IN THE 1990s, Huawei CEO Ren Zhengfei visited the United
States several times, hoping to learn from its leaders of industry about how to
turn his Chinese telecoms equipment maker into a global company.
On one trip in 1992, in the days before China had credit
cards, he paid all his bills with cash from a $30 000 stash in his briefcase.
Sixteen years later, Ren was listed among Forbes' 400
richest Chinese and Huawei was one of the world's largest telecoms gear
vendors, but the United States still treated him as an outsider.
He was keen to win customers like AT&T, Verizon and
Sprint but had secured just $200m of business in the US in 2007 - in a $23bn
global market. Early that year, the United States effectively vetoed Huawei's
bid for US networking equipment manufacturer 3Com on security grounds.
In March 2008, according to a US cable leaked to WikiLeaks,
Ren visited the US consulate in Guangzhou to complain he was issued only a
He was exasperated at
US suspicions that his company was close to the Chinese military and
government. He pointed out that his parents were sent to labour camps during
China's Cultural Revolution and the only reason he was allowed into the
People's Liberation Army (PLA) was because they were short of skilled
While controversy over Ren's supposedly cosy links to
China's officialdom has dogged Huawei's global expansion plans, his own story
suggests the firm's success is largely down to a strong individualistic streak
that pits Ren against the world.
Ren declined to be interviewed for this article. However, he
has written numerous letters and articles which have been shared with Huawei
staff and, in some cases, with the public. Sources in the company have
confirmed the authenticity of the material.
He certainly began life as an outsider.
Born on October 25, 1944 to a rural family in a remote
mountainous town in Guizhou province as the first of seven children, life was
His parents were schoolteachers, and his mother often had to
borrow money to make ends meet, he wrote later in an article published in an
internal magazine. "Until high school," he wrote, "I never owned
a proper shirt."
His father fought for the nationalist Kuomintang against the
Japanese in the 1930s, only later joining the Communist Party. This and their
"intellectualism" condemned both parents to labour camps during the
Ren graduated in 1963 from the Chongqing Institute of Civil
Engineering and Architecture, and in 1974 the PLA, strapped for engineers,
overlooked his background and put him in the Engineering Corps.
He later said he was excluded from an inner circle. "I
was unable to join the Communist Youth League when I was at college and failed
to join the Communist Party when I served in the army," he wrote in a
letter emailed to his staff late last year.
"There was always adversity in my life, and I became
Despite this, Ren excelled. He rose to deputy director, the
equivalent of deputy regimental chief, and was invited in 1978 to the National
Science Conference and, in 1982, to the National Congress of the Communist
Party of China. His army career ended with Deng Xiaoping's cutbacks the
Ren flitted through various jobs, realising his technical
and scientific knowledge was being outpaced by rapid changes in technology.
Armed with 21 000 yuan (now worth $3 300), he and some friends set up Huawei as
a third-party re-seller of telecom devices in Shenzhen.
Ren pushed the company to quickly move up the value chain,
emulating other companies' products until in the early 1990s Huawei was
producing its own designs. In 1993, it introduced the C&C08, a digital
telecoms switch which was both reliable and much cheaper than other systems.
Despite the perception that Ren profited from his PLA
connections, only a fraction of Huawei's early contracts were from the
military, according to Mike W Peng, professor of global strategy at the
University of Texas at Dallas and author of a book on global business strategy.
Instead, Huawei battled its better-connected rivals by
adopting a quasi-military strategy since eulogised as the "wolf spirit".
If multinational corporations were elephants, Ren said at the time, Huawei was
a mouse - so needed a keen nose and a strong competitive instinct allied to a
spirit of cooperation and sacrifice.
Ren outwitted his competitors by focusing on rural areas,
deploying sales people to win contracts there before moving into the towns and
cities. He called these local managers "guerrilla heads" and gave
them great autonomy, but later admitted he had no great understanding of how to
But it worked.
Huawei won local and provincial telecoms contracts by
agreeing to set up joint ventures, enabling those authorities to recoup much of
their investment through annual dividends. By 1996, Huawei had the
second-largest share of China's telecoms switches market.
The following year Ren ventured abroad, targeting
under-served markets in Africa and Russia, according to Run of the Red Queen, a
study of Chinese economic expansion by academics Dan Breznitz and Michael
In most cases Huawei offered soft loans to cash-strapped
developing world carriers. In 2004, for example, Huawei used a $10bn credit
line from China Development Bank to offer loans, undercutting rivals' bids by
as much as 70%, according to a paper written by JETRO, a Japanese trade organisation.
Ren pushed his workers hard, particularly in research and
development. Citing Siemens data, Peng wrote that European R&D workers work
about 1 400 hours a year, while Huawei's Chinese R&D workers put in twice
that - at as little as a sixth of the cost.
Huawei became known for its "mattress culture",
where engineers would put in long hours and sleep in the office.
Annual sales rose tenfold between 1995, when it served only
China's rural markets, to $2bn in 2000. But, to Ren, Huawei's future remained
He had promoted Li Yinan, a bright young optical engineer
nearly 30 years his junior, to vice-president, only to see him leave in 2000 to
set up a rival company. By then the dot.com bubble was beginning to burst, and
with it the boom years of investment in telecoms driven by a wave of
Ren was facing his own personal demons, too.
