Wednesday Tech Briefing: Xiaomi, Huawei, Tencent

BIG TECH COMPANIES

1. Tencent’s WeChat Launches Digital Wallet in Malaysia

What: “Tencent’s WeChat, China’s most popular social media app, has launched its digital payments platform in Malaysia, its first market in Asia beyond China and Hong Kong,” the Financial Times reported.

Why it’s important: Users of the new service will be able to make payments in ringgit, the local currency, suggesting that Tencent is now targeting local users rather than Chinese traveling abroad.

Big picture: Mobile apps are rapidly becoming the payment method of choice in China, but “WeChat Pay also faces the challenges of different local infrastructure and app-use habits in going abroad.” (Source: Financial Times)

2. Faraday Future on Track for Mass Output of Electric Cars

What: Chinese electric carmaker Faraday Future expects to begin mass production of its FF91 car by 2019, and has begun construction of its first China production facility in Guangzhou, Faraday’s new owner Evergrande Health said.

Why it’s important: Faraday’s expensive operating costs nearly bankrupted its previous owner, the embattled video streaming company LeEco, before Evergrande stepped in to bail the project out. LeEco founder Jia Yueting was put on a national debt default blacklist last year after he failed to pay back 480 million yuan ($70 million) owed by his company. (Source: South China Morning Post)

DEALS & FUNDRAISING

3. Chinese Phone Giant Xiaomi Struggles to Live Up to Mega-IPO Hype

What: “Xiaomi Corp. raised $5.4 billion by selling investors on its promise as a high-growth internet company. Some are starting to lose faith,” according to Bloomberg. The company’s stock has fallen 19% from its peak in mid-July.

Why it’s important: Xiaomi reports its earnings on Wednesday, “offering a close-up of two of its most important initiatives: an international expansion and its evolution beyond hardware and into online services from music to video, a la Apple Inc.”

Big picture: Analysts have expressed skepticism over Xiaomi’s high valuation as an internet company, noting that its main business is still hardware-reliant. “We don’t think it’s worth a pure internet company because it’s not the same as Alibaba or Baidu or Amazon. They can only get a new subscriber by selling a smartphone,” Mark Newman, an analyst with Sanford C. Bernstein, told Bloomberg. (Source: Bloomberg)

POLICY

4. Up to 3 Billion Pieces of User Data Stolen From Nearly 100 Tech Companies

What: A group of Chinese companies stole up to 3 billion pieces of user data from 96 tech companies, including e-commerce giant Alibaba Group Holding Ltd. and Tencent Holdings Ltd., which runs popular messaging and payments app WeChat.

Why it’s important: The group, led by Shenzhen-listed Ruizhi Huasheng Technology Corp., stole data by taking advantage of a 2014 business deal with state-owned mobile carriers. The leaked data has been used to make profits by a number of means, such as selling them to advertisers. Ruizi Huasheng’s data business revenue was 20 million yuan in 2017, with a gross-profit rate of 55%.

Big picture: The case is the latest in an ongoing government crackdown on crimes involving user data privacy violations. As of July 2017, the Chinese government has investigated at least 1,800 data privacy cases and arrested nearly 5,000 suspects, according to official figures. (Source: Caixin)

5. U.S. Tariffs Cast Cloud Over Huawei’s Solar Electronics Launch

What: A 25% U.S. tariff on Chinese electronics could affect Huawei Technology Co.’s launch of its new solar-panel control device FusionHome, which was previously expected to challenge rivals with its lower price tag.

Why it’s important: Huawei will “either have to reduce its margins or raise prices,” which would give its rivals SolarEdge and Enphase Energy a leg up, analysts told Reuters.

Big picture: Tariffs, the main weapon in the ongoing trade war between China and the U.S., “could eat up the margins of cost-competitive Chinese manufacturers and potentially change the player landscape of the U.S. solar inverter market,” analyst Iben Frimann-Dahl from Rystad Energy told Reuters. (Source: Reuters)

6. Sport or Sellout? Debate Rages Over Medals for Video Games

What: Computer games, for the first time, will be included alongside other sports in the Asian Games, which will take place in Indonesia this week. “Contestants from Saudi Arabia to Japan will battle for national pride and bragging rights across six titles, including League of Legends and StarCraft II in a huge marketing coup for publishers like Tencent Holdings Ltd. and Activision Blizzard Inc.,” Bloomberg reported.

Why it’s important: The Asian Games is Asia’s biggest sporting event. The inclusion of video games has sparked debate over whether these games should be considered sports. “This week’s games are the largest showcase yet for esports, an early test of whether it will be included at 2024 Paris Olympics.”

Big picture: The Olympic Charter bans the inclusion of mental or mechanical-driven activities, but “with Olympics attracting fewer viewers, especially among younger audiences, officials may be willing to bend the rules to welcome the $140 billion video game industry, which commands the attention of teenagers and millennials.” (Source: Bloomberg)

Compiled by Hou Qijiang and Qian Tong