WEBVTT - Huawei Battling Cyberattacks Despite US Sanctions

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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>Tim Steneveek on Bloomberg Radio.

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

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<v Speaker 2>Huawei and Apple were the only two major brands to

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<v Speaker 2>record growth in China smartphone shipments in the second quarter.

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<v Speaker 2>Chain that was according to IDC, showing the Shenzen based

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<v Speaker 2>firm grew by seventy six percent. That's pretty big.

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<v Speaker 1>Well, on Friday, Huawei Technologies, the electronics behemoth, reported that

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<v Speaker 1>it grew sales for a third straight quarter after new

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<v Speaker 1>businesses like clouds services and a resurgence smartphone unit helped

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<v Speaker 1>mitigate the fallout from those US sanctions.

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<v Speaker 2>Well, the company is trying to revive its high end

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<v Speaker 2>device businesses, which has been bludgeoned by US sanctions. You

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<v Speaker 2>guys know, we talked about this a lot, but could

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<v Speaker 2>feature five G capabilities without using American chips. So back

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<v Speaker 2>with us with more on the business and how it

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<v Speaker 2>continues to navigate a tricky US China relationship. We're delighted

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

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<v Speaker 2>officer Huawei USA on zoom in DC. His bio deep

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<v Speaker 2>and wide in the public and privatestors, reminding us that

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<v Speaker 2>Andy was a member of the White House staff team

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<v Speaker 2>that helped draft the US National Strategy to Secure cyber

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<v Speaker 2>space that was back in three He also worked at

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<v Speaker 2>the US Department of Homeland Security to launch the National

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<v Speaker 2>Cybersecurity Division and the US Computer Emergency Readiness Team. You

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<v Speaker 2>have a great background. This is why we wanted to

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

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<v Speaker 2>and welcome back.

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

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<v Speaker 2>Well, hey, can I ask you how do you feel

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<v Speaker 2>about cybersecurity? Do you feel like we're in a better

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<v Speaker 2>way at this point? We just did a whole thing

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<v Speaker 2>about generative AI and deep fakes and how we're going

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<v Speaker 2>to moderate all that content, But how do you feel

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<v Speaker 2>about security right now?

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<v Speaker 3>Well? Security is on a journey, not a destination, as

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<v Speaker 3>colleagues always say. And the fact is that we are

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<v Speaker 3>becoming increasingly dependent on technologies five G technologies and technologies

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<v Speaker 3>beyond five G. And the fact is we're going to

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<v Speaker 3>become more dependent on these technologies. So the need to

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<v Speaker 3>increase the cybersecurity and privacy ecosystem to have international standards,

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<v Speaker 3>greater testing, can four months, transparency continues to increase because

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<v Speaker 3>we can see there continue to be cyber attacks, and

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<v Speaker 3>these cyber attests can be very serious if we don't

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<v Speaker 3>continue to up the game as part of a global

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<v Speaker 3>approach to this risk.

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<v Speaker 1>Andy, can you talk a little bit about your journey,

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<v Speaker 1>because I was talking to it to Carol about it

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<v Speaker 1>a little earlier on our planning call when we were

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<v Speaker 1>preparing for this. Going from the White House staff team

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<v Speaker 1>that helped rep the US national strategies to secure cyber

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<v Speaker 1>space back in two thousand and three, you're at the

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<v Speaker 1>Department of Homeland Security. Later you're on the US Computer

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<v Speaker 1>Emergency Readiness Team. How do you go from there? Talk

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<v Speaker 1>about the transition from there and from government work to

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<v Speaker 1>going to work in the private sector and especially for

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<v Speaker 1>the Chinese company Wallwei.

