The Chinese government on July 12 announced it had given Xiaomi a production license to independently assemble electric vehicles, meaning the smartphone maker has cleared the official hurdles required to scale up its production independently, without needing its traditional car manufacturer ally BAIC.

Why it matters: The green light from Chinese regulators will pave the way for a smooth production ramp-up for Xiaomi, which has raised its delivery target to 120,000 from 72,000 units for this year and hopes to reach a wider customer group with upcoming models.

Details: Xiaomi is now on the list of “all-electric passenger car manufacturers,” according to the registration filings released for public review by China’s Ministry of Industry and Information Technology (MIIT) on July 12 (our translation).

• Xiaomi also updated the filing for registration of its first consumer car, the SU7, to the country’s top industry regulator, with the model carrying the “Xiaomi” name on its rear, rather than “Beijing Xiaomi” as previously shown, the photos revealed by MIIT show.
• The popular sedan has always been manufactured at Xiaomi’s factory in the Beijing Economic and Technological Development Zone, but its production application had earlier been filed in the name of a subsidiary of state-owned automaker BAIC, TechNode reported.
• The company had been waiting for final approval from MIIT after getting the nod from China’s state planner to manufacture EVs, Reuters first reported last August, while reportedly looking for a partner to produce its second model. Its Beijing plant can turn out 150,000 cars a year.

Context: Xiaomi reached the 10,000-unit milestone in June, its third delivery month, bringing the year-to-date delivery volume of its answer to Tesla’s Model 3 to nearly 26,000 units.

• President Lu Weibing told investors in May that the company is aiming to deliver 120,000 cars this year. This is far higher than the firm’s original target of 72,000 units revealed by chief executive Lei Jun at Xiaomi’s annual investor day in April, CNBC reported.
• Priced from RMB 215,900 ($29,881) with styling similar to the Porsche Taycan, the all-electric Xiaomi SU7 has become a success in China, securing 88,898 pre-orders in the 24 hours following its launch on March 28. The company has since been under pressure to ensure timely delivery.
• The tech giant is also rushing to introduce its second car, an all-electric sports utility vehicle, in the first half of next year, while a third model is said (in Chinese) to be an extended-range hybrid (EREV) targeting Chinese families, and is scheduled for release in 2026.

READ MORE: “China’s Apple” Xiaomi takes aim at Tesla with debut EV launch, as millions watch online

Chinese carmakers Geely, NIO, and Huawei-backed Aito on Monday reported record deliveries of electric vehicles for June as the country’s EV segment recovery gathers momentum. Meanwhile, Huawei and Li Auto are emerging as the leaders among the newer players, despite BYD and Tesla still enjoying a near-duopoly position in the world’s largest EV market.

Why it matters: The rally, which contrasts with overall flat sales in the market, comes amid a temporary cooling-off period for the industry-wide price war on electric autos in the country. It also reflects companies’ sprints to make deliveries by the end of the first half of 2024. A new wave of consolidation and some reshuffling is also speeding up within the sector, with fewer smaller players staying in the game and some legacy giants falling behind.

Details: Li Auto topped the ranking among young EV makers by delivering 47,774 cars to customers in June, up 36.4% from a month earlier, as sales of its most affordable extended-range hybrid crossover the L6 started to ramp up after its April launch. Chief executive Li Xiang also attributed the sales recovery to improved efficiency, as the company restructured its sales and delivery teams recently following a failed launch of its first all-electric model, the Mega, in March.

• Huawei continues to put pressure on Li Auto despite delivering 1,633 fewer vehicles than the Nasdaq-listed EV startup in June. The Chinese technology giant said its Harmony Intelligent Mobility Alliance (HIMA), which for now includes Aito and Luxeed brands only, delivered 194,207 vehicles from January to June, which is more than the 188,981 units posted by Li Auto. Huawei will launch a new premium brand called Stelato with partner BAIC next month after it began taking orders for the first model, the S9, on May 31.
• Among traditional competitors, Geely set a new record for EV sales of 65,959 units in June. In particular, deliveries of its mainstream luxury brand Zeekr surpassed the threshold of 20,000 units for the first time since its inception. Geely management on Tuesday announced it was raising this year’s sales goal by 5% to 2 million units, while Zeekr’s annual outlook of selling 230,000 units remains on track. Lynk & Co sold 24,439 cars last month, 62% of which were EVs, a record high percentage for the Geely-Volvo joint brand.
• Changan’s EV sales rose 61% year-on-year and 14.7% month-on-month last month to roughly ​​64,000 units, of which 16,659 were Deepal-branded EVs. The automaker said it received more than 15,000 refundable orders for its first off-road sports utility vehicle, the Deepal G318, priced from RMB 175,900 ($24,186), five days after it was launched on June 13. Chery’s EV sales surged 181.5% to 180,947 units during the first half of this year, thanks to strong overseas demand for its budget cars, such as the QQ Ice Cream and Little Ant.
• Both NIO and Leapmotor reached the 20,000-unit milestone in June. NIO has sustained the growth momentum that it’s seen since April and is demonstrating the potential to deliver 30,000 cars a month once its first mainstream car goes on sale in September. Leapmotor reached the milestone for the first time last month, as the Hong Kong-listed firm now positions itself as a cheaper alternative to Li Auto. Smartphone giant Xiaomi handed over more than 10,000 SU7 sedans to customers in its third delivery month.
• Meanwhile, Tesla is feeling the heat. Sales of its China-made vehicles declined 10.5% year-on-year to 426,623 units during the first half of this year, including exports, according to figures released by the China Passenger Car Association (CPCA). The US automaker said on Tuesday it delivered 443,956 vehicles in the three months to June 30, a smaller-than-expected 5% drop from a year earlier and up 14.8% from the previous quarter, sending shares up more than 10%, Reuters reported.

Context: China’s retail passenger EV sales volume is expected to reach 864,000 units in June, representing a 30% growth from the same month last year and a 6% rise from May, while overall car sales declined 8% year-on-year, the CPCA estimated on Wednesday.

READ MORE: China’s EV sales recovery picks up pace in May, helped by promotions

Major Chinese automakers reported higher electric vehicle sales for May than in April, boosted by new government subsidies and the continued use of discounts to lure cost-conscious shoppers. Notably, NIO and Geely’s Zeekr were among the top-performing companies in the market, reporting their best-ever monthly deliveries.

