Bottom line: Tsinghua Unigroup’s pending purchase of a controlling stake in H3C could mark the start of a new partnership with HP in routers, but is unlikely to affect its older partnership with Intel in the telecoms chips.
HP eyes router stake sale to Unigroup
Semiconductor company Tsinghua Unigroup was already a name to watch after a string of major deals last year including a tie-up with Intel (Nasdaq: INTC), and now it’s adding to its allure with word of a major new alliance with Hewlett-Packard (NYSE: HPQ). This latest deal would trump the earlier one from Intel in size, and would see Unigroup buy a controlling 51 percent stake of HP’s China-based H3C unit, which makes routers and switches that compete with US giant Cisco (Nasdaq: CSCO).
It’s not completely clear how much Unigroup would pay for the stake, though the amount would almost certainly be more than the $1.5 billion that Intel paid last year for 20 percent of a new company that Unigroup created through its merger of 2 of China’s leading telecoms chip designers. I’m no telecoms expert, but I’ll admit this latest deal is leaving me just a bit puzzled due to the very different natures of the businesses of H3C and the earlier tie-up involving Intel, which revolved around telecoms microchips. Read Full Post…
Bottom line: Washington’s raising of Beijing’s foreign technology restrictions to the WTO and London’s acceptance of Huawei equipment could add to pressure on all parties to soften their restrictive actions over use of foreign technology.
US takes nat’l security dispute to WTO
A pair of stories in the headlines today show a growing divergence in how China’s major trading partners are treating their cyber security clashes with Beijing. The larger of the 2 stories has Washington formally posing questions at the WTO over Beijing’s recent restrictions that limit the sale of foreign technology to Chinese banks. The other has seen Britian issue a report saying products from leading Chinese telecoms equipment maker Huawei pose no threat to the nation’s security, or at least that the threat is controllable. Read Full Post…
Bottom line: The latest negative headlines on Unicom and its confusing earnings reflect its broader dysfunction and a lack of investor interest in its stock, though a major new share buyback could provide a good short-term buying opportunity.
Unicom in big share repurchase
I’ve always wondered which investors were fans of China Unicom (HKEx: 762; NYSE: CHU), which based on media and its own earnings reports is easily the most disorganized and dysfunctional of the nation’s big 3 telcos. Now I’m finally learning the answer to that question, with Unicom’s announcement of a major plan to buy back up to 10 percent of its Hong Kong-listed shares. That would equate to a massive $3.6 billion worth of stock, based on the company’s current market value, in what would easily be one of the biggest share buybacks I’ve ever seen. Read Full Post…
Bottom line: Huawei’s and ZTE’s attempts to cultivate alternative brands with Honor and Nubia could both stand a relatively strong chance of success, though ZTE’s slower, more focused approach looks a bit more prudent.
Huawei holds Honor gala
Chinese smartphone makers Huawei and ZTE (HKEx: 763; Shenzhen; 000063) are trying to shed their stodgy images with newer brands targeting the kind of young trendsetters that have propelled start-up sensation Xiaomi onto the global stage. I got a chance to check out Huawei’s Honor brand phones and ZTE’s Nubia models last week at a major trade show in Spain, where both were trying to show that they can be just as hip and edgy as Xiaomi and Apple (Nasdaq: AAPL), the global leader in trendy, cutting edge smartphones. Read Full Post…
Bottom line: Apple Watch should debut strongly in China thanks to extensive partnerships with top Chinese retailers and app makers, giving the product instant relevance in the local market.
Apple Watch coming to China
Global gadget leader Apple (Nasdaq: AAPL) has been in the local tech headlines nonstop these last few days, wowing Chinese fans with a customized version of its new Apple Watch that will debut in China next month as part of its global launch. Pundits are mixed on how the watch will fare in China, but I expect it should do quite well thanks to inclusion of China’s hottest apps together with the company’s own strong reputation for well-designed, cutting-edge products.
In a separate but probably related Apple headline, media are also reporting a new smart air conditioner that the company has developed with local appliance leader Haier (HKEx: 1169) will also debut in April. Apple first announced this alliance last June as part of a broader smart device alliance under the name of HomeKit, and I suspect the Apple Watch will be usable with these new air conditioners. Read Full Post…
Bottom line: China needs to realize that hardware from private western firms isn’t a risk to national security, and change its stance on new security-related requirements or risk another major trade war.
China’s growing insecurity
China’s growing insecurity is quickly shaping up as the next front line in a seemingly endless series of business disputes with the west, with word that Beijing is weighing a major new anti-terrorism law that would place huge new intrusive conditions on western technology firms. This story has been gaining rapid momentum over the last year, though until now many of the moves have been largely talk and one-time actions aimed at individual companies.
This new move, involving a proposed counter terrorism law, looks set to formally place many of the previous requirements on all foreign tech companies that sell their equipment to Chinese government agencies and other sensitive sectors like banks. Most of the companies being targeted come from the telecoms and related sectors, including networking equipment and the software that runs such equipment. Read Full Post…
Bottom line: Huawei’s massive spending at the world’s biggest telecoms show this week hints at its determination to make big inroads in Europe and the US this year for its older networking equipment and newer smartphone businesses.
