Caixin
Jan 21, 2019 08:10 PM
BUSINESS & TECH

Huawei Founder Forecasts ‘Bitter Days’ Ahead, Announces Layoffs

Ren Zhengfei, founder and CEO of Huawei Technologies Co. Ltd., answers questions during an interview at the company’s headquarters in Shenzhen, Guangdong province, on Jan. 15. Photo: VCG
Ren Zhengfei, founder and CEO of Huawei Technologies Co. Ltd., answers questions during an interview at the company’s headquarters in Shenzhen, Guangdong province, on Jan. 15. Photo: VCG

* Comments follow last week’s remarks that company has won over 30 5G commercial contracts worldwide and that its revenue is expected to grow

* Company founder promises that layoffs will be on “a small scale”

(Beijing) — The founder of beleaguered Huawei Technologies Co. Ltd. said the tech giant is cutting staff as it faces headwinds in its emerging 5G business.

Ren Zhengfei’s comments came despite his saying last week the company has won over 30 5G commercial contracts worldwide and that its revenue is expected to grow this year.

The telecom network-gear supplier should brace for “bitter days” over the next few years as overall industry conditions may not be favorable, Ren said in an internal email to all employees on Friday. He didn’t elaborate.

Ren didn’t say how many employees will get the ax, but said the layoffs will be on “a small scale.” He also said Huawei’s overall human resource evaluation process should also be overhauled to better retain talented workers.

“We have had comfortable days for the past 30 years,” Ren wrote. “We have been expanding fast and we should now look at the efficiency of this move.”

The reclusive tycoon, 74, who hadn’t spoken to the media since 2015, last week met with both international and local reporters in separate interviews to rebut accusations that Huawei is spying for China by installing “back doors” in its equipment, and argued that the company firmly stands on the side of customers when it comes to cybersecurity and privacy.

Huawei has long been suspected of espionage because of Ren’s history as a former military engineer. The company has come under attack in the U.S., while Australia and New Zealand have started barring its equipment. Earlier this month, Polish authorities arrested then-Huawei executive Wang Weijing on charges of conducting espionage. Huawei subsequently terminated Wang’s employment.

The company has also been at the center of an international firestorm since its chief financial officer, Meng Wanzhou, was arrested Dec. 1 in Canada at the request of U.S. authorities. Meng is Ren’s daughter.

Ren last week said Huawei owns (link in Chinese) 2,570 5G patents, has struck over 30 commercial deals with global carriers, and shipped 25,000 5G base stations. The founder said this year’s revenue growth will be lower than it was in 2018, which is expected to see sales jump over 20% to $108.5 billion.

Huawei surpassed Sweden’s Ericsson AB to become the world’s largest telecom-equipment supplier in 2017, according to research firm IHS Markit. The No. 3 player was Nokia Oyj from Finland, while Huawei’s hometown rival, ZTE Corp., followed in fourth place.

Ren wrote in the email that Huawei pays $30 billion a year for its 180,000-strong headcount, including wages, bonuses and stock dividends.

An internal letter in October said Huawei should prioritize internal transfers for job vacancies over new hires, Caixin has learned.

Ren also underscored the importance of overhauling staff performance evaluations, saying each business unit should be empowered to make its own decisions instead of sticking to the fixed guidelines.

Huawei, along with its other technology peers in China, currently adopts a quota system in which the worst performers of a unit are fired after the annual review. That’s regardless of whether, for example, all team members of a particular unit performed well. These companies say the quota system encourages competition.

Contact reporter Jason Tan (jasontan@caixin.com)

You've accessed an article available only to subscribers
VIEW OPTIONS
Share this article
Open WeChat and scan the QR code
GALLERY
Copyright © 2017 Caixin Global Limited. All Rights Reserved.