Huawei founder urges focus on cash flow to ensure survival

As the world economy faces a looming recession, Huawei Technologies’ founder in China has urged staff to put profitability and cash flow before sales to ensure the company’s survival.

According to a report in Chinese publication Yucai, Ren Zhengfei posted a memo on Huawei’s internal networks warning staff that the economic climate poses a serious threat. He said that Huawei needs to change its way of thinking and business practises to survive the next three years.

Ren believes the world economy will experience up to a decade of weak demand, with particularly challenging years anticipated from 2023 to 2025. He expressed doubt about Huawei’s ability to “break through” the 2023-2024 timeframe.

“With survival the main principle, marginal businesses will be shrunken and closed, and the chill will be felt by everyone,” Ren wrote.

The Huawei founder said the company would curtail or sell noncore businesses, indicating that further job cuts could follow the decision to slash 2,000 employees last year.

“No more stories, we have to talk about the realities,” Ren said in the memo.

“We have to survive first, and we’ll have a future if we can survive.”

The message implies that Huawei is in crisis management mode amid declining sales and profit. The company’s revenue fell in the first half of 2022, with a 5.9% year-over-year drop in sales to ¥301.6 billion ($44.7 billion).

The CEO attributed his pessimism to a combination of post-COVID economic challenges, the Ukraine war and ongoing US sanctions.

The USA placed Huawei on an export blacklist in 2019, preventing it from using critical US-made technology, which affected its capacity to design chips and purchase parts from external suppliers.

Huawei has refuted US allegations that the company poses a security risk due to its ties with the Chinese government.

As well as warning about cost-cutting and layoffs, Ren hinted about a withdrawal from or downsizing in several foreign markets.

He also identified the company’s cloud computing and digital energy businesses as among the areas where Huawei could see growth, and emphasised the significance of the business’s traditional focus on information and communications technology.

The South China Morning Post wrote that Huawei refused to confirm or refute the Yucai report.

Zichen Wang, a journalist for Chinese state media who runs the English language Pekingology blog, said Ren’s message went viral in China, as it was seen as further evidence of an economic downturn that has already seen the real estate sector dive and youth unemployment in the country.

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