WEBVTT - Huawei Not Welcome in the U.S.

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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. Well, Wawei

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<v Speaker 1>has battled for survival since the US bartet from buying

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<v Speaker 1>an array of imported components from Qualcom's most advanced chips

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<v Speaker 1>to Alphabets Android system two years ago. Companies looking for

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<v Speaker 1>growth and emerging businesses such as wireless communications, project products

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<v Speaker 1>that are using coal mines and smart cockpit solutions for

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<v Speaker 1>electric vehicles. They're really looking for growth in a lot

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<v Speaker 1>of areas. We're very pleased to have back with us.

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<v Speaker 1>Andy Purty, chief security officer at Huawei Technologies USA. Andy

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<v Speaker 1>joining us once again via zoom from College Park, Maryland. Andy,

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<v Speaker 1>how are you? But actually I'm in San Francisco conference.

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<v Speaker 1>Good to have you with us at in San Francisco.

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<v Speaker 1>Remind me why are you there the rs A Security

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<v Speaker 1>conferences this week? Perfect? There it is. What are the

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<v Speaker 1>big topics that are at the RSA Security Conference? Now

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<v Speaker 1>that's back in person. There's a lot about zero trust,

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<v Speaker 1>technological innovation, cypelucurity, risk, cloud. I mean, it's just everything

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<v Speaker 1>is covered. Well, I've been at that event. Yeah, it's

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<v Speaker 1>really fascinating. I do feel like, uh Andy, certainly when

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<v Speaker 1>we talk with CEOs of companies, and we've we've found

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<v Speaker 1>this when we were at at Milkin on the West Coast,

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<v Speaker 1>is that when it comes to if companies have to

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<v Speaker 1>rain in spending at all, depending on the economic environment,

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<v Speaker 1>they're not necessarily going to do it when it comes

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<v Speaker 1>to tech, and certainly not when it's tech related to security.

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<v Speaker 1>Uh the spend is on. Tell me a little bit

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<v Speaker 1>about your outlook. Um, we know that last time around

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<v Speaker 1>in terms of earnings, it was a little tricky for

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<v Speaker 1>you guys. What are you seeing. I think your profit

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<v Speaker 1>was down about sixty seven. I know a lot of

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<v Speaker 1>it has to do with US sanctions against you guys.

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<v Speaker 1>What's what's business look like right now? And what's the outlook? Well, well,

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<v Speaker 1>certain of the components that we haven't been able to

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<v Speaker 1>get have dramatically hurt our five G mobile phone business.

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<v Speaker 1>But in the other areas we have been holding our

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<v Speaker 1>own in terms of our five G networks. Our enterprise

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<v Speaker 1>business has done tremendously well with digitalization that's really transforming business.

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<v Speaker 1>We've been selected by two hundred and sixty seven of

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<v Speaker 1>the global Fortune five companies to do their transformation, and

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<v Speaker 1>we've had great success in terms of what we call

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<v Speaker 1>the seamless AI life experience with mobile devices, wireless handhelds,

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<v Speaker 1>those kinds of things. We're making a big difference, and frankly,

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<v Speaker 1>it's given the challenge of moving forward. We've made a

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<v Speaker 1>gigantic investment in R and D, up from ten percent

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<v Speaker 1>of revenue to we spent twenty two billion last year

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<v Speaker 1>in R and D. We're making great progress with it.

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<v Speaker 1>How much would you characterize these sanctions placed by the

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<v Speaker 1>United States are affecting the business? How much is it

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<v Speaker 1>holding back from more companies in the essen in the

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<v Speaker 1>fortune adopting your technology. Well, it's hard to it's hard

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<v Speaker 1>to say. Certainly. Our global revenues, for one, as you know,

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<v Speaker 1>we're down like which is a dramatic cut down to

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<v Speaker 1>just under a hundred billion dollars um. We have so

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<v Speaker 1>many UH countries in the world that are interested in

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<v Speaker 1>doing business with, so many companies that want to do

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<v Speaker 1>business with our five g is is all over the world,

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<v Speaker 1>and we're having a great user experience. And frankly, what

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<v Speaker 1>I'm encouraged by is that we are so open to

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<v Speaker 1>collaborating with whoever, including the US government, private companies on

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<v Speaker 1>some of this R and D that's going to be

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<v Speaker 1>necessary to move from five G to five point five G.

