Huawei emerges stronger than ever as US sanctions backfire
Huawei and China's tech industry have rallied to fill the gap left by US trade restrictions, and now they're thriving like never before.
Welcome back,
This week’s belated issue comes to you powered by a bank holiday and half a week of late nights thanks to the European football championships.
All kidding aside, this week’s issue is a meaty one with plenty of news around how Huawei is thriving, not simply surviving, from US sanctions; Shein’s incredibly profitable 2023; why India loves quick commerce apps… and the death of India’s Twitter-like service.
We will return, as scheduled, on Monday with another round-up.
Best,
Jon
PS: Follow the Asia Tech Review LinkedIn page for updates on posts published here and interesting things that come our way. If you’re a news junkie, the ATR Telegram news feed has you covered with news as-it-happens.
News in focus
US sanctions didn’t kill Huawei—instead it made it stronger
Huawei is back! The company never went anywhere, to be clear, but it has gone beyond surviving US sanctions to actively thriving. That’s according to a series of news and media articles over the last week.
The Economist analysed how America’s moves to cripple the firm by banning access to US-originated technology, and particularly chipsets, has actually made Huawei less vulnerable. That’s because China Tech Inc has rallied to fill the void
Huawei replaced some 13,000 foreign-produced components that exist in its devices with others made in China, in some cases it had to step up and develop them itself as alternatives didn’t exist.
It developed new operating systems for its smartphones and laptops—that’s HarmonyOS—and even more obscure tech such as its own ERP (enterprise resource planning) software as Oracle was prohibited from working with the firm.
Rather than kill it, this resilience has galvanised Huawei and made it immune to future US insurgencies. “If Huawei was a worry when America first declared war, it is a bigger one now,” wrote The Economist.
Related links:
HarmonyOS unseated Apple’s iOS to become China’s No 2 mobile operating platform
Huawei may begin taking an Apple-like cut off in-app purchases on HarmonyOS such is its confidence in its market share and ability to compete
YMTC, China’s top memory chip maker and one of the suppliers which stepped up to help Huawei with parts, is seeing rising domestic demand as local firms step into the void left by US sanctions that impact firms beyond Huawei
The machinations of “India’s Twitter”
Koo, a startup once heralded as ‘India’s Twitter,’ is struggling to stay alive. Rest of World reported that the company is seeking partnerships or deals to keep it afloat because it has been unable to raise new funds. The firm has been looking for that elusive partner for close to a year now, indicating that things aren’t good at all.
The service racked up an impressive 60M downloads having burst on the scene in 2020 as one of a number of domestic-focused social media services in India, alongside peers like ShareChat, a unicorn that was backed by Google and Twitter among others. Buoyed by growth from the pandemic, it set a course for international growth but launches in Brazil and other markets failed to gain traction.
Koo raised around $60M from investors—albeit a more modest valuation of just under $300M— but last year it cut costs significantly with layoffs impacting around one-third of its staff. A steep drop off in users, makes its future in its current guise look very uncertain.
Quick commerce thrives in India despite struggling in other countries
Reuters looks at how India got hooked on 10-minute grocery apps like Swiggy, Zepto and others. While US e-commerce giants prioritise same or next day deliveries, India is a country with a culture of visiting local stores for daily essentials and that’s a habit that quick commerce services have latched onto—reshaping how the country shops and threatening small shops.
Meanwhile, an article in TechCrunch contrasted the struggle of similar services in markets outside of India, where once-thriving startups are retreating, consolidating or shutting down as they seek to make their models more profitable or relevant post-pandemic.
Even though delivery has yet to be profitable in India, there’s generally seen to be huge potential for growth.
India’s e-commerce sales stood at $60 billion to $65 billion last year, according to industry estimates. That’s less than half of the sales generated by e-commerce firms on China’s last Singles Day and represents less than 7% of India’s overall retail market of more than $1 trillion.
Reliance Retail, India’s largest retail chain, clocked a revenue of about $36.7 billion in the financial year ending in March, with a valuation standing at $100 billion. The unorganised retail sector — the neighbourhood stores (popularly known as kirana) that dot thousands of Indian cities, towns and villages — continues to dominate the market
Interestingly, Goldman Sachs believes Blinkit, the quick commerce app acquired by Zomato, is more valuable than the Zomato food business itself. And the flurry continues with DST Global and Lightspeed among the investors that will reportedly join a new round for Zepto, which would take its valuation to $3B.
Shein doubles profits but walks US-China tightrope
Impressive finance figures for Shein emerged as the e-commerce firm moves closer to an IPO in London.
The Information reported 40% growth in 2023 as revenue reached $32.2B last year—beating European rivals Zara and H&M. Net profit doubled to reach $1.6B, while net profit margin grew from 3.5% to 5%. Those numbers are sure to be a boost to prospective investors—the firm is already pursuing new revenue streams and boosting its infrastructure to cut delivery times.
The fast fashion startup is trying to build warehouse capacity to cut delivery times. Shein’s ability to convince investors that it can continue to grow beyond its fast fashion market will determine its valuation as it prepares to go public. Analysts have said the company needs to adapt its business model of shipping clothes directly from factories in China to take on Chinese rival Temu and Amazon.
But a bigger issue may be geopolitics—a common theme for us here at ATR. In its most recent episode, the fast-fashion retailer raced to hide remarks by its chair that claim it is essentially an “American company.” Those comments were part of its efforts to distance itself from its Chinese roots, but at the same time Shein must maintain relationships in China, and with the Chinese government, if it is to go public. That’s a tough tightrope to walk.
