The Chinese Chip Giant That Could Be Nvidia's Biggest Threat

Right now, Nvidia stock is back near its all-time highs, thanks to seemingly unquenchable demand for its AI chips. When it comes to profiting off of this boom, Nvidia's lead and lock-in looks almost unassailable. But there is one particular company that is clearly on the mind of CEO Jensen Huang, and that is Huawei. On this episode, we speak with Washington Post reporter Eva Dou, the author of the new book House of Huawei: The Secret History of China's Most Powerful Company. Her book explains how the historical development of Huawei is basically synonymous with the rise of modern China, having started early on in Shenzhen, when that was one of the few parts of the country where capitalism and free enterprise were allowed to take root. She discusses what the company does, how it became so strong, its links to the Chinese government, and how it emerged as a possible rival to Nvidia. Only Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox, plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlotsSee omnystudio.com/listener for privacy information.

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• 1:32Joe Weisenthal?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

• 1:37Speaker 05

  And I'm Tracy Alloway.

• 1:39Joe Weisenthal?

  Tracy, we recently did that episode with Mackenzie Hawkins, talking about, you know, some of the geopolitics of AI and chips, et cetera. And when it comes to AI chips, it basically is Nvidia and nobody else. But there is one other company that's clearly lurking out there in the picture.

• 1:55Speaker 05

  Huawei.

• 1:56Joe Weisenthal?

  Yes, right. So that was one of the things that came up, which is that, yes, Nvidia has this huge dominance within AI, but you know, there is this Chinese company, as we said, Huawei, that is making a lot of progress. If there's one area of concern or if there's one possibility that another company's tech could really sort of like form the backbone of AI, this is probably them.

• 2:19Tracy Alloway?

  I find Huawei really fascinating as a company. So it's sort of this national champion, right? And even the name, I think, means something like China has achievements or China is able to achieve or something like that. And yet it has these like really weird European headquarters, European style headquarters. Yeah, they look like French castles and things like that. And you hear all these stories about how aggressive some of the Huawei sales tactics are. There was the arrest of the founder, Ren Zhengfei's daughter a few years ago. So there's just all this stuff going on and like kind of weird tensions. And I want to learn more about what this company actually is and what it does.

• 3:04Joe Weisenthal?

  Totally. A lot of mystery, a lot of perhaps paranoia, a lot of concern about what it does and who it is and its connection to the Chinese government, the CCP, et cetera. Anyway, we have to learn more if this is going to be the one company that could at some point in the future threaten Nvidia. And we really do have the perfect guest to talk about it. We are going to be speaking with Eva Do. She is the author of the fairly new book. It came out earlier this year. House of Huawei: The Secret History of China's Most Powerful Company. It's really an extraordinary book. I actually think like someone asked me the other day, what are a few books you would read about China these days? And this is now, I think, sort of an instant classic. So Eva, thank you so much for coming on Odd Lots. Kind of perfect timing.

• 3:48Speaker 05

  Thank you so much for having me here.

• 3:49Joe Weisenthal?

  Actually, it's really perfect timing because just today, the founder of the company, Ren Zhengfei, gave an interview with People's Daily. And it's clear in your reporting, he does not do like a ton of media, et cetera. He's certainly not like a Jensen Huang, always talking to the press. What do you take away from that, that suddenly there's a, just I think, literally just today, or maybe yesterday, that there's a Ren Zhengfei interview with People's Daily?

• 4:15Speaker 05

  Yeah, so this is very, very rare for them to publish a full interview transcript with a private enterprise entrepreneur on the front page of the People's Daily, which is the party's mouthpiece and usually is chronicling what the nation's leader Xi Jinping and other senior officials are doing. And I think it really speaks to Huawei's sort of central role now in China's tech industry and not only that, in diplomatic relation. This is the message to the United States and the world for them to put his words on the front page of People's Daily at a time when Huawei is very much in the crosshairs of the Trump administration.

• 4:57Tracy Alloway?

