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In the memo sent to all Huawei staff, Ren Zhengfei said the company must focus on profit over scale and discard “overly optimistic” expectations

With a global recession looming, this week has seen employees of Chinese vendor giant Huawei issued a stark warning from the company’s founder and chairman, Ren Zhengfei.

In a leaked memo delivered to all the company’s 195,000 staff members, Ren was gloomy about the future of the global economy, telling employees that there was a “very painful” decade ahead, citing the long-term effects of the pandemic, the war in Ukraine, and US sanctions on Huawei.

“Huawei must reduce any overly optimistic expectations for the future and until 2023 or even 2025,” he said in the memo. “We must make survival the most important guideline, and not only to survive but survive with quality”.

Ren said that the company must adapt to these new conditions by refocussing on cash flow and profit, rather than simply growing sales revenue.

“Take surviving as the main program, shrink and close all marginal businesses, and pass the chill to everyone,” Ren said. “The entire company’s business policy should shift from the pursuit of scale to the pursuit of profit and cash flow.”

As part of this process, Ren indicated that the company could seek to downsize in overseas markets and reduce spending on R&D in areas not delivering immediate profit, such as electric vehicles.

In fact, Huawei has already begun streamlining its workforce, having already cut roughly 2,000 jobs in 2021, largely due to US sanctions shrinking the company’s annual revenue by over a third. Now, sources are suggesting that the company is preparing to cut 4,000–5,000 additional middle manager jobs.

It appears to be no coincidence that Ren’s memo should come shortly after the Huawei’s H1 financial results, which were quietly announced earlier this month. While the company’s decline in revenues had slowed since Q1, the company still reported their overall revenues as down 5.9% year-on-year, reaching roughly $44.7 billion.

This ongoing slump in revenue is largely attributed to the continued decline of Huawei’s handset business – the business unit worst hit by US sanctions – where sales shrunk by around a quarter compared to 2021.

However, the revenue reduction was also offset somewhat by the company’s carrier and enterprise software units, which continue to grow at a healthy pace.

“While our device business was heavily impacted, our ICT infrastructure business maintained steady growth,” said Ken Hu, Huawei’s rotating chairman at the results announcement. “Moving forward, we will harness trends in digitalization and decarbonization to keep creating value for our customers and partners, and secure quality development.”

“Our strategy for operations in 2022 revolves around surviving and doing so sustainably,” Hu noted.