Ren Zhengfei's Northern European Media Roundtable, Part 5

Ren Zhengfei, Huawei CEO, welcomed media from northern Europe to a roundtable and invited them to ask whatever they wished, however challenging the question. GEORGIA TODAY will be publishing those questions and answers in the present and following issues of GEORGIA TODAY newspaper.

Where will Huawei's revenue mainly be from? Africa or Asia?

I think most of our revenue will still come from China and Europe.

What do you think about Swedish ICT ecosystems and knowledge in IT and Telecom?

I think Sweden is a great country. Over 20 years ago, when I told the Head of the Guangdong Communications Administration Cui Xun that one day we would catch up with Ericsson, he just laughed at me and said it was impossible. He told me how Sweden does a great job providing universal education and facilitating scientific and technological innovation, and how many new technologies emerge from Sweden.

We are now building a new campus for our Huawei University and the first phase will be finished in the beginning of next year. Its design was inspired by the buildings in Sweden's coastal areas. I think we can learn a lot from Sweden, in terms of both dedicated spirit of the Swedish people and Swedish culture as a whole. Chinese people are beginning to win the Nobel Prize awards. I truly feel that China is making such progress.

Twenty years ago you didn't think you would reach Ericsson's level, but today you think you're ahead of them, at least on 5G. Why? What happened?

I think the first reason is that we knew we were lagging behind. So we spent more time on our work to try to catch up, even sacrificing the times that other people use to have coffee. Second, we are very open. We collaborate with research institutions and universities all around the world, and provide funding for their research. For example, the theory behind massive MIMO, a key 5G technology, was first proposed by a professor at Linköping University in Sweden, and Huawei was the first to apply the technology to products. To sum up, since we knew we were lagging behind, we have been working all out with partners around the world to catch up with other world leaders.

How did China's Cultural Revolution shape the way you think and the way you shaped Huawei?

I'm an eye-witness to how the People's Republic of China has grown into what it is today from when it was founded. I lived in an extremely poor region when I was a kid, and I saw what life was like for poor people with my own eyes. I also witnessed many political campaigns and how China struggled and kept moving in the wrong directions by constantly swinging one way to another.

I think the Cultural Revolution is the biggest mistake China has ever made, and it had an enormous impact on the country. At that time, China built the Liaoyang Synthetic Fiber Factory with equipment imported from two French companies, Technip and Speichim. During my time at the factory, I had access to world-leading technologies, and was able to distance myself from the radical revolutionary movement. As China sought revival after the collapse of the Gang of Four, I had the opportunities to put what I had learned into practice. As a result, I grew rapidly during that period. Later, China significantly downsized its military so that it could focus on economic development. After my entire military unit was disbanded, I came to Shenzhen, which was then at the forefront of China's reform and opening-up.

At that time, I knew very little about the market economy. For instance, I didn't even know what supermarkets were when many friends who had studied abroad came back and told me about them. I knew nothing about them and could only guess what they were like or why they were called supermarkets. Just imagine how difficult it was for someone as ill-informed as I was to go into the market economy!

At first, I worked as the deputy manager of a small company and had very little power. Other managers were directly appointed top-down with certain titles; some of them never reported to me, but any mistakes they made would be my responsibility. With a poor grasp of the market economy, I made a big mistake that got me cheated out of a ton of money. Reclaiming that money took me more than a year. I couldn't afford to hire a lawyer for my lawsuit, so I studied all the law books I could get my hands on and tried to be my own lawyer. In the end, what I got back were assets, rather than cash. Turning those assets into cash caused some losses to the company, so they decided to let me go. I had no option but to start a company of my own. After I started making some money, I helped my former employer repay some of its debt. It was not until then that I started to grasp a little bit about the market and the economy, and I ran my company without knowing what the world of communications was about.

The first generation of Huawei employees made communications products by referencing a textbook written by a university professor. This simple approach to R&D was the beginning of our journey. One thing that sets Huawei apart is that we spend less on our own meals or clothes but more on the company's future. You may wonder why Huawei is more successful than many other companies. Most Americans throw their money into Wall Street. Most Europeans spend their money on personal wellbeing. At Huawei, we invest all our money into the company's future. And our investments have been enormous. Our annual investments into R&D are around 15 to 20 billion US dollars, and we have about 90,000 R&D employees who throw themselves into their work no matter what. Our immense, focused investments have led to breakthroughs.

At Huawei, there is no legacy holding us back, and we are always open to new things. Our 5G technology is based on a mathematics paper by Turkish professor Erdal Arikan. We came across this paper just two months after it was released ten years ago. We have dedicated several thousand employees to analyzing the paper, turning out patents, and getting our 5G business up and running.

We are supporting universities all over the world. This practice has the same spirit as the US's Bayh-Dole Act, which provides funds for universities without demanding their research findings or returns on investment. The US government often gives funds to universities, and whatever patents come out of these funds still belong to the universities. We provide funds to universities the same way. Research findings that our funds make possible belong to the universities themselves, and we only want to be informed of the findings. This way, universities are like beacons that light the way for us and others. And we can stay one step ahead of others if we are the first to understand how these beacons work.

At Huawei, a team of 15,000 scientists, experts, and senior engineers focus on understanding the findings of scientists and turning money into knowledge. Another 70,000 engineers turn that knowledge into products and finally money. This is how we have gradually explored our own path and learned new things. Having been through many ups and downs over the past three decades, we are now just beginning to scratch the surface of how things work. But there's still a long way to go, and we can't say for sure that we will never make the wrong step.

Did the Turkish professor ever receive revenue for his family or dividends from Huawei for using his formula?

No. We wanted to offer him some rewards, but he rejected outright. But we have been supporting his lab.

Could it be that Huawei's success is not just Huawei's success, that it's a push from the whole of China that no other technology companies can benefit from?

First of all, export credit was first adopted by Western companies. When China was just starting its reform and opening up, it was still very poor and underdeveloped. As carriers didn't have money to buy equipment from Nokia, Ericsson, or Alcatel, the Western governments provided loans to these carriers to buy equipment from these vendors. However, the Chinese government at that time couldn't provide such loans to carriers, so they didn't buy our equipment. That was how things were in the beginning.

Later, the Chinese government mimicked its Western peers and started to provide loans to carriers in Africa and some other underdeveloped countries. The loans were offered to carriers, not us, because we couldn't afford to take on the debt ratio. In fact, we weren't eligible for that much export credit, and most of the credit was allocated to large-scale infrastructure projects, like bridges and railways. Generally, telecom contracts were relatively small, and most telecom carriers had enough money to buy equipment, so export credit wasn't a critical issue for our equipment sales. In China, export credit was first introduced by Western countries exporting to China. At that time, China was just opened up, and it had very little money.

Export credit has become a common practice around the world.

Influential people in China don't like the press, especially the foreign press. Until recently, you didn't give interviews like this. How come you feel comfortable doing this? For instance, just a moment ago, you criticized the Cultural Revolution. Don't you sometimes think that even you should be more careful about what you say in China?

This criticism of the Cultural Revolution isn't mine alone; the government also recognizes the impact of that mistake. It's not like we're not allowed to criticize anything in China. As long as we speak the truth based on real facts, we don't need to worry about what we say. Like in Western countries, China also respects people's freedom of speech. We are just more careful about not crossing the line.

Do you agree that Nokia and Ericsson are stuck with OECD or other rules/terms on financing, while your hands are freer when you negotiate with customers?

We have to abide by the rules too; otherwise, it would be difficult for us to survive.