China voices | The history of Huawei phones: Rise of the squares
May 27, 2019
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How does an unassuming back-end hardware maker develop into a global phone giant? According to this pseudonymously published longform story on the Fantong Dai Laoban (Fat Boss Dai) WeChat channel, it takes farsighted executives willing to challenge their boss, “no bullshit” leaders, and huge investments in R&D.
The article traces the influence of machismo for good and for ill, describing the company’s key figures with the hard-to-translate term “hardcore straight guys” (yinghe zhinan)—a phrase that evokes competitiveness, bullheaded literalism, and indifference to the aesthetic—a mix of the American stereotypes of the logical nerd and the competitive bro. In short, a square.
What follows is a summary, translated and often paraphrased for brevity. All research is the original author’s, whose byline translates to “False Zhang.”
written by Zhang Jiajia
At first, Huawei founder Ren Zhengfei was dead set against the idea. Zhang opens by describing the perils of trying to persuade him:
By 2002, he’d resisted incentives from the Ministry of Information to get into the phone business for years.After hearing yet another lower-level manager’s pitch to make phones, Ren responded by screaming and banging on the meeting table:
Huawei doesn’t make phones! This is a done deal, so whoever is still discussing this topic is just bullshitting! And whoever keeps talking this shit is going to get themselves fired!
But this manager had already spent a month researching the topic and was convinced of its merit. “Although managers in Huawei rarely openly challenge Ren Zhengfei’s orders, they sometimes in surreptitious ways do what they can to change his mind.” So after another set of meetings, the junior managers finally got him to buy in.
And buy in he did. On a small revenue base, the Huawei CEO ordered his CFO to allocate a billion RMB to research. Initially, leadership was content with an OEM model, manufacturing low-end handsets without any Huawei branding and selling at low profit margins.
In 2008, Zhang writes, the phone business survived its hardest year. After the financial crisis, profits were down and Huawei’s debt levels grew worryingly high. In this context, Ren Zhengfei decided to shop around a 49% stake in Huawei’s mobile phone business to the likes of KKR, Blackstone and Bain Capital. Yet, since the final offers were only three-quarters of what Huawei was expecting, leadership decided to stick it out and reinvest themselves.
By this point, Zhang argues, Huawei was able to piggyback somewhat on Apple’s success. When manufacturing the iPhone, Apple sought to diversify its supply chain away from Taiwan and invested heavily in the mainland. The production of the iPhone largely in mainland China, he writes, created an industrial base with “mature technology, a complete supply chain, convenient logistics, cheap labor costs, and a huge consumer market” that Xiaomi and Huawei could build on for their own products.
Zhang identifies 2010 as the turning point when Huawei, more confident in the wake of market recovery, decided to shift from OEM products sold to businesses to creating top-of-the-line products marketable directly to consumers. Yet at first, under the leadership of Huawei company man Yu Chengdong—“a rough-skinned, full-of-steel straight guy”—its products failed to compete with the likes of Xiaomi and Samsung. Critically, its engineers were slow to adapt to making consumer-focused products.
[Huawei engineers] always like to talk technical specs with you and bowl you over with hardcore qualities. But when you take this sort of working style and bring it to the consumer space, it’s just like the style of one of these straight guys on Hupu [a bro-y male-dominated forum that covers NBA, streetwear and the like]. In the eyes of Huawei’s engineers, it has the best components and industrial parameters, so of course it should sell, right? But this is the same as when you’re talking to a girl and you just say, “I’ve got a car, a house, and money, and I don’t gamble or see prostitutes, so why on earth don’t you like me? Why? Why?”
Even though these first phones were duds on the market, Huawei made the critical decision to double down on research and development for its own chips and not resort to foreign-made critical components. Zhang credits this decision, expensive at the time, with allowing Huawei to create truly differentiated products and somewhat shielding it from the threat of US export bans.
To break through as a consumer brand, Huawei needed someone different: someone a little bohemian. Enter Liu Jiangfeng, who, though he joined Huawei back in 1996, calls himself an “unconventional Huawei man.” Zhang describes him “swilling a glass of red wine, cigar in hand, dazzling in a Maserati, a high-end speaker at home, quoting Milan Kundera and Sorescu… basically like Fitzgerald’s Gatsby, the kind of guy completely out of place in Huawei.” He took charge of the Glory line of phones and produced the first Huawei product to win consumers’ hearts. The Glory line was a stunning success, bringing in $3 billion in revenue on 20 million phones sold.
Despite this remarkable performance, Liu resigned from the company in 2015, fed up with the culture. Zhang writes that ultimately “the essence of Huawei phones is the same as the whole company, that of ‘hardcore straight guys,’ and if you’re not that type of person, it’s hard to lead well inside.”
Zhang concludes that “hardcore straight guy” culture is the heart of Huawei—the source of both its victories and its setbacks.
Why did Huawei emerge as such a force to be reckoned with?
Ren Zhengfei recently gave this answer at a strategic retreat: “Orient strategically in more or less the right direction, and make sure the organization is full of vigor.” Huawei has not wavered from its dedication to communications as its main channel, subsequently moving into mobile phones and chip-making. Ren Zhengfei and Huawei have made many mistakes, but they understood the essence of the business, remained open-minded towards the suggestions of young talents, were unafraid to experiment and open to rapid self-correction.
At the same time, while we’re all singing Huawei’s praises, the hardships behind its rise were suffered by Huawei employees and family: the overtime work culture, the wolf culture of “endure, adapt, compete” [ren, gun, hen—the title of a career allegory], hearing about the death of your parents over a phone call at the airport, crumbling family life, a deteriorating body, and countless days and nights of loneliness and feeling helpless.
There’s no such thing as talent, you can’t rely on resources, there’s no other way but to work hard, struggle bitterly, so much that you exhaust yourself to overcome the gap between yourself and your competitors. There’s just no alternative. Isn’t that the story of our nation’s last 40 years?