Multinationals

TRADE: Micron, China Mobile Muddy US-China Trade Tensions

Bottom line: A court order barring Micron Technology from China and Donald Trump’s attempts to keep China Mobile out of the US reflect blurring lines between business and politics in heightening US-China trade tensions.

Fujian court bars Micron sales in China

Two new headlines are showing how trade tensions between the US and China are spilling over into the high-tech realm, while also reflecting a certain amount of confusion and twisting of the facts. Leading the somewhat misleading headlines is an item that has U.S. memory chip giant Micron (Nasdaq: MU) suddenly being shut out of China for a number of its products due to a patent dispute. The other headline has Donald Trump saying that leading Chinese telco China Mobile (HKEx: 941; NYSE: CHL) shouldn’t be allowed to offer services in the US due to national security concerns.

The Micron story is being spun by some media as having a US-China trade tensions angle, when really that’s not the case and it’s just a typical patent dispute. The same could be said for the much larger case involving a US ban on telecoms equipment maker ZTE (HKEx: 763; Shenzhen: 000063), which is being spun as part of US-China trade tensions, even though ZTE is being punished for violating much older US sanctions against sales to Iran. China Mobile, on the other hand, is clearly a Trump pet project and does reflect his protectionist tendencies. Read Full Post…

TELECOM: What’s Next After ZTE Resolution of ZTE Case

Bottom line: ZTE will experience fallout from its run-in with Washington through much of next year, and could see an even longer-term hit to its global business as international customers start to look for alternate suppliers.

ZTE off life support, but major challenges remain

The saga of embattled smartphone and telecoms equipment maker ZTE (HKEx: 763; Shenzhen: 00006) appears to be nearing an end, as trading resumed in the company’s stock following an official settlement with Washington over  illegal sales to Iran. The ending to this story certainly came with a big climax, with ZTE shares plunging by 42 percent in Hong Kong on the first day after trading resumed.

They fell by a smaller 10 percent in China on Wednesday, but only because China places a 10 percent limit on daily rises and declines in individual stock prices. Not surprisingly, the stock was down another 10 percent in China on its second day of trade, while the Hong Kong shares did a dead cat bounce and were up slightly. Read Full Post…

PCs: Lenovo Blasted as Traitor for Supporting US Standard

Bottom line: A brouhaha involving Lenovo’s branding as unpatriotic for not supporting homegrown technology is likely to blow over quickly, and spotlights China’s continued reliance on foreign technology.

Lenovo branded as traitor

In a story that looks like a something from the McCarthy era, embattled PC maker Lenovo (HKEx: 992) has landed at the center of a controversy that’s seeing it branded by some as a traitor for choosing foreign technology over a homegrown Chinese alternative. This kind of thing isn’t at all that uncommon in China, where politics, business and everyday life mix freely.

We’ve seen a few examples of such mixing over the last few months, all involving western companies that were forced to repent after making the egregious error of listing places like Hong Kong and Taiwan as separate “countries” from China on their marketing materials. Such missteps ended up causing outrage by some nationalists on the web, prompting sleepy regulators to step up and demand such places be labeled as part of China. I’m not a big fan of Donald Trump, though I did find his branding of this kind of thing as “Orwellian nonsense” as both humorous and also a nice gentle rebuke to China. Read Full Post…

CHIPS: U.S. Kills China Deals to Buy Xcerra, Chicago Stock Exchange

Bottom line: Two new vetoes for Chinese purchases of US microchip and financial companies are the latest signals the Donald Trump administration intends to use such vetoes to fight for a more balanced trade relationship.

Washington vetoes 2 more Chinese U.S. purchases

What started as a trickle of dying cross-border deals involving Chinese buyers of US assets is showing signs of becoming a flood, with two new vetoes hitting the headlines. The latest of those is from the all-too-familiar high-tech chip sector, and has US chip maker Xcerra (Nasdaq: XCRA) saying it is scrapping its plan to be purchased by a Chinese buyer after failing to win clearance from the US national security reviewer. In a related vein, the Chicago Stock Exchange earlier this week scrapped a similar deal due to objections from the US stock regulator.

