Huawei’s founder, Ren Zhengfei, adopted a markedly different approach from Jack Welch’s strategy of financialization and downsizing. While Welch emphasized short-term shareholder gains and cost-cutting—even at the expense of manufacturing and employees—Ren focused on long-term industrial growth, technological capability, and self-reliance. In contrast to Welch’s approach, Huawei’s strategies actively strengthened China’s industrial base and fostered sustained technological development.
Heavy Investment in R&D and Technological Self-Reliance
Huawei’s prominence in the global technology industry can largely be credited to its substantial investment in research and development and its dedication to technological independence. Unlike firms such as General Electric under Jack Welch, which shifted much of their focus toward financial services[1], Huawei consistently reinvested a significant share of its revenue—generally 10–15% annually—into R&D. The company concentrated on developing key technologies, including proprietary chips, 5G networks, and telecommunications infrastructure, to minimize reliance on foreign suppliers. Equally critical was Huawei’s focus on nurturing talent; founder Ren Zhengfei emphasized creating a highly skilled workforce of engineers and technical specialists capable of driving long-term innovation. This strategy has allowed Huawei to establish a strong domestic industrial base and compete effectively on a global scale in advanced technology sectors.
In contrast, the decline of companies like Nortel (a Canadian firm), and to some extent General Electric and the broader U.S. manufacturing sector, demonstrates the risks of over-prioritizing shareholder value. Nortel, in pursuit of short-term financial performance, engaged in aggressive accounting practices such as “earnings smoothing,” which ultimately damaged investor confidence when significant restatements became necessary. The company also underinvested in research and development at critical times, weakening its competitive edge against rivals like Cisco and Huawei. Additionally, Nortel pursued acquisitions more to project growth than to strengthen its core capabilities strategically, while a corporate culture heavily focused on maximizing shareholder value fostered internal competition and secrecy, further undermining effective management.
After Nortel’s bankruptcy, unfounded claims emerged suggesting that Huawei had caused the company’s downfall. Former Nortel employee Brian Shields propagated allegations that Huawei had hacked into Nortel’s systems, a story later covered by media outlets including CBS’s 60 Minutes after 2018. However, these claims lack credible evidence. Nortel’s decline was primarily due to internal factors: financial scandals, poorly executed mergers and acquisitions, and insufficient R&D investment. Interestingly, Huawei did indirectly benefit from Nortel’s bankruptcy by acquiring some of its former talent, including Dr. Tong Wen, who eventually became Huawei’s Chief Scientist for 5G technology.
In summary, Nortel and General Electric’s struggles, along with broader challenges in U.S. manufacturing, were largely the result of strategic misjudgments, financial mismanagement, and cultural shortcomings. In contrast, Huawei’s success has been driven by persistent R&D investment, technological self-sufficiency, and long-term talent development. Conspiracy theories blaming Huawei for Nortel’s collapse overlook the structural and managerial realities that truly shaped the outcomes of both companies.
Long-Term Planning Over Short-Term Profits
Huawei’s strategic philosophy emphasizes long-term planning over short-term profits, setting it apart from many Western corporations that prioritize quarterly shareholder returns. Rather than chasing immediate financial gains, Huawei has pursued a customer- and innovation-driven strategy, focusing on long-term contracts, global partnerships, and technological leadership. The company initially solidified its domestic market before gradually expanding internationally, often reinvesting profits into research, development, and global growth instead of distributing them to external shareholders. This approach has not only strengthened Huawei itself but has also contributed to the broader development of China’s industrial ecosystem.
A key factor enabling this long-term focus is Huawei’s decision to remain privately held. Unlike publicly listed companies, which face constant pressure from investors to deliver quarterly results, Huawei operates under a unique employee-owned structure. Through a union-based shareholding system, most of the company is collectively owned by employees, while founder Ren Zhengfei retains strategic oversight. This structure provides independence from external shareholder demands and avoids the distractions and pitfalls that can arise after going public. Historical examples, such as Motorola’s failed Iridium project, Enron’s bankruptcy, and Yahoo’s post-listing decline, illustrate the potential risks of market-driven pressures on corporate performance.
Remaining private also preserves Huawei’s organizational focus and flexibility. The company can make swift strategic decisions, invest aggressively in cutting-edge technologies such as 5G and semiconductors, and navigate geopolitical challenges without the constraints of public market scrutiny. Ren Zhengfei has noted that publicly listing a company can diminish employee motivation, as wealth from shares may reduce the drive for innovation. By maintaining a founder-controlled, employee-owned structure, Huawei ensures that its workforce remains engaged, its strategy remains long-term oriented, and its technological ambitions can be pursued without compromise.
Employee Retention and Incentivization at Huawei
Huawei emphasizes collective ownership and profit-sharing as a cornerstone of its employee retention strategy. The company provides employees with opportunities to participate in stock ownership plans and receive bonuses tied to long-term performance. Through mechanisms such as restricted stocks and “virtual shares,” employees can share in the company’s profits, creating alignment between individual effort and Huawei’s strategic goals. These incentives are designed to reward sustained contribution rather than short-term results, reinforcing a culture of long-term commitment and value creation.
Huawei’s incentive system is both comprehensive and differentiated. Material rewards, such as profit-sharing and project follow-up investments, are complemented by spiritual incentives and a clear talent promotion framework. The company’s “Striver Identification Mechanism” recognizes and rewards high contributors with excess returns, ensuring that resources are concentrated on employees who drive value. Huawei’s approach is meritocratic: once employees join, academic qualifications and past credentials become secondary to actual performance and demonstrated ability. This system allows diverse talent—from overseas returnees to graduates of ordinary schools—to compete on an equal platform and be motivated by a customer-centric, people-oriented ethos.
