Peter andy purdy is chief Security Officer for huawei. He is based in washington, d. C. , and he is our guest on the communicators. What do you do for huawei . Andy my primary role is internal, although i have been doing external things for the past few months, but my responsibilities include chairing a committee of key parts of the company in the United States that tries to control riske, and and help support our overall ethics and Compliance Program so that we make sure we protect huawei, protect our companies, and continue to do business and managers Cyber Security risk. Peter what is huaweis legal and commercial status in the u. S. Right now . Andy it is a moving target. We have a pending rule to an rule pursuant to an executive order. Right now, we cant sell to the u. S. Government, cant sell to u. S. Contractors, and there is pressure for our smallcarrier customers, wireless and wireline customers, to rip out huawei gear. So, there is legislation pending that would provide funds, not adequate or providing sufficient time, that would give them money to rip out huawei equipment. So it is a difficult situation and although not official, the u. S. Government has blocked the american carriers, at t and verizon, from selling their mobile devices. Peter why do you think that is . Andy it is a complicated matter. We have the geopolitical context of the u. S. And china, and the trade talks having exasperated things. And, we also have a situation i think affects many of us in our everyday lives, where people dont want to hear or read anything that doesnt agree with their position. So we have a lot of false information out there. Some of it expressed by u. S. Government officials, and some provided by the u. S. Government to the media, but we cant meet ,with the u. S. Government. Cant meet with the u. S. Government. We dont have the opportunity to provide the fax. It is a challenging situation. Peter to help us deal with some issues that huawei and the u. S. Government are facing, john hindle of politico is our guest reporter. John thanks for having me, peter. Andy, i want to talk about the implications of huawei operations in the u. S. I think there are about 1500 employees for huawei here, but given the changes and the heat the company has gotten from the Trump Administration, fcc, congress, are those number is going to change in 2020 . And your role, too, how is that going to shift as the government moves to block out the company . Andy we have been forced to downsize in the United States. We may recall we laid off about 600 people working in our r and d capabilities, primarily in Silicon Valley in california. And, we cut down our staffs for our carrier business, enterprise business, and our device business. But frankly, when you look at our global revenues and global growth, the United States from an income perspective is really not a very important factor for huawei. Although it is the largest market in the world, and we would love to have the chance to talk with the u. S. Government about doing business here. John will you expect further cuts in 20 in terms of the staffing . Is there a sense of how that might change . Andy it is more likely than not that there will be additional cuts. The legislation that is pending that would provide funds to allow our 60 smaller customers to rip and replace huawei gear. That would mean we wouldnt be able to provide software and hardware updates to the technology, so that would cause a decrease in revenue, a decrease in the workforce necessary to maintain the business. So the headwinds are definitely measurable for us. John you mentioned the trade war, and how much that has been overhang that really influences what is going on here. We are now in 2020, a u. S. President ial election year, so has there been much discussion about whether a new administration might provide any sort of reset or opening to discuss these issues in a different way . I have found myself looking at the trade war, and it is a signature issue of President Trumps. He is seeking a second term, but would things potentially be different under a president biden, a president warren . How much is this tied specifically to the Trump Administration and President Trump in particular, do you think . Andy i think it is important to understand the geopolitical context. And, that context exists, regardless of which administration is in power. The u. S. Is quite concerned about china and the rise of china, economically and militarily, and is concerned, some believe, that china wants to take over the world. So there is concern about, what is the american role with our allies in creating and maintaining the type of capability necessary to keep us safe . If china were to turn and become a kinetic warfare adversary. As we think of cyberspace, we are building a space command, as we think of cyberspace, the implications of a growing dependency by our country and others on the digitized economy and the 5g Internet Things and so forth, these are going to be increasingly dependent as a country and a world on those kinds of technologies. So that which really didnt matter so much since i left the white house over 15 years ago are really going to matter. So the question is, how do we manage the risk to the United States, regardless of who the suppliers are . That is something that is top of mind, whether you are a democrat or a republican. One of the frustrating things to me is the fact that the government wont meet with us. There is a lot of information being communicated that is not based on facts. If the government is giving various publications or speaking publicly about things that are wrong, i can only imagine what they are saying to democratic and republican leaders. I think it is important, whether in our personal lives are lives, or government, or geopolitics, to base things on facts and on data and to be objective, so we understand the risks