Ren Zhengfei's Interview with the Financial Times

June 24, 2019

Q1 James Kynge: We have all seen a very famous photo recently, an Il-2 aircraft from World War II. I heard that you like this photo very much. Could you share with us why you like it? Do you think the aircraft is akin to your situation? Is Huawei facing many challenges today, just like this aircraft?

Ren Zhengfei

Ren: I stumbled upon this photo when I surfed on wukong.com one night. The website said that this aircraft managed to make its way home. I felt that it was quite like us – we are riddled with bullets from the US. We had prepared a bit for this, but we didn't expect the US government would be so committed to attacking Huawei from so many fronts. The US government has launched precise and systematic "strikes" against us. We didn't anticipate they would be so strong and all their industries would be so united. They even leveraged the media, academic institutions, and standards organizations to push us into a corner. Their "strikes" have hit more than a little software or a few chips, and have left us with several thousand "holes".

That aircraft is quite a bit like us. It has unshakable resolve to fly home. So I downloaded it from the website. I was trying to find a clearer photo of it, but I failed.

Q2 James Kynge: I heard you said last week that you protect your core parts only, like your engine and fuel tank, and aren't prepared to protect non-core parts. Which businesses do you want to give up on?

Ren: First of all, Huawei does not have enough energy to defend from all sides at once. This is impossible. To lead the world, we need to develop some cutting-edge parts, and build systems based on these core competencies. We compare these core parts to the engine and fuel tank of the bullet-riddled aircraft. We have worked hard for over 10 years, so we can make it. We won't collapse. We wouldn't be able to make it home if the fuel tank were hit, because the engine couldn't run without fuel. We couldn't fly back if the engine were struck either, even with a full fuel tank. But if the wings were struck with several "holes", we could make our way back, though we may need to slow down.

We believe the US is cracking down on our network connectivity business and 5G is just a small part of that business. This business is fully prepared, so impact on this business will be minimal. We didn't expect that our consumer business is suffering more. Though there is more of impact on it than we see in connectivity, we are gradually regaining customer trust. Some of our non-core product lines have been shut down in recent years and their employees have been transferred to our core businesses.

Q3 James Kynge: The US has added Huawei to its Entity List recently. How will Huawei address this difficulty and challenge?

Ren: I don't think we will collapse because of this. I am sure of this. We are repairing the aircraft while continuing to fly on. Of course, some of the "holes" that we are fixing are quite large, while some others are small. Ultimately, we will get all of them fixed over time. After that, we will be able to survive and thrive.

James Kynge: Which big holes should be fixed?

Ren: Holes are everywhere.

James Kynge: Is it chips?

Ren: We don't have too many problems with chips, as we can create most of what we need. But we haven't got prepared as much for some other components as we didn't think they had much technical content. But a machine won't work if a component is missing.

We don't have big problems with our hardware. But there is some impact on our software systems. I think the world has an extremely rich reserve of software talent. The software business is booming in every country, including China. We at Huawei also have strong software capabilities, mainly in embedded operating systems for hardware. We are the strongest in the world in this regard. But we may not be that strong in software-defined network, which is a macro architecture for networking. Even if they continue to cut off our supply of these things, we will be able to get the "holes" fixed and catch up.

Q4 James Kynge: Do you think you can buy US chips from Chinese companies that have imported them from the US?

Ren: This goes against the spirit of the Entity List, which, in essence, bars any sale of US components to Huawei.

James Kynge: How could they possibly find out?

Ren: For the past one or two decades, the US has often run unannounced inspections on our equipment. They could enter a few lines of code, and the results would show whether the equipment contained US components and whether it was installed where Huawei promised it would be. If some equipment ever went missing and wasn't installed where we promised it would be, they would beat us to death. There is no way we could buy US components from other channels. If they sold to us, other companies would be under US investigation, too.

James Kynge: As a result of the US Entity List, when will you experience the biggest adjustment? Is it in three months, six months, or something else?

Ren: We've been making adjustments for years. Our overall business hasn't been affected much because we have already developed capabilities in chips, which is the most advanced and important part of our business. For smaller components, we can research and develop them rapidly. We can also use Chinese components as alternatives.

