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Hi, everyone. This is Kenji in Hong Kong, where we are experiencing an unusual December. It is supposed to be the time to be merry and jolly with family and friends but all dine-in services after 6pm will be banned from Thursday, as a “fourth wave” of the coronavirus sweeps across the city. It’s an unusual December for key tech component manufacturers as well, but in a surprisingly good way. Find out why in our Big Story this week.

China’s Great Leap Forward in technology continues. It says it has a quantum supercomputer able to do calculations much faster than rival supercomputers. Meanwhile, another Chinese technology is allowing digital renminbi to be transferred just by tapping phones together. Meanwhile, the tech war with the US drags on as Beijing gets rid of 105 apps from its online stores and Washington prepares to delist Chinese companies from the country’s bourses. These are all in Mercedes’ top 10, below. 

You can hear from our sages on this theme, too. China’s tech product development is turbocharged, according to Kai-Fu Lee, the bestselling author on the AI supremacy of China versus the US. But Elizabeth Braw argues that the seeds of those ideas and technologies in China have been bought from the US and Europe. Wishing you a merry and jolly — and a healthy — Christmas season. 

The Big Story — Exclusive

Asia’s electronics industry has a happy problem. Stellar demand is leading to a shortage of a wide range of components used in electronics devices, from computers and smartphones to gaming consoles and cars, according to this exclusive in Nikkei Asia.

United Microelectronics, the Taiwanese contract manufacturer, is a case in point. Companies ranging from Intel, the US chipmaker, to leading mobile chipmaker MediaTek and Realtek, a provider of Bluetooth and WiFi chips, are all asking UMC for more support, two people familiar with the matter said.

Key implications: Most of UMC's capacity is fully booked through the second quarter of next year and some is not available until the end of 2021, the people said.

Most production capacity at Taiwan Semiconductor Manufacturing Co, the world's biggest contract chipmaker, is also fully booked until about the third quarter, according to two people familiar with the matter, though these orders are still subject to adjustment.

Upshot: The consequences are apparent in a big rise in profitability for key suppliers. Micron, the US’s biggest memory chipmaker, just raised its earnings outlook while many leading display makers — from China's national champion BOE Technology Group to LG Display of South Korea — reported a significant improvement in earnings for the third quarter of 2020. Micron's shares hit a 20-year high last week.

Mercedes’ top 10

  1. China claims to have achieved quantum supremacy. State media say the supercomputer can process 10bn times faster than Google’s version.

  2. What if you could transfer money by tapping phone? This is the trial feature China is rolling out for its digital currency project as soon as this week.

  3. Yatsen, the US-listed Chinese start-up behind the Perfect Diary cosmetic brand, owes its dizzying ascent to a focus on the social media generation.

    © REUTERS
  4. Low car ownership in Asia paved the way for the meteoric growth of ride-hailing companies. Now, an interesting counter-trend has emerged.

  5. Grab, Sea Group and Ant won coveted digital banking licences in Singapore. But the main prize is likely to be south-east Asia.

  6. Staying with Grab, merger talks with its Indonesian arch rival Gojek have progressed to the point that a deal could happen in the coming weeks.

  7. China has removed 105 apps — including that of US travel firm TripAdvisor — from app stores in the country, none of which was Indian.

  8. Japan bets big on hydrogen as a power source, aiming to install the equivalent of 30 nuclear reactors by 2030.

  9. A bill to delist Chinese companies that disobey US auditing rules is imminent. Kandi Technologies is the latest company to be accused of false sales.

  10. A Chinese lithium producer struggling with heavy debts is selling almost half of its interest in Australia’s largest lithium mine.

When sages speak

  • Good piece here by Elisabeth Braw at the American Enterprise Institute, a US think-tank, on how China is buying up US and European high-technology.

  • There is a bit of a long lead-in to this but Kai-Fu Lee, author of AI Superpowers, warms to his theme at about 10.20 in this video discussion hosted by Asia House. He talks about how the cycle of product development is moving at warp speed in China.

  • What would be the purpose of a US-led democratic tech alliance to confront China? An insightful blog post by Steven Feldstein at the Council on Foreign Relations think-tank.

Best of comment

Australia is trying to blaze a trail on tech regulation with a new code that would require Google and Facebook to pay for the news they circulate online, writes Joseph Stiglitz, a Nobel laureate and an economist at Columbia University, in the Financial Times.

The code would not just ensure fair pricing for the use of news but force more disclosure of changes in algorithms and the sharing of user data. 

In an ideal world, we would simply seek to ensure there is competition between the platforms and within the traditional media. But the nature of social media today suggests that is not going to happen. As technology changes, so too does the role of government. Australia should be commended for recognising this reality and attacking it head on. 

It is not yet clear if Canberra’s effort will come to fruition — both Google and Facebook have fought back hard against the proposals. But other governments from Africa to the EU and US are watching closely to see whether the code is something they should try to emulate.

Find the latest update on this topic here.

Spotlight

Xin Lijun, chief executive of JD Health, earned some bragging rights this week. The cancellation of Ant Group’s blockbuster initial public offering catapulted his company into the spotlight as Hong Kong’s biggest listing of 2020.

Raising $3.5bn is a far cry from the $37bn that Ant had hoped to generate but investors were happy. Shares jumped 75 per cent on their trading debut on Tuesday. The deal also shows not every Chinese technology platform is under fire from the Communist party.

JD Health and other Chinese healthcare platforms, including Ping An Good Doctor and Alibaba’s AliHealth, have reported surging revenue and user activity this year. Patient fears over visiting hospitals during the coronavirus outbreak in China caused online consultations to jump in early 2020.

Xin told the Financial Times that new government policies allowing insurance claims for online care and hospitals to increasingly distribute medicines via the internet represented lasting changes that benefited JD Health.

The platform hosts more than 100,000 online consultations a day, he added, peaking at 150,000 during the height of China’s Covid-19 outbreak.

Art of the deal

What is the number one company besides Apple for Bluetooth audio chips? The answer may surprise you. It’s Bestechnic, a five-year-old Chinese chip developer that is set to list on the Shanghai Star market.

Bestechnic is not a household name but its register of customers is a who’s who in tech including Samsung, Sony, Google and JBL, as well as almost all of China’s tech giants, from Xiaomi and Huawei to Alibaba and Baidu, according to the company’s prospectus. Shipments of the Beijing-backed supplier’s Bluetooth audio chips already exceed those of US rivals Qualcomm and Broadcom, according to one data provider.

The company, which is set to raise Rmb4.86bn ($741m), is an embodiment of China’s drive to become self-sufficient in semiconductors. And it says it has not suffered tensions between Washington and Beijing. “Currently our company does not see any obvious impacts caused by the US-China tech and trade conflicts,” Liang Zhang, Bestechnic's chairman, told an investor conference.

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