HONG KONG (Reuters) – China’s Huawei will spend more on production equipment this year to ensure supply continuity, cut redundant roles and demote inefficient managers as its grapples with a “live-or-die moment” in the wake of U.S. export curbs, founder Ren Zhengfei said.
His remarks come as the United States said this week it will extend by 90 days a reprieve that permits Huawei Technologies to buy components from U.S. companies to supply existing customers, but it also moved to add more than 40 of Huawei’s units to its economic blacklist.
In a memo sent to employees on Monday loaded with military metaphors, 74-year-old Ren asked staff to work aggressively towards sales targets as the firm goes into “battle mode” to survive the crisis.
“The company is facing a live-or-die moment,” Ren, a former Chinese army officer, said in the memo, which was seen by Reuters. Huawei confirmed the contents of the memo.
“If you cannot do the job, then make way for our tank to roll; And if you want to come on the battlefield, you can tie a rope around the ‘tank’ to pull it along, everyone needs this sort of determination!”
Huawei is a key theme in a broader, year-long U.S.-China trade war, with Washington slapping it with the trade ban in May citing national security risks. Huawei, however, posted a 23% revenue jump in the first half, helped by strong smartphone sales in its home market.
Ren said in the memo, “In the first half, our results looked good, it is likely because our Chinese clients were sympathetic and made payments in time, the big volume made cash flow look good, this doesn’t represent the real situation.”
But he expressed confidence in Huawei’s full-year results and said it needs to “spend the money and solve the production continuity issue” by ramping up strategic investment on things including production equipment.
According to the memo, Huawei, which employs nearly 190,000 people around the world, is reforming its operation globally by granting more power to the frontline, cutting out reporting layers and eliminating inefficient posts.
“In 3-5 years time, Huawei will be flowing with new blood,” Ren said. “After we survive the most critical moment in history, a new army would be born. To do what? Dominate the world,” Ren said.
While Ren said in June the ban was worse than expected and that Huawei’s revenue may stay flat in the next two years, in the memo he called on staff to try their best in meeting the sales target outlined at the start of the year before the ban – which was to grow its revenue to around $125 billion from more than $100 billion in 2018.
He also warned of cash flow risk if receivables are not paid in time. He asked staff to be conservative in ensuring dues were paid in time by clients, because otherwise the lack of liquidity could be fatal to the company.
Reporting by Sijia Jiang; Editing by Himani Sarkar and Muralikumar Anantharaman