  I want to ask the pressing question on my mind and then maybe get into other important stuff, but what is the deal with the European castle headquarters for this company that has sort of grown in tandem with the Chinese economy and is considered a national champion, national symbol in many ways. Why do they have French castles and like Greek statues as their headquarters?

• 5:22Speaker 05

  Yeah, this is one of the strange and amusing things about this company. They have this sort of larger than life campus that just mystifies people when they come to visit. They have like a replica of Versailles. They have a replica of the castle of Heidelberg from Germany and they have their R and D operations in things like European style castles and it's very strange to people. And this has never been fully explained by the company, but in a way it does show the level of their ambition, like they are building sort of an empire far more than just what many people think of sort of a single tech company does and its global footprint.

• 6:05Joe Weisenthal?

  The weird thing about Huawei, you know, when we talk about these big Chinese industrial giants typically, a lot of them are publicly traded or talk about PYD or Xiaomi or so forth, or CAT, the battery company. And then it's also not a state owned enterprise. You tell in the book, the story of it was founded in Shenzhen and either the late 70s or early 80s, they explicitly decided not to go down the SOE route, unlike competitor ZTE. What is it though? Explain like, what is the structure of this company?

• 6:35Speaker 05

  This sort of gets to the heart of it. Of why I was so interested in this company Huawei Technologies. In that if you really, if you understand how this company works, then you really do understand how China works. Yeah. At large. And so it is this fusion between capitalism and the party controlled Chinese economy. That's where Huawei sits. So it is registered as a private company and it is privately held. They have resisted listing on the stock market for decades, which means that they are able to take a longer term view.

• 7:12Speaker 05

  They don't have to deliver quarterly results. They aren't under the gun from investors to be profitable every single year, even though they are. So they sort of are able to plow more of their money into long-term R and D investments. And the other part of that is they do have national guidance under the party from Beijing as one of the nation's tech champions. And so it's kind of this fusion.

• 7:41Tracy Alloway?

  How does competition with ZTE actually work? Huawei is this big, important privately held company in China, but ZTE is part state owned. I guess both of them like have some sort of relationship, obviously with the CCP. But how do they actually compete against each other? And I guess, how does the party actually view the purpose of that competition?

• 8:05Speaker 05

  Yeah, so Huawei and ZTE, they're crosstown rivals. They're both based in Shenzhen. They're sort of like siblings, how they've grown up. They're in some ways very similar in the types of products they offer and their global footprint. And this reflects how China has built its economy, which is it encourages this kind of competition among among domestic companies and they have to fight it out amongst themselves. And this pushes them to be more efficient, to be better. And Huawei largely has been the one who's worn out.

• 8:41Joe Weisenthal?

  But there's competition everywhere, right? And there's competition in the United States. What is it specifically about the bones of this company that makes it unique and how cutthroat and competitive it is?

• 8:53Speaker 05

  I think Huawei is infused in this Chinese communist ethos of sacrifice towards a larger cause, towards the company's cause and the nation's cause in a way that is quite unique. And so, one example will be, so in January 1996, there was this seminal moment in Huawei's history, which was its first mass resignation ceremony. And so, Ren Zhengfei essentially fired his entire sales department and made them reapply for their own jobs because he was unhappy with his performance. But the way he went about this was just very different than what you would see in a Western company.

• 9:36Speaker 05

  So each of the salespeople had to write up a resignation letter, and then they held a rally where all the employees took turns criticizing themselves. You had salespeople blaming themselves and pledging that they were going to sacrifice themselves for the company's success. And this gets to this communist ethos of self-criticism and sort of sacrificing your individual interests toward the national goal, which is really a key part of Huawei's culture.

• 10:08Joe Weisenthal?

  Tracy, would you do a self-criticism and sacrifice for Odlots? And go up on stage in front of the entire team and talk about ways that you've fallen short?

• 10:18Tracy Alloway?

  Joe, I do self-criticism every day.

• 10:20Joe Weisenthal?

  I would. I would take part in an Odlot self-criticism session in front of all of you.

• 10:24Tracy Alloway?

