Q1 UK Documentary Producer: I am here today not to just find out about what's going on with Huawei in this present moment, but to really understand who is Huawei, where does Huawei come from, and what are the things that made Huawei what it is today, so we're going to start all the way back into your period of history. I would like to start by asking about your time in the Liao Yang factory as an engineer for the PLA, can you tell me about some of the working conditions and experiences you had there?
Ren: The Liao Yang Chemical Fiber Factory was a key national construction project during the Cultural Revolution. The factory introduced a whole set of synthetic fiber equipment for processing crude oil and derived chemicals from French companies named Technip and Speichim. The Chinese economy was really rough back then. The government built this factory in the hopes that every Chinese could have a set of synthetic fiber clothes. Leaders from the central government paid a lot of attention to the project.
It was a chaotic time in China, and no local engineering team wanted to run the project in such a tough environment. So the central government had no choice but to assign the army to run the project. At that time, the army didn't really have enough talent trained in the required techniques. Fresh graduates like me were treated like this kind of talent because we knew a little bit more than others.
We lived in tough conditions. First, we didn't have enough to eat in Northeast China at the time. We basically only ate cheap cereal crops throughout the year and pickled cabbage and radishes during winters that would last six months. The biggest problem was that we rarely had any meat to eat or enough oil to cook with. Each month, people normally would be rationed 150 grams of oil. Since we were in the military though, we could get 500 grams.
Second, our unit was part of the tens of thousands of troops that were sent into the northern wilderness with very little preparation, so there weren't any houses for us to live in. We built our simple houses on our own. It wasn't as easy to do back then as it is now. It was way harder. The houses were built during the winter, so the foundations weren't solid. The walls sank and cracked, so cold winds would blow through. Despite these difficult living conditions, our engineering work was actually pretty advanced and highly automated. It threw everything into very sharp contrast.
China didn't really value culture or education at that time. During the Cultural Revolution, the education system was a mess. Leaders from central and municipal governments only pushed those of us in the factory to read and learn. And that was only because if we didn't keep learning, we wouldn't be able to figure out how to install the advanced equipment and how to test and adjust the instruments. We also wouldn't be able to manage actual production.
During those times, we had a rare opportunity to learn. So despite the difficult living conditions, we were very happy. The factory was like an oasis in the desert. It was really difficult to find a place in China at the time where reading technical books wouldn't be treated as a political mistake.
Q2 The Producer: So you got all your knowledge to create the pressure balance that you invented from the books you read while in Liao Yang or did you get the knowledge from somewhere else?
Ren: There were actually already devices like this in France at that time. A Chinese expert saw it there and he was able to roughly describe what it looked like to me. I used my knowledge of mathematics, like partial differential equations, to figure out the overall structure of the device. I also consulted Li Shijiu, a math professor from China's Northeastern University, asking him whether my inferences were correct and whether he believed I could actually achieve what I was attempting. He assured me that I could do it. So I came back and continued designing this system. The device was made mainly to test instruments imported from France. China didn't have this kind of test equipment at that time, so I succeeded in inventing one.
I succeeded around the time the Gang of Four was overthrown. After that, China started to care a lot more about science, technology, and production. To me, my invention was just a little thing and it didn't matter that much. But since no one invented anything at that time, the country was very proud and touted my little gizmo as a big invention and called me a big hero.
Q3 The Producer: And was it this experience in Liao Yang that inspired you to start Huawei at the age of 44?
Ren: I had no experience when I started Huawei at the age of 44, and I took the plunge blindly. After leaving the military, retired soldiers like us had quite a hard time adapting to the market economy, much harder than Western soldiers did. Though Western militaries at that time were not market-oriented, their countries were. So their soldiers knew what the market economy was, and were more adaptive to working in companies after retiring from the military. But we were not adaptive at all. We had got so used to a planned economy, under which we couldn't even think of making a penny.
We couldn't understand why people were selling things they bought with 10 yuan for 12 yuan under the market economy. That must be cheating because they were asking for two extra yuan. We didn't realize there were other expenses involved, including operating costs, financial costs, and taxes. We didn't know about this stuff and found it quite difficult to fit in. We didn't even know what a supermarket was.
If I had any experience before founding Huawei, it would just have been my age. I had more experience with tough times than people in their 20s. I suffered huge setbacks and difficulties during the Cultural Revolution. So when it came to the market economy, I found the difficulties were much easier to bear. I didn't have any skills that could support the founding of Huawei.
