Tech at the mercy of politics and a global EV scramble

Hi, everyone, it’s Kenji from Hong Kong. We are witnessing a new round of Sino-American rivalry after US House Speaker Nancy Pelosi visited Taiwan, meeting President Tsai Ing-wen and key semiconductor industry leaders. Outraged by the highest-ranking Washington official to land on the self-ruled island in 25 years, Beijing is already flexing its military muscles harder in the surrounding waters, and more sanctions are expected.

The diplomatic bombshell coincides with the annual secretive gathering by Communist Party’s top leadership and its elders in the coastal resort of Beidaihe, about 300km east of Beijing. It is always extremely difficult to know what is happening behind the bamboo curtain, but the geopolitical tensions with the US will certainly be on the agenda.

It has become even more apparent how deeply the tech sector is intertwined with politics. On top of the potential fallout from the Pelosi tour and the outcome of Beidaihe conclave, global chipmakers find themselves in effect being forced to choose between Washington and Beijing, while Chinese tech players are under continued pressure to toe the party line. A close watch over political developments remains crucial in keeping track of the sector.

Pushed around by politics

Chips and politics are becoming ever more entwined, as recent developments in the world’s two biggest economies show.

Before embarking on her Asia tour, Speaker Pelosi last Friday signed the $280bn Chips and Science Act, which contains $52bn in funding to boost the US semiconductor sector. Major chipmakers, including Taiwan’s TSMC and South Korea’s Samsung, welcomed the legislation which enjoyed rare bipartisan backing.

However, the subsidies come at a price — restrictions on material investments in China and certain other countries for up to a decade. For companies falling foul of the rules, the potential damage could be serious, according to a joint report by Nikkei Asia’s Cheng Ting-Fang, Lauly Li and Yifan Yu.

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“Penalties can include not only losing the funding, but also other penalties ‘in the national interest,’ which is quite broad language,” said Clinton Yu, a Washington-based lawyer at Barnes & Thornburg. Other experts say the legislation could be a prelude to even more scrutiny of outbound investments by chipmakers.

Meanwhile, China is escalating a crackdown on its own tech sector. The country’s top corruption buster last week detained at least three leading figures who have been instrumental in developing the domestic chip industry, including a government minister. China’s recently revised antitrust law, moreover, tightens control over tech companies.

As government scrutiny rises, global tech players will have to step ever more carefully.

More Missfresh mishaps

Laid-off employees and investors are lining up to sue collapsed Chinese grocery delivery company Missfresh and the Wall Street underwriters who marketed its shares in a $300mn New York offering last year.

Employees are angling to get overdue salaries paid while investors in the US hope to recoup some of their losses, alleging the start-up, its executives and underwriters violated securities laws, Nian Liu, Ryan McMorrow and Gloria Li write for the Financial Times.

In recent days, hundreds of Missfresh employees have filtered into labour arbitration courts in Beijing and Shanghai as they try to claw back salaries owed from June and July, and force the company to pay severance.

The problem, an executive from Missfresh explained to employees last week, is that a planned financing from a coal mining group had fallen through and Missfresh had run out of cash.

The issues have sent Missfresh’s Nasdaq-listed stock plunging from $13 a share at its listing price last June to 10 cents on Monday, saddling investors like Juan Chen with massive losses.

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Chen lost most of the $68,000 he put into Missfresh shares and is the lead plaintiff in a class action suit against the company. The suit alleges Missfresh misled investors with fake revenue numbers in its IPO prospectus and names banks who brought the company to market, like JPMorgan and Citigroup, as co-defendants.

His argument is helped by a Missfresh SEC filing in July admitting that revenue figures in its financial statements had been overstated.

Losing steam already?

Line chart of Indexed showing Japan’s private consumption by channel

Japan, long a global laggard in ecommerce, has rapidly made up ground over the past few years, thanks in large part to the impact of the pandemic. However, that momentum is already lost, according to Tokyo-based big data analyst Nowcast. Its ecommerce consumption index has levelled off this year and even dipped for two months through June.

One explanation, write Nikkei’s Hiroki Obayashi and Kazuya Manabe, is that consumers have simply grown tired of shopping on their smartphones. To reignite momentum, some in the industry suggest closer integration of online and brick-and-mortar stores, especially as Japan’s Covid-19 restrictions are gradually eased. Tomoyuki Mochizuki, vice-president of ecommerce consultancy Itsumo, believes that “the role of physical stores will expand”.

But even if the ecommerce sector regains its spark, a shortage of delivery workers remains a potential bottleneck. Retailers like Seiyu and Rakuten Group have begun trials using self-driving robots to deliver fresh food and boxed meals.

The race is on

As electrification takes centre stage in the auto industry, traditional players are locking horns over new markets. While Tesla and a handful of local makers compete in China, Nikkei has learned that Germany’s ZF, the world’s third-largest auto parts supplier, is set to enter the Japanese commercial EV market, aiming to produce 10,000 units by 2030.

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Hyundai Motor, meanwhile, made a comeback in Japan after a 12-year hiatus, this time with its strategic sports utility EV Ioniq 5. With its first directly run customer service centre opening in Yokohama last week, the South Korean automaker aims to take another crack at a market where its previous gasoline-powered strategy sputtered.

And while its home market is being targeted by foreign players, Toyota Motor has struck a deal to gain access to a US lithium mine to help it compete in the global EV race. Its joint venture with Panasonic Holdings is entitled to 4,000 tons of lithium carbonate annually over five years from 2025.

Suggested reads

  1. India’s Reliance Jio tops Airtel, Vodafone in 5G auction spending (Nikkei Asia)

  2. Alibaba to ‘strive’ to keep New York listing despite addition to SEC watchlist (FT)

  3. Indonesia’s Indika Energy readies ‘affordable’ e-motorbike venture (Nikkei Asia)

  4. South Korean app dubbed ‘honest LinkedIn’ aims to make money from Big Tech (Nikkei Asia)

  5. Investors worry that India has passed ‘peak outsourcing’ (FT)

  6. Samsung seeks to reassure markets over semiconductor competitiveness (FT)

  7. China’s top tech groups on track for worst-ever quarterly results (Nikkei Asia)

  8. Lex — Taiwan/Pelosi: push to pick US or China leaves TSMC in dire straits (FT)

  9. Japan electronic parts makers’ rising stocks stoke production cut fears (Nikkei Asia)

  10. Samsung and SK Hynix rethink China exposure following US chips act (FT)

#techAsia is co-ordinated by Nikkei Asia’s Katherine Creel in Tokyo, with assistance from the FT tech desk in London.

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