This pair of collapses extends a recent string of similar developments that actually dates back to the Obama administration. But the pace is clearly picking up under current President Donald Trump, who has made no secret of the fact that he wants to see a more level playing field in US-China trade relations. Whether or not these deals represent a real security risk is open to interpretation. But regardless, Trump is making it clear he will use this pretext to block deals in the sensitive financial and high-tech sectors. Read Full Post…

MEDIA: DreamWorks Crashes Out of China Animation JV

Bottom line: DreamWorks Animation’s withdrawal from its China joint venture marks the end of an explosive phase in China-Hollywood tie-ups, with one-off co-production deals the most likely form of cooperation going forward. 

Take-two for DreamWorks Animation China JV

In what could herald a wave of the future, a highly-touted joint venture between DreamWorks Animation and Shanghai’s China Media Capital (CMC) has come unglued, with the official departure of DreamWorks from the tie-up. This particular exit appears quite symbolic, as Oriental DreamWorks was the first of what ended up becoming a huge wave of similar tie-ups between China and Hollywood. Thus the big question becomes if this abandonment of the venture could signal more unraveling of similar tie-ups ahead.

I suspect the answer to that question is yes, but perhaps not for the reasons you might expect. It appears that DreamWorks Animation’s decision to quit the joint venture owed to disappointing results, and I suspect the company’s acquisition by Comcast two years ago was also a factor. The fact of the matter is that China’s movie market still has huge potential. But Beijing has shown less appetite for these China-Hollywood tie-ups these days, less for political reasons and more because it is trying to stem the outflow of money for foreign acquisitions. Read Full Post…

INTERNET: Didi Chuxing Drives Into Bikes, Brazil

Bottom line: Didi’s Brazilian acquisition looks relatively shrewd and could be followed by more such moves in developing markets, while its purchase of a local bike-sharing firm looks less prudent.

Didi drives into Brazil

China’s homegrown Uber is in a couple of headlines as we round out the first week of the new year,  reflecting its global aspirations and also its desire to expand beyond its original car-based services at home. The first headline has Didi Chuxing making its first major overseas acquisition in Brazil, while the second has it buying what is probably China’s largest shared bike operator behind the leading pair of Mobike and Ofo.

Each of these headlines is interesting though not earth shattering, and in my view probably reflect the fact that Didi has too much cash more than anything else. This is a classic problem for this kind of superstar Chinese startup, which often runs into the unusual problem of raising more cash than it really needs simply because so many investors want to buy in. At the same time, Didi’s own car services business has probably shrunk over the last year, following a clampdown by many major cities and also as the novelty factor wears off for many consumers. Read Full Post…

INTERNET: Google Launches China AI Lab, Still No App Store

Bottom line: Google’s launch of a China AI lab marks the latest step in its campaign to curry favor with Beijing, which could give it a 50-50 chance of being allowed to sell its Pixel phones and open a China Google Play store in 2018.

Google’s China return like watching grass grow

Chronicling Google’s (Nasdaq: GOOG) slow march back to China has been a bit like watching grass grow these days. It’s been a painfully slow process, including the latest announcement that the company will open an artificial intelligence (AI) lab here in Beijing.  Put more cynically, one might call this the world’s longest brown-nosing exercise in the brief history of the Internet, due to unique conditions that prompt many to say that Beijing is in some ways creating its own made-in-China 1.1 version of this medium of the 21st century.

That internet version 1.1 includes features like China’s notorious firewall that filters out sites that Beijing doesn’t like for the vast majority of the country’s more than 700 million web surfers. A corollary of that is that anyone who operates an officially-registered website inside China tacitly agrees to abide by the nation’s vague laws that require all operators to self-police their sites for sensitive content. Read Full Post…

INTERNET: Twitter Tweets Indecisively Around China

Bottom line: Twitter’s conservative approach to China reflects a broader indecision at the company that is limiting its growth potential.

