Hi all — James here in Hong Kong. The China electric vehicle story only gets more interesting. This week’s Big Story posits the (very real) possibility that Tesla’s Model 3 — the US company’s best-selling car — could soon be 100 per cent made with Chinese parts. Such shifts in the global tech hierarchy only happen rarely.
Elsewhere, the drumroll ahead of Ant Group’s listing is speeding up and the upheavals over Huawei’s supply chain continue (Mercedes’ Top 10). Just as significant is the visit of Japanese prime minister Yoshihide Suga to Vietnam, where he signalled Tokyo’s intention to help Japanese companies diversify their supply chain to south-east Asia. Also, check out Google’s travails in India (Best of comment) and the headaches facing Hyundai’s new chairman. Lastly, M&A activity in Asia’s chip sector has important implications (Art of the deal). Take care, until next week.
The Big Story — Exclusive
Is Tesla’s Model 3 set to become entirely Chinese? The electric vehicle maker headed by Elon Musk is already using Chinese-made batteries for the Model 3 and may now be set to source engines from a Chinese supplier, writes Shunsuke Tabeta, Nikkei staff writer.
Suzhou Inovance Automotive, a Chinese EV engine manufacturer listed on the Shenzhen stock exchange, has already supplied engines to domestic EV makers such as WM Motor Technology and Li Auto. It appears set to add Tesla and other foreign manufacturers to its customer list.
Key implications: China’s “dual circulation” policy — under which Beijing seeks to bolster domestic supply chains — is being played out in the rapidly developing EV market.
Battery maker CATL, a rival of Japan’s Panasonic and South Korea’s LG Chem, already supplies Tesla. Other Chinese EV component suppliers are also boosting their international customer roster.
Zhejiang Sanhua Intelligent Controls, a maker of heat-control parts for EVs, counts Tesla, Volkswagen and General Motors as customers. In addition, Xiamen Hongfa Electroacoustic, which manufactures electronic parts for EVs, is already doing business with Tesla, VW and Daimler.
Upshot: China’s market for EVs is already the world’s biggest. It now looks likely that the country may become the global tech leader in this technology.
Mercedes’ top 10
The big event is getting closer. Ant Group got approval for the Hong Kong leg of its $30bn IPO, the biggest in the world.
Japanese PM Suga in Vietnam: We will help Japanese companies diversify supply chains across south-east Asia.
Orders to Japanese electronic parts makers are surging after US sanctions on Huawei knocked the Chinese group out of the market. For more, catch this exclusive interview with Huawei’s chief digital transformation officer.
But the loss of orders from Huawei has hardly damped the performance of Taiwan’s TSMC, the world’s biggest contract chipmaker.
Alibaba is China’s ecommerce king but it is pushing deeper into physical retail with its $3.6bn acquisition of Sun Art Retail Group.
Netflix is hoping a free trial campaign in India will boost its flagging growth in the crucial streaming market.
The pandemic has caused “time to stand still” for the Japanese creator of the popular game series Final Fantasy.
Shenzhen’s rapid rise from fishing village to global tech hub is overshadowing China’s other special economic zones.
Chinese-Americans campaigning for Trump on WeChat? It sounds unlikely but is in fact a thing.
A Japanese company is trialling the use of AI to diagnose dementia in as little as five minutes.
When sages speak
Here is a bumper harvest on US-China tech strife. “Decoupling” the tech ecosystems that have grown up between the two superpowers will be “painful and unrealistic”, write Richard Danzig and Lorand Laskai in a detailed and insightful paper.
In the past two years, China’s installed offshore wind power has increased more than any other nation, writes Gao Baiyu in China Dialogue. China accounted for 40 per cent of global added offshore wind capacity in 2019. The country now has 23 per cent of installed global capacity.
Nisha Holla sees an imperative to democratise technology in this report for the Observer Research Foundation. There is a need to make digital rights such as data privacy, personal safety, security and self-determination sacrosanct, she says.
Best of comment
Ever since gaining independence from the British in 1947, Indians have been sensitive to even a hint of Western “domination” over them, writes Ken Koyanagi, Nikkei Asia’s editor-at-large. Now Google, with its ubiquitous Android operating system, has unwittingly touched on the most sensitive of national nerves.
The uproar started when Google announced in September that it would start strictly enforcing a rule that any sales made in apps distributed through its Google Play store must use its proprietary payment system and be subject to a 30 per cent commission.
Start-ups and app developers across India quickly blasted the move as “unilateral” and “arbitrary”, with some comparing it to a hated salt tax imposed by Britain on colonial-era India.
The founder and chief executive of Paytm, India’s top mobile payment app, is among the most vocal critics. “This giant monopoly, namely Google, is no more an innovation ecosystem but rather a toll collector,” Vijay Shekhar Sharma said during an online conference this month.
In the spotlight
Hyundai’s massive recall of its Kona EVs has come at a frustrating time for Euisun Chung, who last week became the sprawling South Korean conglomerate’s first new chairman in 20 years.
Mr Chung is attempting to shepherd the so-called “Japanese car-killer” — a moniker earned due to Hyundai taking market share from Japanese rivals — through a delayed transition to the next generation of vehicles. Mr Chung has shifted gears from Hyundai’s previous go-it-alone strategy, declaring that outside technology is necessary to adapt to rapid change. It is planning investments in new sectors including EVs, hydrogen fuel cells and driverless cars over the next five years.
But Mr Chung, who last week took over from his ailing father Chung Mong-koo, is dealing with a familiar problem for the carmaker. Shares fell as much as 7 per cent on Tuesday after Hyundai announced $3bn in provisions. That followed the recall of 77,000 of its Kona EVs due to problems with battery cells, marking the company’s third consecutive year of recalls over engine-related issues.
Art of the deal
A blockbuster year for global semiconductor dealmaking hit a new high this week. South Korea’s SK Hynix has agreed to pay $9bn for Intel’s Nand memory unit, giving it a dominant position in a sector that is experiencing booming demand.
The addition of Intel’s business will make SK Hynix the world’s second-biggest producer of Nand chips, propelling it ahead of Japan’s Kioxia and Micron. Samsung is the Nand market leader. The chips are used in everything from Apple iPhones to data centres and hard drives.
While SK Hynix will become one of the biggest Nand memory makers, there is some muttering around the price tag. Shares in the company fell more than 1 per cent in the hours after news of the deal broke. Nevertheless, analysts say the buy will be good for SK Hynix as well as for other players, as consolidation can stabilise the Nand industry by reducing excessive investment. Lee Seung-woo, an analyst at Eugene Investment & Securities, said consolidation had historically been “good news” for the chip sector.
Nearly four years after Eric Jing, Ant Group’s then chief executive, took to a Davos stage to declare his global ambitions, the fintech business’s fortunes remain heavily entwined with mainland China.
Ant, which is shaping up to launch potentially the biggest equity listing in history, has spent hundreds of millions of dollars expanding across the globe by investing in everything from south-east Asian e-wallet businesses to British payments processing group WorldFirst. But a look at its international revenues and payments, which are a fraction of its domestic numbers, show that for all its aspirations, Ant is essentially a China story. For investors in its IPO, that may be all that matters.
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