Q4 The Producer: And given that this was such a risky enterprise for you, why did you decide to start a company anyway without this knowledge?
Ren: Honestly, I had no other choice at that time. I wasn't able to do my job well and got fired. The Shenzhen science and technology bureau suggested that I start a technology company because I had previously worked on technology. I thought it was possible for me to deal with some technology, so I chose this path we are on right now. Looking back, I think I was very naive to choose this path, but there was no turning back for me. If I were to give up, I would have to get by on manual labor, because I had already used up all the compensation I got when leaving the military.
Q5 The Producer: And some reports say that your experience with the PLA proves that Huawei, in turn, has ties with the PLA. Can you talk to me about this?
Ren: Over the last 70 years, over 50,000 people have been demobilized from the Chinese military, and I was one of them. These people need to get employed after being demobilized, just as people do in the US. We are no longer tied to the military after leaving it, because we take up civilian professions. Therefore, this inference is unreasonable.
Q6 The Producer: And you mentioned the funding for Huawei and that, if you failed, you would have to lose that funding and start from scratch. How much funding did you start with for Huawei and where did that funding come from if not from PLA?
Ren: Huawei's registered capital was roughly 21,000 yuan, but the compensation I received upon leaving the military was only about 3,000 yuan. So I pooled funds from different individuals and founded Huawei. When the company grew a litter bigger, they wanted to cash out their shares for a lot of money. So they filed a lawsuit and won a large sum of compensation. After that, they all pulled out and the company was owned by me alone. I gradually distributed the company's shares to our employees. The court rulings with regard to their cashing out their shares are all archived at Huawei, and you can have a look at them if you like. We didn't receive a single penny from the government, and our funds were pooled from individuals. I didn't have 21,000 yuan of my own to start a business.
Q7 The Producer: There were several hundred companies selling switches back then, but most of them did not survive. What was the secret to Huawei's survival when selling these switches for the Hong Kong company?
Ren: First, Huawei has been customer-centric from day one. To protect the interests of our customers, we'd rather take on more difficulties ourselves. That's how we have earned our customers' recognition.
The statement that there were several hundred companies selling switches may be an underestimate. These companies survived for a while because China was such a huge market where undersupply was a serious issue, and any product, even ones that weren't very good, could sell. Huawei was a reseller of the switches made by Hung Nien Electronics Limited, a company based in Hong Kong. Their analog switches were relatively advanced at the time. We worked hard and made some money during those early years. We didn't spend the money ourselves; we invested it in our service system to create even more value for our customers.
I didn't even have my own house until 2000. Before that, my family rented a 30-square-meter apartment. I couldn't understand why Forbes called me a rich man when I didn't even own a house just about two decades ago.
I wasn't able to take good care of my parents. My father died from food poisoning after drinking something he bought from a street vendor. My mother was constantly worried about the political implications of being called rich so publicly by Forbes. She asked me where the money came from. Given the environment at the time, she was haunted by these fears, and eventually died in a car accident on her way back home from the local market.
At that time, we invested all the money we'd earned during our early years into our future development. This sets us apart from other companies that spend their money elsewhere or invest in other businesses.
Second, we dealt in good faith with our suppliers. As soon as we got paid by our customers, we immediately paid our suppliers. Some suppliers trusted us so much that sometimes they sent us supplies first. That's how we managed to buy products from suppliers and then resell them even though we didn't have any money. This model gave us some opportunities for development. The support we received from Hung Nien cannot be overstated.
Q8 The Producer: When you moved on to develop your own technology, there was a massive risk for Huawei. Can you explain to me why it was such a big risk and why you decided to take the risk to go into developing your own technology?
Ren: I was cheated out of a big sum of money when working for a state-owned company. This was a major setback in my life. As I didn't have money to hire a lawyer for my lawsuit, I read a lot of law books, including those about common law and civil law, as I wanted to serve as my own lawyer. From this experience, I learned that a market economy is mainly about two things – the customer and the goods – and the law governs what's in between: the transaction. I knew that we could never control customers, so we had to get hold of the goods. The only way to get hold of the goods was to do R&D on our own.
In the earliest days, we were a reseller of BH01 switches made by a small company in Zhuhai. This company refused to continue supplying us when our resale business started booming. Things were similar when we were added to the US's Entity List. We later became a reseller of the HAX products from Hung Nien. Again, the Hong Kong company stopped supplying us when our business started doing too well. This forced us to develop our own communications products. It was the external environment and our inner drive to serve customers well that compelled us to make our own products.
