An oil processing facility at Abqaiq and the nearby Khurais oil field was attacked on Saturday.Marketsread more
"There is reason to believe that we know the culprit," Trump said in a post on Twitter.Politicsread more
Brent crude surged by as much as 19.5% to reach $71.95 per barrel on Monday, the biggest intra-day jump since the Gulf War in 1991.Oilread more
The strike, depending on its length, could easily cost GM hundreds of millions of dollars. The last time the union declared a strike at GM was in 2007.Autosread more
Saudi Aramco has 35-40 days of supply to meet contractual obligations, a source close to the matter told CNBC.Energyread more
The trucking industry is worth hundreds of billions of dollars per year. Uber is going after this market with Uber Freight, an online platform that matches truckers with...Technologyread more
OxyContin maker Purdue Pharma filed for Chapter 11 bankruptcy protection on Sunday.Health and Scienceread more
Saudi Arabia on Saturday shut down half its oil production after a series of drone strikes hit the world's largest oil processing facility in an attack claimed by Yemen's...Futures & Commoditiesread more
U.S. stock futures sank amid fears that a surge in oil prices following an attack in Saudi Arabia could slow down global economic growth.Marketsread more
The recommendations include changing corporate reporting structures, creating a new safety group, and changing the cockpits of future planes to accommodate new pilots with...Aerospace & Defenseread more
The state would become the second in the country, behind Michigan, to ban the sale of fruit flavored e-cigarettes, which are popular with teenagers.Health and Scienceread more
Below is the transcript of a CNBC Exclusive interview with Ren Zhengfei, Huawei Founder and CEO. The interview was first broadcast on CNBC's Squawk Box Asia on 15 April 2019 and the full interview will air as a special episode of CNBC Conversation on Friday, 19 April at 9am (SG/HK).
All references must be sourced to a "CNBC Interview'.
Interviewed by CNBC's Arjun Kharpal
Arjun Kharpal: Mr. Ren, you started Huawei over 30 years ago with 5,000 US dollars. What were you thinking at the time and what were your expectations for the company?
Ren Zhengfei (Mr Ren): When I had just started Huawei, we still did not understand China's reform and opening-up policy. The country wanted to reform and open its doors. However, most of us didn't really understand how important this decision made by the CPC's Central Committee was.
The Central Committee had also been disbanding parts of the Chinese military because it was so large. Most of us also didn't understand that move. Some top military officers didn't understand it, either. They had thought that disbanding was to weed out unnecessary troops and strengthen the remaining units. The engineering troop I was in was among one of the first troops to be disbanded. The railway and machinery troops were let go along with us. This was because we were never intended to engage in military operations. After we were discharged, we were assigned to different places across China.
At the time, the market economy was beginning to take shape in China, at least in coastal cities. These cities were moving away from the previous planned economy.
I felt very uncomfortable with the transition from the military to Shenzhen which was becoming at forefront of the reform and opening-up. I couldn't really get what the market economy was about, so I ended up making a mistake while working for a state-owned company which got me let go. Where was I supposed to go from there? I had no idea.
I had a vague feeling at the time though, that the communications industry was about to explode and so I started looking for opportunities in this market with tremendous potential. We just wanted to produce some small things that could easily be sold. We did not know that these small things were designed to connect the whole city or even the whole world. So our products needed to be standardized. Otherwise, we wouldn't be able to enter the network equipment industry. We chose a tough road. The industry had high requirements. Our company was very small then and almost had no capital or technology. It was hard times.
I majored in architecture back in school, but I studied electronics technology myself. It was analog technology, analog automatic control. The major form of analog control was a proportional-integral-derivative control. By the time I left the military, 186, 286, and 386 had dominated the computer world. I could not keep up with the times. But I still had to find a job to feed my family. I was naive and took it for granted that I could earn money playing with this huge industry. I hadn't realized that the communications industry was so cruel.
However, there was no way back. I raised a total of over 20,000 RMB to pay the variety of fees needed to start a company. By the time I got my business license, I didn't have a single penny left. There was no chance for us to step back and start another business. So we gritted our teeth and pushed ahead.
Arjun Kharpal: You were in the People's Liberation Army. You survived some hardships like famine. What did you learn at the time that helped you start Huawei and guide your philosophy?
Mr. Ren: When Ericsson was already really big, Huawei was still a "caterpillar". Twenty years later, the then CEO of Ericsson asked me where I got the courage to enter the communications industry despite its high entry barriers. I told him that I didn't actually know that the barriers were so high, and once we had entered the industry, there was no turning back.
