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Huawei is the world’s second biggest smartphone maker and the world’s largest manufacturer of telecommunications gear. Huawei is also the face of the Trump administration’s trade war and economic tensions with China. The U.S. has mostly banned American companies from doing business with Huawei, and it has pressured other countries to stop using Huawei’s networking gear, saying it could be used to spy for the Chinese government.
Not surprisingly, Huawei is on a public relations offensive. The company invited several journalists, including Marketplace senior correspondent Scott Tong, for a factory tour and meetings at its Shenzhen headquarters. Marketplace Tech host Molly Wood asked Tong about what he saw and how executives are feeling about the U.S. blacklisting. The following is an edited transcript of their conversation.
Scott Tong: They feel angry. I spent several years in China. I’m ethnic Chinese, and, you know, the Chinese are pretty good at hiding their emotions. It’s clear a lot of people are angry about this. They feel that they have been picked on for political reasons by the U.S. government, that they’re a pawn in this broader fight. They also are kind of scratching their heads, because this is in a part of China that is the private sector of Silicon Valley of China, as it were. They feel like this is a private-sector company that had to compete with the state-owned companies. It has had to compete with the foreign companies to gain access and win in China and to win in the world. So as they see it, it’s totally not what this company is about.
The counter to that, of course, is that in China, if the intelligence services really said, you know, we need to tap you on the shoulder, and we need to tap your wires, a lot of people think it would be pretty hard for this company to say no. And as we know, it was also pretty hard for a U.S. telecommunications company to say no to the U.S. government.
Molly Wood: Right. Well, the other question is, did you get a sense about concern for the future of the business because of this pretty sustained assault from the U.S. administration? This kind of blackballing that they hope will be adopted worldwide?
Tong: Absolutely. And they said as much. This company has big questions about whether it can still buy important electronic components from the United States, whether it’s hardware, whether it’s software. So they’re trying to check the supply chain. They’re trying to see what they can bring back into Chinese soil or certainly just out of American soil. There is some level of scrambling here. They also say that in the long run, they think they can get through this, and that is part of the company history. The company made an explicit decision to say, we’re going to DIY, we’re going to learn how to make semiconductors by ourselves. They optimistically think they’ve been through this before, but certainly in the short term, it’s going to be problematic.
Wood: As a quick follow up, can you give us more details about the automated assembly line? I know it sounds like there are some pretty charming details about the robots on the floor there.
Tong: Yeah, so there are maybe eight or nine humans on this pretty long assembly line. It’s mostly robots making the thing in the first place. After the phone is out and boxed, a robot comes by to take each phone or each set of phones to wherever they need to go. First of all, when they see a human being, they know how to slow down and kind of wait for the human beings to cross. And then when a robot sees another robot, in a very polite Asian way, so as not to create some kind of a collision, one of them says “Excuse me” in Chinese before passing. So, it’s a nice little touch to show the Westerners.
Wood: I have to say that I am not aware of any other factories that have robots that say “Excuse me.” That all by itself is a technical achievement.
Tong: I’ve been in a lot of factories — a first for me.
At a conference in Shanghai on Tuesday, a Huawei executive said the company still plans to be the world’s biggest smartphone brand, but will have to wait a little longer to get there.
Not every U.S. company is on board with the ban on doing business in China.
Yahoo Finance had a story Tuesday about how Intel is trying to help reverse the ban. Huawei buys chips and other equipment from Intel. Goldman Sachs says the deal is worth about 1 percent of Intel’s revenue. And Intel sells a lot of other goods in China — like $70 billion worth in 2018.
Intel and other companies are worried about the long-term impact of a war on Huawei. And even though Google said it would stop providing Huawei with its full version of Android by August, the company is also pressuring the Trump administration for exceptions or a looser ban.
The president of the U.S.-China Business Council also said Tuesday that if America didn’t want to do business with Huawei, that would be one thing, but “it’s more like murder,” he said. “It’s trying to put an end to them.” And the head of the White House Budget Office apparently sent a letter earlier this month asking for a delay in implementing the Huawei export ban.
It’s hard trying to unwind a global supply chain, folks.