Why it matters: The latest sales figures marked a swift turnaround for Chinese auto majors as they have been mostly grappling with weak consumer sentiment and intensifying competition in recent months.

• Demand was mainly boosted by China’s new subsidies encouraging consumers to trade in their old, less eco-friendly vehicles for new more energy-efficient ones. Meanwhile, several regional trade events have garnered more consumer attention than usual and boosted the appetite for new models, such as the recent Beijing Auto Show, wrote the China Passenger Car Association (CPCA) on May 29.

Details: Both NIO and Zeekr witnessed triple-digit growth year-on-year in May, with monthly deliveries reaching a record high.

• NIO said on June 1 that it surpassed the 20,000 vehicle sales limit last month for the second time since its inception, with its delivery numbers up 31.5% from April. The growth was driven by additional cash rebates totaling RMB 1 billion ($138 million), offered by the company in the name of car trade-ins since April 1, as well as a more than 25% price cut on its battery leasing program in March.
• Zeekr’s May deliveries reached 18,616, up 16% in a month, thanks to strong demand for its redesigned 001 shooting brake, of which sales surpassed 10,000 units for two months since delivery began on March 1. The Geely affiliate on May 10 became the fourth Chinese EV maker to go public in the US. Sales at its parent company also picked up momentum to 58,673 units over the month.
• Meanwhile, Li Auto saw its best-ever monthly sales this year in May, buoyed by a recent price reduction of up to RMB 30,000 on its existing vehicle lineup and the strong demand for the L6, which went on sale in mid-April. The company said the L6 accounted for more than 15,000 units out of its total deliveries in May and that it expected the number to surpass 20,000 units in June.
• Sales of Huawei-backed EVs took a slight hit in May while the Chinese tech giant was busy launching the redesigned versions of its existing Aito cars with partner Seres. Huawei’s Harmony Intelligent Mobility Alliance (HIMA), which currently consists of Aito and Luxeed series models, reported combined deliveries of 30,578 units last month, up 3.2% from April, with no breakdown.
• State-owned manufacturers Chery and GAC’s Aion also reported strong May sales, as both companies introduced big discounts in a move to respond to Beijing’s call to boost consumption. Chery on May 9 began selling the Sterra ET crossover at a competitive starting price of RMB 189,800.
• Xiaomi reported a 22.3% improvement in deliveries from April and aims to deliver more than 10,000 units starting in June.

Context: Retail sales of new energy passenger vehicles, which include all-electrics and plug-in hybrids, increased 27% year-on-year and 2% month-on-month to roughly 574,000 units during May 1-26 in China, when passenger car sales fell slightly to 1.2 million units, the CPCA figures showed.

• BYD, by far the dominant player in the market, on May 4 began offering subsidies of up to RMB 8,000 to consumers trading in their old cars. The auto giant on May 28 rolled out two new models with a driving range of 2,100 kilometers (1,305 miles), enabled by its latest plug-in hybrid technology.

Sales of Chinese electric vehicle makers Li Auto and Huawei-backed Aito dropped sharply in April as rivals Zeekr and NIO managed to post major improvements, in the latest indication of how competition in the country could be impacted by price cuts and new model launches. 

Why it matters: The latest sales figures in April showed the world’s largest EV market is slowly recovering from a sales slump due to an economic downturn and inclement weather early this year. Some potential EV buyers are still waiting on the sidelines for possible stimulus measures and for new cars shown at this year’s Beijing Auto Show to make it to market, experts say. 

READ MORE: Global carmakers take on Chinese giants in EV showdown at Beijing Auto Show 2024

Details: GAC’s Aion, Li Auto, and Huawei-backed Aito – which are among the biggest Chinese EV makers – all reported double-digit declines in EV deliveries in April from a month earlier. Huawei saw sales of Aito-branded EVs fall 21% last month, with monthly deliveries of the redesigned M7 falling to 10,896 units from its peak of nearly 30,000 units. Aion and Li Auto delivered 28,113 and 25,787 EVs in April, 13.6% and 11% fewer than a month earlier, respectively. 

• All three EV makers have launched new cars and ushered in steep price cuts for their existing models in order to maintain demand throughout 2024. Huawei said on Monday it had secured 11,000 reservations with non-refundable deposits for the Aito and Luxeed lineups over the recent five-day Labor Day holiday, while there were more than 41,000 pre-orders for Li Auto’s L6 range-extended hybrids between April 18 and May 5. GAC is currently putting the redesigned versions of its Aion V and Hyper HT battery crossovers on display in its showrooms nationwide. 
• In the meantime, Zeekr achieved record deliveries of 16,089 vehicles in April, up 24% month-on-month and 99% from a year earlier, mostly driven by a strong performance for its revamped 001 shooting brakes. NIO also saw sales hitting 15,620 vehicles, up from 11,866 a month earlier, as the company’s multiple sales pushes started to pay off. The EV startup has been offering a RMB 10,000 ($1,386) price reduction for those who trade in their old, gas-powered vehicles for a NIO car since the beginning of April. 
• While bringing attention to its rivals such as Zeekr and NIO for their similar offerings, Xiaomi posted impressive April sales to officially start its career as an electric car maker. The smartphone giant handed over 7,058 SU7 battery sedans to customers in its first delivery month and secured nearly 89,000 reservations with non-refundable deposits as of April 30. Chief executive Lei Jun expects the company to achieve an annual delivery target of 100,000 cars this year, with its production ramp-up already underway at its Beijing factory. 
• Xpeng Motors saw a slight recovery in April sales, delivering nearly 2,000 units of its first multi-purpose vehicle and bringing the total deliveries of the RMB 359,800 van to almost 10,000 units in the four months since its launch. The Volkswagen-backed EV maker has been under pressure from larger rivals, and declined to give detailed figures for the rest of its models. Sales of its G9, G6, and P7 models dipped to less than 1,700 units in March, figures compiled by Chinese auto service platform Dongchedi showed.

Context: China’s new energy vehicle sales in April are expected to be on par with March at roughly 720,000 units, partly because wait-and-see sentiment has grown among Chinese customers, the China Passenger Car Association said in an April 25 post.