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<v Speaker 3>Well, coming out of the Department Homeland Security, I work

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<v Speaker 3>for five different startups as an advisor and consultant and

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<v Speaker 3>that was a very exciting time. And I moved on

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<v Speaker 3>to Computer Sciences Corporation and then Huawei in twenty twelve,

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<v Speaker 3>and frankly, I was recruited to Huawei to help promote

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<v Speaker 3>a SAYE for cyber space and this is the role

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<v Speaker 3>that I've been able to contribute to as part of

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<v Speaker 3>a global cyber and privacy assuring system. And so I've

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<v Speaker 3>been to twenty six countries for a while, but I've

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<v Speaker 3>been to China twenty seven times and meeting people and

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<v Speaker 3>former colleagues from other countries who are close to the

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<v Speaker 3>United States. It's been a great journey and hopefully that

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<v Speaker 3>in this toxic political environment we won't lose sight of

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<v Speaker 3>the fact that regardless of where the products come from,

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<v Speaker 3>we need a very strong ecosystem with international standards, independent testing, conformance,

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<v Speaker 3>and accountability both from a cybersecurity and privacy perspective to

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<v Speaker 3>continue with the challenge that we've got to work to

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<v Speaker 3>meet every day.

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<v Speaker 1>So help us understand where does the US have it

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<v Speaker 1>wrong with Huawei? Why shouldn't the US have sanctions on

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<v Speaker 1>the company?

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<v Speaker 3>Well, I think the way I would like to see

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<v Speaker 3>an approach to these issues globally is to try to

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<v Speaker 3>consider what's in the best interest in the United States.

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<v Speaker 3>And a number of these issues, such as what kinds

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<v Speaker 3>of products can be sold to what companies, can be

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<v Speaker 3>fairly complex because there can be a risk that one

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<v Speaker 3>can cut off your nose despite your face and really

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<v Speaker 3>can threaten American jobs. So we've been interested in talking

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<v Speaker 3>to the US government for some years, but right now

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<v Speaker 3>it's really a global situation and we have colleagues around

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<v Speaker 3>the world. I've spoken to several in Europe within the

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<v Speaker 3>last seven days that the challenge of trying to not

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<v Speaker 3>be distracted from the mission of cybersecurity progressy assurance by

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<v Speaker 3>the geopolitics, by the pressure there needs to be these

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<v Speaker 3>kinds of strong standards in independent testing for anybody, because

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<v Speaker 3>the bad guys can hack into everyone. So we cannot

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<v Speaker 3>put our guard down by thinking, well, we've blocked companies

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<v Speaker 3>from this country. That's not going to make a safer

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<v Speaker 3>and so we have to make sure that we reduce

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<v Speaker 3>the risk on a continuous basis, hopefully on a global

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<v Speaker 3>basis with our colleagues around the world.

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<v Speaker 2>It's also about business for you guys, right, because it

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<v Speaker 2>hurts business correct to have these sanctions by the US.

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<v Speaker 3>Yeah, we had about a thirty billion dollar hit in

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<v Speaker 3>our revenue a couple of years ago when they lock

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<v Speaker 3>the five G chips from being allowed to be sold

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<v Speaker 3>from American companies to Huawei. So our consumer devices didn't

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<v Speaker 3>really affect all that much else but our consumer devices

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<v Speaker 3>took basically a permanent hit, and so we have regrouped.

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<v Speaker 3>We've raised our research and development up to twenty five

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<v Speaker 3>percent of our closer revenues, and so we're investing in

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<v Speaker 3>digital transformation, the intelligent world five G and AI, not

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<v Speaker 3>generative AI chat ChiPT but AI for business for industry.

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<v Speaker 3>We believe that going forward, ninety eight percent of all

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<v Speaker 3>ALI will be industrial and some agriculture, and only two

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<v Speaker 3>percent will be consumers. So we're working with partners around

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<v Speaker 3>the world to help bring about digital transformation of industry

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<v Speaker 3>and industry sectors with partners, and AI is a big

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<v Speaker 3>part of it.

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<v Speaker 2>Do you just move on? I mean, you guys already

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<v Speaker 2>have right in terms of the restrictions because of those

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<v Speaker 2>US sanctions, whether it's you making your own design tools

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<v Speaker 2>for processor chips, I mean you just have to kind

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<v Speaker 2>of move on because you don't know whether or not

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<v Speaker 2>things are going to get warmer and fuzzier between the

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<v Speaker 2>US and China.

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<v Speaker 3>That's right. We're not going to look back. We're not

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<v Speaker 3>going to particularly complain about it either, and the excitement

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<v Speaker 3>of working with our partners and customers around the world.

