Baidu-Alibaba-Tencent stare down the barrel as China squeezes Big Tech again
BAT look all at sea after regulatory bat-tering
Welcome back and Happy New Year,
I hope you had a great festive break. ATR took a long pause for the holidays and this week’s newsletter is a gentle opener for 2024 with a focus on the struggles of China’s big tech.
Remember when BAT—Baidu-Alibaba-Tencent—was the axis of power? Not so much now. Two FT stories look at the very different struggles of Baidu and Alibaba while Tencent is going through a storm of its own around gaming.
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News in focus
Regulators warned against assault on China’s Big Tech firms
A newspaper that serves as a mouthpiece for the Chinese Communist Party has cautioned regulations to stop erratic moves against big tech platforms after a crackdown on gaming, via a proposition to limit video game spending, wiped billions from gaming company stocks.
According to the Study Times opinion piece, the erratic regulatory behaviour is “a risk and a challenge” for China as its leading internet firms are left further behind their global peers in terms of competitiveness and growth potential.
Big tech seemed to be a Chinese government darling for years, with all manner of startups from e-commerce and payments, to EVs, smartphones, AI and others growing into global businesses. But crackdowns on companies like Tencent, Alibaba, Ant, Didi and others have suggested tension with the growing influence of big tech platforms and products. That, in turn, has economic implications.
The gaming meltdown, which took place over the festive period, has had further impact:
China removed an official at a government body that regulates video games
One of Tencent’s most senior executives, who led numerous moonshot investments worldwide, has stepped down
While Baidu terminated its proposed $3.6B acquisition of live-streaming business JOYY, first announced in 2020, as it would not pass regulatory scrutiny
Baidu in trouble
On that note, Baidu—once a big tech darling in China—is going through tough times.
The FT looks at how the “fallen tech group” is going all or nothing on AI—a sector it has focused on for some time, to give it credit—but there’s plenty of concern internally.
More than a dozen current and former Baidu employees who spoke with the Financial Times said issues with Li’s leadership and company culture had contributed to the group’s difficulty incubating new business lines over the past decade.
They praised Li’s devotion to advancing technology and his work ethic but said Baidu was plagued by a lack of product focus and high turnover especially among its most talented staff — problems that threaten its nascent efforts in generative AI. Some added that Li and his wife Melissa Ma’s joint presence at the company caused issues for subordinates.
On a more positive note, Baidu claims that its Ernie chat bot, a Chinese alternative to ChatGPT, now has more than 100M users.
Speaking of struggling Chinese giants, Alibaba is under the microscope, too, in another FT story.
The e-commerce firm saw younger rival PDD, the parent of Temu, jump past its market capitalization late last year—while Alibaba shares are down a remarkable 75% from all-time highs.
Company insiders and analysts say Alibaba has so far failed in combating aggressive new competitors effectively, keeping abreast of AI developments and capitalising on its strengths in domestic ecommerce to succeed in western markets.
The Financial Times spoke to nine Alibaba employees, who painted a picture of a flailing enterprise trying to chart a new course after canning crucial planks of an ambitious restructuring plan that was supposed to revive its fortunes.
Several Alibaba insiders, who declined to be named, spoke of the confusion that resulted. “Many people do not know what has and has not split,” said one Alibaba employee working across different businesses. “That is until they’ve been fired after their business unit has been spun off,” they added.
Ant has completed the process of removing Jack Ma’s control link
Elsewhere, Ant Group is close to buying Dutch payments firm MultiSafepay at around $200M in its latest push into Western payment markets link
ByteDance appears to be ramping up work in fields well beyond the bounds of social media: Biology, chemistry, natural sciences and pharmaceuticals. The company is recruiting American talent in computational biology, quantum chemistry, molecular dynamics and physics for its “AI for Drug Design” and “AI for Science” teams. link
TikTok aims to grow the size of its US e-commerce business tenfold to as much as US$17.5B this year, posing a bigger threat to Amazon link
Meanwhile, TikTok Shop has increased seller fees and lowered subsidies for some merchants in the US in what appears to be a move, or at least test, of general sustainability link
That comes as a WSJ looks at the struggle of sellers on platforms like Temu, Shein and TikTok Shop who deal with razor thin profits due to broad pricing controls and uncertainty over whether items will sell link
Nvidia is finding that customers in China don’t want the downgraded chips it is selling in response to US export restrictions link
Dutch firm ASML, meanwhile, was forced to cancel shipments of some of its machines to China at the request of the US, weeks before export bans on the high-end chipmaking equipment came into effect link
China’s newly established data administration, an agency created by Beijing to make data an effective production factor, has unveiled a three-year action plan to use the country’s massive troves of information to boost its economy link
China’s robotaxi companies, once darlings, have been force to apply the brakes and seek new monetisation lines as the widespread commercialization remains a distant horizon link
Chinese Premier Li Qiang visited the country’s foremost developer of memory chips, in the latest show of government support for US-sanctioned Yangtze Memory Technologies as the two powers clash over technology link
Early backers of social commerce startup Meesho could reportedly sell shares on the secondary market for a $3-3.5B valuation link
Disney and Reliance have started antitrust diligence on their planned India media merger link
The state of Gujarat is in talks with chipmakers in Japan, South Korea and the United States for investments, its top minister said link
Payment firm Pine Labs and b2b e-commerce firm Udaan are the latest Indian startups to plan a move ‘home’ to India by reincorporating its overseas parent company to India—the moves seems to be in line with IPO plans and regulatory requirements link
Indian financial services startup MobiKwik seeks to raise $84M in India IPO link
Uber is testing flexible pricing service in over a dozen Indian cities link
Vietnam EV maker VinFast is planning to invest $2B in India link
Vietnam is a rare market in Southeast Asia where cash remains king and that’s causing a reported rise in fraud, with drivers paying out of pocket for online cash orders and expecting to be paid back by the customer but often the customer can disappear link
South Korea is the latest country to propose a ban on credit card payments for crypto link
SK Hynix aims to raise about $1B in in a bond deal—that would follow a $1.7B raise last year, its first for a decade, and mark becoming the second largest South Korean company based on market cap link
Korean National Police Agency are investigating a $81M crypto theft from Orbit Chain link
South Korea drew a record amount of foreign direct investment last year in a sign of growing bets on its technology sector, which has become more deeply embedded in global supply chains since the pandemic—around $18.8B flowed into South Korea in 2023, a 3.4% year-on-year increase, with the electronics sector accounting for $3B link
Huobi Korea shuts down its platform citing business difficulties link
Rest Of Asia
A takeover bid from Germany’s Merck prompted JSR, a Japanese chip materials maker, to seek a buyout from a state-backed fund, in a deal that has sparked investor scrutiny on rising government intervention in the country’s semiconductor industry. link
The founder of Taiwanese crypto exchange ACE has reportedly been arrested for alleged fraud link
North Korea crypto hackers stole “at least” $600M in 2023, according to an analyst report, which claims they’ve now nabbed $3B from crypto thefts since 2017 link