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Huawei founder says US woes not hardest crisis

Inside Telecom Staff

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China Huawei Founder

By JOE McDONALD AP Business Writer

SHENZHEN, China (AP) — For decades, Huawei’s founder stayed out of sight as it grew to become the biggest maker of network gear for phone carriers and passed Apple as the No. 2 smartphone brand.

Now, Ren Zhengfei is shedding that anonymity as China’s first global tech brand mobilizes to fight back against U.S. sanctions and warnings Huawei Technologies Ltd. is a security risk.

The entrepreneur at the center of the Trump administration’s battle with Beijing over technology is a survivor of competition that drove Western rivals out of the market, brushes with financial disaster and job stress so severe he contemplated suicide.

The 75-year-old former army engineer who worked his way out of childhood poverty sees American pressure as just the latest of the tests that have hardened him and his company.

“For three decades, Huawei has been suffering and no joy,” Ren said in an interview. “The pain of each episode is different.”

This episode has a personal dimension: Ren’s daughter, Huawei’s chief financial officer, is under arrest in Canada on U.S. charges she helped to violate sanctions against Iran.

The escalating clash with Washington has transformed Ren from an admired but rarely seen businessman worth an estimated $3 billion into one of China’s most prominent figures.

He belongs to the generation of entrepreneurs who founded communist-era China’s first private companies in the 1980s. They navigated a shifting, state-dominated landscape, overcoming shortages of money and technology to create industries that are expanding abroad.

Ren launched Huawei in 1987 after his military post was eliminated.

Huawei is a star in industries the ruling Communist Party is promoting but a target for complaints those plans are based on stealing or pressuring foreign companies to hand over business secrets.

Despite his success, Ren talks like a struggling rookie, worrying aloud that employees might get too comfortable.

Ren writes letters urging employees to “prepare for the worst,” said Nicole Peng of Canalys, an industry research firm.

As for “whether his character can help the company to survive,” said Peng, “I’m sure it will. It will survive. Like he said, they are prepared for it. They know there is always difficulty.”

Born in 1944, Ren was raised by a schoolteacher who he said fed seven children on a monthly wage of 40 yuan ($6).

When Ren was a teenager, the ruling party embarked on the Great Leap Forward, a disastrous campaign to become an industrial power overnight. At least 30 million people died in the 1959-61 famine that followed.

Ren’s mother declared no one would die and divided each meal into nine portions, one for each family member, said Tian Tao, co-author of “The Huawei Story.”

“His mother’s ‘meal system’ had a big impact on him,” said Tian.

Following that ethos, Huawei says it is owned by the Chinese citizens who make up half its workforce of 180,000. Ren’s ownership has declined to 1.14% as more shares are distributed to employees.

Ren joined the army in the 1960s and was sent to the northeast to build a textile factory. He said he slept outdoors in weather as cold as -28 C (-18 F) and ate noodles and pickled radish.

Ren says he has tried to ensure Huawei’s long-term survival through a system of shared decision-making. Still, he is known as a forceful, even autocratic, decision-maker.

That was highlighted by a battle in 2000 over whether to develop the personal handy-phone system, which caught on as a low-cost alternative to mobile service. Ren rejected PHS as a distraction from work on next-generation mobile technology that promised to be cheaper and more reliable.

Ren said he resisted appeals to back PHS as bills for 3G development rose to 6 billion yuan ($750 million).

“Today’s crisis is one-tenth or 1% of the pressure at that time,” Ren said.

Tian, his biographer, said Huawei employees told him Ren, unable to sleep, would call and worry aloud about how to pay a 300 million yuan ($50 million) monthly wage bill.

“When Ren Zhengfei talked with employees six or seven years ago, he revealed a secret: He had suicidal thoughts several times,” said Tian, a Huawei adviser and co-director of the Ruihua Innovation Research Institute at Zhejiang University.

Following his daughter’s December 2018 arrest in Vancouver, Huawei launched a charm offensive aimed at defusing Western suspicions the company facilitates Chinese spying.

Ren gives interviews lasting up to two hours to reporters and TV crews who trek to Shenzhen, a former fishing village near Hong Kong that is now a technology center of 15 million people.