When Huawei was up and running, I paid some of the debts of my former employer.
The Producer: And what potential downside could there have been to developing this product? What would have been the result for Huawei if this investment into your own product went wrong?
Ren: At that time, we had no other options. We didn't think about what would happen if we failed; we were quite confident that we could succeed. Analog communications equipment was not as complicated back then, and we were confident in our own abilities.
We started out by making 40-line switches for hotels, and we succeeded. This success gave us the confidence to develop 100-line and then 200-line switches. We moved ahead one step at a time. We didn't start by making something really big.
Q9 The Producer: Where did you get the knowledge to invent these switches to go from selling someone else's product to understanding how to create your own product?
Ren: All of our knowledge came from a textbook written by Professor Chen Xisheng which was published by China's Nanjing University of Posts & Telecommunications. All of us studied this textbook to figure out how to make a switch.
Q10 The Producer: And at the time, the Chinese market was dominated by Western products. How did you break through that Western dominance to have your products being bought in China?
Ren: Back then, there was no way we could compete with Western companies. We started out by making small analog switches for small hotels. Later we gradually worked to make larger analog switches. We didn't begin to make digital switches until we already had many years of experience.
Q11 The Producer: And at the time, Huawei lost many opportunities because you chose not to invest in the CDMA technology, which then became the prevalent technology in China. Looking back on this lost opportunity, would you have done that differently? Would you have invested in CDMA?
Ren: There is a long story behind this. Starting in 2000, China was indecisive about which wireless communications technology to choose, whether it be CDMA, GSM, or something else. As the government didn't grant a mobile license to China Telecom, the carrier brought the Personal Handy-phone System (PHS), a technology that had been phased out in Japan, to the Chinese market. We guessed that PHS might be profitable, but it had no prospects, so we didn't invest in it. We actually invested in CDMA, but we chose to invest in 1X rather than IS-95, an outdated technology. In the end, China only went for IS-95 rather than 1X, so it turned out that we had made the wrong choice and were not selected by the Chinese market. Both of these were frustrations we faced back then.
From 2000 to 2008, China was making a decision on 3G and we were deciding how to develop our wireless technology. During the eight years, I went through a lot and was on the brink of collapse. I insisted on investing in 3GPP's GSM and UMTS, instead of the other two technologies. I faced tremendous pressure. I was not afraid of external pressure, because no matter how tough it was, I could just keep moving forward. But I was afraid of internal pressure. Company executives kept writing emails and giving me reports saying, "If you made the wrong choice, Huawei would collapse."
During those eight years, every day felt like a year. No one but me could take responsibility for this decision. At that time, many companies made big money but we didn't. We were having a much harder time than others. Many articles talked about Huawei in a very ironic and cynical way. What if I really made a mistake? About 8 years later, the Chinese government finally issued 3G licenses. Suddenly, we were able to unleash our potential, but we didn't feel like we succeeded. We just felt like a huge burden had been lifted since our equipment could finally be used.
When we had no more opportunities at that time in the Chinese market, we put most of our efforts in markets overseas. But during our first years in overseas markets, we had no opportunity to meet with customers, let alone secure a contract or make any money. Back then, China was selling knock-offs like jackets to Russia. Because of that, Russia's Minister of Communications and Informatics said, "What high-tech products could China have? All you have are fake ones." We brought along our own products and tried to win their recognition, all the while being lumped together with those who were selling fakes. It was really a difficult time for us then. Despite all this, we had to get into overseas markets. If we failed to do so, we would just end up facing more difficult situations down the road since we didn't have any opportunities in China.
Back then, I spent most of my time in Africa and Latin America. I seldom connected with my family. Looking back I feel very sorry because my younger daughter was growing up. She wanted me to play games and spend more time with her, but I didn't. When I came back home from overseas, I was so tired that I would just lie on the bed. I didn't talk much with her, because I had to focus on how to make sure Huawei could survive.
Around 2000, we began selling some equipment and getting contracts overseas, giving us the opportunity to show our commitment to serving our customers. Customers gradually accepted us. Actually, our products were not even that good, and we were not on par with our Western competitors. But why did the African market accept us? Because they were in the middle of a war and the Western companies all ran away. As Africa had a demand for our equipment, we could sell it to them. We were also able to sell in a few other countries stricken by epidemics and under extreme conditions, helping us gain some successful overseas experience.