  Okay, since we brought up self-criticism, which is very, very much a CCP thing, and everyone remembers like the images and writings about self-criticism sessions in like 1960s, 1970s. What exactly is the connection between Ren Zhengfei, the founder of Huawei, and the CCP? I know he used to be a PLA engineer, I think, but other than that, like, what exactly is the connection?

• 10:54Speaker 05

  Yes, so the party plays an overarching role in China, including over the private tech sector, and so it is always, always there. So Huawei, since its early days, has had a Communist Party committee within the company, which is a normal thing and required in China, even for foreign companies like Walmart or Disney that are operating in China. And so this, throughout its history, has played a role in aligning the company's operations with national goals. And in some ways, doubles as an HR department in that they have a role and authority to fire people, to recommend people for promotion or vice versa.

• 11:39Joe Weisenthal?

  Yeah, this was really interesting. They also sort of police the behavior of at least the party members who work for the company. I think like you talk in your book about like, you know, they make sure that they're engaging in good moral behavior, like not gambling and stuff like that.

• 11:52Speaker 05

  Yeah, certainly. And so the party members are, it's not the majority of Huawei's employees, but a sizable proportion of the staff are party members. And the party committee specifically is in charge of overseeing the moral guidance of these employees who are supposed to be leaders within the company. And every few years, there is this crackdown on immoral behavior within a company that aligns with nationwide crackdown.

• 12:37Speaker 00

  What's next for virtual assets? I'm Jacob Grease, host of Economy Scale, a series exploring growth in key global sectors. And this episode, we're diving into the digital forces shaping finance. Sean McHugh from Dubai-based Virtual Assets Regulatory Authority has this to say.

• 12:53Speaker 01

  We're seeing a lot of institutional players come in, digital asset dedicated hedge funds, high-frequency traders and that sort of thing, and folks who service institutional clients.

• 13:01Speaker 00

  As more capital enters the market, adaptive regulation is likely to become increasingly key. Rhys Merrick of Ripple says.

• 13:09Joe Weisenthal?

  A lot of regulators globally would like to keep the industry at arm's length. That's the opposite here. I think also what you'll find is that regulation and frameworks can come out, but some of them are maybe a slight iteration on some 80-year-old policy and not actually in line with what the technology can do and offer. And again, that's very different in Dubai.

• 13:28Speaker 00

  Listen to the full episode wherever you get your podcasts. This series is brought to you by Bloomberg Media Studios and the Dubai Department of Economy and Tourism.

• 13:39Tracy Alloway?

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw, innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.

• 14:22Tracy Alloway?

  But according to recruiters, advisors and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company. And Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com.

• 15:02Tracy Alloway?

  Can I ask a very, very basic question, which probably should have been my first question instead of asking about the castles. But what does Huawei actually do? And what did they start out making versus what they make and do now?

• 15:17Speaker 05

  So the way to think about Huawei is right now, we live in this information economy and data is sort of the most valuable commodity in any nation now. And so Huawei is the company that builds the pipes that carry data, both in China and around the world. It's emerged as the most proficient company that does this, that builds the networks for both internet and phone data around the world. And in addition to that, it's also China's leading producer of chips, which right now are the heart of this AI revolution. And so the US has Nvidia and China's alternative is Huawei. And so they make telecom networks,

• 16:01Speaker 05

  they make the chips, and they also have expanded to like a wide range of other products, including consumer technologies like smartphones, smart watches, and smart cars, the most recent one.

• 16:17Joe Weisenthal?

  Oh, I didn't realize. It's really amazing with these big Chinese tech giants, they really build everything. And I actually do think, sort of aside here, it's interesting that like 10 years ago, there was talk about an Apple car and they spent a lot of time looking into getting into cars and it just sort of never materialized. And yet here you have these, here's a company that was clearly late to the smartphone game relative to the Apple iPhone, which was the beginning, and now it's doing cars and watches and everything else and all the 5G gear and all the things that Apple doesn't do. It strikes me as very revealing. There's a comment from the founder that was, I think, dates back to the 90s, where he said, "A country without its own program-controlled switches is like one without an army."

