Bottom line: Tsinghua Unigroup’s pending purchase of a controlling stake in H3C could mark the start of a new partnership with HP in routers, but is unlikely to affect its older partnership with Intel in the telecoms chips.
HP eyes router stake sale to Unigroup
Semiconductor company Tsinghua Unigroup was already a name to watch after a string of major deals last year including a tie-up with Intel (Nasdaq: INTC), and now it’s adding to its allure with word of a major new alliance with Hewlett-Packard (NYSE: HPQ). This latest deal would trump the earlier one from Intel in size, and would see Unigroup buy a controlling 51 percent stake of HP’s China-based H3C unit, which makes routers and switches that compete with US giant Cisco (Nasdaq: CSCO).
It’s not completely clear how much Unigroup would pay for the stake, though the amount would almost certainly be more than the $1.5 billion that Intel paid last year for 20 percent of a new company that Unigroup created through its merger of 2 of China’s leading telecoms chip designers. I’m no telecoms expert, but I’ll admit this latest deal is leaving me just a bit puzzled due to the very different natures of the businesses of H3C and the earlier tie-up involving Intel, which revolved around telecoms microchips. Read Full Post…
Bottom line: The absence of Xiaomi and other newer Chinese smartphone makers from the world’s leading telecoms show reflects their focus on emerging markets and limited promotional budgets due to stiff competition at home.
Xiaomi missing at world’s top telecoms show
I’m in Barcelona this week for what has become the world’s biggest annual telecoms show, and thought I’d kick off my coverage with a look at who is attending from China this year. The list contains most of the big names you’d expect, including Huawei, ZTE (HKEx: 763; Shenzhen: 000063) and Lenovo (HKEx: 992), though Lenovo has decided to keep its name off the “made in China” list and is opting to call itself a US company.
But equally noteworthy is who isn’t on the list, at least not as an exhibitor. That list of absentees includes all of China’s newer smartphone makers, led by the fast-rising Xiaomi that has come from nowhere over the last 3 years to become the world’s third biggest brand. Others that aren’t on the list include locally well-known Chinese names Coolpad (HKEx: 2369) and Meizu, which have recently formed tie-ups with major Internet companies Qihoo 360 (NYSE: QIHU) and Alibaba (NYSE: BABA, respectively. Read Full Post…
Bottom line: Mobile data usage will grow by triple-digit amounts this year as telcos boost 4G promotions, while box office growth will start to slow and the ongoing decline in traditional SMS text messaging will accelerate.
Hongbao chatter fuels mobile data surge
The usual rush of Lunar New Year-related data is coming in, painting a mixed picture for traditional and new media. The clear winner in the mix is new media, whose surging popularity helped to fuel a 70 percent jump in mobile data traffic over the holiday period. Traditional movies also performed well, with China’s box office rising 36 percent during the period. It will also come as no surprise that the big loser over the holiday was traditional SMS text messages, whose volume plunged by 25 percent. Read Full Post…
Bottom line: Foreign technology suppliers will complain about new requirements for them to reveal source codes to Beijing for selling to Chinese banks, but will ultimately comply over fears of being shut out of the market.
Beijing to force new security rules on foreign tech
China’s sudden obsession with national security risks posed by foreign technology has taken yet another step forward, with word that Beijing is preparing to place yet more restrictions on foreign firms that supply networking products and services to Chinese banks. As a longtime industry watcher, I need to quickly add my own view that this particular move isn’t really discriminatory against firms like IBM (NYSE: IBM), Cisco (Nasdaq: CSCO) and Hewlett-Packard (NYSE: HPQ), which are likely to feel the biggest effects. Read Full Post…
Bottom line: ZTE’s latest preliminary results show the company may have turned a corner in the second half of last year and could be set for a business rebound if it can maintain focus on key new product and service areas.
