Thursday Tech Briefing: Huawei, Leshi, SF Express
1. Huawei Asks FTC for Hearing Into U.S.’s Market Restrictions
What: Chinese telecom equipment-maker Huawei Technologies Co. Ltd. has sent a letter to the U.S. Federal Trade Commission (FTC), complaining that “Huawei and certain other foreign entities have faced, and continue to face, regulatory intervention that has inhibited their ability to compete” in the U.S. telecommunications market. Huawei is asking the commission to hold a hearing “to allow for more robust discussion of the effects of regulatory intervention in telecommunications markets.” The FTC is scheduled to hold public hearings on competition and consumer protection in the fall.
Why it’s important: In August, U.S. President Donald Trump signed into law a new defense bill that imposes restrictions on government technology purchases from Huawei and ZTE Corp. Huawei is now showing its unwillingness to accept its ejection from the U.S. market without fighting back.
Big picture: Countries other than the U.S. are restricting Huawei’s access to their markets, giving Huawei a good reason to fight. Earlier this month, Huawei and its peer ZTE were banned from providing 5G technology to Australia on the basis of national security concerns. In July, a British government report said that it has “only limited assurance” that Huawei’s products pose no national security threat to the UK. (Source: U.S. Federal Communications Commission document)
2. AI May Worsen Structural Unemployment in China: Report
What: The rapid development of the artificial intelligence industry in China is expected to exacerbate structural unemployment, according to a new report by the China Development Research Foundation. The report shows that, during the past three years, some enterprises have replaced 30% to 40% of their laborers with autonomous machines in Guangdong, Zhejiang and Jiangsu provinces, where manufacturing industries are concentrated. The report said the replacement of laborers will force educational and research institutions, industries and the social security system to face the challenge of addressing structural unemployment.
Why it’s important: The report echoed previous pessimistic assessments of AI’s impact on job markets. The World Economic Forum estimated in 2016 that 7.1 million jobs could be eliminated by AI by 2020 in 15 major developed and emerging economies. That would only be partially offset by the creation of 2.1 million new jobs. (Source: Caixin)
BIG TECH COMPANIES
3. Leshi Warns It Risks Being Delisted From Stock Market
What: Leshi Internet Information and Technology Corp., the Shenzhen-listed unit of embattled internet company LeEco, said it expects to report a net loss for the first half of more than 1.1 billion yuan ($161 million), 73.4% wider than the loss from a year earlier. Estimated first-half revenue was 984 million yuan, down 82.25% from a year ago. Leshi said it may continue operating in the red in the second half of the year, and that the company risks being delisted if it registers net negative assets for the full year.
Why it’s important: Leshi has been fighting damage to its reputation caused by its parent company’s debt, but debts from related parties and deteriorating financing conditions have caused a severe cash shortage. Under the Shenzhen exchange’s rules, a year of negative net assets would result in the suspension of share trading, with two years ending in delisting. If suspended, the company would have to return to positive net assets, among other requirements, before it can apply to resume trading. (Source: Company filing, link in Chinese)
4. China Railway Corp., SF Express Team Up on Delivery Venture
What: China Railway Corp. (CRC) has formed a cargo venture with delivery company SF Express Co. Ltd. as the Chinese state rail operator hopes to attract private capital to boost its competitiveness. CRC will own 55% of the joint venture while SF Express will own the rest. Cooperation between the two companies will include cargo services by high-speed rail, as well as product research and design.
Why it’s important: The establishment of the joint venture is one of the latest steps CRC is taking to accelerate its “mixed ownership” reform and optimize the cargo business. In June, CRC sold about half of its stake in its Wi-Fi unit to two private companies — automaker Zhejiang Geely Holding Group Co. Ltd. and social media giant Tencent Holdings Ltd. — for 4.3 billion yuan ($630 million). (Source: Caixin)
5. China To Sell 9 Million Smart Speakers Online in 2018, GfK Predicts
What: German research company GfK predicts that China will sell 9 million units of smart speakers online in 2018, compared to 1.65 million in 2017. GfK said this is due to tech companies in China, including Alibaba, Xiaomi, JD.com and Baidu, rushing to provide low-end mini-speakers for Chinese consumers. As these Internet giants offer heavy subsidies to sell their products, smaller players and makers of high-end products will look for opportunities in the offline space and business-to-business market, GfK predicts.
Why it’s important: The 2014 debut of Amazon’s Echo sparked a global craze for smart speakers. Chinese consumers are snapping up smart speakers, making the country the second-largest market for the artificial intelligence-powered devices, behind only the U.S. (Source: Company announcement, link in Chinese)
DEALS AND FUNDRAISING
6. Inspur Plans IPO for Cloud Unit
What: Chinese IT company Inspur Group announced on Wednesday that it’s planning an initial public offering (IPO) for its cloud unit. Group Chairman Sun Pishu said that the cloud unit has already completed two rounds of funding and will soon start work on an IPO filing. Inspur also promised to invest 3 billion yuan ($440 million) over the next three years, to reach at least 15,000 partners on its cloud platform.
Why it’s important: Inspur is believed to be in talks with Google and IBM to bring these companies’ cloud services to the Chinese mainland. As Inspur looks to develop its cloud business, it will require substantial capital to compete with Huawei and other rivals. (Source: Company announcement, link in Chinese)
Compiled by Zhang Erchi
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