• 17:01Joe Weisenthal?

  That strikes me as something that he identified, which now almost every country or everyone around the world is thinking. It's almost like he was 30 years ahead of his time. Because if you think about the anxiety in the US about various technologies that we don't build here, if you think about the anxiety in Europe, et cetera, it really seems like that line is now becoming conventional wisdom among companies and governments all over the world.

• 17:26Speaker 05

  Yes, it really speaks to the role of technology in nations and its relationship to the governments in which there's always been this through line from technology to nations' sort of control and surveillance operations. And so that that is why Huawei has been sort of in the crosshairs of not only the US governments, but governments around the world, is this role that it plays.

• 17:52Tracy Alloway?

  So on this note, one thing I'm really curious about is how does Huawei actually make big decisions? So, you know, for instance, if it wants to launch a self-driving car, what does that discussion actually look like? And I guess like, we just did an episode with Ricardo Hausmann where we were talking about economic complexity and the idea of countries sort of jumping from product to a more complicated product and then a more complicated product after that. But I guess how much interrelation is there between all the things that Huawei makes?

• 18:26Speaker 05

  So Huawei's founder, Ren Yungfei, is still the leader of the company and people have been anticipating his retirement for many years and it's still unclear when he will retire. And so for now, he is making those decisions and under him, there are rotating chairs who take, it's kind of a strange system. They take turns doing half-year stints as Huawei's acting CEO. And so it is a collective decision that's being made about the company's broader strategy. And this is meant to provide consistency in the company's direction going forward, especially as they're looking to a future where Mr. Ren has retired.

• 19:10Joe Weisenthal?

  One of the things that I had forgotten about, that you talk about in your book, is how many big networking companies there used to be, even 10 years ago, but certainly like 20 years ago, or 25 years ago around the dot com bubble. And there's just all these names that I had, I can't remember the last time, Ericsson still exists, but it's clearly just nothing like what it used to be. There's 3com and Palm and Nord Nortel, Northern Telecom and Lucent and Marconi. Like, all of these companies that I just hadn't forgotten about for years, these sort of makers of telephone gear, and there's others too. And what I didn't realize, and correct me if I'm wrong, it basically seems like the reason we don't talk about any of those companies anymore

• 19:55Joe Weisenthal?

  is basically due to Huawei and Huawei specifically. It really was a story of all these different telecom companies ultimately losing out to Huawei.

• 20:04Speaker 05

  Certainly. So there was a period during the 2000s when Huawei just sort of mopped the floor with its competition around the world and ran a lot of these major companies out of business. And so Canada had Nortel, the UK had Marconi. These were gear makers who are making similar equipment to Huawei. And they all just went out of business within a span of a few years. And that's partly why officials in the West started ring the alarm a few years ago, which was they looked around at the global market and it was all Huawei. It's just dominating this market. And in a way, for Western countries, it was sort of an own goal.

• 20:48Speaker 05

  They could have fought harder to keep their companies in this market, which is critical to technological development and critical to national security. But these companies all went under. And there's only a handful of companies in the world left that make this kind of equipment.

• 21:05Tracy Alloway?

  So, speaking of national security, you make the point towards the end of the book that Huawei's goals, they go beyond just shareholder returns. It's also concerned with China's place in the world and helping boost China's competitiveness and all of that. And obviously, there's that CCP link as well that we already discussed. But I guess my question is, what are the sort of strengths and weaknesses of having a corporate mission that goes beyond just pure profit? How does that actually affect the performance of the company?

• 21:39Speaker 05

  Well, for the most part, this has been very successful for Huawei and that part of why it's become number one in its field around the world and difficult to challenge is because it's not playing by these same rules where it needs to seek profitability and it needs to maximize profitability. Kind of explicitly, that's not its main mission and it's not publicly traded. And so they can't take temporary losses and plow all their money into R and D in a way that like a publicly listed US company might find difficult to convince investors to put up with. Yeah, so it has allowed Huawei to become incredibly strong and incredibly competitive

• 22:24Speaker 05

  in a way that's difficult for Western rivals to compete with. I guess one major risk of this kind of alignment with Beijing is, you know, you become at the whim of China's government policies, which often comes and swings and often goes overboard. And Huawei is one of the few companies that has survived in such a strong state from the 1980s to the present day. And many companies have gone under in China, under sort of these political winds.

