Sophos exposes deep hacking networks in China
Plus: Samsung struggles to ride AI wave, FashionValet deal investigated and more
Welcome back,
This week we’re diving into a web of Chinese hackers, Samsung’s struggle as it tries to avoid missing the AI boom and we have an update from our reporting on Malaysia’s FashionValet, an ATR Original that was published back in August.
That’s all for this recap—we’ll back during the week for another of our Original articles.
Have a great Monday and rest of the week,
Jon
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 or join the community chat here.
News in Focus
Sophos exposes deep hacking networks in China
Now this is a crazy story of how cybersecurity firm Sophos spent 5 years playing ‘cat and mouse’ with Chinese hackers that had repeatedly exploited its software to attack targets that include nuclear energy suppliers, a national capital’s airport, a military hospital, state security apparatus, and central government ministries. The targets were mostly in South and Southeast Asia and said to be carried out by groups known to be sponsored by the state in China.
Essentially, Sophos deployed ‘implants’ on devices it knew were being used by the hackers to spy on their activities. That, in turn, dug up a network of links between academic institutions, researchers, hackers and the Chinese government, as Wired reports:
Sophos' report ties those multiple hacking campaigns—with varying levels of confidence—to Chinese state-sponsored hacking groups including those known as APT41, APT31, and Volt Typhoon, the latter of which is a particularly aggressive team that has sought the ability to disrupt critical infrastructure in the US, including power grids. But the common thread throughout those efforts to hack Sophos' devices, the company says, is not one of those previously identified hackers groups but instead a broader network of researchers that appears to have developed hacking techniques and supplied them to the Chinese government. Sophos' analysts tie that exploit development to an academic institute and a contractor, both around Chengdu: Sichuan Silence Information Technology—a firm previously tied by Meta to Chinese state-run disinformation efforts—and the University of Electronic Science and Technology of China.
Sophos has a full account here.
Now the FBI is seeking further information on the attacks—watch this space for more.
Accused of sleeping, Samsung shares slip $122B from record high
There’s concern in Korea that Samsung slept on the future of AI. The electronics giant looked set to capitalise on the boom with its profits and stock price rising to record highs, but now widespread fear that it has fallen behind rivals SK Hynix (AI memory) and TSMC on chipmaking have seen its share price drop by one-third since those heady record heights in July. That’s a $122B wipeout on its valuation!
To make matter worse, other numbers are slipping:
Its smartphone business saw market share drop from 21% to 18%—while it remains ahead of Apple, operating profit is estimated to have fallen by 30% over that period
Its chip division is the monster profit centre, but it missed expectations with Q3 operating revenue of 3.86T KRW ($2.8B) being some way short of its target of 6.7T KRW.
Finally, because three is a crowd, South Korea’s overall semiconductor production dropped for the first time in a year, in a change that could signal a cooling in the AI boom—Samsung’s semiconductor business saw profits plunge by 40% quarter-on-quarter
Samsung says it is focused on high-end chips and it is making progress on a major supply deal, but it remains to be seen whether that can soothe concerns.
FashionValet deal to be probed after Prime Minister raises concern
We wrote in August about Malaysia-based startup FashionValet’s fire sale and, after the co-founders resigned following public pressure, sovereign wealth fund Khazanah Nasional has been ordered to audit the loss-making investment by the country’s Prime Minister.
The business was sold for just over $2M, as we wrote, having previously been valued at nearly $105M around the time of Khazanah’s investment. That, coupled with the high-profile of its founders, led to criticism from Malaysians who were unhappy at the idea that their tax money had been wasted on the deal.
Startup investments are always going to be tricky for sovereign funds—look at Temasek’s investment in bankrupted crypto platform FTX for a much bigger scandal—and going in at such an early stage is inherently risky.
The reality is that most startups fail. Funds rely on a couple of outlier deals to return huge profits to offset the losses or moderate gains from their less successful deals. Whether there was any corruption involved in the deal is another matter.
Apple is growing its manufacturing footprint in India like never before
Apple has been investing in India for manufacturing for a period of time, and now it is pushing the pedal down further.
The US firm is now reportedly using an India-based facility for the initial manufacturing of the base iPhone 17 for the first time, but primary production of the higher end iPhone 17 Pro remains in China for now, according to a report from The Information.
