Bottom line: ZTE’s temporary relief from sanctions for illegally selling US products to Iran is probably contingent on its assistance in a broader probe of the matter, and could result in more arrests and sanctions against others in the case.
ZTE assisting in US probe
In a move that surprised me, Washington is indicating it might reduce the stiff punishment it previously announced for telecoms equipment maker ZTE (HKEx: 763; Shenzhen: 000063) for illegally selling US-made equipment to Iran. In the past, Washington has shown little tolerance for Chinese companies that break the rules, even though Beijing often protests such inflexibility.
But this time is slightly different from the past, since it involves a single company rather than an entire industry. Still, this kind of temporary relief does seem a bit unusual for Washington. Accordingly, I suspect that ZTE is quietly cooperating behind the scenes with an investigation that could ultimately incriminate many other companies and individuals that helped it to circumvent Washington’s rules prohibiting the sale of US-made networking equipment to Iran. Read Full Post…
The following press releases and news reports about China companies were carried on March 12-14. To view a full article or story, click on the link next to the headline.
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Huawei Enterprise Unit Achieves Profitability in 2015 (Chinese article)
Canadian Solar (Nasdaq: CSIQ) Reports Q4 and Full Year Results (PRNewswire)
Alibaba’s (NYSE: BABA) Cainiao Logistics Arm Targets Colleges (English article)
Huayi (Shenzhen: 300027), Tencent (HKEx: 700) Prepare Vehicle for Hollywood, Korea Deals (English article)
Ant Financial’s Sesame Credit Starts Beta Testing of Enterprise Credit Service (English article)
Bottom line: Huawei’s move into electronic payments is its first foray outside its traditional strength as a hardware developer, and reflects its growing aspiration to challenge global rivals Apple and Samsung.
Huawei tries services with Huawei Pay
Fast-rising smartphone maker Huawei no longer seems content to target homegrown rivals like Xiaomi as its main competitors, and is increasingly looking to challenge global leaders Apple (Nasdaq: AAPL) and Samsung (Seoul: 005930). That’s my interpretation of the latest headlines, which say Huawei is preparing to roll out a new mobile payments service in China, less than a month after similar moves by the 2 global leaders.
This particular move comes as a bit of a surprise, since there were no previous indications that Huawei was planning such a foray. Up until now, Huawei was largely been a company focused on hardware, unlike Apple, which has built a big stable of service-related offerings like Apple Pay and its music and video services around its core smartphones and computer products. Read Full Post…
The following press releases and news reports about Chinese companies were carried on March 10. To view a full article or story, click on the link next to the headline.
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iMeigu Submits Proposal to Acquire Dangdang (NYSE: DANG) (PRNewswire)
Huawei Rolls Out Huawei Pay in Bid to Shake Up Mobile Payments Market (Chinese article)
China Smartphone Supply Chain Facing Pressure From Rising Costs – IDC (Chinese article)
Alibaba (NYSE: BABA) Set to Close $4 Bln Bank Loan – Reports (Chinese article)
Ourpalm (Shenzhen: 300315) to Buy 19 Pct of Korea’s Webzen for 1.1 Bln Yuan (English article)
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: 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: 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: 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…
The following press releases and news reports about Chinese companies were carried on February 23. To view a full article or story, click on the link next to the headline.
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Tsinghua’s $2.6 Bln Taiwan Deals to Face Unprecedented Government Scrutiny (English article)
Huawei Debuts MateBook Notebook PC at Mobile World Congress (Chinese article)
HK Lays Out Case Against Short Seller Citron Research’s Andrew Left (English article)
ICBC (HKEx: 1398) Says Cooperating With Madrid Anti-Money Laundering Probe (HKEx announcement)
Parcel Delivery Service SF Express Prepares for Domestic IPO (Chinese article)
