Hi all — James here in Hong Kong. Few people imagined even as recently as six months ago that the US-China “tech war” would get this vicious. But now the “death” of Huawei (Big Story) has become a distinct possibility and China is hurting in other ways, too. Indeed, many of the tech events, trends and fund flows throughout the region are now driven by US-China tensions. See, for instance, the FT’s scoop on Oracle’s interest in TikTok (Mercedes’ Top 10).

In more placid markets, the story (Spotlight) of how Indonesians are getting their movies downloaded at local convenience stores (rather than from Netflix) reveals distinctive characteristics of emerging Asia. Look too at how a Chinese ecommerce company sold Tesla cars online, until the vehicle maker took umbrage. Catch up with how the Hong Kong stock market is getting a tech makeover (Smart data). Take care until next week.

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The Big Story — exclusive

US sanctions are hitting China’s 5G telecoms ambitions. Huawei and ZTE, the country’s two largest telecom equipment providers, have slowed down the installation of 5G base stations in the country, write Lauly Li and Kenji Kawase in the Nikkei Asian Review.

The slowdown is a byproduct of China’s “de-Americanisation” of its supply chain after Washington tightened export controls on Huawei this year.

Key implications: The US “tech war” against Beijing is now really hurting China, with some analysts talking about the “death” of Huawei. Washington’s announcement this week that escalated its attack on Huawei could “finish” the Chinese company as a maker of 5G equipment and smartphones, said Dan Wang of Gavekal Research.

This week’s move also clobbered the share prices of Asian semiconductor companies that supply Huawei. The shares of MediaTek, a chip designer that supplies Huawei’s smartphone business, plunged more than 9 per cent on Tuesday. Novatek Microelectronics, a designer of display integrated circuit drivers, and camera lens maker Largan Precision also suffered share price declines. Both companies count Huawei as a key customer.

Upshot: The impact of the US move this week coupled with evidence that China’s 5G network roll out has been set back shows the heft of Washington’s firepower in its “tech war” with China.

Mercedes’ Top 10

  1. Scoop: the FT says that Oracle has entered the race to acquire TikTok’s US, Canada, Australia and New Zealand operations. The FT’s team in San Francisco and Washington weigh up Oracle’s chances in a race against the clock with longtime rival Microsoft for the Chinese-owned video app sensation.

  2. A strong story from the FT’s China team revealed that Tesla had clashed with China’s Pinduoduo, known for its subsidies-based model, after it sold the US group’s electric vehicles at a hefty discount.

    © Pavel Kapysh/Dreamstime
  3. “We’re looking at other things, yes we are.” US president Donald Trump over the weekend signalled that other Chinese companies beyond TikTok and WeChat may be targeted by Washington.

  4. Mitsubishi Chemical will build a new factory in Taiwan next year to boost the supply of semiconductor materials for Taiwanese producers, the latest instance of Japanese companies riding the growing demand for 5G internet services.

  5. The Washington Post reported that Google will stop responding directly to data requests from Hong Kong authorities — instead directing inquiries to the cumbersome Mutual Legal Assistance Treaty with the US.

  6. Alibaba is pushing its financial technology ever deeper into south-east Asia. A top Myanmar conglomerate will use the Chinese group’s credit analysis tech to help it offer loans to consumers and small businesses.

  7. A tech-fuelled stock market run has left one region behind: south-east Asia. The reason? The region lacks tech stocks. There is, however, one south-east Asia tech company doing well. Sea Group, the ecommerce and gaming technology group, is the world’s best performing large-cap stock.

  8. Australia has been seeking to blunt the power of US tech companies, especially in news media, with “world-leading” legislation. Google is one of the companies fighting back.

  9. Back to Huawei and ZTE’s woes: India is set to give the Chinese companies the cold shoulder for its 5G rollout, Bloomberg reports. India’s decision echoes actions by the US, UK and Australia, which have raised red flags about the company’s Chinese government links.

  10. Matchmaking — but for business. A new app matches corporate Japan with Indian tech engineers. With Washington suspending the issuance of US H-1B work visas, Japan’s business community has more opportunities to attract Indian engineers.

When sages speak

  • With signs growing that India is set to ban Huawei and ZTE, two Chinese telecoms equipment companies, from participating in building the country’s 5G telecoms network, this piece for India’s Observer Research Foundation looks into the UK’s experience as a reference for New Delhi.

