Japan reaps the benefits from US-China tech war

Investments from Microsoft and Google follow resurgence in Japan’s chip industry

Apr 15, 2024

Welcome back,

Hello from Vietnam, this week I took a break from Thai New Year for the first time since I moved here. Songkran is always great fun but I’ve enjoyed getting lost in Vietnam, a country with incredible ambition, plenty of money and a dynamic young population. It has plenty of struggles, too—just last week, a business woman was sentenced to death as part of a $12.5 billion fraud case.

I’ll be back in Bangkok next week for the double header of conferences: Money2020 and Southeast Asia Blockchain Week. If you’re in town, drop me a line. I’ll be around both shows and the many side events happening around them.

We have lots of exciting plans for ATR this year, so if you remain a supporter and regular reader, firstly, thank you—and secondly please do share with friends or colleagues who you think will be interested.

Secondly, MintDefense—my must-have Web3 security app—just introduced a referral campaign. You can use this link to get a 10% discount on the $99/year or $9.99/month plans. Just follow the link and hit register, you can also choose a 30-day free trial. The MintDefense browser extension detects and blocks sites that can steal your crypto and NFTs—a small price to pay for peace of mind—and it is run by a team based in Southeast Asia. (MintDefense is not a sponsor, I am just a happy customer.)

That’s all for this week,

Jon

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News in focus

Japan benefits as the US moves to counter China on technology

Japan is one of the countries that is increasingly enjoying the attention of Western tech firms as they look to diversify away from China with their operations and technology dependence, and this last week saw the money roll in.

Microsoft inked a deal to invest $2.9B towards AI and cloud infrastructure in the country over the next two years. It will set up an AI lab and work to ‘upskill’ 3M people. Amazon and Microsoft have made similar deals across Asia, but this is Microsoft’s biggest push into Japan. Google is also pledging to spend $1B to boost Japan via two new subsea cables that will improve connectivity and the resources that underpin the development of AI and other technologies.

These deals are in the background of a major effort to rebuild Japan’s chip industry, which is exemplified by Taiwanese semiconductor giant TSMC’s effort to develop a chip making hub in the country. The New York Times wrote this week that Kikuyo, once a small farm town, is becoming a key piece as the home to TSMC’s first chip fabricator outside of Taiwan since 2018.

TSMC has received billions of dollars in support from the Japanese government, and now the US government is doing similar. It just awarded TSMC $6.6B in grants and as much as US$5B in loans to help build factories in Arizona. The Biden administration has also given Samsung up to $6.6B to expand its chip making to Texas.

The FT pointed out the missing pieces of Ameria’s AI chip puzzle despite the TSMC bet link

Taiwan Semiconductor Manufacturing Company’s decision to bring its latest technology to America is a big step forward for US President Joe Biden’s quest for security in the vital tech supply chain—but still leaves Washington short of being able to completely produce the most complex chips in the US.
The world’s biggest chipmaker by sales must also pull off an intricate balancing act as it steps up its US presence, satisfying customers such as Nvidia without damaging its highly profitable business model, which has underpinned the development of the global semiconductor industry for more than 30 years.

ByteDance dramas continue

ByteDance isn’t about to go public, and that has caused some issues:

It faces a backlash from US employees over a stock awards programme that blocks them from cashing in their shares while leaving them exposed to a large potential tax bill, according to interviews with more than a dozen current and former workers link

But ByteDance has extended its employee share buyback program to non-US workers: offering nearly $171 a share as US employees grow concerned about tax bill on unsold stock link

Business, though, is booming with the company’s profit surging roughly 60% in 202. Earnings before interest, tax, depreciation and amortization reportedly jumped to more than $40B from about $25B in 2022. The company also grew sales to nearly $120B from $80B. ByteDance denied the report—though it is reportedly planning to launch (another) Instagram rival while its AI for kids homework has surged in popularity

Elsewhere, ByteDance stands accused of misleading the Central Bank of Ireland in early 2023, after HSBC shut down the company's bank accounts following a money laundering probe, according to an article from The Information:

In early 2023, Irish banking regulators contacted ByteDance with a pointed question: Why was the Chinese internet giant and parent company of TikTok moving large sums of money, likely in the tens of millions of dollars, out of its HSBC bank accounts? ByteDance officials quickly sought to assuage their concerns by telling the Irish regulators it was simply moving the money for “liquidity management purposes,” jargon for money transfers designed to ensure the company had plenty of cash on hand.
In reality, that was not what sparked the transfers. Instead, the company had been forced to move the money because HSBC had shuttered its accounts after it discovered deficiencies in the money-laundering controls at ByteDance’s payments division, according to an internal ByteDance presentation to staff and former employees. The UK-based bank had scrutinized ByteDance’s controls after a Turkish regulator had raised its own concerns about large sums of money moving through TikTok but going to just a handful of user accounts.

Carro revs towards IPO at higher $1.5B valuation

We know Carsome is looking to go public, and its rival Carro is doing the same, too.

