Huawei Technologies Co.’s billionaire founder intends to kick off a three- to five-year overhaul of the networking giant, creating an “iron army” that can help it survive an American onslaught while protecting its lead in next-generation wireless.
Major structural shifts are around the corner as U.S. sanctions threaten the survival of its cash-cow smartphone business, Ren Zhengfei warned in an internal memo seen by Bloomberg News and verified by a Huawei spokeswoman. The consumer business faces a “painful long march,” Ren wrote, a possible reference to the Communist Party’s historic cross-country trek.
China’s biggest technology company is grappling with an existential threat after Washington blocked Huawei from buying American technology, cutting off vital components from Qualcomm Inc. chipsets to Google’s Android operating software. Ren, 74, said an internal revamp was now needed to meet war-time needs, meaning organizations deemed unnecessary or redundant will be removed. He didn’t provide details about how such a restructuring might unfold.
“We have to complete an overhaul in harsh and difficult conditions, creating an invincible iron army that can help us achieve victory,” Ren wrote in the letter dated Aug. 2. “We absolutely have to complete this re-organization within three to five years.”
Ren, a former engineer with the People’s Liberation Army, has a penchant for militaristic language. The entrepreneur has spoken previously about a “strategic withdrawal” from certain markets in response to escalating U.S. scrutiny. Huawei itself hasn’t been clear about how Trump administration curbs would impact its 190,000-some employees worldwide but the company has begun to lay off U.S.-based staff, the Wall Street Journal has reported.
Huawei reported slower sales growth in the second quarter compared to the first as the ban started to bite, especially into a consumer business encompassing smartphones and laptops. The company unveiled its in-house HarmonyOS last Friday, saying it can replace Android if Google’s software was barred from its future smartphones. But Ren said the company needed a lot more time to build an apps ecosystem, a major requirement for any operating software to thrive in the long run.
“Two bullets fired at our consumer business group unfortunately hit the oil tanks,” Ren said in his letter, without elaborating.
Still, Ren talked about Huawei’s edge against the U.S. in fifth-generation telecommunication technologies. The Chinese company’s dominance in 5G has been cited as motivation for a U.S. campaign to contain its ascendancy, because the technology is expected to propel future modern economies.
“The U.S. doesn’t use the most advanced 5G technology,” he wrote. “That may leave it lagging behind in the artificial intelligence sector.”