Tim Cook pledged to increase investment in China during a visit last week. That was picked up broadly by local media, but its progress in India is showing more than ever. Apple’s iPhone exports from India rose by a third in the six months through September to reach $6B. The company is expected to hit $10B in exports from India this year, another first-time milestone, but there are challenges if it is to truly ramp up production from India.
“The choice of an Indian factory for this stage of iPhone development—figuring out how to translate a prototype designed in Cupertino into a device that can be mass produced—highlights the progress Apple has made in diversifying its supply chain to India from China and its confidence in the capabilities of Indian engineers,” writes The Information.
China
Despite the US push to squash Chinese tech development, the rest of the world is increasingly driving Chinese electric vehicles, scrolling the web on Chinese smartphones and powering their homes with Chinese solar panels, writes Bloomberg link
Meanwhile, the US has finalised rules to curb investments in China around AI, semiconductors and quantum information technologies—the proposal was signed by President Biden back in August 2023 and will come into effect in January link
Chinese research institutions linked to the People’s Liberation Army developed an AI tool based on Meta’s open-source Llama model for potential military use, according to a June paper reviewed by Reuters link
Intel invested $300M in a China chip packaging and testing plant link
In response to China’s recent push to build its own space-based military systems, the Pentagon and U.S. intelligence agencies are preparing to invest billions in new low-Earth orbit satellite constellations link
China’s Zhipu AI says its app can use voice prompts to carry out tasks on a smartphone like sending messages, ordering coffee and more link
Skydio, the largest US drone maker and a supplier to Ukraine’s military, faces a supply crisis after Beijing sanctioned the company, blocking Chinese suppliers of critical components, including batteries link
Huawei reported that its revenue rose for the seventh consecutive quarter, driven by strong smartphone demand in China link
The company reported sales of 168.4 billion yuan ($23.7 billion) for the September quarter, up 15.6% year-over-year, based on figures from its parent’s financial disclosure
Net profit dropped 70.5% to 7.79 billion yuan, reflecting possible struggles in chip production as U.S. restrictions challenge China’s 7-nanometer chip capabilities
Temu is to be be investigated by EU tech regulators over the potential sale of illegal products link
No wonder, then, that Temu is said to be considering joining Europe’s anti-counterfeit group link
India
Fintech startup Slice has merged with North East Small Finance Bank, making it one of the few startups to enter India’s highly regulated banking sector link
Reliance is the latest to adopt the rapid delivery model pioneered by Indian grocery startups, as it aims to reduce delivery times from days to just 10-30 minutes—it plans to use its 3,000 supermarkets across 1,150 cities as micro-fulfillment hubs, adapting them for fast deliveries through dedicated in-store kiosks link
Delivery giant Swiggy set its IPO valuation at $11.3B, a 57% discount to rival Zomato’s stock market value—Swiggy remains unprofitable and it is forecast to go public next week link
Swiggy aims to raise $1.34 billion, with $535 million from fresh share issuance and the remainder through existing investor exits. Swiggy, which led India’s food delivery market four years ago and pioneered quick commerce, has since lost significant market share in both segments. In quick commerce, it now ranks third behind Zomato’s Blinkit and Nexus-backed Zepto.
Meesho has become India’s first horizontal e-commerce firm to generate positive cash flow, a pretty major achievement in a space that’s famed for discounts, promotions and losses-for-market-share link
Southeast Asia
Vietnam’s Vingroup is launching a $150 million fund to support tech startups in Southeast Asia with a focus on AI, semiconductors, and cloud computing—it will initially look at Vietnam with plans to expand to Singapore, Indonesia and the Philippines over time link
Sister company and EV maker VinFast is set to receive over $1B from investors led by Emirates Driving link
Indonesia blocked sales of Apple’s newest iPhone 16 and Google Pixel smartphones for failing to meet domestic content and investment requirements. Apple is said to have failed to meet a previously-agreed investment commitment to the country, while Google had failed to source 40% of the components for its device locally, another requirement that the government put into place link
Here’s a nuanced overview from Aulia Masna, an Indonesia-based writer and ATR contributor, writing in the ATR group chat:
TKDN (local content) value requirement for cellular devices has been going up since 2016 from 30% to now 40% and will remain at 40% for the foreseeable future. There’s no plan to push it higher, yet.
