Hello everyone, this is Mercedes in Singapore. We are delighted to share that Nikkei Asian Review has rebranded as Nikkei Asia — and you can get their scoops and analyses for free today. Don't forget #techAsia is also free for 30 days — if you like what you read then get your colleagues and friends to sign up here.
Our Big Story this week is an exclusive on the scramble by SMIC, China’s leading chipmaker, to secure supplies from American, European and Japanese suppliers after a US clampdown.
Elsewhere we have a great line-up of articles, from the venture capital bets on India's fantasy sports market to a look at Japan's digital leap forward (Mercedes' top 10). The strained Panasonic-Tesla relationship (top 10) took another hit and cloud computing is threatening the beloved video game console. Don't miss Peter Thiel's latest move — a Spac with south-east Asia as its target — (Spotlight) and how Hong Kong has notched up record inflows from global investors ahead of Ant Group's IPO (Smart data).
The Big Story — exclusive
SMIC, the latest Chinese target of US export restrictions, is stockpiling equipment and parts. China’s leading chipmaker has vastly expanded its purchases from American, European and Japanese suppliers in a bid to ensure it can maintain production, according to this report by Cheng Ting-Fang and Lauly Li of Nikkei Asia.
The US commerce department sent a letter last week to American companies warning that they would need a special licence to continue shipping to SMIC. The letter cites “unprecedented risks” that SMIC products could end up being used by the Chinese military.
Key implications: SMIC relies heavily on foreign suppliers of semiconductor manufacturing machinery, including Applied Materials, Lam Research, KLA and Teradyne of the US, as well as ASML of the Netherlands and Japan's Tokyo Electron.
It has scaled up purchases for key production processes such as etching, lithography, wafer cleaning and testing. It has also stocked up on more than a year's worth of consumable parts, which must be replaced on a regular basis to keep machines running and daily operations on track.
SMIC is even working with other Chinese chipmakers to create a shared reserve of such parts, sources said, adding that a central warehouse has been set up to store these items.
Upshot: Although SMIC has not been formally included on the US “entity list” like Huawei and other Chinese companies, the increased scrutiny could prompt its clients to look elsewhere for their chips to avoid the risk of unstable supply, observers said.
Mercedes’ top 10
Let’s start with a big scoop from Nikkei. Japan’s Nippon Telegraph and Telephone will turn listed carrier NTT DoCoMo into a wholly owned subsidiary via a tender offer expected to be worth about $38bn, the largest ever for a Japanese company.
India’s loosely regulated fantasy sports market has taken off despite being dangerously close to sports betting — which is prohibited. Now foreign venture capitalists are piling in, according to this piece in the FT.
China has inoculated at least 350,000 people against Covid-19 even though the drugs are still undergoing clinical trials, writes Nikkei’s Shin Watanabe. Long lines are seen snaking around the Beijing Institute of Biological Products, one place where vaccine shots are being provided.
Is Vietnam ready for an online-only bank? Timo Plus thinks so. The digital bank relaunched its services this week with a new plan to bring in more business.
Japan’s paperbound society is about to take a great digital leap forward under its new prime minister. It will be a “Herculean labour”, writes the FT’s Leo Lewis.
More signs of strain in the Tesla-Panasonic relationship? After public sparring last year, the US electric carmaker’s plan to shift to in-house production of electric vehicle batteries came as a shock to investors in the Japanese company last week.
China will go from being responsible for 90 per cent of laptop manufacturing to just 40 per cent by 2030, according to a Taiwan think-tank. Its replacement? South-east Asia.
Japanese trading house Mitsui is breathing new life into China’s infamous steel mill smoke by turning it into fuel ethanol to power cars.
Can Singapore really become Asia’s Silicon Valley? Check out my video on the city-state’s venture capital ambitions.
When sages speak
Hot off the press, here is a translation of China’s new policies towards “strategic emerging industries”. It is a joint effort from the Center for Security and Emerging Technology at Georgetown University and DigiChina.
Here is an important paper by Trisha Ray and Akhil Deo for the Observer Research Foundation, an Indian think-tank, that takes an in-depth look at New Delhi’s “tech diplomacy”. It comprises several strands of policy that feed into India’s ambition to increase the size of its digital economy to $1tn by 2025.
