Tuesday Tech Briefing: Qualcomm, SF Express, Megvii

DEALS & FUNDRAISING

1. Qualcomm-NXP Deal Faces Moment of Truth With China ‘Yes’ or ‘No’

What: Chinese government agencies have already signed off on Qualcomm Inc.’s $44 billion purchase of Dutch supplier NXP Semiconductors NV, nearly two years after the acquisition was announced, sources told Bloomberg. Qualcomm is now waiting to see if political leaders will give the deal their final approval, amid rising trade tension between the U.S. and China.

Why it’s important: Both companies operate in China, so the deal requires approval from the country’s government, which is the last remaining obstacle now that shareholders and other governments have given the deal the green light. If the deal falls apart, Qualcomm will have to pay NXP a $2 billion breakup fee.

Big Picture: China’s decision on the deal may be affected by the U.S. government’s earlier action against Chinese telecommunications company ZTE Corp., which was temporarily banned from purchasing American components and faced demands including replacing its top management and paying a $1 billion fine. (Source: Bloomberg)

2. SF Express Gets Warm Welcome in Offshore Bond Market

What: Chinese courier company SF Express Co. Ltd. said its $500 million offshore bond was oversubscribed sevenfold by global investors including Manulife Financial Corp. and China Life Insurance Co., reflecting warm market reception for the fast-growing logistics giant.

The five-year bonds were priced for an annual yield at 4.125%, and will be traded on the Hong Kong Stock Exchange.

Big Picture: Logistics businesses are booming in China, reflecting the rapid growth of the world’s largest e-commerce market. SF Express is the first Chinese logistics business that has tapped the overseas bond market. Amid heated competition at home from rivals including Alibaba-backed Cainiao Network Technology Co. and ZTO Express, SF Express has stepped up efforts to expand its network globally. (Source: Caixin)

3. Alibaba Joins $600 Million Round for AI Startup Megvii

What: Alibaba is said to be joining facial recognition startup Megvii Inc.’s latest funding round, which will raise at least $600 million. Other potential investors include Boyu Capital. People familiar with the case said this round of funding will be closed within weeks.

Why it’s important: Megvii is one of China’s hottest artificial intelligence start-ups, attracting backers including Alibaba affiliate Ant Financial and one of Chinas’s largest state-backed venture funds. Alibaba has also invested in Megvii’s rival SenseTime.

Big Picture: Facial recognition technology has also attracted interest from the Chinese government, which hopes to apply it to surveillance and security systems. (Source: Bloomberg)

POLICY

4. Government Grants Mobile Virtual Telecom Network Licenses to 15 Companies

What: The Ministry of Industry and Information Technology, after a five-year trial period, has granted licenses allowing a first batch of 15 companies to run mobile virtual telecom networks in China.

Why it’s important: Mobile virtual network operators (MVNOs) do not own the networks over which they provide services but instead lease capacity from the traditional players. The new licenses are part of a push by the government to open up the Chinese telecom market, which is currently dominated by the “big three” — China Mobile, China Unicom, and China Telecom. (Source: Caixin)

5. Kunming to Close Door to New Bike-Sharing Firms

What: Kunming, the capital of Yunnan province, will allow no longer accept permit applications from bike-sharing firms from next month, as existing operators have already exceeded the city’s capacity.

Why it’s important: The rise of the app-based bike-sharing industry has caused problems for Chinese cities, including traffic jams and the loss of parking space due to improperly parked bikes. Other cities have also tightened rules for bike-sharing companies, with Hangzhou removing at least 80,000 bikes from the street since May.

Big Picture: Bike-sharing companies face the challenges of maintaining and managing bicycles, while struggling to turn their businesses profitable. New restrictions on the industry could make it harder for smaller players to survive, while increasing costs for industry leaders Ofo and Mobike. (Source: Xinhua)

BIG TECH COMPANIES

6. Ctrip Seeks Overseas Growth Through Trip.com Brand

What: Chinese online travel services provider Ctrip wants to expand overseas customers’ share of its revenue from from 2% to 20% over the next five years. Ctrip acquired Silicon Valley-based Trip.com at the end of last year, and is using Trip.com as a platform for international expansion.

Big Picture: Ctrip has grown rapidly over the past two decades, boosted by increasing numbers of outbound Chinese tourists, who made 130 million overseas trips in 2017. But global tourists represent a far larger market, making 11.9 billion trips last year and accounting for 6.7% of global GDP. Ctrip currently serves less than 5% of those trips — a percentage the company hopes will grow. (Source: South China Morning Post)

Compiled by Hou Qijiang and Qian Tong