Speaker 1: You're listening to Bloomberg Business Week with Carol Messer and
Speaker 1: Tim Steneveek on Bloomberg Radio.
Speaker 2: We are talking technology. I don't know if you guys noticed.
Speaker 2: Huawei and Apple were the only two major brands to
Speaker 2: record growth in China smartphone shipments in the second quarter.
Speaker 2: Chain that was according to IDC, showing the Shenzen based
Speaker 2: firm grew by seventy six percent. That's pretty big.
Speaker 1: Well, on Friday, Huawei Technologies, the electronics behemoth, reported that
Speaker 1: it grew sales for a third straight quarter after new
Speaker 1: businesses like clouds services and a resurgence smartphone unit helped
Speaker 1: mitigate the fallout from those US sanctions.
Speaker 2: Well, the company is trying to revive its high end
Speaker 2: device businesses, which has been bludgeoned by US sanctions. You
Speaker 2: guys know, we talked about this a lot, but could
Speaker 2: feature five G capabilities without using American chips. So back
Speaker 2: with us with more on the business and how it
Speaker 2: continues to navigate a tricky US China relationship. We're delighted
Speaker 2: to have back with us. Andy Perdy, He's chief security
Speaker 2: officer Huawei USA on zoom in DC. His bio deep
Speaker 2: and wide in the public and privatestors, reminding us that
Speaker 2: Andy was a member of the White House staff team
Speaker 2: that helped draft the US National Strategy to Secure cyber
Speaker 2: space that was back in three He also worked at
Speaker 2: the US Department of Homeland Security to launch the National
Speaker 2: Cybersecurity Division and the US Computer Emergency Readiness Team. You
Speaker 2: have a great background. This is why we wanted to
Speaker 2: lay it out. There's lots more Andy, How are you
Speaker 2: and welcome back.
Speaker 3: I'm great, it's secured to be back with you today.
Speaker 2: Well, hey, can I ask you how do you feel
Speaker 2: about cybersecurity? Do you feel like we're in a better
Speaker 2: way at this point? We just did a whole thing
Speaker 2: about generative AI and deep fakes and how we're going
Speaker 2: to moderate all that content, But how do you feel
Speaker 2: about security right now?
Speaker 3: Well? Security is on a journey, not a destination, as
Speaker 3: colleagues always say. And the fact is that we are
Speaker 3: becoming increasingly dependent on technologies five G technologies and technologies
Speaker 3: beyond five G. And the fact is we're going to
Speaker 3: become more dependent on these technologies. So the need to
Speaker 3: increase the cybersecurity and privacy ecosystem to have international standards,
Speaker 3: greater testing, can four months, transparency continues to increase because
Speaker 3: we can see there continue to be cyber attacks, and
Speaker 3: these cyber attests can be very serious if we don't
Speaker 3: continue to up the game as part of a global
Speaker 3: approach to this risk.
Speaker 1: Andy, can you talk a little bit about your journey,
Speaker 1: because I was talking to it to Carol about it
Speaker 1: a little earlier on our planning call when we were
Speaker 1: preparing for this. Going from the White House staff team
Speaker 1: that helped rep the US national strategies to secure cyber
Speaker 1: space back in two thousand and three, you're at the
Speaker 1: Department of Homeland Security. Later you're on the US Computer
Speaker 1: Emergency Readiness Team. How do you go from there? Talk
Speaker 1: about the transition from there and from government work to
Speaker 1: going to work in the private sector and especially for
Speaker 1: the Chinese company Wallwei.
Speaker 3: Well, coming out of the Department Homeland Security, I work
Speaker 3: for five different startups as an advisor and consultant and
Speaker 3: that was a very exciting time. And I moved on
Speaker 3: to Computer Sciences Corporation and then Huawei in twenty twelve,
Speaker 3: and frankly, I was recruited to Huawei to help promote
Speaker 3: a SAYE for cyber space and this is the role
Speaker 3: that I've been able to contribute to as part of
Speaker 3: a global cyber and privacy assuring system. And so I've
Speaker 3: been to twenty six countries for a while, but I've
Speaker 3: been to China twenty seven times and meeting people and
Speaker 3: former colleagues from other countries who are close to the
Speaker 3: United States. It's been a great journey and hopefully that
Speaker 3: in this toxic political environment we won't lose sight of
Speaker 3: the fact that regardless of where the products come from,
Speaker 3: we need a very strong ecosystem with international standards, independent testing, conformance,
Speaker 3: and accountability both from a cybersecurity and privacy perspective to
Speaker 3: continue with the challenge that we've got to work to
Speaker 3: meet every day.