If the US opens up to us, we can use their hardware and software to make extremely cutting-edge systems. But if we aren't allowed to use US components, we are very confident in our ability to use components made in China and other countries to make industry-leading integrated systems, because we have world-class capabilities in this regard.

James Kynge: Do you mean that Huawei will not stop the production of any products despite the US Entity List?

Ren: We will stop making some non-core products. But we won't do that in our core businesses because our world-class, major products don't rely on US suppliers.

Yuan Yang: Which products will be ceased?

Ren: In 5G, optical transmission, core networks, and access networks, we are immune to US impact. Our optical systems are well ahead of others in the global market, and we don't need any help from the US in this respect. In 5G, we are at least two to three years ahead of others in the global market, and we also don't need any US components in this respect.

In terms of core networks, there might be some impact on our servers, but other parts of the business will not be affected. Our TaiShan servers boast quite powerful performance, and they will soon be mass-produced to support our core network business. According to the Entity List, we cannot use the US's x86 servers, so we are facing temporary challenges in the public cloud market.

Q5 James Kynge: It's said that you have developed a new operating system called HongMeng. Do you think Huawei is able to roll out an operating system that can replace Google's Android system?

Ren: First, the HongMeng OS was not made for mobile phones, but for IoT applications such as autonomous driving and industrial automation. The OS ensures precise low latency, down to 5 milliseconds or even sub-milliseconds.

Second, we hope to continue using the globally accessible, open operating system and ecosystem for our mobile phones. But if the US restricts our access, we will develop our own operating system. What's most critical to an OS is its ecosystem. It takes two to three years to build a robust ecosystem.

We are confident that we can rely on the Chinese market to build a global ecosystem. First, China has a huge market of apps. Compared to all other types of Internet software, our OS delivers extremely low latency. If some people can effectively develop low-latency applications with our OS, they will choose Huawei for some of their business. Second, many Chinese content service providers who are eager to go overseas have failed. Embedded in our OS, they will be able to expand overseas.

James Kynge: What production apps are included?

Ren: Just now I was talking about our system for phones. We have another system for production. Our production system is, if I may say, leading the world.

While our phones may have weaknesses in the ecosystem and apps, they are strong in many other areas. For example, our smartphones are the world's leader in photography, all-scenario services, and AI, thanks to our mathematical capabilities. Huawei has several hundred mathematicians and several hundred physicists. They shouldn't be likened to Leonhard Euler, though we indeed have an Euler Lab. We do not call them "Eulers" or "Turings"; we call them mathematicians. There isn't just one mathematician. There are thousands of mathematicians in the world. Huawei needs a huge number of mathematicians, physicists, chemists, and neurologists. Their achievements will come out on top, and there will be demand for them.

After Huawei was added to the Entity List, our consumer business saw a huge decline outside China. But it has gradually recovered and is now close to its original numbers. Sales in China have soared. Some Chinese people are even buying Huawei phones because they feel bad for us. I once said, "Buying Huawei phones is not a patriotic act." People can buy our product if they like it, but if they don't like it, then they'd better not buy.

Young ladies in China are fond of taking photos of themselves. Huawei has the world's best photography technology because we have put a huge team of mathematicians into this area. Good photography does not rely on camera lenses. A human eye is composed of several hundred million "camera lenses" and thus sees images pretty crisply. Cameras are nowhere near the human eye. Our mathematicians use mathematical methods to convert incoming light rays through tens of thousands, or even hundreds of thousands, of camera lenses into electrical signals that make up an image. This mathematically calculated image looks pretty real.

Huawei is a world leader in these domains. As of May 30, we had sold more than 100 million phones. That means we reached our goal of 100 million units 50 days earlier than we did last year. Of course, good performance in the first half of the year doesn't guarantee good results in the second half, because our growth was fast before the US added Huawei to its Entity List. When the blow came in May, we continued growing over the next two months due to the momentum we'd built up previously. We will scale down some of our businesses for the rest of the year and there will be a moderate decline in our phone sales.

