Bottom line: New court actions by Huawei, Weibo and NBA star Michael Jordan reflect China’s efforts to crack down on white collar crimes that are common but threaten to hamper the country’s economic development.
Huawei tussles with corporate thief
The headlines are bubbling today with a few notable stories from the courtroom, which spotlight the slow but steady progress China is making against corporate cheats who undermine the nation’s business climate. Leading the news is telecoms giant Huawei, which is chasing a rogue former executive who was already jailed once for stealing company property and tried to continue his illegal ways after being released from prison.
Another headline has a judge ruling in favor of the Twitter-like Weibo (Nasdaq: WB), which accused a software maker of illegally stealing data from its service. Last but not least there’s the NBA, whose legendary Michael Jordan is closing in on a high-court decision that could finally force a rogue sporting goods maker to stop illegally using his trademark. Read Full Post…
Bottom line: Beijing should take more aggressive steps to ensure true competition between China’s 3 telcos, to prevent collusion like their current resistance to ending domestic roaming fees.
China telcos resist end to roaming fees
The latest sign of collusion in China’s telecoms sector was in the headlines last week, as the nation’s big 3 carriers appeared to band together to counter new calls for an end to domestic roaming charges. A number of arguments were put forth for maintaining such fees, but the bottom line is that carrier costs of providing such service are negligible and the fees themselves remain an important revenue source.
The US market, which is most similar to China, eliminated such fees more than a decade ago due to competition between 4 major carriers that emerged in the 1990s. But China’s carriers, while competitive in some areas, appear to be acting together in anti-competitive fashion to resist the change, a common occurrence due to close ties between the companies. Read Full Post…
Bottom line: China Mobile’s latest results show that its business is starting to pick up after years of stagnation, which could provide some upside for its stock over the next 1-2 years as it steals share from its two smaller rivals.
China Mobile posts solid results
Profit growth of 0.5 percent may not sound like anything to boast about, but at least it’s growth and not contraction. That’s the message that telecoms giant China Mobile (HKEx: 941; NYSE: CHL) hopes to send with its latest results, which show the company returned to profit growth in the first quarter of this year after a sharp drop in last year’s fourth quarter.
China Mobile’s return to profit gains was fueled by strong revenue growth, as the company took advantage of its early entry to 4G and aggressive promotions to build up its customer base and steal market share from its 2 smaller rivals, China Unicom (HKEx: 763; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: 728). The trend certainly looks positive for China’s largest telco, since its profit growth is likely to accelerate now that the most aggressive spending on its new 4G network is in the past. Read Full Post…
Bottom line: Positive buzz in China bodes well for Huawei’s latest higher-end model, the P9, which could help the company meet its target of selling 10 million of the smartphones and continue its positive momentum.
Huawei launches P9 in China
A week after unveiling its new mid-range smartphone at an event in London, the fast-rising Huawei has launched the P9 at an event here in China that is drawing strong interest from media and fans attracted by its high-end camera. I visited a Huawei shop over the weekend on the popular Nanjing Road pedestrian street here in Shanghai, and was quite surprised to see large crowds checking out the new model.
Of course the crowds were even larger at the much bigger Apple (Nasdaq: AAPL) store just down the street, even though it’s been a month since Apple launched its latest model, the small-screen iPhone SE. But the fact that Huawei could draw big crowds at all testifies to the company’s recent growing momentum, as it looks to overtake Apple and Samsung (Seoul: 005930) to become the world’s largest smartphone brand. Read Full Post…
Bottom line: Unigroup’s cautious approach to the potential acquisition of a small US chip maker reflects political realities that make larger purchases difficult, dealing a setback to China’s dreams of quickly building a chip-making giant.
Unigroup buys into Lattice Semiconductor
After being rebuffed several times in the US and Taiwan, China’s ambitious Tsinghua Unigroup is back in the chip acquisition headlines with word that it’s exploring a possible purchase of smaller US chip designer Lattice Semiconductor (Nasdaq: LSCC). Unlike the earlier failed deals that were either outright acquisitions or purchases of major stakes worth billions of dollars, this latest deal is quite small both in dollar terms and stake size.
That would seem to indicate that Unigroup and its affiliated sister companies, all housed at the prestigious Tsinghua University, are shifting to a more cautious approach targeting smaller companies in their global M&A strategy. We saw a similar move earlier this month, when a Shanghai-based government-backed buyer bid for Okmetic (Helsinki: OKM1V), a Finnish chip design house with a market value of about $200 million. (previous post) Read Full Post…
Bottom line: The naming of a technocrat as chairman of China Telecom ends speculation of an industry shake-up, and indicates China’s big 3 telcos will continue as big state-owned companies that lag their global peers.
Beijing continues old ways with new China Telecom chief
It’s been quite a few months since I last wrote about China’s 3 big telcos, so the naming of a new chairman of China Telecom (HKEx: 728; NYSE: CHA) seems like a good chance to revisit this lifeless trio that were a hot topic last year due to rumors of an industry shakeup. The naming of a new technocrat as head of the carrier implies that it’s business-as-usual at China Telecom and for the broader trio of state-run caarriers, and that a shake-up that many of us were hoping for isn’t coming.
