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Huawei says it hires more scientists amid US sanctions

Huawei founder Ren Zhengfei attends a panel discussion at the company’s headquarters in Shenzhen, Guangdong province, China on June 17, 2019.

Song of Aly | Reuters

BEIJING – Chinese telecommunications giant Huawei has said it is expanding its team of scientists even as the company has lost revenue as a result of US sanctions.

It’s a safe bet that doubling down on research can help China develop its own technologies, now that the United States under President Joe Biden’s administration is determined to compete with Beijing and has maintained restrictions on access from the Chinese company to the United States semiconductor technology.

Huawei CEO Ren Zhengfei claimed in an internal meeting in early August that the company paid its expanding workforce on time, despite pressure from the United States, according to documents released Wednesday. Many Chinese companies often postpone their employees’ salaries or force quits without pay.

“Despite US restrictions over the past two years, we haven’t changed our human resources policies, and everything is working as usual, such as pay and bonus distribution, grade increases, and stock allocation. of the business, ”Ren said, according to an English-language transcript seen by CNBC. “There has been no chaos within the company. Instead, the company is now more united than ever and has even attracted more talent.”

The telecommunications company says it increased its workforce by 3,000 between the end of 2019 and 2020, amid the start of the coronavirus pandemic. Just over half, or 53.4%, of employees are in research and development, according to Huawei.

In 2019, the administration of former President Donald Trump put Huawei on a blacklist that blocked U.S. companies from selling technology to the Chinese company, citing national security concerns. Huawei has denied that it poses such a threat.

“Due to US restrictions over the past two years, we are no longer looking to use the best components to make the best products,” Ren said. “Instead, we use scientific and reasonable methods to ensure balanced traffic through the system and use appropriate components to make high quality products, which has dramatically improved our profitability.”

A drop in global smartphone sales has also affected Huawei’s business.

The company reported sales of 320.4 billion yuan ($ 49.67 billion) in the first six months of 2021, down from 454 billion yuan in the same period a year ago. year. The revenue for the first half of this year was still lower than the first half of 2019 and 2018, before the pandemic and the US sanctions.

The two largest business segments, consumers and carriers, saw sharp year-over-year declines in the first half of 2021. The much smaller business activity, on which Huawei has focused its strategy of growth, increased by 6.6 billion yuan.

Ren remained determined to pay for the scientists – and spoke of compensation equivalent to an undisclosed amount for professors at China’s prestigious Tsinghua University.

“If the company had not paid attention to basic science and research, had not established in-depth cooperation with the world’s leading scientists, or had not appreciated those who engaged in basic research over the past decade, we would not have accumulated the enormous amount of theoretical, technological, and technical knowledge needed to overcome the difficulties created by US restrictions and blockages, ”he said.

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Ren’s comments come as China’s central government attempts to address a shortage of workers in high-tech industries such as manufacturing. Beijing has ambitious plans to develop its own technology – in semiconductors and quantum computing – over the next decade.

“China has seen economic bubbles, with young elites all rushing to do things that produce quick returns with relatively little investment,” Ren said.

“China still lags behind in products such as machine tools, processing equipment and techniques, instruments and counters, as well as materials and catalyst research. What methods can we use to conduct production experiments under such circumstances? This is a difficulty that we are now facing. “

– CNBC’s Arjun Kharpal contributed to this report.