Telecoms

SMARTPHONES: ZTE Sees Double With New Smartphone

Bottom line: ZTE’s new dual-screen smartphone will turn some heads and raise the company’s profile briefly due to the novelty factor, but the effect will quickly fade due to lack of practical uses.

ZTE tries two screens

You can’t blame ’em for trying. That’s the first thing that came to mind when I saw the announcement and some photos of a new foldable ZTE (HKEx: 763; Shenzhen: 000063) smartphone with  two screens. This clearly looks like the company’s attempt to find new relevance in the cutthroat smartphone market, where phones increasingly look and feel the same. The move seems to be part of a recent trend that says “give them more space” on their screen, which others are trying to do by creating phones whose entire face is taken up by the screen.

I’m not really a gadget person, but from a business perspective I do have to credit ZTE for trying to find something new to distinguish itself from the pack. The company was one of China’s earliest success stories in the cellphone and later the smartphone space. But a big portion of its products still go to US wireless carriers who stamp their own brand on the phones and give little or no space to their Chinese supplier. Read Full Post…

M&A: Cowen, MoneyGram Deals Wait for US Nod, Xinhua Lectures Trump

Bottom line: The US could veto the purchase of brokerage Cowen by a Chinese energy firm, and could also block Ant Financial’s purchase of MoneyGram under tougher scrutiny by the Donald Trump administration.

US set to block more Chinese purchases?

Just days after President Donald Trump made his first veto of a Chinese deal in the US, two other deals appear to be running into trouble for similar reasons, though it’s too early to call either dead just yet. In both instances, the buyers, Ant Financial and CEFC China Energy, have refiled proposals to regulators for their purchases of two financial services firms, MoneyGram (NYSE: MGI) and Cowen Inc. (Nasdaq: COWN), respectively. Both need approval from the powerful Committee on Foreign Investment in the United States (CFIUS), which reviews all such cross-border deals for national security considerations.

The regulatory stalling of those two deals comes just days after Trump officially killed another deal for a China-backed bid to buy Lattice Semiconductor (Nasdaq: LSCC), (previous post). So now people are trying to draw connections between these developments. Since that veto, China’s official Xinhua news agency has come out with an editorial over the weekend saying Trump is only hurting America by blocking such deals, which are part of the natural ebb and flow of global trade. Read Full Post…

CHIPS: Trump Vetoes Chipmaker Sale, More to Come?

Bottom line: The US is likely to take a tougher stance towards Chinese M&A of politically sensitive companies following Trump’s veto of a major deal, but in such cases will still need to justify the national security risk.

Trump vetoes sale of chipmaker

In a move that is sure to make major waves but wasn’t completely unexpected, Donald Trump has made his first big statement on the sale of US high-tech companies to Chinese buyers by formally blocking a relatively large deal that was pending for quite some time. Followers of the space may recognize I’m talking about chipmaker Lattice Semiconductor (Nasdaq: LSCC), which was set to be bought by a China-backed private equity firm in a deal that has dragged on for more than a year.

Some might argue that this marks a big setback for cross-border M&A between China and the US in the high-tech realm, though the decision does seem consistent with what we’ve seen in the past. I’ll recount some of the deals we’ve seen previously vetoed for similar reasons, which usually involves defense applications. Perhaps the major difference here is that Trump has made the first such move quite early in his presidency, which could presage a more aggressive position for national security reviews in future deals. Read Full Post…

SMARTPHONES: Huawei Unseats Apple, Eyes the Cloud

Bottom line: Huawei could overtake Apple as the world’s second largest smartphone seller in the next 1-2 years, while it could also pose a challenge in global cloud services over the next 5 years.

Huawei takes a shot at the cloud

We’ll begin the new week with a couple of items from Huawei that show how the company that began as a telecoms network builder looks set to unseat fading PC giant Lenovo (HKEx: 992) as China’s global leader in consumer tech. The first of those has one research house releasing data that show Huawei’s smartphones surpassed Apple (Nasdaq: AAPL) for two consecutive months in June and July to become the world’s second largest brand. The second has a Huawei executive discussing his plans for the company’s cloud computing services, saying he wants to become a global top 5 player.

