Hi all — James here from Hong Kong. When we emerge blinking into the sunlight after the pandemic, we’ll find that the world around us has changed. The engagement between the US and China that drove decades of globalisation is being torn apart. Splinters from the wrenching and the ripping are starting to cause intense pain. Our main story this week looks at the potential for a tech “cold war”. These are not words that we have rushed to use, but in light of recent events they seem justified.

In addition, don’t miss Mercedes’ piece on the frenetic competition between US and Chinese tech companies for south-east Asia’s cloud computing market (Mercedes’ Top 10). Those with a mischievous sense of humour will delight in SoftBank’s “Valley of Coronavirus” slideshow — you couldn’t make it up (Mercedes’ Top 10). And catch up with ambitions to see India’s Jio Platforms become “Vodafone, plus Tencent, plus a [handset] maker” (Smart data). Take very good care till next week.

The Big Story

The US and China are on the brink of a tech “cold war”. US moves to cut off the supply of computer chips to Huawei, one of China’s leading companies, could have a significant impact on the world’s technology supply chain, writes Kathrin Hille, the FT’s Greater China correspondent.

Already TSMC, the world’s biggest contract chipmaker, has halted new orders from Huawei in response to the tighter US controls, according to this exclusive by Cheng Ting-Fang and Lauly Li in the Nikkei Asian Review.

Key implications: “There is a huge amount of nervousness that this . . . is turning into a technological cold war,” said Geoff Blaber of research company CCS Insight.

Huawei said that the US moves put its survival at stake. Analysts believe the new controls will neuter HiSilicon, Huawei’s semiconductor affiliate and China’s largest chip design company. SMIC, China’s largest contract chipmaker, could also be hit.

But it is also important to recognise that supply chains are immensely complex and mutable; Huawei and other companies hit by the move will be looking for workarounds, loopholes and other ways to soften the potential blow after a 120-day grace period expires.

Upshot: When the US first blacklisted Huawei in May last year, there was much hand-wringing over how the Chinese company could survive. But in the end, Huawei raised its spending with US suppliers by 70 per cent in 2019. Tech Scroll Asia’s hunch is that this week’s news will trigger more rounds of “supply chain cat-and-mouse”.

Mercedes’ top 10

  1. Competition between US and Chinese tech giants for the world’s fastest-growing cloud computing market in south-east Asia is driving a frenzy of investment by big names such as Amazon, Google, Alibaba, Tencent and Microsoft.

  2. The US’s tech-focused Nasdaq will introduce restrictions for initial public offerings, a move that will largely target China. But already the changes are being dismissed as “cosmetic”. More here on the impact for Chinese listings from FT Asia markets correspondent Hudson Lockett.

  3. Is the great freeze between Tesla and Panasonic thawing? The US carmaker and the Japanese company have revived talks to expand production of electric vehicle batteries at their US Gigafactory.

  4. Jesus Christ was also misunderstood and criticised. That was the response from SoftBank founder Masayoshi Son when pressed by analysts on his Vision Fund’s poor performance at the conglomerate’s results update. Hat tip to FT Alphaville for making sense of SoftBank’s presentation slides with a dose of humour.

  5. SoftBank is also selling down its stakes in strategic assets to shore up confidence in its own performance. The Japanese group is considering a sale of up to $20bn in shares of T-Mobile US and could sell as much as $11.5bn of shares in China’s Alibaba.

  6. Indonesia has been trying to get Big Tech to pay their fair share of taxes for years. The coronavirus crisis has accelerated that drive and new laws could potentially add to the bills of local customers of Netflix, Spotify and others.

  7. Chinese electric vehicle start-ups are trying to close the gap with Silicon Valley, rolling out pilot projects, racking up test miles and raising new funds as US rivals sit idle during the coronavirus crisis.

  8. Facebook is reportedly planning to build a $1bn cable to bring faster internet to Africa and one of the telecom carriers it could partner with is China Mobile.

  9. The Facebook-led digital currency may be gathering some serious backers again. Singapore’s Temasek has signed up to the Libra Association, the first Asian and institutional investor to do so.

  10. The great charm of Japan’s Kagawa prefecture is that nothing much happens there. It has, glacially, perfected the udon noodle and its manicured Ritsurin Garden has remained unchanged for nearly 400 years. But now Kagawa is jumping into three seething global debates. Leo Lewis explains.

When sages speak

  • Four Chinese initiatives to find a vaccine for Covid-19 have moved to the trial stage, says this useful backgrounder by Claire Felter from the Council on Foreign Relations. Biotech firms CanSino Biologics and Sinovac, the medical-research arm of the People’s Liberation Army and state-run company Sinopharm all have trials under way.

  • James Crabtree at the National University of Singapore’s Lee Kuan Yew School of Public Policy argues in this insightful piece that many companies are likely to resist post-pandemic pressure to disentangle global supply chains from China. 

  • Not strictly about Asia, but this is an interesting and fun discussion with Matt Ridley about how innovation works, with particular reference to finding a vaccine for Covid-19. Human civilisation is an “infinite improbability drive”.

  • Elsa Kania and Lindsay Gorman argue in this piece for the Centre for a New American Security that the US can’t afford to turn away Chinese talent.

Art of the deal

  • SenseTime, one of China’s artificial intelligence champions, is considering a $1bn capital raising, according to the Wall Street Journal, although the report is light on detail. The coronavirus pandemic has led to new uses for the company’s facial-recognition technology, which has been deployed for contactless temperature checks that can also detect whether people are wearing masks.

  • Alibaba’s Alipay quest for dominance of south-east Asian e-wallets continues: the latest is a $73m investment in Digital Money Myanmar.

  • Chinese fitness app Keep, which is backed by Tencent, has joined the unicorn club after raising an $80m Series E round led by Jeneration Capital Management, GGV and German conglomerate Bertelsmann’s Bertelsmann Asia Investments. It is one of the country’s first sports tech companies to hit a valuation of more than $1bn and serves more than 200m users.

In the spotlight

Meet the new face of TikTok in the US. Kevin Mayer, once a contender to lead Disney, has been appointed as head of the viral video app.

Mr Mayer, who most recently oversaw Disney’s streaming push, has over the past two decades orchestrated a series of acquisitions — including Pixar, Marvel and 21st Century Fox — to help build the US entertainment group into the world’s biggest traditional media company.

He has his work cut out for him. On top of bolstering the company’s nascent offering to advertisers, Mr Mayer is tasked with solving TikTok’s reputational issues. While the app has exploded in popularity during the health crisis, its Chinese parent company ByteDance has been dogged by concerns over user privacy, national security and censorship.

And how will the new leadership manage TikTok’s relationship with ByteDance as the app’s popularity continues to grow in the US?

Smart data

Reliance’s year of dealmaking

“It’s Vodafone, plus Tencent, plus a [handset] maker.” India’s Mukesh Ambani is trying to reposition Reliance Industries, his sprawling energy-heavy conglomerate, as a homegrown consumer internet giant.

And the investors are piling in. In the past several weeks his telecom and digital services business Jio Platforms has received billions of dollars of new funding, starting with Facebook’s $5.7bn investment. As the spread of coronavirus sparked an anti-China backlash in both the US and China, American investors including Silicon Valley titans have made their moves, as the chart above shows.

For Jio’s American investors, it ties their fortunes in the booming Indian market — arguably the most promising outside China — to the country’s most powerful tycoon.



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