On January 8 2001, while on a trip to Iran with then
Vice-President Hu Jintao, his mother was hit by a car when out buying cabbage.
A six-hour layover in Bahrain, a storm and a missed connection in Bangkok
delayed Ren's arrival at her bedside.
By then, according to an article by Ren published in an
internal magazine and whose authenticity has been confirmed by sources within
Huawei, she was on life support. He blamed himself. Had he phoned her before
boarding the plane, he wrote later, she may have left the house later and
The following month he wrote another article, entitled
Huawei's Winter, in which he warned against complacency in the company, which
he said could trigger bankruptcy in the face of a coming crisis in the telecoms
"It is spring now, but that means winter is not too far
away, so we will have to ponder about the problems in winter during spring and
summer." Huawei, he said, must prepare itself.
"One will freeze to death without any premonition or
preventive measures," he warned. "When that happens, whoever has a
woollen jacket will survive."
To protect Huawei he sold off a California subsidiary,
Avansys Power Co, to Emerson Electric for $750m.
Shaun Liu, an IBM consultant to Huawei who had just started
working out of the company's Shenzhen headquarters, recalled how Ren often
asked his employees to be prepared for the crisis.
Behind the scenes, all was not well. With the company
expanding rapidly it was unable to absorb new hires, causing chaos.
Ren was trying to run the company himself, working long
days, his suit wrinkled, as problems stacked up on his desk. For six months he
had nightmares and would wake up crying.
The IBM consultants made him realise how much needed to be
done to transform the company. Ren later wrote he recognised the company had no
viable long-term strategy and sorely lacked organisational expertise.
The consultants told him the future was in R&D and
services, not manufacturing, but Huawei must shed its image of being cheap.
Between 2000-2003 Ren "became fatigued", he wrote
last year, "collapsed, suffered from many diseases and had cancer surgery
twice." In 2002, he wrote "Huawei was on the verge of collapse".
From the outside, though, it didn't look that way: while
telecom infrastructure investment around the world shrank, Huawei's
international revenue grew to $552m in 2002 from $328m in 2001. It now had a
foothold in 40 countries.
Suicides and depression
IBM's emphasis on quality service - coupled with Ren's
insistence on worker dedication - created a workforce pushed to its limits.
Huawei's former head of operations in Africa, Wilson Yang,
recalled for a case study by the University of Pennsylvania's Wharton School
how customers knew they could call a Huawei technician 24 hours a day, seven
days a week.
A sales manager, quoted by Jie Xiong of France's EMLYON
Business School in a letter written in 2011, said he would often celebrate
Christmas with colleagues while fixing a client's server.
"Christmas," he said, "is not our holiday."
In late 2007, Huawei asked 7 000 employees to resign so they
could be re-hired on short-term contracts that were not subject to China's
Labour Contract Law, according to Hong Kong's China Legal Bulletin.
Worse: the mattress culture was apparently contributing to a
spate of suicides. A baffled Ren wrote to a senior member of the Communist
Party, according to the Xinmin Weekly, asking what to do.
"What can we do to help our employees have a more
positive and open attitude towards life?" the paper quoted him as writing.
As an outsider, he was sympathetic - "I used to have
serious depression and anxiety disorder," he wrote in a missive to staff,
"but with the help of doctors, along with my own optimism, my illness is
As Huawei has grown, so has concern over its future.
Reports in Chinese media about boardroom battles in 2010
suggested Ren was planning to hand over to one of his sons — a rumour Huawei
denied. These, and questions about Ren's PLA connections, have forced the
company to be more open, last year publishing for the first time a list and
biographies of the people who run the company.
This only partially dampened talk of a family-run business. It
showed Meng Wanzhou, Ren's daughter, was chief financial officer. Ren's younger
brother, Ren Shulu, was appointed to the supervisory board in January 2011.
At the end of last year Ren gave some insight into the
structure in place at Huawei, explaining a system in which eight executives
took turns as chairperson for six months.
It was this system, he said, which prevented any one
division or figure from becoming too dominant, or, as he put it, "internal
hilltops had been unconsciously levelled."
Smart guy with a vision
Ren remains an aloof, enigmatic figure, even to the 40 000
workers at Huawei's headquarters. There are few photos of him on the walls, and
for most their only contact with him has been via his missives, laden with
flowery historical references, which arrive by email and prompt as much
amusement as reverence.
"He's a very smart guy who has a vision," one
staff member said. "He sees it as his challenge to make his staff see his
vision, so he spends a lot of time motivating people."
An industry source who met Ren earlier this year recalled
that he looked pale, with a nurse popping in to check his blood pressure.
Ren's vision remains one of impermanence.
In early February, Huawei's internal communications team
produced a copy of their Huawei People magazine emblazoned with a sunset photo
of an estuary, headlined The Spring River Flows East.
Inside, Ren's 2011 letter was carried in English in full,
complete with explanatory footnotes, where he warns of coming catastrophe when
"an economic bubble caused by excessive leverage will ultimately
He concludes: "Tides rise and fall in the sweep of
history and the spring river flows east, into the Pacific Ocean, into the
Indian Ocean, and will never return ..."
Around the time he was writing that, Australia was preparing
to block Huawei from bidding on the country's $39bn national broadband network,
one of the largest telecoms infrastructure deals in years, citing security