Valued at over $1B since 2021 when it was backed by SoftBank’s Vision Fund, Carro is now reportedly closing in on a $100M-plus round that would value it at up to $1.5B and serve as a precursor to an IPO.

Jack Ma Alibaba turnaround

Alibaba’s turnaround is being masterminded by its original co-founders. Jack Ma stepped into the limelight last week as he jumped into an internal Alibaba forum with a rare semi-public message of support for the reformation process that’s underway. The moral-boosting message urged staff to embrace change, prepare for the impact of AI on e-commerce and more.

Still, critics argue that Alibaba will struggle to knock Temu and other rivals from the top perch where they now sit—even though Ma’s involvement and occasional missives still rally the stock price. Put simply: e-commerce has changed since he left the business, it is certainly far more complicated than it was before. Its core bet remains a better shopping experience, AI and overseas growth.

Alibaba also made moves in other key areas last week:

Launching a major campaign of subsidies for Aliexpress brand and merchants
Its AI narrowed the gap with Baidu’s Ernie Bot
And Alibaba Cloud cut prices again, this time for international customers

China

Chinese walkie-talkie maker Hytera to appeal against US global sales ban, sanctions it claims are ‘harsher’ than actions against Huawei link

Didi and RV maker GAC Aion plan to mass produce robotaxis next year link

US Senators have proposed plans that will boost efforts to stop the shipment of US chips, AI and quantum tech to countries like China, Russia, Iran and North Korea link

Chinese firms that are helping the country’s military get AI chips have been added to a US export blacklist link

Meanwhile, China is pushing to cut American chip makers out of the country’s telecoms systems—the move to phase out foreign processors that are core to their networks by 2027 would hit American chip giants Intel and AMD link

Blizzard Entertainment’s top games—including World of Warcraft, Overwatch and Diablo—will return to China after an 18-month gap after it struck a deal with NetEase link

Huawei is building a massive semiconductor equipment research and development center in Shanghai to beef up its chip supply chain link

Huawei says it will start selling PCs powered by Intel's AI chip — MateBook X Pro features HarmonyOS and Pangu LLM, both developed in-house link

Thousands of Chinese victims of an investment fraud are calling on Beijing to seek the return of more than £3B worth of bitcoin seized in the UK link

Unauthorised third party accessed Chinese-owned Dutch chipmaker Nexperia servers in March—RTL Nieuws reports customer data from Apple, Huawei stolen link

India

Indian ride-hailing giant Ola has quit the UK, Australia and NZ in an international pullback (I’d forgotten it was active overseas) link

Avendus, India’s leading investment bank for venture deals, is looking to raise $300M for its private equity unit link

Cornerstone Ventures launches second fund with $200M link

Filter Capital hits final close of $96M maiden fund link

Apple now makes 14% of its iPhones in India after it doubled production over the last year to reach $14B devices produced in the last financial year Link

Pegatron is in advanced talks to hand over control of its only iPhone manufacturing facility in India to the Tata Group link

Neysa, a Mumbai-based AI cloud and platform-as-a-service startup, raised $20M link

EV fleet management startup Zypp is close to raising $40M at a $300-350M valuation link

WhatsApp is testing Meta AI, its large language model-powered chatbot, in India link

OnePlus is facing multiple grievances against its India operations, from profit margins to warranty and service claims link

Southeast Asia

Singapore is reportedly losing shine as Southeast Asia base for multinationals—companies are maintaining a presence in Singapore but moving some operations elsewhere link

Streaming content producers in Southeast Asia are facing a very different, much quieter landscape to the one in front of them just 12 months ago—as US players rein in their spending to appease shareholders, and neighbouring countries such as Korea, Japan and India draw attention link

Southeast Asian students are heading to Taiwan to train for semiconductor jobs, which is helping to fill a talent gap at the world’s top producer link

Malaysian 'Silicon Valley' seeds homegrown chip startups - Former Intel engineers attempt to push Penang to higher end of value chain link

Taiwan

UK fintech TransferGo raised $10M from Taiwan-based investor Taiwania Capital, with a view to expanding into APAC link

TSMC’s sales surge most since 2022 after riding AI chip boom link

Taiwan’s ACE Exchange founder David Pan among seven indicted in $10.7M fraud case link

Foxconn is considering introducing a rotating chief executive system in a major overhaul of its management structure designed to nurture future talent link

Micron flags hit to its DRAM supply from Taiwan earthquake link

South Korea

Montenegro’s Supreme Court has overturned its earlier decisions to extradite Do Kwon to South Korea—that means the Luna/Terra co-founder could be shipped to the US on fraud charges link

South Korea will invest 9.4 trillion won ($6.94B) in AI by 2027 as part of efforts to retain a leading global position in cutting-edge semiconductor chips—the announcement, which also includes a separate 1.4 trillion won fund to foster AI semiconductor firms link