Below is the transcript of a CNBC interview with Huawei Chairman, Liang Hua. The interview took place at CNBC's East Tech West conference in Nansha, Guangzhou, China, and was first broadcast on 18 November 2019. If you choose to use anything, please attribute to CNBC and Geoff Cutmore.
Geoff Cutmore: Thank you so much for giving us your time for this event. Can I start by just addressing some of the latest news that we see from overnight? There is a report that the United States is going to extend, for another few weeks perhaps, the licences that allow American companies to continue buying from Huawei. What is your reaction to these reports?
Liang Hua: I am very glad to be here at CNBC East Tech West. You ask about the licences of the US. Even if it's an extension, it will only have a limited impact on Huawei's business. Our products can be shipped without relying on US components and chips, and we can supply our customers with products. In the last 20 or 30 years, we have established some partnership with US suppliers.
Huawei's growth has been with the support of US suppliers. So if the US can allow US suppliers to partner with us, then we will continue to work with them and have a cooperative approach. We will use the component in our products. If the US can't supply the components, we will still have the ability to ensure that Huawei's mainstream products, including the 5G base stations and our core networks, can still be manufactured, and meet the guarantee we have made to our customers.
So, the temporary licence would pose more damage to the US suppliers than to us. We hope the US government considers the interest of US suppliers in this. Huawei's future design, development and growth, to some extent, doesn't have to rely on US suppliers
Whether there will be an extension or not on the temporary licence, the impact on Huawei's business is limited. We will continue to operate our business with our normal product design and marketing activities, and continue to deliver to our customers' needs. During this process, our customers have given us a lot of confidence and support.
Geoff: Can I ask you, though, chairman, whether you have any direct contact with the Commerce Department or any other US body that has informed you of the decision that is going to be taken, with regard to the extension of licences? It would seem extraordinary to me that they haven't discussed this directly with you.
Liang Hua: Huawei has not received any communication from any US entities. We don't have a channel to talk to the US government.
Geoff: Why do you think they are not talking to you directly? Shouldn't you be having a direct conversation with these important administrative arms of the US government?
Liang Hua: With regards to this question, I think the US government does not understand Huawei well enough. Over the past 30 years, Huawei has kept its feet on the ground, and worked hard. We have worked very hard to build the business. We have grown from a small company to the size that we are today.
I think the US government doesn't know Huawei well enough. If they had more understanding, they would see that we are a company that has worked with dedicated efforts over the past 30 years, just like US companies like Amazon, Google and Facebook. They are younger than us and have grown faster than us. Today, they are larger than us.
I think the lack of communication is because of the lack of knowledge about us from the US government.
Geoff: So I'm a little bit confused. Perhaps you can help me understand. The Attorney-General of the US recently wrote to the FCC and described Huawei and ZTE as untrustworthy companies. Why would one arm of the US government say that, while another arm is extending licences to US companies to continue to buy Huawei products?
Liang Hua: I don't know how different branches of the US government coordinate their decisions. You know, the FCC and the Commerce Department. But whether or not there will be an extension to the temporary licence, it has no impact on our actual business. We will focus on our business and continue to make sure we get things done for our survival, including redesign of our products, and delivery of our products to meet customers' needs, especially with the arrival of 5G. There is increased customer interest in 5G, so we need to meet that interest.
The other thing is, the FCC proposal of banning of Huawei in some areas, especially rural areas - I think by doing this, it will only damage broadband suppliers in those rural areas, which will cause a bigger digital divide in the US. It will impact the development of the digital economy. Huawei's products in the US - we are essentially helping rural areas enjoy having accessibility to digital services. What we did was help bridge the digital divide.
If the US doesn't let us provide services there, I think it will only damage the broadband network carriers in the rural areas of the US, because they will no longer be able to deliver the services.
Geoff: You, as a company, have taken a brave decision over this last year to start talking more publicly about your position on these issues. You have addressed the concerns that are being expressed by the American government. And I think the international audience appreciates the fact that you seem to be more transparent and more open, and more willing to respond to the allegations.
