical approaches. There's clean room. There's second sourcing. There're all kinds of techniques to ensure that every nation, including the US, has a right to protect its critical infrastructure. But that doesn't mean Huawei cannot be an effective supplier and there's no reason, in my view, Mr. Ren should give away his business. If he can outcompete American companies, that's the American way.
Christine Tan: Mr. Ren, would you want to give away your business?
Ren: I can understand that.
Christine Tan: Peter, what do you think about this issue?
Peter Cochrane: I don't actually think it's about the technology or 5G or networks. I think the real power in this situation is what we are going to do with it. It's the enabling function of 5G that I think is the real driver. We can transform things like healthcare, logistics, and manufacturing. It's a really good way, of very quickly orchestrating the resources of a country, and the planet, to great effect.
I don't think that some new company coming in to this field, or a company that's already in the field, that takes the technology from Mr. Ren, is suddenly going to become superior. There's a very powerful research team here. They've got terrific scientists and engineers already thinking what's beyond 5G.
The reality is, if we're going to get 5G rolled out across the planet, really quickly, we need more than one company doing it. When any market becomes stabilized, and a product becomes a commodity, you usually only finish up with only 3 or 4 suppliers, but in the early stages you need a lot of suppliers to get it out there. I think the urgency is related to global warming and transforming societies.
04 Christine Tan: Mr. Ren I read that you're open to the idea signing a no-backdoor agreement, something you're exploring with some countries in Europe. Can you clarify your situation? Is that happening? What's the latest?
Ren: Over the past 30-plus years, Huawei has maintained a solid track record in cyber security worldwide. This has proved that Huawei's equipment has never caused a large-scale network breakdown, and has never experienced malicious security incidents.
In the UK and Germany, we are subject to stringent scrutiny. No other equipment vendor has been subject to the same kind of rigorous tests. These tests have proven that there are no problems with our products and solutions. It's true that the UK has found some issues with our solutions, but we will take them seriously and make improvements accordingly.
We have never had any malicious intentions. We support Europe in subjecting equipment vendors and carriers everywhere to these tests. The purpose is to ensure that no one installs backdoors. We have full confidence in signing no-backdoor agreements with various countries, and we are sure that we can deliver on this commitment.
We are investing heavily in R&D to ensure that we are at least up to the EU's cyber security standards and the requirements of the General Data Protection Regulation (GDPR). We have determined that our top goal for the next five years will be to ensure cyber security and privacy protection. On top of that, we will build simplified network architecture; simplified base stations, transmission networks, and core networks; and simplified transaction models. We will also build secure and trustworthy networks while protecting privacy. This will make networks faster, simpler, more secure, and more trustworthy.
We are working hard on these goals. And that's why we dare to promise to governments worldwide that our equipment contains no backdoors.
05 Christine Tan: So the issue of trust is very real. Even though you want to sign a no-backdoor agreement, there is the issue of "if I don't trust you, I'm going to develop my own technology instead." This talk has given rise to the fact we are facing a scenario where we could see two separate tech worlds, a tech decoupling of sorts. One in China and one in the US. How real is this possibility, Jerry?
Jerry Kaplan: Well, it would be a terrible economic travesty for both sides and both countries, as Mr. Ren has written about extensively. However, if you're just talking about 5G, let me point out that this is a replay of things that happened between Europe and the United States with 3G and 4G. The standards were different, and your phone didn't work in the other place. Ultimately chips were developed that operated on both standards. It's a surmountable problem. This isn't the end of the world.
Christine Tan: Peter, if we get one standard in China and one standard in the US, where does that put Europe?
Peter Cochrane: I don't think it's a sustainable solution for the planet. It's just very expensive. What really happens in the tech world is, we spend billions developing technology. We have to get it out there in large numbers to amortize that investment, and then the prices fall and we can spread that technology across mankind in general. But if we have a smaller market, the prices are going to be higher. The cost of development is much higher.
The reality is, not the United States, not Europe, China or India or Russia have got all the resources, all the people, all the technologies, all the manufacturing facilities and know-how in country. We are in a global market; we are dependent upon each other. And I don't think the politicians understand either the technology, or the globalization, or the markets. Otherwise, they wouldn't be doing such stupid things.
Christine Tan: Mr. Ren, to what extent do you think Huawei can decouple from technology in the West? To what extent can you reduce your reliance on foreign technology? And does this force you to develop your own technology instead?
Ren: In the early years of railways, there were narrow tracks, wide tracks, and standard tracks. These differences impeded international transportation and hindered industrial development. The same problem has occurred in the communications industry. There are three standards for 3G and two standards for 4G, and it's widely agreed that these different standards have slowed down the development of communications worldwide and imposed high costs. For 5G, there is only one unified standard, which is the result of collective discussion among tens of thousands of scientists from more than 100 countries over the past two decades. As a result, the whole world will be connected by one standard network architecture, and this will bolster the development of AI and social progress.
I don't support any technological decoupling, whatever the cause. My position is very clear: If US companies are allowed to sell components to Huawei, we will buy from them, even if this means cutting the production of components we have developed in-house. We support globalization and we will never seek to develop entirely on our own. We will never close ourselves off. The actions we are taking now in response to suspension of supplies don't represent our long-term ideal, which is to become an integral part of the world.