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<v Speaker 1>The connectivity that's going to be necessary will have to

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<v Speaker 1>grow a hundredfold every year. So we have to push

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<v Speaker 1>some of the scientific theories, and we'd love to collaborate

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<v Speaker 1>with the experts around the world to do that well.

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<v Speaker 1>And what's interesting you talk about five G, but I

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<v Speaker 1>have conversation after conversation about five G hasn't lived up

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<v Speaker 1>to its expectations. We've done some reported here at Bloomberg. Uh,

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<v Speaker 1>what signs do you have that that maybe is changing

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<v Speaker 1>well in certain parts of the world where you have

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<v Speaker 1>true five G Because as you know, it's not just

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<v Speaker 1>about speed, it's also about latency, the lag time. It's

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<v Speaker 1>also about the number of connections. So moving toward an

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<v Speaker 1>intelligent world, the five G enabled technologies are happening in

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<v Speaker 1>great order in several countries of the world. So we're

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<v Speaker 1>hopeing that we can share the experience, not that we

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<v Speaker 1>would necessarily do the business in the United States, but

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<v Speaker 1>make sure the American sectors understand that these technologies are

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<v Speaker 1>available now and it's going to really help transform the companies.

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<v Speaker 1>That's going to help their competitiveness, and it's going to

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<v Speaker 1>help the citizens of those countries to get involved in it.

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<v Speaker 1>What hope do you have that President Biden, and let's

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<v Speaker 1>get to kind of the elephant in the living room,

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<v Speaker 1>that he will review those tariffs. He's talked about reviewing

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<v Speaker 1>the tariffs imposed um on imports from China. That something

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<v Speaker 1>will change. And I'm curious about the conversations that you

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<v Speaker 1>are having with folks in Washington that anything significantly will

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<v Speaker 1>change on this front. Well, frankly, we are such a

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<v Speaker 1>small player in this and the business even at its

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<v Speaker 1>peak that we did in the United States was was

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<v Speaker 1>not a material thing. So when you look at the

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<v Speaker 1>factors that are taking place with the Russian invasion of Ukraine, UH, COVID,

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<v Speaker 1>other factors, you see the global community is concerned about

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<v Speaker 1>changes in globalization because I think it was the I

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<v Speaker 1>m F has said that global is nation in the

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<v Speaker 1>last thirty years raised over a billion people out of poverty,

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<v Speaker 1>and we just hit uh Washington Propost story said that

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<v Speaker 1>we hit a record of twenty eight point five billion

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<v Speaker 1>of goods traded last year. So we're a small player.

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<v Speaker 1>Globalization that has brought great benefits to the global community

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<v Speaker 1>has to be careful. Let's not throw the baby out

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<v Speaker 1>with the bathward. We have to reshape globalization and and

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<v Speaker 1>so we're just a small player. We want to share

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<v Speaker 1>information and collaborate, particularly on things like cybersecurity and innovation

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<v Speaker 1>and some of these hard scientific problems. But we're just

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<v Speaker 1>open and we just want to try to do business

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<v Speaker 1>where where we're welcome, And we're welcoming an awful lot

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<v Speaker 1>of places. But do you feel like, Okay, you're welcoming

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<v Speaker 1>a lot of places. Do you anticipate that you'll be

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<v Speaker 1>welcome back, small player or not in the US market

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<v Speaker 1>anytime soon. No, I certainly don't think we'll be welcomed

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<v Speaker 1>back in the US anytime soon. Uh. I think in

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<v Speaker 1>the long term, and I'm encouraged that the cybersecurity efforts

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<v Speaker 1>of the United States government and the private sector and

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<v Speaker 1>partnership have grown dramatically. It's recognized that, as I think

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<v Speaker 1>we talked about before, there's no such thing as trusted suppliers.

