Bottom line: China is likely to lead the list of countries getting national security reviews for its US purchases over the next few years, reflecting Chinese companies’ growing pursuit of foreign technology and other sensitive expertise.
Treasury Department releases annual security report
The past year has been notable for a growing number of Chinese acquisitions in the US attracting national security reviews, and now a new report from the reviewing agency is providing some big-picture numbers about the trend. The headline figure from the new report by the US Treasury Department shows that it reviewed 24 proposed acquisitions of US firms by Chinese buyers in 2014, making China the biggest recipient of such reviews.
At the same time, the report also cast a spotlight on several other trends, including the spread of reviews outside the sensitive high-tech sector and into less conventional areas like real estate. One such deal surprised many last year, when the purchase of the storied Waldorf-Astoria hotel in New York to Chinese insurer Anbang for nearly $2 billion was subject to such a review. 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…
Bottom line: National security concerns are likely to torpedo pending sales of crane maker Terex and the Chicago Stock Exchange to Chinese buyers, while a similar sale of Ingram Micro shouldn’t draw as much scrutiny.
Terex, Chicago Stock Exchange sales draw national security concerns
Just a day after chip maker Fairchild (NYSE: FCS) called off talks to be purchased by a Chinese buyer over concerns that Washington would veto the deal, 2 other similar planned acquisitions of US firms are coming under the microscope. In the more ominous of the new developments, a group of 46 US congressmen have expressed reservations about a deal announced last week that would see a little-known Chinese company buy the Chicago Stock Exchange.
The other development has a single US congressman expressing similar reservations about a deal that would see Chinese construction equipment maker Zoomlion (HKEx: 1157) buy US crane maker Terex (NYSE: TEX). At the same time, yet another major deal that could draw similar national security scrutiny is in the headlines, with word that a company connected to private equity investor HNA Group has offered to pay $6 billion for computer and component distributor Ingram Micro (NYSE: IM). Read Full Post…
Bottom line: Fairchild’s decision to halt talks to be acquired by a Chinese group reflect mounting US national security concerns over cross-border M&A from China, which are likely to remain high until after this year’s presidential election.
Fairchild calls off talks with Chinese buyer
The Year of the Monkey is shaping up as a busy time for Washington officials reviewing China-US deals for national security concerns, with word that such concerns have killed a bid for Fairchild Semiconductor (NYSE: FCS) by a Chinese buyer. In this instance, it was Fairchild itself that decided to terminate the discussions with a group led by a unit of Chinese conglomerate China Resources, citing worries that such a deal would get vetoed by Washington.
Fairchild’s decision marks the latest case in a recent rise of US-China deals thrown into doubt over national security concerns, which has its roots in several factors. Several of the killed deals have come in the high-tech semiconductor chip sector, which is now in the process of global consolidation. Adding to the pressure are an increasingly aggressive group of cash-rich Chinese global buyers looking to expand beyond their traditional realms of natural resources and other low-end products. Read Full Post…
Bottom line: Huawei is likely to consolidate its position as China’s top smartphone brand this year, while Lenovo and Samsung could regain some market share as each mounts aggressive turnaround campaigns.
Huawei takes China smartphone crown
A year is almost like an eternity in the fast-moving smartphone world, and nowhere is that reality more on display than in the latest quarterly data on China’s cut-throat market. In the smartphone history books, 2015 will go down as the year that saw Huawei surge to become China’s largest player, with smaller homegrown brands Vivo and Oppo also making impressive gains. On the other side of the aisle, the year is one that former high-flyers Samsung(Seoul: 005930) and especially Lenovo (HKEx: 992) would rather forget, as both plunged out of the nation’s top 5 brands.
Smartphones are an extremely big business due to their high prices, a fact that has drawn numerous companies to the space and created intense competition in China. But constant changes to technology, combined with increasing commoditization due to the dominance of the free Android operating system, means that unknown companies can quickly rise to become major players. Similarly, a winner one year can quickly stumble to become a loser the next. Read Full Post…
Bottom line: Western Digital’s planned sale of 15 percent of itself to a Chinese buyer stands a 50-50 chance of getting vetoed by Washington on national security grounds, which could throw Western Digital’s planned purchase of SanDisk into doubt.
Western Digital’s China tie-up unraveling?
Many have been writing about China’s mega purchase last year of a big stake in computer hard drive giant Western Digital (Nasdaq: WDC) as if it’s a done deal, even though the $3.8 billion tie-up has yet to formally close. Even the buyer, Tsinghua Unisplendour, appeared to believe its purchase of 15 percent of Western Digital was unlikely to attract controversy, and was already using the US company as part of plans to build up China’s first global memory chip giant.
