Friday Tech Briefing: NXP, Huawei, Pinduoduo

BIG TECH COMPANIES

1. NXP to Buy Back $5 Billion of Shares as Qualcomm Deal Fails

What: Dutch chipmaker NXP Semiconductors NV said it will repurchase $5 billion of its shares, after telecom chip giant Qualcomm’s $44 billion bid to buy NXP fell apart when it failed to receive approval from Chinese regulators in time. NXP is set to receive a $2 billion breakup fee from Qualcomm.

Big Picture: Observers see the deal as one of the biggest victims of the trade conflict between China and the U.S. The acquisition was announced in October 2016, but failed to receive Chinese approval by its Wednesday deadline despite having obtained clearance from every other jurisdiction in the world. However, China’s Commerce Ministry said the delay was related to antitrust concerns, and had nothing to do with U.S.-China trade friction. (Source: Bloomberg)

2. Huawei to Raise Minimum Annual R&D Spending to at Least $15 Billion

What: Huawei has raised its minimum annual research and development (R&D) budget to $15 billion, up from its previous minimum of $10 billion. It also said it plans to dedicate 20% to 30% of its budget to basic science research, up from 10% in the past.

Why it’s important: Huawei’s increased spending comes amid a pushback from foreign governments against the company’s technology due to security concerns. Huawei is already among the world’s top R&D spenders, spending 89.7 billion yuan ($13.2 billion) on R&D last year. Google parent Alphabet, the second-highest R&D spender in the U.S., poured $16.6 billion into research last year. (Source: South China Morning Post)

DEALS AND FUNDRAISING

3. Pinduoduo ADRs Soar in Wall Street Debut

What: Chinese group-buying site Pinduoduo made a strong debut on the Nasdaq Stock Market on Thursday, following a $1.63 billion initial public offering (IPO) that was one of the biggest flotations by a Chinese enterprise this year. Its American depositary receipts (ADRs) opened at $26.50 each, nearly 40% higher than the offering price of $19, valuing the company at more than $29 billion.

Why it’s important: Pinduoduo, backed by social media giant Tencent Holdings, is one of the fastest-growing companies in China’s thriving online shopping industry. The company priced its IPO at top of the projected range and was oversubscribed twentyfold.

Big Picture: Pinduoduo is the latest to join a rush of sizable Chinese tech listings this year. By the end of June, 26 Chinese tech companies sold $8.5 billion of new shares through IPOs, including many household names such as video sites iQiyi and Bilibili and online medical services platform Ping An Good Doctor, according to financial market information provider Dealogic. (Source: Caixin)

4. WeWork Steps Up China Growth With $500 Million in New Funding

What: Global shared-workspace giant WeWork has secured $500 million in new funds for its China operation, signaling continued momentum in one of its largest and fastest-growing overseas markets. The funding valued WeWork China at $5 billion, sources close to the deal told Caixin.

Why it’s important: WeWork co-founder Adam Neumann said the infusion of cash will help the company expand. Investors in this round include Trustbridge Partners, Temasek, SoftBank Group, SoftBank Vision Fund and Hony Capital.

Big Picture: A year ago, WeWork announced a funding round of $500 million from Hony Capital and SoftBank for its China business, which now operates nearly 40 locations in three Chinese cities with a combined 20,000 members. WeWork’s largest local rival Ucommune operates more than 100 spaces in dozens of Chinese cities. (Source: Caixin)

5. JD.com Gets Regulator’s Approval for Stake in Insurance Venture

What: E-commerce giant JD.com Inc. has gained insurance regulators’ approval to take a 30% stake in the China arm of Germany-based insurer Allianz SE for 483 million yuan ($71.2 million). The deal will make JD.com the second-largest shareholder in Allianz China.

Why it’s important: JD.com joins other tech behemoths muscling into China’s financial-services sector. Alibaba affiliate Ant Financial Services Group bought a controlling 51% stake in Taiwan’s Cathay Century Insurance Co. in 2016, and Tencent was granted permission to sell insurance products over its popular WeChat app last year. (Source: Caixin)

POLICIES

6. Shanghai Rolls Out Welcome Mat for Silicon Valley

What: A delegation representing Shanghai visited companies including Google, Synopsys, Applied Materials, Tesla, and Intel on a trip to Silicon Valley from July 17 to 20, the Shanghai Municipal Commission of Economy and Informatization said in a statement Thursday.

Why it’s important: The delegation took autonomous cars on test drives during their visit, and one of their main aims was to develop Shanghai’s autonomous-driving industry. The technology is part of China’s “Made in China 2025” manufacturing strategy, and local governments are currently vying for foreign autonomous-car makers to set up shop in their cities. Alphabet’s Waymo is considering opening a China office, but has not decided on a location yet, according to Chinese media reports. (Source: SHEITC press release)

Compiled by Qian Tong and Hou Qijiang