Thursday Tech Briefing: ZTE, Ofo, Xiaopeng
BIG TECH COMPANIES
1. U.S. Signs Off on Last Part of ZTE Deal
What: The U.S. Commerce Department has signed the escrow agreement with ZTE Corp. that could soon end the ban against the Chinese chipmaker purchasing parts from U.S. suppliers. As part of a settlement with the U.S. government, the U.S. will lift the ban after ZTE completes a $400 million escrow deposit.
Why it’s important: On June 7, ZTE agreed to comply with U.S. requests that the company overhaul its top management, accept a new 10-year suspended denial order, pay a $1 billion fine and put another $400 million into an escrow account that can be used for future penalties if it fails to uphold the settlement terms.
Last week, the company named new senior executives, days after replacing its entire board, which was one of the conditions of the agreement. The U.S. Commerce Department has temporarily authorized ZTE to resume maintaining its core operations from July 2 through Aug. 1.
Big picture: Despite ongoing trade conflict between China and the U.S., ZTE, one of the current conflict’s earliest victims, could soon resume full operation after facing tough penalties and a strict compliance regime. However, some members of the U.S. Congress are attempting to pass legislation reinstating a harsher, earlier version of the ban on ZTE. (Source: Statement from U.S. Department of Commerce)
2. Bike-Sharing Giant Ofo Puts Asia Expansion in Reverse
What: Bike-sharing giant Ofo plans to slim down its Asia operations to four overseas markets — Japan, South Korea, Hong Kong and Singapore — as it focuses on its most promising areas in a bid to become profitable, a knowledgeable source told Caixin.
Why it’s important: After raising and spending hundreds of millions of dollars in cash, Ofo and rival Mobike must now face impatient investors who want them to find a sustainable business model. Ofo, founded in 2015, has come under even more pressure following the acquisition of Mobike earlier this year by Meituan-Dianping, China’s largest online-service platform.
Big picture: Ofo and other bike-sharing companies have revolutionized the shared-bike industry by using technology that allows subscribers to pick up and unlock bikes anywhere they can find them, and then simply lock them anywhere when they are finished. (Source: Caixin)
3. Analog Devices Collaborates With Baidu on Autonomous-Driving Project Apollo
What: Analog Devices Inc. (ADI), an American semiconductor company, announced that it has signed a collaboration memorandum of understanding with Baidu to jointly develop technologies including radar and digital signal processing for Project Apollo, Baidu's autonomous driving system platform.
Why it’s important: Apollo has been the core platform of Baidu’s AI strategy. Apollo has teamed up with more than 100 partners, including BMW, BYD, etc., since Apollo was launched in April 2017. (Source: Company press release)
4. Espionage Suspect is ‘General Employee,’ Says Xiaopeng Motors President
What: Xiaopeng Motors (XPENG), a Chinese electric car startup, said it is cooperating with a U.S. investigation into one of its employees, who has been charged with stealing trade secrets from his former employer, Apple Inc. Zhang Xiaolang, the U.S. suspect, is a “very general technical employee, not any technical director,” Xia Heng, president of Xiaopeng Motors, told Caixin. Xiaopeng Motors said in a statement that it had no knowledge of Zhang’s alleged espionage activities, and was not involved in any way.
Why it’s important: The U.S. Federal Bureau of Investigation (FBI) charged Zhang with theft of trade secrets from Apple, where he previously worked on a secretive program to develop autonomous vehicles. Only 2,700 of Apple’s over 135,000 full-time employees had the same access as Zhang, according to a FBI criminal complaint filed in a U.S. federal court.
Zhang was arrested at San Jose International Airport in California on Saturday while he was attempting to board a plane to China. Zhang could face up to 10 years in prison and a $250,000 fine if convicted.
Big picture: Founded in 2014, Xiaopeng Motors is backed by investors that include Alibaba Group Holding Ltd., Foxconn Technology Group and IDG Capital. Zhang’s arrest comes amid accusations of Chinese companies stealing American intellectual property, and a growing trade war between China and the U.S. Major Chinese wind-turbine maker Sinovel was recently convicted of stealing trade secrets from U.S.-based AMSC, and must now pay over $50 million in compensation. (Source: Caixin, link in Chinese)
5. LG Display Gets China Approval for High-Tech Display Plant
What: South Korea’s LG Display Co. Ltd. said the Chinese government has approved its 5 trillion won ($4.5 billion) investment to produce advanced display-panels in Guangzhou.
LG Display is setting up a joint venture with the Guangzhou Economic and Technological Development District to churn out organic light-emitting diode (OLED) displays, which are more energy-saving and bendable compared to the liquid crystal displays (LCDs) currently used in most display screens. LG Display will control a 70% stake in the joint venture.
Why it’s important: LG Display had announced such a plan in July 2017, but Seoul gave the green light only in December on the condition that the electronics giant be allowed to keep its advanced technology secret and ensure that hiring decisions remain in South Korea’s national interest.
Big picture: LG Display is the world’s top LCD-maker for televisions, and manufactures nearly all large OLED screens for televisions globally. It is currently the only company capable of commercially producing large OLED panels, which are used in TVs and expected to eventually replace LCDs. Competitors Samsung Group and China’s BOE Technology Group Co. Ltd. also produce OLEDs, but only at smaller sizes suitable for smartphones and tablets. (Source: Caixin)
DEALS AND FUNDRAISING
6. Pony.ai Raises $102 Million to Advance Autonomous Driving
What: Chinese autonomous driving startup Pony.ai announced that it has raised $102 million in an A1 financing round. Investors include ClearVue Partners, Eight Roads, Sequoia Capital China, and Morningside Venture Capital.
Why it’s important: Pony.ai, established at the end of 2016, is becoming the most valuable autonomous driving startup in China, having raised a total of $230 million so far. (Source: Company press release, link in Chinese)
7. Alibaba’s Cainiao Buys Control of Dianwoda
What: Cainiao Network Technology Co., the logistics arm of Alibaba Group, invested $290 million to take control of domestic logistics service startup Dianwoda in another move to expand its delivery capacity.
Why it’s important: The deal follows Cainiao and Alibaba’s investment in the $1.38 billion funding round of leading delivery company ZTO Express in May. Cainiao in June also announced a partnership with Emirates SkyCargo, the freight division of Emirates, to jointly develop a logistics hub in Dubai.
Big picture: With Chinese consumers increasingly relying on online purchases and services that can deliver to their doorsteps, e-commerce giants and logistics enterprises have stepped up efforts to expand their express delivery networks. (Source: Caixin)
Compiled by Ye Zhanqi.
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