Huawei can prosper despite US sanctions, says board member

Huawei has been forced to adopt the mentality of a startup partly because of US government sanctions, Catherine Chen, a board member for the Chinese telecommunications company, has said.

Helping to run probably the most scrutinised company in the world, she said Huawei would survive and eventually break free of the attempted US shackles by using its technical expertise to forge a path into new markets less dependent on the US, such as energy conservation, artificial intelligence and electric cars.

Speaking to the Guardian from Shenzhen, Chen said: “We are now in a very complicated situation. I feel like it’s very similar to being a startup company again. Starting a business involves a lot of uncertainties. Many elements that we relied on in the past are now changing.

“Confidence is important for a startup. For startups, success is the result of ideals, not calculations.

“In truth, we’ve already overcome numerous challenges over the past 30-plus years. This time, the challenge we face isn’t the result of some internal problem. Instead, it’s external pressure. In fact, this challenge has reignited the passion of our over 190,000 employees.”

She said her son, who goes to a British university, told her: “It’s going to be OK, Mum. Look, Manchester United once had an even harder time than you guys, but they are a top team today.”

The Trump administration blacklisted Huawei over claims it would allow its access 5G network to spy on behalf of the Chinese state. It later amended its export control rules to block all unlicensed shipments of chips and components to the company, even from non-US suppliers, if they included any American machinery or technology. The plan was endorsed by the UK defence select committee, which said there was clear evidence of collusion between the company and the Chinese Communist party apparatus.

On the surface, the US strategy, endorsed by Joe Biden, is working, even if Huawei is not quite heading for the relegation zone. Its revenues have fallen year on year by 38%. The premium smartphones it launched in late July do not work for 5G or with the Google Play store. It has been forced to sell part of its business to Honor, which has largely grabbed Huawei’s domestic market share of the handset business.

In the UK later this month, telecom firms face the final deadline to stop installing Huawei equipment in British 5G networks. Huawei has also found itself locked in a court battle involving Meng Wanzhou, Huawei’s chief finance officer and daughter of the company’s founder, Ren Zhengfei. She remains under house arrest in Vancouver as the US seeks her extradition for allegedly fraudulently misleading her bankers, HSBC, into a potential breach of US sanctions on Iran.

“Meng Wanzhou has been my colleague and friend for 26 years,” Chen said. “We are both women and mothers. She has been detained in Canada for nearly 1,000 days, which is truly unfair to her. I can imagine how difficult this time has been for her and how much impact this has had on her life and work. We have full confidence in her innocence. I know her very well. We have always and will continue to support her pursuit of justice.”

Asked if she acknowledged there was a connection between the extradition case and the two Canadians arrested in China, Michael Spavor and Michael Kovrig, and the possibility that they are bargaining chips, she ducks, as she does wider human rights issues. “I read media reports that said those cases are related, but I don’t know what the connection is.”

But Chen’s main message is about the firm’s ability to survive, insisting Huawei has the means to diversify and find new revenue sources, pointing out that of the company’s 190,000 employees, more than 100,000 work in research and development.

She said: “Our R&D investment this year will remain around $20bn [£14.5bn]. According to a report from Europe, Huawei has ranked as one of the top R&D spenders for 10 consecutive years. We also rank among the top companies in terms of patent applications.”

But she admitted: “We currently have no solution to the restrictions on advanced chips that we are facing, so our revenue from this business has suffered. The chances are that companies in China, Europe, or other places will address the obstacles to advanced chips. At that time, Huawei might make a comeback in the smartphone business.”

In the meantime, Huawei can advance with other products that have lower requirements for advanced chips, she said.

“To be honest, we still don’t know the form of future smart devices. The smart devices we use in the future may look very different from those of today. Even though Huawei only focused on communications technologies in the past, we now realise that many of the technologies we developed can be applied to industries outside communications and create value. In addition, these technologies are independently developed by Huawei, meaning they rely very little on US technologies.”

‘Excluding Huawei does not make the US safer’

She says America has identified in Huawei the wrong cyber-threat. “Excluding Huawei does not make the US safer. There hasn’t been a drop in cyber-attacks in the US or anywhere else since Huawei was cut out. Excluding Huawei doesn’t make the US stronger, either. In fact, these moves have undermined the competitiveness of US companies,” she said.

“Let me be clear: Huawei has never received any requests from the Chinese government to undermine other countries’ interests or act illegally. Never. Our founder says the same thing when he is interviewed in China. The Chinese government and the Chinese people understand our position on this. Mr Ren has also stated that we would never comply with such a request. This is something we have repeatedly stated.”

In the case of Britain she is clear Boris Johnson’s revised decision to exclude her firm from 5G was politically driven. “Specialist cybersecurity risk management organisations in the UK, like the Huawei Cybersecurity Evaluation Centre Oversight Board, have identified areas where we can improve, such as our software quality. But it also acknowledged that Huawei is subject to the most stringent scrutiny regime in the UK.

She claimed there has been no evidence of any wrongdoing on Huawei’s part during this entire decade of oversight.

“In the first half of 2020, they [the UK government] made a decision based on risk management considerations, but in the second half of that year, they made a decision based on political considerations.” No credible evidence had ever been produced against her firm, she said.

The UK government says it “will never let commercial decisions prevail over national security”, and although it stands by its initial assessment that the risk associated with Huawei were manageable with monitoring, the US ban on sale of its chips to Huawei in May 2020 meant the risk had changed.

Chen said that in medium term the UK may be the net loser from excluding Huawei. “If the UK government wants to maintain its leadership in innovation, achieve balanced development between the north and the south, and excel in other domains, they should uphold an open and free trade policy to attract more investment in R&D and other areas.”

As to the scale of the pushback against Huawei’s involvement in 5G across Europe she does not appear despondent. “What we are seeing now is pretty much in line with what I expected. Huawei has been in Europe for more than 20 years. I believe our customers already know whether Huawei’s products and technologies are secure, valuable, or competitive.

“I think most countries would choose to work with Huawei if they made decisions based solely on technological considerations.”

She ends by admitting how much the pandemic has shocked her by revealing our collective lack of mutual understanding. “I thought I understood different cultures, but this pandemic has really made me question this due to the way different cultures have responded. People cannot even reach a consensus on wearing masks.”