READ MORE: ​ Explainer: How a new round of price cuts are reshaping China’s EV market ​

Global carmakers from Volkswagen to Toyota are introducing new models at the Beijing Auto Show 2024 with the help of Chinese tech companies in an effort to defend market share amid a major shift to electric vehicles led by local car giants. 

The biannual trade event, which on Thursday witnessed a return to pre-pandemic attendance levels after a brief pause in 2022, also represents another landmark moment for the Chinese EV sector where domestic players are once again on the offensive with an array of new models. A similar event in Shanghai a year ago reportedly prompted the industry’s legacy players to either increase their efforts or rethink their brands in order to adapt to the changes.

Below, TechNode provides a summary of some of the biggest releases from both international and Chinese automakers, including BYD, GAC, Geely, Honda, Toyota, and Volkswagen. There are also some notable updates from younger players such as Xiaomi, NIO, and Xpeng, which might give a clue as to where the most competitive EV market in the world is heading. 

BYD

China’s biggest EV maker on Thursday unveiled a higher-end variant of its Qin vehicle, the top-selling compact sedan in the country last year. The new car is scheduled for launch in the second quarter with an expected price tag of RMB 120,000 ($16,560). The Qin L measures 4.8 meters in length and spans a 2,790-millimeter-long wheelbase, placing it between the Qin Plus and the Han in terms of size. It features the company’s next-generation plug-in hybrid platform DM-i 5.0, which could suggest an improvement in range and fuel efficiency. The company also introduced the Seal 06, a plug-in hybrid EV under the Ocean lineup which is about the same size as the Qin L but loaded with more stylish design language to attract younger customers. 

GAC

Aion, the third best-selling EV brand in China last year after BYD and Tesla, showcased its first global model, replete with modern technologies and angular styling, as its state-owned parent beefs up its strategy to woo customers worldwide. GAC said its all-new Aion V, scheduled for launch in July, will maintain a driving range of over 750 kilometers (466 miles) even when the mercury dips to -30 degrees Celsius, and offers a large interior space comparable to the likes of the BMW X5. The all-electric sports utility vehicle, which incorporates traditional Chinese dragons into its design, can navigate varied urban environments worldwide with features such as lane switching by utilizing advanced artificial intelligence algorithms to process sensor data instead of high-precision maps, the company said.

Geely

Volvo’s parent showed its ambition to become a disruptive force in the global automotive industry with the debut of what it described as the world’s first production model with two sliding doors and front swivel seats. Geely has taken a radical approach to how EVs are put together, giving the 4.7 meter-long Zeekr Mix an extended wheelbase of three meters achieved through a more compact electric motor, shorter front overhangs, and repositioning of the air conditioning system, among other components. This, along with the front seats that can rotate 270 degrees, would allow kids to play or families to dine together in a 1.5 square meter interior flat space. The five-seater multi-purpose vehicle, offering a 1.5 meter width opening area for passengers, targets three-generation Chinese families, especially those with elders and pregnant mothers.

Honda

Japan’s Honda on Thursday began selling its second all-electric model with time-limited discounts in China in the company’s latest effort to boost sales. The move comes after entrenched rivals such as BYD and Tesla recently rolled out more price cuts amid slowing growth. The e:NP2 SUV has a driving range of 545 km at a price tag of RMB 159,800, providing buyers with a RMB 30,000 reduction compared to its original plan, according to Li Jin, a deputy general manager of Honda’s China joint venture with GAC. Honda also debuted the Ye, a new series of all-electrics with technologies sourced from Huawei and iFlyTek among other Chinese tech firms, as part of its plan to sell only EVs in China by 2035.

Toyota

Toyota said on Thursday it will integrate lidar sensors into its two upcoming models under the “Beyond Zero” (bZ) all-electric series, as the world’s top-selling automaker looks to provide consumers with the same level of assisted driving technology as Huawei and Xiaomi. The bZ3x and the bZ3c compact crossovers will be able to automatically change lanes, and enter and exit Chinese highways when they go on sale within the next 12 months. Toyota also announced it is exploring the uses of generative AI in collaboration with Tencent, as Chinese consumers expect their future vehicles to be more capable and personalized. This follows reports that the Japanese giant is using Huawei components to enable autonomous driving functions on its China-made EVs. 

Volkswagen 

Germany’s biggest carmaker participated in Auto Beijing 2024 with major global debuts including the ID.Code concept – which offers a glimpse into its upcoming, China-specific all-electric lineup ID.UX – as well as the Audi Q6L e-tron, the first production model based on its PPE electric platform. The coupe-styled ID.Code will be equipped for highly autonomous driving and come with a sophisticated AI assistant with contributions from local designers, as Volkswagen plans to introduce the first model under the new series later this year. In addition to partnerships with Xpeng and Horizon Robotics, the automaker confirmed it is working with Chinese tech giants including DJI, as its latest Tiguan L SUV now features an advanced driver assistance system (ADAS) sourced from the drone maker.  

Xiaomi, NIO, and Xpeng

Xiaomi was the center of attention on Thursday when the Chinese smartphone giant said it had secured 75,723 reservations with non-refundable deposits for the SU7, its first EV, with a competitive price range between RMB 215,900 and RMB 299,900. Chief executive Lei Jun expects monthly delivery to exceed 10,000 units in June and the company is set to reach a milestone with 100,000 EV deliveries by this year, which would be a record speed for any Chinese EV brand. The 55-year-old entrepreneur is an icon in the Chinese tech and auto industries, with his visits to rivals’ booths becoming one of the hottest topics at this year’s Beijing Auto show.

Xpeng Motors could take on its major frenemy with the mainstream brand MONA, short for ‘Made of New AI,’ CEO He Xiaopeng told reporters during a press conference. 

Meanwhile, one of NIO‘s new affordable brands, called ONVO, is scheduled for launch in the second quarter of this year. The luxury EV maker on Thursday launched a redesigned version of its ET7 sedan with a starting price of RMB 428,000, which is RMB 20,000 lower than its original version launched three years ago.