US companies are constantly making changes so that they can gradually resume their supplies to Huawei. We welcome this and we are happy about it. Decoupling is the last thing I want to see. It takes a lot of work to create a unified technology. Decoupling will only jeopardize the creation of new wealth for humanity.
Market fragmentation can only lead to high costs, even if it's possible to develop the required technology. The purpose of globalization is to support large-scale adoption of technologies and reduce the costs of quality services to benefit the seven billion people who share this planet. This is something we have been working hard to achieve. Fragmentation and decoupling should be avoided whenever and wherever possible.
06 Christine Tan: Operating systems are the next big technology for China. What would you say to that?
Ren: The development of HarmonyOS has taken us seven to eight years. This OS is originally intended for the Internet of Things and industrial control. Low latency is the biggest feature of HarmonyOS. You may be wondering whether it will be used for consumer devices. In fact, we are working to make that happen. Google has been friendly to us, and it is very capable. If the US government prohibits Google from providing Google Mobile Services to us, we will have to work hard to solve the issue.
Jerry Kaplan: I want to talk about the standards issue for a second. We're conflating a whole series of things. Standards allow interchange and permit innovation if they're good standards that can be different underneath. Now 5G is a much more complicated thing than the two letters, 5 and G, sound like. It's a whole series, a stack of layers. It's quite possible for the US to adopt the same standard as China and yet for the world to bifurcate because of silly trade issues and commercial issues that neither government has any business imposing on the world's corporations. So I think it's important to understand that. But, we've been through this before, fax machines, same story. Everyone had their own standard, and nobody profited. When there was one standard, everybody's machines could talk to each other, so there was plenty of room for people to make money. Personal computers just in the United States. IBM released the personal computer in 1982, if I'm remembering correctly. I'm old enough that I was around with the horse and buggy, so I think in 1982 they released that and it wasn't until they opened it up and licensed the design to everybody that the personal computer revolution really took off through standardization. So we can have that standardization and interchangeability. We do it with telephones, we do it with airplanes, we do it all over the place and it's separate from the other economic issues.
Peter Cochrane: The worst case scenario is we have to put a box in the middle to translate between the two. It's an awful engineering solution, but it does cure the problem. But I think you should recognize that it's not just Huawei that's being affected here. I'm over here with my Apple computer. I have two Gmail accounts. I have other American products that are suddenly not working so well or not working at all. This is not the technology or the people engaged in the markets, it's brought on by politicians. So these somewhat ridiculous impositions have no place in the future.
07 Christine Tan: So, gentleman, I'm going to be really controversial here. Let's just say we did have that two tech worlds and there was a decoupling, and we could never say "No" because the world is so uncertain these days. Who would win out the tech race? Will it be the US or will it China eventually? Indulge me with an answer.
Peter Cochrane: It will be China and all its customers, because you have to remember that the entire United States population is less than 4% of the world population and so where are people going to go?
Zhang Wenlin: The standards that are most open and global will win. This has already been proven in the communications industry. In the 2G era, the standard of 3GPP was more open than another standard which was relatively closed even though it was more technologically advanced. Since then, from 3G to 4G and now with 5G, the standards of 3GPP have been embraced all over the world. Companies that supported advanced but closed standards have taken the wrong track. Huawei has witnessed this historic journey, and we are a staunch supporter of globalization, openness, innovation, and collaboration for shared success.
Ren: I think it's unlikely that our world will be divided into two camps.
Though we have not been allowed to interact with US scientists and professors, sooner or later we will still see the papers they release. For example, we can see the papers of a Turkish professor two months after they are released. We may end up seeing the papers of a US professor three years after they are released. It's just a matter of time. And when we can see their papers, there will be impacts on our technology. It always takes time to transform new theories into engineering practice, but we can catch up if we run as fast as we are able during this period.
Even though the US is a bit ahead of us, the "snow water" on top of the Himalayas may still be the same. The US is the world's most powerful country and has the best technologies, which are like the snow water on top of the Himalayas. Technological decoupling is like building a dam to prevent snow water from flowing downhill, and the crops growing at the foot of the mountains will die from drought. In this way, the water will not be put to effective use to create value. The better approach would be to let the snow water flow down the slope, so that it can be used to irrigate the crops at the foot of the mountains. That way, the water itself creates value from crop yields. This is what globalization achieves.
How can the US become more prosperous if its companies are not allowed to sell their great products? Crops can't survive without water. When the mountain streams stop flowing, a farmer can dig a well for irrigation. If a developing country is barred from buying from a certain country, they will find alternative suppliers. If water can't flow down the mountain, it brings no benefit to those at the top of the mountain, either. Scientists and ordinary workers have to make a living. A country's economy will shrink if its technologies can't be turned into products or can't secure the global market. Objectively speaking, no country can thrive if it distances itself from the rest of the world. No country can create a regional market that keeps foreign countries out. That said, I have to admit that the landscape is very rugged.
There's a book named The World Is Flat. I have always believed that the world is flat, albeit with glaciers in some places. It takes great effort to traverse the glaciers, and you have to be extremely careful even where the surface is flat. All roads in the world, however rugged, are connected to each other. We are in an Internet era, where technological decoupling and regional separation are impossible.