James Kynge: Do you mean that because of the Entity List, China, especially Huawei's business, has to be localized? Will your imports decrease in the next two to three years?

Ren: Our imports will remain diversified, and we will still buy from the US if they allow us to do so. US component suppliers are also seeking approval from Washington to sell components to us. Once this approval is granted, we will continue buying components from them in large quantities. But we are also looking for alternatives at the same time. We are developing our own components and we have strong expertise in doing so, which will enable us to survive.

Q6 James Kynge: What are Huawei's advantages over Nokia and Ericsson in the 5G market, especially in the international 5G market? Are Huawei's advantages in price or technology? If your prices are cheaper than theirs, could you tell us how much cheaper?

Ren: Our 5G equipment is much more expensive than that of Ericsson and Nokia. For the same type of equipment, ours can deliver far more value to our customers and is thus more expensive. If our products were too cheap, we may have pushed some other vendors out of the market. So we insist on selling products at higher prices, like Apple, so that we can make more money. If we distribute this money to our employees and shareholders, they may become complacent. So we choose to spend a large portion of this money on research and development, and donate a portion of this to universities to support the research of professors. In this regard, we adopt principles similar to how investment works according to the US's Bayh-Dole Act, where universities own research results that they have achieved using federal funding.

Likewise, we fund university research and don't seek to own the research results of universities. This helps us stay far ahead of others in terms of theory. Even during our hardest times, our R&D spending will not fall below 15 to 20 billion US dollars.

We have the aspiration and motivation to move forward, and we will surely achieve our expected results.

Q7 James Kynge: I heard that you have won 46 5G contracts from countries other than China and shipped 150,000 base stations. Is that true?

Ren: Actually we have won 50 5G contracts and shipped 150,000 base stations.

James Kynge: How many 5G contracts do you expect to win from markets outside China for this whole year?

Ren: Most customers outside China will choose Huawei's 5G, because we provide the most advanced 5G equipment with the highest practical value. We've worked with our customers for over 20 years, and they won't abandon Huawei just because of a few things others say about us.

James Kynge: How many out of the 140-plus countries in the world will use Huawei's 5G system?

Ren: About 135 or 136 countries. The US and Australia certainly won't choose us. Most European customers will, however.

James Kynge: How about the UK?

Ren: The UK will, too.

Q8 James Kynge: I heard that the UK is now reviewing the source code of Huawei's systems.

Ren: The UK is reviewing our source code out of their concern for us, because no system is perfect. The UK has simply pointed out our problems and vulnerabilities concerning security during their reviews. We are both working to ensure security. The UK is not rejecting us; it's telling us that our systems have vulnerabilities. They just don't use fancy words to solve problems. Huawei has been subject to the most stringent reviews in the UK, and is thus deemed the most trustworthy by them.

James Kynge: Will this cost Huawei a lot? What is the estimated cost?

Ren: It will, of course, cost a lot of money, but I don't know the exact figure. There must be a consistent standard for cyber security to avoid discrepancies between countries and companies. Europe has proposed to develop a consistent cyber security standard, and has released its privacy protection standards – the GDPR, which we strictly abide by.

This will require us to re-architect and re-develop networks, and make changes to network architecture and code. It will take about five years to re-architect all products, which means a lot of effort across the company. However, the new network and product architecture will be the most simplified, the most secure, and the cheapest for future networks, and comply with the GDPR at least.

Before Huawei was added to the Entity List, we had planned to increase our revenue to 250–300 billion US dollars in 2023. However, due to the impact of the Entity List, our projected revenue for the next two years may decrease. But this revenue may then leapfrog in the following three years, or even hit the target we previously set.

Q9 James Kynge: Do you think Huawei will get the largest share of the Chinese 5G market?

Ren: We will certainly have a larger share in the Chinese market, because all of the Chinese carriers know us well. During recent bidding for the core network launched by China Mobile, about 44% of the market share went to Ericsson and Nokia, while we got a little over 50%. The West is most concerned about the core network when it comes to cyber security. China is open in this area, so it allows Western companies to have such a large market share in the core network. This also shows that China trusts them.