The first headline shows that Huawei is not a company to be taken lightly, which means that people should pay close attention to the second headline. In my years of covering Huawei, the company has proven to be quite focused and determined, and pours large amounts of money into product development to make sure it can meet its goals. It focused its early efforts on building traditional telecoms networks, but more recently has moved to enterprise networks and consumer devices like smartphones and notebook computer. Read Full Post…

CHIPS: Samsung Chases China Goodwill With Massive Chip Expansion

Bottom line: Samsung’s new $7 billion investment in a chip expansion in Xi’an should help to earn big government goodwill, which could help position its smartphone division for a rebound in China.

Samsung expands chip chip plant

A major new China investment by chip maker Samsung (Seoul: 005930) is spotlighting just how important the market has become to the company, and South Korean companies in general, and how they are trying to play into Beijing’s agendas to maintain their place at the table. That’s become all the more important lately, as a disagreement between Beijing and Seoul has been costing South Korean companies business in China, as often happens when such political disputes spill out into the business sector.

This particular investment, totaling $7 billion, was obviously in the planning stages long before that dispute broke out earlier this year, involving Seoul’s decision to install a sophisticated anti-missile defense system supplied by the US to counter the North Korean threat. But Samsung’s decision to make its announcement now looks shrewd, as it should win it some goodwill from Beijing at a time when the company’s smartphones face similar struggles in China that they’re seeing in the rest of the world. Read Full Post…

TELECOMS: Giddy Unicom Picks 14 Mixed-Ownership Partners

Bottom line: Unicom’s choice of 14 partners for a mixed-ownership reform plan involving its Shanghai-listed unit is far too many, and is ultimately likely to fail when those partners become frustrated and sell their shares.

Unicom puts 14 new partners into its mix

What I feared might happen has come to pass in a mixed-ownership reform plan being crafted by China Unicom (HKEx: 762; NYSE: CHU), one of the nation’s three telcos that is experimenting with selling some of itself to private investors. That’s a reference to reports in early August that the company might be planning to take on as many as 20 partners in the plan to sell a significant stake in its Shanghai-listed unit, China United Network Communications (Shanghai: 600050), to strategic private investors.

My worry was that taking on so many partners would effectively dilute the plan, since none of the partners would receive a very big stake and Unicom’s attention would be too fragmented. As it turns out, the number 20 was a bit too high, but not far off the mark. That’s the latest word, as Unicom has finally announced its mixed-ownership reform plan that will see it partner with 14 private companies in a bid to become more dynamic. Read Full Post…

TELECOMS: Unicom Plan Gaining Too Many Partner

Bottom line: Unicom’s mixed-ownership reform plan could prove a dud if it chooses too many partners, which looks likely based on the latest reports.

Unicom eyes too many cooks for pilot plan

I haven’t written for a while about a highly anticipated plan to inject some new life into perennial laggard telco China Unicom (HKEx: 762; NYSE; CHU) through a Beijing-led pilot program, even as reports build that an announcement of the mixed-ownership plan are imminent. Those reports include the latest word that an announcement could finally come later this month.

But what caught my eye in this particular report was the number 20, a reference to how many private companies could potentially take part in this plan. That number looks a bit ridiculous to me, and would completely wipe out any potential benefits that Unicom might have received from the program. But perhaps that’s what this laggard carrier wants. Read Full Post…

SMARTPHONES: Xiaomi Comeback Marches On, But Will It Last?

Bottom line: Xiaomi’s rising market share and securing of $1 billion in new financing underscore its nascent turnaround may have some legs, even as its position remains tenuous in the cutthroat market.

Xiaomi unveils latest phone

Former smartphone sensation Xiaomi is in several headlines as we head into the close of the week, all of which seem to underscore that its nascent rebound may have some legs. But as anyone in the industry will tell you, any smartphone maker is really only as good as its last model these days, meaning fortunes can quickly turn with just one misstep. The smartphone sphere is littered with such examples of such missteps that ultimately led to corporate downfalls, including Samsung (Seoul: 005930), as well as former giants Nokia (Helsinki: NOK1V) and Motorola.