and we can take steps necessary to address risk. Peter but andy, every time we have had a member of congress or member of the administration on, democrat or republican, we asked them would you own a huawei phone, and the answer has been no, acrosstheboard. They have information that there is a backdoor and a way for china to access that information. Andy you began your comment with a but. Your comment is agreeing with what i am saying, that democrats and republicans are worried about china. Many has said have said its really not about huawei. It is about the china government, and what the china government, in their view, could force huawei to do. For example, some Government People recently talked to some of our customers. The Government Officials thought huawei was giving away equipment free to customers. There are recent comments by a Government Official and an attorney, publicly, comparing our founders offer to license our 5g technology, which means the u. S. Government could see all the hardware and all the software, he likened it to elon musks tweet that got him in deep trouble with the fcc, calling his offer to license the 5g technology to america basically the equivalent of a criminal fraud, which is objectively false. Finally, another example of what has been said publicly is that we update our equipment with Software Updates from china. A Government Official said that. That is demonstrably false. And, of course, the Government Officials dont hear this, because they are hearing one side of the story. They are not willing to listen to us or other major experts who say there are real cybersecurity risks in the world, and all the equipment, the carriers and the equipment providers, have to be subject to strict scrutiny and testing of products and conformance of measures, because the bad guys can hack into everybodys products, particularly with a Global Supply chain deeply embedded in china. Those are the kinds of things necessary to make sure america is safe, going forward, and that is where the discussion needs to get to the next level. When you talk about the Chinese Government, in the wall street journal recently was this report of review of credit facilities, tax breaks and other Financial Assistance details for the first time how huawei had access to as much as 75 billion 75 billion in state support as it grew from a littleknown vendor of phone switches to the Worlds Largest telecom company. And, in that article, it said comparing 75 billion to 45 billion cisco is getting, so put things in perspective. And that is an instance where the u. S. Government provided dramatically inflated information to the wall street journal for that story, way above the 75 billion figure. And the fact is, and hopefully show him someone can show us the information so we can have a chance to say that is right or wrong, the biggest item and there is over 45 billion. If you take that out, we are lower than what cisco is getting around the world for china. The idea of Chinese Governmentbacked banks providing loans to customers, lines of credit. So the question is, is that 45 of the 75, is that the amount of money customers borrowed, they are alleging it at artificially low rates and giving unfair advantage to huawei, because our customers would have lowercost financing. But the fact is, very few customers use the lines of credit, so i cant tell from the article whether the 45 billion is just theoretical lines of credit, but we know only 4 billion or 5 billion of the 45 billion, i know this gets technical, was actually used by customers to buy our products. And when you are looking at 150 billion in revenue, 4 billion to 5 billion in support is nothing. Lets talk about the facts, but when there isnt discussion and people are not even willing to think about or talk about the facts, i would suggest as we said previously, block huawei if you must, but lets do the things necessary to make america and our allies safer, and we are not doing that enough. That is the kind of thing we are recommending. John you talked about issues with the administration not being open to speaking with huawei. What does lobbying look like for the company at this point . I wonder if that resistance also extends to member of congress. To what degree is the huawei lobbying operation like going into 2020 . One of those conversations or efforts looking like . Andy you are more of an expert on lobbying and how to affect Public Policy. Certainly, some of our competitors who make significant Campaign Contributions to members of congress, and we dont make such contributions, that can have an impact on the discussion. There are some people on capitol hill that are willing to talk with us about some of the issues, and we are going to redouble our efforts to reach out to them to try to have some of these discussions about what the facts and evidence are, and frankly, from my perspective, my focus is security and risk, what is necessary to make america safer with transparency. John how much are you talking with some of the smaller, Wireless Companies you work with companies . You work with you said around 60 right now . Andy yes. John what have they been saying, given the administration and others have moved to push out huaweis influence, talking about even ripping and replacing the equipment. What is the message from them . Andy they provided substantial input to the federal communications commission, both last year and this year. I believe they provided input to the commerce department, in response to the executive order from last year. They told us about some of their discussions with the government where it is clear some of the folks in the government think we give away our equipment free, and some of our customers are telling the government they have particular measures they can use to help manage the risk, whether it is from huawei equipment, or nokia or ericsson. So those kinds