iTWire sat down for a lengthy interview with Huawei Australia Chairman and Independent Director John Lord to discuss his involvement on the board, the company's relationship with Australian governments at various levels and what Huawei is doing to get its name out there to a public who still largely may have never heard the word 'Huawei', let alone know how to pronounce it (for the record, it's 'wha-way').
When you talk about Huawei, how do you like to describe it?
It has been what I used to call a BP. BP used to be called British Petroleum. They used to always say 'BP, quiet achiever', and Huawei, when I was approached to join the company four years ago, I'd never heard of it. Most people I knew had never heard of it. And yet there were statistics then saying over 50% of Australians use a bit of Huawei in their daily communications needs. And none of us had heard of it. So it just means they were supplying business to business, and doing that well. And to be fair, the company globally said at the time 'we don't have to do anything else', but all of a sudden it started to get a bit more into mobile phones, and wanted to break out a bit more from being just business to business. And it wondered why people hadn't heard of it and didn't want to do business with it. Huawei realised it needed to start branding, and get known, so in this last three years you've seen it published its annual reports. It always did them, and they were always audited by KPMG for the last ten years, but they couldn't see that anyone would be interested. So it's published them, it's gone out and branded, it's told people who it is. And they've started to do that globally, they really want to become a global corporate. It's been a big change.
Have you found people in Australia are getting to know the brand, or is it early days?
It's definitely applied to Australia, well we're still the only non-executive board, we'll expand the board model overseas hopefully this year or early next, but when we came on the board, the three of us, we said to Huawei 'no-one knows us. We really do need to get known', and that was the case in Australia. Absolutely no-one in Australia, except if you were very heavily into the ICT industry, had ever heard of Huawei. So then there were all these things like 'ah, you must be a government-owned enterprise', or 'you couldn't possibly be privately owned, no Chinese company could be this big and be private.' So coming back to Australia, it was really a big job to tell people about it. The other thing is of course the pronunciation. It's really tough if you don't know it!
It's also branding. People need to do know what it is you actually do. If I say to Australians 'do you know that we're number three in the world at mobile phones', they say 'you're not, if I go down to my local phone store, you're not the third maker in there', and we're not. But globally, we're number three. A lot of that is China, and new areas in Africa, South America and Europe, where we are big. So in Australia we're just starting to get into that market. Our latest P7 has just got into Harvey Norman, it's the first Huawei product they've carried.
Is the smartphone market specifically going to be a key focus?
Yep. The network market is pretty full, and it's replacement and competition between the network vendors. And it's still our biggest source of revenue in Australia, and perhaps globally. But the future focus for the company in Australia and globally is enterprise and devices. Devices will probably change over the next ten years. Right now it's smartphones and media pads at the moment, but our R&D team is working on one device that probably will do all of that, and I know you can almost do that now, but as well as that will talk back to your home, turn the heating on, talk to your car, and do all of those things. Those will be the future devices people will want. Instantaneous communication from the one device. You're seeing us all fiddle around with watches and goodness knows what at the moment, I think that's gimmicky, and that will change into this single device, one that's hopefully not too big, and will do most things. You'll walk around the house with it, you'll answer your phone on there, and you'll control your house.
Is Huawei well positioned to offer that device?
Definitely our R&D centre is looking at that device, and I'm sure our competition is too, although being Huawei, we're across the whole spectrum of ICT, and probably only Ericsson are too, although they've recently pulled out of mobile. Some of the others are just phones so they'll have to make a transition. But yes, our R&D is definitely looking towards the device of the future, that actually helps people do the tasks better, and that interaction with the individual. Because at the moment they give you information, the individual still has to use it. But in the future it's going to be this interaction between the user and the device, the device will help the individual make the decision. And that's the real growth we see. The data's all there.
How do the board meetings work, what do you talk about as part of your role as Chairman?
It's been a great learning experience for me and my fellow Australian directors, and also for the company, because it's never had an independent board before. They're an executive director board in China, so they control the whole operation. So the last three years has been getting comfortable with each other and delegations coming down to the Australian board. So it would be fair to say by the middle of last year we were at a situation where what you'd call all the good normal delegations you would expect from a centrally controlled company down to an independent board have come true and were fully endorsed. So the board now is totally responsible for governance and compliance with all Australian regulations and other rules. We're responsible for marketing in Australia. We're responsible for public image and brand. And we're responsible for corporate social responsibility. So all those delegations have now come down to the independent board. I describe the model now as a board model that meets all Western governance standards, that has a Huawei and Chinese influence.
And what is the Chinese influence? A slightly different way of doing business. A more conciliatory approach; going around the topic to get to the answer, rather than directly across the table. What's the Huawei part? It's really a family. All the shares are owned by the employees, and if you leave you've gotta give them back, well we buy them back. Huawei is very much a company that wants to know you, and know its employees. So at the board level, it wants to have a close relationship with its board. So on our board we have two global directors, three Australian directors and two senior managers. And we very much depend on a close relationship, so we meet outside the board a lot, and it's a very open relationship. That's the Huawei family feel that you get. Apart from that, we follow all the rules, and I guess we are moving towards being a global corporate, and I guess other companies like this before us, like Toyota, in Japan, they design the car, build the car, colour the car, and then they give it to a region to market it, sell it and introduce it. And if you look at Huawei, all the co-ordination of R&D is done in Shenzhen. And we get on with the marketing and introducing Australians to it.
