CHIPS: Qualcomm Sues Meizu, MediaTek Presses Taipei

Bottom line: Qualcomm and Meizu are likely to reach a new licensing agreement after the former sued the latter, pressuring Meizu’s profits, while Taipei will reach a compromise with local chip makers that would allow mainland investment in the sector.

Qualcomm sues Meizu over chip license

Two high-tech chip stories are in the headlines today, reflecting the complex dynamics now taking place in the market between China and the rest of the world. In both cases, the common theme is that China wants to build up its own manufacturing base for high-tech chips that power everything from cars to smartphones and home appliances. It’s already the world’s biggest consumers of such chips, since it manufactures many of those devices. But it doesn’t design or produce most of the actual chips, which is an extremely high-tech business that also carries high profit margins. Read Full Post…

CONSUMER: Midea, SMIC on European Buying Spree

Bottom line: Midea’s purchase of Germany’s Kuka and Italy’s Clivet, and SMIC’s purchase of Italy’s LFoundry represent a wave of opportunistic buying by Chinese firms in Europe, with more such deals to come under Beijing’s directive to go global.

Midea buys Italy’s Clivet

A sluggish European economy, made worse by last week’s shock Brexit, is providing fertile shopping ground for Chinese firms, with 3 large deals in the headlines as the new week begins. Two of those involve home appliance maker Midea (Shenzhen: 000333), whose controversial and very expensive plan to buy a big stake in German robotics maker Kuka (Frankfurt: KU2G) looks set to reach a final agreement this week. At the same time, Midea has reached another deal to buy an Italian rival in the air conditioner space. Last but not least, faded semiconductor maker SMIC (HKEx: 981; NYSE: SMI) has announced another deal in Italy to buy the smaller rival LFoundry. Read Full Post…

Shanghai Street View: Dressing Up Drive

ChinaJoy to impose dress code

The dog days of summer may be descending on Shanghai, but one place that won’t be too steamy this year is the city’s annual game fest, formally known as ChinaJoy, that takes place in July. The organizer of the country’s biggest gaming trade show has thrown cold water on people who attended in the past to ogle scantily clad models, saying it will enforce a strict dress code at this year’s edition.

This particular move follows a similar ground-breaking prohibition on excessive skin at the Shanghai auto show last year, a move that was greeted with cheers from true car enthusiasts but boos from some who said it dampened the show’s festive atmosphere. I tend to side with the former group, and applaud this broader movement that’s trying to clean up our business culture here in Shanghai and make it more professional and globally respectable. Read Full Post…

China News Digest: June 25, 2016

The following press releases and news reports about China companies were carried on June 25. To view a full article or story, click on the link next to the headline.
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  • PBOC to Study Alibaba’s (NYSE: BABA) Shadow Banking Activities, Zhou Says (English article)
  • MediaTek (Taipei: 2454) Calls on Taiwan to Ease Limits on Investment from China (Chinese article)
  • MIIT Says Licensed Non-Telcos Allowed to Provide Free Voice Service (Chinese article)
  • Qualcomm (Nasdaq: QCOM) Sues Meizu for Patent Infringement (Chinese article)
  • SMIC (HKEx: 981) to Buy 70 Pct of Italy’s LFoundry for 49 Mln Euros (HKEx announcement)

RETAIL: Quirky Conglomerate Sanpower Joins Bidding for McDonald’s

Bottom line: Sanpower’s bid to become McDonald’s main China franchise partner looks like a long-shot, and China Resources or Beijing Capital Agribusiness are the most likely to emerge as winners in a deal valued at $2-$3 billion.

Sanpower eyes McDonald's
Sanpower eyes McDonald’s

What does global fast-food giant McDonald’s (NYSE: MCD) have in common with niche retailers Brookstone of the US and Britain’s House of Fraser? The answer: All 3 could soon become linked through Chinese conglomerate Sanpower Group, while already owns the 2 niche retailers and is now making a much bigger bid for most of the McDonald’s stores in China and Hong Kong. Sanpower is the latest company to enter the bidding for the China McDonald’s stores, which are being sold as the US fast food giant moves to a franchise model in the market to replace its previous approach of self-owned stores. Read Full Post…

BUYOUTS: Qunar, Sky-mobi Gets New Offers; Autohome War Continues

Bottom line: Qunar looks like the latest Chinese buyout candidate to become involved in a contested bidding war, while Autohome is unlikely to succeed in efforts to stop the sale of a stake in the company by its largest shareholder.

