You're listening to Bloomberg Business Week with Carol Messer and Tim Steneveek on Bloomberg Radio.
We are talking technology. I don't know if you guys noticed. Huawei and Apple were the only two major brands to record growth in China smartphone shipments in the second quarter. Chain that was according to IDC, showing the Shenzen based firm grew by seventy six percent. That's pretty big.
Well, on Friday, Huawei Technologies, the electronics behemoth, reported that it grew sales for a third straight quarter after new businesses like clouds services and a resurgence smartphone unit helped mitigate the fallout from those US sanctions.
Well, the company is trying to revive its high end device businesses, which has been bludgeoned by US sanctions. You guys know, we talked about this a lot, but could feature five G capabilities without using American chips. So back with us with more on the business and how it continues to navigate a tricky US China relationship. We're delighted to have back with us. Andy Perdy, He's chief security
officer Huawei USA on zoom in DC. His bio deep and wide in the public and privatestors, reminding us that Andy was a member of the White House staff team that helped draft the US National Strategy to Secure cyber space that was back in three He also worked at the US Department of Homeland Security to launch the National Cybersecurity Division and the US Computer Emergency Readiness Team. You have a great background. This is why we wanted to
lay it out. There's lots more Andy, How are you and welcome back.
I'm great, it's secured to be back with you today.
Well, hey, can I ask you how do you feel about cybersecurity? Do you feel like we're in a better way at this point? We just did a whole thing about generative AI and deep fakes and how we're going to moderate all that content, But how do you feel about security right now?
Well? Security is on a journey, not a destination, as colleagues always say. And the fact is that we are becoming increasingly dependent on technologies five G technologies and technologies beyond five G. And the fact is we're going to
become more dependent on these technologies. So the need to increase the cybersecurity and privacy ecosystem to have international standards, greater testing, can four months, transparency continues to increase because we can see there continue to be cyber attacks, and these cyber attests can be very serious if we don't continue to up the game as part of a global approach to this risk.
Andy, can you talk a little bit about your journey, because I was talking to it to Carol about it a little earlier on our planning call when we were preparing for this. Going from the White House staff team that helped rep the US national strategies to secure cyber space back in two thousand and three, you're at the Department of Homeland Security. Later you're on the US Computer
Emergency Readiness Team. How do you go from there? Talk about the transition from there and from government work to going to work in the private sector and especially for the Chinese company Wallwei.
Well, coming out of the Department Homeland Security, I work for five different startups as an advisor and consultant and that was a very exciting time. And I moved on to Computer Sciences Corporation and then Huawei in twenty twelve, and frankly, I was recruited to Huawei to help promote a SAYE for cyber space and this is the role that I've been able to contribute to as part of
a global cyber and privacy assuring system. And so I've been to twenty six countries for a while, but I've been to China twenty seven times and meeting people and former colleagues from other countries who are close to the
United States. It's been a great journey and hopefully that in this toxic political environment we won't lose sight of the fact that regardless of where the products come from, we need a very strong ecosystem with international standards, independent testing, conformance, and accountability both from a cybersecurity and privacy perspective to continue with the challenge that we've got to work to meet every day.
So help us understand where does the US have it wrong with Huawei? Why shouldn't the US have sanctions on the company?
Well, I think the way I would like to see an approach to these issues globally is to try to consider what's in the best interest in the United States. And a number of these issues, such as what kinds of products can be sold to what companies, can be fairly complex because there can be a risk that one can cut off your nose despite your face and really
can threaten American jobs. So we've been interested in talking to the US government for some years, but right now it's really a global situation and we have colleagues around the world. I've spoken to several in Europe within the last seven days that the challenge of trying to not be distracted from the mission of cybersecurity progressy assurance by the geopolitics, by the pressure there needs to be these kinds of strong standards in independent testing for anybody, because
the bad guys can hack into everyone. So we cannot put our guard down by thinking, well, we've blocked companies from this country. That's not going to make a safer and so we have to make sure that we reduce the risk on a continuous basis, hopefully on a global basis with our colleagues around the world.
