Huawei CEO Says 'Bullets Fired' at Smartphone Business by U.S. Sanctions, Calls for Dramatic Overhaul to Survive

The founder of besieged Chinese tech giant Huawei has reportedly told employees to expect "major structural shifts" within five years as a U.S. trade blacklist bites.

An internal letter sent by billionaire CEO Ren Zhengfei, first reported by Bloomberg, references the ongoing troubles caused by his firm's inclusion on the so-called "Entity List," which stops tech companies from trading with Huawei without the U.S. government's permission.

"Two bullets fired at our consumer business group unfortunately hit the oil tanks," Ren said in a letter dated August 2, Bloomberg reported. Since being added to the blacklist in May, links with key business partners—including Google, Qualcomm and Facebook—have crumbled.

"We have to complete an overhaul in harsh and difficult conditions, creating an invincible iron army that can help us achieve victory," Ren wrote, according to Bloomberg. "We absolutely have to complete this reorganization within three to five years," he added—without further detail.

Layoffs impacting hundreds of jobs are being planned for the U.S. divisions of Huawei, The Wall Street Journal reported in July. Last month, speculation surfaced that the Chinese tech company would be allowed to resume some U.S. trade, but any deal appears to have stalled.

"We are not going to do business with Huawei," president Donald Trump told reporters on Friday when asked about the ongoing situation. "It is much simpler not to do any business with Huawei… that doesn't mean we won't agree to something if and when we make a trade deal."

Huawei did not immediately respond to request for comment.

In recent months, the potential loss of the Android operating system appeared to speed up the need for Huawei's HarmonyOS, a new piece of software designed for smart products that may soon be used in smartphones if the relationship with Google does not improve.

The open-source OS was unveiled during a developer conference last Friday and will be used in a new smart TV by the Honor subsidiary. Richard Yu, CEO of the Consumer Business Group, said during the event that Android remains the first choice for Huawei devices. But he added: "If we cannot use it in the future, we can immediately switch to HarmonyOS," CNBC reported.

According to Bloomberg, Ren's internal company letter referenced HarmonyOS, saying more time would be needed to build an app ecosystem that could possibly rival Android or iOS.

The CEO reportedly put more faith in Huawei's ability to dominate in the field of 5G technology. "The U.S. doesn't use the most advanced 5G technology," Ren reportedly told staff. U.S. senators have previously criticized Huawei over its alleged links to the Chinese government, claiming the firm may put American data at risk of spying or espionage—an allegation denied by Huawei.

It remains unclear if HarmonyOS will ever penetrate the mass U.S. market. "If you didn't trust Huawei hardware running [Google's] Android then you aren't going to trust Huawei hardware running their own operating system," Robert Pritchard, a cybersecurity expert who previously worked digital security roles inside the U.K. government, told Newsweek in an interview last week.

Ren Zhengfei
Huawei founder Ren Zhengfei gestures as he hosts a panel discussion on technology, markets and enterprise in Shenzhen, Guangdong province, on June 17, 2019. HECTOR RETAMAL/AFP/Getty