Hi everyone, Mercedes here in Singapore. When James and I started this newsletter early last year, we had little inkling that the biggest story in Asia tech would be political. No company provides a better example of this than Huawei. This week we lead with a scoop on how the Chinese equipment maker’s efforts to convince its suppliers to shift more production to the mainland are hitting strong resistance.
Elsewhere, the coming introduction of an anti-terror law in the Philippines has coincided with a surge in fake Facebook accounts in that country, putting people at risk (Mercedes’ top 10). We also see some proof that ByteDance, the Chinese owner of TikTok, does not have the Midas touch with everything (also top 10).
Don't miss Robert Atkinson’s views on what the US must do in terms of a post-Covid-19 industrial strategy to counter China’s rise (When sages speak), and read about how Zuoyebang — one of China's biggest online tutoring start-ups, and one that most people have probably never heard of — is reportedly raising funds (Art of the deal). Finally, would you wear electric clothing to ward off the coronavirus? In Japan, two companies are betting on it (top 10).
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The Big Story
Huawei is facing headwinds in its drive to localise its supply chain. The Chinese telecoms equipment giant has been trying to persuade essential Japanese, Taiwanese and Korean suppliers to move manufacturing processes to China, but Covid-19 and geopolitical issues are making that difficult, according to the Nikkei Asian Review.
Some suppliers are caught in a US-China tussle. “There are suppliers who also need to address their US semiconductor clients' requests to produce outside of China over security reasons, so they chose not to expand their Chinese capacity,” said one executive.
Key Implications: Huawei wanted its chip-related suppliers to carry out most packaging and testing in China by the end of this year. It also wanted printed circuit boards made in China, sources said.
Huawei procured chips worth $20.8bn last year, giving it considerable market clout. But chip manufacturing is mostly done outside China — in Europe, Japan, South Korea and Taiwan — and persuading the supply chain to relocate is far from easy.
Upshot: “The current geopolitical situation and the pandemic are prompting suppliers to diversify production bases from China,” said Chiu Shih-fang of the Taiwan Institute of Economic Research. “In that case, it could be challenging for them — if they are not Chinese companies — to again concentrate and move more production to China for a single client.”
Mercedes’ top 10
The investment arm that manages SoftBank’s $100bn Vision Fund is cutting 15 per cent of its 500-strong staff after a disastrous stretch in which $18bn was wiped off the value of its technology bets. These are the first cuts since SoftBank Investment Advisers was established in 2016.
Huawei has launched an offensive to win over British hearts and minds as the Chinese equipment provider battles to keep a role in building the UK’s 5G networks. Vodafone has already warned that the UK’s hopes of leading in 5G technology would be dealt a terminal blow if the government removes Huawei.
A coronavirus bet by a little-known Japan tech start-up has paid off. Cyber Security Cloud listed at the height of the March market turmoil and its shares are up more than 600 per cent.
Facebook has been hit by a surge in fake accounts in the Philippines and the FT’s John Reed provides the worrying context: a forthcoming anti-terror law that could be used against people affected.
The Nikkei Asian Review has its finger on the pulse of one of the biggest stories right now: supply chain shifts away from China. The latest retreats include Rohm, the Japanese chipmaker, and Japan Display, an important Apple supplier.
Proof that ByteDance, the Chinese owner of TikTok, does not have the Midas touch with everything. Exhibit A: its TopBuzz news app.
Staying with ByteDance, a report says its China-based employees are denied access to the “sensitive data” of its overseas products, including TikTok.
A Japanese biotech company has cut the processing time for 5,000 simultaneous coronavirus tests from 24 hours to two hours, according to a scoop in the Nikkei Asian Review.
What happened to SenseTime when it was added to the US entity list? Not much. The Wire China profiles the Chinese AI company that beat out Facebook’s facial recognition algorithm to become the most accurate in the world.
Are you brave enough to wear electric pants to ward off coronavirus? Two Japanese companies are testing the effectiveness of a fabric that kills germs with little electric shocks.
When sages speak
Digital trade needs an open international architecture, writes Sam duPont of the German Marshall Fund of the United States. China’s vision on digital trade, however, reflects its own concerns about “cyber sovereignty”. The vision that wins out will shape cross-border data flows, which are already more valuable than the trade in goods.
This has been out there for a while, but Robert Atkinson’s views on what the US must do in terms of a post-Covid-19 industrial strategy to counter China’s rise are valuable. Atkinson provides useful statistics and insights to back up his arguments.
Merics, the Berlin-based think-tank, has a detailed report here on China’s digital platform economy. It looks at the relative strengths of China’s technologies — crucial to improving productivity in the manufacturing sector — and those of Germany.
In the spotlight
The meteoric rise of videoconferencing app Zoom has thrust its China-born founder and chief executive Eric Yuan into the limelight. He is a Chinese-American business leader at a time of rising tension, with technology a main source of friction between the two countries.
Born in Shandong, Yuan moved to the US in the 1990s, becoming an engineer at a company later acquired by Cisco. When Cisco rejected his idea for a simple app, he quit to build it himself. Zoom has grown from supporting 10m daily meeting participants in December to 300m in April. And despite lapses such as security problems, the company is looking to expand into new technologies.
Last week, the value of the 50-year-old’s personal stake in the company he founded nine years ago rose above $10bn for the first time, vaulting him into the ranks of Silicon Valley’s deca-billionaires and enhancing his status as a rare China-born leader in the US tech hub.
Art of the deal
Zuoyebang, one of China’s biggest online tutoring start-ups, is in talks to raise up to $800m, according to Reuters. The five-year-old company is valued at $6.5bn.
“Buy now, pay later” companies are surging in popularity, as recent deals by Tencent and Alibaba demonstrate. Australia’s Zip has acquired US rival QuadPay in a $270m deal that will see it compete with Tencent-backed Afterpay in America.
Indonesia’s biggest unicorn, Gojek, has spun out its video-streaming platform and closed the first independent funding round for the unit, led by Asia-based VCs ZWC Ventures and Golden Gate Ventures for about $15m.
JD.com, one of China’s largest technology companies, will sell up to $4.3bn in shares when it lists in Hong Kong in what is likely to be one of the largest public offerings this year.
Beijing Eswin Technology Group, a semiconductor product and services start-up led by the former head of Chinese display giant BOE, has raised $283m in a Series B round led by IDG Capital and Legend Capital.
uCloudlink, a Chinese mobile data marketplace, will raise up to $61m on the Nasdaq. The listing comes despite significant risks to its business given that the company derives the majority of its revenue by providing international travellers with mobile data connectivity services.
Resource-poor Japan has been tapping an unlikely source for rare metals: garbage. The country’s mountains of discarded electronics contain not only gold and silver but also metals crucial for electric cars.
JX Nippon Mining began using compact equipment for recycling automotive batteries in February, to affordably recover such metals as lithium and cobalt. Sumitomo Metal Mining operates a facility that can extract copper, cobalt and nickel from lithium-ion batteries. Plans are to begin commercial operation as early as 2021. The company also handles the recycling of nickel-metal hydride hybrid-auto batteries with Toyota Motor.
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