A moment ago, Zhang Wenlin explained which type of standards will win. In the 2G era, CDMA was more technologically advanced than GSM. Who saved GSM? It was China. The country refused to accept the harsh requirements of CDMA, so China bought GSM products in huge quantities. The call drop rate of GSM networks was high at first due to poor product quality, but issues were identified and fixed as China put GSM products into wider use, and the products themselves became better during the process. Against this backdrop, 3GPP has made rapid advances. GSM is more open. Tens of thousands of companies have come on board to support the 3GPP standards, form an ecosystem, and make achievements, including today's 5G. The success of 5G is the success of the 3GPP organization.
Christine Tan: So you are sure technology decoupling will not take place. Are you willing to say to this crowd and people tuning in that it will not take place?
Ren: Why am I sure that decoupling won't take place? Because the Internet has made widespread communication possible. With Internet, it's impossible for US professors to hide their paper in a fridge from everyone else. Otherwise, American engineers wouldn't be able to make products based on this paper either. So the paper will be visible to everyone if it gets published, and those who read it will build on the theories developed by US scientists. They could also follow the theories of European scientists or Russian mathematicians. Eventually, they will form parallel ecosystems, with some on a higher level and some lower. However, there will be no fundamental differences with regard to the entire ecosystem.
Peter Cochrane: There's not a single instance in our history where isolation has succeeded. Not for a company, not for a country, not for the planet. Mr. Ren is right. It's just a question of time.
Jerry Kaplan: However, with respect to artificial intelligence, it's a bit of a different dynamic. There's this mythology about who's going to win. There's some kind of race. Politicians, and I'm talking about a lot of the media people here, love to talk about it as though it's an international competition. But artificial intelligence is a software technology. It consists of two parts, you have programs, and mostly the value is in data, large amounts of data. And all that AI is, when you really look at it, it's programs that analyze and find patterns in very large collections of data. That's what current AI is. Now the problem is that everybody is going to have the technology and it's easy to transport and American companies are giving it away. That's not going to be an issue. The question is what happens with the data.
What I would like to point out is that the data that is collected in China is not necessarily useful or as useful in other places. A bifurcation in terms of the data is just as true in artificial intelligence as it is in any other kind of database. AT&T can't use China Unicom's data. It's not a useful thing to do. The technology that does face recognition in China isn't necessarily going to work well on the range of faces that it's going to see in the United States. The best analogy I can use is to the movie industry. It's like saying "Who is going to win?" American films or Chinese films? Because it is also data. And with that I think you can see, I don't think anybody in the US is worried about Chinese films taking over Hollywood and I don't think in here anybody is worried about Hollywood films taking over whatever wonderful films you have here in China that I've never watched. So this is a big myth, and the investment and worry the governments have about this is completely misplaced. It is not like nuclear energy where you can in fact bottle it up and have a unique advantage.
Peter Cochrane: Just correct me on this, but the only other instance I can think of like this in the US was with Japan and it was over automobile manufacturing. Autoworkers in the United States were being laid off because the Japanese were producing cheaper, better quality, and reliable cars. A trade war broke out, as I recall. Jerry Kaplan: I thought you were going to mention the 5th generation computing project, which is a complete coincidence, ironically, it's 5G. This went on for years. Japan and the US were worried. They had a major reaction and started a big government project. And the same thing happened in Japan, because it was happening in the United States. Both countries wasted their money. It came to nothing. And we can go through that same pattern and replay in artificial intelligence but if we're smart we're not going to do that.
08 Christine Tan: Jerry, I'm glad you talked about data, because that's something I want to bring up. In the West and in the US, there are lots of issues about data protection and privacy. In China, Mr. Ren, correct me if I'm wrong, there's a willingness to share the data to improve on existing technology. I know you may say the West is still going to be ahead in terms of technology. Don't you think that's a big point for China to drive ahead? Because data and privacy protection is going to drag down technology innovation in the West.
Zhang Wenlin: I'm a fan of Jerry, and I've read many of his books. I admire his in-depth insights, but I do disagree with him on this particular issue. Data is obviously very important to AI. For AI, data varies with regions, and has unique value to particular regions. This is what I like most about data. Data of one region may not be as attractive when it is transferred somewhere else. This means that AI will create business for every region, and every region can get deeply involved in the development of the new AI industry.
In terms of technological breakthroughs, the more pressing, key issue is computing power. The concept of AI has actually existed for a while. But it has just begun its basic application now, 60 years after the concept was put forward, because many related technologies have only recently become ready to support the use of AI. These include connectivity technology and high performance computing.
Only after extraordinary breakthroughs are made in information infrastructure, especially computing power, will AI likely become ubiquitous and always available like electricity is today. Therefore, we believe infrastructure capabilities, including connectivity and computing, are vital to AI.
Ren: First, different countries have very different views on data and privacy protection. China used to be a conservative country that lagged behind the rest of the world, but it's becoming increasingly open these days. Many young people post their daily lives online, voluntarily. Some people may say that you should not post your pictures online for safety considerations. But many people just keep posting. Chinese young people today are different from my generation. This is where Chinese young people today are different from my generation. They don't see protection the way we do.
Second, I think privacy protection should be done in a way that promotes the safety of individuals and the security of society as a whole, and drives social progress. Excessive protection will do more harm than good for society.