Ren, a ruling party member, tried to defuse security concerns by promising in January he would defy any official demands to reveal foreign customers’ secrets.

Huawei, along with Nokia Corp. and LM Ericsson, leads in fifth-generation telecom technology. It is meant to upgrade and expand networks to support self-driving cars and other futuristic applications. But that increased reach makes 5G politically sensitive.

The company’s U.S. market vanished in 2012 after a congressional panel declared Huawei a security risk.

Despite that, sales tripled as Huawei made inroads into Europe, Asia and Africa. Sales last year rose almost 20 percent to $105 billion.

U.S. export controls, if enforced, will disrupt Huawei’s access to processor chips and other technology. Its smartphones would lose Google maps and other services, making it hard to compete.

To limit that impact, Ren has emphasized making Huawei a self-reliant technology creator. This year’s research spending is due to rise 20% to $17 billion.

The company has released a smartphone operating system it says can replace Google’s Android if necessary. It makes some of its own processor chips but needs U.S. suppliers for high-end products.

“They do things from scratch,” said Peng. “I think this is the influence of the founder.”

Credit: Associated Press

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GM looking to build 2nd US battery factory, Tennessee likely

Associated Press

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GM looking to build 2nd US battery factory, Tennessee likely

General Motors says it’s looking for a site to build a second U.S. battery factory with joint venture partner LG Chem of Korea.

The companies hope to have a decision on a site in the first half of the year, spokesman Dan Flores said Thursday.

Flores would not say where the company is looking, but it’s likely to be near GM’s Spring Hill, Tennessee, factory complex, which is one of three sites the company has designated to build electric vehicles.

A joint venture between GM and LG Chem currently is building a $2 billion battery factory in Lordstown, Ohio, near Cleveland, that will employ about 1,000 people. The site is fairly close to GM’s two other designated electric vehicle plants, one in Detroit and the other north of the city in Orion Township, Michigan.

GM is likely to need far more battery capacity if it’s able to deliver on a goal of converting all of its new passenger vehicles from internal combustion engines to electricity by 2035.

LG Chem now has a battery cell plant in Holland, Michigan, that supplies power to the Chevrolet Bolt hatchback and the new Bolt electric SUV.

Industry analysts have said that automakers face a global shortage of batteries as the industry moves away from gasoline powered vehicles. Most of the world’s batteries are built in China and other countries.

The Wall Street Journal first reported that GM and LG Chem are pursuing a site in Tennessee to build a new battery plant.

GM’s venture is risky, at least based on U.S. electric vehicle sales. Last year full battery electric vehicles accounted for only 2% of the U.S. market of 14.6 million in new vehicle sales. But automakers are set to roll out 22 new electric models this year and are baking on wider consumer acceptance.

The consulting firm LMC Automotive predicts that U.S. battery powered vehicle sales will hit over 1 million per year starting in 2023, reaching over 4 million by 2030.


DETROIT (AP) — By TOM KRISHER

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UK competition watchdog investigates Apple’s App Store

Associated Press

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UK competition watchdog investigates Apple's App Store

U.K. authorities have launched an investigation into Apple’s App Store over concerns it has a dominant role that stifles competition and hurts consumers.

The Competition and Markets Authority said Thursday it was looking into “suspected breaches of competition law” by Apple. The announcement adds to regulatory scrutiny of the iPhone maker’s app distribution platform, which is also the subject of three antitrust probes by the European Union’s executive Commission.

Apple said the App Store is “a safe and trusted place for customers” and a “great business opportunity for developers.”

The investigation was triggered in part by complaints from app developers that Apple will only let them distribute their apps to iPhone and iPad users through the App Store. The developers also complained that the company requires any purchases of apps, add-ons or upgrades to be made through its Apple Pay system, which charges up to 30% commission.

“Millions of us use apps every day to check the weather, play a game or order a takeaway,” Andrea Coscelli, the authority’s CEO, said in a statement. “So, complaints that Apple is using its market position to set terms which are unfair or may restrict competition and choice – potentially causing customers to lose out when buying and using apps – warrant careful scrutiny.”