READ MORE: Huawei, Xiaomi, and Geely’s new EVs have details leaked on Chinese government site

Major Chinese automakers, including Geely and Changan, have strategically introduced big discounts to their car prices or new variants of existing models despite posting a pickup in March deliveries, in a defensive move after Xiaomi’s first car reached nearly 90,000 pre-orders in just 24 hours. 

Xiaomi’s smash hit: The initial success of Xiaomi’s first EV, rolled out on March 28 with a lower-than-expected price tag, is having a knock-on effect on most other automakers which are being forced to take immediate action in order to hold on to their market shares. 

• The reservation-to-order conversion rate of the electronics brand’s SU7 has currently reached more than 35%, according to Sun Shaojun, founder of consumer behavior research agency CarFans. 
• Around 40% of Xiaomi customers canceled their pre-orders partly due to an expected long waiting time for vehicle delivery, Sun said in a Tuesday post on WeChat. Some were also frustrated by awkward sales-service interactions at overcrowded Xiaomi stores in major cities, Sun added, as the Chinese smartphone giant is gradually expanding its sales network for car retail. 
• Nevertheless, this is equal to a volume of at least 31,000 non-refundable orders in just four days, still an impressive performance for a new entrant and one that sees it surpass the early sales figures of Aito, a rising player launched by Xiaomi’s long-time rival Huawei.

March sales, discounts: Sales of Geely’s new energy vehicles (NEVs) rose 65% year-on-year and 34% month-on-month to 44,791 units in March, of which roughly 13,000 were Zeekr-branded battery EVs, partly driven by the strong sales of its refreshed 001 sports wagons, delivery of which began on March 1. 

• Geely on Monday launched a new rear-drive Zeekr 007 sedan, turning a bundle of add-ons into standard features including a large head-up display unit and heated and ventilated seats, at a price tag that is RMB 6,000 ($829) cheaper than Xiaomi’s SU7. 
• This comes after a similar move by Changan which two days earlier introduced a new entry-level variant of its Avatr 12, lowering the starting price of the premium sedan by 12% to RMB 265,800. Avatr’s deliveries more than doubled to 5,016 units last month. 
• Meanwhile, Huawei-backed Aito, which sells both battery EVs (BEVs) and plug-in hybrid EVs (PHEVs), edged out rival Li Auto for a third month in March with 31,727 deliveries compared to Li Auto’s 28,984, buoyed by strong demand for both the M7 and M9 crossover. 
• Aito claimed the M9 was the top-seller in the RMB 500,000-plus price segment in China last month, a title Li Auto had previously aimed for (and failed to reach) with its Mega van. Still, the EV brand, co-launched by Huawei and Seres, on Monday slashed the starting price of its best-selling five-seater by 8% to RMB 229,800. 
• NIO and Xpeng Motors deliveries also jumped significantly through March, and yet both are either slashing prices or using other promotions to lure customers. NIO’s ET5 and Xpeng’s P7i sedans compete in the same price segment as the Xiaomi SU7. 
• NIO said on Monday it will offer a reduction of RMB 10,000 for those who replaced their gasoline cars with a new EV. Xpeng’s G9 crossover now costs RMB 20,000 cheaper than its original list price, following a more than RMB 10,000 price reduction across its lineups a month earlier. 

READ MORE: Explainer: How a new round of price cuts are reshaping China’s EV market

Context: The March sales figures – which showed a rebound from the annual Chinese New Year holiday slump – also indicated a stronger growth momentum for PHEVs than BEVs with a growing number of carmakers pivoting to more affordable PHEVs as they look to expand NEV sales in China’s vast majority of underdeveloped regions.

• PHEVs accounted for more than half of BYD’s sales and enjoyed a higher growth rate than BEVs over the first three months of this year, according to a regulatory filing posted on Monday (in Chinese). The country’s biggest EV maker was followed by the likes of Geely, Aito, and Li Auto, all preferring a broader product portfolio to purely BEVs.
• Ouyang Minggao, an academic at the Chinese Academy of Science, said last month that PHEVs could grab substantial market share from internal combustion engine cars in the coming years, especially in the entry-level price segment, and expected more widespread adoption of BEVs over the next decade.
• EV adoption in China’s lower-tier cities and rural regions is slower than in the country’s more developed areas. A growing number of EV owners from lower-tier cities said they will go back to conventional automobiles for their next purchase due to a lack of charging infrastructure, according to an annual report by consultancy McKinsey released on March 12. 

READ MORE: Chinese officials reaffirm commitment to EV ambitions and promise raft of support measures amid industry doubts

Hundreds of people flocked to a Xiaomi store in the southern Chinese city of Guangzhou in the late hours of Thursday evening to be among the first to take a look at what many deem to be the electronics brand’s more affordable alternative to a Porsche, as the brand announced a lower than expected starting price for its debut electric vehicle. That’s what TechNode observed during a livestream broadcast by a Chinese electric car blogger on social media app WeChat that attracted more than 200,000 viewers within an hour. 

Xiaomi has already enjoyed a debut win after securing a record 50,000 pre-orders in just a few minutes following its SU7 EV launch event. The official livestream racked up nearly 43 million views on microblogging platform Weibo, underscoring the overwhelming interest among tech-savvy Chinese consumers in the company’s first car. Those making a reservation were asked to pay a RMB 5,000 ($692) deposit as part of the process, with the tech giant expressing its thanks to customers who did so in a brief statement on the microblogging platform Weibo (in Chinese). 

The all-electric sports sedan is selling at a lower than expected starting price of RMB 215,900 ($29,881), roughly $4,100 cheaper than the popular Tesla Model 3, while touting better performance from driving range to acceleration. The dual-motor all-wheel drive version competes with the Porsche Taycan with a top speed of 265 kilometers (165 miles) per hour at a price tag of only RMB 299,900.

Xiaomi’s car launch contrasts markedly with Apple’s surprise retreat from the EV landscape, after the iPhone maker reportedly scrapped its decade-long effort to make a car recently. “We will provide every user, including those with Apple devices, a smart and connected life experience everywhere, creating seamless integration in their homes, cars, and beyond,” Xiaomi chief executive Lei Jun said during the press conference (our translation). 