Let me give you an example. About 10 years ago, there were an average of 18,000 cases where motorcycle riders snatched purses from female pedestrians. But last year there were 0 cases like this. And all of the 94 more serious cases last year were solved. It turns out China has become one of the safest places in the world now. But during this process, many people have experienced a reduced level of privacy. Whenever I go out for a drive, I get photographed by CCTV; we all do. Those photos go into databases, but the access to the photos is limited, even to the police. They have to get certain permission to access them. As a result, security in the city of Shenzhen has improved significantly.
When the economy doesn't work, some people may risk engaging in wrongdoing. But China has been changing in many ways, which is good for productivity and employment. The West tends to believe that nothing should be violated, leading to poor security for its society. The US, in particular, has suffered from gun violence from time to time. If they are willing to give up on their privacy a little bit more, then when a security guard spots a customer carrying a gun entering a department store, they can stop them to prevent a shooting. Otherwise, this one person's privacy may be protected, but many lives may be at stake.
When it comes to protecting privacy, we must take a scientific approach. This is particularly true for a sovereign state in how it should manage its information and data, and it is ultimately up to the sovereign state to decide this for itself. There's no universal standard on this. Every sovereign state is entitled to choosing their own approach to data governance as long as no innocent people get hurt during this process and the security level of the society as a whole changes for the better.
Christine Tan: That's the plan to protect their data, trying to protect their privacy. Where are innovative companies, where are technology companies going to get their data from, to improve their technologies?
Peter Cochrane: People will volunteer for free. Let me give you an example. Suppose I'm ill tonight, my medical records are in the UK, you can't get them. They are now constrained by GDPR. They're my records, and I want to give them to you, but at the moment I'm prevented from doing so. But believe me, there are many personal things and a lot of my personal information I will gladly give away. So if we have a study on some ailment or illness, I will gladly donate all my data. The question is, does it pose a security threat for me or my family, and does it make a contribution? And best of all, for me, does it make my life easier and safer?
Christine Tan: Does it? Does it make your life easier?
Peter Cochrane: If you want my medical record, I will give to you on a memory stick, and then while I'm here you can act as my agent, if I'm ill, you can look after me.
Jerry Kaplan: It's perfectly appropriate to have different laws for protecting privacy in different places, because this is a social and cultural issue. People have a different attitude in China than they do in the United States for long historical reasons and the same thing is true in Europe. The only problem is AI likes a lot of data. It so happens because of that China is in a much better position to take advantage of artificial intelligence and to benefit from it more than it would have been in the US, even if you completely separate the data sets, because China simply has more data. People in the United States don't realize and they don't appreciate the scale. I found out today that Shenzhen has 15 million people. It's more than Los Angeles. I was in Shanghai. The population in Shanghai is more than the State of Texas. There are more English speakers in China than there are in the United States. There are all kinds of amazing facts and figures about this. It's a big market. There is more data, and the barriers to be able to centralize the data into large data sets are smaller here than they are in other places.
Zhang Wenlin: I'd like to add something else. I don't think we need all the data to make technological advancements. In most cases, we only need data that is valuable for training, such as data corrected or labeled by specialists. We don't need to acquire every kind of data, especially not personal data. In the early stages, some Internet companies didn't actually know what types of data they really needed. However, people have gradually realized the importance of respecting data and privacy and protecting data sovereignty in order to sustain robust industry development. As Peter said, we will use our data in exchange for services. Tech companies are responsible for creating maximum value by taking only minimal amounts of data. At the same time, they should try their best to keep users informed and give them the choice to decide whether to participate in the exchange.
Christine Tan: Is it only a matter of time before China puts in place privacy and data protection laws? Do you think that'll happen?
Ren: I believe China should enact a very stringent Privacy Protection Law, and under this law, anyone who illegally acquires and uses others' data should be punished. Just now I said sovereign states have the right to manage their data. For example, police officers and people with judicial power can control data. I did not mean regular citizens should.
In China, some people sell off data for a quick profit. For example, some sell data about expectant and new mothers to infant formula manufacturers, who then target their product promotions to these mothers. It's wrong to leak personal information like this. There are also people who steal private phone numbers and send them to scammers. I think China should strengthen privacy protection and legislation in these areas and impose severe punishments against those who infringe upon privacy. This is a necessary step to move society forward.
I firmly support the EU's GDPR, and our equipment fully complies with this regulation. I also support China in making step-by-step progress in information management. In fact, significant progress has been made and regulation has been tightened in this area over the past two years. China needs to gradually improve its privacy protection to create a more secure and harmonious environment for its people. This is the happiness people desire most.
09 Christine Tan: This brings us nicely to regulations, rules of governments. What policies and controls should they put in place to manage these risks? In terms of companies, what sorts of principles should they put in place when it comes to developing new technology so they don't breach any privacy issues or data protection issues? What are some of the ideas that you have about how this could take place? The broad framework, how we can come up with some sorts of viable regulations that everybody can agree upon and can move forward in this tech world?
Peter Cochrane: I don't think we have to make this very difficult. Any company and organization that comes to me and says: "We would like your data, this is what we are going to do with it, and we guarantee that we will protect that data." Then on that basis, I will afford them my data. If then as a matter of negligence, my data gets out, I think there's a price to pay for being careless. I always feel any organization that is attacked by a 15-year-old in a bedroom using a laptop, this is a good punishment, because if their security is so poor, they really have not spent enough money. But I have seen governments. I have seen defense departments. I have seen banks, all kinds of big organizations that have lost a huge amount of data. Fortunately, it's not been too damaging.
