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Speaker 1: You're listening to Bloomberg Business Week with Carol Messer and

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Speaker 1: Tim Steneveek on Bloomberg Radio.

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Speaker 2: We are talking technology. I don't know if you guys noticed.

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Speaker 2: Huawei and Apple were the only two major brands to

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Speaker 2: record growth in China smartphone shipments in the second quarter.

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Speaker 2: Chain that was according to IDC, showing the Shenzen based

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Speaker 2: firm grew by seventy six percent. That's pretty big.

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Speaker 1: Well, on Friday, Huawei Technologies, the electronics behemoth, reported that

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Speaker 1: it grew sales for a third straight quarter after new

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Speaker 1: businesses like clouds services and a resurgence smartphone unit helped

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Speaker 1: mitigate the fallout from those US sanctions.

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Speaker 2: Well, the company is trying to revive its high end

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Speaker 2: device businesses, which has been bludgeoned by US sanctions. You

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Speaker 2: guys know, we talked about this a lot, but could

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Speaker 2: feature five G capabilities without using American chips. So back

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Speaker 2: with us with more on the business and how it

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Speaker 2: continues to navigate a tricky US China relationship. We're delighted

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Speaker 2: to have back with us. Andy Perdy, He's chief security

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Speaker 2: officer Huawei USA on zoom in DC. His bio deep

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Speaker 2: and wide in the public and privatestors, reminding us that

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Speaker 2: Andy was a member of the White House staff team

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Speaker 2: that helped draft the US National Strategy to Secure cyber

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Speaker 2: space that was back in three He also worked at

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Speaker 2: the US Department of Homeland Security to launch the National

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Speaker 2: Cybersecurity Division and the US Computer Emergency Readiness Team. You

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Speaker 2: have a great background. This is why we wanted to

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Speaker 2: lay it out. There's lots more Andy, How are you

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Speaker 2: and welcome back.

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Speaker 3: I'm great, it's secured to be back with you today.

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Speaker 2: Well, hey, can I ask you how do you feel

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Speaker 2: about cybersecurity? Do you feel like we're in a better

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Speaker 2: way at this point? We just did a whole thing

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Speaker 2: about generative AI and deep fakes and how we're going

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Speaker 2: to moderate all that content, But how do you feel

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Speaker 2: about security right now?

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Speaker 3: Well? Security is on a journey, not a destination, as

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Speaker 3: colleagues always say. And the fact is that we are

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Speaker 3: becoming increasingly dependent on technologies five G technologies and technologies

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Speaker 3: beyond five G. And the fact is we're going to

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Speaker 3: become more dependent on these technologies. So the need to

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Speaker 3: increase the cybersecurity and privacy ecosystem to have international standards,

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Speaker 3: greater testing, can four months, transparency continues to increase because

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Speaker 3: we can see there continue to be cyber attacks, and

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Speaker 3: these cyber attests can be very serious if we don't

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Speaker 3: continue to up the game as part of a global

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Speaker 3: approach to this risk.

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Speaker 1: Andy, can you talk a little bit about your journey,

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Speaker 1: because I was talking to it to Carol about it

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Speaker 1: a little earlier on our planning call when we were

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Speaker 1: preparing for this. Going from the White House staff team

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Speaker 1: that helped rep the US national strategies to secure cyber

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Speaker 1: space back in two thousand and three, you're at the

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Speaker 1: Department of Homeland Security. Later you're on the US Computer

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Speaker 1: Emergency Readiness Team. How do you go from there? Talk

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Speaker 1: about the transition from there and from government work to

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Speaker 1: going to work in the private sector and especially for

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Speaker 1: the Chinese company Wallwei.

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Speaker 3: Well, coming out of the Department Homeland Security, I work

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Speaker 3: for five different startups as an advisor and consultant and

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Speaker 3: that was a very exciting time. And I moved on

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Speaker 3: to Computer Sciences Corporation and then Huawei in twenty twelve,

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Speaker 3: and frankly, I was recruited to Huawei to help promote

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Speaker 3: a SAYE for cyber space and this is the role

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Speaker 3: that I've been able to contribute to as part of

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Speaker 3: a global cyber and privacy assuring system. And so I've

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Speaker 3: been to twenty six countries for a while, but I've

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Speaker 3: been to China twenty seven times and meeting people and

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Speaker 3: former colleagues from other countries who are close to the

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Speaker 3: United States. It's been a great journey and hopefully that

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Speaker 3: in this toxic political environment we won't lose sight of

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Speaker 3: the fact that regardless of where the products come from,

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Speaker 3: we need a very strong ecosystem with international standards, independent testing, conformance,

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Speaker 3: and accountability both from a cybersecurity and privacy perspective to

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Speaker 3: continue with the challenge that we've got to work to

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Speaker 3: meet every day.

