WEBVTT - Huawei Revenue Takes Hit in Chips Business

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<v Speaker 1>You're listening to Bloomberg Business Week with Carol Messer and

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<v Speaker 1>Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. So some

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<v Speaker 1>news came out early this morning. Whahwei Technologies their net

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<v Speaker 1>profits surging see despite deep revenue declines across its business,

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<v Speaker 1>all reflecting efforts to shave costs and really rely on

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<v Speaker 1>home grown components to whether the fallout from American sanctions.

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<v Speaker 1>The Chinese networking and smartphone giant unveiling its annual results

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<v Speaker 1>at a briefing presided over by its CFO, who meets

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<v Speaker 1>media for the first time since her September release from

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<v Speaker 1>three years of house arrest in Canada. There's a lot

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<v Speaker 1>going on in a lot to unpack with our next guest,

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<v Speaker 1>Maaty Purdy, is Chief security officer at Huawei Technologies USA.

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<v Speaker 1>Joins us via Zoom from College Park, Maryland, from Washington.

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<v Speaker 1>See rather, uh Andy, it's good to have you back

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<v Speaker 1>with us. How are you? Thank you? It's good to

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<v Speaker 1>be here. It's been that crazy time, Yes, it really has. Hey, Um,

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<v Speaker 1>we'll get to the results in a few minutes. I

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<v Speaker 1>do want to start though, with Russia's invasion of Ukraine

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<v Speaker 1>and and really try to understand and because we've seen

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<v Speaker 1>so many multinational companies pull out of Russia UH and

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<v Speaker 1>stop doing business there as a result of what happened

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<v Speaker 1>more than a month ago and continues to this day. UM,

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<v Speaker 1>where is where is Huawei when it comes to doing

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<v Speaker 1>business in Russia? Well, our rotating chairman while paying on

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<v Speaker 1>the press conference earlier today, so that while we're studying

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<v Speaker 1>the policies of different countries and regions of the world, UH,

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<v Speaker 1>and he is not yet in a position to make

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<v Speaker 1>an announcement about whether we're going to continue to do business.

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<v Speaker 1>We very much value our business in Ukraine and having

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<v Speaker 1>been there, it's a it's an unbelievably terrible situation. I

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<v Speaker 1>hope we can go to ceasefire soon and and bring

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<v Speaker 1>back to children and the people that had the fleet.

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<v Speaker 1>No absolutely, UM, and give us an idea of how

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<v Speaker 1>much business you guys do in Ukraine, how much business

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<v Speaker 1>you do in Russia? How important are those markets? You know?

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<v Speaker 1>I don't have a number right now, We'll have to

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<v Speaker 1>get that for for another time, UM. But we have

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<v Speaker 1>been focusing on a hundred and seventy countries in the world.

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<v Speaker 1>In fact, I recently you know, a couple of years

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<v Speaker 1>ago before the pandemic. I went to Moldova before when

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<v Speaker 1>the Romania, Moldova being west of Ukraine, and I was

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<v Speaker 1>in Kieva twice in so the size of the country,

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<v Speaker 1>the amount that we make doesn't matter. We really are

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<v Speaker 1>trying to do business where people are willing to do

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<v Speaker 1>business with us and where we can bring value to

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<v Speaker 1>our partners and to our customers. Uh, that's where we

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<v Speaker 1>can get some value ourselves. So uh, it's uh, it's

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<v Speaker 1>it's a very difficult, trying time and hopefully we can

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<v Speaker 1>get to a better place soon. What about when you

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<v Speaker 1>know one thing that we've talked a lot about on

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<v Speaker 1>the program over the last six weeks or so, uh

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<v Speaker 1>Andy has has been the tech talent in both Russia

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<v Speaker 1>and Ukraine. And I know that Lahwe has made a

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<v Speaker 1>lot of robust hires in Russia, recruiting a lot of

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<v Speaker 1>engineers there. Um, what do we know about those engineers

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<v Speaker 1>and plans to hire more in Russia. Yeah, we're trying

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<v Speaker 1>to get to take stock of what this situation actually is.

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<v Speaker 1>Our communications is not what we might like. Um. We

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<v Speaker 1>certainly have hired globally a tremendous number of new employees

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<v Speaker 1>and engineers, and and the quest for talent is a

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<v Speaker 1>is a fundamental thing that is critically important us in

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<v Speaker 1>other companies. But we do under andy, like in terms

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<v Speaker 1>of I understand it's probably very difficult to get the

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<v Speaker 1>lay of the land considering what's going on in Russia

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<v Speaker 1>in terms of any kind of hiring you want to do.

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<v Speaker 1>But what is the position in terms of the hiring

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<v Speaker 1>you are looking to do and how aggressively you know

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<v Speaker 1>you are continuing with those plans or has that change?