So, while we have the international audience with us, can I ask you, do you think that this approach now will basically deal with and address concerns about security with regards to Huawei products? Do you think your customers now trust you more because of the approach you've taken this year to communicate more?
Liang Hua: We have partnered with customers, some of them for 20 or 30 years, and over that time, we have established trust through cooperation. So I can say in the current circumstances, many telecom operators, our customers, have placed great trust, encouragement and support in Huawei. I would like to take this opportunity to thank these customers for their long-term support and confidence.
Coming back to cyber security issues - we hope that there will be unified standards surrounding cyber security. I think countries should contribute to the unified standards. It should be setup from a technology-neutral approach. Once these standards are established, it will benefit suppliers, operators, and other people in the chain. We should use these standards to conduct testing and verification.
We think it has to be a fact-based, evidence-based approach to establish standards and resolve problems. Cyber security will become more complex in this digital society. If we don't address the issues with technology standards and appropriate regulations, and other processes to regulate cyber security, it will be less effective and the problem will become more complex.
We call on efforts to build cyber security standards in a unified ecosystem, and based on the agreed standards, conduct verification and testing to enable fact- and evidence-based discussions to be carried out. In that sense, it will help produce trusted, verifiable and reliable networks.
The third point, coming back to Huawei - we provide the equipment, the infrastructure. This infrastructure and equipment is adopted by main telecom operators in different countries. It is these operators that should bear the responsibility of the network operations and assurance of cyber security. So I think building cyber security standards is crucial. The operators should all be a part of the testing and verification process.
Geoff: How has your international strategy changed in the light of the year that you've had? Are you going to be more aggressively marketing to non-Americans and non-Western countries that have not expressed concerns about your technology?
Liang Hua: Huawei will provide longer-term support and develop a relationship with our customers. We will provide better solutions and services to customers that choose us. In the digital age of 5G, we want to help operators to develop better networks, and use these networks to enable the development of the digital economy.
From this aspect, for those customers who have chosen us, we will deliver superior services. In the past, not every customer in every country has chosen Huawei, and that will probably continue to be the case in the future.
We will spend more time and effort to better service the customers that have chosen us, including telecom operators and enterprises. We will make sure we deliver this experience, and ensure good development.
Geoff: Can I ask you specifically about Mate 30, which was a bit of a flat launch internationally because of the concerns about access to Google's OS? What can you do to address customer concerns, and will Harmony OS be ready as a clear replacement for Android?
Liang Hua: Generally speaking, for our consumer business, our products aim to deliver positive experiences for global consumers. Huawei's smartphones – just then you mentioned Mate 30 - have a lot of features, including our hardware, camera, and AI features. It combines multiple functions to deliver a superior experience.
When consumers make a choice, they will think consider both the hardware and software features.
From Mate 30 specifically, without Google's GMS and ecosystem, we are developing Huawei's HMS core and our service and, on top of this, more applications will be developed.
You mentioned Harmony OS. Let's say on November 20, two days from now, we will release our strategy, so I hope you will be able to tune in.
Whether or not there will be a decision by the US, we will still launch our strategy.
Geoff: We have got a small group here that I think maybe you can give some early insight to on this strategy. I think we'd be interested to know which direction you're going to go in when it comes to replacing some of the apps that are available for the Android setup. Could we, for example, see you talking to Baidu or maybe other companies to get access to their technology?
Liang Hua: We are still developing HMS, and have devoted a lot of effort to do this. We selected developers who were originally working on cutting-edge research for the next 5-10 years, and asked them to help develop the HMS. At the same time, we were working on the ecosystem with a number of partners.
We hope the partners and players in the ecosystem will develop diverse applications on the HMS ecosystem, so that together, we can deliver a good experience to global consumers.
Whether it is maps, email, other applications, we will select respected partners – they could be regional or global partners. We will be able to enable Huawei smartphones in the non-China market. With regards to this, we will continue to engage with our partners. We believe we will be able to accelerate our work on the HMS core. However, it may take time to build a thriving ecosystem. It could be 2-3 years to build a Huawei system that will better support this experience.
Geoff: It sounds like a 'watch this space' story at the moment, chairman. We will be very interested to hear the announcement in the next couple of days here. Mr Ren in the past has suggested that the company might licence its 5G technology to a US company to "level the playing field", I think was the terminology used.