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<v Speaker 3>There's a whole lot of places in the world that

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<v Speaker 3>want to do business with us, a whole lot of

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<v Speaker 3>places in the world. They're going to benefit. And our

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<v Speaker 3>partners know that we don't make money unless they make money.

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<v Speaker 3>So bringing these new technologies in smart mining, in ports,

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<v Speaker 3>and healthcare, in transportation, smart cities, and frankly, green energy,

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<v Speaker 3>reducing the carbon footprint using technology not just limiting access

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<v Speaker 3>to fossil fuels, but technology that can help reduce the

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<v Speaker 3>carbon footprint and create greater capacity for green energy, both

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<v Speaker 3>in creation, in transmission, and storage. So yeah, we're not

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

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<v Speaker 2>Andy, you're in DC and I can imagine the conversations

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<v Speaker 2>that you're having with either regulators or lawmakers. How would

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<v Speaker 2>you describe the environment between US and China right now?

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<v Speaker 3>Well, we're just a small player in a large world,

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

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<v Speaker 3>We are just going to move forward doing what we're doing,

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<v Speaker 3>working with our customers in about one hundred and seventy

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<v Speaker 3>countries and helping them meet the requirements of government in

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<v Speaker 3>their various parts of the world. Of course, at the

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<v Speaker 3>global level, we hope common ground can be found on

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<v Speaker 3>some issues between the US and China, because everybody can

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<v Speaker 3>benefit if we can find some common ground. We do

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<v Speaker 3>have an interconnected world and we can all benefit if

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<v Speaker 3>we can find common ground and help reduce the toxic

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<v Speaker 3>political environment somewhat.

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

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<v Speaker 1>knowing what you know now, what would you advise?

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<v Speaker 3>Well, I think what we've heard from the Commerce Secretary

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<v Speaker 3>and the Treasury Secretary, and I think the now Security

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

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<v Speaker 3>have some conversations to try to find some common ground.

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<v Speaker 3>I can't do any better than that. I hope some

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<v Speaker 3>of the things could have to do climate change and

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<v Speaker 3>green energy and the ecosystems, helping to connect the unconnected.

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<v Speaker 3>They're three billion people in the world that are unconnected.

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<v Speaker 3>These are problems hopefully we can work together on. So

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<v Speaker 3>we shouldn't let those things we can agree on be

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<v Speaker 3>held up because there are things we can't agree on.

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<v Speaker 3>All right.

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<v Speaker 2>We do want to get back to a guest because

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<v Speaker 2>we are delighted to still have with US. Andy Perty,

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<v Speaker 2>chief security officer at Huawei USA, on zoom from New

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<v Speaker 2>York from Washington, DC, just moved you to New York. Andy, Sorry,

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<v Speaker 2>you're welcome anytime, you are welcome, And as we said,

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<v Speaker 2>also worked in the US government, Andy, Can I ask

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<v Speaker 2>you something? Then? I want to move on to kind

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<v Speaker 2>of more broadly, do you think things would be easier

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<v Speaker 2>if Huawei, I know, they're a massive company, if they

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<v Speaker 2>stopped being private and became a publicly traded entity, because

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<v Speaker 2>there's a certain level of transparency that really goes along

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<v Speaker 2>with that that it would make it an easier plight

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<v Speaker 2>for the company, if you.

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

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<v Speaker 3>I don't think that could possibly make a difference of

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<v Speaker 3>the hostility between the US and China and the concern

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<v Speaker 3>the US says that the China government force Squawa to

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

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<v Speaker 3>offered to talk with the US government, and they have

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<v Speaker 3>not been willing to talk with us about some of

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<v Speaker 3>the proven risk mitigation measures that, for example, are in

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<v Speaker 3>place for Ericson and Nokia that allow them to do

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<v Speaker 3>business in the United States despite their very deep presence

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

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<v Speaker 3>of transparency could help at all but we're open to

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<v Speaker 3>some mechanisms that could provide great assistance. But the kinds

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<v Speaker 3>of measures that are necessary to make sure that people

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<v Speaker 3>don't use their products for bad things is what's necessary

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<v Speaker 3>to make sure they don't use other people's products for

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<v Speaker 3>bad things. And you think back to the attacks on

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<v Speaker 3>Solar Winds and Microsoft Exchange server and the recent attacks

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<v Speaker 3>on the Microsoft Digital Certificate. No such thing as a

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<v Speaker 3>trusted supplier. We need to have the mechanisms for everybody

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<v Speaker 3>to make sure the bad guys can't hack through and

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<v Speaker 3>do home.

