Thursday Tech Briefing: Tencent, Xiaomi, Pinduoduo

BIG TECH COMPANIES

1. Xiaomi’s Revenue Surges Nearly 70% in Second Quarter as Smartphone Growth Remains Strong

What: In its first set of quarterly earnings since listing in Hong Kong, smartphone-maker Xiaomi Corp. reported a net profit of 14.7 billion yuan ($2.16 billion) for the second quarter this year, bouncing back from a 7.03 billion yuan loss in the first quarter. The company posted revenue of 45.2 billion yuan for the second quarter.

Why it’s important: Xiaomi’s stock fell from its post-IPO peak prior to its earnings announcement, amid continued skepticism over its high valuation as an internet company. “Analysts are concerned that Xiaomi could struggle to diversify its business away from hardware, which is a low margin business. Smartphones account for around 70 percent of Xiaomi’s revenues, while other products such as TVs are another 20 percent. Under 10 percent of revenues come from its internet services business which include its music streaming product,” CNBC reported. (Source: CNBC)

2. Tencent to Invest $438 Million in Expansion of Chongqing Data Center

What: “Tencent said on Wednesday that it will invest 3 billion yuan ($438 million) to start building the second phase of its data center project in Chongqing,” the China Daily reported. This will increase the Chongqing facility’s total number of severs to 200,000 units.

Why it’s important: “The move is part of Tencent’s broader push to expand its presence in the cloud computing sector amid heightened competitions from rivals such as Alibaba Group Holding Ltd.” (Source: China Daily)

3. Intel, Bytedance Set Up Joint AI Lab

What: U.S. chipmaker Intel and Chinese content platform Bytedance announced Wednesday they will set up a joint artificial intelligence (AI) technology research lab.

Why it’s important: Bytedance is one of China’s biggest online content companies, with a portfolio that includes news-aggregation app Jinri Toutiao and short-video platform Douyin (known as Tik Tok outside of China). Bytedance’s apps, which relying on content recommendation algorithms, have expanded rapidly and are among the most downloaded non-game apps on Apple’s App Store this year.

Big picture: The two companies have collaborated with each other in fields like AI and big data since 2013. Bytedance told Caixin it is currently conducting research on AI chips, an area the industry has taken growing interest in recently. (Source: Caixin, link in Chinese)

DEALS & FUNDRAISING

4. Xiaomi Smart Home Appliance Supplier Is Said to Plan U.S. IPO

What: “Viomi, a supplier of internet-connected home appliances to Chinese smartphone giant Xiaomi Corp., is planning a U.S. initial public offering”, Bloomberg reported, citing anonymous sources.

The company “could seek about $200 million in the share sale, and aims to list as soon as this year.”

Why it’s important: Viomi, whose smart home appliances can be controlled via smartphone, would become the second Xiaomi supplier to go public after Huami, a fitness wristbands maker, raised $126.5 million in its New York listing in February. (Source: Bloomberg)

5. Pinduoduo Closes 1128 Online Stores, Takes Down 4.3 Million Counterfeit Products

What: Chinese e-commerce company Pinduoduo said in a statement that they had taken 1,128 stores and 4.3 million counterfeit products off its shopping platform between Aug. 2 and Aug. 9.

Why it’s important: Pinduoduo has been plagued by accusations that it allows the sale counterfeit goods, especially since its high-profile Nasdaq debut on July 26. On Aug. 1, China’s State Administration for Market Regulation said it had begun investigating the company.

Big picture: A number of U.S. law firms are also looking into potential securities claims and may file class-action suits on behalf of people who bought Pinduoduo Inc. shares on Nasdaq, which would make it the latest Chinese company to face class-action litigation in the U.S. (Source: Caixin, link in Chinese)

Compiled by Qian Tong and Hou Qijiang