Bottom line: Lack of buzz around Xiaomi’s launch of production in India and Lenovo’s new line of ZUK smartphones reflect fatigue that is rapidly consuming domestic Chinese brands due to rampant competition in their home market.
More fatigue signs in China smartphone market
Signs of fatigue continue to grow in China’s overheated smartphone market, where rampant competition and unending price wars these last 2 years have led to saturation and a rapid slowdown. That fatigue is visible in 2 of the latest headlines, one of which has former superstar Xiaomi failing to garner much buzz as it launches production in India to jump-start its stalling growth. The other has the struggling Lenovo (HKEx; 992) launching its own new brand of smartphones, as it also faces lackluster performance for its current lineup sold under its own name and the Motorola brand it acquired last year.
China’s smartphone market is the world’s largest, but also the most competitive due to the presence of many homegrown domestic players. That reality has forced many mid-sized and smaller names to seek tie-ups with wealthier partners, and forced everyone to look abroad for growth as profits shriveled at home. Adding to the woes, China’s smartphone market has been contracting this year, with sales falling 4.3 percent in the first quarter after several years of explosive growth. Read Full Post…
The following press releases and media reports about Chinese companies were carried on August 14. To view a full article or story, click on the link next to the headline.
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Lenovo (HKEx: 992) faces Motorola Hangover, Cuts 3,200 Jobs as Sales Slide (English article)
Xiaomi Announces New Products, Including MIUI 7 Operating System (Chinese article)
Amazon (Nasdaq: AMZN) China to Accelerate Local Investment – President (Chinese article)
Bottom line: Alibaba’s naming of a westerner and former top Goldman Sachs executive as its new president looks like a smart move to boost its struggling global expansion, and could bring more focus to the division over the next year.
New Alibaba president to lead international efforts
After muddling around on the global stage for a while without much to show for its efforts, I’m happy to see that e-commerce giant Alibaba (NYSE: BABA) has finally taken the step of hiring someone with extensive experience outside China to spearhead its international expansion. The company’s naming of a former Goldman Sachs executive as its new president should help to bring some focus to an international drive that to date has been quite fragmented and hasn’t produced any solid results.
More broadly speaking, the naming of Michael Evans as the new president of Alibaba Group marks the second major appointment for the company in the last 3 months, as founder Jack Ma installs a new executive team to head his $200 billion company. His decision to name foreigners to some of the top spots mirrors a similar strategy by PC giant Lenovo (HKEx: 992) and also Tencent (HKEx: 700), one of Alibaba’s chief rivals. Read Full Post…
Bottom line: The purchase of Micron by Tsinghua Unigroup offers a good chance for Sino-US confidence building if Washington signals it will fairly consider such a deal and Unigroup demonstrates its actions are commercially driven.
Micron sale offers chance to boost Sino-US trust
A potential mega-deal that would see China’s Tsinghua Unigroup buy leading US memory chip maker Micron Technology (Nasdaq: MU) could become a major trust-building exercise between China and Washington if handled properly, but could also quickly end in an angry war of words if the opposite occurs. Both sides need to take important steps to ensure fair trade in the case, which is sensitive because it involves the acquisition of a US high-tech leader by a company with close ties to China’s top science university.
For its part, Unigroup could take steps to show its independence from Tsinghua University, and more broadly to show that it is a commercially-focused business that doesn’t make decisions based on government orders or support. For its part, Washington could signal it is willing to consider a deal that appears to pose no threat to national security, even though it would see a major technology company taken over by a Chinese peer. Read Full Post…
Bottom line: Second-quarter smartphone data confirms recent trends that have shown a surge for Huawei and Apple, while Lenovo and Samsung struggle and Xiaomi also faces rapidly slowing growth.
Huawei consolidates spot as world’s No 3 smartphone maker
The latest smartphone sales figures are out, showing a recent surge for Huawei and strong but slowing growth for Xiaomi, as Chinese brands continued to take 3 of the top 5 global spots. Meantime, the same chart shows the lackluster Lenovo (HKEx: 992) continued to stumble as it failed to find an audience for its products, and global leader Samsung (Seoul: 005930) also continues to struggle.
The latest second-quarter figures from IDC come as another smaller data tracking firm IHS Technology released its own numbers showing Xiaomi continued to rule the China roost and even boosted its share of the market. Meantime, Samsung continued to slip in the world’s biggest smartphone market, falling a notch to barely stay in the top 5 brands. Read Full Post…
Bottom line: Huawei’s accelerating smartphone sales reflect its growing momentum in China, and could prompt it to consider spinning off the unit for a potential IPO in its drive to become more transparent.
Huawei News
Smartphones power Huawei resurgence
Growing momentum for its smartphone business has become the driving force behind a resurgent Huawei, which has just reported solid first-half revenue growth that is showing signs of accelerating after a recent slowdown. That’s good news for Huawei, but less promising for domestic rivals like Lenovo (HKEx: 992), Xiaomi and Coolpad (HKEx: 2369), which are struggling for direction in a crowded Chinese smartphone market where global giant Apple (Nasdaq: AAPL) has also shown signs of a recent resurgence.