Huawei spends millions at big telecoms show
In between running from interview to interview at the world’s largest telecoms show this week in Barcelona, I managed to scribble down some notes on which Chinese firms were spending the most heavily at this year’s Mobile World Congress (MWC). Such spending hints at company priorities for the year ahead, including which markets they are targeting. In this case it’s worth noting that MWC is largely a show for customers from North America and especially Europe, so anyone who attends as an exhibitor is almost certainly eying those markets.
All that said, it should come as no surprise that telecoms giants Huawei and ZTE (HKEx: 763; Shenzhen: 000063) were the 2 biggest spenders among Chinese firms at this year’s show, based on my own analysis. PC giant and smartphone aspirant Lenovo (HKEx: 992) was the only other Chinese firm with major representation. But perhaps most surprising was the size of Huawei’s presence, which easily dwarfed both ZTE and Lenovo. Read Full Post…
Bottom line: ZTE’s decision to slim down its cellphone product line and focus on 4 key areas looks like a smart formula for success, but its big bet on voice could bring trouble if the technology fails to gain momentum.
ZTE slims down cellphone product line
After a painful but necessary restructuring, telecoms stalwart ZTE (HKEx: 763; Shenzhen: 000063) has largely withdrawn from the price wars that have plagued China’s smartphone market and is focusing on a strategy that emphasizes simplicity and higher-end products. The simplification strategy takes its cues from Apple (Nasdaq: AAPL), whose focus on just 2 or 3 new smartphones each year contrasts sharply with the many different models rolled out by its now-struggling chief rival Samsung (Seoul: 005930).
I quite like the simplification strategy for a number of reasons, even though consumers ultimately get less choice. Fewer models lowers product development costs, and allows a company to focus on a smaller number of phones with better designs. Such a strategy also creates stronger focus in consumers’ minds, which in turn helps to build a brand’s identity and the kind of customer loyalty that Apple has found. Read Full Post…
Bottom line: China Mobile’s new unnamed social networking platform based on RCS technology has a 50-50 chance of posing a serious challenge to WeChat due to the many advantages it will enjoy from its China Mobile connections.
New China Mobile platform to challenge WeChat
After 2 years of standing on the sidelines as Tencent’s (HKEx: 700) WeChat rapidly stole its text messaging business, leading telco China Mobile (HKEx: 941; NYSE: CHL) is finally preparing to fight back with its own competing product offering, according to ZTE (HKEx: 763; NYSE: CHL), which is supplying networking equipment for the product. ZTE’s cloud computing chief Zhu Jinyun told me the new product will be an entire platform for social networking and other services based on rich communications suite (RCS), a technology developed by a global telecoms association.
I’m admittedly not too familiar with RCS, though some web searches showed it’s a platform that allows for a wide range of functions, from one-on-one instant messaging to group chats, file transfers, IP voice calls and location-based services (LBS). Anyone looking at that list will instantly recognize that many of those features are already present on WeChat, whose popularity has rapidly siphoned texting business from China Mobile and the nation’s other telcos. Read Full Post…
Bottom line: The absence of Xiaomi and other newer Chinese smartphone makers from the world’s leading telecoms show reflects their focus on emerging markets and limited promotional budgets due to stiff competition at home.
Xiaomi missing at world’s top telecoms show
I’m in Barcelona this week for what has become the world’s biggest annual telecoms show, and thought I’d kick off my coverage with a look at who is attending from China this year. The list contains most of the big names you’d expect, including Huawei, ZTE (HKEx: 763; Shenzhen: 000063) and Lenovo (HKEx: 992), though Lenovo has decided to keep its name off the “made in China” list and is opting to call itself a US company.
But equally noteworthy is who isn’t on the list, at least not as an exhibitor. That list of absentees includes all of China’s newer smartphone makers, led by the fast-rising Xiaomi that has come from nowhere over the last 3 years to become the world’s third biggest brand. Others that aren’t on the list include locally well-known Chinese names Coolpad (HKEx: 2369) and Meizu, which have recently formed tie-ups with major Internet companies Qihoo 360 (NYSE: QIHU) and Alibaba (NYSE: BABA, respectively. Read Full Post…
Bottom line: Mobile data usage will grow by triple-digit amounts this year as telcos boost 4G promotions, while box office growth will start to slow and the ongoing decline in traditional SMS text messaging will accelerate.
Hongbao chatter fuels mobile data surge
The usual rush of Lunar New Year-related data is coming in, painting a mixed picture for traditional and new media. The clear winner in the mix is new media, whose surging popularity helped to fuel a 70 percent jump in mobile data traffic over the holiday period. Traditional movies also performed well, with China’s box office rising 36 percent during the period. It will also come as no surprise that the big loser over the holiday was traditional SMS text messages, whose volume plunged by 25 percent. Read Full Post…