I lived through the great famine that hit China, and the economic recovery that followed. I also participated in a large project that brought equipment in from France. These experiences taught me to endure hardships. When I was young, I had no ideals. Wearing nice clothes or seeking further education was not what I wanted. I only wanted to keep my belly full. That's my only ideal.
After I joined the army, I was tasked to establish a chemical fiber factory in Liaoyang, a city in the northeast of China. The factory's equipment was from France, and at the time, it was some of the world's most advanced equipment with a high level of automated controls.
Back then, it would reach minus 20-something degrees Celsius in the winter. We were living in an adobe house that only provided us a little shelter from the wind. Every night, we took turns fueling the stove, because if it went out, we would have frozen. During the day, we were building a highly modernized factory. The contrasts were stark.
For me, it was an exciting experience. Back then, China was still going through the Cultural Revolution. The country paid little attention to technology and knowledge, but we were working on a project that required technology and knowledge. Living in such extremely harsh conditions and working on such a highly modernized project was really a good experience for me.
Back then, we couldn't use testing instruments from foreign countries. China also didn't have its own testing instruments, so I invented one. Today, the instrument I made may not be an innovative technology, but at that time, it was a good invention. At that time, China was just beginning with its reform and open-up policy, and was paying more attention to technology, talent, and knowledge. I happened to have this invention, and the value of my invention was exaggerated by the country, which led to a promotion for me. Before I was able to settle into this new position though, China disbanded many of its military forces and everyone had to go find another job. As a result, I went back to where I started and jumped into the market economy.
Arjun Kharpal: You mentioned the Ericsson CEO at the time said it was a bold move to jump into this space. Huawei is now the world's largest telecoms equipment maker. What have been the driving forces behind that?
Mr. Ren: When I was a kid, I didn't have many hobbies mainly because my family was poor. I liked reading books, doing homework, and solving math equations on scrap newspaper. During China's Cultural Revolution, I designed a small instrument using my math skills, and actually received recognition from the government for this device. Small projects like this ignited my passion for scientific research.
When we first entered the telecom industry, we started by reselling products from another company. We earned a bit of money this way. Later, that company stopped working with us. Drawing on this experience, we developed our own 40-line switch for rural markets that could support 40 users. This switch was used by hotels and small organizations. In our early days, we relied on only two multi-meters and one oscilloscope to develop the product. That's how we started out.
After I was discharged from the army, I ran into a big trouble at work. As a result, I read a lot of books on law and learned that the market was about two things: the product and the customer. The law governs what's in between – the transaction. We obviously couldn't control our customers, so we had to get hold of the products. We also had to understand the law. By studying law on my own, I realized that only a focused approach to scientific research could lead to new products.
Arjun Kharpal: I want to talk a bit about your management style. You often use military imagery and images of battles in your speeches and communications with the employees at the company. Is this a battle for you?
Mr. Ren: I often talk about staying focused. Tanks can cross a swamp, but needles can pierce hard things through. We have limited resources and technologies. Everything is limited. If we spread things too thin, there is no way we will be successful. So instead, we choose to narrow our focus, like a needle point, on a specific area where we can make breakthroughs. We just focus on a single point. At first, we had several hundred employees focus on this point, then we had several thousand, tens of thousands, and now we have hundreds of thousands. We always focus all of our energy on this same single point. Every year we invest more than 20 billion US dollars in it.
At Huawei, we often talk about the term of "Van Fleet Load", which was invented by a general of the US army. We invest heavily in our focus area. At first, this focus approach let us start pulling ahead of our Western peers in a given area. And then, once we had established some market presence, we began to build up capital. But our strategy of focused investment never changed as our capital grew. We remained focused on this same single point. Gradually, we have become a leader in this narrow, focused area.
Western companies are no different. Microsoft focuses on Windows and its Office Suite. Amazon, Google, and many others all have their own focus areas. Intel only makes chipsets. Unlike many Chinese companies that set up many businesses but most cannot be called successful, US companies know how to narrow their focus and then charge forward. We are actually learning from US companies.
Why do I like to use military terms? Because they are simple and easy to understand. When I can't find a better term to easily describe how business works, I use military terms.
Arjun Kharpal: Do you feel that your military-style speeches empower the employees here? Or do you feel sometimes they are intimidated by that style of leadership?