Today at Huawei, we require our managers to have experience working in Africa and other challenging regions overseas. When we decide whether to promote employees to managerial positions, we follow similar criteria to what the US military uses to appraise their officers. In the US military when they decide whether to promote a person, they ask: Has this person been in combat? Has this person been in a live firefight? Has this person been wounded? Successful overseas experience is a must for those up for promotion; otherwise, high-quality employees who've only worked away from the frontlines will end up becoming managers. This is not how our value assessment system works. Although this system may not help us make the best use of some very talented people, our first-string team comprises of our toughest. That's why today we have such a strong team. Although the US has kept attacking Huawei, we haven't collapsed; instead, our team has even better morale than before.
While we were losing opportunities in the Chinese market, we sought opportunities abroad. After we returned to the Chinese market, we found the country was experiencing a new phase of development. Since we have developed an excellent team of managers overseas, we are bringing some of them back to China to regain ground here.
Q12 The Producer: It's reported that you spent nearly half your annual profit in 1998 bringing in advice from Western companies. Can you talk to me about what advice you sought, and why that was so important to you?
Ren: When Huawei started out, it was only me. Then people started joining the company. We didn't have any rules back then. For example, I had the final say about everyone's salary raises. That practice benefited some people, but also hurt some others. As the company grew bigger and bigger, we needed to draft many documents to standardize corporate management. But I wasn't really experienced in this. I had only worked in technical areas when I was in the military and had no clue how to manage a company. To drive the company forward, we drafted a lot of documents. But I still thought that they weren't standardized and would prevent the company from growing into a large one.
At that time, I saw the potential of Huawei to become a large company, so we hired many consulting firms like IBM and Accenture. The hourly salary for each consultant was 680 US dollars, almost equal to the average monthly salary of our employees, which was about 5,000 yuan. But to prepare for the future, we had to learn from others. We recognized the value of these consultants and sent many people to learn from them. There were some among the team who didn't cherish the opportunity to learn. When they saw others getting promoted, they became impatient and left halfway through their training. Because of this, we didn't end up seeing many of the consulting programs through to the end. This is a pity.
But we did see one program through. When IBM started to advise us on financial management and auditing, Meng Wanzhou was still a low-ranking employee. She became the project manager and then worked with IBM consultants for the next 20 years, making Huawei's financial management really stand out. In addition, she moved beyond the guidelines of the consultants, set even higher standards, and greatly improved Huawei's financial management. Now the quality of our financial management systems is much better than that of many Western companies. Many consultants from large consulting firms have offered to become our consultants for free. We have politely declined because if they come to us, we will have to teach them our ways now. This is time-consuming. We don't want them to come because they are not up to our level.
As we learned from Western companies along the way, we kept optimizing what we had learned. That's why the current US attacks on us don't really affect us that much. We have understood, internalized, and accepted many kinds of systems. In hindsight, we were right to learn extensively from the West.
Q13 The Producer: You talked about your strategy for targeting countries and regions outside of China that were less developed, like Africa and India. With your success in that, why did you consider selling to Motorola in 2003?
Ren: Because we had already anticipated that our growth would eventually lead us to the top where we would have to confront the US. Then US attacks against us would be inevitable. So we wanted to sell our company to Motorola, just to wear an "American cowboy hat". The company would still be run by tens of thousands of Chinese people. That would be a success for Chinese people. With capital from the US and labor from China, it was better for the company to expand into international markets. We agreed to sell the company to Motorola at 10 billion US dollars and all the contracts were signed.
We had two plans back then. Some of us were thinking about entering the tractor business after the Motorola acquisition. China's tractor business at that time was on the brink of collapse. We thought about buying all the tractor factories in China, including the Luoyang Tractor Factory. The average price of a tractor in the market at that time was 1,000 US dollars. But the tractors were susceptible to oil leaks and overheated engines. With the Integrated Product Development (IPD) process we had learned from IBM, we could solve these problems, and then increase the unit price to 2,000 US dollars. Though we might not be able to disrupt the automotive industry, we could possibly create the largest tractor empire in the world. The majority of people, however, wanted to stay in the communications industry. Either way could work and lead to glory. However, the deal with Motorola fell through.
