Huawei Founder Warns Of Painful Decade

Founder Ren Zhengfei has issued a stark warning to Huawei staff in an memo, warning the firm must focus on profit over cashflow and expansion, if it is to survive the next three years.

The chilling warning from China’s largest company, came in a leaked internal memo, the Guardian newspaper reported, in which Zhengfei said the next decade will be very painful for the firm.

Zhengfei cited the Covid-19 pandemic, as well as the impact of the Ukraine war, and sanctions and blacklisting by the United States.

Survival mode?

In a leaked internal memo, Ren Zhengfei told Huawei staff “the chill will be felt by everyone” and the company must focus on profit over cashflow and expansion if it is to survive the next three years

This could indicate the Chinese firm is considering further job cuts and divestments.

It should be remembered the firm already offloaded its Honor smartphone brand in 2020 to a Chinese consortium.

“The next decade will be a very painful historical period, as the global economy continues to decline,” Ren was quoted by the Guardian as saying, pointing to the pandemic as well as the impact of the Ukraine war and a “continued blockade” by the US on some Chinese business.

“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 reportedly said.

“In the past, we embraced the ideal of globalisation and aspired to serve all mankind, so what is our ideal now?” wrote Ren.

“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 Guardian reported that Ren’s memo went viral on Chinese social media, with some expressing fear of what it meant for regular people and small businesses if a company the size of Huawei was sending such warnings.

China turmoil

The warning from Huawei’s Ren Zhengfei comes amid concern about a global economic downturn.

And China’s economy is already feeling the pressure from ongoing pandemic restrictions that have badly hampered manufacturing and economic output, and the country’s growing isolation over its militarisation and threats to Taiwan.

China is not expected to reach its economic growth target of 5.5 percent this year, the Guardian reported, and its youth unemployment is nearing 20 percent.

Huawei meanwhile is responding to big falls in profit and revenue, the Guardian reported. Its net profit margin narrowed to 4.3 percent, from 11.1 percent a year earlier, in the three months through March.

Revenue meanwhile declined 14 percent in the first three months of 2022.

China’s government this week announced a further $146bn (£123bn) in stimulus funding and 19 new measures to address the economic damage wrought by the pandemic, the Guardian reported.