Inside Alibaba's massive reorg to get competitive (and more)
Inside Alibaba's massive reorg to get competitive (and more)
Asia Tech Review: 3 April 2023
Welcome back,
This week saw Alibaba announce a massive, transformative overhaul to make its sprawling business—which employs nearly a quarter of a million people—more nimble and competitive against younger and founder-led rivals in China.
Elsewhere, Binance is in very hot water in the US where ByteDance is set to launch a new social media app.
We also have long reads on the challenges of being a female ride-hailing driver in Indonesia, why live commerce isn’t translating from a success in China to a success in the US, and much more.
See you again next week,
Jon
Stories in focus
Alibaba disrupts itself with massive reorg to get competitive again
Alibaba announced it will reorganise its business into six units that it says will be run independently in what is the firm’s latest change in its 24 year history. The units are as follows:
Cloud intelligence—principally Alicloud, its fastest growing unit
E-commerce under Taobao-Tmall—it’s most profitable division
Cainiao’s smart logistics operations—another highly-rated vertical that’s reportedly planning to IPO soon
Local services—including food delivery and mapping services
Global digital business group
Digital media and entertainment Group
The move sent Alibaba’s stock—which is down 2/3s from a record high in October 2020—up over 10% based on a number of positive assertions which include:
Fight harder and smarter: Many of Alibaba’s key rivals are founder-led companies tackling single-industries (Meituan in local services; PDD in e-commerce; and J&T Express in logistic, for example) so giving increased business unit autonomy may serve as a counter to this, as Momentum Works notes in an astute blog post which references increased efficiency too.
Regulators: Making the firm appear smaller may appease regulators who have taken Chinese Big Tech to task, including the very publicised take down of sister company Ant Group, which itself has had to split into smaller units to continue on. This change may make Alibaba seem smaller, the FT reported, and grant it a little leeway with authorities—we shall see.
Future profits: Alibaba may consider selling stakes in the units and allow them to chase increased independence through funding (which could unlock strategic partners) and potentially future IPOs—will there be shades of the Yahoo holding company moment in the future…? JD took a similar approach when it span out and listed a number of its business units so this isn’t unheard of. (JD just saw its shares spike after it announced another spinout)
Jack’s (Kinda) Back: Jack Ma is said to have engineered the restructuring from overseas, despite having stepped down as executive chairman of the company in 2019. It perhaps explains why he recently resurfaced in public—initially in Thailand—and paid a visit to China. He pushed for change to make the firm more nimble and competitive, according to the Wall Street Journal’s reporting.
But concern over job cuts: Might Alibaba follow a lot of big tech and make layoffs? Some at the firm told the media they believe it could be so… although markets tend to react favourably, particularly since Alibaba has nearly 250,000 staff on its books.
Binance allegedly allowed terrorists, money laundering and more
Binance is under significant pressure after a trove of documents and internal messages came to light following a lawsuit from the Commodity Futures Trading Commission (CFTC).
“The CFTC alleges that Binance traded in crypto-related derivatives with US-based customers despite not having regulatory permission and despite having said in 2019 that it would no longer serve US customers,” wrote The Guardian.
The case has dragged highly damaging and embarrassing information into the public domain, details from the 74-page document include:
Binance was aware that terrorist groups including Hamas used its platform but senior execs suggested only for small sums of money
Its money laundering reporting officer created fake annual reports
Binance allegedly commingled funds between its entities, which number some 120 according to CFTC
There are plenty of other frankly absurd tidbits and messages between senior execs, including CEO Changpeng Zhao
Unsurprisingly, users withdrew their money in droves. Nansen reported that over $2B left Binance in a week.
TikTok has a new sister app in the US
ByteDance might be under the cosh with TikTok in the US, but that isn’t stopping it from strengthening its roots with creators. The company’s newest app is Lemon8 (screenshots below), the New York Times reports:
“ByteDance, the parent company of TikTok, invites you to become a launching creator on their new Lemon8 platform before it officially rolls out in the United States!” said one of the messages sent to creators last week from marketing companies hired by ByteDance to do the outreach.
The notes and linked materials, which were reviewed by The New York Times, declared Lemon8’s ambition to become a top global social media service and cited the success of its “sister company TikTok.” It added that the platform, which has already been quietly introduced on app stores, used “the same recommendation engine that helps TikTok succeed.” It will initially focus on topics like fashion, healthy food and wellness.
ByteDance’s success has made it one of the world’s top tech firms, and the numbers are making that official.
The Information reported the Chinese firm saw $80B in annual revenue last year, that’s up from $60B in 2021. That’s on par with Tencent—the long-established powerhouse—which had a similar number in its annual report released last month. Insane.
