Bottom line: OnePlus and Smartisan are 2 brands that could be most at risk for closure or acquisition in a looming smartphone shakeup that will intensify next year and claim at least 2-3 mid-sized and smaller players.
Less than 2 weeks after he talked about a looming shakeup in China’s overheated smartphone sector, OnePlus co-founder Carl Pei is having to explain layoffs at his company, and also fend off rumors of a takeover bid. At the same time, more signs of Pei’s predicted shakeup are coming from Smartisan, another newer smartphone play, whose manufacturing partner for its new model has reportedly gone bankrupt.
Both OnePlus and Smartisan fit the profile of the kind of company that Pei said would be most at risk in the coming shakeup. Each is relatively young, and both are pure smartphone plays without any other operating history. That means they have few other resources to fall back on as their profits evaporate in the unending price wars gripping China’s smartphone market. Read Full Post…
The following press releases and media reports about Chinese companies were carried on December 9. To view a full article or story, click on the link next to the headline.
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China Resources Challenges ON Semiconductor with Fairchild (Nasdaq: FCS) Bid (English article)
Postal Savings Bank Signs China Life, Ant Financial, Tencent as Investors for HK IPO (Chinese article)
Google (Nasdaq: GOOG) Registers Company in Shanghai Free Trade Zone (Chinese article)
ZTE (HKEx: 763), Shanghai Oriental Pearl in Strategic Cooperation (HKEx announcement)
Uber Releases China ICP Permit Number in Response to WeChat Blockage (Chinese article)
Bottom line: A new patent lawsuit against it in the US highlights one of the biggest challenges Xiaomi and other Chinese tech brands will face in their global expansion, and exposes a major weakness in China’s own patent protection system.
Xiaomi hit with US patent lawsuit
Stumbling smartphone sensation Xiaomi suffered a recent new setback in its global aspirations, after being sued in the US for patent infringement involving technology used in several of its popular models. The new action comes a year after Xiaomi was sued over similar allegations in India, and reflects one of the biggest challenges Chinese high-tech brands face as they try to expand beyond their home market.
Foreign companies often choose to pounce when these Chinese brands venture abroad, because they know that legal systems are more mature and patent enforcement more effective in these countries than in China. Many of these countries take immediate action against suspected patent violators if they believe a case is valid, unlike China where cases can often drag on for months or even a year or more before a verdict is reached. Read Full Post…
Bottom line: Richard Li’s investment in ZTE reflects the company’s improving position after an overhaul during the last 2 years, while Pony Ma’s sell-down of his Tencent stake looks like ordinary share selling by a company founder.
Pony Ma sells Tencent, Richard Li buys ZTE
A couple of stock sales are in the news as we head into the new week, led by Pony Ma’s sale of a massive HK$3.8 billion ($500 million) worth of shares in his company, social networking giant Tencent (HKEx: 700). While Ma was busy cashing out some of his stake, Hong Kong’s Richard Li, son of billionaire Li Ka-shing, moved in the other direction by boosting his stake in ZTE (HKEx: 763; Shenzhen: 000063), the telecoms company emerging from a major overhaul over the past 2 years.
Of these 2 moves, the latter is probably more significant since it marks a vote of confidence in the turnaround story of ZTE by Li, whose investment decisions are fairly well respected though nothing like those by his much better-known father. Pony Ma’s sell-down of his stake looks more routine, though it’s still a relatively large portion of his sizable holdings in China’s second most valuable Internet company, with a market value of $180 billion. Read Full Post…
The following press releases and media reports about Chinese companies were carried on December 5-7. To view a full article or story, click on the link next to the headline.
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Ola, Didi Kuaidi, Lyft and GrabTaxi Gang Up to Kill Uber (English article)
The following press releases and media reports about Chinese companies were carried on November 12. To view a full article or story, click on the link next to the headline.
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Alibaba (NYSE: BABA) Generated $14.3 Bln GMV on Global Shopping Festival (Businesswire)
Perfect World to Reaquire Online Literature Unit from Baidu (Nasdaq: BIDU) – Source (Chinese article)
Bottom line: The failure of 2 major touch-screen technology manufacturers in Guangdong is the latest sign of trouble in China’s overheated smartphone sector, with similar new closures likely to accelerate in the next few months.
Two more smartphone component suppliers go bust
China’s smartphone wars are taking an unexpected twist, with suppliers to some of the nation’s top brands emerging as the first victims of a prolonged battle for market share. I had previously expected at least one or two small- to mid-sized brands would bow out of the market by the end of this year, though we have yet to see any such developments.
Instead the inevitable shake-out appears to be starting in the supply chain, with media reporting that 2 major smartphone part suppliers have gone bankrupt in southern Guangdong province where much of the manufacturing takes place. (Chinese article) The insolvency of these 2 major suppliers, one in the boomtown of Shenzhen and another in the nearby city of Huizhou, comes just a couple of weeks after the bankruptcy of a major supplier of metal casings for smartphones sold by Huawei and ZTE (HKEx: 763; Shenzhen: 000063). Read Full Post…
Bottom line: The bankruptcy of a major component supplier to ZTE and Huawei is the latest sign of stress in the overheated smartphone sector, and at least 1-2 small to mid-sized brands are likely to leave the market by mid-2016.
Smartphone price wars undermine parts maker Fosunny
Fresh new cracks are appearing in China’s smartphone making machinery, with reports that a major component supplier to Huawei and ZTE (HKEx: 763; Shenzhen: 000063) has gone bankrupt. At the same time, another report is citing bad weather for a supplier’s delivery delays that are causing Alibaba-backed (NYSE: BABA) smartphone maker Meizu to postpone the launch of a new high-end model.
The most worrisome of these 2 stories is the bankruptcy of Fosunny, a maker of metal casings used for smartphones. The company lists US wireless carrier AT&T (NYSE: T) and Europe’s Vodafone (London: VOD) among its customers on its website, but I suspect that both of those relationships come via third-parties like Huawei and ZTE that supply smartphones to those telcos. Read Full Post…
The following press releases and media reports about Chinese companies were carried on October 10-12. To view a full article or story, click on the link next to the headline.
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China Resources Unit to Sell Wal-Mart (NYSE: WMT) China Store Stakes for $525 Mln (English article)
The following press releases and media reports about Chinese companies were carried on September 19-25. To view a full article or story, click on the link next to the headline.
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Bottom line: Smaller foreign tech companies could follow Trend Micro’s lead and withdraw from China over the next few years, as they suffer sharp business downturns due to restrictions under the country’s new national security law.
Trend Micro sells China unit
This summer has been unusually quiet for big multinationals in China, following campaigns in the last 2 years targeting foreign companies for monopolistic practices and corruption, among other things. But the real turbulence this year has been happening behind the scenes, as foreign technology companies face a major business downturn following China’s recent roll-out of a strict new law designed to protect national security.
Many foreign tech firms have complained the new law is too broad and intrusive, and now security software specialist Trend Micro may have become the first major victim. That’s my interpretation, following an announcement that appears to show Trend Micro is withdrawing from the market. This particular move will see Trend Micro sell all of its China operations to AsiaInfo, a Chinese owned maker of telecoms software. Read Full Post…