The UK has made the right decision to allow Huawei equipment to be used in its networks, except for the core networks. 5G base stations are truly transparent. Information packages are not opened while being transmitted, and they are not opened on the access network. They aren't opened and processed until they arrive at the core network. Therefore, it is understandable that the UK proposes not to use Huawei equipment for its core network because they think this ensures better security. However, not using Huawei's core network equipment could also mean being left behind, because Huawei's core network equipment is the best in the world. There will be more foreign customers willing to buy our core network equipment in order to stay competitive.

China has not allowed a monopoly in the core network market. It has allowed 44% of the market share to go to Nokia and Ericsson. We won't attempt to snatch up too much of the 5G market share. Otherwise, we will be squeezing other companies into a very limited space.

James Kynge: People think that China will be a huge 5G market. Can you predict how large it will be in around two or five years?

Ren: It's hard for me to make a prediction about the Chinese market alone. I have never thought about sizing up the Chinese market alone. I think the whole world will need at least 12 million 5G base stations, which means the market potential is huge. I'm very optimistic about the future 5G market.

James Kynge: Does Huawei receive any preferential treatment in the domestic 5G market?

Ren: No.

James Kynge: Huawei is a leading company not only in China, but also worldwide, so does it deserve to be treated preferentially in China?

Ren: China is a market economy. How can there be any preferential treatment in a market economy? The Middle East is rich, so it makes sense to sell at higher prices there. In Europe, prices are quite high as well, which also makes sense. Our phones sell at higher prices in countries outside of China.

Yang Yuan: The 50% of market share you mentioned was for the core network. What if we also consider base stations and other equipment?

Ren: China has just started the 5G bidding process, and I'm not sure about our market share in base stations. It is likely that this is also higher than that of other companies.

Q10 James Kynge: Let's talk a bit about President Trump. If he gave you a call, would you pick up the phone?

Ren: He is very busy. Would he be able to make the time to call me? I don't think this is realistic.

James Kynge: If he was willing to do so, would you answer the phone?

Ren: I don't understand English anyway.

James Kynge: Interpretation could solve that.

Ren: Interpreters don't know much about politics, while I specialize in electronics. We might speak different languages. So there may be some difficulties communicating with each other.

James Kynge: If Trump called and you answered, what would you say to him? How do you think the dispute between the US and China, particularly the dispute regarding Huawei, could be resolved?

Ren: First, he is somebody, and I am nobody really. How could I possibly meet him? Second, I am busy patching holes and may not have time to meet him. Third, the trade issue is a national issue that is related to the livelihoods of hundreds of millions of people. Why should we get involved and ask people to sacrifice their interests to save Huawei? If China negotiated in Huawei's favor, it would have to make concessions in other areas to benefit the US. I don't think our country should do this. It's fine if we are attacked. We get less money and work harder, which will toughen us up.

Q11 James Kynge: We all know that the US government has caused a lot of trouble for Huawei. Do you think the Chinese government will continue to restrict US companies that do business in China?

Ren: In fact, the US is helping us in a great way by giving us these difficulties. Under the external pressure, we have become more united than ever. The greater the pressure we face, the more resilient we will become. That's how steel is made, through thousands of strikes. We are currently a little bit "fat" as a company because we have been expanding without being tested by many hardships over the past 30 years. These attacks against us will force our organization to become more solid, and our people to become tougher and stronger-willed. This is good for our future development. We are not afraid of such attacks.

However, I don't think China will retaliate against US companies because only by staying open will China have a future. The current situation is that the US is not selling its advanced products to China, not that China is not buying American products.

If China refused to buy from advanced US companies, wouldn't China cause itself to be left behind? Strategically speaking, China will only become more open, not more closed. This is how I understand it from the speeches delivered by China's leaders on television. China will only become increasingly open, especially in the manufacturing sector. In the past, joint ventures were mandatory in the manufacturing sector. Now we can see more and more solely-foreign-owned companies in this sector. They use their own technology, make their own products, and sell these products on their own. During this process, China is acting as a platform.