China
President Xi Jinping has launched a charm offensive to convince investors the country is open for business despite recent years of clamping down on big tech and overseas firms in China link
Huawei says it has developed its own chip design tools in a bid to side-step US sanctions—the firm teamed up with other Chinese firms to develop the system to produce semiconductors at 14 nanometers and above link
(The move comes after Huawei reported its biggest profit decline ever as pandemic controls in China also impacted its struggling business link)
Another company looking to bounce back from US export controls is China’s Yangtze Memory Technologies Corp—it expects its new, fully equipped manufacturing plant to begin production in the second half of next year. YMTC has been testing locally made tools over a long period and is now confident enough to rely more on domestic suppliers for replacements link
Meanwhile, China will examine US chipmaker Micron's products for cybersecurity risks link
Two Chinese payment apps are the main winners in Nigeria following a botched currency overhaul—Opay is part-owned by browser firm Opera and connected to a ride-hailing app; rival PalmPay is jointly owned by a device OEM (which pre-installs it on phones) and NetEase link
Disgraced FTX founder Sam Bankman-Fried is accused of conspiring to bribe Chinese government officials to the tune of $40M link
In an effort to revive Huobi, Justin Sun (its new owner) is shifting the focus back to China—that’s included encouraging Chinese crypto traders to apply for foreign citizenship to pass KYC checks, deposit yuan via local bank accounts, and more link (He’s also held talks about selling a stake in Huobi—although the valuation, size of outside investment and any kind of strategic goal aren’t clear yet link)
Live commerce isn’t having the same success in the US that it has had in China—this feels very evergreen link
Activision Blizzard and NetEase’s failure to ink a new partnership saw millions of players lose access to games overnight in January, emphasising the toll of China’s economic crackdown link
Disney Lays Off More Than 300 Streaming-Focused Employees in China as part of broader, company-wide cuts link
Hong Kong
China’s state banks are said to be courting crypto firms in Hong Kong despite the Mainland banning crypto many years ago link
India
Nimbbl, which improves conversions for merchants with 1-click payments, raised $3.5M from Sequoia Capital India and GFC link
Google won partial relief in the Android antitrust case in India link
GitHub reported laid off its engineering team in India, although some media are reporting fewer were let go link
India is said to be hunting for new spyware with a lower profile than the controversial Pegasus system—the government is in talks with surveillance software firms over new bids link
India is considering a related-party services ban which could mean that e-commerce providers will not be allowed to offer their in-house logistics services to merchants on their platform link
Insurtech startup Acko is reportedly near to raising $120M led by General Atlantic, as it gears up to offer life insurance services link
Distressed startup GoMechanic has been acquired by a consortium led by real estate group Lifelong link
PhonePe is said to have called off its plan to acquire buy now, pay later startup ZestMoney over concerns following due diligence—the result could mean the startup is forced to make layoffs link
In official layoff news: Unacademy let go of 12% of its workforce, that’s over 350 roles and it follows a similar downsizing back in November link
Hyperlocal delivery startup Dunzo is in late-stage discussions to raise around $50M link
US investors have slashed the valuations of Byju’s and Swiggy link
BlackRock cut Byju’s—India’s most valuable startup— by nearly half to $11.5B
Swiggy—India’s most valuable food delivery startup—was marked down by nearly $3B to a valuation of $8B by Invesco
Southeast Asia
GPS collars are helping save Sumatra’s last wild elephants link
Rest of World has a deep and dark look into the perils of being a woman rideshare driver in Jakarta—despite flexibility there’s dropping income and physical danger link
Japan
Analysis: How the $15B scramble to bail out Toshiba went from a bang to a whimper link
Japan will restrict exports of 23 types of semiconductor manufacturing equipment in a show of solidarity and alignment with the US moves against China link
South Korea
South Korea passed its ‘Chips Act’ which is aimed at boosting domestic investment from chipmakers—the legislation will nearly double tax credits to 15% for major firms that invest in manufacturing facilities; smaller players can get up to 25% from 16% now link
Indeed, Korea is forecast to overtake China in spending on advanced chipmaking equipment next year in a sign of US export controls reshaping global supply chains for semiconductors. link
Agritech startup Green Labs landed $38.4M in debt financing one month after laying off 70% of its workforce link
Elsewhere in Asia
Facebook broke its own moderation policies in Sri Lanka link
Five-year-old delivery startup Trax, which pioneered startups in Pakistan, raised $3.7M link
North Korean group APT43 has used crypto services to launder stolen currency, according to a new report from Mandiant link
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