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<v Speaker 1>What are those protections that need that while.

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<v Speaker 3>We can have well, the kinds of mechanisms, for example,

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<v Speaker 3>that Noki and Erickson operate under, are government monitored risk mitigation,

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<v Speaker 3>independent testing of the products. We've been open and we

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<v Speaker 3>believe that all the telecom suppliers should make critical components

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<v Speaker 3>available by testing by independent, recognized third party experts based

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<v Speaker 3>on international standards, with accountability for failure to meet the requirements,

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<v Speaker 3>and accountability if your equipment is allowed to be used

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<v Speaker 3>to do bad things like the spy or cause various attacks.

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<v Speaker 3>Those are the kind of measures that everyone needs.

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<v Speaker 2>So I do want to broaden out a little bit

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<v Speaker 2>because we've I'm thinking about our Daybreak Asia program coming

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<v Speaker 2>up in just about fifteen minutes, getting ready for the

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<v Speaker 2>Asia Open. And you know, there are as you know,

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<v Speaker 2>well know a lot of concerns about what's going on

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<v Speaker 2>in China, whether it's the real estate market and now

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<v Speaker 2>is it moving out to kind of the fringe financial firms,

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<v Speaker 2>and just concerns, concerns, concerns. How would you describe the

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<v Speaker 2>Chinese economy? And you know, do you agree President Biden

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<v Speaker 2>when he said the Chinese economy is a ticking time bomb.

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<v Speaker 3>Frankly, unfortunately, I'm not an expert in global economics or

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<v Speaker 3>the economy of China. I've got a number of good

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<v Speaker 3>friends who work over there for China. I look forward

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<v Speaker 3>to visiting them, but unfortunately I'm not your person to

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<v Speaker 3>help you do an analysis what's happening in China. I

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<v Speaker 3>just know my colleagues are so happy that host COVID.

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<v Speaker 3>They can live normal lives over there, and that's a

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<v Speaker 3>great burden off them, and their quality of life is

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<v Speaker 3>much better.

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<v Speaker 1>I think what's puzzling to us. And one thing that

0:11:44.160 --> 0:11:46.360
<v Speaker 1>we wanted to talk to you about was, you know,

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

0:11:50.880 --> 0:11:53.400
<v Speaker 1>juxtaposed with the challenges that we've heard about the Chinese

0:11:53.440 --> 0:11:55.800
<v Speaker 1>economy of late, Can you share anything there?

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<v Speaker 3>Well, we have been providing very real value that can

0:12:00.760 --> 0:12:03.280
<v Speaker 3>help save money. I can help reduce the carbon footprint,

0:12:04.040 --> 0:12:09.600
<v Speaker 3>increase efficiency, increase the safety, reduce the necessity of some workers.

0:12:09.880 --> 0:12:13.160
<v Speaker 3>And so by bringing value and helping to save money,

0:12:13.640 --> 0:12:16.480
<v Speaker 3>we can generate revenue for ourselves and for our partners.

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<v Speaker 2>So when you guys did report earnings on Friday, came

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<v Speaker 2>out with a financial update reporting that the company, Hilwe

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<v Speaker 2>Technologies grew sales for a third straight quarter. Talked specifically

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<v Speaker 2>about new businesses such as cloud services and a resurgent

0:12:31.880 --> 0:12:34.960
<v Speaker 2>resurgence excuse me, in the smartphone unit, so helping to

0:12:35.040 --> 0:12:38.240
<v Speaker 2>kind of counterbalance some of the fallout from the US sanctions.

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<v Speaker 2>Tell us a little bit about the business you are

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<v Speaker 2>seeing and where is the growth. Is it domestically, is

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<v Speaker 2>it demand from all the overseas customers? Talk to us

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<v Speaker 2>a little bit about that if you could.