For more, including on how Lord describes Huawei's relationship with the Australian government, continue to page two.
Are there other things that make Huawei especially different?
I guess the other difference with the company is it puts R&D centres in areas of expertise. For instance Italy is our microwave R&D centre. There aren't two of them. It's Italy. They had this centre there, a cell of small companies supporting R&D infrastructure that focused on microwaves. I think UK recently got the R&D centre for industrial design. That one's in the UK because the company found a very smart company there, and got them to join us, so that now does our product design including colours and things. We have different areas of expertise across the world. And in Australia, before Christmas we bought a company called Fastwire, based here in Melbourne, and that does software for operational support systems. And that provides our global supply time. It's the only one of that we have in the world. So we don't duplicate. And I think all ICT companies will have to do that in the future, because you don't have all the brains in one country or one base, I mean Silicon Valley's close, all the brains go into Silicon Valley, but what we've done is used the brains back in their home countries, and made centres there. You've got to do that.
Are Australian government relations improving, or are they frosty?
It'd be fair to say government relations have never been frosty. There's been decisions made by governments that affect us and affect all the ICT industry. In fact, we're watching the ISPs at the moment having heavy discussions with government at the moment about what they have to hold and store, and the advantages and disadvantages. We're watching the Googles and the Apples having discussions with government about tax. So we all have our moments.
With a company like Huawei coming out of China, with technology and innovation, there's going to be some people saying 'ooh, we don't trust this technology,' and there's others saying 'we need to embrace this technology in Australia.' And irrespective of which party was in government, we always had our supporters, and those who question what we're doing. That's the job of the board, is to keep working with government of either persuasion to say 'hey, here's what we can do for your country', while we also do our business. The Australian board would say we've got three main roles - to continue to grow the profits, 10% every year, second is to continue building our relationships, and Optus and Vodafone are very big for us in the world and in Australia. And the third area is trying to get Huawei to get more of its innovation and R&D coming to Australia, because we believe the smaller SMEs in Australia, the ICT SMEs, they get it. Australian ICT SMEs are underrepresented in global supply chains in the world. And if we've got very smart SMEs, we've got very good universities, and we're a reasonably small country, so we'll have to focus on R&D and innovation. And that way we won't have all that people going to Silicon Valley, they'll stay here as well. So a focus on our ICT SMEs would be a win-win for Huawei, and it'll help Australia. So that's a message we're selling the government as well, welcome companies that are dealing with technology, irrespective of where they come from, because Australian business will grow out of it.
Has that been the biggest challenge over the last few years? Getting people to welcome imported talent?
Yes it has, and I wouldn't say we're the reason for it, I understand the Minister for Technology Malcolm Turnbull's coming out with a innovation and technology paper soon, which is going to say this is where we see Australian businesses, SMEs and companies going in innovation and technology. I think it's going to be a very heavy focus on them growing and keeping people in country. The real challenge for Huawei in Australia is we come from what you call a non-traditional ally, or non-traditional partner country. If we're European or American, we're tradeworthy. Huawei isn't. The example I give is, the 1960's, when Japan was getting into big manufacturing, it came to Australia.
Australians said 'we're not going to buy a Japanese watch, because it's a cheap copy of a Swiss. We're not going to buy a Toyota, they've copied it from somewhere, and we don't trust the Japanese because we just fought the war against them.' Huawei's almost like that in Australia today. Who is China, what's it doing, it doesn't have a democracy. And what's this private company doing out of China? And didn't China used to steal technology, and copy it? And here we are saying 'here's Huawei, here's its R&D, here's all the patents', and all of that.
The other thing is we're counter-cylical in growth, in that when some of the European companies had problems with mobile phones and ICT, and had to downsize, we picked up quite a few employees. We've grown 10,000 employees a year in the last few years. They didn't all just graduate, we've picked up quite a lot, but yeah it's quite huge.
You've got some contracts with the UK government, what's different about them than the Australian government?
I think it's fair to say we were working closely with BT at an early stage, and we were therefore better known. As I said, in Australia no-one could spell Huawei... they'd never heard of us. We were just working really well business to business. In the UK we were a bit more obvious because we were working with BT, which is the Telstra of the UK effectively. When the UK got to their NBN equivalent, there was this company called BT saying 'we use Huawei products, and in these areas they're better than anyone else in the world. And when we do our NBN we want to keep using it.' And the UK government said 'that's fine.' So what we did then was build a test laboratory, so all our equipment could be tested, before it went into the NBN. And the British government said 'that's fine, that suits our security requirements, BT is the guarantor and the partner of Huawei', so we went very excitedly into their NBN. I think we were known better, and secondly the British worked out very early on the technological advantages of a company like Huawei. And I guess UK was a little more used to R&D and innovation than Australia is. The Brits used to have their own industries, and they've kind of faded away, but Australia imports basically all of its ICT. We don't really have an ICT industry here.
Australia still looks to the US a lot more than Europe does, and Europe used to do it all itself. And because it used to do itself, its got a bit of US and China now, whereas now Australia just look to the US, and we have total reliance on it for ICT. And I think in the future that won't be the case, we'll still have a reliance on the US, because the US will always be a leader in innovation and technology, but I think our future will be Asian technologies, and the US. And that's the stage Australia's got to get to if it wants to get the best of both worlds.
For more information on Huawei Australia check out its website.