Incentives at Huawei are closely tied to strategy rather than simply revenue generation. Performance metrics integrate the company’s long-term objectives, such as product launches, market share growth, profitability, and quality improvement. The company enforces rigorous performance management, including high-pressure accountability and a “rank and yank” system that removes the bottom 10% of performers. While this environment may not suit all employees or types of enterprises, it ensures that market pressures are transmitted throughout the organization, from sales to R&D, supply chain, and finance, driving continuous improvement.
By combining differentiated incentives, strategic alignment, and disciplined talent management, Huawei cultivates a skilled and motivated workforce. This approach supports sustained industrial growth, technological innovation, and long-term organizational success, reinforcing a culture where high performance and value creation are systematically recognized and rewarded.
Vertical Integration and Supply Chain Control
Huawei and other Chinese technology companies exemplify a strategic approach to supply chain management that emphasizes control, integration, and national industrial capability. Huawei developed a vertically integrated supply chain for critical components such as routers, base stations, and semiconductor chips. By reducing dependence on foreign suppliers, the company mitigated risks from geopolitical pressures, including U.S. trade restrictions, while strengthening China’s domestic industrial base and technological autonomy. Huawei maintains control over product design while outsourcing physical manufacturing, a “virtual integration” strategy that leverages external production efficiency without sacrificing strategic oversight.
This approach contrasts with the corporate philosophy of Maximizing Shareholder Value (MSV), popularized by Jack Welch at General Electric[1]. MSV prioritizes shareholder returns, often measured through profit margins, earnings per share, and stock price. Under this mindset, business units that cannot deliver top returns must be fixed, sold, or closed, creating intense pressure to reduce costs. For manufacturing-intensive companies, this translated into offshoring production to lower-wage countries and outsourcing non-core functions such as components, IT, and back-office services. By reducing costs and improving efficiency, companies could boost short-term earnings, increase stock prices, and satisfy the MSV imperative.
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While MSV did not explicitly prescribe offshoring or outsourcing, the relentless focus on shareholder returns incentivized companies to pursue any strategy that improved profitability. In contrast, Huawei’s strategy demonstrates that a focus on supply chain control, technological autonomy, and ecosystem integration can coexist with outsourcing, but in a way that reinforces strategic objectives rather than simply cutting costs. China’s manufacturing ecosystem—characterized by geographic clustering, a concentration of skilled talent, tight supply chain integration, government-industrial coordination, and rapid prototyping—enables companies like Huawei, as well as Apple and Tesla, to rely heavily on Chinese capabilities despite efforts to diversify production to countries such as India, Vietnam, and Mexico.
In sum, Huawei’s vertically integrated and selectively outsourced supply chain illustrates a model where control, innovation, and ecosystem leverage coexist, while the MSV-driven model exemplified by Welch emphasizes cost reduction and efficiency as the primary levers to drive shareholder returns. The contrast highlights how corporate philosophy shapes supply chain strategies and, ultimately, technological and industrial resilience.
From “What’s good for GM is good for America” and “What’s good for Wall Street is good for America” to “What’s good for Huawei is good for China”
From the mid-20th century mantra “What’s good for GM is good for America” to the modern adaptation, “What’s good for Huawei is good for China,” corporate strategies can reflect broader national priorities—or undermine them. During Jack Welch’s era at General Electric, the pursuit of Maximizing Shareholder Value (MSV) often drove decisions to offshore or outsource manufacturing to lower-cost countries like Mexico and China. While these strategies enhanced short-term profitability and stock performance, they frequently conflicted with U.S. national interests, contributing to job losses, wage stagnation, erosion of domestic skill bases, and a weakening of the industrial foundation. Industries critical to national security, such as high-tech manufacturing and defense, became increasingly vulnerable as production shifted abroad, highlighting the tension between shareholder interests and strategic economic priorities.
In contrast, Huawei’s growth trajectory exemplifies alignment with national industrial policy. The company has actively supported Chinese government initiatives such as “Made in China 2025,” bridging private enterprise and state-led strategies for high-tech development and industrial self-sufficiency. Huawei’s investments in AI computing systems, domestic chip development, and advanced technology platforms reinforce China’s broader goals of technological self-reliance and economic resilience. Furthermore, U.S. export restrictions on companies like Nvidia have created opportunities for Huawei to strengthen China’s domestic capabilities, directly contributing to the country’s strategic and industrial objectives.
The divergence between GE under MSV and Huawei highlights a fundamental contrast: while MSV prioritized shareholder profits at the expense of domestic employment, industrial capacity, and long-term strategic interests, Huawei’s business model supports China’s national priorities. Its technological development, infrastructure investment, and capacity-building efforts not only advance corporate growth but also enhance national economic stability, technological leadership, and industrial security. In this sense, Huawei’s success reflects the integration of corporate strategy with national interest, offering a modern counterpart to the earlier notion that what benefits a leading company can benefit the nation as a whole.
Conclusion
While Welch focused on maximizing shareholder returns and short-term financial maneuvers—sometimes at the expense of the manufacturing workforce—Ren Zhengfei emphasized long-term technological development, employee skill-building, vertical integration, and alignment with national industrial priorities, contributing to the growth of both Huawei and China’s broader industrial sector rather than weakening it.
References
[1] The Man Who Broke Capitalism: How Jack Welch Gutted the Heartland and Crushed the Soul of Corporate America―and How to Undo His Legacy, David Gelles, 2022