The 200-year history of the US shows why being open is the right way forward. More than 200 years ago, the US was an untamed land of wilderness. Over the past 200 years, it kept opening up, attracting talent in great numbers, and extensively optimizing its systems. These factors are what made the US the most powerful country in the world. China needs to learn from the openness of the US.

Q12 James Kynge: Let's discuss the trade war between the US and China. Are you willing to see Huawei included in the trade agreement? Is that possible?

Ren: There is no benefit to us if we are included in the trade negotiations. We barely have any sales in the US. If these two countries were two large balls, Huawei is just a sesame seed smashed between them. Oil can be squeezed from a sesame seed, but where would the oil flow to? We don't benefit from the US, so why should we participate in the discussions between the two countries? We are still focusing on patching our "holes". We don't have enough time or energy to study global trade relations.

James Kynge: Is it possible that the US will remove Huawei from the Entity List and allow US companies to continue to export to Huawei?

Ren: Of course I hope the US will do this. There is no reason to add Huawei to the Entity List. If we are guilty of something, we should be put on trial. However, they have never provided any evidence, and passed judgment without any debates or trials. What the US government did is unfair. In this case, how could the world believe that the US is a country ruled by law? I think they should remove Huawei from the Entity List. But even if they don't, we are not afraid of what we may face. This will only make us stronger.

Q13 James Kynge: It is said that the HSBC is cooperating with the US government, which may be causing many difficulties for Huawei. What do you think about Huawei's partnership with HSBC in the future?

Ren: First, HSBC ended its partnership with Huawei quite a long time ago.

Second, there isn't any proof that Meng Wanzhou committed any crime. The bank knew about Skycom's business in Iran from the beginning and also understood Skycom's relationship with Huawei. This can be proven by emails between the bank and Huawei, which have the bank's logo on them. From a legal perspective, they can't claim they were deceived or knew nothing, because we have evidence.

Meng Wanzhou just casually said something over a cup of coffee, which can't be evidence of a crime. Throughout years of business dealings with Iran, Meng Wanzhou was simply part of one discussion in a café. This cannot be the basis for accusations of a crime. The US court should investigate the prosecutors. They have accused Meng Wanzhou of crimes, but what are these charges based on?

Under the current circumstance, we need to clarify the facts related to this case and present all the evidence. In addition, Meng Wanzhou hasn't committed any crimes in Canada, so Canada has violated its own law enforcement procedures. Canada is a country ruled by law. They should stop infringing on an individual's constitutional rights by taking the US' side. The country's image could be severely damaged if people stop believing that Canada is a country ruled by law.

We trust the Western rule of law, which is based on facts and evidence. Only with facts and evidence can we judge whether someone is guilty. This issue won't impact our partnerships with other banks. When this issue is clarified, we still need to seek further collaborations in the future. Finance is already a globalized system.

Sue-Lin Wong: Has HSBC provided any explanation regarding the end of their partnership with you?

Ren: HSBC ended its partnership with us and stopped all transactions. It's HSBC that called a stop to this, not us. They didn't explain and simply stopped providing services to us. We will partner with other banks.

Sue-Lin Wong: Do you think you have been treated fairly? If these issues are properly addressed, will you continue to partner with HSBC?

Ren: The world is never fair. It's all about whether you are strong enough or not. We have the strength to resolve these issues, so we don't care about how we are treated. Now is not the appropriate time to discuss partnerships. The most important thing to do right now is to complete these legal proceedings.

James Kynge: Ms. Meng's case has been going on for a long time. What do think the next step will be? Should the US speed up to resolve this issue?

Ren: Meng Wanzhou is innocent from all legal perspectives. She shouldn't be extradited to the US. First, this case is based on groundless charges. Second, Canada detained Meng Wanzhou based on the direction of the FBI. They severely infringed upon her basic rights multiple times. Third, the arrest of Meng Wanzhou is an affront to double criminality, a foundational principle of Canadian extradition law, because Canada does not impose financial sanctions on Iran. Fourth, the political factors affecting the extradition procedures will impair the fairness of this case and also infringe on the legal rights of Meng Wanzhou.