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Speaker 1: So help us understand where does the US have it

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Speaker 1: wrong with Huawei? Why shouldn't the US have sanctions on

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Speaker 1: the company?

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Speaker 3: Well, I think the way I would like to see

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Speaker 3: an approach to these issues globally is to try to

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Speaker 3: consider what's in the best interest in the United States.

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Speaker 3: And a number of these issues, such as what kinds

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Speaker 3: of products can be sold to what companies, can be

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Speaker 3: fairly complex because there can be a risk that one

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Speaker 3: can cut off your nose despite your face and really

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Speaker 3: can threaten American jobs. So we've been interested in talking

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Speaker 3: to the US government for some years, but right now

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Speaker 3: it's really a global situation and we have colleagues around

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Speaker 3: the world. I've spoken to several in Europe within the

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Speaker 3: last seven days that the challenge of trying to not

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Speaker 3: be distracted from the mission of cybersecurity progressy assurance by

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Speaker 3: the geopolitics, by the pressure there needs to be these

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Speaker 3: kinds of strong standards in independent testing for anybody, because

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Speaker 3: the bad guys can hack into everyone. So we cannot

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Speaker 3: put our guard down by thinking, well, we've blocked companies

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Speaker 3: from this country. That's not going to make a safer

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Speaker 3: and so we have to make sure that we reduce

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Speaker 3: the risk on a continuous basis, hopefully on a global

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Speaker 3: basis with our colleagues around the world.

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Speaker 2: It's also about business for you guys, right, because it

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Speaker 2: hurts business correct to have these sanctions by the US.

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Speaker 3: Yeah, we had about a thirty billion dollar hit in

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Speaker 3: our revenue a couple of years ago when they lock

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Speaker 3: the five G chips from being allowed to be sold

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Speaker 3: from American companies to Huawei. So our consumer devices didn't

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Speaker 3: really affect all that much else but our consumer devices

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Speaker 3: took basically a permanent hit, and so we have regrouped.

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Speaker 3: We've raised our research and development up to twenty five

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Speaker 3: percent of our closer revenues, and so we're investing in

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Speaker 3: digital transformation, the intelligent world five G and AI, not

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Speaker 3: generative AI chat ChiPT but AI for business for industry.

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Speaker 3: We believe that going forward, ninety eight percent of all

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Speaker 3: ALI will be industrial and some agriculture, and only two

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Speaker 3: percent will be consumers. So we're working with partners around

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Speaker 3: the world to help bring about digital transformation of industry

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Speaker 3: and industry sectors with partners, and AI is a big

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Speaker 3: part of it.

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Speaker 2: Do you just move on? I mean, you guys already

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Speaker 2: have right in terms of the restrictions because of those

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Speaker 2: US sanctions, whether it's you making your own design tools

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Speaker 2: for processor chips, I mean you just have to kind

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Speaker 2: of move on because you don't know whether or not

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Speaker 2: things are going to get warmer and fuzzier between the

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Speaker 2: US and China.

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Speaker 3: That's right. We're not going to look back. We're not

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Speaker 3: going to particularly complain about it either, and the excitement

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Speaker 3: of working with our partners and customers around the world.

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Speaker 3: There's a whole lot of places in the world that

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Speaker 3: want to do business with us, a whole lot of

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Speaker 3: places in the world. They're going to benefit. And our

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Speaker 3: partners know that we don't make money unless they make money.

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Speaker 3: So bringing these new technologies in smart mining, in ports,

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Speaker 3: and healthcare, in transportation, smart cities, and frankly, green energy,

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Speaker 3: reducing the carbon footprint using technology not just limiting access

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Speaker 3: to fossil fuels, but technology that can help reduce the

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Speaker 3: carbon footprint and create greater capacity for green energy, both

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Speaker 3: in creation, in transmission, and storage. So yeah, we're not

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Speaker 3: looking back, we're looking forward and it's an exciting future.

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Speaker 2: Andy, you're in DC and I can imagine the conversations

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Speaker 2: that you're having with either regulators or lawmakers. How would

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Speaker 2: you describe the environment between US and China right now?

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Speaker 3: Well, we're just a small player in a large world,

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Speaker 3: and we're a privately owned company. We can't affect those issues.

