Huawei’s Big Offer: CEO Daily

September 20, 2019, 10:30 AM UTC

Good morning from Hong Kong.

Clay Chandler and I spent yesterday at Huawei’s sprawling and palatial campus in Shenzhen, talking to company founder Ren Zhengfei about his extraordinary proposal last week to license his company’s 5G technology to an American company. Most Western commentators saw that proposal, made through the New York Times and the Economist, as a pure PR play. But Ren insists he is serious: “This comes from deep within my heart.”

Why would Ren give his company’s most valuable IP—source code, hardware design, production technology, testing methods, the whole ball of wax—to an American company, in effect creating a new competitor? Well, first of all, because he’s correctly come to the conclusion that U.S. concerns over the security of the Huawei ecosystem are not going away. Those concerns did not begin with Trump, and they will not end with him.

But intriguingly, Ren also argued a new American competitor would be good for his company.

“The time when we take a dominant position may be the time when we are closest to collapse,” the enigmatic entrepreneur told me. I made the translator repeat that sentence, to make sure I heard it correctly. That prompted Ren to go into a long discourse on the rise and fall of great powers.

He started with Michael Phelps. Just when the swimming superstar had become unbeatable, Ren said, he started to lose. Then he went on an extensive discussion of his own industry, and how giants like NEC, Fujitsu and Siemens, and then in the U.S., Lucent, Nortel and Motorola, had won and then lost the technological lead.

“For any company, if they are too overwhelmed by their own past, they are likely to lose their lead,” he said. “I am concerned that our next generation of leadership may be overwhelmed by the success of our company.”

At another point in the conversation, he put it this way: “Right now, I hold the sole whip in my hand. If I hand that whip to the U.S., a strong competitor would push our employees to always be vigilant.”

“If my employees can’t sleep,” he said, “then I can sleep.”

Did that mean the U.S. was doing Huawei a favor by pushing his back against the wall? Ren grinned, and turned up both thumbs. When I asked what U.S. company should take on his challenge, Ren said it would need to be big enough to continue to develop the technology, it would need a background in communications, and it would need to be global—the license would have no geographical restrictions.

Anyone interested? If so, Ren says they should reach out to him directly:

Good luck. More news below.

Alan Murray


Business Roundtable

The next chair of the Business Roundtable will be Walmart CEO Doug McMillon, who will succeed JPMorgan's Jamie Dimon at the start of next year. McMillon has already been part of the group for five years, and will front it for two. Fortune

Brexit Hopes

Sterling popped Friday morning on what the markets apparently see as upbeat sentiment from outgoing European Commission President Jean-Claude Juncker regarding the possibility of a Brexit deal. Juncker said Brussels would be fine with the replacement of the controversial "Irish backstop" if the U.K. could propose a viable alternative. Is that a game-changer? Er, not really—that's always been the EU's line, and the Brits have yet to produce what's needed. Financial Times

Vaping Sickness

The Food and Drug Administration has launched a criminal investigation into the soaring numbers of vaping-related illnesses, following an eighth death. The Centers for Disease Control and Prevention says there have now been 530 reported cases of vaping-related chemical injury to the lungs. So far, no single product has linked all the cases. NBC News

Stripe Valuation

The online payment technology firm Stripe has become one of the U.S.'s most highly-valued startups, with a new fundraising round that prices it at $35 billion—more than Airbnb or Palantir. Wall Street Journal


Climate Strikes

Street protests are taking place around the world today, calling for urgent action on the climate crisis. The climate strike in Melbourne, Australia, reportedly drew a whopping 100,000 people. Berlin's, naturally, will involve techno. And in New York, Greta Thunberg—the Swedish teenager who is spearheading the movement—will address protestors in Battery Park in the afternoon. Guardian

Indian Tax

The Indian government has slashed the corporate tax rate from 30% to 22% for domestic companies, "in order to promote growth and investment." The move means India's corporate tax rate is more in line with those of other Asian countries. Economic Times

Israeli Elections

Benjamin Netanyahu is struggling to cling onto power after the Israeli elections. He can't get the numbers he needs to form a right-wing coalition, so he proposed a government of national unity including the centrist Blue and White alliance, which ended up with two more seats than Bibi's Likud, plus parties to Likud's right. But Blue and White leader Benny Gantz refused, and is reportedly preparing to take the first shot at forming a new government. Jerusalem Post

Bond Markets

Fortune's Kevin Kelleher has an interesting piece out this morning on bond market turbulence and why it matters. As he writes, the economic slowdown and U.S.-China trade war, and the prospect of a looming recession, "drive down rates, as investors become more willing to accept less 'yield,' or interest, in return for bonds’ perceived safety. Taken together, these forces have dragged the rate on the benchmark 10-year U.S. Treasury from 3.24% in November 2018 to as low as 1.45% this September." Fortune

This edition of CEO Daily was edited by David Meyer. Find previous editions here, and sign up for other Fortune newsletters here.

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