Mr. Ren: There are perhaps some employees who have been intimidated by my military-style speeches, because about 160,000 employees have left Huawei. But there are still more than 180,000 employees working at Huawei.
In total, 300,000 to 400,000 people have joined Huawei, but only around 180,000 people decided to stay. Why do they accept these things? Because we want to grow our harvest and produce actual results. Otherwise, how can we make ends meet? If we couldn't make ends meet, we wouldn't be able to survive. Our employees are used to the way I speak. So I don't think they are intimidated.
Arjun Kharpal: I want to also address some of other criticisms towards your company. Some governments have criticized the relationship between Huawei and the Chinese government. There has also been questions about your past as a communist party member and what that means for Huawei. And also, some countries have also said that Huawei could be a risk because it could work for the Chinese government and carry out espionage on behalf of Beijing. How do you respond to some of these very, very strong criticisms from governments around the world?
Mr. Ren: Huawei is based in China. So firstly, we must abide by Chinese laws and regulations. Secondly, we need to pay taxes to the Chinese government. Our relationship with the Chinese government is primarily defined by these two points. Our subsidiaries in other countries also have this relationship with local governments. They also need to follow local laws and regulations and pay local taxes. If we didn't pay taxes or follow the laws and regulations in the over 170 countries where we operate, we wouldn't have survived in those countries.
Our financial statements are audited by KPMG, which can clearly show whether or not we are supported by the Chinese government. KPMG wouldn't hide anything for us. We have become what we are today with our own strength.
Arjun Kharpal: You mentioned you abide by the local laws here in China. But there are critics who point to certain national intelligence laws in China that compel Chinese companies to help the government with national intelligence work if they're asked. If the Chinese government or any other government ask you to hand over data, how would you react?
Mr. Ren: First, Mr. Yang Jiechi, a member of the Political Bureau of the Communist Party of China (CPC) Central Committee, made a statement at the Munich Security Conference that the Chinese government always requires Chinese firms to abide by international rules and laws and regulations of the country where they operate, and that China has no law requiring companies to install backdoors or collect foreign intelligence.
Second, Premier Li Keqiang reiterated this point at a press conference following a recent session of the National People's Congress.
On April 12, at the "16+1 Summit" in Croatia, Premier Li repeatedly told all our employees not to install backdoors on networks. This represents Chinese state leaders' position on backdoors, so we will never install backdoors on our equipment.
Even if we were ordered to, Huawei would still not install backdoors. If a single backdoor was found in even one of the countries where we operate, our sales would shrink in all of them. Then a large number of our employees would resign, but I cannot leave. I would have to repay tens of billions of dollars in debts. If I could not pay, I would be hounded by creditors every day. How can I live a life like that? So we would never follow anyone's instructions to install backdoors. It will never happen.
Arjun Kharpal: What guarantees can you give to customers that their data is safe?
Mr. Ren: We have worked closely with our customers for 30 years. This proves our equipment is secure. Over the next 20 to 30 years, we will never do anything that compromises security and we will remain secure.
Networks belong to our customers, not us. We just provide the equipment used to build these networks. Information that flows through the networks also belongs to our customers, not to us. We don't need customers' information. So it would be impossible for us to provide customer information to any third party.
Arjun Kharpal: Mr. Ren, you talk a lot about the distance between Huawei and the Chinese government. But what we've seen publicly is senior officials in the government talking at times on Huawei's behalf. Is that useful to the company, or do you find that a distraction?
Mr. Ren: First, it's understandable that government leaders would take pride in the great companies of their country.
Second, Huawei is being stuck in an extremely difficult situation – the US is launching intense attacks against us. If the US government speaks ill of Huawei, why couldn't the Chinese government speak in our favor? That creates a kind of balance. In the past, no one spoke up for us.
Right now, the support of the Chinese government may not necessarily help our sales, but when the US government criticizes us, it tells the world how great Huawei is. Over the past century, which countries and companies have made the US scared? The US hasn't been scared of anyone or anything though. For such a powerful country to be scared of a small company like us, some other countries are saying, "Your products are so good that the US government is scared. We won't test your products. We'll buy them directly." That's why some deep-pocketed countries with rich oil reserves are buying from us. They are buying our products in large quantities as the US government is advertising for us.
The US government is actually advertising for us in a good way. Some US politicians are criticizing Huawei everywhere they go. These great people are going to great lengths to find fault with a little rabbit or mouse like us. This shows that the little rabbit or mouse must have something great to offer.
Arjun Kharpal: So would you say the US is scared of Huawei?