Speaker 1: So help us understand where does the US have it
Speaker 1: wrong with Huawei? Why shouldn't the US have sanctions on
Speaker 1: the company?
Speaker 3: Well, I think the way I would like to see
Speaker 3: an approach to these issues globally is to try to
Speaker 3: consider what's in the best interest in the United States.
Speaker 3: And a number of these issues, such as what kinds
Speaker 3: of products can be sold to what companies, can be
Speaker 3: fairly complex because there can be a risk that one
Speaker 3: can cut off your nose despite your face and really
Speaker 3: can threaten American jobs. So we've been interested in talking
Speaker 3: to the US government for some years, but right now
Speaker 3: it's really a global situation and we have colleagues around
Speaker 3: the world. I've spoken to several in Europe within the
Speaker 3: last seven days that the challenge of trying to not
Speaker 3: be distracted from the mission of cybersecurity progressy assurance by
Speaker 3: the geopolitics, by the pressure there needs to be these
Speaker 3: kinds of strong standards in independent testing for anybody, because
Speaker 3: the bad guys can hack into everyone. So we cannot
Speaker 3: put our guard down by thinking, well, we've blocked companies
Speaker 3: from this country. That's not going to make a safer
Speaker 3: and so we have to make sure that we reduce
Speaker 3: the risk on a continuous basis, hopefully on a global
Speaker 3: basis with our colleagues around the world.
Speaker 2: It's also about business for you guys, right, because it
Speaker 2: hurts business correct to have these sanctions by the US.
Speaker 3: Yeah, we had about a thirty billion dollar hit in
Speaker 3: our revenue a couple of years ago when they lock
Speaker 3: the five G chips from being allowed to be sold
Speaker 3: from American companies to Huawei. So our consumer devices didn't
Speaker 3: really affect all that much else but our consumer devices
Speaker 3: took basically a permanent hit, and so we have regrouped.
Speaker 3: We've raised our research and development up to twenty five
Speaker 3: percent of our closer revenues, and so we're investing in
Speaker 3: digital transformation, the intelligent world five G and AI, not
Speaker 3: generative AI chat ChiPT but AI for business for industry.
Speaker 3: We believe that going forward, ninety eight percent of all
Speaker 3: ALI will be industrial and some agriculture, and only two
Speaker 3: percent will be consumers. So we're working with partners around
Speaker 3: the world to help bring about digital transformation of industry
Speaker 3: and industry sectors with partners, and AI is a big
Speaker 3: part of it.
Speaker 2: Do you just move on? I mean, you guys already
Speaker 2: have right in terms of the restrictions because of those
Speaker 2: US sanctions, whether it's you making your own design tools
Speaker 2: for processor chips, I mean you just have to kind
Speaker 2: of move on because you don't know whether or not
Speaker 2: things are going to get warmer and fuzzier between the
Speaker 2: US and China.
Speaker 3: That's right. We're not going to look back. We're not
Speaker 3: going to particularly complain about it either, and the excitement
Speaker 3: of working with our partners and customers around the world.
Speaker 3: There's a whole lot of places in the world that
Speaker 3: want to do business with us, a whole lot of
Speaker 3: places in the world. They're going to benefit. And our
Speaker 3: partners know that we don't make money unless they make money.
Speaker 3: So bringing these new technologies in smart mining, in ports,
Speaker 3: and healthcare, in transportation, smart cities, and frankly, green energy,
Speaker 3: reducing the carbon footprint using technology not just limiting access
Speaker 3: to fossil fuels, but technology that can help reduce the
Speaker 3: carbon footprint and create greater capacity for green energy, both
Speaker 3: in creation, in transmission, and storage. So yeah, we're not
Speaker 3: looking back, we're looking forward and it's an exciting future.
Speaker 2: Andy, you're in DC and I can imagine the conversations
Speaker 2: that you're having with either regulators or lawmakers. How would
Speaker 2: you describe the environment between US and China right now?
Speaker 3: Well, we're just a small player in a large world,
Speaker 3: and we're a privately owned company. We can't affect those issues.
