Bottom line: The US should penalize ZTE for violating trade restrictions against Iran, but should moderate the severity to acknowledge that Chinese firms are improving their adherence to global laws and standards.
ZTE assists with US probe
Two days after exploding into the headlines, US sanctions against ZTE (HKEx: 763; Shenzhen: 000063) continue to ripple through the news as the Chinese telecoms equipment maker faces major disruptions to its supply chain. Washington has determined that ZTE sold equipment from US companies to Iran in violation of export restrictions against the country at the height of an international dispute about its nuclear development program.
As a result of its finding, which comes after a 4-year investigation, all of ZTE’s US suppliers, including the likes of Microsoft (NYSE:MSFT) and Oracle (Nasdaq: ORCL), must now apply for export licenses before they can sell to ZTE. Media reports have indicated that Washington is likely to deny such license requests, as punishment to ZTE for violating the trade restrictions. Read Full Post…
Bottom line: Xiaomi is likely to need new funds around a year from now, at which time its valuation will stagnate or even come down up to 10 percent as its growth continues to slow.
Xiaomi’s Lei meets reporters at NPC
Struggling smartphone maker Xiaomi is making headlines today for what it’s NOT doing, namely planning to raise cash anytime soon. Xiaomi’s lack of cash raising plans are coming from talkative chief Lei Jun, responding to questions about whether his company has lost value since its last mega funding at the height of its meteoric rise about a year ago.
Most of the reports are focusing on Lei’s comments that Xiaomi has no plans for an IPO in the next 5 years, and also that his company has plenty of cash — more than 10 billion yuan ($1.5 billion) to be precise. Both remarks look aimed a deflecting speculation that Xiaomi might have to return to investors soon for more money, an exercise that would force it to put a new value on the company. Read Full Post…
Bottom line: ZTE will face major supply chain disruptions following new punitive US actions for violating UN sanctions against Iran, forcing it to lower its 2016 sales targets by up to 10-15 percent.
ZTE braces for US sanctions
Officials at telecoms equipment and smartphone maker ZTE (HKEx: 763; Shenzhen: 000063) got a rough start to the new week, after media reported the company was set to get punished by Washington for selling products to Iran in violation of earlier UN sanctions. The news quickly buzzed through the headlines, and prompted ZTE to request a halt to trading of its Hong Kong-listed shares. (HKEx announcement)
This particular case actually dates back to 2012, when reports emerged that the FBI was investigating ZTE for illegally selling US computer equipment to Iran at the height of tensions with the west related to its nuclear development program. (previous post) Crosstown rival Huawei also faced similar accusations at that time. Read Full Post…
Bottom line: IBM’s sale of its Lenovo shares isn’t surprising since it probably received the stock as part of a recent transaction between the pair, but still comes as the latest sign of no confidence in the struggling Chinese PC giant.
IBM dumps Lenovo shares
Things just keep getting worse for struggling PC maker and smartphone wannabe Lenovo (HKEx: 992). Just 2 weeks after new data showed the company’s smartphone sales plunged in its home China market at the end of last year, new reports are saying that US tech giant IBM (NYSE: IBM) is dumping the Lenovo shares that it received as part of a recent transaction between the pair of companies.
The amount of the sale doesn’t look that big, with IBM looking to sell about $150 million worth of Lenovo shares, the reports say. (English article; Chinese article) But it’s important to note those same shares were worth about twice as much in October 2014, which is when IBM probably first received the stock as part of a sale of its low-end server business to Lenovo for $2.1 billion. Read Full Post…
Bottom line: Apple would probably hand over iPhone user information to Beijing if faced with a situation like its current standoff with Washington, but would keep the matter low profile and possibly try to find other ways to placate Beijing.
Washington standoff spotlights Apple’s cooperation with Beijing
As the high-profile standoff between Apple (Nasdaq: AAPL) and Washington continues over access to information on a terrorist’s iPhone, a new report is raising the interesting question of what the US tech giant might do if faced with a similar situation in China. Actually, the “what if” scenario isn’t raised too much in the Los Angeles Times report, which instead focuses more on the cozier relationship that Apple has with Beijing in terms of allowing access to sensitive information related to its products.
But this still looks like a good opportunity to explore the “what if” angle, since Apple might find far fewer friends in China if it decided to defy a Beijing order to hand over information stored on the Chinese iPhone of a known terrorist. By comparison, the US technology giant has found at least some supporters for its refusal to help the FBI access information stored on the iPhone of Syed Rizwan Farook, the man behind the worst terrorist attack in the US since September 11. Read Full Post…
Bottom line: Xiaomi’s new Mi 5 model is likely to get a tepid reception due to its lateness to market and a fading corporate image, and the company’s valuation is likely to shrink when it returns to market later this year for new funding.
