Huawei USA Security Chief on outlook under Biden administration

Andy Purdy, Huawei Technologies USA, Inc. Chief Security Officer, joins Yahoo Finance’s Akiko Fujita and Zack Guzman to discuss outlook for Huawei and the smartphone market in China.

Video Transcript

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AKIKO FUJITA: Welcome back to "Yahoo Finance Live." Chinese tech giant Huawei launching its most ambitious phone to date this week, the Mate X2, the company's latest foldable phone. This time though, it's powered by flyways own operating system, rivaling the Android system from Google. This comes two years after the US placed Huawei on a trade blacklist, preventing American companies from supplying components as well as technology to the Chinese company.

Let's bring in Andy Purdy, he is Huawei's USA chief security officer. Andy, it's good to talk to you. Huawei has made no secret of the fact that you have been hit hard as the result of US actions. If you look at smartphone shipments alone, down about 40% over the last three months. How is the company thinking about the path forward right now with the administration, at least publicly, giving no indication that they're planning to go a little softer on the company?

ANDY PURDY: Well, we took a big hit in revenue, potential revenue in 2019 and another big hit in 2020. And we think things are going to continue to be very difficult in 2021. The administration has some really big issues on their plate in terms of the coronavirus and the economy.

There was an increasing focus on the relationship between national security and the economy. There was an effort to try to improve the cybersecurity of the United States, which is very important and very necessary.

We're hoping that the Biden administration, rather than bundling all the various issues together and using them for geopolitical negotiation with China, will look at individuals separately, such as the ability of American companies to sell to Huawei at least $12 billion a year, which is about 40,000 jobs. We hope they'll look at each issue in terms of what's in the best interest of the United States.

And maybe they'll also address the issue of releasing our chief financial officer and considering licensing our 5G technology, which I think would be very helpful to United States.

AKIKO FUJITA: Have you gotten any indication from the Biden administration that there is likely to be a shift in tone, at least as it relates to allowing for Huawei to do business here?

ANDY PURDY: Oh, well, there are two different issues. Our ability to sell in the United States is definitely-- that's a long-term thing. It would require a legal change. We know that's not going to happen anytime soon.

Before the administration can even decide that for the benefit of American workers, that they're going to allow companies to sell us, I think we're going to see a number of actions like we've seen recently, such as the executive order President Biden issued to help promote the semiconductor industry, to help promote a more stable supply chain. I think they're going to try to raise the bar on the ability of Americans to address supply chain risk, cyber supply chain risk.

And as the United States raises the bar, I think we'll see the approach that this administration takes for multilateralism, working closely with allies. And so we're hoping when they look at things like Germany's doing, the European Union are doing, that perhaps at some point they'll say, OK, what's in the best interest of the United States in terms of the ability of the American semiconductor industry to sell to Huawei. And what's in their long-term best interest? Because it's at least 40,000 American jobs. And if everybody is forced to find technology elsewhere, if they let that happen long enough, those jobs are going to be gone forever.

AKIKO FUJITA: Yeah, but Andy, it seems like the core question is still the same, which is does Huawei pose a national security risk. On that key issue, do you get the sense that this president is looking at it differently?

ANDY PURDY: Well, we don't see that yet. But again, there are two different issues, the ability of American companies to sell nonsensitive chips to us and the ability to sell chips that would go in the 5G phones. The phones are not a security risk.

As you may know in America, phones are not even tested for security. And it's like, so you're going to block our for security risk? In addition, the United States needs much stronger privacy protection to help protect the data.

So at this point, we're hoping the US government disaggregates issues and focuses on them one at a time rather than a lump thing and that they focus on the best interest of the American workers and the best interest of America and not on issues that pertain to us. Hopefully, rather than talking to the China government, hopefully they'll talk directly to us.

ZACK GUZMAN: Where does the company stand on supplies right now? You still can't get US components, or you can't get components from American companies. You can't still use US technology. The question that keeps coming up, do you have enough right now in place? Have you stockpiled enough? Do you have enough internally that your manufacturing will be able to continue, particularly on the consumer devices side?

ANDY PURDY: It's been a very difficult struggle, as you know. I think you saw that we released, in general terms, the fact that our revenues and profits for 2020 were actually positive relative to 2019, which is a very good thing. But we've definitely been hurt. And very shortly, we'll come out with a more detailed breakdown of the statistics. But we've been hurt very significantly in terms of the mobile devices.

But we're taking a very long-term approach. And it's helping us prioritize which products are most important. Which components do we have? What do our customers need the most, companies, individuals?

And so we're going to get through this. It's going to be difficult. And as long as it takes to get through it, we will put the effort into it to get there.

AKIKO FUJITA: There have been a number of reports that have suggested that the company is considering a potential sale of its smartphone business. You talked about the struggles right now. Is that something that's being considered? Are there multiple options on the table right now as you wait for a policy shift that may or may not come from DC?

ANDY PURDY: I have not heard anything about the possibility that we would totally sell our consumer business. It's a pretty big business. As you know, until recently, we had surpassed Apple and Samsung as number one in mobile devices in the world.

Now, we are committed to this space. And even if we take a hit for a few more years, we are going to be in this space. I'm just worried as an American that we shouldn't cut off our nose to spite our face. We shouldn't block the sales of nonsensitive products to Huawei and threaten the long-term situation for the American semiconductor industry. I think that would be a shame. In fact, that would hurt the US Defense industrial base because those companies are very important for that.

AKIKO FUJITA: Andy, you talked earlier about the chip shortage that we have been seeing play out globally. Where does that put Huawei right now? Forget about the opportunities you see for Huawei to be able to fill the void. But specifically for the company, are you able to find the chips there to sustain the kind of momentum you want to? Is the move that we saw over the last year or so to really try to build more in-house, is that, in a way, sort of benefiting you at a time like this?

ANDY PURDY: Well, it is a long-term process. As you know, the challenge of bringing the chip capabilities up to the kind of level that are necessary for today's products and tomorrow's products is a very difficult, very long-term process. You may have read a recent report in "American Affairs" by Paul Triolo about the economic forces at work in China, trying to find ways that companies can actually build these capabilities.

So we are hurting. It's exacerbated, of course, by the coronavirus and the export controls of the US that are impacting, actually, throughout Europe and throughout the world. So we're doing the best we can. In the end, we're going to succeed. But it's a very difficult process. And we don't know the milestones for the future and how we're going to fare.

AKIKO FUJITA: And finally, Andy, we started the conversation by talking about the big launch for the Mate X2 this week. It's the first one we've seen with the operating system built in-house. This does, of course, come as a necessity or sort of because your hand was forced because of the US sanctions. Is Huawei doubling down on that? Or if the US lifts some of the sanctions, is the idea to go back to Google's Android system?

ANDY PURDY: Well, the sooner, the better that we can make decisions to go back to Google, the better. The sooner that we can be allowed to buy from the American semiconductor industries, the better for everyone.

Our commitment is that we want to be able to go back to Google. But yes, we are doubling down to try to increase our capability to live without the American suppliers because we have to expect that we will not get these supplies. And of course, as a result, the American jobs are going to be lost.

AKIKO FUJITA: But if you get the green light to be able to do business with Google again, Huawei would still be open to that?

ANDY PURDY: That's correct.

AKIKO FUJITA: OK, Andy Purdy. It's always good to talk to, Huawei Technologies USA chief security officer.