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25 April 2019

Inside Huawei: the rise of Ren Zhengfei’s embattled empire

The world’s largest supplier of telecoms equipment has become the focal point of a trade war, multiple diplomatic incidents and accusations of espionage and repression. 

By Oscar Williams

Three years ago, the southern slopes of Songshan Lake in Dongguan, south-east China, were lined with subtropical woodland. Today, they belong to Huawei, and the 25,000 scientists and engineers tasked with re-imagining its future. The Chinese tech giant has often faced criticism in the West for taking design cues from its Silicon Valley rivals, but this vast metropolis is not an Apple-like campus replete with sweeping glass walls and aluminium finishes.

Spanning an area around nine times the size of London’s Hyde Park, it has instead been modelled on a dozen European cities – from Paris and London to Oxford and Verona – favoured by the company’s founder, Ren Zhengfei. And its employees travel from district to district not on electric scooters or hydrogen buses, but a fleet of gleaming red trains imported from Switzerland.

The £1.5bn research centre is the beating heart of Ren’s empire and reflects the breathtaking speed at which Huawei has grown. The company he started with just £4,000 in 1987 has become the world’s second biggest smartphone manufacturer and the largest producer of telecoms equipment.

As critics in the US claim its growth has been accelerated by corporate espionage and government support – allegations which Huawei denies – the campus serves as a statement of the company’s intent to compete with the US tech giants on the strength of its intellectual property alone.

But Huawei is now facing a degree of international scrutiny rarely levelled at any company, let alone a Chinese tech firm, and the future its employees are building at Songshan Lake – from folding smartphones to 5G networks – looks increasingly uncertain.

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Ren’s military years

The undulating slopes of Songshan are a far cry from the mountain town where Ren was raised. He was born in 1944 to two teachers in what was and remains one of China’s poorest provinces. “We had salt to cook with so we were considered wealthy,” he told the BBC in a rare interview in 2015. University was Ren’s route out, as it still is for many rural Chinese citizens. He studied at the Chongqing Institute of Civil Engineering and Architecture, and worked as an engineer after graduating. But it was what happened next that continues to draw unwelcome attention to Ren and the empire he built.

In 1974, two years before the death of Mao Zedong, the communist leader who had instigated the country’s “Cultural Revolution”, China was facing an economic and political crisis. As well as suffering from shortages of fresh food, the country was in desperate need of fabric to clothe its population. The government unveiled plans for a synthetics factory, and the military was tasked with building it in partnership with a French firm, Technip Speichim. As a local civil engineer, Ren claims he was enlisted to help out “by chance”.

In the following years, he quickly rose up the ranks of the People’s Liberation Army and ultimately became a member of the Communist Party of China. Washington officials claim these links prove Ren worked in close partnership with the Chinese government to build a company, modelled on its US rivals, which would advance China’s influence around the world.

Although Huawei denies these claims, it has historically been reluctant to disclose details of Ren’s military and political career. His official company biography reveals only his job titles and that he did not hold military rank. But in January, as US pressure on Huawei grew, Ren gave an unusually detailed account of his past to US media, starting with his early military years.

“The conditions were very harsh,” said Ren of the site of the synthetics factory where he was enlisted to the military. “Back then, China was in complete chaos, and the central government was trying to mobilise local engineering teams for the construction.”

“We had been given access to the world’s most advanced technology. [The] French company had a very high level of automated controls that no Chinese companies had. We learned to endure hardship. Our housing was very shabby, so we constantly felt cold as it couldn’t protect us from the wind.” At times, Ren said, the temperature would drop to minus 28 degrees. “In a nutshell, we learned from the world’s most advanced technology while living a life that could be seen as primitive.”

While reports have suggested that Ren rose to be a deputy director in the army’s technology division, he claims his unit was dedicated to construction research and employed just 20 people. But in 1978, having devised a breakthrough in construction technology which made national news, he was invited to attend the Chinese government’s National Science Conference.