“A trump card”

Lei, the 55-year-old serial entrepreneur dubbed “China’s Steve Jobs”, tried to lure users away from traditional carmakers during the two-hour event by showcasing how Xiaomi’s ecosystem would provide universal connection and integration between different devices, including phones, cars, and gadgets at home. 

Xiaomi essentially promised potential buyers that their devices would be all tied together with a click, swipe, or a simple voice command. The car’s air conditioning will cool the interior down on a hot summer’s day once the owner tells a home speaker what temperature they want before even leaving the house, according to one example given. In another, the car’s dashboard could become a centralized command station for home accessories which will be activated as the driver approaches home. 

Although rival Huawei has touted similar efforts with its EV partners, Xiaomi claimed last November that more than 655 million devices have been connected to its IoT (Internet of Things) platform, from televisions to fitness bands, making it the biggest network of its kind worldwide. “This is a trump card from Xiaomi,” said Lei when discussing the linking of the brand’s new EV with its IoT network. 

“Better than Tesla”

Meanwhile, Lei mentioned Xiaomi’s plans to be “among the top-tier players” in autonomous driving, a field where Tesla already stands out as a pioneer globally and Huawei is establishing its name at home. The company said its EVs are already capable of traveling more than 300 km on average autonomously on Chinese highways before human drivers take over and will be able to complete most trips by themselves on urban streets across China by August. 

Xiaomi is moving towards two distinct approaches by working on both a camera-based computer vision system and another advanced driver assistance system (ADAS) that relies on more sensors including lidar. The company said it will exclusively employ Nvidia’s cutting-edge chips for both systems and bring the software development completely in-house to ensure timely over-the-air updates across all its car variants. 

“In China, Tesla vehicles will not be as good as the SU7 when it comes to intelligent driving capabilities,” said Lei, adding that customers who placed their orders before the end of this year will get the software free of charge. Tesla currently charges Chinese buyers RMB 64,000 for future access to its full self-driving (FSD) package, despite it remaining unavailable in the country. Still, it is faced with competitors from BYD to Geely which also look to offer customers highly automated features with their premium EVs.

READ MORE: Key takeaways from Xiaomi’s EV pre-launch: A top offering facing a tough test

Details of new electric vehicle models from Chinese auto and tech majors including Huawei, Xiaomi, and Geely have been leaked online via an official regulatory process. Some are expected to make their debut at the upcoming Beijing Motor Show next month, positioned to compete with models from dominant rivals such as BYD and Tesla, and potentially stirring up a new price war in the world’s biggest auto market.

The companies expect the upcoming models, now making a splash online, to become bestselling or otherwise strategically important cars for their brands. Below are highlights from the registration filings released for public review by China’s Ministry of Industry and Information Technology (MIIT) on Tuesday, giving critical details of the models ahead of their official launches. 

Stelato S9

The S9 will be the first model under the new premium Stelato brand launched in partnership between Huawei and China’s BAIC and the largest sedan model of all Huawei-enabled EVs to date. The car measures 5.1 meters in length and 1.5 meters in height with a wheelbase of nearly 3.1 meters, offering passengers a spacious and comfortable interior in an effort to draw in affluent Chinese consumers. 

The all-electric executive sedan will be available in single and dual-motor variants producing 308 and 524 horsepower respectively, and will include innovative elements such as a camera-based digital rear-view mirror system as an optional add-on, according to the filings. Analysts expect the car to be launched in June for between RMB 300,000 and RMB 500,000 ($41,730-$69,550). Shares in partner BAIC Bluepark surged 32% on the mainland Chinese stock market on the news over the week. 

Zeekr Mix

China’s Geely is raising its bet on the small but growing segment of multi-purpose vehicles with its upcoming roll-out of the Zeek Mix, an all-electric five-seater van, after the launch of its larger and more business-oriented Zeekr 009 nearly two years ago. The pictures published by MIIT show a mid-size MPV with a rounded exterior and low center of gravity as well as an optionalLIDAR unit mounted on the car’s roof for automated driving. 

It is slightly shorter than the Zeekr 007 sedan at nearly 4.7 meters in length, likely making it easier to maneuver and attractive to parents, while offering a larger interior with a 3,008-millimeter-long wheelbase. The single-motor car has a 422-horsepower electric powertrain – higher than the plug-in hybrid Denza D9 from BYD, currently a top-seller in the market, but less powerful than bigger offerings such as the Xpeng X9 and the Li Auto Mega. 

Xiaomi SU7

Xiaomi on Wednesday received Chinese government approval for a new variant of its first EV, the long-anticipated SU7, equipped with lithium iron phosphate (LFP) batteries sourced from CATL and roughly 110 kilograms heavier than the one powered by BYD’s iron-based batteries. Speculation has circulated that the new power option could be CATL’s Shenxing batteries, which have boasted of a high energy density for a longer driving range and an 800-volt electrical system for faster charging compared with existing offerings. 

China’s industry regulator had previously uncovered details about another entry-level SU7 and the more premium SU7 Pro/Max, which the company claimed could accelerate from 0 to 100 km/h (62 mph) in 2.78 seconds and would be more aerodynamic than rivals’ offerings including Tesla’s Model S. Chief executive Lei Jun said on Friday that the smartphone maker will begin deliveries immediately on March 28, when pricing of the sports sedan will be finally announced.

READ MORE: Explainer: How a new round of price cuts are reshaping China’s EV market

On Feb.18, Wang Hua, Xiaomi’s public relations manager, declared on the Twitter-like social media platform Weibo that the company does not intend to implement any mass layoffs but is focused on routine personnel adjustments aligned with annual performance evaluations. Wang’s statement followed reports that the company was considering substantial layoffs by the end of February, providing an N+1 compensation package without negotiation. 

In China, N+1 compensation is a common severance compensation standard, where N represents the number of years the laid-off employee has worked for the company. For example, if an employee with five years of tenure is terminated, they would receive a severance package equivalent to six months’ salary.

Why it matters: The economic slowdown has led to decreased demand in the smartphone industry, which in turn has raised the specter of layoffs within the sector. 

Details: On Feb. 18, the first working day of the Chinese Year of the Dragon, Xiaomi PR manager Wang Hua denied rumors of mass layoffs on Weibo and shared a photo of a red envelope, a traditional Chinese gift that contains cash and symbolizes good fortune.