But the tie-up could fall victim to US national security concerns, following Western Digital’s new disclosure that it’s extending a timeline for the deal to close due to scrutiny from Washington. It’s probably too early to say this particular deal will collapse, even though Western Digital was apparently caught off guard by the scrutiny it’s now receiving from the Committee on Foreign Investment in the US (CFIUS), which reviews major cross-border high-tech deals for national security risks. Read Full Post…
Bottom line: Washington and Beijing risk seriously hindering global trade and M&A in high-tech products in the name of national security, and should be more transparent when blocking deals and trade over such concerns.
National security vetoes look increasingly protectionist
The national security debate was in 2 major headlines last week, as word emerged that Washington might consider blocking proposed major acquisitions of US companies by Chinese construction equipment giant Zoomlion (HKEx: 1157; Shenzhen: 000157) and memory chip maker Tsinghua Unisplendour. While neither deal has been vetoed yet, the talk comes less than a year after several Washington politicians expressed reservations that ultimately killed another deal by a Chinese company to purchase leading US memory chip maker Micron (Nasdaq: MU).
With the US entering an election year, the likelihood of more deals being killed for similar reasons could grow due to opposition from politicians seeking to curry favor from voters. The growing noise from Washington comes against a backdrop of similar moves by Beijing, which last year rolled out a new national security law that foreign technology firms said was overly invasive and discriminates against them. Read Full Post…
Bottom line: Beijing should note the latest trouble signal from ZTE in the smartphone sector, and take steps to prevent future similar boom-bust cycles by encouraging more responsible investing incentives by local governments.
ZTE cautious on China smartphone market
The latest trouble signal from China’s overheated smartphone sector came last week from telecoms stalwart ZTE (HKEx: 763; Shenzhen: 000063), which said it would remain cautious in the world’s largest market even as it announced ambitious new sales targets for the rest of the world this year. The company’s relative caution in its own home market comes amid a looming shakeout that is just the latest in a series of boom-bust cycles that have become all too common in China’s business landscape in the last 3 decades.
While market forces play a large role in these bubbles, regional governments looking to spur economic growth may also share some responsibility by offering incentives that encourage local firms to enter unfamiliar areas where the chance of failure is high. Such failures often result in big financial losses and mass layoffs, negating any economic benefit they were supposed to create. Read Full Post…
Bottom line: Huawei’s new move into notebook PCs could seriously challenge the existing establishment, and it could become a top 5 brand by the end of next year.
Huawei moves into notebook PCs
Telecoms giant Huawei is making a surprise move into the PC market, with word that it will launch a new line of notebook models next month using chips supplied by Intel (Nasdaq: INTC). The move would put Huawei into direct competition with leading PC maker Lenovo (HKEx: 992), as it aggressively expands beyond its older networking equipment business and diversifies into consumer electronics.
Huawei’s move into notebooks isn’t a huge surprise, since such products are increasingly similar to the new generation of smartphones where Huawei has found recent success. Huawei already sells tablet PCs, which perform many of the functions as notebooks as well. But the move does represent an entire new product area for Huawei, and is almost certain to put the company on collision course with Lenovo in their home China market. Read Full Post…
Bottom line: Competition will remain fierce in China’s smartphone market this year, as major players including Huawei and Xiaomi compete aggressively with newcomers like LeTV for market share.
LeTV sets ambitious smartphone goal
The sputtering Xiaomi and high-flying LeTV (Shenzhen: 300104) have become 2 of China’s first smartphone makers to announce 2015 sales figures, as broader industry data show just how crowded the field has become. Xiaomi’s first-look sales figures come in a microblog post from one of its executives, and show the company missed its 2015 sales target by around 10 percent. LeTV’s figures come from an emailed statement, and say the company sold a relatively modest 4 million smartphones last year following its entry to the space.
Then there’s the broader industry data that points out 7 of the world’s top 10 smartphone brands last year came from China. That report notes that among the top 10, only Samsung (Seoul: 005930), Apple (Nasdaq: AAPL) and LG (Seoul: 066570) were non-Chinese, and that a surging Huawei overtook Lenovo (HKEx: 992) to become the world’s leading Chinese brand. Read Full Post…
Bottom line: Lenovo’s plans to turn around its struggling smartphone business lack focus and are likely to fail, which could ultimately result in the exit of longtime chief Yang Yuanqing this year.
Lenovo denies plans to change Motorola logo
Computer giant Lenovo (HKEx: 992) was busy showcasing its latest PCs at a major trade show last week in Las Vegas, but industry watchers were far more interested in the outlook for its struggling smartphone business. That’s because 2016 could easily become a make-or-break year for Lenovo, which desperately needs to turn around a smartphone unit that will be critical to its future growth.
In response to a flurry of questions focused on its smartphones, talkative CEO Yang Yuanqing said his company is making steady progress in the BRICS markets of Brazil and India, and that he’s aiming to set Lenovo back on an upward track in its home China market. Lenovo also announced a vague new smartphone partnership with Google (Nasdaq: GOOG), and denied any plans to jettison its the famous bat-wing logo for its recently acquired Motorola brand.Read Full Post…
