According to an internal memo, Huawei’s CEO reportedly urged the company to keep cash flowing to “survive” tough economic times

The founder of Chinese tech giant Huawei, he allegedly told his employees to prepare for survival in the face of a grim outlook on the global economy.

Once riding on the waves of globalization and holding one of the highest global shares of shipments of communication devices, the telecom was a strong performer. The company has since reportedly changed its mind after being heavily sanctioned in the United States and other Western countries.

It is telling employees now to stop believing in the company’s past glory and instead to “focus on cashflow and profit” for survival.

A man wearing a protective face mask sits near a Huawei store logo in Beijing on July 31, 2020. (Ng Han Guan/AP Photo)

“The next ten years will come down as a painful period in history, as the world economy goes into recession … Huawei needs to tone down on any over-optimistic forecast and make survival its most important creed in the next three years,” Ren Zhengfei, CEO and founder of Huawei, wrote in the leaked memo, according to the South China Morning Post (SCMP).

Ren’s comments were reported first by Yicai (a Chinese financial news magazine). Although Huawei declined to confirm the memo or discredit it, many local experts and media outlets believed the text was authentic. The report was removed from Yicai as well as other news websites.

According to The Epoch Times reporter, who looked at the memo before its removal, words such as “survive” were used seven times.

In May 2019, the United States placed Huawei on its entity sanctions list, preventing U.S. companies from supplying products to Huawei without permission from the U.S. Department of Commerce. Google stopped working with Huawei and Huawei phones were not allowed to access Android updates.

In May 2020, the U.S. Department of Commerce offered new regulations requiring that any chip produced using U.S. technology and equipment first be approved by the United States before it can be sold to Huawei.

Most global chip fabs, such as the SMIC-leading Chinese foundry and Taiwan’s TSMC’s TSMC respectively, buy equipment from U.S. firms like Applied Materials and Lam Research and KLA.

TSMC revealed to the public on July 16, 2020, that it had stopped accepting orders from Huawei on May 15 due to the impact of the U.S. ban on Huawei.

An additional blow for the Chinese telecom company is the ban on Huawei equipment in five countries–the United States of America, Australia, New Zealand and the United Kingdom–which has impacted their 5G networks.

Ren’s ‘Survival’ Strategy

Ren was Huawei’s chief executive. He suggested that the company keep its budget within a reasonable range, blind expansion and blind investments should be reduced or stopped, and the manpower saved should go to the frontline .”

Ren stated that the goal of the plan is to narrow down the product range, increase profitability, and reduce company focus on software and hardware. Ren stated that any sector not performing well would be eliminated… and those losses will be taken from employees’ meal benefits .”

Ren stated that Huawei once embraced the notion of globalization, and made a large bet on it. But now the goal is to “stay alive by earning whatever .”

you can.”

He also suggested that promotions and bonuses should be tied to company operating results. This would encourage employees to work harder for their profits.

Massive Drop in Profitability

According to Huawei’s operating results released in mid-August, the company’s sales revenue in the first half of this year was about $44 billion, and net profit was 5.0 percent of that, or $2.2 billion.

Meanwhile, the company’s sales revenue for the same period last year was $46.7 billion, and the net profit was 9.8 percent, or $4.6 billion.

The numbers show that Huawei’s sales revenue in the first half of this year dropped 5.9 percent or $2.7 billion year over year, while net profit plunged 52 percent or $2.4 billion.

Founded in 1987, Huawei currently has 195,000 employees and operates in more than 170 countries and regions worldwide. It is currently under strict U.S. sanctions to supply telecommunications equipment Iran.

The company’s smartphone sales also fell due to a reduction in chip supply. Data from British market research firm Omdia showed that Huawei’s smartphone shipments in 2021 fell to 35 million units, a staggering 81.6 percent drop from 2020.

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