Apple has been meeting these requirements by investing in Apple Academies since 2018 and most recently pledged the opening of a fourth location in Bali (other three are near Jakarta, Surabaya, and in Batam). Because the fourth site isn’t operational yet, the government deems the investment unrealized and unwilling to issue a certificate extension until it is or until Apple invests an equal amount before that happens, to match the shortfall which is about $15 million.
Apple is the only phone maker operating in Indonesia that doesn’t manufacture cellular devices in the country. In 2023 85% of all phone imports or 2.4 million units are iPhones. Indonesia manufactures about 50 million units a year (used to be 70 million some years ago)
Tangentially related: Apple does not sell cellular iPads in the country and the only reason the Apple Watch Ultra is available in the country despite being cellular only is because SIM duplication or cloning is illegal here so it’s not possible to have a network connected Apple Watch. Telcos won’t let you share one phone number on different devices using “cloned” SIM or eSIM.
Singapore is seeing deep tech startups emerge in areas like autonomous vehicles, semiconductors, robotics, and pharmaceuticals—despite a funding slowdown, deep tech investment in Singapore grew by 31% in 2023, even as overall investment fell by 20%, according to DealStreetAsia and Enterprise Singapore link
Deep tech made up 25% of total deal value, up from 17% in 2022 and above the 20% global average. Investors were mostly from Singapore and the U.S., with some from Taiwan, Japan, France, and Malaysia. This surge in deep-tech funding helped Singapore jump in Startup Genome's global rankings from 18th in 2022 to seventh this year, making it Asia's top-ranked ecosystem.
Zinc, a wealth management platform focused around financing education that’s founded by former PayU Credit CEO and PaySense founder Prashanth Ranganathan, raised $25.5M link
US Web3 firm Paxos launched a new USD stablecoin with Singapore’s DBS Bank link
Meta criticised Malaysia’s plan to require social media platforms to obtain a regulatory license by January, stating that the proposal lacks clear guidelines link
It’s a familiar story across the region: As e-commerce surges in Vietnam, traditional sellers are struggling to keep up, despite support from the government and industry groups link
GDS Holdings, a major developer and operator of high-performance data centres in China and Southeast Asia, raised $1B for its international data centre unit from investors that include Coatue—it plans to raise a further $2.3B in loans to expand to Malaysia which is planned alongside Hong Kong and Indonesia-based developments. Bloomberg reports the company may consider going public as soon as next year link
Thailand said it approved $2B worth of investments in data centres and electronics, which includes a near-$1B investment from Google parent Alphabet link
Japan
Toyota and NTT plan to invest over $3B by 2030 to develop an AI-based platform to reduce traffic accidents—the platform will use driver data and assistive technology to reduce accidents in low visibility areas, support automated driving and make expressway merging and lane-changes easier link
SoftBank retains about 90% ownership of ARM post-IPO, and CEO Masayoshi Son aims to expand Arm’s role beyond chip designs—SoftBank’s investment in OpenAI, he said, could see the two team up to develop AI-centric data centres to develop ARM’s business model and rival Nvidia link
SoftBank's telecom unit has opened one of Japan’s largest startup hubs, Station Ai, to boost the local startup economy—the location will house 500 startups and 200 partners, including Toyota link
Taiwan
Nvidia, Microsoft, OpenAI and other top players are increasingly relying on Taiwanese firms for chip fabrication and server building, making Taiwan’s stock market Asia’s top performer over the past year thanks to a $400B rally—Taiwanese firms are poised to play an outsized role in an AI market that’s projected to reach $1.3 trillion by 2032 link
OpenAI is reportedly collaborating with Broadcom and TSMC to develop its first in-house AI chip, while adding AMD chips alongside Nvidia to support growing infrastructure needs link
Rest of Asia
China detained a South Korean chip engineer on espionage charges, heightening tensions between Beijing and Seoul link
Hong Kong's government has issued its first guidelines on the “responsible” use of AI, urging financial institutions to establish governance strategies for AI deployment and to provide advisory and training support link