Saying we haven't communicated with the US government is just not true. We have sued the US government in several US district courts. This is how we communicate with them, through courts and with evidence. Decisions cannot be made over a cup of coffee. If that was the case, you couldn't say the country is ruled by law.

James Kynge: As the father of Ms. Meng, do you have the opportunity to speak with her over the phone? What do you say to comfort her?

Ren: She's studying every day, and I frequently talk to her about various topics. She doesn't need me to comfort her because she's a very strong woman. The US is wrongfully holding her. They thought they would easily get the evidence they needed by arresting her.

Sue-Lin Wong: What is Ms. Meng studying?

Ren: She is studying many things, but I don't know what subjects she is studying in particular.

Q14 James Kynge: It is reported that the US attacked Huawei in 2013, and Mr. Guo Ping also said the US hacked Huawei's system and stole emails and source code. Did you ever analyze that issue or how much harm was caused to your company?

Ren: Back then, when developing our own IT systems, we decided to use American bricks to build our own Great Wall. This Great Wall was not built to defend against the US government, the Chinese government, or any other government in the world. If they just have a look at our systems, that would not do any harm. We only use our Great Wall to prevent malicious competitors from stealing our trade secrets. If we wanted this wall to defend against every government, it would have been extremely thick and very costly.

We don't have anything that is worth the US government hacking. Our company doesn't do bad things. If they find any issues and let us know, we will make corrections so that our systems become stronger. So we are not worried that the US government may get anything from our servers.

Q15 James Kynge: Some people from the White House have claimed that Huawei has ties to the People's Liberation Army and China's Ministry of State Security. Some even said that Madam Sun used to work in the Ministry of State Security. What's your response to these allegations?

Ren: In the US, many people who worked in the military later worked in companies and even held very senior positions in them. Such things are more common in the US than in China. It's true that I was once a soldier, but that does not mean that Huawei has ties to the military. Madam Sun worked as a technician in China's Ministry of State Security, responsible for installing 200-line switches, but she has no other background. Otherwise, she would not have quit her job. After China implemented the reform and opening-up policy, many people left their public service jobs and started their own businesses.

Huawei has no relationship with China's military or Ministry of State Security. Our relationship with the Chinese government is very simple: We abide by the law and pay taxes in accordance with the law. We have no other relationship beyond that.

Huawei is a completely independent company. If our success was due to ties we had to the Chinese government, China would be much more prosperous, because there are numerous other companies that have ties to the Chinese government. We have become what we are today because we are able to make our own decisions, including our decision to become an industry leader.

Q16 James Kynge: Regarding Huawei's revenue and profits, you said last week that Huawei's revenue in 2019 will be about 30 billion US dollars lower than forecasted. Would you please share with us your forecast on profits?

Ren: Our original revenue forecast for this year, made at the beginning of 2019, was 135 billion US dollars, which we have now reduced to around 100 billion US dollars. Our net profits are expected to be around 8 billion US dollars. Actually, I stopped listening to a financial briefing our finance personnel were delivering, because their conclusion regarding our business results was much better than I thought. So I told them to go back to work and not to waste time on reporting. I am a bit pessimistic, you see.

James Kynge: So Huawei's addition to the Entity List will not have a large impact on your business results?

Ren: Our original revenue forecast for next year was more than 150 billion US dollars, which has now been changed to around 100 billion US dollars. This year, our workforce will expand from 180,000 people to 194,000. Why the large increase? We are going to need a lot of manpower for R&D, supply, sales, services, and other domains in order to phase out many old versions of our products and release new versions. We will bring in more than 10,000 fresh graduates in July and August. We will continue to grow despite the difficulties we are facing.

James Kynge: I've heard that Huawei is such a popular employer that there are up to 20,000 people applying for one job position at Huawei. Is this true? Or maybe this number is wrong.

Ren: This has been exaggerated. We welcome people who want to join Huawei, but we also have requirements. Huawei University has developed a system that consists of many different exams. One must pass all relevant exams before being given an interview. For example, if you won a gold medal in an international computer competition, you may get a salary 5 or 6 times higher than the average starting salary. There are just 40 gold medal winners around the world every year, and we recruited many of them this year, because we offered higher salaries than Google. We have recruited several young geniuses this year, and more will join Huawei next year. Talent, rather than land, helped the US develop into the world's most powerful country. We can learn from the US to attract more outstanding talent. We believe more such talent will join Huawei in the future.