It's also about business for you guys, right, because it hurts business correct to have these sanctions by the US.
Yeah, we had about a thirty billion dollar hit in our revenue a couple of years ago when they lock the five G chips from being allowed to be sold from American companies to Huawei. So our consumer devices didn't really affect all that much else but our consumer devices took basically a permanent hit, and so we have regrouped.
We've raised our research and development up to twenty five percent of our closer revenues, and so we're investing in digital transformation, the intelligent world five G and AI, not generative AI chat ChiPT but AI for business for industry. We believe that going forward, ninety eight percent of all ALI will be industrial and some agriculture, and only two
percent will be consumers. So we're working with partners around the world to help bring about digital transformation of industry and industry sectors with partners, and AI is a big part of it.
Do you just move on? I mean, you guys already have right in terms of the restrictions because of those US sanctions, whether it's you making your own design tools for processor chips, I mean you just have to kind of move on because you don't know whether or not things are going to get warmer and fuzzier between the US and China.
That's right. We're not going to look back. We're not going to particularly complain about it either, and the excitement of working with our partners and customers around the world. There's a whole lot of places in the world that want to do business with us, a whole lot of places in the world. They're going to benefit. And our partners know that we don't make money unless they make money.
So bringing these new technologies in smart mining, in ports, and healthcare, in transportation, smart cities, and frankly, green energy, reducing the carbon footprint using technology not just limiting access to fossil fuels, but technology that can help reduce the carbon footprint and create greater capacity for green energy, both in creation, in transmission, and storage. So yeah, we're not looking back, we're looking forward and it's an exciting future.
Andy, you're in DC and I can imagine the conversations that you're having with either regulators or lawmakers. How would you describe the environment between US and China right now?
Well, we're just a small player in a large world, and we're a privately owned company. We can't affect those issues. We are just going to move forward doing what we're doing, working with our customers in about one hundred and seventy countries and helping them meet the requirements of government in their various parts of the world. Of course, at the global level, we hope common ground can be found on some issues between the US and China, because everybody can
benefit if we can find some common ground. We do have an interconnected world and we can all benefit if we can find common ground and help reduce the toxic political environment somewhat.
What's a good way If you were still in the government, knowing what you know now, what would you advise?
Well, I think what we've heard from the Commerce Secretary and the Treasury Secretary, and I think the now Security Advisor Secretary of State, they're talking about let's try to have some conversations to try to find some common ground. I can't do any better than that. I hope some of the things could have to do climate change and green energy and the ecosystems, helping to connect the unconnected. They're three billion people in the world that are unconnected.
These are problems hopefully we can work together on. So we shouldn't let those things we can agree on be held up because there are things we can't agree on. All right.
We do want to get back to a guest because we are delighted to still have with US. Andy Perty, chief security officer at Huawei USA, on zoom from New York from Washington, DC, just moved you to New York. Andy, Sorry, you're welcome anytime, you are welcome, And as we said, also worked in the US government, Andy, Can I ask
you something? Then? I want to move on to kind of more broadly, do you think things would be easier if Huawei, I know, they're a massive company, if they stopped being private and became a publicly traded entity, because there's a certain level of transparency that really goes along with that that it would make it an easier plight for the company, if you.
Will, something that's been suggested over the years. And frankly, I don't think that could possibly make a difference of the hostility between the US and China and the concern the US says that the China government force Squawa to
do certain things. It's one of the reasons that we've offered to talk with the US government, and they have not been willing to talk with us about some of the proven risk mitigation measures that, for example, are in place for Ericson and Nokia that allow them to do business in the United States despite their very deep presence in China. So now, I don't think that particular aspect of transparency could help at all but we're open to
some mechanisms that could provide great assistance. But the kinds of measures that are necessary to make sure that people don't use their products for bad things is what's necessary to make sure they don't use other people's products for bad things. And you think back to the attacks on Solar Winds and Microsoft Exchange server and the recent attacks on the Microsoft Digital Certificate. No such thing as a
trusted supplier. We need to have the mechanisms for everybody to make sure the bad guys can't hack through and do home.