  • Lauren Hallanan, a former China-based livestreamer with more than 400,000 followers, gives an interesting take here on why ecommerce livestreaming has become explosively popular in China.

  • Many of the Chinese companies listed on US exchanges are in the tech sector. But they may be living on borrowed time. This succinct view by Stephanie Segal and Dylan Gerstel at CSIS gives a useful run down of the issues in play.

Best of comment

China’s share of global exports has been hit by its trade dispute with the US which — together with the pandemic, corporate governance demands and the rise of artificial intelligence — is pushing multinational companies to reduce their dependence on the Asian powerhouse, writes Kathrin Hille for the FT in Taipei.

Last year, Chinese exports of 1,200 products accounted for 22 per cent of the world’s exports, 3 percentage points down on the previous year, according to a new study by Baker McKenzie, the law firm, and Silk Road Associates, an economic consultancy.

For consumer goods, the country’s global market share fell by 4 percentage points to 42 per cent. The findings come as Washington targets China with wide-ranging measures aimed at weaning itself off China-based supply chains and hobbling Beijing’s ambitions to become a global tech power.

Liu Young-way, chairman of Foxconn, the largest Apple supplier and the world’s largest contract electronics manufacturer with a workforce of up to 1m in China, said last week that the company expected global technology supply chains to split into two camps: “It will be one for China and those associated with it, and another for the US and their friends.”

Spotlight

Steve Chen, co-founder and former chief technology officer of YouTube, a pioneer of on demand video streaming, is going back to basics. Taiwan-born Mr Chen has backed a start-up that allows customers in Indonesia to download movies cheaply on to their mobile phones at the local warung, or neighbourhood convenience store.

The start-up, Migo, installs its proprietary video device in the warung. Consumers then walk in and download movies and shows from the machine, allowing them to watch films and shows offline. This saves low and middle-income Indonesians from having to use mobile data to stream or download videos as they would if they subscribed to Netflix or Amazon Prime.

With the backing of Mr Chen, Migo has raised about $50m. Other investors include Singapore’s Temasek and local Indonesian backers. The opportunity in the region is defined by the lack of market penetration by content providers Netflix, Disney+ and Amazon Prime, which Migo ultimately wants to partner with. Netflix has just over 1m of its 200m global customers in south-east Asia, a market of 650m people.

“Migo solves streaming video for emerging markets,” Mr Chen said. “YouTube built the habit of short form watching but Migo unlocks true bingeing behaviour with offline long-form.”

Art of the deal

  • Prolific gaming investor Tencent has taken a stake in Voodoo, giving the French mobile games company an enterprise value of $1.4bn and crowning it the first “unicorn” company in the fast-growing “hyper casual” gaming market.

  • SoftBank is on another investment spree — and US Big Tech is its target. The Japanese conglomerate had built a $1bn stake in Amazon as of June 30. Other new holdings included $500m of shares in Google parent Alphabet and $200m each in Tesla and Netflix.

  • JD.com took another step towards transforming itself into a logistics technology company. The Chinese ecommerce company has acquired a controlling stake in Kuayue Express Group for Rmb3bn ($432m). Meanwhile JD.com’s health spin-off, JD Health, is set to win $830m in funding from China’s Hillhouse Capital for its Series B financing.

  • Silicon Valley’s Lightspeed Venture Partners, which has backed Indian start-ups including Byju’s, Oyo and Udaan, has raised $275m for its third India fund.

  • MDI Ventures, the venture arm of state-backed telecoms company Telekom Indonesia has closed a $500m tech investment fund to help the country’s state-owned enterprises digitise.

Smart data

Tech sector rises in Hang Seng index

Hong Kong’s 50-stock Hang Seng index is getting a tech makeover. As of next month Alibaba, Xiaomi and pharmaceutical research group WuXi Biologics will be included in the index as part of a quarterly review. The rejig will drive fund flows into the newly included stocks.

The index revamp, a milestone for the city’s growing focus on Chinese technology stocks, could also be a harbinger of a bigger shift in the works. Hang Seng Indexes, a unit of Hang Seng Bank, has announced a six-month comprehensive review of the benchmark to ensure it appropriately represents “the fast-expanding innovation and new economy sectors".

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