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<v Speaker 1>Are you considering pulling back because of the current conditions

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<v Speaker 1>and geopolitical problems. I haven't seen anything yet on uh

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<v Speaker 1>the impact on on hiring. Be very surprised if there

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<v Speaker 1>isn't an impact, But that that's something we just don't

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<v Speaker 1>have information on right now. What is the exposure though?

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<v Speaker 1>Can we get an idea of how much you know,

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<v Speaker 1>in terms of the business you guys are currently doing there.

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<v Speaker 1>I know you can't give market size, but how big

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<v Speaker 1>is the team there on the ground. I mean, you

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<v Speaker 1>guys are global I know there's back and forth. Globalization

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<v Speaker 1>means we all have to be you know, a company

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<v Speaker 1>has to be talking to its different divisions. How big

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<v Speaker 1>is the team on the ground in Russia. I'm sorry,

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<v Speaker 1>I don't have numbers on how many people we have

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<v Speaker 1>here beyond what you reference in terms of people that

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<v Speaker 1>we hired there, so I'll have to get back to

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<v Speaker 1>you on that. I'm wondering about, you know, potential contingency

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<v Speaker 1>plans for sanctions on Russia or or sanctions were if

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<v Speaker 1>they were imposed on China. Have you have you been

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<v Speaker 1>able to talk through any contingency plans there? Well, our

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<v Speaker 1>focus has been business continuity generally around the world with

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<v Speaker 1>the challenges that we faced with the pandemic and the

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<v Speaker 1>impact on the on the global supply chain. Uh, and

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<v Speaker 1>trying to make sure that we can have a diversified

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<v Speaker 1>supply chain so that we can meet the needs to

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<v Speaker 1>meet the needs of our customers. UH. So we we

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<v Speaker 1>we need more information and uh, you know, we're trying

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<v Speaker 1>hard to to get it so Andy. You know, I

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<v Speaker 1>feel like one of our big stories, you know, and

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<v Speaker 1>I don't need to sugarcoat it is all about semiconductors

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<v Speaker 1>in demand and you know how this the pandemic and

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<v Speaker 1>what's going on right now is impacting kind of global

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<v Speaker 1>supply chains. Talk to us a little bit more about

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<v Speaker 1>what your plans are, what we always plans are in

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<v Speaker 1>terms of chip making. UM, you know, we have ideas

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<v Speaker 1>about you guys, I think weaning yourself off American Latin

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<v Speaker 1>latent chips, finding ways to get more out of mature technology.

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<v Speaker 1>Give us, give us some ideas of what the plans

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<v Speaker 1>are going forward. Well, we've been impacted tremendous ease. You

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<v Speaker 1>know why, our inability to get the chips for our

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<v Speaker 1>consumer mobile devices. UH, and so that has caused the

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<v Speaker 1>gigantic hit in our revenue. They're fortunately our five jeep business,

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<v Speaker 1>we're able to use the less sophisticated chips to to

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<v Speaker 1>to maintain that business. We have been emphasizing trying to

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<v Speaker 1>improve our our product portfolio. We've managed to make our

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<v Speaker 1>operations and in five G and telecom stable. UH. We're

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<v Speaker 1>fortunately able to meet the demands. And I think there

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<v Speaker 1>was a study that came out recently of Whilways five

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<v Speaker 1>G and in thirteen different countries that were we provide

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<v Speaker 1>the best user experience. Our enterprise business has has drown

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<v Speaker 1>dramatically with digitization. UH. That's affecting UH, individuals and organizations

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<v Speaker 1>around the world. We've we've been chosen by seven hundred

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<v Speaker 1>cities and two hundred and sixty seven of the Fortune

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<v Speaker 1>Global five companies to be their digital transformation partner, and

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<v Speaker 1>we have six thousand service and operation partners doing that

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<v Speaker 1>around the world. We're also investing heavily, and I'm sure

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<v Speaker 1>you saw over of our revenues we invested in R

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<v Speaker 1>and D, which is an extraordinary number. Heavily invested in

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<v Speaker 1>in some pure research, trying to figure out how to

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<v Speaker 1>make the connectivity better, how to reduce energy consumption using

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<v Speaker 1>digitization of energy has been a major thing that we're

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<v Speaker 1>trying to do to help the I c T industry.

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<v Speaker 1>You need the car numbers for UH AND and we

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<v Speaker 1>feel like we're making tremendous progress on that. Part of

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<v Speaker 1>that is not just generating in power, but it's storage

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<v Speaker 1>and the availability of the storage too. When when you

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<v Speaker 1>can't get the sunshine that you can you can have

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<v Speaker 1>the energy. So we're talking with Andy Purty, he's chief

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<v Speaker 1>security officer at Huawei Technologies USA, joining us via zoom

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<v Speaker 1>from College Park, Maryland. Hey, Andy, to go more with chips.