James Kynge: Are these young geniuses from China or other countries? How many of them are from abroad?

Ren: Both. Of course, these dozens of young geniuses are not all gold medal winners; some are silver and bronze medal winners. There are maybe 50,000 contestants in the world's computer competitions every year. After rounds of screening, only 4,000 will be left, which will then become 400. In the end, only 40 will be winners. There are nowhere near enough Chinese contestants in these competitions. China should encourage more university students to participate in these international competitions. These competitions have established rules and very strict coaches, which can help assess the participants' abilities and improve our education approaches. After these geniuses join Huawei, they will activate our organization and inspire our team.

Yuan Yang: You just mentioned that the world's software market is very flexible. Have you recruited more people from your American carrier customers or partners?

Ren: In principle, we don't hire Americans in this domain. As long as a person has an American passport, green card, or permanent residency, they may be  considered to have American elements. Hiring them will make us subject to the US government's long-arm jurisdiction.

Yuan Yang: You don't recruit their employees?

Ren: No. Because the US government has long-arm jurisdiction. If we hire people who have a fixed presence in the US, their work results may be subject to the US export control laws.

Q17 Yuan Yang: Many governments now require tech companies to hand over data. For example, the US government required Apple to hand over user data in order to unlock their phones. If the Chinese government raised some lawful requests which might go against user interests, what would you do?

Ren: Apple is our model.

Yuan Yang: Will you stand against the government like Apple?

Ren: No. Actually, Apple is not a mobile phone company, but an Internet company, a kind of carrier. Only carriers can control user data. Apple has established a platform on which a full ecosystem has developed, so Apple owns that data. After we sell pipes (network equipment) to customers, everything transmitted through them, be it water or oil, is controlled by carriers. We don't own any data. Sovereign states have the right to manage the data of carriers within their territory, but no sovereign state can manage data across borders.

Yuan Yang: What if the government requires Huawei to unlock a phone?

Ren: Users control their own data, not us, so how could we unlock their phones? Data is owned by our customers, not us. Carriers have to track every user, otherwise no phone calls could be made. It's a carrier's duty to track user data. We, as an equipment provider, don't track any data. So this issue doesn't apply to us.

Yuan Yang: But you know the operating system, so you could help unlock a phone. If the Chinese government raised a lawful request, could you reject it? Would you be put in prison for rejecting such requests?

Ren: Why would I agree to that? We will never do such a thing. If I had done it even once, the US would have evidence to spread around the world. Then the 170 countries and regions in which we currently operate would stop buying our products, and our company would collapse. After that, who would pay the debts we owe? Our employees are all very competent, so they would resign and start their own companies, leaving me alone to pay off our debts. I would rather die.

At the Munich Security Conference, Yang Jiechi, a member of the Political Bureau of the Communist Party of China (CPC) Central Committee and Director of the Office of the Foreign Affairs Commission of the CPC Central Committee, made it very clear that the Chinese government never requires companies to install backdoors. Premier Li Keqiang then reiterated that position at the press conference held after a recent session of the National People's Congress. Recently, when Premier Li Keqiang visited our booth at this year's 16+1 Summit in Croatia, he told our staff not to install backdoors. The Chinese government cannot make it any clearer that it will never ask any company to do that.

Now the EU is preparing to set a unified standard which will require all equipment vendors and carriers to guarantee there are no backdoors in their equipment and networks. We strongly support this initiative and are willing to take the lead to sign an agreement based on this standard. Unfortunately, such an agreement cannot be signed for now, because we need to wait for other equipment vendors and carriers to agree and for the EU to establish the system. But overall, this is a great initiative from the EU.

Yuan Yang: I am a little bit surprised to hear your answer about user data. Both Tencent and Alibaba have said publicly that, if requested, they would hand over some user data to the Chinese government. They have also said that these are lawful requests so they have to accept them. Is Huawei different in this regard?