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

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<v Speaker 3>as you know, the particular areas that grew the most

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<v Speaker 3>for us is the cloud business and digital power, which

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<v Speaker 3>is which is very exciting. But our ict, our information

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<v Speaker 3>communication technologies infrastructure business remain solid. Our consumer business, which

0:13:07.000 --> 0:13:09.800
<v Speaker 3>took the hit that we talked about before, has achieved

0:13:09.800 --> 0:13:12.560
<v Speaker 3>growth and we've released a number of new four G phones,

0:13:13.280 --> 0:13:16.360
<v Speaker 3>So yeah, there's there's growth, there's progress all around the world,

0:13:16.360 --> 0:13:20.079
<v Speaker 3>and the use caps is the partnership we formed are

0:13:20.120 --> 0:13:23.440
<v Speaker 3>also all around the world. So companies and the major

0:13:23.440 --> 0:13:27.240
<v Speaker 3>five G carriers can see how should they invest their

0:13:27.280 --> 0:13:31.320
<v Speaker 3>money so they can maximize and monetize those benefits, and

0:13:31.360 --> 0:13:34.960
<v Speaker 3>how can they partner and help the industry sectors prioritize

0:13:34.960 --> 0:13:37.880
<v Speaker 3>how should they spend their money to bring the benefits

0:13:37.880 --> 0:13:42.360
<v Speaker 3>of digital transformation and decarbonization to the industries of the world.

0:13:42.400 --> 0:13:46.040
<v Speaker 2>When you talk to about the cloud, I'm assuming AI

0:13:46.320 --> 0:13:49.920
<v Speaker 2>is a big engine there as well. Is that fair?

0:13:50.040 --> 0:13:53.079
<v Speaker 3>Yeah, a AI has been in huge and our digital

0:13:53.160 --> 0:13:57.360
<v Speaker 3>cloud business, our PANNGU model, which is involved in a

0:13:57.440 --> 0:14:00.959
<v Speaker 3>number of industry sectors, a number of proven use cases,

0:14:02.320 --> 0:14:05.120
<v Speaker 3>for example, weather forecast. The journal Nature wrote an article

0:14:05.160 --> 0:14:08.840
<v Speaker 3>about the use of AI to protict weather. But also

0:14:08.880 --> 0:14:11.200
<v Speaker 3>we've been heavily involved in We've formed our own business

0:14:11.320 --> 0:14:14.600
<v Speaker 3>units within our company, things like smart mining, smart road

0:14:14.640 --> 0:14:18.079
<v Speaker 3>electric power, waterways, and port All these things have AI

0:14:18.200 --> 0:14:21.680
<v Speaker 3>aspects of the not generative AI, but AI to help

0:14:21.960 --> 0:14:25.760
<v Speaker 3>advance efficiency and reduce the carbon footprint.

0:14:26.520 --> 0:14:28.600
<v Speaker 2>All right, we're going to leave it on that note. Hey, listen, Andy,

0:14:28.600 --> 0:14:31.560
<v Speaker 2>thank you as always as you're always so gracious in

0:14:31.600 --> 0:14:33.920
<v Speaker 2>giving us a nice chunk of time. So appreciate it.

0:14:34.120 --> 0:14:37.680
<v Speaker 2>Andy Perdy. He's chief security officer at Huawei USA. As

0:14:37.680 --> 0:14:41.800
<v Speaker 2>we mentioned, several stints in the US government, including a

0:14:41.840 --> 0:14:44.280
<v Speaker 2>member of the White House team that helped draft the

0:14:44.400 --> 0:14:47.200
<v Speaker 2>US National Strategy to Secure cyber space. That was back

0:14:47.200 --> 0:14:49.400
<v Speaker 2>in two thousand and three, so we're talking twenty years ago,

0:14:50.240 --> 0:14:53.520
<v Speaker 2>but certainly cybersecurity issue is probably even more front and

0:14:53.560 --> 0:14:54.920
<v Speaker 2>center than ever before.

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<v Speaker 1>I love talking, Andy, I do too, great perspective.

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<v Speaker 2>All right, you're listening to you and watching Bloomberg Businessweet

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<v Speaker 2>Carol Masser along with Tim Stanovich, and this is Bloomberg