Mr. Ren: If they aren't scared of us, why are they advertising for us everywhere they go?
Arjun Kharpal: Let's talk a little bit about the US for a moment. I want to use a case analogy here. Do you see that Huawei is a pawn in the broader US-China trade war that's going on at the moment?
Mr. Ren: I don't know what the US is after and have no idea how they are going to resolve the trade disputes. But I don't think Huawei can help solve the disputes between the US and China. If we get caught in the middle, we will be crushed like a watermelon when these two powers clash. We don't have much influence over China-US trade relations.
Second, we don't really sell in the US market, so we will not be affected by a sales ban. We will not be affected by increased tariffs, either. As I said, this is because we have no real presence in the US market.
If the US thinks we can be used as a pawn, I'd say they probably have the wrong person. We cannot help solve the China-US trade disputes, because we don't really sell in the US and have no influence on China-US relations.
As far as I know, Huawei has never been mentioned in any of the China-US talks or in any official news releases. Neither side has mentioned Huawei, which means Huawei does not actually carry much weight. We are not that important in the bilateral relations between the two countries. We will need to sort out our problems with the US by ourselves.
Arjun Kharpal: But the US has put intense pressure on some of its allies in Europe, for example, Germany and the UK, to block Huawei from 5G networks. There's a lot of disagreement, of course, on what the right course of action is in Europe. Do you still feel Europe is open to Huawei, or could one country blocking Huawei mean that the whole union stops Huawei from participating in 5G?
Mr. Ren: First, I think our customers already know Huawei pretty well since we have worked with them for nearly 30 years.
Second, customers have the right to make their own choices. They don't choose certain goods just because a politician says so. So I don't think there will be a significant impact on Huawei's business.
In Europe, we will face some difficulties in the short term, but there will be no impact on our business. I can share some numbers with you. Sales of our consumer business increased by more than 70% in the first quarter of the year. Our network equipment sales dropped 1.5% last year, but enjoyed a 15% increase in Q1 of this year. These figures show that we are still growing, not declining. So this won't impact us too much.
European countries want to think over all their options a bit. I think it's the right thing for them to do. Germany proposed the establishment of a unified global convention that would bar all equipment vendors from installing backdoors, and require them to sign a no-spy agreement. We are supportive of this. We endorse unified global standards that make installing backdoors a crime.
When we were negotiating with the German government about signing such an agreement, we didn't know top officials from the Chinese government were also discussing the same thing. We want to sign such an agreement because we think it's the right thing to do.
No backdoors. This message has been reiterated by many senior officials of the Chinese government, including Yang Jiechi, who stated his position at the Munich Security Conference, and Premier Li Keqiang, who made similar statement at a press conference shortly after a recent session of the National People's Congress. When attending a summit in Croatia, Premier Li also told our employees not to install backdoors. So we believe our engagement with the German government will be endorsed by the Chinese government. We will also push the Chinese government to sign a cyber security agreement with the German government. We will comply with European cyber security standards and the GDPR.
Over the next five years, we will invest more than 100 billion US dollars in R&D to restructure our networks. In particular, we will build the simplest networks, ensure cyber security, and protect user privacy. We will also increase our sales revenue, which is now more than 100 billion US dollars, to around 250 billion US dollars. We are going to make this happen.
Will Europe understand us when they see how much effort we are putting into this? If they do, they will buy some of our products. If they don't, they might not buy our products. If that happens, we will just sell our products to other countries that do accept us. We can scale down a little bit.
Arjun Kharpal: Would you support similar ideas about no-spy agreements in other countries, including the US? Is that the right way forward?
Mr. Ren: I can't speak for other companies; I have no authority over them, but Huawei will be the first company to comply with this agreement. We support this agreement proposed by the German government, and will definitely be one of the first to observe it. However, we are not in any position to require other companies to do the same.
Arjun Kharpal: I want to switch topic a little bit to talk about your daughter, Meng Wanzhou. She's, of course, facing extradition to the U.S. How did you feel after her arrest in December?
Mr. Ren: I think the most essential factors to judge guilt are facts and evidence. Facts and evidence should be made public and transparent in the courts, which are the basis for fair and just judgment. This is fundamental to solving problems.
I believe they may not have the evidence or the facts to prove her guilt. Huawei has kept a low profile, ever since it was founded. Nothing we've achieved would give us the right to neglect any laws or overlook the technologies of any country. If we didn't abide by those laws and regulations, we wouldn't survive even a day.