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<v Speaker 1>That bad guys can hacken everybody. So one of the

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<v Speaker 1>things we're seeing here at the RSA conferences the efforts

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<v Speaker 1>to raise security to raise assurance, to implement the zero

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<v Speaker 1>trust kind of principles that President I've mentioned in the

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<v Speaker 1>Cybersecurity Executive Order about a year and a half ago. Now,

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<v Speaker 1>those are the kinds of things that are necessary to

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<v Speaker 1>make sure these technologies, as we come to get the

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<v Speaker 1>benefits of them, will be dependent on them, and we've

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<v Speaker 1>got to make sure they're going to be resilient. They're

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<v Speaker 1>gonna be up and running when we need them. And

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<v Speaker 1>that's going to continue to require the public private partnership

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<v Speaker 1>and greater global cooperation for standards and independent testing of

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<v Speaker 1>key components of everybody's products. And we're supporting that around

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<v Speaker 1>the world. To what extent are you concerned that the

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<v Speaker 1>way that the United States has essentially blacklisted Wahwei spreads

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<v Speaker 1>to other countries at this point, Well, frankly, I'm not

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<v Speaker 1>concerned about it. You know, I've been to twenty six

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<v Speaker 1>countries for Whahwei, although I haven't traveled since uh March

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<v Speaker 1>of um, we're still doing business in an awful lot

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<v Speaker 1>of places. I mean, the fact I mentioned earlier that

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<v Speaker 1>two hundred and sixty seven the Global Fortune companies have

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<v Speaker 1>turned to us for their transformation the Asia Pacific. All

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<v Speaker 1>these these countries are very interested in in green energy,

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<v Speaker 1>and we're really becoming a leader in green energy, partnering

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<v Speaker 1>with folks to help develop greater capabilities to create the

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<v Speaker 1>green energy, to transmit it, and to store it. And

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<v Speaker 1>we're gonna get an awful lot of business in the

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<v Speaker 1>in the Asia Pacific realm, and I think increasingly in Europe.

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<v Speaker 1>So there's it's a big world out there, and we've

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<v Speaker 1>got plenty of business and do But it can be

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<v Speaker 1>Whawei can be just fine in a world without the

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<v Speaker 1>United States. I mean to be fair, there is a

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<v Speaker 1>ton of equipment here in the United States that is

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<v Speaker 1>running on Huawei parts and other Chinese companies because they

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<v Speaker 1>were already here before the ban um went into effect,

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<v Speaker 1>the US ban against Chinese made components. But can Wahwei

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<v Speaker 1>have a future you talk about, you know, the global

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<v Speaker 1>reach that you guys have in globalization, you know, is

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<v Speaker 1>the U S market crucial to this company going forward? Actually,

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<v Speaker 1>as I said, we have not had significant revenues in

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<v Speaker 1>the United States compared to our global revenues. Yes, we

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<v Speaker 1>can continue to do fine without any revenue from the US.

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<v Speaker 1>But when you talk about globalization, the issue of the

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<v Speaker 1>sanctions limiting the ability of the American semiconductor industries to

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<v Speaker 1>sell the WAWAEY. Now that has tremendous benefits for the

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<v Speaker 1>American worker because when we were at twelve billion a

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<v Speaker 1>year in those purchases, that supports about forty tho American jobs.

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<v Speaker 1>So we hope at some point there will be a

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<v Speaker 1>recognition and there are discussions on some of the tariff

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<v Speaker 1>issues you solve the editorials in the Wall Street Journal

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<v Speaker 1>and Washington Post recently trying to get folks to say,

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<v Speaker 1>let's look dispassionately at tariffs. Let's not put tariffs on

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<v Speaker 1>Chinese goods if we can't get goods from somewhere else.

