Thursday Tech Briefing: June 7

POLICY

Securities Regulator Releases Guidelines for Tech Giants to Issue CDRs

What: The China Securities Regulatory Commission published highly anticipated guidelines for its China depositary receipt (CDRs) pilot program.

Modeled after U.S.-listed American Depositary Receipts for foreign equities, the CDR program will allow for trading in China of shares of overseas-listed Chinese companies.

Why it’s important: Publication of guidelines signals readiness of the CDR pilot, paving the way for overseas listed Chinese tech giants including Alibaba Group Holding Ltd. and Baidu Inc. to trade shares on the domestic market.

Big picture: Expectations on the launch of CDRs have risen since the beginning of the year as regulators seek to invigorate domestic capital markets.

Sources have told Caixin that Baidu, NetEase Inc., Alibaba and JD.com Inc. have been waiting for the release of detailed guidelines while working with sponsors for planned CDR issues as early as the end of June. (Source: Caixin)

DEALS AND FUNDRAISING

Foxconn Industrial Internet to Launch IPO in Shanghai on June 8

What: Foxconn Industrial Internet, a unit of Taiwan manufacturing giant Hon Hai Precision Industry Co. Ltd., will launch its IPO in Shanghai on June 8.

The company, which makes cloud service equipment and industrial robots, also announced that in the first quarter of 2018 it had operating income of 77.695 billion yuan, an increase of 19.78% year-on-year, and a net profit of 2.653 billion yuan, a year-on-year increase of 4.53%.

Big picture: Foxconn’s listing will become the second fast-tracked major offering under Beijing’s campaign to give preferential treatment to companies representing the new economy. In May, drugmaker WuXi AppTec Co. Ltd. made its trading debut in Shanghai, just two months after the securities regulator gave it speedy approval for the listing. (Source: Company Announcement.)

BIG TECH COMPANIES

ZTE Takes Back Bonuses, Disciplines 35 Employees to Meet U.S. Pledge

What: Chinese telecom company ZTE is trying to resolve a seven-year ban from buying U.S. components by sending reprimand letters to 35 current and former employees involved in its illegal sales to Iran.

ZTE also hopes to get back bonuses from these employees, even if some have left the company.

Why it’s important: ZTE suggested the actions under a previous settlement with the U.S. government over its illegal sales of American products to Iran. But it failed to carry through on those actions, resulting in the latest U.S. punitive action that ZTE has called life-threatening.

Big picture: Previously, Reuters reported that ZTE had signed an agreement in principle with the U.S. to lift the export ban. But a U.S. Commerce Department spokesman said no definitive agreement has been signed.

The ban has spotlighted how China’s tech giants are still highly dependent on imported technology. (Source: South China Morning Post)

Huawei Responds to Disclosure that It Received Shared Data from Facebook

What: Facebook Inc. disclosed that it had data-sharing partnerships with four Chinese smartphone makers, including Huawei and Lenovo. The partnership with Huawei prompted particular concerns in the U.S., as Huawei is seen there as a national security threat.

Huawei said in an emailed statement that it never collected or stored Facebook user data but had worked in the past with the social media company to make services “more convenient for users.”

Why it’s important: The U.S. government is worried about Huawei’s access to the user data and Facebook’s consistent failure to inform users how their personal information is used.

Big picture: Facebook is facing a global backlash after a March revelation that information on up to 87 million of its users was given to political consultancy Cambridge Analytica. Facebook CEO Mark Zuckerberg had to go to Washington and Europe to testify after the incident. (Source: Bloomberg)

Alibaba Affiliate Cainiao Forms JV to Build Logistics Center in Hong Kong

What: Alibaba logistics affiliate Cainiao Network said it will form a joint venture with China National Aviation Corp. and delivery company YTO Express to build a logistics center at Hong Kong International Airport for $1.5 billion.

Why it’s important: Alibaba has made a commitment to invest over 100 billion yuan in a logistics network that will complete delivers in China within 24 hours, and within 72 hours globally. The logistics center in Hong Kong is just one of six international logistics hubs the company plans to build.

Big picture: According to Alibaba co-founder Jack Ma, logistics costs currently take up about 15% of China’s gross domestic product, versus around 7% to 8% in countries with more-developed logistics systems. Ma says Alibaba’s investments in the logistics network will help cut this figure to 5%. (Source: South China Morning Post)

PRODUCTS

Huawei Unveils GPU Turbo and Inches Closer to Apple in Smartphone Shipments

What: Huawei Technologies Co. Ltd. said it will ship nearly 200 million smartphones this year, close to Apple’s 200 million to 210 million annual shipments.

The company unveiled GPU Turbo, a new technology it said can boost smartphones’ image processing efficiency by 60% while reducing chip energy consumption by 30%.

Why it’s important: Huawei has been investing heavily in new technologies in the areas of software systems and chips to compete with Apple. The growing shipment numbers seem to show that investment is paying off.

Big picture: Huawei is currently the world’s third largest smartphone maker and one of China’s most successful companies in the area. It is hoping to someday overtake global leaders Apple and Samsung. (Source: China Daily)

Compiled by Zhang Erchi and Zhang Yidi