This case is undergoing legal procedures, and we believe it will be solved in court. The US and Canadian legal systems are open, transparent, just, and fair. We will wait for the court to make its judgment.
Arjun Kharpal: But what was the personal effect of her arrest on you as a father?
Mr. Ren: I think my children have grown up without experiencing much hardship. Struggling a bit can be good for them. Cuts and bruises toughen her up, and even since ancient times, heroes were born of hardship. I think this challenge will be good for my daughter. These difficulties will make her stronger and prepare her for even greater things ahead. So I'll let her face what she is facing.
Arjun Kharpal: Have you spoken to her recently? If so, what did she say to you? What did she speak about?
Mr. Ren: We have calls quite often, talking about family. We don't talk about anything else, because we know that our communication is being monitored. What else can we talk about? Nothing but life.
Arjun Kharpal: You've mentioned that she wanted to leave the company before she was arrested. What's next for Meng Wanzhou in her life, in her career?
Mr. Ren: I don't know. I had thought that this was an Internet rumor initially, so I said that without much thought. I was later told that she sent me a letter, where she mentioned that she wanted to leave the company. After all these upheavals, she has changed her mind and doesn't want to leave. She has understood the difficulties that the company is facing and wants to help us see this through.
During World War II, there was a famous Il-2 aircraft that kept flying after being riddled with bullets from both other planes and anti-air defenses. Meng is now in a similar situation. She will be a hero if she makes it back to us. I think that is how this story is likely to end.
Arjun Kharpal: So that's a metaphor for your daughter? So you said she doesn't want to leave anymore. So what is her role at this company if she is eventually released?
Mr. Ren: She will continue to do what she has been doing.
Arjun Kharpal: I want to go back a little bit to talk about the US-China trade war because Meng Wanzhou was arrested in Canada on behalf of the US authorities. Do you think she's a hostage in this broader US-China trade battle?
Mr. Ren: Maybe.
Arjun Kharpal: You said Huawei should not be used as leverage between the US and China, and Donald Trump, President of the United States, said that he could intervene in the Meng Wanzhou case as part of a bigger trade deal between the US and China. Is that something you would welcome?
Mr. Ren: I don't know. President Trump hasn't shared his thoughts with me.
Arjun Kharpal: Have you tried to reach out to the president to speak to him about it?
Mr. Ren: I don't have his phone number.
Arjun Kharpal: If you say that Meng Wanzhou is maybe a hostage in this US-China trade battle, does that mean some of the allegations, from a legal point of view, you don't believe in?
Mr. Ren: Regarding the allegations against Meng Wanzhou and Huawei, the US Department of Justice has sued Huawei, and Huawei has pleaded not guilty in the court. We also sued the US government in Dallas. The US government must present evidence to substantiate their charges against Huawei as this lawsuit proceeds.
So we will leave these issues up to the courts. The negotiations between China and the US have nothing to do with Huawei. Huawei was not mentioned in any of the negotiation meeting minutes published by the US and China. Therefore, we will count on the law to address these issues. We believe US laws are open, transparent, fair, and just.
Arjun Kharpal: Mr. Ren, you said you haven't spoken to Mr. Trump, but what do you think of his leadership style and his tactics?
Mr. Ren: I would like to comment on President Trump without considering his administration's treatment of Huawei. I would like to express my own opinions instead of as a Huawei representative.
I would say he is a great president. He is the first president of a democracy to reduce taxes significantly within such a short period of time. His tax cuts are helping revitalize enterprises. Enterprises can now transfer their funds in other countries back to the US because of a low tax rate of 12%. This helps the US greatly improve their national reserve. Many companies' financial statements last year weren't great because they needed to pay income tax arrears. But this year, once the slate is wiped clean, the financial statements they will release in July will be much healthier. The US stock market may witness a significant rise this July. Investor and consumer confidence will increase, and the US economy may take a turn for the better. This is thanks to Trump. That's why I said he is a great president.
But he also has shortcomings. If President Trump continues intimidating other countries and companies, and keeps randomly detaining people, who would risk investing in the US? People will be afraid of getting trapped there. If no one dares to invest in the US, then how can they make up for lost tax revenue? The government would find it hard to address its deficit. When he reduces taxes, he must be hoping to attract more investment. But if investors are scared that they won't get their money back, they won't dare to invest in the US.