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<v Speaker 1>We have to look at what's in the best interest

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<v Speaker 1>in the United States. And I think that's a great standard,

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<v Speaker 1>and I hope over time that that will be something

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<v Speaker 1>that the US government will consider. But frankly, we're seeing

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<v Speaker 1>a change in the global supply chain of semiconductors. The

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<v Speaker 1>head of Intel was asked on TV last week when

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<v Speaker 1>the U s will be independent and semiconductors. He said never.

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<v Speaker 1>And what he said was, and we see the coming

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<v Speaker 1>out of Europe that there will be a transformation in

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<v Speaker 1>the semiconductor market globally Asia, US and Europe, and it

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<v Speaker 1>will be Europe, US and fifty percent Asia. So we're

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<v Speaker 1>going to see a transfer a globalization UH. And we

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<v Speaker 1>have reconstructed our product portfolio and our path forward. So

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<v Speaker 1>if we're not able to get those chips from the

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<v Speaker 1>United States, we're still going to be fine, and we're

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<v Speaker 1>in survival mode. But but we're going to survive in

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<v Speaker 1>survival mode, but going to survive. Andy, I want to

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<v Speaker 1>talk a little bit. You mentioned the supply chain, and

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<v Speaker 1>I'm wondering what you can tell us about the global

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<v Speaker 1>supply chain right now and what you're seeing in terms

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<v Speaker 1>of components And have you seen the constraints that we've

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<v Speaker 1>all experienced over the last couple of years and particularly

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<v Speaker 1>over the last fourteen months at this point, are you

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<v Speaker 1>starting to see those ease Well, UM, not in a

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<v Speaker 1>substantial way. But what we've been working on is UH

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<v Speaker 1>to diversify our suppli shot. We've also adjusted the products

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<v Speaker 1>that we make to make sure that we have components

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<v Speaker 1>that we know we can that we can get and

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<v Speaker 1>we're pursuing those products shortening the life cycle of other products.

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<v Speaker 1>So the UH and the greater research that we're doing

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<v Speaker 1>in in computing UH, in UH, the power supplies, UH

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<v Speaker 1>in the individual digitalization of sectors. That we're going to

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<v Speaker 1>find new business in those areas, and we're going to

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<v Speaker 1>help inform those that are going to make chips around

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<v Speaker 1>the world that some of the things that we've learned

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<v Speaker 1>we're going to be sharing with them, and so that

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<v Speaker 1>there there will be more supplies from around the world. Generally,

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<v Speaker 1>we've diversified our supply chain for those things we can get,

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<v Speaker 1>and I think that's what we're gonna see around world.

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<v Speaker 1>It's got to be greater diversification so that a company

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<v Speaker 1>or government can know they'll be able to get it

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<v Speaker 1>from here, that they'll get it from there, and probably

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<v Speaker 1>need some capability in the United States so that if

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<v Speaker 1>really bad stuff happens in the short term and something's essential,

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<v Speaker 1>then we'll have it. But look at something like the

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<v Speaker 1>baby formula, Right, you can't just have everything domestic and

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<v Speaker 1>think that that you're going to have what you need

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<v Speaker 1>when bad things happen. Right, you have to have kind

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<v Speaker 1>of overarching approach and and still somewhat of a refocused,

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<v Speaker 1>reshaped global supply chain. Yeah, it's certainly something that I

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<v Speaker 1>talked about earlier in that panel, the Bloomberg Live Panel,

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<v Speaker 1>when it comes to near shoring, on shoring, I mean

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<v Speaker 1>people are making sure they've got good backup systems. Uh.

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<v Speaker 1>Any party, Thank you so much. Chief security officer at

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<v Speaker 1>Wawei Technologies USA, on the phone from San Francisco,