Hi everyone — James here in Hong Kong. The power and the vulnerability of Chinese tech is on display once more. As Ant Group prepares for what could be the biggest IPO in history (Mercedes’ top 10), the sale of TikTok to US suitors has been thrown into jeopardy (The Big Story). HiSilicon, a chip designer owned by Huawei, is also looking shaky in the face of US sanctions (Mercedes’ top 10).
Elsewhere, Xpeng is basking in the halo that Tesla has thrown around electric vehicles in China, much to the enrichment of He Xiaopeng, the company’s boss (Spotlight). Check out also Sequoia’s big footprint in India and Facebook’s travails in Thailand, Australia and India (Mercedes’ top 10). Enjoy reading and stay safe.
The Big Story
Is China serious about blocking the sale of TikTok to US suitors? The video-sharing app’s operator, ByteDance, has pledged to abide by new Chinese regulations on technology exports, even though these threaten to block or at least delay TikTok’s proposed sale.
Last Friday, China updated its list of “forbidden and restricted technology exports” to include “personalised information recommendation services based on data analysis” — a definition which includes TikTok’s algorithm.
Key implications: Under China’s rules, the export of such services are restricted — not banned — so ByteDance may still be able to sell them abroad. But they would have to apply for government approval, which if forthcoming can take up to 30 business days.
Some analysts in China said Beijing would be unlikely to ban the sale for fear of triggering another round of punitive US action towards China. Others, however, said it was unlikely that Beijing would permit the algorithm to fall into US hands.
Upshot: China has rarely invoked technology export controls, so it is hard to know whether it will block or simply delay approval for its sale. Its US suitors, Oracle and a joint bid by Microsoft and Walmart (see Smart data), are keen to buy but a sale is not a foregone conclusion.
Mercedes’ top 10
From India to Thailand to Australia, Facebook is having a time of it in Asia. For more, James Crabtree expertly examines the twists and turns of Facebook’s troubles in India and the implication for Mark Zuckerberg’s broader expansion plans in the region.
HiSilicon, Huawei’s in-house chip designer, is on shaky ground after the latest US sanctions, reports Shuhei Yamada, Nikkei Asia Tech chief editor.
With Ant Group preparing to launch what may become the world’s largest ever share offering, this piece by the FT’s China team reveals how Jack Ma’s creation has transformed itself in the past five years.
Huawei is hurting as the US squeeze tightens. But the Chinese champion is nevertheless building up its cloud computing business to ensure its survival. Separately, Huawei’s procurement from Japan is surging as it reorientates away from US suppliers.
Nikkei Asian Review delivers an excellent story on Japan’s Mitsubishi Electric supplying warning and control radar systems to the Philippines to help track China's expansionist moves in the South China Sea.
Unexpected consequences of the US-China tech war: Fighting American wildfires has become more difficult due to a shortage of Chinese-made drones.
Speaking of drones, Nikkei Asian Review has produced a fascinating teardown of the Mavic Air 2, Chinese dronemaker DJI’s newest lower-end model. Many of the device’s sophisticated parts are American.
In India, the country’s richest man is pushing deeper into ecommerce. The FT breaks down Reliance Industries’ $3.4bn deal to help it take on Walmart and Amazon.
Deal Street Asia, staying on top of the unicorn watch in Asia, reports that Sequoia Capital is the top unicorn investor in India.
A harbinger of a Japan tech bubble? Neural Pocket, an artificial intelligence start-up that listed last week, has already exceeded $1bn in market capitalisation after jumping 466 per cent. That’s on revenues of $3m.
When sages speak
The question of “Who lost Lucent?” only seems to accumulate importance with time. Robert Atkinson, president of the Information Technology and Innovation Foundation, is at his best in this piece for American Affairs.
Should we all delete TikTok from our phones? asks Mara Hvistendahl in this MIT Technology Review article, in which she explains how China surveils the world.
This piece by Gurjit Singh for the Observer Research Foundation, an Indian think-tank, goes into some detail on Japanese investment into India. The impression is of multiple impediments.
Best of comment
Ethnically Chinese residents of America were already dodging the verbal crossfire of a Sino-American cold war, writes Patti Waldmeir in the Financial Times. But its tangible impact on their lives could be about to get a lot worse. Donald Trump has now taken aim at an institution that is central to the culture of millions of Chinese living in the US, as well as Chinese-Americans: the social messaging app WeChat.
Last month, Mr Trump issued an executive order that gave American companies and individuals like me and my children, who use WeChat to keep in touch with friends in China, 45 days to halt “transactions” with WeChat, which is owned by the Chinese technology group Tencent. No one knows yet what a “transaction” is: simply downloading the app could qualify. WeChat could disappear from Apple’s app store. (A similar US order would effectively ban TikTok, the video app that has kept so many of us entertained during the pandemic, unless its Chinese parent group ByteDance sells to a US company.)
WeChat, which has more than 1bn users worldwide, has no obvious parallel internationally. Chinese use it where others might use a combination of Facebook, emails, texts, Instagram and Twitter. It’s a payment platform, too. Banning it, for Chinese in the US, would be far worse than blocking Facebook — which, of course, China has already done at home. Still, that does not make this decision right.
Xpeng is benefiting from a “Tesla halo”. The Chinese electric vehicle company which last week listed in New York was founded in 2014 by Chinese entrepreneur and former Alibaba executive He Xiaopeng. Shares surged 40 per cent after an upsized IPO and remain well above their offer price of $15. Li Auto, another Chinese EV maker featured in #techAsia, also rose on debut.
Mr He’s record and the company’s technical capabilities have led analysts to anoint the company as one of China’s leading potential challengers to Tesla, the EV industry leader. Its tech-laden vehicles offer automated driving features and the distance they can travel on a single battery charge compares with that of Tesla, but at a lower price.
Some analysts, however, doubt Chinese EV makers would be on such a meteoric trajectory without Tesla’s example in the Chinese market. “I’m not saying that the companies are in terrible shape — quite the opposite,” one consultant said. “But on their own merit, without Tesla, they would be operating hand to mouth.” More here.
Art of the deal
SoftBank appears to be gathering more firepower for acquisitions. The Japanese group will sell a third of its shares in its local telecoms unit for ¥1.47tn ($14bn). SoftBank already said it would sell ¥4.5tn of assets in March to pay down debt and buy back shares, but the telecom share sale would push it past that total, suggesting the group is preparing to make some new investments.
Kerry Express Thailand, the country's second-biggest delivery services operator, has filed to go public as the ecommerce sector surges during coronavirus.
Vietnamese payments group NextPay is considering a private placement to raise $60m-100m in early 2021, ahead of a planned stock market listing the following year. The company is the first, and so far the only, fintech company in Vietnam to announce an IPO.
Struggling Apple supplier Japan Display plans to sell a smartphone screen factory and the land it sits on to Sharp for ¥41.2bn. Read more here about how Apple pulled the strings to get the deal across the line.
Singapore fund GIC has joined a $3.4bn deal to acquire the telecom tower assets of India’s Reliance Industries, citing the country’s attractive data demand growth outlook, given that 4G and smartphone penetration remains low.
Why does TikTok appeal to Walmart? The US retailer has been light on detail but its joint bid with Microsoft for the Chinese-owned video sharing app highlighted its potential to expand two particular parts of the US retailer’s business: advertising and its online third-party marketplace. The retailer remains a digital tiddler compared with Seattle-based Amazon. Walmart’s net sales of $520bn last year were almost double that of its rival but it has had few successes with various digital ventures. TikTok could turn that all around. More here.
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