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Huawei CEO reportedly puts company in survival mode

Ren Zhengfei warns tough economic times mean it’s time to focus on profit and quality

Huawei CEO Ren Zhengfei has reportedly told staff that tough economic times represent a real threat to the company.

Reports in Chinese outlets Yucai and NetEase allege that Ren posted a missive on Huawei’s internal networks in which the CEO called for the company to prioritize cash flow and profit instead of growth and scale.

Ren’s reasoning is that the global economy is in for up to a decade of depressed demand, with very tough years expected from 2023 to 2025 – a period during which a focus on survival will be necessary.

He reportedly wrote he is uncertain whether Huawei can “break through” the 2023-2024 period.

The CEO blamed the combination of post-COVID economic complications, war, and US sanctions for his pessimism.

He therefore wants Huawei to halt complex projects that have high risk of failure, use the company’s own cloud to improve efficiencies, reduce R&D on items like electric cars, and abandon businesses that have little prospect of turning a profit.

Ren foreshadowed withdrawal from or downsizing in some overseas markets and repatriation of staff.

Customer service will be prioritized.

The company will also focus on IT infrastructure, a market Ren believes will continue to offer opportunities.

The South China Morning Post wrote that Huawei has declined to confirm or deny the report. Zichen Wang, a journalist for Chinese state media who writes the English language Pekingology blog, believes Huawei’s stance amounts to confirmation of the memo’s existence.

Pekingology also states that Ren’s post went viral in China as it was taken as further evidence of an economic slowdown that has already seen the real estate sector tank and unemployment surge among the young.

Huawei recently reported H1 results that featured tepid growth and a massive drop in profits.

Company chair Ken Hu said the company’s “device business was heavily impacted” but added “our ICT infrastructure business maintained steady growth.”

“Moving forward, we will harness trends in digitalization and decarbonization to keep creating value for our customers and partners, and secure quality development,” he added.

Ren’s reputed remarks appear to signal even more change will come to the Chinese giant.

Or perhaps Ren is being pessimistic: Chinese e-tailer yesterday reported revenue growth that exceed expectations, a feat that rivals Alibaba and Tencent could not match. ®

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