Our prediction about confrontation with the US was unfortunately correct. As you can see, we are now under fire. By adding Huawei to the Entity List, the US is trying to stop everyone from selling to Huawei. Even McDonald's outlets in Mexico were not allowed to sell to us for a while. The US is taking an extreme action by prohibiting all kinds of sales to Huawei. We can't even use things from our own subsidiary in the US. Our staff in the subsidiary are not allowed to communicate with us in China; otherwise, they would be violating US law as per the Entity List. We anticipated the kind of extreme situations that have become reality recently. We anticipated this years ago and we prepared ourselves, so we are not panicking. We can weather this storm.
Q14 The Producer: Despite the difficulties that you had in the European market, Huawei was able to break through by using cost-cutting measures. Some people have said that these cost-cutting measures, these price-cutting measures, were so extreme that the company must have had help from the Chinese government to be able to give such low prices for their equipment to the European market. Can you tell me about that?
Ren: This is a total misconception. The prices of our products were not that low; actually, they were pretty high. We can send you an electronic copy of our financial statements over the past 10 or 20 years, and you will see that we made a lot of profits. Otherwise, how could we have become such a large company?
Our breakthrough in the European market was attributed to our SingleRAN solution, which was developed by a mathematician who was in his twenties back then. He successfully integrated the algorithms for 2G and 3G. Thanks to his invention, a single piece of equipment could support 2G and 3G at the same time. The volume, weight, and cost of the equipment were all halved.
In Europe, the biggest problem was that it was often very difficult to find the right place for a tower where we needed to install heavy equipment. Europe has many old houses, so equipment could only be installed on rooftops and thus needed to be pretty light. After our SingleRAN solution was developed, our distributed base stations immediately became very popular in Europe, and many carriers started buying our products.
Thanks to the SingleRAN solution, our costs dropped by at least 30% to 40%, so our profits were quite high. Our employees are much better paid than their counterparts in Western companies. That's why many talented individuals, including mathematicians and other scientists, have joined us.
Huawei became the world leader in the wireless domain because of one of our breakthroughs with algorithms, which was made by a young Russian man. He is now a Huawei Fellow. After that breakthrough, we tested and verified it in Shanghai and used the algorithms to get rid of many things in our equipment.
So why were those algorithms so important for our company? Back then, 3G and 4G equipment had three standards: CDMA, UMTS, and China's TD-SCDMA. With those algorithms, we only needed to produce a single piece of equipment to support these three standards at the same time. This significantly reduced our production costs. With the new algorithms, our vertical systems supported multiple frequencies. Why was this necessary? Many carriers had been around for 70 to 80 years, and the majority of them had been allocated more than a dozen wireless frequency bands, which initially required more than a dozen antennas to receive all of the radio signals. Our algorithms integrated these multiple frequency bands, allowing one antenna to receive signals from all of these frequencies. You can take a tour of our antennas. They are extremely advanced. You can imagine how we saved in costs by reducing a dozen antennas down to one, so our profits were a little too good. These algorithms adapted our base stations to multimode and multi-frequency technologies, so they were high quality and highly cost-effective.
Our financial statements cannot look too good anymore, because that will not be conducive to our development. We can only consume our profits by increasing our strategic investment in R&D. That's why we have been investing at least 15 to 20 billion US dollars in R&D every year, which includes increased funding for universities. By doing this, we are investing into the future. We cannot distribute too much money back to our employees; otherwise, they will become too well off and stop working hard. We also cannot distribute too much back to our shareholders, or they will also become complacent.
I often say that Apple is our teacher. They always sell their products at very high prices, which allows companies that charge low prices to survive. Huawei actually also does this. If we sold our products at the lowest prices we could afford, all of our peers would be put out of business. We have won the European market through scientific and technological innovation rather than low prices.
Q15 The Producer: And so this investment into R&D, which you are so well-known for, you have actually invested into R&D centers outside of China as well, such as India. What is your global strategy for R&D outside of China?
Ren: We build R&D centers in places rich with talent. This allows our talented employees to work for Huawei in their hometowns without needing to come to China.
Q16 The Producer: And so, from 2011 to 2012 Huawei made a big shift in its business. So, as I understand it, the core of your business has always been connecting people. But the move from being the inside components and things that people don't see, to being a consumer-facing brand, why did you choose to make that decision?