• 22:57Joe Weisenthal?

  It does seem like there's a parallel between the trajectory of Huawei and also the current government under Xi Jinping. Ren Chongfeng's own father was sort of cast out of the Communist Party or criticized or something like that. He was a persona non grata in some manner or another, much like Xi's own father. And yet Ren has obviously committed himself to China, obviously. Xi is the president of the country. It does feel like there has been this sort of clear co-evolution. One of the things that you write about in your book that I thought was interesting is he was talking about like people who got sort of kicked out of the party. And he says, you know, if you get cast into the fire and you survive, then you become the phoenix.

• 23:40Joe Weisenthal?

  It really does seem like a story here about sticking with the party and sticking with the country even when you suffer personal misfortune because of it.

• 23:52Speaker 05

  Certainly, and Huawei's story in specific is China's story more broadly. The company was founded at the dawn of China's grand experiment with capitalism, when it was starting to open up from purely socialist economy. And it's been in step with China's development ever since. And so its fate is intertwined with Beijing probably more than ever now. And this has been something that Ren Zhengfei has tried to resist at times, to put some distance between himself and the government. But what they make, it's so critical for the nation's technology industry,

• 24:35Speaker 05

  so critical for national security that there's no way of really separating it.

• 24:41Tracy Alloway?

  I was just about to ask about tensions between the company and the party. But can you give us some examples of where disagreement might arise or why Ren would want to separate Huawei a little bit from the CCP?

• 24:55Speaker 05

  Yes, so in the 1990s Huawei went through this period where it was setting up a lot of joint ventures with state-owned enterprises across the country. That was its first big step to to take over China's domestic market was through these tie-ins with local governments. And so during that period, there definitely was tension. There was definitely culture clash. So then Huawei had to be taking on all these new employees who were used to the slow pace of work in state-owned enterprises, you know, leisurely lunch, afternoon nap. And it was quite a shock for them coming to work at Huawei,

• 25:37Speaker 05

  which was a company where employees literally worked themselves to death in some cases. And that kind of martyrdom was sort of idealized.

• 25:48Joe Weisenthal?

  Can we talk a little bit about alcohol? Tracy posted a story from, it was actually in the Wall Street Journal yesterday, that there is another, yet another attempt by the Xi Jinping government to crack down on certain excess And there are some like local government officials and they consumed a bunch of bottles of Baijiu and then one of them died that day. You also talk about this in your book, which is that like the sales culture was so intense and there was this expectation that the salespeople had to get more drunk than the colleagues or than the clients or that the clients never felt embarrassed by how drunk they're getting. Talk to us about alcohol and like all this drinking and partying that goes on.

• 26:27Speaker 05

  Certainly. So Huawei through most of its history and trying to have had this reputation of a very bro culture, which in China meant a lot of heavy drinking of hard liquor Baijiu, which is this incredibly strong liquor. And in China, part of

• 26:46Tracy Alloway?

  You're not missing out. You're not missing anything. I hate it personally.

• 26:51Joe Weisenthal?

  I've never tried. I gotta try it sometime. Keep going, sorry.

• 26:54Speaker 05

  So part of Chinese corporate culture of entertaining your clients is taking them out and getting just rip roaring drunk. And as the salesperson, you're supposed to get more drunk than your client to show respect to them. And so, and so you have these salespeople who really are were suffering pretty severe health consequences of this heavy drinking. And at some point, the officials within Huawei, they were sending out like these stomach bombs to employees who had suffered stomach damage from, from getting so drunk doing their jobs. And this was sort of seen

• 27:38Speaker 05

  as a part of the personal sacrifice you do to further Huawei's goals to make the company succeed.

• 27:44Joe Weisenthal?