Twitter shackled by indecision in China

While social networking giant Facebook (Nasdaq: FB) actively flirts with China in a bid to enter the world’s largest Internet market, the smaller, struggling Twitter (NYSE: TWTR) seems unable to make up its mind. That seems to be the key takeaway from a new interview on the prickly subject of China between Maya Hari, Twitter’s Asia Pacific chief, and Caixin, a well-respected Chinese financial media that also happens to be my current employer.

This particular message seems to be a recurrent theme with Twitter, which, like Facebook, doesn’t like China’s strict self-censorship policies but also finds it hard to ignore such a big market. In Facebook’s case, the company has made it quite clear it’s willing to tolerate China’s self-censorship policies for a chance to build a presence in the market, most likely through a future joint venture with a local partner. Read Full Post…

SMARTPHONES: Apple Finds Its China Mojo as Xioami Moves Up

Bottom line: Apple should be able to extend its return to growth in China into at least one more quarter, while Xiaomi should also be able to continue posting strong double-digit growth for the next year.

Apple returns to China growth

Apple (Nasdaq: AAPL) has just released its latest quarterly results that show China is back on a growth track, quieting skeptics who had said its latest iPhone was debuting to mostly snoozes in the world’s largest smartphone market. On a broader basis, IDC has also just announced its global figures for third-quarter smartphone sales, showing Huawei continues to creep up on Apple and could well take the global No. 2 spot from its U.S. rival over the next year if current trends continue.

Last but not least is China’s own Xiaomi, which is catching people’s attention again with the strongest growth of any global players in the third quarter, consolidating its position as the world’s fifth largest player. It’s probably too early to say that Xiaomi’s comeback story has legs. But the company is the only one posting triple-digit growth among the top 5 in the latest quarterly results, a distinction previously reserved for Huawei and Chinese rival  Oppo. Read Full Post…

MULTINATIONALS: Whatsapp Bows, Microsoft Visits, Google Plays

Bottom line: Whatsapp has likely been permanently blocked in China, while Satya Nadella’s visit to Xiaomi underscores Microsoft’s growing ties  with the company, and Google’s China AI push is mostly PR.

Whatsapp booted from China?

A couple of the big high-tech multinationals are in the headlines as we head into the next-to-last month of the year, which seems like a good opportunity to review where these companies stand heading into the second term of President Xi Jinping and also as Donald Trump gets set to make his first China visit. One of those headlines involves Google (Nasdaq: GOOG), and comes in a soft-ish report pointing out the company is actively pushing its artificial intelligence (AI) development software in China.

Next there is Microsoft (Nasdaq: MSFT) CEO Satya Nadella, who is in China this week where he paid a visit on recovering smartphone maker Xiaomi. I’m not a huge fan of Microsoft’s strategy in general. But its growing ties with Xiaomi do look like an interesting new approach that could ultimately pay off nice dividends under Nadella’s 3-year-old leadership at the software giant.  Read Full Post…

MEDIA: Tencent, Alibaba in Music Swap as Regulator Gets Involved

Bottom line: A new music re-licensing deal between Alibaba and Tencent, combined with a meeting between the copyright regulator and major online music sellers, hint at attempts to create a more level playing field in the space.

Alibaba, Tencent in music cross-licensing deal

A couple of items from the music sector are in the headlines today, showing how tricky the situation is becoming with copyrights and online licensing in China. One of those has two major players, the music services of Internet giants Alibaba (NYSE: BABA) and Tencent (HKEx: 700), signing an agreement to cross-license music to each other when one of them owns the rights to such music. The other has China’s copyright office actually calling a meeting between those two companies and two other major players, NetEase (Nasdaq: NTES) and Baidu (Nasdaq: BIDU), to discuss issues confronting the industry.

Two issues appear to be driving these two deals that appear to be related. One is concerns from the music industry that rights to their songs will become fragmented and confined to single platforms under the current licensing system, limiting consumer choice. Similar concerns might also be what’s driving the regulator to get involved as well. An interesting footnote to this might be whether the same thing could soon happen in the video licensing arena, which shares similar issues. Read Full Post…