Ren: Our primary goal of that move was to simplify management. We wanted to keep businesses that were not closely related separate. If these businesses were managed as one, they would be linked horizontally, and would create a lot of problems. So we separated these businesses and treated them like independent "trees". These "trees" all grow from the same "soil", where they share corporate systems for finance, HR, and performance appraisal, but their actual business management is kept separate from each other. This makes our management much simpler.
Q17 The Producer: So, Huawei has been recently facing a lot of pressure from the US, who is claiming that Huawei is a security threat. Can you talk to me about your thoughts on Huawei's security?
Ren: I think cyber security will be an increasingly important issue for humanity. In the past, communications were conducted through physical connections. They had few security problems because external attacks could hardly break into them. Once they evolved into Internet Protocol (IP) networks, they became more vulnerable to security attacks. Now that communications networks are undergoing cloud transformation, more parts of the networks will be exposed to attacks, bringing greater security challenges than ever before.
Europe is doing right by establishing the General Data Protection Regulation (GDPR) and cyber security standards. These standards will push all companies to work hard on cyber security and user privacy protection. But it will be very difficult to go forward, as this is a whole new area. For example, the river may end up flooding before we have finished building the dam. So it is a challenge for all equipment vendors, carriers, and humanity to figure out how to develop sufficiently robust cyber security and privacy protection systems amidst a rapid surge of information.
Q18 The Producer: So, how have Huawei's operations been affected by this pressure that is coming down from the US? Can you tell me about that?
Ren: I think being added to the Entity List basically has no impact on Huawei's operations. Our cutting-edge equipment, such as 5G equipment, can be produced independently of the US. The US is quite far behind when it comes to 5G. We can ensure a sufficient supply of chips and systems without the US. We have also long been a world leader in network connection equipment, including equipment for transmission, access, and core networks, and barely rely on the US at all in this regard. As for consumer devices, there will be some impact, as our ecosystem has not been fully developed. But this impact will not be very significant or essential to our survival.
Q19 The Producer: And specifically with Google not allowing you to utilize Android, can you talk to me about the development of your new operating system?
Ren: We have already talked about our Hongmeng Operating System (OS). Its main feature is low latency, which mainly applies to industrial control, automatic control, autonomous driving, and connected vehicles. This OS will likely be applied first to Huawei's watches, 8K smart TVs, and industrial control systems.
As we know, 5G is actually a quite "simple" technology. 5G will support AI through its advantage in low latency. In addition, 5G provides high uplink bandwidth, which makes it convenient for companies to upload their data to the cloud. Previously, 4G and earlier technologies only supported communication between people. Now with 5G, communications between things as well as between companies can also be realized. This includes massive-scale automatic control. We haven't yet considered how to evolve the Hongmeng OS into a system that also supports mobile phones. Even if we decide to do so, it will take several years to develop a sound ecosystem. It cannot be established in a short time.
Today, the US should not blame Huawei's rise for its failures in the communications industry. The real reason was that the US picked the wrong path. When wireless communications emerged around the world in the 1990s, the US was the most powerful country in science and technology, so they forcibly pushed the CDMA and WiMAX standards on other countries, just like how it is now urging many countries not to use Huawei's 5G equipment. However, the US was wrong. The global trend led by 3GPP was the right path. The US's poor decision has led to its current failures in the communications industry. Another example is that the US used to lead the world with x86 CPUs, and had a big opportunity to dominate the global market. They should be more open and collaborative. We can add our AI to their plate to help them seize more opportunities in data centers. But unexpectedly, several new types of CPUs have emerged in other countries. We have also launched our Kunpeng CPU ecosystem, which will compete with our US counterparts.
Ultra-fast connections will be realized in the 5G era. In the future, AI will rely on the von Neumann architecture that includes supercomputers, ultra-large storage capacity, and ultra-fast connections. The US has supercomputers and ultra-large storage capacity. If the US also has ultra-fast connections, it could become a world leader in AI; but without these, it will lag behind. In addition to 5G, fiber technology is also critical to delivering ultra-fast connections.
China also has supercomputing centers and ultra-large storage capacity. If China deploys 5G and optical networks on a large scale, it may be able to take the lead also in AI. In a word, 5G technology is "simple". The US's ignorance of 5G may be a result of a bad decision long ago. I believe AI will present the biggest opportunity for the future of society.
Q20 The Producer: So when you're talking to your employees about your overall strategy for combatting the difficulties of being put on the US Entity List, what do you say to them?