  Wow. I love how like a lot of people would think like partying as a salesperson is like one of the perks of the job, but I love the idea of like partying so hard and getting so drunk that it ceases to be a perk anymore and is actually represents your sacrifice to the company because like you're blowing out your stomach and your liver in doing so to the point where the company needs to send you, send medicine out to the sales force.

• 28:08Speaker 05

  Yes, certainly. And you have these stories of salespeople, they're getting so drunk, they have to go and take a vomit break in the middle and then they come back and keep drinking, whatever it takes to get the job done.

• 28:19Joe Weisenthal?

  That's how you win all those, that's how you win all those, anyway, sorry Tracy, keep going.

• 28:23Tracy Alloway?

  As someone who spent a lot of time in Japan, I find the idea of people partying so hard, it ends up being a sacrifice and something they don't want to do, very, very relatable. Can we talk a little bit about tariffs and trade restrictions? So obviously, you know, since 2018, the first Trump administration, the US has tried to put limits on exports to China and tried to, I guess, block some of China's technological development in various ways. A lot of those restrictions were carried through by the Biden administration. Some people would even say that the Biden administration was harder on Huawei than Trump. Fast forward to today, and obviously, we've had Liberation Day and all this back and forth on trade

• 29:06Tracy Alloway?

  restrictions yet again. And still, it seems like Huawei has been doing a pretty good job. I know they managed to produce a 5G processor and things like that. Have the tariffs or trade restrictions had any effect on Huawei's development specifically? And how has it responded?

• 29:26Speaker 05

  Certainly. So during Trump's first term, the target was Huawei's telecom networks, especially their wireless networks. 5G was being rolled out around the world at that point. And the first Trump administration had worked very hard to stop Huawei's progress in 5G networks. And so, fast forward to the second Trump term, now the focus is AI chips. And it is chips versus Huawei's and their role in building sort of these super smart computers that can power things like ChatGPT. And the fact that we're still talking about Huawei speaks to the scope of their technology and just their central role in China's tech

• 30:10Speaker 05

  industry, that it is still this company that is both doing the telecom networks and doing the AI chips. And so what we've seen during the early months of the second Trump term is Trump's administration has warned countries around the world that they view using Huawei's chips, AI, Huawei's AI chips anywhere in the world as a violation of US export controls, which means, you know, they're threatening countries around the world that they might suffer consequences from the United States from buying and using Huawei AI chips. And yeah, this certainly has had a big impact on Huawei's trajectory, but it hasn't stopped them. In many ways,

• 30:55Speaker 05

  has pushed them to redouble their efforts to build technology domestically.

• 31:17Speaker 04

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices,

• 32:01Speaker 04

  but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 32:41Speaker 04

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• 33:41Joe Weisenthal?

  Sitting aside, geopolitics, et cetera. I understand why Western governments are anxious after watching what happened to all of those telecom giants that virtually disappeared since the late 90s or early 2000s. Why, they certainly don't want to see that repeated again. It's interesting, though, going back to this new Global Times interview that came out today. There's a lot in there about AI and one of the things that Ren says is, "AI may be the last technological revolution in human society, though maybe also nuclear fusion." That's interesting. But he's, one thing that's clear is that a big part of this interview is to like, you know, he talks about how far behind they are still.

• 34:22Joe Weisenthal?

  By the way, we're recording this on June 11th, so people can go look for the Global Times article. He talks about how far behind they are still. Like, they're clearly trying to make the point in this interview that, yes, AI is the future, it could even be the last important tech that ever exists. But at the same time, you know, don't be too threatened by us. We're still at least a generation behind Nvidia and so forth.

• 34:43Speaker 05

  Yeah, certainly. So Ren has always downplayed Huawei's strength publicly. And part of that has been he's, until recent years, done very few interviews at all. Part of Huawei's culture is they are quiet, they are humble, and they sort of downplay their achievements. And that's allowed them, partly helped them in making these technological leapfrogs before people really recognize that's what they have done. Mm hmm. So the last couple of years, AI has become this global frenzy where with ChatGPT, everyone's talking about AI, AI revolution.