Huawei hasn’t been too generous in providing financial data for the first half of the year, saying only that revenue jumped by 30 percent to 176 billion yuan ($28 billion). (company announcement; Chinese article) For anyone who tracks the global market, that figure is already more than double the $12.5 billion in first half sales reported by Ericsson (Stockholm: ERICb), Huawei’s leading rival in its traditional networking equipment core area. Read Full Post…
Bottom line: Qihoo’s new Dazen smartphones stand a low chance of success, even if they provide better quality to comparably priced rivals, due to their late entry to the overheated ultra low-end of China’s smartphone market.
Qihoo unveils Dazen smartphone
About a half year after announcing its intent to enter China’s crowded smartphone space, software security specialist Qihoo (NYSE: QIHU) has unveiled its new product under a brand name that sounds clever and catchy but is decidedly downscale. Qihoo has just announced that its new smartphones will carry the brand name of Dazen, and will sell for a bargain basement price of 899 yuan, or about $150.
The move appears to be an extension of Qihoo’s longtime strategy of selling products cheaply or even giving them away for free, and then using those products as a marketing tool for its other paid products and services. But in this case the strategy of going after the ultra low end looks a bit questionable, since that part of the market is already quite crowded and many brands are believed to be losing money. Read Full Post…
Bottom line: US national security regulators are likely to approve the potential purchase of Micron by China’s Tsinghua Unigroup, to demonstrate their commitment to fair trade and avoid politicizing cross-border high-tech M&A.
Micron sale likely to get US approval
In the days after reports emerged that China’s Tsinghua Unigroup was planning a bid for US memory chip giant Micron (NYSE: MU), media have been buzzing with speculation over whether Washington might veto a deal on national security grounds. I can understand the logic from both views, and some say recent US allegations of frequent hacking attacks from China could add to arguments for a veto of the deal.
But as a longtime watcher of this kind of transaction, I expect that Washington will ultimately approve the purchase to demonstrate its commitment to fair trade. Such a move would also send a strong signal to Beijing, which is showing growing signs of limiting sales by foreign technology companies in China with its recent introduction of a sweeping new national security law. Read Full Post…
Bottom line: The current fund-raising frenzy reflected in a recent round of buyouts for US-listed Chinese companies and large IPOs like the one for Legend Holdings is likely to quickly fizzle if China’s stock market sell-off continues.
KongZhong gets buyout offer
The China fund-raising machine has continued to rumble ahead despite the recent stock market sell-off in Shanghai, with yet another privatization offer coming for a New York-listed firm and a lethargic but respectable debut for newly listed Legend Holdings (HKEx: 3396). The former item saw shares of game operator KongZhong (Nasdaq: KZ) jump after receiving a buyout offer, even as most New York-listed Chinese shares slumped in line with the big sell-off in Shanghai. The latter item saw Legend shares finish down slightly in their Hong Kong trading debut, which doesn’t sound too exciting but was still far better than the 3.3 percent decline of the Shanghai benchmark index. Read Full Post…
Bottom line: A probable correction in China’s stock markets could cause Tongcheng to abandon its decision to list at home, and lead to a weak debut for Legend Holdings’ Hong Kong IPO.
Toncheng eyes China IPO
When the history books are written, the latest batch of IPO news could well mark the end of a brief but unusually buoyant period that has seen many Chinese companies eschew overseas stock markets for listings at home. Leading off the news was a sizzling performance by securities brokerage Guotai Junan (Shanghai: 601211) on its trading debut in Shanghai, as it become China’s biggest domestic IPO since 2010.
Another piece of IPO news also cast a spotlight on the hot Chinese stock markets, as online travel site Tongcheng said it was eying a listing at home in the next year, in a snub to New York where most of its peers are traded. Last but not least, the lukewarm reception for Chinese listings abroad was reinforced by Legend Holdings, parent of PC giant Lenovo (HKEx: 992), which failed to attract any major international investors as it priced its Hong Kong IPO. Read Full Post…
Bottom line: The see-saw performance of iDreamSky shares after its buyout offer reflects a growing number of speculators in the market for US-listed China shares, while Legend’s Hong Kong IPO is likely to price and debut weakly.
iDreamSky gets buyout offer
As we head into the end of June, the first half of 2015 is set to set an unusual record of becoming the first such period to see a negative number of New York IPOs by Chinese companies. That fact is being driven by a record number of companies that have announced privatization plans, including the latest by mobile game developer iDreamSky (Nasdaq: DSKY). If this latest plan is successful, iDreamSky would also set a new record for shortest time ever as a New York-listed Chinese firm, since the company only made its IPO last August.
Meantime, one actual IPO that is moving forward is coming in Hong Kong, where Legend Holdings, parent of PC giant Lenovo (HKEx: 992), has set a price range, date and chosen a ticker for its offering. This particular deal appears to be getting a ho-hum reception in Hong Kong, as most investors remain fixated on a rally across the Chinese border that has seen China’s domestic stock markets more than double over the last year. Read Full Post…