Ren: We are telling them that we're an aircraft riddled with bullets shot by the US, and everyone needs to work hard to patch the holes. All employees know that patching these holes is their responsibility, and that if we can patch them up, we will survive.
Q21 The Producer: So we also heard that Huawei has built up stations on Mount Everest and that you've been to the camp 5,200 meters above sea level. Why is Huawei always looking to build networks in such dangerous areas that nobody else wants to go?
Ren: If customers make such a request, we will honor our commitment to them. China needed to build a base station on that 6,500-meter peak as a requirement for the live broadcast of the 2008 Beijing Olympics' torch bearing relay. To make it possible, a broadband base station was a necessity, so we built a base station on that 6,500-meter peak.
The same is true for Nepal. We are also building base stations there. And near Nepal, there is a Chinese county called Medog. Even though it had been part of modern China for decades, it still had no communication network. The government had specially deployed a satellite network for them, but it didn't work. The county had been constantly experiencing earthquakes and landslides; the roads could hardly be repaired before being destroyed again. Medog was in a very difficult situation. Back then, we were using outdated CDMA 450 equipment. When we went to build a base station there, Huawei employees and over 200 rural workers had to carry a complete set of such equipment, and climb over four snow-capped mountains. They spent four nights in the snow before they reached Medog, and then they installed the first base station there. Since then, people in Medog have been able to make phone calls. Are we making money there? Absolutely not.
Huawei's ideal is to serve humanity, not just to earn money. We are different from Wall Street. We also do not exist to serve our employees, so we are different from European companies, which tend to distribute almost all their money to their employees. Their employees are often happy and feel free to have a leisurely cup of coffee on the street, but some lack a strong force driving development. When we make money, we don't prioritize giving it to our shareholders or employees, but invest it in our customers. In specific, we invest the money in future-oriented scientific research, and in fully fulfilling the spirit of serving customers.
Our total sales in Africa add up to less than half of our total sales in Guangdong Province. However, employees' income in Africa triples that of our employees in Guangdong. Due to the low sales and high expenditures in Africa, we can hardly make a profit there. But still, we encourage our employees to go to the front line. Specifically, we set this as a prerequisite for their future promotion, and give them more money as compensation. All of this shows our aspirations of serving humanity.
As you can see today, carriers are suffering more than we are from the US's ban on Huawei. But they are still buying equipment from us. This shows their trust in us. Under Theresa May, even the British Parliament adopted the proposal of continuing buying Huawei's equipment for their non-core networks. This shows their great support for us. Now the British Parliament and its Intelligence and Security Committee are concerned that if they don't buy Huawei's core technology, they may fall behind. So maybe they will also buy our core network products. Although the US and the UK are close allies and the US is exerting a great amount of pressure on the UK, the UK is still buying from Huawei. This shows that our dedication to customers all these years has really started to pay off.
Q22 The relationship with the UK goes back many years with certification from BT and Vodafone. Can you talk to me about how the UK has been in that long relationship with Huawei?
Ren: We place great trust in the UK government. The UK is a country ruled by law, and we believe their decision making process is rational and deliberate. We do have received a lot of criticism from the UK, but we always consider such criticism as a sign of caring. It's impossible for any company to make any equipment perfectly. We are working to correct any mistakes that have been identified.
That's why we are making strategic investments in the UK.
First, we are supporting Arm. One or two decades ago, when I met officials from the European Union, they thought the information industry in Europe was being left behind, because the US took advantage of so many opportunities. I said we still could work together.
We decided to support Arm more than 10 years ago. Arm has grown fast, and has been sold at around 32 billion US dollars. With more money, Arm is expanding even faster. Now, Europe has its own CPUs. That's a contribution we have made to Europe.
Second, we have purchased more than 500 acres of land in the UK, and have plans to build an optical chip factory there. This factory will export chips to the rest of world. Why? Because we place great trust in the UK. What's more, the UK is a great hub for scientific and technological talent.
We have also made breakthroughs in optics. Now, we are able to make optical chips that support 800G. No other company in the world can do this, and the US is being left far behind in this regard. This is also a contribution we have made to Europe.
Third, we are leading the world in microwave. We have plans to build our microwave plants in Italy.
We are making contributions to Europe, and we will continue to do more in the future. Strategically, we regard Europe as our second largest home market. When I talk about Europe, I also include the UK. We are making huge investments in these European countries.
Q23 The Producer: And you mentioned that the 5G era is going to be all about connectivity. Can you talk to me about what you see happening in the 5G era? What the future will look like in a 5G era?