The watchdog said it would consider whether Apple has a “dominant position” in app distribution for Apple devices in the U.K., and, if it does, whether the company “imposes unfair or anti-competitive terms on developers” that results in less choice or higher prices for consumers buying apps and extra.

Apple said it looked forward to explaining its App Store guidelines to the U.K. watchdog.

“We believe in thriving and competitive markets where any great idea can flourish,” the company said by email. “The App Store has been an engine of success for app developers, in part because of the rigorous standards we have in place — applied fairly and equally to all developers — to protect customers from malware and to prevent rampant data collection without their consent.”

By The Associated Press

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UK extends job support, tax breaks for pandemic-hit economy

Associated Press

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UK extends job support, tax breaks for pandemic-hit economy

Britain’s treasury chief on Wednesday announced an additional 65 billion pounds ($91 billion) of support for an economy ravaged by the coronavirus pandemic, extending job support programs and temporary tax cuts to help workers and businesses in his annual budget.

Chancellor of the Exchequer Rishi Sunak told the House of Commons that it is too soon for the government to rein in spending, saying that his plans would “protect the jobs and livelihoods of the British people” through September as the government slowly lifts lockdown restrictions that have shut businesses across the U.K.

At the same time, he said Britain must be prepared to cut the deficit, announcing plans to increase the tax on corporate profits and boost revenue from personal income taxes in 2023.

“An important moment is upon us,” Sunak told the House of Commons. “A moment of challenge and of change. Of difficulties, yes, but of possibilities, too. This is a budget that meets that moment.”

U.K. public borrowing has risen to levels not seen since World War II as the government seeks to cushion the fallout from COVID-19, which has reduced gross domestic product by 10% and cost more than 700,000 people their jobs. Projections released Wednesday by the Office for Budget Responsibility show that the economy will still be 3% smaller five years from now than it would have been without the pandemic.

Sunak said government support programs have succeeded in mitigating the impact. The unemployment rate is now expected to peak at about 6.5%, rather than the 11.9% forecast last July, he said, citing estimates from the Office for Budget Responsibility. The economy is forecast to grow 4% this year and 7.3% in 2022.

On Wednesday, Sunak announced plans to extend those support programs for six months. They include a furlough program, under which the government pays 80% of the wages for private employees unable to work during the pandemic, as well as grants for self-employed workers, a temporary increase in welfare payments and tax relief for businesses.

Sunak cheered business leaders by offering a tax credit of up to 130% of the money companies invest in expanding and improving their operations. Sunak said the credit is expected to increase investment by 10% or 25 billion pounds over the next two years, creating jobs and boosting economic growth.

Stephen Phipson, chief executive of Make UK, described the policy as bold.

“Manufacturers have strong intentions to invest in capital equipment as well as digital and green technologies which are crucial for our long-term recovery,” he said. “Today’s announcement should help turbocharge investment to ensure that those plans turn into reality in the short-term.”

Looking to the future, Sunak said the government will in 2023 increase corporation tax to 25%, from the current rate of 19%, and freeze personal income tax thresholds, which will increase revenue as inflation boosts incomes.

But opposition leader Keir Starmer accused Sunak of failing to address deep-seated economic problems and banking on a “consumer spending blitz” to bail out the economy.

Starmer said the budget fails millions of key workers who are having their pay frozen, businesses swamped by debt, and families paying higher local property taxes.

“The central problem in our economy is a deep-rooted insecurity and inequality, and this budget isn’t the answer to that,” Starmer said. “So rather than the big, transformative budget that we needed, this budget simply papers over the cracks.”

Ian Blackford, the Scottish National Party’s leader in Parliament, criticized Sunak for continuing a strategy of temporary support that leaves businesses and consumers unsure of the future.

The budget leaves Scottish voters with a clear choice as the SNP campaigns to hold a second referendum on independence from the U.K., Blackford said.

“For the people of Scotland, this budget comes at a critical moment of choice,” he said, echoing Sunak’s language. “Post-Brexit and post-pandemic, Scotland now has a choice of two futures: The long-term damage of Brexit and more Tory austerity cuts, or the opportunity to protect her place in Europe and to build a strong, fair and green recovery with independence.”

LONDON (AP) — By DANICA KIRKA

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