China
The US is considering further restrictions on China’s access to chip technology used for artificial intelligence, targeting new hardware that’s only now making its way into the market ink
These new restrictions could deny China access to chip making services from TSMC, Samsung and others link
US AI startups are relocating their China-based engineers as part of the ongoing US-China tech battle link
One example is two-year-old Opus Clip, whose generative AI video-editing tool allows creators like Scott Galloway to turn longer clips into TikTok-like shorts. The Sunnyvale, Calif.–based startup is relocating its China-based engineers to Canada and Singapore, according to an employee and an investor who spoke to company leaders. And HeyGen, a Los Angeles–based startup that uses AI to generate avatars and voices for videos, earlier this year began to move its China-based engineers to Canada, according to people with direct knowledge of the relocation. Those who didn’t want to accept the Canada-based jobs resigned, they said.
It isn’t just TikTok, a new breed of Chinese AI social media apps are seeing demand rise in overseas markets link
Ant Group spent a record $2.9B on research last year as the fintech giant increased its investment in technology including AI link
The new breed: PDD founder Colin Huang and ByteDance’s Zhang Yiming top China’s tech rich list link
Didi’s 2021 US IPO upset Chinese regulators to the extent that it was forced to delist less than a year later, but now the firm is wooing investors, including those in the US, as it plans a new IPO this time in Hong Kong and as soon as next year thanks to improved business performance and improved relations with Beijing link
EV maker Xpeng’s flying car takes first flight in Beijing in step towards commercialisation link
Tencent plans to ban digital hosts powered by AI on its live-streaming commerce platforms, as Beijing tightens controls over AI-generated content link
India
Oyo, once valued at $10B, is close to raising new funding at a lower $2.5B valuation link
Paytm is in talks with Zomato to sell its movie and events ticketing business, sources say, as it carves a revival strategy link
Tata Group is in talks to acquire a majority stake in the Indian unit of Chinese smartphone maker Vivo link
We’ve seen tech giants investing billions of dollars into Southeast Asia, Japan and elsewhere but they are preparing even larger investments in India link
Microsoft has committed about $3.7bn to India’s southern state of Telangana, local officials have said. According to Structure Research, the tech giant has acquired land in India for the construction of data centres that would add 660 megawatts of IT capacity — equivalent to the annual electricity needs of about half a million European households. Amazon, meanwhile, plans to invest about $12.7bn in cloud infrastructure in India by 2030.
Wealth management company 360 One acquired mutual fund app ET Money for $44M link
Battery swapping service Battery Smart raised $65M at a $340M valuation link
An Indian court has halted Byju’s second rights issue as its $200M fundraise falters link
Engineering hardware startup Ethereal Machines raised $13M led by Peak XV Partners and Steadview Capital link
Southeast Asia
Vietnam’s state postal service claims it has restored its systems following a cyberattack link
Beijing has fallen behind Singapore in a global startup ecosystem ranking amid US-China tech war link
ByteDance is slashing about 450 jobs, or 9% of staff, at its Indonesian e-commerce arm in the first round of cuts since combining its TikTok Shop with local rival Tokopedia link
Indonesia has threatened to shut down X, formerly known as Twitter, after it updated its policies to permit adult content link
Three out of Vietnam's five active international undersea internet cables were down over the weekend, marking the second major round of outages in the country in just over a year link
South Korea
Terraform Labs, the company behind disgraced crypto products Terra and Luna, reached a $4.47 billion civil settlement with the SEC after being found liable by a jury for defrauding investors who lost an estimated $40 billion when they collapsed in 2022 link
Naver's Webtoon Entertainment is aiming to raise as much as $315M at a $2.67B valuation from its upcoming US IPO link
Samsung is combining two North America-based AI research centres with ex-Apple exec leading the initiative link
AI chip developers Rebellions and Sapeon may merge, according to Sapeon parent SK Telecom link
Samsung says its contract manufacturing business plans to offer a one-stop shop for clients to get their AI chips made faster link
Google and Apple are among the tech firms ordered to pay small fines for allegedly violating a clause on disclosing its policy on location data link
Samsung is leading a round of at least $300M in Tenstorrent, a Toronto-based AI chip company helmed by Jim Keller, an Apple and Tesla veteran—the deal valuation is $2B and LG may join link
Japan
A data leak has led Japanese officials to demand that South Korea’s Naver reduces its 50% ownership stake in Line Yahoo, a $20B venture conceptualised by SoftBank founder Masayoshi Son, on security grounds link
Japan's parliament enacted a law to promote competition in smartphone app stores by restricting Apple and Google from limiting third-party companies from selling and operating apps that compete directly with their platforms ink
SoftBank developed voice-altering technology to protect call centre from customer harassment and psychological burden by changing the voices of complaining customers to calmer tones link
A Japanese smartphone app is using AI to tell cat owners when their pet is feeling pain—the goal is to cut down on the guesswork of when it is necessary to go to the vet link
Sakana AI, a Tokyo-based large-language model developer, is raising around $100M co-led by New Enterprise Associates and existing investors Lux Capital and Khosla Ventures—the round would value the company at around $1B link
The rest of Asia
Amazon is continuing its spend spree after pledging to invest billions of dollars in Taiwan over the next 15 years to build data centres, the latest global technology company to boost its footprint in Asia to meet the region’s growing cloud-service demand link
Hackers allegedly based in Pakistan used Android-based malware during a six-year campaign targeting India’s government as well as Indian companies connected to the defence and technology sectors link
Sanctions are not applicable because they do not operate in the same region. The target users are also different. The technological gap between the United States and China is not that significant; the main difference lies in the semiconductor sector.
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