Christine Tan: Isn't that dangerous also, when it comes to technology? Companies like Huawei are developing technology so fast, but at the same time government officials don't quite understand how it works. This is skepticism. (Peter: That's an understatement.) Yeah, they don't know the risks. They think "Oh, it's new technology. It's dangerous. Let's ban it completely," because they don't understand. If they don't understand the new technology, how are they expected to put rules and regulations in place to govern this new technology? Jerry?
Jerry Kaplan: Well, there is no good answer to that question, but when you talk about protection of data, there are ways to parse this part that I think really gave point to some kind of an answer.
The issue is not the collection of the data. The issue is the use of the data, and the retention of the data. If it is collected you have to be informed about a purpose and it has to be restricted to be used for that purpose and you should know that it expires after some period of time. So it can't fall into the wrong hands or be used for purposes for which you did not know. And transparency about what these purposes are and communicating them so they're understood by the person providing data is very important. That's the problem we're having in the United States right now. People on Facebook and Twitter, their data is being used for purposes that they did not know. People might not want it to be used for political purposes or police work or something like that. And so we need to put those kinds of restrictions in place.
Christine Tan: Mr. Ren? Do you have an opinion on that?
Ren: I think our society needs to show more tolerance towards new technologies. Inventions and innovations would be impossible without academic freedom and freedom of thought. Some innovations and inventions benefit people and some don't. Whether or not innovations and inventions will bring benefits must be verified gradually through practice.
Take atomic bombs for example. They were invented based on nuclear fission theory and are obviously disastrous for humanity. But after further research into nuclear theory, nuclear energy will provide huge benefits for humanity. So we should take a tolerant attitude towards new technologies. If we adopt a stereotypical approach to assessing scientific breakthroughs, I think it would be very hard for new technologies to emerge, and social progress would be very slow, just like what we saw in the Middle Ages.
Let's take genetic technology as another example. I think it takes time to tell whether genetic technology will ultimately be beneficial or harmful for humanity. Some gene editing technology may do harm. However, the experiments on a few people may bring happiness to billions of people. We shouldn't jump to conclusions about whether a technology is good or bad.
At Huawei, we adopt AI primarily to improve our production process and products. We do not study the social or ethical implications of this technology. Some sociologists have put forward some pessimistic ideas about AI, but I don't think those ideas will prove true, not at least over the next three decades. I think we should also adopt a more tolerant approach to AI. We cannot prevent advancements in AI due to some hypothetical fears about it.
New technologies, sciences, and ideas are often not easily accepted by the general public. The truth is in the hands of the few. If you put a new idea or technology in a poll on the Internet, you may not get a lot of support for it, as most people just don't understand the value that it will create. So I think we should show tolerance towards and protect the few innovators in our society through government policies, laws, and ethics. Even if the innovators go past the boundaries, we should show tolerance towards them so that they will come back. If we don't show a tolerant attitude towards new things, social progress will slow down, and it will take a long time for a country to improve its competitiveness.
When Huawei was founded, China was in the early stages of its reform and opening-up period. At that time, 20 million young intellectuals had just come back to the cities from rural areas. They didn't want to continue staying in rural areas where the environment was tough and they felt lonely. The government agreed to let them come back to the cities they originally came from. However, they weren't able to find jobs in cities and were thus allowed to sell big bowls of tea, steamed buns, and things like that from street stalls. That's how China's private sector started.
The central government issued a document saying businesses were not allowed to employ more than eight people; otherwise, they would be considered capitalistic and would not be allowed to move forward. At that time, Huawei already had more than eight employees. Fortunately, the local government showed tolerance towards us. We were not labeled as being capitalistic and were allowed to develop step-by-step.
Every year, we pay 20 billion US dollars in taxes to the Chinese government and other governments around the world. This does not include the social progress facilitated by our employees' consumption, and other contributions. Huawei would not have become what it is today without the tolerance we benefited from in our early years.
We should be more tolerant towards new things and give them more free rein. This is the only way we will be able to create a brighter future.
Zhang Wenlin: This is a very key topic in the industry. People have concerns, fears, and high expectations for technology. I think the best way forward is to have an open discussion about the nature and stages of technology with people like sociologists, scientists, regulators, and tech companies. ISO and IEC have established the JTC 1/SC 42. Huawei is actively participating in this initiative. It is the most important platform that collects people's concerns and feedback about technology and seeks global solutions. As digital technology develops rapidly, tech companies really need to take any negative impact that may be caused by data protection very seriously, and help find solutions to mitigate the impact. Tech companies must first abide by the laws of every country where they operate. Also, they must use trustworthy and secure technologies to protect customer privacy and data sovereignty, and then provide secure, trustworthy, and high-quality products.
Ren: No matter how many people sit down together and talk about this, I don't think a consensus will ever be reached. We should let everyone express their thoughts, and then let society assess those thoughts.
Zhang Wenlin: I think our industry is making progress, and we need the industry to sit down to make a common framework and generate trust. Otherwise, those who don't understand a technology will cause a stir, and those who do understand it will refuse to share about it. If they don't understand and talk with each other, technological advancements will not be possible. Take this HUAWEI Mate 30 smartphone for example. The pages turn automatically even without me touching the screen. Even tech-savvy people find it cool and amazing. The technology behind this is actually not mysterious. We use AI to identify gestures, which is similar to facial and image recognition technology. It's like revealing the secrets of a magic trick. People will understand and believe it if the truth is not something that is beyond their imaginations.