ZTE turns corner after restructuring
A new profit report from ZTE (HKEx: 763; Shenzhen: 000063) is painting a cautiously upbeat picture about the telecoms giant as it emerges from a difficult period and tries to reposition itself as a specialist in networked systems and devices that talk to each other. The company’s report that its profit for 2014 nearly doubled from a year earlier certainly looks encouraging, though it probably includes many one-time items that make the figures less meaningful. A comparison with its last financial report from the third quarter is more meaningful and also looks mostly encouraging, showing operating profit and revenue growth were picking up even as net profitability appeared to be slowing. Read Full Post…
Bottom line: China and the west should sign an agreement for telecoms networking equipment trade that creates a transparent and fair playing field for fair trade while protecting national security.
Transparency needed in global telecoms trade
A simmering national security standoff between China and the west involving telecoms networks could soon heat up again, with word that China Telecom, the smallest of China’s 3 state-run carriers, is preparing a bid to build a new wireless network in Mexico. Analysts say the US might object to such a Chinese-run network so close to its borders, fearing it could contain backdoors and other hidden features that might accommodate spying by Beijing.
Similar previous concerns have locked Chinese telecoms equipment makers out of the lucrative US market, and cost leading manufacturer Huawei a chance to help build a cutting-edge broadband network in Australia. Read Full Post…
Bottom line: Telefonica’s sell-down of its Unicom stake presages an exit from the investment next year, ending a decade of failed tie-ups by foreign telcos looking to tap the Chinese telecoms services market.
Telefonica halves Unicom stake
Chinese telco shares may look like a good bet for small investors hoping to profit from company stock gains, but they’re a clear dud for foreign carriers hoping to profit from China’s huge but highly protected telecoms market. That’s my latest assessment following word that Spain’s Telefonica (Madrid: TELF) is further selling down its stake in China Unicom (HKEx: 762; NYSE: CHU), in what looks like a prelude to a complete exit from this problematic investment.
If Telefonica does indeed completely dump Unicom, it would mark the end of a decade-long courtship that saw some of the world’s top telcos invest heavily in their Chinese counterparts. All of those investments ended in divorce, with the foreign carriers selling their shares when they failed to get any strategic benefits from the tie-ups. Read Full Post…
After fraying under a steady stream of disputes over the last 2 years, China-Western trade relations took a much-needed turn for the better last week with new reports showing that Beijing and its major trading partners were taking constructive steps to reduce the tensions. Two reports indicated Beijing will take steps to reduce some of the government support it gives to emerging high-tech industries, addressing a sore spot in its trade relations with the west. Read Full Post…
So much has been written already about the sudden approval of the iPhone 6 in China, after several weeks of unexplained delays, that I thought I would focus on the broader implications of this surprise move in the ongoing war of words between the US and China over cyber security.
I praised iPhone maker Apple (Nasdaq: AAPL) in August for emerging as a voice of reason in this war of words after it decided to use China-based servers for to store some of its local user data (previous post), and it seems like more praise is in order this time as well. Only this time the praise should go to Beijing, for finally taking a break from the cyber security war of words by realizing that companies like Apple are far more interested in doing business than engaging in cloak-and-dagger spying games. Read Full Post…
A trio of headlines are shining a spotlight on a new twist in the brutally competitive smartphone market, where national security is suddenly becoming a major new headache for manufacturers. In one headline, Chinese smartphone sensation Xiaomi is being investigated in Taiwan for national security risks related to the storage of local user data on some offshore mainland Chinese-based computers. In a similar news bit, Beijing is reportedly considering forbidding government workers from using foreign-made smartphones.
And in yet another related story, global smartphone giant Apple (Nasdaq: AAPL) is reportedly finally on the cusp of winning approval to sell its new iPhone 6 in China, following an embarrassing delay that may be related to the cybersecurity issue. Read Full Post…
A rally for shares of China’s 3 major telcos early this week is raising the interesting question of whether an extended uptick is coming for these 3 companies, which are facing several developments that could help to lower costs and boost revenues, raising their profits. Media are citing the newest of those developments, the formation of an infrastructure joint venture between the trio, as the main driver for the Monday rally in shares of China Mobile (HKEx: 941; NYSE: CHL), China Unicom (HKEx: 762; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA). But the bigger story is a number of major factors at play, all of which could help these 3 stodgy state-run firms boost their profits. Read Full Post…