It was a seminal event in China’s modern history. Attracting more than 6,000 researchers and scientists, the conference led to the creation of a technology policy that formed a central part of China’s 20-year plan. “I was selected to attend … but I was not a CPC [Communist Party of China] member,” Ren said. He claims he had previously been denied membership because his father had been labelled a capitalist intellectual. “My supervisor felt [it] was really strange [that I was not a member], so with the help of party organisations, I became [one].”

It’s not clear what role Ren played at the conference, but four years later, he was selected to become a member of the party’s most senior decision-making body, its 12th national congress. “Unfortunately, I was too young to truly understand what the big reform was all about in that historical moment. That was really a pity.” Ren was 34. “I was a complete technical geek back then. Today, I still love my country. I support the Communist Party of China. But I will never do anything to harm any other nation.”

In 1987, after his team in the army was disbanded and following a short stint in the oil industry, Ren founded Huawei.

Huawei’s “wolf culture”

In written, simplified Chinese, the word for “propaganda” can also be used to mean “publicity”. So it might not look odd to English-speaking employees at Huawei’s prototype smartphone line in Dongguan, a short drive from Songshan Lake, that a number of posters are titled: “Huawei propaganda”. At the end of the production lines, a zone is dedicated to Huawei employees who have devised ways to automate their roles. It’s clear that even small efficiencies – five seconds here, half a minute there – are valued.

Of course, having automated themselves out of a job (and into another), these staff are no longer around to see their success recognised. But it serves as a constant reminder to the employees who remain that they too could move on to bigger and better things in Huawei, so long as they can first find a way to make themselves redundant.

Ren is proud of the company’s fearsome work ethic, which he has called “wolf culture”. In January, he revealed that in 2011 employees had been sent to Fukushima in Japan to fix telecoms networks after it was struck by an earthquake that led to a nuclear leak and a mass evacuation. “Huawei employees risked their lives and restored 680 base stations within two weeks,” Ren marvelled. Similar emergency exercises have been carried out by Huawei employees following a Chilean earthquake and an Indonesian tsunami.

“The other example is Africa,” said Ren. “In a lot of African countries, there is not only war, but also very serious disease. A lot of Huawei employees have contracted malaria. A great number of Huawei employees often go to war – or disease-affected areas to do their job,” he told reporters. “We have pictures to prove it. If you are interested, we can have our public relations staff send them to you.”

The trade war

On 1 December 2018, Meng Wanzhou – Huawei’s chief financial officer and Ren’s daughter – was arrested in Vancouver. She was detained by Canadian police and threatened with deportation to the US over allegations of fraud. In an indictment released in the following weeks, Meng was accused by the US of using a subsidiary to try to violate sanctions prohibiting firms from doing business with Iran, claims Huawei denies. The company was also accused of stealing intellectual property from T-Mobile, a dispute the Chinese firm claimed it had settled two years previously.

The timing of the arrest aroused suspicion. The US had in the months leading up to Meng’s detention launched a ferocious lobbying campaign cautioning its allies against using Huawei’s 5G infrastructure equipment. Ren’s links to the Communist Party were highlighted by its critics, as were new Chinese cyber laws that compel companies to assist with intelligence investigations. The fears were threefold: that Huawei could be forced to leverage its networking equipment to spy on Western governments and citizens, steal corporate secrets and even shut down critical infrastructure, such as energy networks, at Beijing’s behest.

But the arrest, critics claimed, was not just about sending Huawei a message. It was also said to be designed to use Meng as a political pawn in the US-China trade war (which has been fuelled, at least in part, by American fears over Chinese corporate espionage). Donald Trump lent credibility to such suspicions when he said he would be willing to intervene in Meng’s case on the condition it paved the way for a trade deal. She is now suing Canada over her arrest and is likely to use the US president’s comments as proof that it was politically motivated.

Mike Pompeo, the US secretary of state, has since warned that the US could withhold intelligence from allies if they let Huawei into their 5G infrastructure. Speaking to British media at the company’s global headquarters in Shenzhen in February, Eric Xu – one of Huawei’s three “rotating chairmen” – hit back at the US. “I think Mr Pompeo’s remarks are yet another indication that the US government is undertaking a well-coordinated, geopolitical campaign against Huawei,” he said. “We have been wondering, and I think many other people may have been asking this question, is the recent fixation on Huawei truly about cyber security or could there be other motivations?”