Speaker 3: We are just going to move forward doing what we're doing,
Speaker 3: working with our customers in about one hundred and seventy
Speaker 3: countries and helping them meet the requirements of government in
Speaker 3: their various parts of the world. Of course, at the
Speaker 3: global level, we hope common ground can be found on
Speaker 3: some issues between the US and China, because everybody can
Speaker 3: benefit if we can find some common ground. We do
Speaker 3: have an interconnected world and we can all benefit if
Speaker 3: we can find common ground and help reduce the toxic
Speaker 3: political environment somewhat.
Speaker 1: What's a good way If you were still in the government,
Speaker 1: knowing what you know now, what would you advise?
Speaker 3: Well, I think what we've heard from the Commerce Secretary
Speaker 3: and the Treasury Secretary, and I think the now Security
Speaker 3: Advisor Secretary of State, they're talking about let's try to
Speaker 3: have some conversations to try to find some common ground.
Speaker 3: I can't do any better than that. I hope some
Speaker 3: of the things could have to do climate change and
Speaker 3: green energy and the ecosystems, helping to connect the unconnected.
Speaker 3: They're three billion people in the world that are unconnected.
Speaker 3: These are problems hopefully we can work together on. So
Speaker 3: we shouldn't let those things we can agree on be
Speaker 3: held up because there are things we can't agree on.
Speaker 3: All right.
Speaker 2: We do want to get back to a guest because
Speaker 2: we are delighted to still have with US. Andy Perty,
Speaker 2: chief security officer at Huawei USA, on zoom from New
Speaker 2: York from Washington, DC, just moved you to New York. Andy, Sorry,
Speaker 2: you're welcome anytime, you are welcome, And as we said,
Speaker 2: also worked in the US government, Andy, Can I ask
Speaker 2: you something? Then? I want to move on to kind
Speaker 2: of more broadly, do you think things would be easier
Speaker 2: if Huawei, I know, they're a massive company, if they
Speaker 2: stopped being private and became a publicly traded entity, because
Speaker 2: there's a certain level of transparency that really goes along
Speaker 2: with that that it would make it an easier plight
Speaker 2: for the company, if you.
Speaker 3: Will, something that's been suggested over the years. And frankly,
Speaker 3: I don't think that could possibly make a difference of
Speaker 3: the hostility between the US and China and the concern
Speaker 3: the US says that the China government force Squawa to
Speaker 3: do certain things. It's one of the reasons that we've
Speaker 3: offered to talk with the US government, and they have
Speaker 3: not been willing to talk with us about some of
Speaker 3: the proven risk mitigation measures that, for example, are in
Speaker 3: place for Ericson and Nokia that allow them to do
Speaker 3: business in the United States despite their very deep presence
Speaker 3: in China. So now, I don't think that particular aspect
Speaker 3: of transparency could help at all but we're open to
Speaker 3: some mechanisms that could provide great assistance. But the kinds
Speaker 3: of measures that are necessary to make sure that people
Speaker 3: don't use their products for bad things is what's necessary
Speaker 3: to make sure they don't use other people's products for
Speaker 3: bad things. And you think back to the attacks on
Speaker 3: Solar Winds and Microsoft Exchange server and the recent attacks
Speaker 3: on the Microsoft Digital Certificate. No such thing as a
Speaker 3: trusted supplier. We need to have the mechanisms for everybody
Speaker 3: to make sure the bad guys can't hack through and
Speaker 3: do home.
Speaker 1: What are those protections that need that while.
Speaker 3: We can have well, the kinds of mechanisms, for example,
Speaker 3: that Noki and Erickson operate under, are government monitored risk mitigation,
Speaker 3: independent testing of the products. We've been open and we
Speaker 3: believe that all the telecom suppliers should make critical components
Speaker 3: available by testing by independent, recognized third party experts based
Speaker 3: on international standards, with accountability for failure to meet the requirements,
Speaker 3: and accountability if your equipment is allowed to be used
Speaker 3: to do bad things like the spy or cause various attacks.
Speaker 3: Those are the kind of measures that everyone needs.
Speaker 2: So I do want to broaden out a little bit
Speaker 2: because we've I'm thinking about our Daybreak Asia program coming
Speaker 2: up in just about fifteen minutes, getting ready for the
Speaker 2: Asia Open. And you know, there are as you know,
Speaker 2: well know a lot of concerns about what's going on
Speaker 2: in China, whether it's the real estate market and now
Speaker 2: is it moving out to kind of the fringe financial firms,
Speaker 2: and just concerns, concerns, concerns. How would you describe the
Speaker 2: Chinese economy? And you know, do you agree President Biden
Speaker 2: when he said the Chinese economy is a ticking time bomb.