The new chairman, Yang Jie, will assume the helm of China Telecom 4 months after his predecessor, Chang Xiaobing, abruptly stepped down last year due to a corruption probe against him. Chang himself was previously chairman of China Telecom rival China Unicom (HKEx: 763; NYSE: CHU), but switched places with China Telecom’s chief Wang Xiaochu in the middle of last year in a characteristic bureaucratic reshuffling by Beijing. Read Full Post…
Bottom line: Huawei stands a reasonably good chance of meeting its goal of becoming the world’s second largest smartphone brand in the next 3 years, while ZTE’s sell-off with the resumption of trading in its shares looks overblown.
Huawei unveils mid-range P9 at London event
Two of China’s oldest and largest telecoms names are in the headlines, though Huawei and smaller rival ZTE are moving in opposite directions as we close out the week. New data are showing that Huawei continued to pick up share in China’s smartphone market in February, as the division’s head discussed his latest timeline for overtaking global leaders Apple (Nasdaq: AAPL) and Samsung (Seoul: 005930) in the next 4-5 years. Meantime, shares of ZTE finally resumed trading, and promptly tumbled as much as 16 percent, after a difficult few weeks due to a tussle with Washington.
The 2 stories reflect the opposite recent paths of these crosstown rivals, both based in the southern Chinese boomtown of Shenzhen. Huawei’s rapid rise in the smartphone space dates back to the middle of last year. ZTE’s woes are more recent, dating back to last month when Washington punished the company for illegally selling US-made equipment to Iran. But I would caution that Huawei’s rising fortunes could quickly run out of fuel in the fast-changing smartphone world, while ZTE may be oversold following resolution of its tussle with Washington. Read Full Post…
Bottom line: ZTE’s change of leaders is a much-needed move to revive the company’s fortunes, though the choice of its former technology chief as new chairman looks a bit conservative.
ZTE gets new chairman
Following a turbulent period that saw it nearly lose access to many of its key suppliers, telecoms giant ZTE (HKEx: 763; Shenzhen: 000063) has just announced the arrival of a new chief, as it seeks fresh starts in its 2 main businesses selling networking equipment and smartphones. Many are pointing to ZTE’s recent run-in with Washington for illegally selling products to Iran as the direct reason for the departure of Shi Lirong, who was chairman for the last 6 years.
Perhaps that’s partly true, but the reality is that Shi’s tenure at the helm of ZTE has been marked by a much longer series of stumbles that has cost the company millions of dollars in sales and market value. Those missteps led ZTE to launch a major overhaul a couple of years ago that seemed to be showing results for its older networking equipment business. But more recently ZTE’s newer smartphone business has been showing signs of stumbling, and the latest Iran controversy may have driven the board’s decision to replace Shi. Read Full Post…
Bottom line: China’s latest plan to buy Finnish chip maker Okmetic could get vetoed on national security concerns, reflecting foreign government concerns about selling technology companies to government-backed entities.
Finland’s Okmetic gets buyout bid from China
China’s ambitions of building a world-class high-tech microchip industry were in the headlines again last week, when the small Finnish chip maker Okmetic (Helsinki: OKM1V) revealed it had received a takeover bid from a government-backed company based in Shanghai. Beijing’s ambitions are understandable, since China currently buys over 60 percent of the world’s microchips to feed its vast manufacturing complex that makes everything from smartphones to computers and home appliances.
But recent resistance in the US and Taiwan has also highlighted reluctance by overseas governments to seeing their companies purchased by the big state-run vehicles that Beijing has recently set up to achieve its aims. Historically speaking, China has also achieved mixed results when the government backs big microchip projects, which often fall victim to government agendas that limit their ability to quickly respond to the fast-changing market. Read Full Post…
In a move that is likely to alleviate its strained relationship with Beijing and give new impetus to big data in one of China’s poorer regions, Qualcomm (Nasdaq: QCOM) has signed a strategic cooperation agreement with the provincial government of Guizhou.
Signed on January 17, the agreement will see Qualcomm establishing a Guizhou-based investment corporation to look for more business opportunities in China’s integrated circuit market, and promote the development of the country’s related industries.
The deal, which also creates a joint venture named Guizhou Huaxintong SemiconductorTechnology, is a major step in Guizhou’s effort to position itself as a leader in the big data field in China. The province has been designated by the central government as a pilot zone for the development of big data, and has a sound regulatory framework and a sophisticated infrastructure that is of growing interest to foreign tech firms. Read Full Post…
Bottom line: Beijing should launch an aggressive campaign to privatize state-owned enterprises, which could cause some short-term pain but will ultimately put the economy on a more stable long-term footing.
Profits tumble at SOEs
The latest profit reports for big state-owned enterprises (SOEs) are coming in for the first 2 months of the year, and the picture isn’t pretty and even looks quite worrisome for China’s thousands of state-owned enterprises (SOEs). New data published late last week showed profits for SOEs tumbled 14.2 percent in January and February combined, as they continued to be plagued by problems like overcapacity and weak demand due to China’s slowing economy.
But one of the biggest problems facing these companies, and one that threatens their long-term survival, is their failure to act commercially, a legacy of China’s planned economy that saw big SOEs historically function as tools for executing government policy. Such a tendency is what, for example, drives steel makers to continue producing at full throttle even when every ton of product they sell adds to losses due to the sector’s huge overcapacity. Read Full Post…