“Some people argue that [America] is trying to find leverage for US-China trade negotiations,” Xu added. “Some other people argue that if Huawei equipment was used in those countries, US agencies would find it harder to get access to the information of those people or find it harder to intercept their mobile communications.”

“I believe in the wisdom of the seven billion people in the world; I think they clearly can see these different types of possibilities.”

Chinese state influence

Ren has said the Chinese government has never called on him to spy on customers and that he would defy any attempts to force him to do so. “We will learn from Apple,” he has said. “We would rather shut Huawei down than do anything that would damage the interests of our customers in order to seek our own gains.”

But unlike in the US, where Apple had fought the FBI’s efforts to force it to unlock a terrorist’s iPhone, China does not have an independent courts system through which Ren could resist such demands.

Last year, the Financial Times and Le Monde Afrique reported that officials at the headquarters of the African Union, which had been funded by the Chinese government to the tune of $200m (£153m), accused China of downloading confidential data from its computer network every day for five years.

Huawei was the primary supplier of IT to the headquarters. “This doesn’t mean the company was complicit in any theft of data,” said Danielle Cave of the Australian Strategic Policy Institute in a review seen by the BBC. “But… it’s hard to see how – given Huawei’s role in providing equipment and key ICT services to the AU building and specifically to the AU’s data centre – the company could have remained completely unaware of the apparent theft of large amounts of data [for so long].”

The company has said that if the leaks existed, they were not processed through the technology it supplied. “What Huawei supplied for the AU project included data centre facilities, but those facilities did not have any storage or data transfer functions.”

Security flaws

Under the iron fist of China’s state media, Chinese employees are less likely to leak information than those employed by their US rivals. It is possible, therefore, that we will never know to what extent Ren’s empire is influenced by the Chinese government.

But the UK does have an unparalleled insight into the way its technology operates. A recent review carried out by analysts overseen by the National Cyber Security Centre (NCSC) found significant flaws with its software. Huawei telecoms equipment is cheap and well regarded by operators, but the company’s relentless growth appears to have given way to shortcomings in its code. The NCSC said it “does not believe that the defects identified are a result of Chinese state interference”. But the report warns that they are “capable of being exploited by a range of actors”.

The report also claimed Huawei had made “no material progress” in fixing the flaws since the last annual review raised security concerns. In what was seen as a thinly veiled reference to its 5G equipment, the report concluded it would be “difficult to appropriately risk-manage future [Huawei] products in the context of UK deployments”. It now appears likely that the UK will limit Huawei’s role in building British 5G to non-core parts of the network. An official announcement is yet to be made.

Huawei has pledged to spend $2bn on boosting its security and rewriting its code base, and an executive told NS Tech at Mobile World Congress in February that the project, predicted to take three to five years, could end up costing significantly more.

Ren’s legacy

Ren is braced for further restrictions on the company’s exports. “As long as we can survive and feed our employees, there’s a future for us,” he has said. But America’s efforts to contain Huawei extend only as far as its economic and political reach. As China develops its Belt and Road trade initiative, Huawei is likely to win further business overseas. Indeed, it has already reportedly been enlisted to help Russia build a restricted internet modelled on the system that China uses to surveil its population.

As Huawei has grown over time, Ren’s fortunes have been transformed. The 74-year-old entrepreneur is worth an estimated £1.6bn and no longer has to endure the sorts of hardship he faced in his early military years. But he looks back on that time fondly. “I was happy then, because if you read too many books in other parts of the country, you could get criticised,” he has recalled. “The factory was probably one of the few places that people could read. We had to read to understand how this modern equipment worked.”

Perhaps, then, this will be the ultimate irony of Ren’s eventful life; the legacy of a man who was liberated by books and technology may be a vast network of systems in which, for millions of people around the world, the liberty to read freely is gradually being taken away.

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