The founder of tech company Huawei has raised concerns in China after warning of a “very painful” decade ahead.
He predicted that China would suffer from harsh market conditions and indicated that Western sanctions threatened the conglomerate’s existence.
Chinese phone company founder and CEO Ren Zhengfei sent a blunt company-wide memo to staff earlier this week, according to local media.
In the message, Zhengfei warned that Huawei was simply trying to survive by focusing on cash flow and profit, and that expansion and growth were no longer a priority.
“The next decade will be a very painful historical period, as the world economy continues to fall,” Ren said in the leaked letter.
“Huawei must lower any overly optimistic expectations for the future and until 2023 or even 2025, we must make survival the most important guideline, and not just survive but survive with quality.”
He also allegedly added that it is unclear whether Huawei can “break” the 2023-2024 financial period.
Ren also partially blamed Huawei’s struggles on Western countries, including Australia, mentioning an “ongoing lockdown” in his message.
Australia was the first country to ban Huawei products in 2018 on national security grounds. Other Western countries followed suit, including the US, New Zealand, and the UK. In May of this year, Canada also did the same.
The US ban imposed by former President Donald Trump in 2019 was particularly devastating for the telecommunications company, as it prevented Huawei customers from using key Google apps such as Gmail, Maps and YouTube on their phones.
“In the past, we embraced the ideal of globalization and aspired to serve all of humanity, so what is our ideal now?” Ren continued, according to reports.
“Survive and make a little money wherever we can. From this point of view, we need to adjust the market structure and study what can be done and what should be abandoned.”
The CEO also noted that some divisions of the company could face downsizing.
There was reportedly a lot of activity on Chinese social media platforms once the message was leaked.
A whopping 100 million people shared and commented on the news.
Many worried that this spelled disaster for China’s tech industry as a whole because last year a real estate chief executive issued a similar warning that heralded the sector descending into chaos.
News.com.au has contacted Huawei for further comment.
Linghao Bao, an analyst at Trivium China, told The Guardian: “The reason Ren Zhengfei’s words stood out is the way he said them. She sounded like she was in panic mode.”
Professor Steve Tsang, Director of the China SOAS Institute, said: “When someone like Ren admits the problems a national champion like Huawei may face as a result of US sanctions, it indicates that the Chinese economy in general is also vulnerable”.
“But that is, as the saying goes, above his salary level and it is a matter for Xi Jinping to decide on how to deal with it. The questions are whether Xi will have Ren’s pragmatism and vision to come up with something that can be as effective as what Ren is proposing for Huawei.”
China’s economy has been hit hard this year amid tight Covid restrictions, sour international relations, an economic slowdown and a real estate crisis triggered by the collapse of property giant Evergrande.
Huawei released an update to its half-year earnings earlier this month on August 12, and the results were trending down.
Its first half net profit more than halved in value from January to June, compared to the first half of 2021.
Revenue fell 5.9 percent compared to the same period a year earlier.
The steepest decline occurred from January to March.
The telecom giant posted a net profit of 15.08 billion yuan, according to Reuters, up from 31.39 billion yuan in the same period in 2021.
Leave a Reply