Ren: 5G is just a tool. Like a screwdriver, it can not create value on its own. However, a screwdriver can be used to help assemble cars. I think the value of 5G lies in its ability to support the development of AI.
The concept of AI was proposed by British scientist Alan Turing in the 1940s. During World War II, he used these basic theories to crack the Germans' Enigma code. This allowed the UK to track German movements. But the UK decided they couldn't reveal they had cracked the code. When German fighters bombed factories and industrial bases in the UK, Winston Churchill kept this secret instead of intercepting the German fighters. He was worried that revealing they had cracked the code would ruin the Normandy landings.
Even though Alan Turing first proposed AI as early as the 1940s, and many other people around the world have also pondered similar ideas, AI hasn't really been taken seriously until today. Why?
AI relies on supercomputing, ultra-large storage capacity, and super-fast connections. It's only recently that we have been able to get all the things ready for AI. 5G itself will not bring many disruptive changes. But it will help make AI a reality around the world.
On a more positive note, AI will create massive wealth for humanity. For example, an AI-powered tractor can work 24x7 ploughing land without any human intervention. This way, we can grow more crops. In rougher parts of the world where people don't want to go, AI-powered tractors can plough the land instead of people.
Q24 The Producer: Can you tell me about Huawei's vision of the future? What does the world, according to Huawei, look like in 5 years time? 10 years time?
Ren: I can't foresee what will happen in 5 to 10 years. I can't even foresee what will happen in 3 years, because this world is developing so rapidly. A number of years ago, it was difficult to even make phone calls. Then, all of a sudden, Steve Jobs's iPhones gave rise to the mobile Internet. How could we have possibly known this would happen in the years leading up to it? So it's impossible for me to envision what will happen 3 to 5 years from now. We will just act like a chameleon and adapt to the changing world a little bit more rapidly so that we are not left behind.
The Producer: Just maybe in a shorter time frame, given what Huawei is working on now, what are the things that you would like to achieve in the near future with Huawei?
Ren: Huawei is committed to making networks faster, with much lower latency, so that people can fully enjoy the value created by information services. The bandwidth of 5G is around 10 to 100 times that of 4G. 5G equipment is 70% smaller and consumes one-tenth of the power that 4G equipment consumes per bit. In the 5G era, people will surely enjoy higher bandwidth and faster information services, with higher quality and lower prices. Of course, this is still not possible today. When 5G is deployed all over the world, the prices of information services will drop, enabling underprivileged kids and kids living in rural areas to gain access to the outside world via the Internet. This will improve their education, which will then enhance their ability to create wealth for humanity.
Q25 The Producer: And speaking of children everywhere, I was given some fantastic pictures yesterday of you with your family. And, as a person growing up in the UK, I have no idea what this was like. Can you tell me a little bit about what it was like to grow up in China at this time?
Ren: I grew up in a very small town where people were very poor. We were a bit better off than our neighbors, because my parents were both teachers. By better off, I mean we could add salt when we cooked vegetables. And that was also how local people understood being rich. At that time, there was only rock salt, not granulated salt. Poor people tied the salt together with some string, and when the vegetables were done, they put the salt in for a bit just to add some flavor. That was what I saw personally when I was a child. Even that was not available to the poorest. When we were young, we lived in such an environment. I knew nothing about the outside world. I had no idea that people in the UK had an abundance of bread. At that time, we just didn't have enough to eat. As we lived in rural areas, we didn't know anything about the outside world – not even cities in China. If kids in rural areas can broaden their horizons via the Internet, think of how much progress they will help China make!
Q26 The Producer: And so, this need to survive, how has that fed into Huawei's philosophy of success through survival, success through struggle?
Ren: There is no logical connection between these two things. Although I lived in a remote, mountainous region, I had a strong sense of curiosity about the world. I learned about the outside world through story books and science books like One Hundred Thousand Whys. When I eventually went to university, I borrowed books from the library there. By reading books, I was able to broaden my horizons constantly. This was all driven by my curiosity. This curiosity is also driving Huawei forward. We adopted the concept of lowering our center of gravity for development because we believe that we need to maintain stability. If we develop too rapidly, we might not be able to keep it up. This would be a huge disaster for any company. We must remain stable, so we use the concept of survival to denote stability. We must not be rash. This has nothing to do with what I experienced when I was young.