Can you tell us - have you had any discussions with any individual US companies about taking this next step?
Liang Hua: So far, no large US companies have approached us. There are some people trying to get information from us, but that doesn't count, because no single US company has approached Huawei directly.
From Huawei's perspective, when we set out, we were genuine in offering our 5G technology through licences to the US companies, so that they can develop their technologies and networks. Huawei was genuine about that offer.
Geoff: This could be a pathway to nullifying some of the complaints from the United States, if you find a Western partner that you can work very strongly on technology sharing with.
Is that an avenue the company is keen to explore, or was the offer of licencing 5G technology a bit of a token to try and perhaps distract the administration from its complaints against you?
Liang Hua: We are not aiming to distract the US government from the complaints. We are genuine and want to offer our current 5G technology, through licence to a US company, so that they can develop their own 5G networks.
Regarding this, I understand the US government has a lot of concerns. But if a US company got hold of 5G technology, and enabled developments on top of that, it could address the concerns around 5G technology and accelerate the US development of 5G. In a sense, I think this would benefit the technology around the world and be good for humanity.
5G will enable AI and technology. Artificial intelligence will magnify the impact of digital technology in the future, and will help the digital economy.
We went from an agricultural economy to an industrial economy, and now we have evolved into a digital economy. Some analysts have pointed out that in the future, the digital economy will make up 25% of global GDP, which means that the development of the digital economy will be very significant in global development.
We would like to be opening up our technology. We want to alleviate pressure. We had many discussions around this and want to genuinely share the licensing of 5G to the US, so they can also develop their networks.
Geoff: The results from the company suggests that the actions of the US government has had a limited effect so far in slowing down growth. It would appear you have also increased your R&D budget as a way of offsetting some of the pressure on components and supplies.
Next year, we go into a very political event, which be the trial of Meng Wanzhou. Can I ask you, how is the company preparing itself for this very public exposure that you will experience next year, that won't focus on the technology, but will focus on the personalities and the governance?
Liang Hua: For the first quarter of this year, Huawei managed to have a 24.2% yearly growth in sales revenue. In the first two quarters, we had very rapid growth. After the ban on Huawei in the US, there was a carry-over effect on revenue growth. From the current performance, we can see we will still have a pretty good performance for 2019.
If next year, the US government continues with the sanctions and the entity list, if Huawei is able to develop well next year, then we will call that a success, that Huawei has survived, and we will continue to invest into the future. So next year will be critical.
I welcome you to visit the Huawei office this time next year, to see with your own eyes if Huawei still exists and is developing well.
I think we are very confident in next year and will continue to invest, and we will focus on optimising products and solutions to meet customer needs and, at the same time, we will look at the new research and investments, and continue to invest for the future. Because if we don't do this, the business in the future will be impacted.
Regarding Ms Meng's trial for January next year, I don't have any further comment. We firmly believe that Ms Meng is innocent. She has not conducted any wrongdoing, as stated by the US, and she will be vindicated through the court ruling. We believe in the justice and ruling of the Canadian legal system.
Geoff: If we could wrap up here, there are plenty of people in the room here with us who run technology businesses, or are starting technology businesses, or thinking about starting technology businesses.
Your strategy of communicating with the international markets has been forced to change over the last year because of the position the United States has taken.
If you could offer up a piece of advice, perhaps, to our audience, as to what you have learned as a company over the last year, albeit in the face of some very painful issues, what would that be? What would that advice be?
Liang Hua: I can only talk about this in terms of Huawei's own experience of development. We are confident in our development, and also approach situations from a fact-based angle. We believe that only through this communication will be able to present a true picture to others, that they can understand Huawei better.
In the past, we used to focus more on the business and how to improve services to customers. But, after these kind of issues, we have invited more media to tour the company, and engage in open conversations with the media. This allows others to understand the true side of Huawei.
Geoff: I'm afraid, chairman, we've run out of time, but it's been terrific talking with you. Please can I ask for your applause for our chairman and for his comments.
Thank you so much. Thank you.
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