Amid growing global mistrust of China’s information and communication technology companies and social media apps, Beijing announced a new “Global Initiative on Data Security”. Rebecca Arcesati at Merics, a Berlin-based think-tank, has a pithy take on what this means for Europe.
William Reinsch at CSIS, a Washington-based think-tank, gets to the nub of the matter in this thought-provoking piece about US-China decoupling. “The dilemma for US companies, particularly in the [ICT] sector, is that China is simultaneously their best customer and their biggest threat,” he writes.
Best of comment
John Thornhill pulls no punches in his verdict on the “cockamamie” TikTok deal. Donald Trump prides himself on “the art of the deal” but the arrangement has all the artistic structure of an abstract spray painting by Jackson Pollock, he writes in the Financial Times.
Not only has the US president trampled over due governmental and legal process in dealing with TikTok, he has also failed to deliver on his earlier promise to ban the popular Chinese viral-video app in the US. The details of the deal with Oracle and Walmart have yet to be clarified, but, as it stands, it skirts many of the stated national security concerns.
Moreover, as Sinan Aral, co-leader of the Massachusetts Institute of Technology’s Initiative on the Digital Economy, argues, US-owned tech platforms, such as Facebook and Twitter, are themselves still open to manipulation by malign foreign powers. This is a systemic failing that needs to be tackled, not a national security threat that can be expunged by one executive order.
What is Peter Thiel up to in south-east Asia? Last week the Silicon Valley billionaire — an early Facebook investor and co-founder of PayPal — teamed up with Hong Kong investor Richard Li to launch a special purpose acquisition company (Spac) that will list on Nasdaq and target “new economy” companies in the region. The filing with the US Securities and Exchange Commission says the Spac, which is called Bridgetown Holdings, is seeking to raise $575m.
The filing describes Bridgetown as a “blank check” company, meaning that it has no specific purpose yet beyond investing in south-east Asia. Spacs, one of the hottest asset classes in American equity markets, have acquired something of a bad reputation of late.
But this aside, Thiel’s move is seen as part of a trend of growing investor interest in south-east Asia, which has one of the world’s fastest-growing mobile populations. It comes just days after US venture capital fund Lightspeed Venture Partners launched in south-east Asia. For more on why the well-known VC, like Thiel, is bullish on the region check out this Twitter thread from Pinn Lawjindakul, one of Lightspeed’s team.
Art of the deal
An investment company set up by Huawei in 2019 has built up stakes in a number of mainland semiconductor companies and other technology groups. Habo Investments has invested in a bunch of small, niche companies such as Vertilite, 3Peak and Shoulder Electronics.
JD Health, the healthcare unit of Chinese ecommerce giant JD.com, filed for an initial public offering on the Hong Kong Stock Exchange in a bid to raise up to $2.8bn. JD Health operates the largest pharma retail website in China and parent JD will maintain a majority stake post-IPO.
Sina, the Chinese company behind the popular Twitter-like microblog Weibo, said its board accepted an updated go-private offer by chairman and chief executive Charles Chao that values the company at $2.59bn. The endorsement pushes the 22-year-old company a step closer to delisting itself from the Nasdaq.
XtalPi, an American-Chinese biotech firm that focuses on AI-assisted drug discovery, has raised a $319m Series C funding round from a group of enthusiastic investors led by SoftBank’s Vision Fund.
Last week we mentioned the FOMO — fear of missing out — fuelling the demand for Ant Group IPO shares. This week, Nikkei Asia’s chief banking and financial correspondent Narayanan Somasundaram goes a step further and charts how Hong Kong has recorded inflows of almost HK$55bn ($7.1bn) since the company, controlled by Alibaba’s Jack Ma, filed a month ago for a dual listing in the city and on Shanghai’s Nasdaq-styled Star market.
The deluge has prompted the Hong Kong Monetary Authority to intervene almost every day since September 14 to keep the currency within the pegged trading band of 7.75 to 7.85 against the US dollar, boosting domestic currency liquidity to a three-year high. “Everyone I have spoken to says they are building cash reserves either by moving cash or selling existing investments to be ready when the offering opens,” said a person involved in preliminary discussions with potential investors over Ant’s offering.
Get alerts on Technology when a new story is published