INTERNATIONAL: The founder of technology company Huawei has sparked alarm in China after warning about a ‘very painful’ decade ahead.
The founder of technology company Huawei has sparked concern in China after warning of a “very painful” decade ahead.
He forecast that China would suffer through tough market conditions and indicated Western sanctions were threatening the conglomerate’s existence.
The founder and CEO of the Chinese phone company, Ren Zhengfei, sent a blunt company-wide memo to staff earlier this week, according to local media.
In the message, Mr Zhengfei warned that Huawei was simply trying to survive by focusing on cash flow and profit and that expansion and growth was no longer a priority.
“The next decade will be a very painful historical period, as the global economy continues to decline,” Mr Ren reportedly said in the leaked missive.
“Huawei must reduce any overly optimistic expectations for the future and until 2023 or even 2025, we must make survival the most important guideline, and not only survive but survive with quality.”
He also supposedly added that it is unclear if Huawei can “break through” the 2023-2024 financial periods.
Mr Ren also partially blamed Huawei’s struggles on Western countries including Australia, mentioning a “continued blockade” in his message.
Australia was the first country to ban Huawei products in 2018 over national security concerns. Other western countries followed suit including the US, New Zealand and the UK. In May this year, Canada also did the same.
The US ban imposed by former President Donald Trump in 2019 was particularly devastating for the telco 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 globalisation and aspired to serve all mankind, so what is our ideal now?” Mr Ren continued, according to reports.
“Survive and earn a little money where 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 flagged that some divisions of the company might experience downsizing.
There was reportedly a flurry of activity on Chinese social media platforms once the message was leaked.
A whopping 100 million people shared and commented on the news.
Many concerned that this spelled disaster for China’s tech industry as a whole because a similar warning came from a real estate CEO last year which foreshadowed that sector falling into disarray.
Linghao Bao, an analyst at Trivium China, told The Guardian: “The reason why Ren Zhengfei’s words stood out is the way he said it. He sounded like he was in panic mode.”
Professor Steve Tsang, director of the SOAS China Institute said: “When someone like Ren admits how much trouble a national champion like Huawei can be facing as a result of US sanctions, it does indicate the wider Chinese economy is also vulnerable.”
“But that is, as the saying goes, above his pay grade and is a matter for Xi Jinping to decide on how to tackle. The questions are whether Xi will have the pragmatism and vision of Ren to come up with something that may be as effective as what Ren is putting forth for Huawei.”
China’s economy has been hit hard this year amid stringent Covid restrictions, souring international relations, an economic slowdown and a property crisis sparked by the collapse of real estate giant Evergrande.
Huawei released an update on its half-yearly revenue earlier this month, on August 12, and the results were trending downwards.
Its first-half net profit more than halved in value from January to June, compared to the first half of 2021.
Revenue dropped 5.9 per cent compared to the same period the year before.
The sharpest decline occurred from January to March.
The telecommunications giant posted a net profit of 15.08 billion yuan, according to Reuters, down from 31.39 billion yuan in the same period in 2021.
(source news.com)
