Huawei has published two of founder Ren Zhengfei’s internal speeches after rumors of staff cuts generated heated debate online. Ren responded to the rumors and explained that Huawei will undergo “human resources reform.” Many see this as a move to cut costs as the technology giant’s operating margin has been decreasing, falling from 12.2% in 2013 to 11.6% in 2015.

The rumors began to circulate earlier this year after former employees left comments on the Huawei public WeChat account HWxinsheng (华为心声 or “Huawei thoughts” in English) alleging that the Chinese conglomerate was going to let go delivery engineers older than 34 and research staff older than 40. The comments have since been deleted. In Ren’s most recently published speech, he expressed determination to see Huawei reform its human resource structure.

Huawei founder Ren Zhengfei. Source: Huawei

“Huawei focuses on selection, not cultivation. We do not over emphasize fairness. If we focus too much on ‘not losing at the starting line’ [people being unfairly disadvantaged due to their backgrounds], then we would discourage innovation,” Ren explained. “We need to debate and shake up the painful parts first, then obstacles to human resource reform will be reduced.”

As China’s largest privately-held company, Huawei employs 170,000 staff globally, of which approximately 136,000 are Chinese. In another speech that was released earlier, Ren directly responded to the staff cut rumors.

“On the internet, people questioned about employees retiring at age 34, who will help pay their pension? Our company doesn’t provide pension, we purchase social, medical and accidental insurance policies for current staff,” Ren Zhengfei said. “30-odd years old and in their prime, not willing to work hard and just dream of lying in bed and counting cash, how could this be possible?”

TMTPost reported that Huawei’s 2016 sales are expected to reach RMB 52 billion but its operating margin looks to be only around 7% for 2016, a steep decline from 2015. However, Huawei’s total sales still eclipse that of BAT (Baidu, Alibaba, and Tencent) combined.

“Profit growth is too slow and too much has gone to channel distributors,” Huawei Consumer Business Group CEO Yu Chengdong said in an interview (in Chinese) earlier this year. “We end up working for the channel distributors. This is something Mr. Ren isn’t too happy about.”

Linda Lew

Linda Lew is a Beijing-based journalist who covers technology, start-ups and business in China. You can reach her at lindalew at aliyun dot com.