What are those protections that need that while.
We can have well, the kinds of mechanisms, for example, that Noki and Erickson operate under, are government monitored risk mitigation,
independent testing of the products. We've been open and we believe that all the telecom suppliers should make critical components available by testing by independent, recognized third party experts based on international standards, with accountability for failure to meet the requirements, and accountability if your equipment is allowed to be used to do bad things like the spy or cause various attacks. Those are the kind of measures that everyone needs.
So I do want to broaden out a little bit because we've I'm thinking about our Daybreak Asia program coming up in just about fifteen minutes, getting ready for the Asia Open. And you know, there are as you know, well know a lot of concerns about what's going on in China, whether it's the real estate market and now is it moving out to kind of the fringe financial firms, and just concerns, concerns, concerns. How would you describe the
Chinese economy? And you know, do you agree President Biden when he said the Chinese economy is a ticking time bomb.
Frankly, unfortunately, I'm not an expert in global economics or the economy of China. I've got a number of good friends who work over there for China. I look forward to visiting them, but unfortunately I'm not your person to help you do an analysis what's happening in China. I just know my colleagues are so happy that host COVID. They can live normal lives over there, and that's a great burden off them, and their quality of life is much better.
I think what's puzzling to us. And one thing that we wanted to talk to you about was, you know, the success that we've always been able to find within China, juxtaposed with the challenges that we've heard about the Chinese economy of late, Can you share anything there?
Well, we have been providing very real value that can help save money. I can help reduce the carbon footprint, increase efficiency, increase the safety, reduce the necessity of some workers. And so by bringing value and helping to save money, we can generate revenue for ourselves and for our partners.
So when you guys did report earnings on Friday, came out with a financial update reporting that the company, Hilwe Technologies grew sales for a third straight quarter. Talked specifically about new businesses such as cloud services and a resurgent resurgence excuse me, in the smartphone unit, so helping to kind of counterbalance some of the fallout from the US sanctions. Tell us a little bit about the business you are seeing and where is the growth. Is it domestically, is
it demand from all the overseas customers? Talk to us a little bit about that if you could.
Well, there's definitely a demand from around the world. And as you know, the particular areas that grew the most for us is the cloud business and digital power, which is which is very exciting. But our ict, our information
communication technologies infrastructure business remain solid. Our consumer business, which took the hit that we talked about before, has achieved growth and we've released a number of new four G phones, So yeah, there's there's growth, there's progress all around the world, and the use caps is the partnership we formed are
also all around the world. So companies and the major five G carriers can see how should they invest their money so they can maximize and monetize those benefits, and how can they partner and help the industry sectors prioritize how should they spend their money to bring the benefits of digital transformation and decarbonization to the industries of the world.
When you talk to about the cloud, I'm assuming AI is a big engine there as well. Is that fair?
Yeah, a AI has been in huge and our digital cloud business, our PANNGU model, which is involved in a number of industry sectors, a number of proven use cases, for example, weather forecast. The journal Nature wrote an article
about the use of AI to protict weather. But also we've been heavily involved in We've formed our own business units within our company, things like smart mining, smart road electric power, waterways, and port All these things have AI aspects of the not generative AI, but AI to help advance efficiency and reduce the carbon footprint.
All right, we're going to leave it on that note. Hey, listen, Andy, thank you as always as you're always so gracious in giving us a nice chunk of time. So appreciate it. Andy Perdy. He's chief security officer at Huawei USA. As we mentioned, several stints in the US government, including a member of the White House team that helped draft the
US National Strategy to Secure cyber space. That was back in two thousand and three, so we're talking twenty years ago, but certainly cybersecurity issue is probably even more front and center than ever before.
I love talking, Andy, I do too, great perspective.
All right, you're listening to you and watching Bloomberg Businessweet Carol Masser along with Tim Stanovich, and this is Bloomberg