• 35:25Speaker 05

  So actually, for companies like Huawei, like US tech giants like Google and Microsoft, they saw this coming years ago, and they've been working on AI for well over a decade. And their executives since years ago have been saying that AI is going to be the next revolution, and they have to catch this wave.

• 35:48Tracy Alloway?

  You mentioned succession earlier, and obviously Ren Zhengfei has been such an iconic figure in China and within Huawei. What happens next? Who are the front runners? And what exactly is the process for doing this? Because I'm kind of imagining someone needs to do a Chinese conglomerate version of succession. I would watch that 100%. What is the process?

• 36:13Speaker 05

  I would watch it too. Well, in many ways, he's irreplaceable. So Ren Zhengfei has this unique position in China's tech industry of sort of this hermit sage. He like speaks and riddles, and he makes these predictions that sound fantastical in the moment, but turn out to be true years later. And he's this larger-than-life figure who's like no one else in China's tech industry and no one else really around the world. So it's difficult to see how he can be replaced, really. But he's been working on setting up a succession plan since the 1990s. And the way that it looks now...

• 36:53Speaker 05

  Now is the team, a team of rotating executives who together can kind of steer the company. And so we'll, we'll have to see when he retires, how well this works. And so that this team of top, top executives, it includes several company veterans who have been with Huawei since the 1990s or earlier. And then it also includes Jun Jun Fei's daughter, Mo Man Zhou, who had been the CFO detained in Canada during the first Trump administration. And who has since returned and has been elevated to this national hero status for being under house arrest in Canada.

• 37:33Joe Weisenthal?

  Actually, I have just one more question, which is, it sounded like in your book that at least for the, in the beginning years, the daughter wasn't, none of the family members were actually seen as likely replacements or leaders of the company. But it always seems like in revolutionary environments, communist revolutions, serving some time in prison or in Siberia or something like is really good for your cred, that ultimately doing some sort of stint of suffering is actually helpful in establishing like, okay, you actually belong to be at the top. Did those years where she was facing possible prison time in the US help her in terms of, okay, she might actually be a credible leader at some point in the future?

• 38:17Speaker 05

  Certainly. It was this unexpected thing that happened, her arrest in Canada, that gave her sort of the street cred back home to be elevated, which Huawei is a company where they care about results. And so for years, they had believed that only engineers who really understand the technology can lead this company and be able to make the right decisions and have that authority to lead the engineers. And this was not Mo Man Zhou's background. So she had studied finance and was working in the finance department and had worked her way up to CFO. But many people thought that was maybe the ceiling for her.

• 39:01Speaker 05

  And then that, that changed after her detention, after her house arrest. She came back and soon after was promoted to one of the rotating chair people at Huawei, rotating chairwoman, which is one of the top positions right under Jun Jun Fei himself.

• 39:20Tracy Alloway?

  So, speaking of unexpected developments, in researching your book, I'm really curious if there's one thing that stuck out for you in terms of being surprising. What was the most surprising thing you heard, or saw, or learned about in writing this book?

• 39:38Speaker 05

  I think the role of crises around the world in Huawei's expansion was something that kind of was interesting and unexpected to me in researching this book, which, you know, part of why they were able to make their early sales advances in other countries was they pushed their salespeople to the limit in extreme situations such as wars, natural disasters, pandemics. In Hong Kong, for instance, the Hong Kong market, they landed one of their first big sales during the SARS pandemic, and that was when most of their rivals were staying at home and sheltering in place during the pandemic. And they did the opposite. They basically, in their own words, ignored that a pandemic was going

• 40:22Speaker 05

  on and sort of met with their client as much as possible and won them over during that period. And soon after, SARS were able to win kind of a key order in the company's history.

• 40:36Joe Weisenthal?

  I think you also-

• 40:37Speaker 05

  One of its first stepping stones.

• 40:39Joe Weisenthal?

  You also talk in the book about like in Bahrain, I think it was during the Arab Spring, and various other, or in Afghanistan too, like various times when everyone else was fleeing some sort of political turmoil, the salespeople just carried on business as usual and refused to flee?