Speaker 3: Frankly, unfortunately, I'm not an expert in global economics or
Speaker 3: the economy of China. I've got a number of good
Speaker 3: friends who work over there for China. I look forward
Speaker 3: to visiting them, but unfortunately I'm not your person to
Speaker 3: help you do an analysis what's happening in China. I
Speaker 3: just know my colleagues are so happy that host COVID.
Speaker 3: They can live normal lives over there, and that's a
Speaker 3: great burden off them, and their quality of life is
Speaker 3: much better.
Speaker 1: I think what's puzzling to us. And one thing that
Speaker 1: we wanted to talk to you about was, you know,
Speaker 1: the success that we've always been able to find within China,
Speaker 1: juxtaposed with the challenges that we've heard about the Chinese
Speaker 1: economy of late, Can you share anything there?
Speaker 3: Well, we have been providing very real value that can
Speaker 3: help save money. I can help reduce the carbon footprint,
Speaker 3: increase efficiency, increase the safety, reduce the necessity of some workers.
Speaker 3: And so by bringing value and helping to save money,
Speaker 3: we can generate revenue for ourselves and for our partners.
Speaker 2: So when you guys did report earnings on Friday, came
Speaker 2: out with a financial update reporting that the company, Hilwe
Speaker 2: Technologies grew sales for a third straight quarter. Talked specifically
Speaker 2: about new businesses such as cloud services and a resurgent
Speaker 2: resurgence excuse me, in the smartphone unit, so helping to
Speaker 2: kind of counterbalance some of the fallout from the US sanctions.
Speaker 2: Tell us a little bit about the business you are
Speaker 2: seeing and where is the growth. Is it domestically, is
Speaker 2: it demand from all the overseas customers? Talk to us
Speaker 2: a little bit about that if you could.
Speaker 3: Well, there's definitely a demand from around the world. And
Speaker 3: as you know, the particular areas that grew the most
Speaker 3: for us is the cloud business and digital power, which
Speaker 3: is which is very exciting. But our ict, our information
Speaker 3: communication technologies infrastructure business remain solid. Our consumer business, which
Speaker 3: took the hit that we talked about before, has achieved
Speaker 3: growth and we've released a number of new four G phones,
Speaker 3: So yeah, there's there's growth, there's progress all around the world,
Speaker 3: and the use caps is the partnership we formed are
Speaker 3: also all around the world. So companies and the major
Speaker 3: five G carriers can see how should they invest their
Speaker 3: money so they can maximize and monetize those benefits, and
Speaker 3: how can they partner and help the industry sectors prioritize
Speaker 3: how should they spend their money to bring the benefits
Speaker 3: of digital transformation and decarbonization to the industries of the world.
Speaker 2: When you talk to about the cloud, I'm assuming AI
Speaker 2: is a big engine there as well. Is that fair?
Speaker 3: Yeah, a AI has been in huge and our digital
Speaker 3: cloud business, our PANNGU model, which is involved in a
Speaker 3: number of industry sectors, a number of proven use cases,
Speaker 3: for example, weather forecast. The journal Nature wrote an article
Speaker 3: about the use of AI to protict weather. But also
Speaker 3: we've been heavily involved in We've formed our own business
Speaker 3: units within our company, things like smart mining, smart road
Speaker 3: electric power, waterways, and port All these things have AI
Speaker 3: aspects of the not generative AI, but AI to help
Speaker 3: advance efficiency and reduce the carbon footprint.
Speaker 2: All right, we're going to leave it on that note. Hey, listen, Andy,
Speaker 2: thank you as always as you're always so gracious in
Speaker 2: giving us a nice chunk of time. So appreciate it.
Speaker 2: Andy Perdy. He's chief security officer at Huawei USA. As
Speaker 2: we mentioned, several stints in the US government, including a
Speaker 2: member of the White House team that helped draft the
Speaker 2: US National Strategy to Secure cyber space. That was back
Speaker 2: in two thousand and three, so we're talking twenty years ago,
Speaker 2: but certainly cybersecurity issue is probably even more front and
Speaker 2: center than ever before.
Speaker 1: I love talking, Andy, I do too, great perspective.
Speaker 2: All right, you're listening to you and watching Bloomberg Businessweet
Speaker 2: Carol Masser along with Tim Stanovich, and this is Bloomberg