of discussions are very helpful. They said to the government that the efforts to do what they call rip and replace, which is pending legislation coming up soon this year, that the amount of moneys discuss are not nearly as muffin the timeframe in thely enough timeframe, and it is going to take a lot more time and likely put some out of business. Peter andy purdy, when you talk about rip and replace, how much huawei equipment is being used in the states right now . Andy i am not sure i can give a number. We have, 60 smaller suppliers, about 40 at tier three, the smallest carriers for internet and wireless service. About 40 of those are in rural america, underserved america, so it is the smaller communities where schools and colleges and companies depend on our technology in the service these carriers to do ausiness, and it is relatively small amount of income. But we are committed to continue to support those rural customers if we are allowed to do that. And huawei had a record year last year when it comes to revenues . Andy about 122 billion, up 18 . But it is important, that people are misunderstanding the data. We took a significant hit from the pressure from the u. S. Government, blocking nearly 300 American Companies that we spent over 11 billion on last year, over 45,000 american jobs depend on it. But despite that, in the Third Quarter mark at the Third Quarter mark, we were up 24 , and at yearend, we were only up 18 . For a large company, that is a lot. We have very substantial headwinds going into the year. The Global Environment is a challenge, and the challenge of the competitive nature of the world and the change taking place, it will make the next year or two very challenging for huawei. Peter and your rotating writes theghts external environment is more , inlicated than ever and the long term, the u. S. Government will continue to suppress the leading technology, a challenging environment for huawei to survive. Thrive and survive. Andy thats right, and the environment is different around the world. We are in 170 countries. Every country has its own environment. Every country has carriers and mobile operators trying to figure out what to spend their money on. So as we talk about digitization, 5g, cloud, artificial intelligence, block chain, these things are going to make life better and create millions of jobs around the world, but the companies that are going to invest, they have to see the business case. There is a lot of decisionmaking in individual countries or when the world that is going to affect our opportunities to grow our revenue and serve our customers. John in the yearend message peter referred to, he had also said that survival would be our first priority. What would threaten the survival of huawei . Are there specific things you guys are worried about that could become bigger . U. S. Market marketplace is a smaller share, but that was a line that did jump out at me. How existential is this right now for huawei . Andy i think the challenge of how much we are going to grow and when is a real challenge. The situation with digitization around the world, the challenge of when you are in a competitive market people think people buy our stuff because it is cheap. That is not true. We lose contracts everyday. We lose them around the world, and we even lose them in china, because china allows ericsson and nokia to compete against us. Half to be competitive, improve our work as individuals and accompany and optimize our company. We have to get rid of dead wood, hold the front line more accountable, and we are like any Major Company trying to meet the challenges of the world. Its impacted by the fact that most of these American Companies cant buy from us, no question. And, it is impacted by the fact we cant buy from google. So coming up with a Huawei MobileService Alternative to google is a major priority for the company, and it is difficult. It takes time, not just to create the technology, but you have got to tested, and some things really take time. You cant have nine women make a baby in one month. Things take time and that is going to have an impact on our growth. Some of our growth in 2019 was based on momentum from the past. The momentum is gone, and we are not going to get the kind of growth in early 2020 that we had in early 2019. John is there a timetable for an alternative of what google provided at this point . I know huawei has talked up its own efforts along those lines, but where is that internally right now . You talk about testing, but when it comes to what google specifically offered, where is that . Andy i honestly dont know the timeframe. I will be going to china for annual meetings next week. I do know there is a lot of work with the App Developers who would provide apps for the platform, because that is a critical part of replacing, for our mobile devices, we sold about 240 million last year, of creating a platform for the app. So you have not just creating the infrastructure, but you have to motivate the developers, give them what they need so they can be working in parallel. I dont know what the date is. It is a major commitment, and it is very difficult. John i want to turn to the recent fcc vote, voting unanimously voting to bar u. S. Telecom providers that receive subsidies working with huawei and cte. Zte. Since then, the fcc has been sued by huawei over that vote. What led you to go to court, and what are your feelings about the prospects there . They had allowed for a bit of a regulatory challenge through that, saying huawei could not challenge the determination that they are a threat. Why go to court, and what do you see happening next . Andy as a former longtime attorney and federal prosecutor, i have some sense of how sensitive federal judges are to making comment on pending cases. So i want to be a little careful about what i say. But frankly, we had to respond, because, as in our fi