Let's look at an example. If the US opens its telecom industry and its operators say they are going to purchase tens of billions of dollars in equipment from us, I wouldn't believe it and wouldn't be willing to make billions of investments. I would be afraid that they would pull out suddenly and stop doing business with us. In that case, billions of dollars would be stuck in the US. That's the shortcoming of Trump's approach.
After he reduced taxes, he should have been friendlier to other countries and try to convince everyone that the US is a great place to invest. If everyone went to invest in the US, the US economy would grow dramatically. The US doesn't need to conquer the world through violence. They have great technologies, skilled labor, and economic strength. Any one of these things could help them conquer the world. They don't need a warship to conquer the world. The cost of using a warship is high. If they attack a country, that country will fight back. If a country is poor and they have nothing to lose, they aren't afraid of being attacked. But the US is in a different situation. It's a wealthy country, so it has a lot to lose.
So I think Trump is a great president, but he didn't consider all the angles when it came to attracting foreign investment. I said this as an outsider without considering his treatment of Huawei.
Arjun Kharpal: In terms of the way he's negotiated with China, some people would say that actually he's managed to get concessions for the US. Does China feel under pressure from President Trump's tactics in the negotiations?
Mr. Ren: I am not a government official, so I don't know what the governments have talked about. I only care about the growth of my company. I don't know what the government officials have said, what concessions they have made, or what opportunities or benefits they've received. And I don't really care about all that.
Arjun Kharpal: You said you've not had any communication with Donald Trump. But if you were in the room with the US President, what would be your message to him?
Mr. Ren: Collaboration and shared success. When two nations or companies meet, they must collaborate to achieve shared success. The US is a strong economy and offers many high-quality products. China has a population of 1.3 billion consumers. The US needs the Chinese market, and China needs technology from the US. The collaboration between these two countries would create two "trains" that can tow the global economy out of trouble.
I believe China and the US should stress collaboration and shared success. There is nothing else that I want to share with him.
Arjun Kharpal: Mr. Ren, you've said in the past that the US government hasn't seen Huawei's technology and source code. Would you invite Donald Trump and his administration to your campus here in Shenzhen to let them see the technology that you have, to put their fears at rest?
Mr. Ren: They are more than welcome to come visit us in Shenzhen.
Arjun Kharpal: A bit about the US market. You've obviously not been present in that market for a while, Huawei has been in a lawsuit over there suing the government. Is it your ultimate aim to get back to business in the US market or just clear your name there?
Mr. Ren: We want the US government to treat Huawei fairly and without prejudice. Whether or not we can get back to business in the US depends on whether our customers want to buy from us. It does not depend on what Donald Trump has to say.
Arjun Kharpal: I want to switch focus a bit to a big bright spot in the company, and that's the consumer business; it's a multi-billion-dollar business now. And you've said that you want to be number one in smartphones. You've often looked up to Apple as a role model. Steve Jobs and Tim Cook have managed to turn Apple to an iconic brand. Do you think Huawei is at that point yet?
Mr. Ren: I think Mr. Jobs was a great man. When he passed away, I was on a vacation in the mountains with my family. My younger daughter is a fan of Mr. Jobs, so she proposed that we stop for a moment of silence to mourn him, and we did. Mr. Jobs was great not because he created Apple, but because he created an era, the mobile Internet era. Saying that he was great is an understatement. I think he was super great.
Apple is also a great company. It is great in that it has always pushed to make the market bigger, not smaller. With an "umbrella", Apple sells at high prices and maintains high quality. It has grown the market, enabling many other companies to survive. When I look back on how Huawei developed in the telecom market, we actually made some missteps. We set prices based on our costs, which were relatively low. Our costs were low for two reasons. First, as our technology advanced rapidly, we managed to bring down the costs of our products. Second, thanks to the Western management approaches we brought in, our operational costs were also kept low. As a result, we set our prices at a relatively low level, which made it hard for Western companies to compete with us. We have reflected on this a lot.
We have raised our prices and now many people think Huawei is expensive. With higher prices, we have started earning more. But we will not distribute this extra money to our employees or shareholders. Instead, we will use it to fund universities and scientists for their research and explorations into the future. That future may be closely related to our business, but it also may not be.
Our strategy for investment is like this: If a technology is still two billion light years away, we may invest just a little money, like a sesame seed. If a technology is 20,000 kilometers away, we can invest a little more, like an apple. If a technology is just several thousand kilometers away, we will invest a lot more, like a watermelon. If a technology is just five kilometers away, we will invest heavily (a business version of a Van Fleet Load). We will rush towards and focus all of our efforts on this technology. We will expand it, and dive deeper into it. This way, we will be able to make world-leading products.