Ren: We are a company that sells water taps and pipes. Why would they request water from us? Tencent and Alibaba are the sources of information, so they have the water. But we don't. How can anyone ask for water from a hardware store like us? We only sell the equipment. The data is stored in your mobile phones, not in our systems.

Q18 Yuan Yang: Regarding the Entity List, it's difficult to localize some components of core servers. What are the most difficult holes to patch? How long do you think this will take? 4 years, 5 years, or 10 years?

Ren: It's impossible to take that long. If we are not allowed to use the x86 server, we can use our own server, TaiShan, instead. Our server is probably more advanced.

Yuan Yang: What are the most difficult holes to patch?

Ren: We are working to patch these holes. I don't think there are any problems in this regard. Otherwise, how would I be able to smile and talk with you about this issue today? I would be very nervous.

Sue-Lin Wong: How long will it take you to break free from reliance on the existing supply chain?

Ren: I don't think it will take long. Most of the issues have already been solved.

Yuan Yang: How will you patch these holes? Will you hire more people?

Ren: Not necessarily. We already have a large workforce. After we cut some of our peripheral businesses, people from these businesses will be transferred to our core businesses.

Yuan Yang: The US has a monopoly over the world's chip designs and the software market. Could you patch these holes in high-end software like this?

Ren: We have obtained a permanent license for these tools and software. This will not be a problem. But it's hard to say whether there will be issues with upgrades.

Q19 Yuan Yang: You'll never accept the US's requests, right?

Ren: Unless they release Meng Wanzhou and remove Huawei from the Entity List with no strings attached, I don't think we would have anything to discuss. Other issues should be handled by the court.

Q20 Yuan Yang: The US sees 5G as one of the most important "battlefields". Just now you also mentioned IoT. Do you hope for Huawei to set the global standard for IoT in the future?

Ren: Certainly, IoT will be even more powerful than 5G.

Yuan Yang: If Huawei becomes the global "king" of IoT, what do you think the US will do?

Ren: They will also attack our IoT.

Sue-Lin Wong: How will they attack?

Ren: They eat a lot of beef, which makes them strong. And they don't get tired easily, so we can't beat them on the football field. To stay healthy, they need to burn a lot of calories. So they spar a lot and don't need to go to the gym.

Sue-Lin Wong: But they are not good at playing table tennis.

Ren: Table tennis does not consume as much energy as football does.

Q21 Yuan Yang: Huawei has some friends in the US, though they have a smaller voice. For example, many semiconductor companies and carriers in the US do support Huawei. Are they talking to the White House on Huawei's behalf? Do you think they can speak for Huawei in the US?

Ren: We don't know what they are doing. We are now focusing on patching the holes on our aircraft, and we don't have the time to think about the rest of the world. Now we have switched from seeking development to fighting for survival. We're trying to gather together scientists to make the most advanced future technologies, so that we can fight back. These people are very competent. It's very easy for them to solve key challenges and difficult problems. They can solve many problems within a short period of time.

Yuan Yang: Will you work with them to make some plans and strategies?

Ren: Our procurement team should be talking with them. After all, we have to sign contracts and place orders. When Washington allows them to do business with us someday, how can they ship goods if we haven't placed any orders? So we should keep discussing supply chain matters with them.

Yuan Yang: Considering the Entity List, Huawei is facing a lot of uncertainty. If some foreign carriers wanted to buy a lot of Huawei 5G base stations, but now they become more cautious and hesitant, how can you convince them to buy your products?

Ren: We don't need to convince any of them. Actually, there are many carriers rushing to buy from us.

Yuan Yang: They are not affected by the uncertainty?

Ren: We have worked with them for two to three decades, and they trust Huawei. So we should have no supply issues.

Q22 Sue-Lin Wong: What do you think is the biggest difference between the relationship between the US government and US tech companies and the relationship between the Chinese government and Chinese tech companies?

Ren: The Chinese government manage private companies through legal frameworks and taxation. They don't intervene in their business operations. I don't know why the US government micromanages its tech companies as much as they do. They act like a mother-in-law, and if they get too involved, their daughters-in-law might run off.