Bottom line: Midea could buy another global brand following its purchase of Toshiba’s home appliance business, while hometown rival Gree will also feel pressure to make a small to mid-sized overseas acquisition in the next 1-2 years.
Midea in MOU for Toshiba’s appliance unit
Following several days of rumors, struggling Japanese tech giant Toshiba (Tokyo: 6502) has confirmed it will sell a controlling stake in its home appliance business to Midea (Shenzhen: 000333), extending a fledgling movement by Chinese buyers abroad. The move could pressure other Chinese rivals, most notably Gree (Shenzhen: 000651), to follow in the footsteps of Midea and Haier (HKEx: 1169), which is also in the process of buying General Electric’s (NYSE: GE) appliance business.
From a bigger perspective, this particular trend looks a bit like what happened several decades ago in the older industry for TV sets. That trend saw Asian buyers purchase big western brands in the fading TV industry, with storied names like Zenith and RCA ultimately get gobbled up. Fast forward to the present, when most of those older brands no longer exist or are insignificant, which could hint at what may lie ahead for these new purchases by the Chinese companies. Read Full Post…
Bottom line: The closure of small smartphone maker Dakele marks the latest distress signal from the sector, with one or more larger, more familiar brands likely to close shop within the next 6 months.
The inevitable has finally happened in China’s 2-year-old smartphone wars, with word that a smaller player named Dakele has officially closed shop after running out of money. It’s not completely true to call Dakele the first victim of China’s smartphone price wars, since we saw a steady stream of bankruptcies among component makers that supply the actual brands toward the end of last year.
But Dakele’s closure does mark a major milestone, since it’s the first case I’ve seen of a sizable brand going bankrupt and probably signals more closures in the year ahead. Some of the most likely candidates for such closure, or perhaps purchase by another larger player, include mid-size brands like OnePlus and Smartisan, which have failed to find an audience and are probably losing big money. Read Full Post…
Bottom line: A subdued mood at Chinese high-tech firms’ New Years parties reflects a growing realism that the days of breakneck growth may be over for many, due to stiff competition and a slowing domestic economy.
Subdued mood at Year of the Monkey parties
The Year of the Monkey is still more than a week away, but already online gaming giant NetEase (NYSE: NTES) is taking the prize for most unusual New Year’s party for including sex toys among its cache of prizes during the lottery at its annual bash. Meantime, stumbling smartphone sensation Xiaomi ushered in the New Year with an unusual dose of new realism from chief Lei Jun, who also added a bit of historical revisionism in a bid to cheer up staff at his annual party.
Theses yearly parties are a good indicator of how companies feel about their performance in the previous year, and also offer some insight into their mood going into the year ahead. A media report sums up highlights from some of this year’s biggest parties, which typically bring together hundreds and sometimes thousands of employees at a single event to celebrate the New Year as a corporate “family”. Read Full Post…
Bottom line: Huawei’s move into the US smartphone market looks like a logical and necessary step to consolidating its place as a top global brand, but will require years of major investment to succeed.
Huawei to sell smartphones in US
Riding high on strong momentum from the second half of 2015, smartphone maker Huaweiis aiming to fill the last major black hole in its global footprint by entering the US. The new campaign carries special significance for Huawei, since the company was banned from selling its older networking equipment in the US several years back due to national security concerns from Washington.
The move into the US was just one of many topics that Huawei executives discussed at CES, the world’s biggest consumer electronics show taking place this week in Las Vegas. But it was the move the attracted the most attention due to Huawei’s past frustrations with one of the world’s biggest markets for both networking equipment and smartphones. Read Full Post…
It’s official: the fast-rising Huawei has formally passed the 100 million mark for smartphone sales this year, cementing its place as the world’s undisputed third largest player behind only Apple (Nasdaq: AAPL) and Samsung (Seoul: 005930). In a relatively unusual move for this low-profile company, Huawei is also trumpeting the milestone in a formal press release and forecasting more strong growth for next year.
Huawei has been China’s biggest success story to date in the young smartphone space, gaining rapid momentum over a crowded field of domestic rivals that includes Lenovo (HKEx: 992), ZTE (HKEx: 763; Shenzhen: 000063) and smaller names like Alibaba-backed Meizu. But the company should also carefully watch the case of the stumbling Xiaomi, which was being called a homegrown Chinese version of Apple before it began its recent rapid fall from grace. Read Full Post…
Bottom line: The arrest of a leading private equity executive for insider trading and Jin Jiang’s new fund-raising represent the latest efforts to clean up China’s unruly stock markets and make them more attractive to international investors.
Private equity giant detained for insider trading
I don’t normally write too much about China’s domestic stock markets due to their chaotic nature, but a couple of news items are shining a spotlight on the ongoing major task of cleaning up these unruly venues as they try to become more international. The larger of the 2 stories is making big waves here in China, where the one of the nation’s best-known private equity chiefs has been detained for insider trading. The second item has recently acquisitive hotel operator Jin Jiang (HKEx: 2006; Shanghai: 600574) preparing for a major new fund raising, as it tries to clean up its own financial house in a bid to become China’s first global hotel operator.
