Huawei Founder Ren Zhengfei Dismisses Chinese Military Connections

DAVOS, Switzerland -- In the telling of Ren Zhengfei, Huawei, the telecommunications company he founded more than three decades ago, traces its origins not to some savvy plan to conquer the world but to the simple imperative to earn sustenance in a Chinese economy still struggling to recover from the Cultural Revolution.

Ren had been a soldier in the People's Liberation Army (PLA). This had itself been an accidental career, as he portrays it, one launched in a desperate bid to gain a paycheck in a then-profoundly poor country. As China began its early experimentation with market reforms, the PLA was downsizing.

"Starting Huawei was really an accident, not something I planned myself," said Ren, speaking here in a wide-ranging conversation on Thursday morning at the World Economic Forum. "In the early 1980s, as the Chinese government reduced the ranks of the military, we were demobilized and we had to find a way to make a living. It's not romantic at all. We were forced to start this company in order to find a way to earn a living."

In the breezy account Ren laid out, everything that came after just sort of happened. Huawei began reselling telecommunications gear manufactured by others, blazing a trail across China in pursuit of customers. Then the company began designing its own equipment and started selling those wares -- first in China, then in the developing world, and finally in the United States and Europe before more recently forging its own line of smartphones to take on Apple, Samsung, and its chief Chinese competitor, Xiaomi.

Bit by bit, through pluck and persistence, Huawei turned itself into a global colossus with more than 140,000 employees worldwide. Today, it is among the largest telecommunications companies in the world. Ren said Huawei expects to log sales of some $56 billion this year, representing a 20 percent increase over last year.

Ren's appealing narrative -- the eager military cast-off whose own success traces that of his country -- amounts to a deft attempt to turn his PLA connection to his advantage, or at least mitigate its impact as a substantial piece of baggage. Although Huawei has secured the unambiguous status of being one of the globe's most important technology companies, a primary impediment to growth has been the company's military connections and the perception that its equipment is effectively compromised, serving as a potential portal into state and corporate secrets for Chinese intelligence. This, in an era in which widespread cyber-spying is taken as a given.

Huawei has lost sales in the United States in the face of threats from the National Security Agency to prevent telecommunications companies that buy its gear from gaining American government contracts, according to the Washington Post. On Capitol Hill, Huawei stands as the default exhibit for members of Congress inclined to portray China's technology companies as the spawn of state-sponsored capitalism seeking to bolster the nation's cyber war and intelligence-gathering capabilities.

Famously reclusive and reluctant to engage the press, Ren used his appearance here to try to puncture this impression, presenting his company as one centered on serving the interests of its customers, now scattered across some 170 countries.

"We are a Chinese company," he said. "We definitely advocate for the Chinese Communist Party. We love our country. Having said that, we will not compromise the interests of other countries."

Huawei has itself reportedly been a victim of cyber-spying: The NSA managed to penetrate Huawei's servers in the southern Chinese city of Shenzhen in pursuit of intelligence, according to documents leaked by the former NSA contractor Edward Snowden.

Asked by the International Business Times whether Huawei has ever received a request from the Chinese government to assist in intelligence-gathering by including secret capabilities in the gear it sells abroad, Ren offered an uncategorical no.

"We have never received such a request from the Chinese government," he said. "There is no way we can penetrate into other people's systems, and we have never been asked to do so."

In Ren's account, defining him and his company by his links to the PLA represents a misunderstanding of China's history and his own place in it.

The eldest of seven children, Ren was born in 1944 and grew up in a village in Guizhou province, one of China's poorest, before moving to a larger town for middle school. He attended university in Chongqing, in the center of China, emerging with his degree in the midst of the chaos that would burgeon into the Cultural Revolution. Driven by Chairman Mao to engage in perpetual revolution, gangs of marauding youth known as Red Guards attacked those deemed not sufficiently wedded to the cause. For a recent college graduate, employment opportunities were effectively nil. The military became Ren's refuge.

China in the late 1960s was chronically short of consumer goods, including fabric for clothes. The government was importing synthetic fabric from France but sought to make its own supply at home. It drafted plans to build a factory in the hinterland.

"No one wanted to go to this destitute place to build a factory, so the government sent the Army," Ren said. "There were no specialists. Anyone with a bit of reading could be considered a suitable guy to build the factory. That was how I entered the military."

During his days in the military, Ren studied on the side, buying textbooks on electronics and gaining a master's degree. When his military demobilization came, leaving him out of a job with only a modest pension, Ren had an inkling about a new pursuit. Still, it was a wrenching transition.

"As soldiers, we weren't at all familiar with the market economy," Ren said. "We felt uncomfortable making money from others."

He gravitated to Shenzhen in the southern province of Guangdong, scene of China's first opening to global markets amid reforms championed by President Deng Xiaoping. "We didn't have any money at the time," he said, so he started small. He set about importing televisions and other electronics and reselling them in China -- a dodgy business. Several times, he said, he paid upfront for goods but never received shipment. On a trip to the northeastern Chinese city of Jilin, Ren recalled, thieves relieved him of his suitcase along with his money.

"We were very ignorant, but I came to understand two things about the market economy," he said. "One was the importance of the customer. The other was the need to secure a reliable supply of goods."

China was growing swiftly by the mid-1980s, laying down the basic infrastructure for the export-led boom that would soon follow. Someone was going to make an awful lot of money making and selling the basic building blocks for telephone calls. With an eye toward capturing a piece of that action, Ren launched Huawei in Shenzhen 1987. He began studying what foreign companies were doing.

"It was Western companies that we saw and followed," Ren said. "We have had great respect for Western companies ever since."

Those words resonate with some irony, as Huawei has been accused of liberally stealing intellectual property from foreign rivals. In 2004, Huawei settled a lawsuit with the American telecom giant Cisco Systems, resolving claims that it effectively pilfered source code in an Internet router.

The settlement did little to dispel the notion that Huawei was more about copying than innovation, with its expansion underwritten by the Chinese government: Four years ago, Huawei acknowledged what its competitors have asserted for years -- that it had benefited from government export credits reaching $30 billion.

Its success in exporting products across Africa, the Middle East, Latin America and Asia merely reinforced perceptions that Huawei's success was emblematic of China's self-serving form of hybrid capitalism, one in which the government picks the winners, ensuring their victories by funneling sales through state-owned Chinese companies and subsidizing exports around the globe.

Ren seemed to enjoy his appearance here, grinning and shouting out to friends in the audience. He scoffed at the notion that Huawei enjoys unfair competitive advantages given its place in China.

"The United States has enjoyed absolute leadership when it comes to electronics," he said. "We are trying to grow from a little blade of grass to a small tree. Whether or not we succeed depends on ourselves."

But he acknowledged a need for change in one area: His aura of mystery, the founder who rarely speaks, seems to lend credence to the idea that Huawei is up to something less than straight-up.

"I'm not mysterious at all. I do not maintain this low profile on purpose," he said. "If you do not show in public, one must assume there is something you want to hide."