These are interesting times for Huawei, to say the least. On Friday, Huawei CEO Ren Zhengfei fired off a companywide email warning that a slowdown in the sale of its 5G gear could lead to job cuts.
The Financial Times newspaper in the U.K. obtained the email in which Ren, who is also the company's founder, cautioned that a slowdown in the company's fortunes could be in the offing due to security concerns by the United States and other countries over using its 5G and telecommunications gear.
"In the coming years, the overall situation will probably not be as bright as imagined, we have to prepare for times of hardship," Ren said, according to The Financial Times. "We also need to give up some mediocre employees and lower labor expenses."
Ren has vehemently denied the allegations by the U.S. and other countries that Huawei's equipment is being used as a backdoor way for China's ruling Communist Party to spy on other countries.
During a gathering with the foreign press earlier this month at Huawei’s headquarters, Ren said the company has no regular contact with the Chinese government and he denied all charges of spying. It was Ren's first meeting with the international press since 2015.
Thanks to its consumer division, which makes some of the world's most popular smartphones, and its core telecommunications business, Huawei, which has 180,000 employees, booked more than $100 billion in revenue last year, but the freeze out of its 5G gear will have an impact, according to Ren. Despite Ren's warning, Huawei previously said it expects a 20% increase in revenues in 2019 to about $125 billion.
"Things went too smoothly for us in the last 30 years," Ren wrote in the email, according to The Financial Times. "We were in a phase of strategic expansion, our organization expanded in a destructive way. We have to review carefully if all geographical subsidiaries are efficient.
"In order to achieve overall victory, we need to conduct some organizational streamlining."
Also this month, Polish authorities arrested a Huawei executive on spying allegations, which only increased Western suspicion against Huawei. Huawei promptly fired the employee and denied the allegations.
Huawei's ongoing troubles have also had a personal element for Ren. Ren's daughter—Meng Wenzhou, who is also the company's chief financial officer—is awaiting extradition to the U.S. after being arrested last month in Canada for allegedly violating U.S. sanctions against Iran.
President Trump is considering a ban of all of Huawei's equipment in the U.S. with an executive order. The governments of New Zealand and Australia have banned Huawei's 5G equipment from being used in their countries' networks. Last week, Germany became the latest country to announce it was considering a ban on the use of Huawei's 5G equipment.
The reclusive Ren took to the Chinese airwaves Sunday night, according to a story on Monday by Reuters. Reuters reported that it was Ren's first interview with state-controlled China Central Television. In the 25-minute interview, Ren said it was basically the other countries' loss if they choose to restrict the sale of Huawei's equipment while also once again denying the espionage allegations.
“If you do (your product) well, there is no need to worry about sales. … It would be stupid on their part if they don’t buy,” Ren said, according to Reuters. “It would be their loss."
There has been speculation that Huawei's troubles could lead to increased sales by rivals Nokia and Ericsson.