Huawei has already warned its survival is at stake after the Trump administration took further steps to cut off the Chinese company from international semiconductor supplies
Huawei has warned its survival is at stake after the Trump administration took further steps to cut off the Chinese company from international semiconductor supplies © PA

Hello, everyone. This is Kenji in Hong Kong. The local government is easing restrictions on social life from Friday, but a resurgence of infections in mainland China is spooking some residents, while authorities here have been accused of using the virus to suppress pro-democracy rallies. Away from the pandemic, Huawei, which is at the centre of US-China rivalry, continues to be shaken. This week, we have a scoop on its flagship smartphone model release being delayed (Big Story), even as Washington loosened its sanctions to allow the Chinese group to work with US companies on 5G standard setting (Top of Mercedes’ list).

Elsewhere, SoftBank is in the line of fire again after an FT scoop exposed how the Vision Fund was funnelling cash to its investor Credit Suisse, while Arm, the UK based, SoftBank-owned chip designer is in the middle of a boardroom battle with its Chinese joint venture. Shifting west to India, Reliance Industries is making yet another deal selling part of its mobile phone unit Jio (Art of the Deal). There’s much more to enjoy from our latest selection of tech stories. Please stay safe and healthy.

The Big Story

US sanctions have upset the production of Huawei’s flagship Mate smartphones. The Chinese equipment maker, which is battling potential supply chain disruption from tightening US controls, has been forced to postpone the mass production timeline for its Mate series, according to this scoop in the Nikkei Asian Review.

The Mate models are Huawei's answer to Apple's new generation of iPhones and are usually unveiled in the second half of the year. The company adopts its most advanced processor designs for the Mate line-up, using chips from its own HiSilicon semiconductor design unit. There is now uncertainty around how much output Huawei can rely on from HiSilicon, for mobile processors and communication chips, after the US commerce department introduced more restrictions in May.

Key implications: One supply chain executive said his company previously planned to start production this month for parts for Mate phones, as well as Huawei’s Honor brand of phones. But the executive said Huawei had already told the company to put output on hold until further notice. Another executive said it would be postponed for at least one or two months.

Upshot: Huawei has already warned its survival is at stake after the Trump administration took further steps to cut off the Chinese company from international semiconductor supplies last month. The postponement of production plans does not necessarily mean that the launch of the latest Mate models will definitely be delayed. But verifying other mobile platforms could lead to redesigns of the mechanical parts of the smartphones, which will take time.

Mercedes’ top 10

A round-up of the week’s top stories from Asia tech reporter Mercedes Ruehl

  1. Following on from our top story, Huawei has reason to be prudent in the face of a capricious Trump administration. The US announced on Monday it would allow American companies to work with Huawei on setting 5G network standards. Shares in Chinese telecoms companies jumped as a result of the US watering down its sanctions.

  2. The Chinese equivalent of MIT was added to Washington’s blacklist of tech entities this year. Nikkei Asian Review has the scoop on the ramifications for Harbin Institute of Technology, including its access to critical engineering software being cut off.

  3. China’s ByteDance is looking to boost its chances of winning a digital banking licence in Singapore by partnering with an investment group with ties to one of the city’s powerful business families.

  4. Call it the circle of funding: Japan’s SoftBank has been quietly pouring more than $500m into Credit Suisse investment funds, which in turn made big bets on the debt of struggling start-ups backed by SoftBank’s Vision Fund. The FT has the scoop.

  5. Arm, the UK based, SoftBank-owned chip designer, is embroiled in a boardroom battle with its Chinese joint venture after an attempt to oust Allen Wu as chairman and chief executive. Arm China denied the attempted coup. A deep dive worth reading can also be found here.

  6. Last week, TSA profiled Eric Yuan, the Chinese-born leader of the hit Silicon Valley start-up Zoom whose fortunes have soared at a time of escalating US-China tensions. Zoom’s disabling accounts of Chinese dissidents has attracted scrutiny and criticism.

  7. China’s biggest import and export fair has gone digital for the first time in its six-decade history. Will visitors still flock to it and do deals without being able to touch products? Nikkei Asian Review investigates.