To give you a simple example. 5G technology was not invented by Huawei. It is an invention of Erdal Arikan, a Turkish professor in mathematics. Around 2008, Professor Arikan published a mathematics paper. Our scientists spotted it and spent 10 years turning his theories into the 5G standards of today. So the standards the US finds so compelling are actually all built on a single mathematics article.
Moving forward, we will invest more in this direction. This can help us address the problem of how we distribute our increasing profit. We will not distribute any extra profit to our employees. Otherwise, they will become overweight and won't be able to move fast. We will not distribute the extra profit to shareholders, either. If they have too much money, they would be obsessed with capital gains. So we won't do that. We need to make our value distribution reasonable. We will put more money into research in new frontiers.
Arjun Kharpal: And part of that R&D budget has gone into 5G, into chips, you've got your own 5G chip. Typically, they've been used in Huawei's products. Are you starting to think about how your own intellectual property like chips could be used and sold to third parties like Apple?
Mr. Ren: We are open to Apple in this regard.
Arjun Kharpal: Mr. Ren, we spoke about Apple and Steve Jobs. You're seen as a visionary very much here in China in the technology world. Steve Jobs is known more internationally. You are less known internationally. Why do you think that is?
Mr. Ren: Because I don't actually know technology that well, and I didn't invent anything.
Arjun Kharpal: But you created the world's largest telecom company.
Mr. Ren: I don't know about technology, management, or finance. I am just taking as a bucket of "glue". I stuck our 180,000 employees together, and encouraged them to forge ahead. Huawei's achievements were not created by me alone, but by our 180,000 employees. So it's impossible for me to enjoy the same prestige as Jobs. When the state wanted to give me some awards for all of this, I felt ashamed. I'm not the one responsible for these achievements, and I shouldn't be the one receiving honors.
Arjun Kharpal: Mr. Ren, I want to move onto a bigger picture of the world of technology. Technology has moved on so rapidly in the past few years that a lot of people are talking about the impact of technology on society. We live in a very connected world. Do you feel that technology has been a force for good or a force for evil?
Mr. Ren: I think technology will advance even faster than we could ever imagine. Some people asked me what the world would be like in 20 or 30 years. I said I couldn't even imagine what it would look in two or three years.
When Huawei was just founded, the world of communications was extremely under-developed. Today, only 30 years later, ultra-broadband has become accessible in most rural areas around the world. This is beyond what anyone had imagined. In the next two or three decades, technology will advance even faster. In particular, the emergence of AI has accelerated social progress.
AI has emerged because of several key advancements: First, massive computing power. Second, ultra-broadband connections, and ultra-large storage systems, as well as micro-computing storage and edge computing. As society moved forward, AI was made possible. AI is also developing faster than what we can imagine. It will greatly increase productivity.
For example, if AI is applied to tractors, they will be able to work 24 hours a day. They wouldn't need to rest, just to refuel. So productivity will be greatly improved. A great increase in material wealth would also help to significantly enrich culture. So AI should be a force for good.
Many scientists also proposed that genetic technology should be gradually integrated with electronic technology to create "new people". It's now just a scientific fantasy, and wouldn't necessarily ever happen. But even if it did happen, it would be at least 30 years from now. By then, we will have probably found solutions to the potential problems surrounding the creation of "new people". I think currently AI has greatly improved productivity. It is good for society and can greatly increase social wealth.
The US has highly developed technology, but it also has a shortage in labor. With AI, workers will be ten times more efficient, so the US will be a major technological powerhouse with an output equal to that of 3 billion people. They will be able to produce more quality products than the whole world can consume.
So AI will make the world better, not worse. Even if AI poses other threats, we can manage them with laws and rules. So there is no need to worry too much about some comments posted on the Internet.
Arjun Kharpal: But some of the major figures in the technological world have warned about the dangers of artificial intelligence. Elon Musk, for example, has continuously warned about the impacts on jobs and actually, artificial intelligence getting more intelligent than humans. He said recently that could potentially wipe out humanity. What do you make of his views?
Mr. Ren: The first time I heard warnings about the societal impact of AI was from Bill Gates and Stephen Hawking. Bill Gates changed his mind though during his later speeches, suggesting that AI could greatly boost social progress. Of course, we can still be concerned about this, but we believe we will have the ability to harness AI and create benefit. Take machine translation as an example. AI can help translate text into 70 different languages simultaneously. This hurts no one. It helps reduce many people's workloads. This does mean though that many translators and stock analysts and the like will lose their jobs. They can transfer to other industries though, and take on new roles. I don't think we need to worry too much about the adverse impact of this technology. Otherwise, we will be hindering scientific advancement.