Qunar gets surprise buyout offer

A flurry of headlines from the wave of privatizations by US-listed Chinese companies are in the news as the week winds down, led by word that online travel site Qunar (Nasdaq: QUNR) has become the latest to get a buyout offer. Qunar wasn’t the only one lining up to leave New York, as game specialist Sky-mobi (Nasdaq: MOBI) also announced its own plan to go private. Meantime, a hotly contested privatization by online car specialist Autohome (NYSE: ATHM) has taken a few new twists, and wind power equipment maker Ming Yang (NYSE: MY) says it has just completed its own previously announced privatization. Read Full Post…

SMARTPHONES: Apple Loses, But Really Wins in China Court Ruling

Bottom line: A Beijing court’s finding that Apple’s iPhone 6 infringed on a small company’s designs looks flawed, and the judge should be commended for allowing sales to continue pending an appeal of the case.

Beijing court rules against Apple in product design case

Apple (Nasdaq: AAPL) is suffering what looks like yet another setback in China, with word that a Beijing court has found the iPhone maker guilty of stealing product designs from an obscure smartphone maker in south China. But a closer look at the reports shows that perhaps even the Beijing judge that made the ruling realizes how ridiculous the case is, and has allowed Apple to continue selling its iPhone 6 phones in China pending an appeal. Such an appeal is likely to take months or perhaps even a year, by which time iPhone 6 sales will probably be insignificant anyhow. Read Full Post…

China News Digest: June 24, 2016

The following press releases and news reports about China companies were carried on June 24. To view a full article or story, click on the link next to the headline.
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  • MIIT to Forbid Non-telcos from Providing Free Enterprise Voice Calling – Reports (English article)
  • Sanpower Group Enters Bidding for McDonald’s (NYSE: MCD) China Stores (Chinese article)
  • Qunar (Nasdaq: QUNR) Announces Receipt of “Going Private” Proposal (GlobeNewswire)
  • Mango TV Raises 1.5 Bln Yuan in Second Funding Round, Valuation Doubles (Chinese article)
  • Huawei Lowers 2016 Smartphone Target by 20 Mln Units – Report (Chinese article)

E-COMMERCE: Alibaba Gets Rare Victory in US Shareholder Suit

Bottom line: Alibaba’s victory in a shareholder lawsuit is partly justified due to its pre-IPO disclosure that piracy is a major risk for the company, but it still should have disclosed a recent government report sharply criticizing it on the matter.

Alibaba triumphs in shareholder lawsuit
Alibaba triumphs in shareholder lawsuit

E-commerce giant Alibaba (NYSE: BABA) is a master at influencing public opinion through its own hype, but is far less successful with government officials who often view its aggressive ways with more skepticism. With that background in mind, the company’s new courtroom victory in a shareholder lawsuit looks like a refreshing nod of approval from a government source, setting it apart from the usual cheers from fans of the company’s stock. I would probably agree with that view, even though in this case I’m not sure I completely agree with the judge’s decision. Read Full Post…

INTERNET: Baidu Challenges Beijing with Economic Indexes

Bottom line: Baidu’s new move into economic indexes looks like a smart use of big data but is also risky due to potential interference from Beijing, and stands a 30-40 percent chance of becoming a significant revenue source.

Baidu gets into index business

When it comes to economic indexes in China, Beijing holds a strong lock over the market due to its unique ability to collect the necessary data needed to compile broad national snapshots. But there’s also a political element to the story due to the sensitivity of economic growth and issues like unemployment. That makes leading search engine Baidu’s (Nasdaq: BIDU) decision to enter the business look both savvy and also slightly risky. But if Beijing doesn’t interfere, the plan looks like a potential new revenue source that would also raise Baidu’s profile by taking advantage of its mountains of big data. Read Full Post…

PCs: Lenovo Test Drives Cars with LeEco

Bottom line: Lenovo’s investment in the smart car business looks like a necessary step for an important new growth area, but its choice of LeEco as partner looks more dubious.

Lenovo invests in LeEco’s car business

I’ve been quite bearish on stumbling PC giant Lenovo (HKEx: 992) these days, but at least I have to commend the company for trying something new to jump-start its fading fortunes. That’s my initial assessment, on reading reports that Lenovo has invested in the smart car business of online video superstar LeEco (Shenzhen: 300104), formerly known as LeTV. But that said, even if the reports are true, Lenovo seems to be coming to the smart car story slightly late, and I also have serious doubts about the suitability of LeEco as its choice of partner. Read Full Post…