• A Xiaomi employee anonymously claimed on Feb.6 that the tech company was planning a large-scale layoff on Feb. 29, with a compensation of N+1, according to local media outlet Jiwei. The employee criticized Xiaomi’s lack of social responsibility, claiming the move could deprive employees of their year-end bonuses, which are expected to be issued on March 5.
• “On the first day back to work,” said Wang Hua via the Weibo post, “I confirmed from multiple departments that there are no plans for any layoffs. There are only normal personnel adjustments based on annual performance evaluations.” Some employees spread rumors of layoffs to cover up their shortcomings, as they do not want to admit to their poor performance, he added in a comment under the post.
• An internal Xiaomi employee informed a Jiwei reporter that the current restructuring does not mean a large-scale layoff, but falls within the regular scope of annual personnel-optimization efforts, impacting a small number of employees.

Context: On Feb. 18, Xiaomi CEO Lei Jun announced the commencement of operations for the firm’s Beijing Changping Smart Factory, which will specialize in producing Xiaomi’s flagship smartphones. It boasts an annual production capacity exceeding tens of millions of units, making it the company’s first large-scale self-owned facility.

• Shipment in China’s smartphone market hit approximately 271 million units in 2023, a year-on-year decline of 5.0% and the lowest shipment volume in nearly 10 years, according to market intelligence firm IDC. Chinese phone brands Oppo, Vivo, and Xiaomi ranked third, fourth, and fifth, respectively.

Xiaomi held its most significant media event of the year in Beijing on Thursday: the debut of its first electric car. With a size comparable to the BMW 5 Series and a shape similar to the Porsche Taycan, the four-door sedan boasts some of the Chinese car market’s highest specifications, as cut-throat competition from maturing rivals rises.

The sleek, gadget-full all-electric sedan is aiming to become a top choice for China’s increasingly tech-savvy consumers, and certainly aroused widespread curiosity judging by the more than 46 million people who logged on for the three-hour-long unveiling on the country’s Twitter-like site Weibo. Yet from journalists and insiders alike, the reaction was mixed. 

From the event, TechNode has selected some of the car’s highlights. 

Main specs

The high-performance SU7 can sprint from 0 to 100 km/h (62 mph) in 2.78 seconds, as it climbs to a top speed of 265 km/h. It is claimed to be the world’s most aerodynamic production car with a drag coefficient (Cd) of 0.195. By comparison, the Taycan Turo can hit 260 km/h and Tesla’s Model S has a Cd of 0.208. It also comes just a month after rival Huawei launched the Luxeed S7 sedan at 0.203Cd. 

Xiaomi said it uses two 9,100-ton mega casting press machines to produce the front and rear underbody pieces, giving the car a torsional stiffness of 51,000 Nm/degree, nearly twice the number of the Ford F-150 Raptor and higher than any other car on the road. The technology, first adopted by Tesla, has since been embraced by Chinese EV makers from Geely-affiliated Zeekr to Huawei-backed Aito.

Vehicle autonomy

Xiaomi’s chief executive Lei Jun presented aspects of the company’s self-driving initiative for public viewing, highlighting that the premium version of the SU7 will incorporate two Nvidia Drive Orin processing chips plus a laser sensor unit on the car’s roof to carry out certain partially autonomous driving functions. Xiaomi also showed a short video of the car drawing into a tight garage space autonomously.

The Chinese tech company has set a goal for its advanced driver assistance software to be available to drivers in 100 major Chinese cities by the end of the next year, according to Lei. Huawei and Xpeng Motors are for now the leaders of this booming market, with established carmakers from BYD to Great Wall Motor trying to catch up.

Smart cabin

The SU7 will be the latest Chinese car model powered by Qualcomm’s smart cockpit computing platform SA8295, after the Zeekr 001 FR and its sibling Jiyue 01, and its infotainment system will turn on in just 1.5 seconds. It is also integrated seamlessly into the Xiaomi ecosystem with the adoption of the company’s self-developed operating system, the HyperOS, which takes only 30 minutes or so to carry out important updates, according to the company. 

CEO Lei said the SU7 would create the same smooth experience that anybody with a Mi Phone is used to, as various apps are pushed from their phones to a 16.1-inch in-car dashboard once they sit in the car. Other devices, from tablets to home appliances, also seamlessly work with the vehicle, an integration trend led by auto and tech majors such as Huawei, Geely, and NIO.

Conclusion

Xiaomi will have to pick an appropriate price tag, given it starts with a somewhat broad, unclear positioning, said You Xi, a seasoned economic and financial writer and co-founder of Chinese online media platform Communication Planet. “It remains challenging for the company to extend its brand into EVs,” You added, citing similar offerings from multiple competitors among his reasons (our translation).

The smartphone giant plans to introduce two variants of the SU7 to “contemporary elites with taste in lifestyle and technology” in China over the next few months, said Lei. Some experts have predicted the premium version of the car, with an estimated driving range of 800 kilometers (497 miles), could cost consumers at least RMB 300,000 ($41,124).

Xiaomi said on Tuesday that it had sacked three employees for “spreading rumors” about plans for its electric vehicle business, as the company also said it was planning legal action over photos of its first car model leaked online by two media outlets. For months, multiple reports have circulated on Chinese social media featuring unauthorized confidential information about the smartphone maker’s EV business.

Why it matters: The news comes as Xiaomi, known for its low-cost pricing advantage in the smartphone market, has captured growing attention from Chinese netizens due to speculation of an imminent launch of its inaugural EV model, potentially heightening competition in the already low-margin sector. 

Details: The three employees were found by the company to have spread inaccurate information without permission during conferences hosted by brokerages and investment firms, severely misleading the markets and disrupting operations at Xiaomi’s EV division, the company said in a post on the Chinese Twitter-like platform Weibo. 

• Xiaomi is taking legal action against the trio, who have been dismissed for breaching the company’s code of conduct. 
• In addition, the smartphone maker is taking legal measures against two Chinese media outlets over allegations that their employees leaked images of its upcoming EV and violated their non-disclosure agreements with Xiaomi. 
• The Beijing-headquartered tech giant said it will continue to take action to ascertain liability for the alleged wrongdoings, including leaks and rumor-spreading. 