With more dialogue among industry players, I think we will work out a trustworthy management framework based on a more reasonable and clear understanding of technology. Then we will help more people understand technology and see it in a rational way.
No tech company should try to use their expertise in technology to deprive users of their right to having a choice. As tech companies, we should do everything in our power to take on complexity ourselves, enable our users to understand the key nature of technology and the rights they have, and give them more choices. We should also help regulators understand technology and establish governance rules to avoid the misuse of technology. This way, we will gradually earn users' trust and continue building trust from society as a whole.
10 Christine Tan: Mr. Ren, my question to you is: since you operate here in China, how open are Chinese officials or Chinese regulators when it comes to new technologies? Do they always understand and support what you're trying to develop at Huawei?
Ren: I think the priority for China is to enhance basic education and basic science. This will allow China to stay abreast with the rest of the world. Currently, Western countries like the US and the UK have very advanced education systems, which are very open and encourage academic freedom and intellectual freedom. Some students in the US for example can choose from 1,600 courses to study. Each student can only choose four courses each semester, which means one student could select just 32 courses over eight semesters. However, two students in the same class may have selected completely different courses for their 31 remaining credits.
This is not the case in China. China has unified textbooks and unified exams, meaning that most students are basically at the same level. Of course, both of you are at a level a little higher than me, but not by too much. Breakthroughs in science and technology in China need pioneers and leaders.
I believe the current situation represents a historical opportunity for us. At Huawei, we take a global approach to research. We do not confine ourselves to just China. We have research presence in countries on and above the Tropic of the Cancer, including the US, Canada, the UK, Russia, and Japan. We have more than 30,000 non-Chinese employees, including a huge group of scientists spread across those countries. We have about 70,000 to 80,000 R&D staff, and some of them are also scientists and top experts in their fields. When they concentrate their efforts, they can make breakthroughs. We are currently frontrunners in this area, unfettered by restrictions.
We want to contribute more to humanity in terms of new technology. We have never thought of completely dominating the market. We are not a public company, so we don't pursue pretty financial reports. Instead, what we want is to become stronger. Nothing limits us.
11 Christine Tan: We have come to the end of our discussion but very quickly I would like to get each of you to think ahead. We're talking about new technologies and innovation. Now we are looking at AI, what's the next big technology out you think is going to happen? What's going to be the next big thing in the world of technology? Can you make a prediction for us? Jerry, let's start with you.
Jerry Kaplan: Well, some things will impact consumers and others will impact the industry, but people are interested in what's going to be for them. I think it's going to be a concept called augmented reality. That's going to make a big difference. And that's basically being able to put on a pair of glasses which will overlay images over what you're seeing, so that you can play games or interact with images of other people. You'll be able to have a conversation with a friend who appears to be sitting at your dining room table, with their arms over the table and legs underneath. It'll bring people closer together and create a very different feel in the way we care about other people and the ways in which we interact. It will be so realistic. It would be like having a very realistic ghost right there in front of you. I think that's probably the way in which people will see the impact of 5G and AI most effectively over the next decade or two.
Peter Cochrane: Last week a paper appeared and quickly disappeared. It was a paper by Google, and it claimed quantum supremacy, that is, a quantum computer that could outclass any super-computer on the planet. I'm not sure why that paper disappeared but it was a 72 Qbit machine.
Why is quantum computing very important? If we can get it to work, it would allow us to truly understand chemistry, biology, life, and intelligence for the first time, and it would allow us to tackle some very difficult, deep-seated problems like protein-folding and communication between the genome and protein, which is probably the source of about 98% of all human illnesses.
But without quantum computing, we're going to struggle to make a giant leap in our understanding and technology that will impact all humanity in a positive ways that are hard to quantify. Quantum computing will change everything; we can get 100 qubits, we become powerful. If we can get 1,000 qubits, we effectively become gods!
Christine Tan: Mr. Ren, what are you getting your engineers to develop at your labs? Is it going to be the next big thing? What's the secret you're working on?
Ren: I'm not sure what the world will look like in the future. We are on the cusp of breakthroughs in multiple frontiers. I can hardly imagine what the world will be like when there are multi-disciplinary breakthroughs. I hope our company can find its place, a strategic high ground, in the future. I think our strategy will remain focused on the strategic high ground. Our current goal is to channel data traffic, and process and distribute data.
I think there will be a huge flood of data traffic coming, just like the flood shown in the movie 2012. It will become increasingly huge. As long as you can deal with the huge amounts of data traffic, you will have opportunities to succeed. I think the amount of traffic that 5G networks can support is still relatively small. Even if optical networks can enable data rates up to 800 gigabit/s, I think this would still be insufficient to handle huge amounts of data traffic. We can continue down this path.
Zhang Wenlin: In general, I share the same idea, but my way of expression or focus is different. Simply put, I think AI will be the most important technology in the future. AI is not a single technology; it is a combination of multiple technologies. AI is just beginning to be used because technological breakthroughs are only beginning to support its application today. AI still has a long way to go. During this process, further breakthroughs need to be made in many domains, including materials science, biotechnology, and molecule-level manufacturing, which will very likely drive AI to develop rapidly.