Arjun Kharpal: One of the concerns is that these powerful technologies like artificial intelligence are being developed by a small group of very, very big technology companies. And there is concern that some of these large technology companies just have too much power. Do you think that companies like yours are too powerful and need to be regulated?
Mr. Ren: As technology develops, the future world will become "winner-takes-all". What company can outperform Microsoft in Office and Windows? None. So Microsoft is the winner and it dominates the market. More and more companies are harnessing new technologies more quickly. This is because technology is lifeless and can be widely applied. We support transparent regulation over companies with new technologies, and we are willing to be subject to such regulation. That's why we told the German government that we are willing to accept their regulation. However, monopolies in these kinds of technologies will benefit the world, rather than harm it. What we have is not some kind of nuclear bomb or weapon. What is the problem with translation software that has faster computing? Is only slower computing good for us?
AI will benefit our society. We should not worry that it will hinder social progress. Genetic inheritance was discovered by Gregor Mendel during his experiments on pea hybridization. People back then thought his discovery was useless and ignored it for 100 years. Then scientists realized the value of genes and DNA. At that time, China didn't accept Mendel's theories; instead, we followed Ivan Michurin's theories. This meant we were left behind for many years in this area.
Now we talk a lot about genetic modification, or gene editing. People don't object to the editing of plant genes. Why cannot we edit human genes? When there is no cure to a disease, maybe we can look into gene editing. Of course, several decades from now, that would potentially cause other side effects that we can't predict, but mitigating the side effects is better than immediate death. It at least might give us time to find real cures. Being born blind and deaf is caused by missing of genes. What if we could identify and change the genes that cause the condition? Google is now helping blind people see the world with nerve sensors, although they are not as good as human eyes. Technologies are advancing. Twenty or thirty years from now, outstanding talent may be able to combine genes with electronics technology to create new "people". This is an idea that scares people, but right now, it is not yet anywhere near reality.
Arjun Kharpal: Mr. Ren, as we come to the end of the conversation, I want to focus on your future. You've grown the company over 30 years to the size of it now. Have you thought of retiring any time soon?
Mr. Ren: In a long run, I can tell you clearly that I will retire as I won't be alive forever but in a short term, it depends on my mental agility as I get older. I think Google might one day come up with a medicine that helps people live forever, but I may not be able to see it coming.
Arjun Kharpal: Do you have a succession plan in place when you eventually do retire?
Mr. Ren: Huawei's future iterative succession system is clearly defined in our Articles of Governance. We can give you a copy if you want. Iterative succession must take place in an orderly fashion. It's not up to me to designate a successor. Don't worry that Huawei would end up having no successor. In fact, we have too many. But Meng Wanzhou will definitely not be the successor.
Arjun Kharpal: You mentioned in our conversation that people ask you about your vision for 20 to 30 years, but you don't even know what's going to happen in the next two to three years. Just tell me what you think are going to be some of the significant technological developments over the next two years that you see coming.
Mr. Ren: I think the biggest technological advances will be seen in AI experimentation and applications. At Huawei, we have two major areas that we are focusing on for the future.
First, we want to provide the best connectivity in the world, and 5G is part of connectivity.
Second, we strive to become the world's best in edge computing. We have given up on supercomputing and intermediate computing. We only focus on edge computing.
We are also collaborating with many vendors in the storage domain, trying to do better, because in edge computing, we will see either CPUs embedded into storage devices or the other way around. This will change the architecture proposed by John Von Neumann. Combining storage and computing will enable devices to run faster. Of course, large equipment still relies on an architecture of no other elements but computing, storing and connecting, so we will also work hard to contribute to a cloud world.
Communications Manager APAC, CNBC International
D: +65 6326 1123
M: +65 9852 8630
CNBC is the leading global broadcaster of live business and financial news and information, reporting directly from the major financial markets around the globe with regional headquarters Singapore, Abu Dhabi, London, and New York. The TV channel is available in more than 415 million homes worldwide.
CNBC.com is the preeminent financial news source on the web, featuring an unprecedented amount of video, real-time market analysis, web-exclusive live video and analytical financial tools.
CNBC is a division of NBCUniversal. For more information, visit www.cnbc.com