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Huawei’s company practices spark international concerns

December 17, 2018

A flash point in the raging trade war between Washington and Beijing, Shenzhen-based Chinese telecom giant Huawei Technologies Inc. is used to facing headwinds in its rise to global prominence.

The multibillion-dollar firm’s extraordinary rise over the past 30 years, an empire that now extends to 170-plus countries, has come despite heavy fire from skeptical Western rivals and governments, drawing so much scrutiny for its ties to China’s government and military that Australia, New Zealand and the U.S. have recently blocked or limited the use of Huawei gear in major new contracts.

The cloud over the company, according to multiple sources, dates back to Huawei’s founder, Ren Zhengfei, a former People’s Liberation Army soldier turned telecom tycoon. Mr. Ren, whose daughter Meng Wangzhou is now at the center of an international custody battle after she was detained in Canada on Dec. 1, is a legendary figure in China’s rise on the global economic stage.

It’s a rags-to-riches story well known across China, mirroring the country’s own rising from a developing nation’s economy to an economic superpower. A survivor of Mao Zedong’s Great Famine in the 1950s, he relentlessly built up Huawei, now the world’s second largest maker of smart phones with yearly revenues topping $90 billion, half of which is made outside China.

The 74-year-old’s mythology includes a speech he used to deliver about a lesson of mental toughness and focus learned from his mother, a teacher in the Chinese countryside. The story goes that she read him the tale of Hercules. But she refused to reveal the ending until he returned to their village home with a good report card from school.

Focus and toughness of mind, his Chinese admirers say, are what fueled Huawei’s meteoric rise. Mr. Ren’s Western detractors, meanwhile, say it is really a ruthlessness that pervades the firms’ so-called “wolf culture” and breeds an unhealthy success-at-all-costs ethos.

These days, Huawei’s headquarters is a sprawling campus in the industrial city Shenzhen, just north of Hong Kong. It is hailed by government officials as a “national champion” one of the handful of Chinese corporate successes that has been able to compete on a global level with rivals such as Apple, Samsung and Ericsson.

In many ways, Shenzhen’s ascent mirrors that of Huawei’s story.

The one-time fishing village of less than 30,000 has mushroomed into a megapolis of an estimated 20 million people since Chinese leader Deng Xiaoping declared it a “free economic zone” in 1979 and unleashed China’s modern capitalist boom.

According to Mr. Ren’s biographers, it was in Shenzhen during the early 1980s that he saw an opportunity to boost telephone penetration rates in China, which ranked about 120th in the world at the time. He founded Huawei in 1987, initially trading telecom equipment.

With Mr. Ren at the helm, the firm worked notoriously hard. He was known to boost morale by serving hearty soups to workers putting in overtime. He also made employees invest back into the company. Huawei is now owned by roughly 80,000 of its 180,000 employees.

By 2006, his overworked employees began hitting the wall. That year the death of 25-year-old known for working too many hours died triggering a wave of company suicides.

Revisions to work habits were made, and today’s Huawei’s campus has quotes from Mr. Ren upon the walls and a research lab that resembles the White House. But the wolf culture persists, critics say.

The firm is still known to flood the occasional sales events with many more salespeople than competitors, undercut rivals through pricing, or in the case of Cisco Systems, simply steal industrial secrets which Huawei once admitted to during a court settlement.

For Washington policymakers, the blend of Huawei’s market dominance and Mr. Ren’s military background equal a massive national security threat. The threat is especially acute, they say, as Huawei bids to be a major player in the global rollout of 5G telecommunications networks, positioning the firm at the heart of vital communications networks across the world.

The ability to spy along these networks, or possibly disrupt vital communications, is huge, the U.S. intelligence community has warned.

Addressing the recent controversies, Mr. Ren posted a speech on Huawei employee network. He urged patience but also signaled there was no intention on his part to pull back.

“We will never give in or yield to pressure from outside,” he said.

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