As AI continues to evolve, it will generate more data, just as Mr. Ren said, massive amounts of data traffic, like the floods shown in the movie 2012. The ideal of Huawei is to make data processing and computing simpler, more efficient and affordable, as well as ubiquitous. It's just like how you use electricity. You don't know where the electricity is generated or how it is transmitted, but it is plug-and-play anytime anywhere. That's the breakthrough that we at Huawei want to make – computing power.
12 Christine Tan: Huawei is developing the next generation, 6G? Is that in the work? Is that in the pipeline?
Ren: Development is being done on 5G and 6G in parallel. We started our 6G research quite a long time ago. 6G is mainly a millimeter wave technology. It will have high bandwidth, but it might not be able to cover long distances. We still have a long way to go to before we can roll out 6G on a large scale.
Zhang Wenlin: What will 6G look like? It'll be something we will see 10 years from now. In our industry, we see a new generation of technology every 10 years. I was involved in the conceptual phase of 5G development. What impressed me most was the 5G concept that a professor at the University of Surrey shared with us when we discussed how 5G should look 10 years ago. He said that within one kilometer, the number of connections will reach one million. We found it difficult to understand because it was different from our traditional understanding of communications. At the time, I even thought it was irrelevant to the technology we were talking about.
But it happens to be what we are seeing today. As Mr. Ren just said, we are still exploring 6G. Right now, we are still exploring, looking at the concept and making theoretical verifications. In our communications industry, if any company or any country wants to wait or skip a certain generation of technology, they will miss many opportunities. The next generation of technology has to be built on the previous generations. If one country performs well in 3G, they generally do well in 4G. The same is true for 5G. A solid foundation in 4G is key to success in 5G. If a country or company wants to skip 5G and go directly for 6G, they are bound to fail. All cases we have seen are failures.
Christine Tan: Do you think Huawei will lead in 6G?
Ren: Yes, definitely.
13 I'm Glen Gilmore from the United States. I'm a member of the adjunct faculty at Rutgers University and also a Huawei KOL. A question for Mr. Ren, if I might, what will it take to liberate technology to rise above national boundaries so that tech for good will truly become tech for all?
Ren: We think technology is only a tool, like a screw driver or a wrench that can be used anywhere in the world. We should think of 5G as a base station, and not as an atomic bomb. It can be used by anyone. Technology should not be politicized. People should choose technologies based on their business needs and market competition. This way people can share the benefits brought by a new technology.
Christine Tan: Does anyone else here want to answer the question? Whether tech for good can be made tech for all?
Peter Cochrane: I think it's inevitable with globalization. If a nation decides to isolate themselves from that globalization, there is a cost. And we've never actually seen that policy succeed anywhere in the past. I can't see it lasting very long.
14 With the development of AI, do you worry that this technology will increase social inequality? People that only have small amount of data to use and the majority of us that generate data may not able to use the data. Mr. Ren, at your last coffee talk, you mentioned that Huawei's revenue will decrease by 30 billion US dollars due to the recent incidents. Last month, a Huawei executive said it would not be as much as that, and that the revenue decrease could be about 10 billion US dollars. What changes and adjustment have you made to change the forecast?
Ren: Will AI widen the gap between countries? Definitely. AI's development needs the support of education and talent. Second, it needs the support of infrastructure. AI is an all-inclusive set of software that needs a support system. That system requires tens of thousands of high-performance computers or supercomputers instead of just one or two. It also needs the support of large-scale data storage systems and super-fast connectivity systems. Building this kind of infrastructure will also require heavy investment. If the software is good but the investment into infrastructure is lacking, the software will not be able to work. It'll be like having cars but no roads. Your car won't be able to do anything.
Wealth disparity will continue to be a problem in the future, and so the world needs to come up with rules. Well-off countries should help poorer countries for things like education. This will gradually help the world prosper as a whole. However, AI is set to contribute to increasing disparities between countries, and those disparities are going to widen faster.
Regarding the predicted drop in our company's revenue, we have not said that our annual revenue would be less than last year's. We have simply lowered our expectations for this year's revenue growth. Some people say, that drop will be about 10 billion US dollars. I think that sounds kind of accurate, but it may end up being less than that. It's hard to say. I cannot tell you the exact figure or else our Finance Department won't have anything to announce next year. I will leave the opportunity to them.
Jerry Kaplan: Briefly, artificial intelligence is automation. And as Karl Marx explained and understood, automation is the substitution of capital for labor. Therefore, the people with capital are in the position to reap the primary economic benefits of the technology. And like other forms of automation, artificial intelligence will be a force for increasing wealth inequality. What we need to do is to stop thinking about our social policy as being in the service of economics, and start thinking about economic policy as being in the service of the social goals of society. We should be trying to maximize overall happiness not trying to build a GDP solely for the benefit of the few.
15 The guests here today mentioned issues with trust. One of the professors thinks that trust contains one's attitude and stance, and it is subjective. I would like to ask Mr. Ren and the two guests, for people who inherently oppose you or are biased against you, do you think it's even possible to gain their trust? We have also noticed that Mr. Ren has been speaking with the international media more frequently this year. Previously, this was uncommon for Huawei and Mr. Ren. How effective do you think Huawei's communication has been over the past year?
