Your Monday Tech Briefing

1. Tencent plans to pour more resources into basic research after ZTE ‘wake-up’ call

WHAT:

• Tencent chairman Pony Ma said in a forum on May 26 that the U.S. ban on American firms selling products to ZTE should be a “wake-up” call for all Chinese Internet companies

• He pledged to pour more resources into basic research, and invest in Chinese semiconductor companies

WHY IT’S IMPORTANT:

• As one of the most valuable companies in China, Tencent can support China’s semiconductor industry by purchasing more chips from local companies

• In April, Alibaba acquired Chinese chipmaker C-Sky Microsystems Co. Ltd. in an effort to increase its chipmaking capabilities. In 2016, Alibaba promised to invest $15 billion over the next five years in R&D

BIG PICTURE:

• The U.S. action against ZTE shows how some of China’s biggest high-tech companies are still reliant on foreign technology despite their own rapid rise

Source: Caixin (link in Chinese)

2. Baidu CEO Unveils New Advertisement-Free Search Engine

WHAT:

• Baidu founder Robin Li said in a speech on May 26 that the company has recently launched a new app named “Simple Search” with no advertisements in its results

WHY IT’S IMPORTANT:

• Baidu has come under fire in recent months for selling listings to advertisers without verifying their claims. A similar practice led to a government crackdown in 2016

BIG PICTURE:

• Chinese internet companies have come under fire in recent years for unscrupulous business practices, including misleading advertisements and selling data without user consent

Source: Caixin (link in Chinese)

PRODUCTS

3. Huaxintong to Ship First ARM-based Server Chip in Late 2018

WHAT:

• Guizhou Huaxintong Semiconductor Technology Co., a joint venture between Qualcomm and the Guizhou provincial government, plans to ship its first ARM-based server chip to Chinese customers later this year

• Earlier this month, Bloomberg reported that Qualcomm was considering an exit from the server chip business, and its server head Anand Chandrasekher has left the company

WHY IT’S IMPORTANT:

• China is worried that almost 99% of its server chips come from Intel, and hopes this joint venture can deliver alternative sources

BIG PICTURE:

• China is worried about overreliance on foreign technology, especially in sensitive areas like computers used in government systems

Source: Official press release

DEALS AND FUNDRAISING

4. China Set to Approve Qualcomm-NXP Deal, in Sign of Easing Trade Tensions

WHAT:

• Chinese authorities will hold a meeting with Qualcomm to discuss its planned $44 billion acquisition of NXP Semiconductors on Monday, people familiar with the matter told the Wall Street Journal

• Approval may come with conditions as Chinese regulators have expressed concerns that the merged company would crowd out domestic businesses in areas such as mobile payment

WHY IT’S IMPORTANT:

• With China’s approval, Qualcomm can finally close the deal with NXP without paying a breakup fee of $2 billion

BIG PICTURE:

• China had been holding up reviews of multibillion-dollar takeovers in response to recent trade tensions with the U.S.

Source: The Wall Street Journal

5. China Internet Giants Place Bets on Hon Hai Unit's IPO

WHAT:

• Baidu, Alibaba and Tencent are becoming strategic investors in Foxconn Industrial Internet Co. (FII). The companies are buying 21.8 million shares each in FII’s listing at 13.77 yuan apiece

• Other strategic investors include Central Huijin Investment Ltd.’s asset management unit, which agreed to buy 58.1 million shares. A unit of China Railway Corp. is buying 43.6 million shares, China Life Insurance Co. is taking 34.1 million shares, and Shanghai Oriental Pearl Group Co. is buying 21.8 million shares

WHY IT’S IMPORTANT:

• FII, a smart factory unit of Hon Hai Precision Industry Co., plans to raise 27.1 billion yuan ($4.3 billion) in the Shanghai listing, which will make it China’s largest IPO since 2015

BIG PICTURE:

• The IPO would be the second major listing to complete an expedited review process begun this year, as part of Beijing’s efforts to list more high-quality companies

Source: Bloomberg

POLICIES

6. China Surveillance Equipment-Maker Hits Back at Proposed U.S. Government Ban

WHAT:

• The U.S. House of Representatives approved a defense policy bill that includes a provision banning U.S. government agencies from using Chinese-made video surveillance equipment or services due to national security concerns

• The bill singled out the world’s largest maker of surveillance cameras, Hikvision, which argues that it is a commercial entity without government ties

BIG PICTURE:

• The bill also mentioned other Chinese surveillance equipment-makers, including radio-transceiver-maker Hytera Communications Corp. and Hikvision rival Zhejiang Dahua Technology Co.

• Chinese technology companies are being singled out for protective actions by the U.S. over concerns their products could contain back doors that may be used for spying

Source: Caixin