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Speaker 3: We are just going to move forward doing what we're doing,

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Speaker 3: working with our customers in about one hundred and seventy

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Speaker 3: countries and helping them meet the requirements of government in

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Speaker 3: their various parts of the world. Of course, at the

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Speaker 3: global level, we hope common ground can be found on

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Speaker 3: some issues between the US and China, because everybody can

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Speaker 3: benefit if we can find some common ground. We do

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Speaker 3: have an interconnected world and we can all benefit if

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Speaker 3: we can find common ground and help reduce the toxic

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Speaker 3: political environment somewhat.

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Speaker 1: What's a good way If you were still in the government,

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Speaker 1: knowing what you know now, what would you advise?

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Speaker 3: Well, I think what we've heard from the Commerce Secretary

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Speaker 3: and the Treasury Secretary, and I think the now Security

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Speaker 3: Advisor Secretary of State, they're talking about let's try to

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Speaker 3: have some conversations to try to find some common ground.

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Speaker 3: I can't do any better than that. I hope some

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Speaker 3: of the things could have to do climate change and

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Speaker 3: green energy and the ecosystems, helping to connect the unconnected.

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Speaker 3: They're three billion people in the world that are unconnected.

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Speaker 3: These are problems hopefully we can work together on. So

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Speaker 3: we shouldn't let those things we can agree on be

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Speaker 3: held up because there are things we can't agree on.

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Speaker 3: All right.

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Speaker 2: We do want to get back to a guest because

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Speaker 2: we are delighted to still have with US. Andy Perty,

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Speaker 2: chief security officer at Huawei USA, on zoom from New

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Speaker 2: York from Washington, DC, just moved you to New York. Andy, Sorry,

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Speaker 2: you're welcome anytime, you are welcome, And as we said,

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Speaker 2: also worked in the US government, Andy, Can I ask

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Speaker 2: you something? Then? I want to move on to kind

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Speaker 2: of more broadly, do you think things would be easier

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Speaker 2: if Huawei, I know, they're a massive company, if they

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Speaker 2: stopped being private and became a publicly traded entity, because

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Speaker 2: there's a certain level of transparency that really goes along

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Speaker 2: with that that it would make it an easier plight

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Speaker 2: for the company, if you.

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Speaker 3: Will, something that's been suggested over the years. And frankly,

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Speaker 3: I don't think that could possibly make a difference of

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Speaker 3: the hostility between the US and China and the concern

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Speaker 3: the US says that the China government force Squawa to

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Speaker 3: do certain things. It's one of the reasons that we've

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Speaker 3: offered to talk with the US government, and they have

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Speaker 3: not been willing to talk with us about some of

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Speaker 3: the proven risk mitigation measures that, for example, are in

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Speaker 3: place for Ericson and Nokia that allow them to do

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Speaker 3: business in the United States despite their very deep presence

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Speaker 3: in China. So now, I don't think that particular aspect

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Speaker 3: of transparency could help at all but we're open to

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Speaker 3: some mechanisms that could provide great assistance. But the kinds

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Speaker 3: of measures that are necessary to make sure that people

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Speaker 3: don't use their products for bad things is what's necessary

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Speaker 3: to make sure they don't use other people's products for

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Speaker 3: bad things. And you think back to the attacks on

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Speaker 3: Solar Winds and Microsoft Exchange server and the recent attacks

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Speaker 3: on the Microsoft Digital Certificate. No such thing as a

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Speaker 3: trusted supplier. We need to have the mechanisms for everybody

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Speaker 3: to make sure the bad guys can't hack through and

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Speaker 3: do home.

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Speaker 1: What are those protections that need that while.

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Speaker 3: We can have well, the kinds of mechanisms, for example,

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Speaker 3: that Noki and Erickson operate under, are government monitored risk mitigation,

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Speaker 3: independent testing of the products. We've been open and we

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Speaker 3: believe that all the telecom suppliers should make critical components

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Speaker 3: available by testing by independent, recognized third party experts based

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Speaker 3: on international standards, with accountability for failure to meet the requirements,

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Speaker 3: and accountability if your equipment is allowed to be used

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Speaker 3: to do bad things like the spy or cause various attacks.

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Speaker 3: Those are the kind of measures that everyone needs.

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Speaker 2: So I do want to broaden out a little bit

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Speaker 2: because we've I'm thinking about our Daybreak Asia program coming

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Speaker 2: up in just about fifteen minutes, getting ready for the

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Speaker 2: Asia Open. And you know, there are as you know,

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Speaker 2: well know a lot of concerns about what's going on

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Speaker 2: in China, whether it's the real estate market and now

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Speaker 2: is it moving out to kind of the fringe financial firms,

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Speaker 2: and just concerns, concerns, concerns. How would you describe the

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Speaker 2: Chinese economy? And you know, do you agree President Biden

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Speaker 2: when he said the Chinese economy is a ticking time bomb.