Ren: As we continue to talk with the media and share real facts through the media, I think the media coverage on Huawei has gradually improved from being very negative last year to being almost good. It wouldn't be possible for all of the media coverage on Huawei to be completely good. The media helps us to communicate what we are doing across the world. At the beginning of this crisis, no one believed we would make it. However, we survived. Some people say it's because we had enough inventory to support our production. We produce over 100 billion US dollars in hardware, which would need 70 billion to 80 billion US dollars in materials. We don't have the capital to hoard that much material. We aren't relying only on our previous inventory to support current production. Our financial results in the first half of this year were not bad, so people are interested in this. The sympathy of our customers may be the reason that we did well. The results from the latter half of this year will prove that we can do well because we have real strength.
Why do customers trust us? We have spent 20 to 30 years building our relationships with them, and they believe that Huawei is a good company with integrity. Second, many Western companies have already started receiving products from us that contain no US components. Their confidence has increased and they believe that we can continue to supply them goods. Why have guest visits to our offices increased by 69%? Because they want to see if we are still up and running. First we take reporters to see the company shuttles that employees take to come to work and get home. If people are coming to work, then they are still working. Second, we take them to our canteens to see how full they are. Then we take them to the production lines which haven't gone down once yet. We do this to strengthen our customer's trust in us. Trust spreads little by little as we show people how we are doing. Of course, the media also helps us a lot by reporting what we show them.
I estimate that the financial results for H1 of next year will continue to be good. There will not be any sharp increases though. When we see the financial results for the first half of next year, we will know that we have survived the storm. By the end of next year, people will also see that Huawei has made it. In 2021 and beyond, people will see our revenue growth continue to recover, and they will say that we have started to grow again by solving our own problems. We will gain their trust not by talking but by working hard. We can only gain their trust through our own efforts. Whether people will trust us or not depends on facts, so we believe that we can regain their trust.
Jerry Kaplan: Just very briefly, if you listen to the political dialogue, what you hear is mistrust, insults, and accusations. But it's important to understand that the political dialogue is actually not aimed at each other but aimed for the local audiences. The truth of the matter is, if you live like where I live, in San Francisco, you would understand something that is not well reported in the press here in China, which is that the Chinese people are very highly respected and they're excellent neighbors and members of the community. So the distrust and conflict you see at the political level makes constructive dialogue impossible. But from people to people, it is a very different story. I want the people here in China to understand that they're highly respected and treated as real members of the community inside the United States.
16 Audience: I have two questions, the first one I want to ask Mr. Ren about licensing technology to an American company. Do you mean that Huawei do not rely on US suppliers so you can produce the product? I mean for all the products you ship now, are they fully independent of US supplies? And another question is that since Huawei has registered for a bond issuance for around 30 billion, is that the correct number and what is the timetable to finish that kind of bond issuance? Because it is the first time Huawei has issued this bond in China. Will banks offer preferential policies to you?
Ren: First, can Huawei survive without relying on the US supply chain? The answer should be yes. However, we can still use US components. In August and September, we are undergoing a run-in period so we can only produce around 5,000 base stations each month during that period. However, we will begin mass production in October. In 2019, we will be able to produce 600,000 base stations. Next year, we will produce 1.5 million base stations. Of course, we hope that the West will resume their supplies of components to us. We have been working with our Western partners for 30 years, and we have formed close ties with them, so we cannot just make money on our own, without them making any money. We cannot do that.
Second, regarding the issuance of bonds, I didn't initially know about this. After the bonds were issued, I learned about it from the news, so I called people in the treasury management department and asked why they had done this. They said that we must issue bonds while our company was experiencing its best period to increase people's understanding of Huawei so they would trust us more. They also said that we shouldn't postpone the issuance of bonds until we meet with difficulties.
In addition, the cost of bond issuance is low. If we keep increasing employee investment in the company, the cost will be too high, because the dividends are often too high. However, the cost of financing from bond issuance is much lower, with an interest rate of only 4%. So why can't we increase our financing through this means?
In the past, our financing mainly came from Western banks. Now that the channels of financing through these banks have become less smooth, we are now trying a shift to Chinese banks for our financing. I don't know what the exact amount of total financing is this time. Maybe it will be 30 or 20 billion yuan. The amount will be decided by the treasury management department because we have sufficient funds right now.
Peter Cochrane: In the last decade the center of gravity for many technologies has moved from the United States and the West towards the East. Flat panel displays, the latest 7nm chips, and batteries, are all sourced in Southeast Asia. So it's not such a giant step to conceive of autonomy. But it's not really a good policy to put everything into one basket. It is better to share technology and encourage its spread. Bilateral trade is absolutely essential.
17 Audience: I am with The Times of India. I'm a little surprised that India is so advanced in science, basic research, and technology, but you don't have much of a center there. However, you're looking for a market in India. What do you think about the Indian market and what kind of challenges, regulatory or legal challenges, do you expect in India? This is a question to Mr. Ren.
Zhang Wenlin: India has very good talent and a very solid foundation. That was why we established a large research center in Bangalore 15 years ago. This research center has more than 3,000 employees, and has been playing an important role at Huawei. The Indian market has always been important to us. Over the years, our operations in this market have been quite good. In addition, the Indian government has been relatively open in communicating its regulatory policies and has had smooth communications with us.
Ren: In the past, the regulations of the Indian government were based on rules for voice communications. Today, after they shift to data communications through broadband networks, they need to adjust their regulations and policies. Infrastructure is the foundation for a country's economic development, and communications is a very important part of this.