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BEIJING, August 24 (TMTPOST)— Huawei founder and CEO Ren Zhengfei cautioned the Chinese telecom giant of shocks including global recession and urged to turn into a survival mode with a strategic transition to profitability and cash flow.

Source: Visual China

In an article titled “Operating Principle of the Whole Company Shall Turned to Seek Profit and Cash Flow, Instead of the Scale”, Ren expected the coming decade to be very painful as the global economic recession would last and no improvement could see in three to five years from now on due to Russia’s war in Ukraine and U.S. onging restrictions on Huawei. Against this setting, Ren asked Huawei to let its overly optimistic expectations cool down and put its survival as the most important principle. “To Live a quality life is a very good motto, and each of our businesses has to follow it, ” Ren noted.

According to the article released on Huawei’s internal online forum, Ren proposed several steps to implement the survival first principle. One of them is to scale down or close all the businesses that expanded recklessly or the company invested in with blindness. In Ren’s view, Huawei shall scale back or wind down unprofitable businesses or those fail to create any value and separate the margin businesses from the heart of the company’s business strategy, so that it can relocate the human and material resources to “the main course” and move the surplus personnel to strategic reserve teams. Another major move Ren suggested is to abandon markets in some countries, which allows Huawei to transfer the staffs who deal with difficulties in these markets to the markets with high margins. In addition, Ren wanted to strengthen accountability and improve the performance assessment with rewards connected to operating results to “pass the chill to everyone”.

Earlier this month, Huawei posted revenue of RMB301.6 billion (US$44.7 billion) in the first half of 2022, representing a 5.9% year-over-year (YoY) fall amid U.S. restrictions on its access to chips since 2020. Its net profit margin in the six months declined to 5.0%, almost half of margin in the same period a year ago. "While our device business was heavily impacted, our ICT infrastructure business maintained steady growth," Ken Hu, Huawei"s Rotating Chairman, commented. Hu promised to harness trends in digitalization and decarbonization as well as to secure quality development.