  8. Start your processors: a Japanese government-backed supercomputer looks set to zip past its US and Chinese rivals to reclaim the fastest computer crown for the first time since 2011.

  9. The US has the unquestioned lead in many parts of the semiconductor industry. But when it comes to actually making them? Not so much, the FT’s Richard Waters writes, and its reliance on Taiwan’s TSMC is making politicians nervous.

  10. Feeling a bit germaphobic? Unmanned, smart hotels in China allow guests to do everything from reserving a room to drawing the curtains using facial recognition — no physical contact or human assistance required.

When sages speak

  • The coronavirus pandemic has accelerated supply chain decoupling between the US and China, Alex Capri writes in a white paper for the Hinrich Foundation, which looks into the implications for the tech sector. “This is techno-nationalism on an unprecedented scale.”

  • Where is artificial intelligence talent coming from — and where is it going? The Paulson Institute in Chicago’s in-house think-tank MacroPolo’s Global AI Talent Tracker is full of interesting insights. The US has the lead, employing nearly 60 per cent of top-tier researchers. But the largest source of them: China, at 29 per cent.

  • Is the US really falling behind in the 5G race — and is it a “race” at all? The first section of a three-part report from James Andrew Lewis at CSIS examines how tech creates wealth and power — and whether political wrangling is creating misconceptions about the next generation of technology.

In the spotlight

Not everyone is convinced by the glowing black and white design. But Jim Ryan, the man who has been involved with the PlayStation console since 1994 when PS1 launched, is confident the long-awaited PS5 is going to be a success.

The Sony veteran began his career at the company’s European division and in 2011 was appointed president of the PlayStation business across Europe, the Middle East, Africa and Oceania. He was promoted as chief executive of Sony Interactive Entertainment, which manages the PlayStation division, in February last year.

Ryan took the reins at a time when more games were being accessed online — results for the quarter ended in March show that two-thirds of games were downloaded. PlayStation Plus, Sony’s online streaming service that allows users to access online multiplayer games, has amassed more than 40m subscribers.

Ryan believes the new unit can keep up as the PS5 will offer options geared for younger, more digital-savvy gamers. “This is what happened with music, and this is what happened with video, too,” he said in a Nikkei Asian Review Interview.

Art of the deal

  • We at TSA are running out of superlatives to describe the dealspree of Mukesh Ambani’s Jio Platforms. Reliance Industries has raised $847m, selling stakes of its digital unit Jio Platforms to private investment firm TPG and private equity firm L Catterton. Saudi wealth fund PIF is also considering a $1.5bn stake, local media report.

  • Sinch, the Swedish cloud services provider, has agreed to buy India’s ACL Mobile for about $70m, its fourth acquisition since the coronavirus outbreak.

  • Warren Buffett-backed Chinese auto group BYD has raised $113m in Series A funding for its chipmaking unit, BYD Semiconductor.

  • Tongcheng Life, an online Chinese platform that facilitates group buying of fresh produce, has raised $200m in Series C funding. Half of the capital came from Joyy, a Nasdaq-listed, Guangzhou-based company that runs several social media and gaming platforms, including short video site YY and livestreaming app Huya.

  • As we at TSA foreshadowed, China’s Tencent acquired a 1.6 per cent stake in Warner Music Group, which is valued at more than $16bn. The Chinese group has been an aggressive buyer of shares in foreign entertainment groups.

Smart data

SMIC lags behind in the global race to shrink semiconductors

Huawei’s founder Ren Zhengfei once said that unlike building roads and bridges, “throwing money” is not enough for the semiconductor industry — one also needs to “throw mathematicians, physicists, chemists”. The struggle of Semiconductor Manufacturing International Corporation (SMIC), China’s largest computer chipmaker is a case in point.

SMIC is China’s best bet at reducing its dependence on foreign-made chips. It plans to raise more money after delisting from the New York Stock Exchange in June and preparing for an offering on Shanghai’s new Star market. But the gap with its competitors remains huge, as the above chart demonstrates. Chip manufacturers compete over who can etch the smallest circuits, thereby squeezing more components into the same amount of chip space. But SMIC has neither the equipment nor skills to compete with leading companies such as Taiwan’s TSMC. The FT’s Beijing deputy bureau chief Yuan Yang has more.

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