That said, Xiaomi is a slightly different case from that trio, since its initial rise to fame was really almost exclusively based on hype and savvy marketing rather than any cutting-edge product. The company is trying to correct that problem now by improving its product lineup, including the unveiling of its latest phone and upgrades to its own operating system. At the same time, media are reporting the company has received a new $1 billion loan, meaning banks still have some confidence in the firm, even if investors are skeptical. Read Full Post…

INTERNET: Whatsapp Goes Spotty in China, Headed for Shutout?

Bottom line: China’s apparent partial blockage of some Whatsapp functions for brief periods is unlikely to end with a total blockage, mostly because the service is used almost exclusively by foreigners.

Whatsapp temporarily blocked in China

Foreign media are buzzing about what appears to be the blockage of some functions on Whatsapp, with the obvious implication that a full blockage of the the popular instant messaging app could be next. This particular story has a few interesting angles, led by the fact that Whatsapp isn’t used by very many Chinese and also that it’s owned by social networking giant Facebook (Nasdaq: FB).

There are a also a number of precedents to go by, none of which looks too positive for the future of Whatsapp. Just about every other major global social networking app has been blocked in China by now, including Facebook itself, as well as Twitter (NYSE: TWTR) and Japan-listed Line (Tokyo: 3938). But there are a few notable exceptions that have been allowed to keep operating in China, one of which is Whatsapp and two others being the Microsoft (Nasdaq: MSFT) owned Skype and LinkedInRead Full Post…

CHIPS: Chinese Buyer Makes Last-Ditch Effort at Lattice

Bottom line: Lattice Semiconductor’s sale to a Chinese buyer stands a 50-50 chance of getting national security clearance, benefiting from warming ties between the US and China and lack of defense-related technologies involved.

Lattice still trying to sell to Chinese buyer

More than a year after it first became an acquisition target for chip-hungry Chinese buyers, Lattice Semiconductor (Nasdaq: LSCC) is back in the headlines again with what looks like a last-ditch effort at salvaging a sale. Lattice is clearly a mid-sized maker of microchips that fits the profile of what Beijing would like to buy, with a market cap of about $840 million, as China tries to build up its own semiconductor sector that can compete with global giants like Intel (Nasdaq: INTC), Qualcomm (Nasdaq: QCOM) and TSMC (Taipei: 2330).

But western governments are wary of China’s aggressive ambitions, which include generous funds for M&A of Asian and western chip makers. A deal first announced more than a year ago saw one of the most aggressive buyers, Tsinghua Unigroup, buy a small stake in Lattice, but then fail to parlay that into an outright acquisition. Now another group, Canyon Bridge Capital Partners, is getting ready to make a third appeal for its plan to purchase Lattice in a filing to the regulator that reviews such deals for national security considerations. Read Full Post…

SMARTPHONES: Lenovo Eyeing CEO Change?

Bottom line: Yang Yuanqing is likely to cede his CEO title at Lenovo to recently returned executive Liu Jun soon, which could be followed by more risk taking and big changes to the company’s lackluster smartphone unit.

Lenovo’s Yang set to cede CEO title?

I used to make fun of mobile carrier China Unicom (HKEx: 763; NYSE: CHU) for its never-ending management reshuffles, but now the more respectable Lenovo (HKEx: 992) is quickly taking that title with its own series of nonstop personnel moves in a bid to right its sputtering ship. What’s interesting to note is that the series of moves are gradually creeping their way to the top of the company, meaning they could eventually unseat chief Yang Yuanqing, which is what I’ve been calling for all along.

This latest move would certainly be the highest yet, and follows Lenovo’s announcement last month of the reorganization of its China region that accounts for more than a quarter of its business. (English article) One part of that overhaul saw the return of former executive Liu Jun to the company to take a top position, and if the latest reports are true Liu could soon take over Yang’s title as company CEO. Read Full Post…