Telecoms

The fifth generation

Huawei’s rare board reshuffle stokes succession rumours

Huawei-w

If Huawei dominates 5G it could also become a player in driverless cars

How long does it take to breed a wolf into a domesticated dog? The answer is many millennia if the results of recent scientific experiments are to be believed. All efforts to turn wolf pups into loyal companions by hand rearing them from birth have failed after the animals’ suspicious and aggressive natures reared their heads when aged around 18 months.

Likewise, Huawei’s self-professed “wolf culture” and “collegiate management style” have always seemed genetically incompatible bedfellows. Wolves may be pack animals, but they are extremely hierarchical and there is always an alpha pair holding rivals in check.

Truly collegiate companies, on the other hand, are based on meritocracies, which are open and transparent. This is terminology that few outsiders have ever applied to the secretive Huawei.

Huawei’s employees nominally own the company through their union, although few seem to have any say in how it is run. Ex-employees have often described the working culture as dog-eat-dog.

The strange dichotomy at the heart of the world’s largest telecommunications equipment manufacturer was on display again in March, when the company’s long-standing chairwoman, Sun Yafang, stepped down. Rumours about her resignation had been swirling since late February, but were only confirmed after the results of board “elections” were made public.

Sun, the executive who had been the other half of founder Ren Zhengfei’s alpha pair for 19 years – Ren himself was said to call her Boss Sun – was sidelined.

The domestic media and netizens speculate that Sun has fallen foul of internal politics as the company has not said what new role she will play beyond stating that the 63 year-old remains a board member. And Ren appears to have replaced a small group of senior managers who shared the CEO role with him on a six-month rotating basis with a group of vice chairs.

These will now rotate around the new chairman, Liang Hua. One of these vice chairs is Ren’s daughter, Meng Wanzhou, who is also CFO.

The domestic media now believe this puts Meng in line to succeed Ren. In the past the 73 year-old Ren has been extremely vocal about the fact that the top job should only go to someone who has “vision, character and ambition” and that his “family do not possess those qualities”. He also famously berated his daughter in a 2015 email to all employees. This followed numerous complaints about how her finance department habitually turned down funding requests even after staff submitted months of paperwork. He compared the mismanagement to that of King Chu who loved narrow waists so much that many courtiers starved themselves to death to please him (Ren clearly knows his ancient history: Chu lived in the Spring and Autumn period – which began about 2,700 years ago).

Such is the level of secrecy at Huawei that few people even knew Ren had a daughter working at the company until 2013. Father and daughter even have conflicting stories about why she uses her maternal surname, Meng. Ren says she was given it at birth in honour of her maternal grandfather who was the deputy governor of Sichuan province. His daughter has previously said she changed her name when she turned 16. By this time her parents had divorced.

Name changing is something, which appears to come naturally to Meng since she also changed her English name from Cathy to Sabrina about a year ago. It’s not clear why. Like her father she rarely gives interviews or makes public comments, although she has previously dismissed rumours that she is married to another newly promoted vice chair, Xu Wenwei.

And then there are Ren’s other family members. A few years ago he said four of them worked at Huawei following media reports that there could be up to seven at the firm. These also comprise: his brother, Ren Shulu, who is chief logistics officer and a member of the supervisory board, his sister, Ren Zhengli, who is a finance director and his son Ren Ping, who is a vice-president in the property department.

Jiasuhui.com alleges Ren Ping has never been popular internally because he set up a company that won contracts from Huawei, which others would have preferred to be publicly tendered. One blogger even went so far as to say insiders describe Ren junior as A Dou, which references the idiot son of an emperor in the Three Kingdoms era.

All this is a long way from the collegiate image Huawei likes to portray when it courts international contracts.

Shareholder activist, David Webb, has previously described the company’s ownership structure as “completely opaque”. Employees are not allowed to retain their shares when they leave, for example. In testimony to the US House of Representatives the company has previously admitted that Ren is able to veto appointments to the board of the union, which owns the operating vehicle.

Aside from any governance issues, the lack of transparency makes it far easier for US lawmakers to block Huawei on the grounds that Ren’s former employer, the People’s Liberation Army, might ultimately control the company. The allegation has clearly stymied the group’s efforts to penetrate the US market and overtake Apple as the world’s second largest smartphone vendor.

At the end of 2017, Samsung had a 22% market share, with Apple on 15% and Huawei on 11%, according to IDC figures. But in the US, Huawei has less than 1% and it is likely to stay that way after Verizon and AT&T withdrew from deals to distribute Huawei phones earlier this year. More recently, US lawmakers have suggested withdrawing federal subsidies to smaller or rural mobile network operators that work with either ZTE or Huawei.

The reasons behind the recent reshuffles are likely to remain unconfirmed, but one possibility is that Ren wants his senior wolves better aligned as he bets the bank on Huawei becoming the undisputed leader in new 5G technologies. News emerged at the weekend that Huawei spent almost $14 billion on R&D last year and it said that figure could grow to $20 billion (on turnover of $96 billion in 2017). Most of this seems to be going on 5G, where it is estimated Huawei already holds 10% of 5G patents, according to a US government body.

Control of this new, faster technology will be more lucrative than 3G or 4G because the next generation networks will support connected devices (the Internet of Things) as well as growth industries like driverless cars. Huawei plans to launch its first 5G smartphone next year.

In an upbeat article about the firm this week entitled “Huawei calls the tune despite US obstacles” the Financial Times analysed the “fast-expanding Chinese telecoms group”. The article acknowledged Ren’s company has produced great results and become the world’s biggest player in telecoms equipment.

Citing Stephane Teral, an analyst with IHS, the FT highlighted his verdict, “This is the most interesting trajectory of any company on the planet: without the US they have managed to be number one.”


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