Context: A research note recently circulated on the Chinese internet and obtained by financial news agency Jiemian published what it said was “key information” regarding Xiaomi’s first EV, naming some of the suppliers for components such as the head-up display. 

• Xiaomi is also rumored to be set to debut the car at a press conference on Dec. 28, an influencer with the handle “Dianwankeji” wrote earlier this month on social e-commerce app Xiaohongshu. The company later said (in Chinese) that it has not decided yet on the event date.
• On Nov. 15, images of Xiaomi’s first consumer car along with key specifications were posted online for public review, as required by China’s Ministry of Industry and Information Technology, TechNode has reported. 
• More information revealed by China’s industry ministry last week showed that the premium version of the SU7 sedan will have a driving range of 800 kilometers, powered by a 101 kilowatt-hour (kWh) battery pack sourced from CATL. 

Xiaomi on Tuesday released a statement refuting an apparent claim made by senior Huawei executive Yu Chengdong that Xiaomi’s dragon bone hinge technology for its foldable phones is a direct copy of Huawei’s dual rotating water drop hinge. Yu, the CEO of Huawei’s consumer department, made these comments during a company event last week; Xiaomi has said the accusation is “seriously inconsistent with the facts.”

Why it matters: One of the key elements of foldable phones lies in their unique hinge design, which directly influences the phone’s folding mechanism and screen creases. The controversy between Huawei and Xiaomi, two of China’s biggest phone brands, reflects intensifying competition in the foldable phone market.     

Details: In the statement, Xiaomi posted detailed comparisons, including the application dates, publication dates, and technical features of relevant patents. Both the design concept and mechanical structure of their dragon bone hinge are completely different from Huawei’s dual rotating water drop hinge, according to the statement, which was posted to the company’s account on the Twitter-like Weibo platform.

• “Some companies directly copy our technology and then claim it as their own invention. The concept of the dragon bone hinge is fundamentally non-existent, as they’ve transformed our double rotating water drop hinge into a dragon bone hinge,” said Yu during an annual Huawei event on Dec.10. “Once competitors make modifications, this technology becomes their own,” he added.
• While he didn’t explicitly name the rival phone brand, Yu’s remarks were widely interpreted as an attack on Xiaomi, which launched its new generation of foldable flagship, the Xiaomi MIX Fold 3, in August and is the only phone brand on the market to use what it terms a dragon bone hinge.
• According to Xiaomi’s statement, the dragon bone hinge was patented on September 18, 2020, and received patent authorization on January 5, 2021. Huawei’s dual-rotating water drop hinge was only publicly disclosed on June 18, 2021, though it was patented on December 13, 2019. 
• Xiaomi’s dragon bone hinge features a “three-level rod, five-component, seven-low-friction design,” the statement continued, while Huawei’s dual rotating water drop hinge is described as a “two-level rod, three-component, four-low-friction design.” 
• Furthermore, Huawei’s current three-level rod patent was applied for on October 29, 2021, and was publicly disclosed on May 5, 2023, but it has not yet entered mass production, according to Xiaomi.
• In the concluding part of the statement, Xiaomi emphasized that Yu Chengdong should adhere to “the basic principles of science” and refrain from misleading the public.

Context: Research firm TrendForce‘s report indicates that the anticipated shipment of foldable smartphones in 2023 is around 18.3 million units, with a year-on-year increase of 43%. Huawei’s estimated shipment of foldable smartphones this year is expected to reach 2.5 million units, according to the same report.

• The Xiaomi MIX Fold 3 set a new record for Xiaomi upon its release, with sales increasing 2.25 times compared to the previous generation, according to the company’s second quarter financial report.
• In the third quarter of 2023, sales of foldable smartphones in the Chinese market reached 1.98 million units, representing a year-on-year increase of 175%, according to CINNO Research. In terms of brand ranking, Huawei occupied the top spot with a market share of 28.6%, while Xiaomi was in sixth place with a market share of 8.7%.

Images of what could be Xiaomi’s first electric vehicle model have leaked online ahead of the car’s expected launch next year. The photos from the Chinese Ministry of Industry and Information Technology show a large sedan with styling similar to the Porsche Taycan, adorned with a Xiaomi logo. 

Why it matters: Automakers are required by Chinese regulators to apply for registration before officially selling vehicles in the country, and the government ministry’s post indicates that the debut of the first Xiaomi car is approaching. 

• Xiaomi has begun trial production of its first EV at its facility on the outskirts of Beijing, with the vehicle expected to hit the market as early as February, a person with knowledge of the matter told Chinese media outlet National Business Daily on Wednesday. 
• A Xiaomi representative declined to comment when contacted by TechNode on Thursday, but in late October, chief executive Lei Jun reaffirmed the company’s plan for the car to go on sale in the first half of 2024, according to an Oct. 25 post published on the Twitter-like platform Weibo. 

Details: The Xiaomi SU7 is around five meters long and spans a 3,000-millimeter-long wheelbase, making it bigger than many mid-size sedans such as Tesla’s Model 3. It has a total mass of 2,430 kg and a curb weight of 1,980 kg, based on the registration details revealed by the MIIT on Wednesday. 

• The car features a sleek, athletic low profile with Xiaomi’s logo on the front and its name on the rear hatch, similar to the Porsche Taycan, a likeness brought to light by a Chinese auto influencer. The images also show a couple of wheel options and a choice of yellow brake calipers.
• The SU7 will be able to reach a top speed of 210 kilometers per hour on a relatively affordable, iron-based lithium-ion battery from BYD. The top speed of the premium SU7 Max will be 265 km/h, with the higher-end model equipped with a more expensive, nickel and cobalt-based battery pack from CATL. 
• An electric motor will provide a power output of 275 kW and 220 kW respectively, while the top-end version will integrate laser sensor units on the roof to enable partially autonomous driving capabilities, according to images released by MIIT.
• The five-seater sedan will be manufactured at Xiaomi’s factory in the Beijing Economic and Technological Development Zone, which has an initial annual capacity of 150,000 units, although its production application was filed in the name of a subsidiary of state-owned automaker BAIC.
• This appears to confirm speculation that BAIC, a manufacturing partner of Mercedes-Benz in China, has joined hands with Xiaomi, meaning the smartphone maker is still waiting for final approval to begin manufacture from the Chinese authorities. 

