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Hello, Mercedes here from Singapore. It doesn’t feel so long ago that the semiconductor sector was the nerdy cousin of other, sexier Asian tech industries such as ecommerce and artificial intelligence. These days the chip rivalry between the US and China is the race to watch. In the latest development, our Big Story on Wednesday reveals veteran engineers are leaving American chip design toolmakers for Chinese rivals. But it is still too early to know how effective these mainland start-ups will be at advancing Beijing’s “Great Chip Leap Forward”. 

Elsewhere, the other great Asian tech rivalry — that between India and China — reared its head again. India has banned another clutch of mainland apps including Alibaba’s AliExpress. In IPO news, JD Health is preparing to go public in the biggest health IPO in Asia — a welcome headline for the Hong Kong exchange after the Ant Group fiasco. Meet the Taiwan digital minister being lauded for the island’s “mask map”. Finally, check out Japan’s addictive weather pain app — a nod to the future.

The Big Story — exclusive

Veteran engineers and high-level executives are leaving top US chip design toolmakers for Chinese rivals as Beijing looks to break America's near monopoly on this important segment of the semiconductor industry, write Cheng Ting-Fang and Lauly Li, Nikkei staff writers.

Three Chinese start-ups established since September last year were founded by, or have hired, executives and engineers from Synopsys and Cadence Design Systems of the US, the world’s two biggest makers of electronic design automation (EDA) tools, as such software is known.

Key implications: America has long dominated the segment, with Synopsys, Cadence, Mentor Graphics and Ansys controlling 90 per cent of the global market for EDA tools.

Mentor was taken over by Siemens in 2017 but maintains extensive research and development operations in the US. These four companies own much of the intellectual property needed for chip development, and count the world’s top chip developers as clients, including Apple, Samsung, Qualcomm, Nvidia, Micron and Huawei.

China’s EDA tools industry, by contrast, has lagged behind. Its two main homegrown players, state-owned Empyrean Software founded in 2009, and Beijing-based Cellixsoft, established in 2002, are still unable to match the offerings of Synopsys and Cadence. Jinan-based Primarius Technologies, founded by a former senior Cadence executive in 2010, is likewise struggling to catch up with its American rivals.

Upshot: China’s drive for self-reliance in semiconductors is driving intense demand for talent. The US will be concerned over the migration of talent, but it is too early to know if the three start-ups will be effective.

Mercedes’ top 10

  1. India’s campaign against China tech shows no signs of abating. New Delhi has banned a further 43 Chinese apps including Alibaba’s AliExpress.

  2. JD Health, the healthcare arm of Chinese ecommerce giant JD.com, is seeking to raise up to $4bn in Hong Kong in what would be Asia’s biggest health IPO.

  3. Investors are reviewing their record holdings of Chinese tech companies after Beijing proposed sweeping new antitrust rules.

  4. Alibaba’s chief executive said new Chinese tech regulation is “timely and necessary”. Jack Ma, take note.

  5. Speaking of which, Beijing sought to tighten its grip on livestreaming sites, banning teenagers from making purchases.

  6. The Ethiopian capital of Addis Ababa is one place where China’s Beidou satellite system is outstripping US rival GPS.

  7. Fines of up to £100,000 a day await UK telecoms groups that don’t comply with rules to phase out Huawei equipment from Britain’s 5G networks.

  8. The first Chinese-manufactured electric cars from BMW and Tesla will soon head to Europe.

  9. Private 5G networks are an opportunity for Asia’s Apple suppliers, which have long sought to break into a field dominated by telecoms players like Huawei.

  10. Cloudy with a chance of a headache. Japan’s Weather Pain Forecast is a glimpse into how information can be used at the point where tech hardware leaves the lab and heads into the great outdoors.

When sages speak

  • Is Europe critically dependent on the Chinese supply chain? Max Zenglein of Merics, a Berlin-based think-tank, shows that overall it is not. Only in 103 product categories out of several thousand does the EU have a critical strategic dependence.

  • Will China’s digital renminbi cut into the business of Alipay and WeChat Pay? Yes probably, says Yan Xiao in this podcast with Rui Ma of Tech Buzz China.

  • Scott Kennedy at CSIS, a Washington-based think-tank, has an interesting overview of China’s new energy vehicle sector. He shows that China’s charging infrastructure is far ahead of the US and predicts that CATL, the Chinese battery maker, will be the world’s number one by the end of the year.

Best of comment

Last week Barclays’ credit card business struck a deal with Amazon to offer seamless customised shopping and payment services in Germany, writes Gillian Tett, the FT’s US editor-at-large.

The announcement drew little attention amid the US election, pandemic pain — and the cancellation of Ant Financial’s putative $37bn initial public offering. But investors and regulators should pay attention. That is not because of what the deal shows about German shopping habits, Amazon’s voracious expansion or Barclays’ strategy, per se.

Instead, the tie-up’s real significance is as a tiny, but unusually visible, sign of a feverish race under way at banks and tech companies to find ways to use big data and artificial intelligence in finance. Essentially, Barclays and Amazon are linking data with AI analysis to approve credit (or not) and predict what clients will want next.

“I personally think that the partnership with Amazon has been one of the most important things to have happened to Barclays in the past five years,” Jes Staley, Barclays chief executive, told me.

Spotlight

Audrey Tang was a child prodigy. She began speaking at eight months old and subsequently scored off the charts in IQ tests. She quit junior high school at the age of 14 after being hired by a leading Taiwanese IT company for her programming skills. A year later she opened a business before moving to Silicon Valley when she was 19.

In her current position as Taiwan’s digital minister, she is being lauded for the island’s “mask map”, an app that provides real time information on the availability of face masks in pharmacies. The system behind the mask map did not just suddenly appear after coronavirus swept the world, but was a result of Taiwan's moves toward “digital democracy".

Taiwan has increased the transparency of its government workings in recent years, partly as a result of the Sunflower Movement of 2014 when students stormed the legislative building to demand that information about a trade deal with China be disclosed to the public. Tang played a vital role in the event, as it was her livestream system that hosted negotiations online between students and lawmakers that brought an end to the occupation of the legislature.

Art of the deal

The turbulence that can afflict dealmaking in China was on display again this month.

Baidu, the Chinese technology group, had announced a $3.6bn deal to buy YY Live, a live streaming platform. But then — just days later — US-based short seller Muddy Waters issued a research report that described YY Live’s business as “almost entirely fake” and “an ecosystem of mirages”. YY Live hit back, criticising the research as “full of ignorance” and “unclear logic”.

The share price of YY Live’s parent company, US-listed Joyy, seesawed. It fell up to 26 per cent on the day the Muddy Waters report came out, only to rise by 17 per cent the next day following ripostes from Joyy.

A Hong Kong-based lawyer, speaking on the basis of anonymity, said that the Baidu deal was likely to be delayed as Joyy worked to reassure investors and disprove the allegations. “Past precedent suggests this is going to take some time,” the person said.

Smart data

Changes in cross-border data flows

Here is a counter-intuitive chart. In terms of cross-border data flows — which are built up when people use the internet to surf sites overseas or engage in ecommerce and other activities — China is leading the US. In fact, with 23 per cent of the world’s cross-border data flows, China has nearly twice the US share of 12 per cent, writes Toru Tsunashima, Nikkei staff writer.

The sources of China’s cross-border data flows have also changed. While the US accounted for 45 per cent of data flows in and out of China in 2001, that figure dropped to just 25 per cent last year. Asian countries now make up more than half the total, including Vietnam at 17 per cent and Singapore at 15 per cent.

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