Thursday Tech Briefing: Huawei, Baidu, Tesla, Apple
DEALS AND FUNDRAISING
1. Tesla Looks to Chinese Partners for $5 Billion Investment in Shanghai Factory
What: Tesla Inc. may look to Chinese partners for funding for a $5 billion factory it plans to build near Shanghai, sources told Bloomberg. Tesla announced a preliminary deal with the Shanghai government last month to build its first China factory, just days into a trade war that has made it more expensive to import U.S.-made cars into China.
Why it’s important: Tesla, which is yet to turn a profit, has faced criticism from investors for its cash-burning behavior. Securing Chinese funding could alleviate some of the financial pressure on the electric car company. A factory in China, the world's largest electric car market, could help Tesla overcome trade barriers raised by China and the U.S. (Source: Bloomberg)
BIG TECH COMPANIES
2. Chinese Internet Industry Revenue Growth Slows in First Half of 2018
What: Revenues in the Chinese internet industry grew 22.9% from January to June this year, down from the 24.9% growth the industry saw during the same period last year, China’s Ministry of Industry and Information Technology announced Wednesday.
In particular, he information service trades, which include businesses like e-commerce platforms and online games, saw a significant slowdown. Revenue in the information services trades grew 23.3% from January to June, down from 38.7% a year ago.
Bigger picture: China's internet companies face a slowdown in growth after a period of rapid expansion in recent years. Industry leader Tencent has lost $143 billion of market value since January, amid lowered growth expectations. (Source: Government announcement, link in Chinese)
3. Huawei Hums With Steady First-Half Revenue Growth
What: Telecom giant Huawei Technologies Co. Ltd. said its revenue reached 325.7 billion yuan ($47.8 billion) and grew 15% in the first half of the 2018, similar to the previous year, as surging business for its smartphone unit offset slowing sales for its older networking equipment business. The company also said its operating margin for the first half was 14%.
Why it’s important: Huawei has emerged as one of China’s biggest high-tech stars in recent years, and is now the world’s biggest supplier of traditional networking equipment and the second largest smartphone-maker. New data released this week showed Huawei’s smartphone sales rose 41% in the second quarter of this year, helping it overtake industry stalwart Apple Inc. to become the world’s second largest smartphone-maker, with 15.8% of the market.(Source: Caixin)
4. Baidu Posts Strong Growth in Second Quarter
What: Chinese internet search giant Baidu Inc. said its revenue for the second quarter of 2018 rose 32% year-on-year to 26 billion yuan ($3.81 billion), beating market expectations. Net income attributable to Baidu was 6.4 billion yuan, up 45% from the same period last year.
Why it’s important: Baidu “had another strong quarter in Q2 with search exhibiting robust revenue growth driven by AI-powered monetization capabilities and Baidu feed continuing strong traffic and monetization momentum,” Baidu Chairman and CEO Robin Li said. (Source: Caixin)
5. Video Streamer iQiyi Sees Strong Subscriber Growth
What: IQiyi, dubbed China's Netflix, said revenue rose 51% year-on-year to 6.2 billion ($932.5 million) for the quarter ended in June driven by rapid subscriber growth. Total subscribing membership jumped 75% to 67.1 million by the end of the quarter from the same time a year ago, with 66.2 million paid members. Citing a surge in marketing, research and development expenses in the quarter, the company reported that its net loss widened to 2.1 billion yuan, more than double the 953.2 million yuan loss in the same period last year.
Why it’s important: IQiyi is among a rush of Chinese tech companies that have floated shares in New York this year. IQiyi raised more than $2 billion in an initial public offering in March, the largest U.S. flotation of a Chinese company since 2014. Despite some bumps, iQiyi’s shares have generally performed well since the IPO. The issue has sustained a rising trend from the $18 offering price and touched a peak in late June of nearly $45. (Source: Caixin)
6. Apple Posts Fourth Quarter of Double-Digit Greater China Revenue Growth
What: Apple Inc. posted revenue of $9.55 billion in the third quarter of 2018 for the Greater China region, which includes Hong Kong and Taiwan, the company said in its latest earnings report. Revenue in the region was up 19% from a year ago, and down 27% from the previous quarter.
Apple's total revenue for the third quarter was $53. 26 billion, up 17% from a year ago and exceeding analysts' expectations.
Big picture: Apple has now seen four consecutive quarters of year-on-year revenue growth in Greater China. But it remains to be seen how the ongoing trade conflict between China and the U.S. will affect the company. It is still difficult to quantify the impact on Apple of tariffs being introduced in upstream industries like steel, as well as fluctuations in the exchange rate, Apple chief executive Tim Cook said during the earnings call. (Source: Caixin, link in Chinese)
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