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<v Speaker 1>I mean, because this is the story when it comes

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<v Speaker 1>to supply chain, at least for tech companies. In two

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<v Speaker 1>UH a story in on Bloomberg just a couple of

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<v Speaker 1>weeks ago, continues to talk about the way times for

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<v Speaker 1>semiconductors just rising again. In February, assigned that the shortages

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<v Speaker 1>are continuing for chip buyers in a wide range of

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<v Speaker 1>industries twenty six point two percent weeks last month, according

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<v Speaker 1>to Susquehanna Financial Group. So where exactly are you going

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<v Speaker 1>to be able to go to get chips to satisfy demand? Well,

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<v Speaker 1>we are working hard to help push the limits on

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<v Speaker 1>the foundational technologies UH that underlie semiconductors, not that we're

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<v Speaker 1>going to manufacture them ourselves, but trying to make some

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<v Speaker 1>some great progress in some of the scientific theories in

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<v Speaker 1>the world to increase capacity and the capabilities of less

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<v Speaker 1>sophisticated different kinds of chips, different kinds of technologies to

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<v Speaker 1>allow uh the network and communication devices to function. We've

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<v Speaker 1>hired a number of experts from around the world, scientists

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<v Speaker 1>to impure research UH, and we feel like we're making

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<v Speaker 1>some very important progress, and we're participating in the in

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<v Speaker 1>the public collaborations with experts around the world on that.

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<v Speaker 1>So we hope that's going to bear some very significant

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<v Speaker 1>fruits in terms of architecture, computing architecture and software performance,

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<v Speaker 1>UH and the ability to store energy and create more

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<v Speaker 1>energy and use a lot less energy in the information

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<v Speaker 1>and communications technologies. Hey, Andy, you know you're there in

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<v Speaker 1>in uh, you know, College Park, Maryland, not too far

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<v Speaker 1>from d C. And I'm thinking about you know, President

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<v Speaker 1>Biden putting out his budget today and he talked a

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<v Speaker 1>lot about security as well. What is Huawei doing. What

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<v Speaker 1>are the conversations that you are having uh with the

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<v Speaker 1>higher ups when it has to address when it has

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<v Speaker 1>to address specifically the security concerns raised by foreign countries,

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<v Speaker 1>particularly the United States, which, as you said, and we

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<v Speaker 1>know is really you know, crympt what Huawei can do well.

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<v Speaker 1>The United States has been unwilling to talk with us

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<v Speaker 1>for quite some time. So we're encouraging the United States

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<v Speaker 1>to get involved in the international standards efforts that are

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<v Speaker 1>going to help contribute to a safer cyber space. We've

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<v Speaker 1>offered to open up our facilities to have government officials

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<v Speaker 1>from the United States and elsewhere to command to see

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<v Speaker 1>what we can do, what our competitors can do to

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<v Speaker 1>be more effective, to be more resilient, and frankly, to

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<v Speaker 1>to be more transparent. We are working with the industry

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<v Speaker 1>organizations and standards bodies to create a safer cyberspace. Uh

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<v Speaker 1>and that requires some some hardcore work in terms of

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<v Speaker 1>setting requirements and learning lessons from these cyber attacks. In

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<v Speaker 1>the last year or so, the idea of so called

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<v Speaker 1>notion of trusted suppliers is no longer any good. We

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<v Speaker 1>saw the taxes. Do you anticipate any forgive me for

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<v Speaker 1>jumping in because we've only got about a minute left,

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<v Speaker 1>I mean, is it likely to get any better? But

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<v Speaker 1>we're not fundamentally concerned about being able to do business

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<v Speaker 1>United States. We hope that we can help share what

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<v Speaker 1>can benefit the United States, whether it's from US or others.

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<v Speaker 1>What is fundamentally important is to grow the ability of

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<v Speaker 1>American government and organizations critical infrastructure to defend themselves. And

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<v Speaker 1>we think we can share some experience in that. Do

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<v Speaker 1>you think because of China's reluctance to condemn Russia is

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<v Speaker 1>only going to complicate the relationship between US and China,

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<v Speaker 1>especially on something like the tele telecommunications or technology. Well,

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<v Speaker 1>there an awful lot of people in the world that

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<v Speaker 1>hopefully United States is going to collaborate with to to

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<v Speaker 1>help improve our defenses. Uh and to try to improve

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<v Speaker 1>the quality and nature of information sharing about private companies

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<v Speaker 1>and government agencies. And we're happy to be as transparent

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<v Speaker 1>as possible to help contribute to those dialogues, contribute to

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<v Speaker 1>coming up with an objective and transparent basis for knowing

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<v Speaker 1>which products and services are worthy of trust and which

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<v Speaker 1>ones are going to be resilient. All Right, we're gonna

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<v Speaker 1>leave it there, uh Andy, thank you so much. Andy

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<v Speaker 1>Purty is chief Security Officer at Wahwei Technologies USA, joining

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<v Speaker 1>us via Zoom from College Park, Maryland.