• 40:55Speaker 05

  Yeah, yeah. I think Rin told his staff at one point that the business they're in, it's not like selling donuts. They can't just leave whenever they want. And so, much of their business is in parts of the world that have seen wars, seen instability. And part of their promise to their customers, why they win these orders, is they're making the promise they're gonna be there. And so, you see sort of like wartime pay for Huawei employees who are working in war zones. You see people who are having to take these personal risks. And that's part of Huawei's business model of how it's been able to become the world's number one maker of telecommunications equipment.

• 41:41Joe Weisenthal?

  Eva, though, it's really an extraordinary book about an extraordinary company that explains much about the world. Thank you so much for coming on Outlaws.

• 41:48Speaker 05

  Thank you so much.

• 42:02Joe Weisenthal?

  I do think that last point, Tracy, is really interesting. This idea of like, you know, lots of companies is like, oh, we're a family, we make a big commitment, blah, blah, blah. But they sort of like prove it, like in all the different examples of like, literally, oh, we're just going to ignore SARS. We're just going to ignore the fact that there is some sort of civil war or crisis happening because we're going to focus on the sale. It really does seem like to establish that among your sales force, you actually really do have to sort of truly mission driven in a way that's beyond just cliche.

• 42:31Tracy Alloway?

  Well, this is where I think the uniqueness of the mission is a really big competitive advantage, right? Because as Eva was pointing out, it's a privately held company. It's stated repeatedly that its mission includes profits, but also goes beyond just that. And so when there's a crisis, it's not under pressure to cut back on costs or slow down expansion or pull out of specific market and things like that. It can keep going. That seems to be a pretty big competitive advantage.

• 43:02Joe Weisenthal?

  Yeah, that's right. You know, like Mao used to like, oh, we have to like, get the ideology first, right? We have to do the ideological stuff first. And I didn't really get it. But maybe this is, maybe this is a way of understanding it, which is that if we're going to talk about like, having a good competitive sales culture, et cetera, it means nothing if you don't just like, fully get people to like, believe deeply, like in their bones, like what this mission is. And it really is striking, like, they just mopped the floor with anyone in like, the first 20 years of the, of the century. And I'd really forgotten how varied and diverse that industry was up until like, 15 years ago, basically.

• 43:38Tracy Alloway?

  I guess drinking loads of Baidu obviously pays off. I gave you bad, I gave you bad advice.

• 43:43Joe Weisenthal?

  We should do that.

• 43:44Tracy Alloway?

  No, no. Although you're bringing back all these memories of insane times in Japan, but there are all these tricks to avoid drinking in a group setting.

• 43:54Joe Weisenthal?

  Oh, I need to, I don't really like drinking. Can you tell me one?

• 43:56Tracy Alloway?

  Well, like, hard liquor, you can discreetly pour out in a plowed plant, which is something that I've done before. You could strike a secret agreement with the bartender to serve you water instead of shots, things like that.

• 44:11Joe Weisenthal?

  I'm not going to do that. I do want to, I do want to try some eventually.

• 44:15Tracy Alloway?

  Okay. Shall we leave it there?

• 44:16Joe Weisenthal?

  Let's leave it there.

• 44:17Tracy Alloway?

  This has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

• 44:23Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at the Stalwart. Follow our guest Eva Doe. She's at Eva Doe and check out her book, House of Huawei. Follow our producers, Carmen Rodriguez at Carmen Armin, Dashil Bennett at Dashbot, and Kale Brooks at Kale Brooks. For more Odd Lots content, go to Bloomberg.com/oddlots, where we have a daily newsletter and all of our episodes. And you can chat about all of these topics 24/7 in our Discord, discord.gg/oddlots.

• 44:49Tracy Alloway?

  And if you enjoy Odd Lots, if you want me and Joe to go out drinking by Jew, then please leave us-

• 44:54Joe Weisenthal?

  And do self criticism.

• 44:55Tracy Alloway?

  And do self criticism. Then please leave us a positive review on your, well, maybe even a critical review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

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