Multinationals

INTERNET: Amnesty, Employees Launch Google Attack

Bottom line: A major new campaign calling on Google to abandon its plan to return to China’s search market will add pressure on the company to reconsider its decision, but is unlikely to succeed unless the pressure grows significantly stronger.

Amnesty launches petition to protest Google’s China return

If Google (Nasdaq: GOOG) CEO Sundar Pichai thought he could quietly launch a new filtered China search engine without any major backlash, he’s quickly finding out otherwise. The search giant’s controversial plan to return to the world’s biggest search market is facing its stiffest resistance to date, in a frontal assault coordinated by human rights group Amnesty International and Google’s own employees.

The message from both groups is the same: Don’t do it. In Amnesty’s case, the group has launched an online petition (announcement) calling on Google not to go through with the plan, code named Dragonfly, that was first uncovered back in August. (previous post) At the same time, a group of more than 300 Google employees has signed a petition urging the company to reconsider its China plans on the blogging site Medium. (online petition) Read Full Post…

CHIPS: China Chipmaker Lands in Eye of Trump Trade War

Bottom line: Washington’s punishment of a Chinese chipmaker accused of stealing from Micron Technology is part of a savvy targeted approach by the Trump administration aimed at spotlighting illegal business practices by Chinese tech firms.

Trump punishes China chipmaker for IP theft

I thought I’d begin this Monday with a wrap and look at what’s ahead for a Chinese chipmaker called Jinhua, which fell squarely in the crosshairs of Donald Trump’s trade war with Beijing in a series of breakneck developments last week. This particular case seems to be part of a growing pattern that is seeing Trump pick his battles one at a time, at least when it comes to handling Chinese technology companies.

We’ll review the details on this latest case involving Jinhua and its dispute with US chip giant Micron Technology (Nasdaq: MU) shortly. But the bigger picture is that Trump has accused Chinese companies of stealing US intellectual property and has made that issue central in his current push for a trade deal. Previously US companies with such complaints could only seek assistance from the courts, mostly in the US and EU, since few believe the Chinese court system could handle such cases effectively and objectively. But the government can obviously take action much more quickly and effectively, as Trump is showing with his latest actions. Read Full Post…

INTERNET: Google Outed on China Search Plan

Bottom line: A new report on Google’s plan to launch a new China search engine within the next year looks credible, and underscores the company’s decision to put the market’s big potential ahead of the negative backlash such a move will bring.

Google prepares to enter eye of China storm

A story in a publication called the Intercept is making big waves in China, saying search giant Google (Nasdaq: GOOG) is preparing a major about-face on its decision to leave the country’s large but highly controlled search market. (English article) While I’ve never heard of this particular publication, the level of detail it contains appears to show it’s credible, which is probably why most major western media are running reports based on the story.

In short, the story says Google has quietly been developing a China-specific version of its search engine that will adhere to Beijing’s strict rules for self-censorship, and has code-named the project Dragonfly. Google previously operated such a search engine in China, but famously pulled out of the market in 2010 after deciding it didn’t want to adhere to those self-policing policies that require removal of all links to sensitive subjects. Read Full Post…

CHIPS: China Kills Qualcomm Mega-Merger With Silent Treatment

Bottom line: China used its traditional silent treatment approach to kill Qualcomm’s bid to buy NXP, quite possibly to show its displeasure with recent US trade tensions, but resulting global pressure could forced it to be more transparent in the future.

China kills Qualcomm-NXP deal with silent treatment

We’ll close out the week with my own quick-and-dirty post mortem of the collapsed deal that would have seen telecoms chip maker Qualcomm (Nasdaq: QCOM) purchase Dutch rival NXP (Nasdaq: NXPI) for $44 billion. Put simply, this deal appears to have been killed by China’s classic approach of “kill them with silence.”

But there’s a bit of a postscript this time around, as China’s regulator took the unusual step of actually breaking its silence once the deal was dead. This appears to show that China has learned a lesson from this particular battle, namely that it needs to take a stance on things and explain its decisions, even if people might disagree. That would be quite a break from its old approach of just sticking its head in the sand and pretending like nothing is happening when it makes unpopular decisions.  Read Full Post…

INTERNET: Facebook, Google in New China Steps

Bottom line: Facebook and Google’s latest micro-moves into China reflect their longer term efforts to get permission to launch major services in the market, though it’s unclear if they will get such a green-light anytime soon.

Facebook, Google take new baby steps in China

You have to give China-challenged Internet giants Facebook (Nasdaq: FB) and Google (Nasdaq: GOOG) an “e” for effort. Both companies have popped into the China headlines over the last two weeks for micro-moves into the world’s largest Internet market, including the latest news that Facebook plans to set up a company in Hangzhou that will become an “innovation hub”.

The Facebook news comes just about a week after Google confirmed that it has launched a new artificial intelligence (AI) game in China on a platform operated by local Internet giant Tencent (HKEx: 700). Both of these moves are miniscule in the big scheme of things, especially for companies of Google’s and Facebook’s size.  But they do reflect the kind of baby steps, some might also say groveling, that such corporate giants will need to take to get a hold in the world’s largest Internet market where they are now mostly denied permission to operate. Read Full Post…

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…