Each of these items is quite different, though both are focused on different aspects of cleaning up a domestic stock market that often seems more like the Wild West than a place for serious investors. Share price manipulation is common practice in the market, which is reflected in the insider trading story. The Jin Jiang story reflects the murky relationships that often exist between listed companies and government entities, making it nearly impossible for serious investors to clearly understand a company’s financial health. Read Full Post…
Bottom line: Tsinghua Unigroup could be quietly helping to bankroll Western Digital’s bid for SanDisk, as part of its vision of building a Chinese NAND memory powerhouse that could challenge Samsung.
Unigroup bankrolling Western Digital’s SanDisk bid?
I don’t consider myself a conspiracy theorist, but a sudden flurry of multibillion-dollar memory chip deals all involving Tsinghua Unigroup is certainly catching my attention. Just a day after global chip giant Intel (Nasdaq: INTC) announced a $5.5 billion investment that looked related to Unigroup, we’re seeing yet another similarly large deal that has some indirect ties to this Chinese company linked to the nation’s top science institution, Tsinghua University.
This latest new deal will see hard disk maker Western Digital (Nasdaq: WDC) buy flash memory maker SanDisk (Nasdaq: SNDK) in a cash and stock deal worth $19 billion. (English article; Chinese article) China watchers will recall that announcement of this deal comes just 2 weeks after a Unigroup affiliate paid $3.8 billion for 15 percent of Western Digital. (previous post) I theorized a short time later that Unigroup’s sudden thirst for memory could even prompt it to make a play for storage device giant EMC (NYSE: EMC), which is in the process of being acquired by Dell in a blockbuster deal worth $67 billion. (previous post) Read Full Post…
Bottom line: Cisco’s new joint venture will mostly resell its networking equipment into China, and is unlikely to ease Beijing’s worries that its products could be used by Washington for cyber spying.
Cisco calls on China with new JV
Networking equipment giant Cisco (NYSE: CSCO) has become the latest global tech firm to capitulate to China’s national security paranoia, announcing the formation of a new joint venture with a local partner. The tie-up with Inspur Group is just the latest in a recent string of new China-based partnerships involving big western tech firms. Those companies, whose ranks also include IBM (NYSE: IBM) and Hewlett-Packard (NYSE: HPQ), fear that without such well-connected local partners, they could get locked out of the lucrative IT services market under tough restrictions imposed by a new Chinese national security law.
Announcement of the new joint venture with Inspur marks a major shift for Cisco, which up until now has preferred to do its business in China by itself rather than with a local partner. Cisco’s earlier go-it-alone posture has already come with a high cost it in a country where Beijing prefers to see big foreign tech names transfer technology to local partners. Thus this latest partnership should perhaps help to ease some of that pressure, even though it could ultimately put some of Cisco’s intellectual property at risk. Read Full Post…
A brewing spat between security software giant Qihoo 360 (NYSE: QIHU) and struggling smartphone maker Coolpad (HKEx: 2369) has provided some good entertainment for followers of China’s vibrant Internet sector over the last few weeks. The tale has all the elements of a good trashy romance novel, including a love triangle and vengeful scheming by China’s most famous Internet bad-boy.
But more fundamentally, the tale is also filled with valuable lessons for anyone doing business in China’s high-tech sector, or really in any of the country’s emerging industries where private entrepreneurs are driving the growth. The story’s biggest moral is to be careful when choosing your business partners – a lesson that many private investors have learned over the last 3 decades as China transforms from a socialist system to a market-oriented economy. Read Full Post…
Bottom line: Strong sales growth for Huawei’s Honor brand in the first half of the year reflects the company’s broader accelerating momentum, and could pose a growing challenge for domestic rival Xiaomi.
Huawei’s Honor brand grows in India, eyes US
More new data is showing the growing momentum for smartphone aspirant Huawei, with word that the company’s Honor brand surpassed its sales target in the first half of the year as it prepares to enter the US. The latest numbers continue to portray a surging Huawei, and show how the company is using its traditional strengths in product development and a newer expertise in consumer marketing to overtake big domestic rivals like Xiaomi and Lenovo (HKEx: 992) and also a host of smaller ones like Meizu and Coolpad (HKEx: 2369).
These latest numbers don’t look extremely impressive at first glance, as they show that Honor just slightly surpassed its sales target for the first half of the year. But in the current climate where many companies are missing their targets due to intense competition in China, the ability to not only meet but even slightly exceed a sales target does seem like a noteworthy accomplishment. Read Full Post…
Bottom line: LeTV’s purchase of a major stake in Coolpad is likely to upset Coolpad’s existing alliance with Qihoo, and could lead to a turbulent period that could ultimately see one of the alliances terminated.
LeTV buys into Coolpad
The battle for supremacy in China’s crowded smartphone space has just taken a strange twist, with word that online video superstar LeTV (Shenzhen: 300104) has purchased a major stake in domestic manufacturer Coolpad (HKEx: 2369). This particular move was quite unexpected, as I had written just last week that software security specialist Qihoo 360 (NYSE: QIHU) was the most likely candidate to purchase a stake in Coolpad being sold by the company’s largest shareholder, Data Dreamland.
Coolpad was once one of China’s hottest homegrown smartphone makers, but intense competition drove it to form a joint venture late last year with Qihoo, which contributed $420 million in much-needed cash for its stake in the venture. That led me to believe that Qihoo could make a bid to invest directly in Coolpad and perhaps eventually buy the company outright after Data Dreamland last week announced its intent to sell some or all of its 38.3 percent stake in Coolpad. (previous post) Read Full Post…