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Speaker 3: Frankly, unfortunately, I'm not an expert in global economics or

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Speaker 3: the economy of China. I've got a number of good

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Speaker 3: friends who work over there for China. I look forward

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Speaker 3: to visiting them, but unfortunately I'm not your person to

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Speaker 3: help you do an analysis what's happening in China. I

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Speaker 3: just know my colleagues are so happy that host COVID.

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Speaker 3: They can live normal lives over there, and that's a

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Speaker 3: great burden off them, and their quality of life is

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Speaker 3: much better.

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Speaker 1: I think what's puzzling to us. And one thing that

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Speaker 1: we wanted to talk to you about was, you know,

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Speaker 1: the success that we've always been able to find within China,

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Speaker 1: juxtaposed with the challenges that we've heard about the Chinese

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Speaker 1: economy of late, Can you share anything there?

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Speaker 3: Well, we have been providing very real value that can

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Speaker 3: help save money. I can help reduce the carbon footprint,

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Speaker 3: increase efficiency, increase the safety, reduce the necessity of some workers.

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Speaker 3: And so by bringing value and helping to save money,

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Speaker 3: we can generate revenue for ourselves and for our partners.

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Speaker 2: So when you guys did report earnings on Friday, came

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Speaker 2: out with a financial update reporting that the company, Hilwe

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Speaker 2: Technologies grew sales for a third straight quarter. Talked specifically

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Speaker 2: about new businesses such as cloud services and a resurgent

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Speaker 2: resurgence excuse me, in the smartphone unit, so helping to

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Speaker 2: kind of counterbalance some of the fallout from the US sanctions.

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Speaker 2: Tell us a little bit about the business you are

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Speaker 2: seeing and where is the growth. Is it domestically, is

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Speaker 2: it demand from all the overseas customers? Talk to us

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Speaker 2: a little bit about that if you could.

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Speaker 3: Well, there's definitely a demand from around the world. And

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Speaker 3: as you know, the particular areas that grew the most

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Speaker 3: for us is the cloud business and digital power, which

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Speaker 3: is which is very exciting. But our ict, our information

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Speaker 3: communication technologies infrastructure business remain solid. Our consumer business, which

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Speaker 3: took the hit that we talked about before, has achieved

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Speaker 3: growth and we've released a number of new four G phones,

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Speaker 3: So yeah, there's there's growth, there's progress all around the world,

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Speaker 3: and the use caps is the partnership we formed are

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Speaker 3: also all around the world. So companies and the major

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Speaker 3: five G carriers can see how should they invest their

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Speaker 3: money so they can maximize and monetize those benefits, and

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Speaker 3: how can they partner and help the industry sectors prioritize

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Speaker 3: how should they spend their money to bring the benefits

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Speaker 3: of digital transformation and decarbonization to the industries of the world.

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Speaker 2: When you talk to about the cloud, I'm assuming AI

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Speaker 2: is a big engine there as well. Is that fair?

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Speaker 3: Yeah, a AI has been in huge and our digital

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Speaker 3: cloud business, our PANNGU model, which is involved in a

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Speaker 3: number of industry sectors, a number of proven use cases,

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Speaker 3: for example, weather forecast. The journal Nature wrote an article

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Speaker 3: about the use of AI to protict weather. But also

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Speaker 3: we've been heavily involved in We've formed our own business

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Speaker 3: units within our company, things like smart mining, smart road

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Speaker 3: electric power, waterways, and port All these things have AI

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Speaker 3: aspects of the not generative AI, but AI to help

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Speaker 3: advance efficiency and reduce the carbon footprint.

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Speaker 2: All right, we're going to leave it on that note. Hey, listen, Andy,

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Speaker 2: thank you as always as you're always so gracious in

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Speaker 2: giving us a nice chunk of time. So appreciate it.

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Speaker 2: Andy Perdy. He's chief security officer at Huawei USA. As

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Speaker 2: we mentioned, several stints in the US government, including a

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Speaker 2: member of the White House team that helped draft the

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Speaker 2: US National Strategy to Secure cyber space. That was back

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Speaker 2: in two thousand and three, so we're talking twenty years ago,

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Speaker 2: but certainly cybersecurity issue is probably even more front and

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Speaker 2: center than ever before.

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Speaker 1: I love talking, Andy, I do too, great perspective.

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Speaker 2: All right, you're listening to you and watching Bloomberg Businessweet

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Speaker 2: Carol Masser along with Tim Stanovich, and this is Bloomberg