Xiaomi rolls out Mi 5
If faltering smartphone sensation Xiaomi is still in business a decade from now, 2015 could well go down as a “lost year” when the company’s sales slowed sharply as its image for making cool, affordable products took a beating. A major factor behind the sudden stall was Xiaomi’s failure last year to release a new fifth generation of smartphones, which were supposed to power sales in the second half. (previous post)
Now Xiaomi is trying to play catch-up with the unveiling of its Mi 5 more than half a year after its originally intended launch date. (English article; Chinese article) It’s probably far too early to say if the Mi 5, along with another new model called the 4S, will be enough to revive Xiaomi’s fading fortunes. But I suspect the damage has already been done, and this new model will ultimately fail to find a big audience due to its late arrival to a fast-moving smartphone market where half a year is really equal to an eternity. Read Full Post…
Bottom line: The absence of most mid-sized Chinese smartphone brands from the world’s biggest telecoms show this week in Spain reflects their inability to mount serious global campaigns, and also growing financial pressures many are facing.
Mid-sized Chinese brands skip MWC
China’s crowded field of low-cost and mid-range smartphone brands may claim to have global aspirations, but you would never know that judging by their loud absence at the world’s biggest telecoms show this week in Spain. I’ll admit that I’m not personally attending this year’s Mobile World Congress in Barcelona, so I’m dependent on the show’s website and media reports to determine who is and who isn’t attending.
But based on my own findings, including talks with spokesmen from at least one of the big domestic brands, most companies are skipping this show that has emerged in recent years as a major venue for debuting new smartphones. There are several reasons for skipping the show, but I suspect that chief among those is costs. Read Full Post…
Bottom line: A strong reception for Apple Pay from consumers, banks and merchants bodes well for the service, which should attract a major audience among iPhone users but won’t pose a major threat to rival services from Alipay and WeChat.
Apple Pay launches in China
The launch of Apple Pay in China is buzzing through the local headlines a day after the roll-out, in a move that looks certain to shake up a stodgy industry dominated by homegrown names like Alipay. The most revealing headlines report on the rush by everyone, from consumers to banks and merchants to jump onto the Apple Pay bandwagon. That reflects the buzz that any major move by Apple (Nasdaq: AAPL) can create in the world’s largest smartphone market.
Local consumers are undoubtedly pleased that Apple chose China for the Asia launch of Apple Pay, selecting their market over more traditional candidates like Japan and South Korea. China is only the fifth global market for Apple Pay, following launches in the US, Canada, Britain and Australia. The pride element at being first in Asia, combined with Apple’s existing premium image here, will draw a big majority of Chinese iPhone and iPad users to try out Apple Pay on their devices. Read Full Post…
Bottom line: Huawei’s debut notebook PC will get mixed reviews and so-so sales due to its lack of experience, but future models will rapidly improve and propel the company to one of the world’s top 5 brands in the next 2-3 years.
Huawei rolls out MateBook PC
Fast-rising smartphone maker Huawei has formally rolled out its first PC model, and is saying quite boldly that its ultimately target in this new product area is struggling hometown rival Lenovo (HKEx: 992). The move comes a month after media first reported that Huawei would enter the stagnating PC space, where traditional desktop models are rapidly disappearing and even growth for portable notebook models is slowing sharply. (previous post)
The move isn’t a huge surprise, since lines are rapidly blurring between traditional notebook PCs and a newer generation of portable devices led by smartphones. Many large-screen smartphones, often called phablets, and tablet PCs are nearly as large as notebooks and have similar functions. Likewise, a growing number of notebook PCs now have detachable screens that can be used like a tablet PC. Read Full Post…
Bottom line: Lenovo’s longtime CEO Yang Yuanqing should resign or be replaced to make way for new leadership to turn around the company’s struggling mobile unit that will be critical to its future.
Lenovo attends Mobile World Congress
The global smartphone spotlight is in Barcelona this week, as industry giants including China’s Huawei and ZTE (HKEx: 763; Shenzhen: 000063) unveil their latest new models at the world’s biggest telecoms show. But one company that’s unlikely to generate much buzz is PC stalwart Lenovo (HKEx: 992), which has disappointed for the last 2 years by failing to gain traction in a smartphone business that will be critical to its future.
To the contrary, Lenovo saw its smartphone sales tumble last year in its home China market, which accounts for about half of its total revenue. The dramatic plunge is all the more worrisome since Lenovo was hoping for a surge last year after its purchase of Motorola, which once enjoyed a reputation as a global leader but later fell onto hard times. Read Full Post…
Bottom line: Huawei’s smartphone prices should continue to rise this year as it rolls out more higher-end models, while Xiaomi’s new drone product looks like a publicity ploy to draw attention back to its sputtering smartphones.
Huawei smartphone prices rise in 2015
Just days after new data showed Huawei finishing 2015 as China’s smartphone leader, different new data is revealing the company was the market’s only domestic brand that was able to raise prices for its products during the year. That boosts the growing perception that Huawei is emerging as China’s first solid mid-range smartphone brand, as it tries to climb the value ladder to someday challenge global leader Apple (Nasdaq: AAPL).
Meantime, domestic rival Xiaomi, which once also liked to compare itself to Apple, is diverging from its former US role model by preparing to roll out a drone product, according to media reports. If the reports are true, this would look like a somewhat desperate move by the fast-fading Xiaomi, which is unable to generate much positive buzz these days for news related to its struggling smartphone division. Read Full Post…