Context: Xiaomi and Huawei are among the Chinese technology giants with the potential to become major players in the EV space with advanced intelligent capabilities and a broad sales network, which remain difficult for many carmakers to replicate, Morgan Stanley analyst Tim Hsiao commented on an earnings call held by Xpeng Motors on Wednesday. 

• Huawei said on Oct. 6 that it had secured over 50,000 non-refundable orders for the revamped M7 sports utility vehicle less than a month after its launch. The number was updated to more than 90,000 as of Wednesday, local media outlet IT Home reported. 
• The telecoms giant started pre-sales of the first electric sedan under the new Luxeed brand with automaker Chery on Nov. 9, followed the next day by the launch of the Avatr 12, a premium crossover co-developed with partners Changan Automobile and CATL. 

READ MORE: Five things to know about Xiaomi’s new electric car company

Xiaomi Group on Thursday unveiled its new operating system, the Xiaomi HyperOS, and its new flagship smartphone Xiaomi 14 series. CEO Lei Jun said the company’s strategy had moved beyond “smartphone connections to AIoT (Artificial Intelligence of Things)”, and now entailed having the “phone, home, and vehicle all within an ecosystem.”

Why it matters: The Xiaomi 14 smartphone series showcases the Xiaomi HyperOS, an Android operating system that uses Xiaomi’s self-developed Vela system that enables the phone to connect with other AIoT devices. The lineup is touted by Xiaomi as the first flagship smartphone driven by Qualcomm’s latest processor Snapdragon 8 Gen 3, unveiled on Wednesday.

Details: In the next two years, Xiaomi HyperOS will replace its MIUI operating system across every Xiaomi smart device, as the company seeks to build a comprehensive ecosystem.

• Xiaomi plans to invest RMB 100 billion ($13.66 billion) in research and development (R&D) over the next five years, Lei Jun revealed at the launch event. Xiaomi also revealed that in 2022 it had invested RMB 16.2 billion ($2.21 billion), or 0.53% of its national R&D expenditure. 
• Xiaomi HyperOS is a cross-platform operating system that has been in development for seven years, involving 5,000 engineers, according to the company. Aiming to create a “people-vehicle-home” interactive ecosystem, Xiaomi has integrated its self-developed Vela system with a modified Linux system.
• The Xiaomi 14 series comprises the Xiaomi 14 and Xiaomi 14 Pro, both carrying the latest Qualcomm Snapdragon 8 Gen 3 chipset, as well as Xiaomi’s own Loop LiquidCool technology for heat dissipation. Both models feature Leica Summilux optical rear lenses.
• The latest Snapdragon 8 Gen 3, built using TSMC’s cutting-edge 4nm processor, is designed for AI applications and gaming, and comes with enhanced audio and camera features. The Gen 3 offers a notable improvement on its predecessor, being 30% faster and 20% more energy-efficient. Additionally, the chipset supports LPDDR5x memory at speeds up to 4,800 MHz and can accommodate up to 24 GB of RAM.
• Xiaomi has opted for a smaller sensor for the 14 Pro, introducing the Light Hunter 900 coupled with a custom Leica Summilux lens. Despite being approximately 44% smaller than last year’s 13 Pro 1-inch sensor, the new setup is up to 80% brighter, according to Xiaomi.
• Depending on storage requirements, a new Xiaomi 14 will cost from RMB 3,999 ($546) to RMB 4,999 ($683), with the pro version costing between RMB 4,999 ($683) and RMB 5,999 ($820).

Context: At the launch event, Lei also mentioned Xiaomi’s commitment to environmental protection and social responsibility, reiterating a pledge made in August to achieve carbon neutrality and to switch to 100% renewable energy by 2040. 

• According to intelligence firm Counterpoint, Xiaomi ranked fifth place in the Chinese phone market in the second quarter of 2023 with a 14% market share.

Nio took a giant leap into the smartphone arena on Thursday with the much-anticipated launch of its Nio Phone, the first handset designed by a Chinese automaker. The new device is hitting the market at a price comparable to the latest flagship offerings by Apple and Huawei. 

Having developed its own phone from the ground up, the electric vehicle maker expects to create an ecosystem across vehicles, devices, and services, which will provide a seamless experience for Nio users. The handset offers the purest form of the Android experience without any pre-installed apps or banner ads, chief executive William Li said during a press event in Shanghai on Thursday.  

Some of the standout features Nio highlights are a master remote control for vehicles with options to control everything from windows to seats, as well as seamless streaming of videos, music, and meetings from smartphone to car infotainment screen. Here’s what impressed us most about Nio’s first Android phone. 

Ultra wideband technology

Nio said the phone offers remote control for in-car devices which differs from most competitors by using Ultra Wideband (UWB) technology, an emerging wireless communication protocol that enables precise, speedy, and secure location tracking.

During a hands-on session where TechNode was present, a Nio ES8 SUV “greeted” the phone by turning its lights on when a Nio employee approached and automatically unlocked shortly before he reached for the door handle without taking out his phone. The smartphone also serves as a central hub to remotely operate the car’s air conditioning among other options at the touch of a single button. 

The short-range, high-bandwidth digital radio technology allows fast data transmission with increased security compared with other wireless standards such as NFC and Bluetooth, which are often absent from existing phone models produced by domestic makers such as Huawei and Xiaomi, according to Nio staff. The first initiative of this kind was announced by Geely-backed rival Meizu a month earlier. 

Several global automakers are also investing in the technology in collaboration with Apple. The US smartphone maker has reportedly been allowing BMW’s iX owners to unlock their cars using select iPhones or wearables since 2021, although most carmakers are currently unable to leverage the technology with Apple’s devices, Nio CEO William Li previously told Chinese reporters.

In-car connectivity

TechNode reporters also played the hit racing game title Asphalt on the in-car display with a Microsoft Xbox wireless controller. It offered a smooth experience which did not freeze or crash, as it runs in the smartphone’s background enabled with 5G services and a Qualcomm semiconductor. 

Nio’s in-car experience also allows users to stream videos on Bilibili, follow turn-by-turn navigation on Amap, or transition to live meetings on Dingtalk from their phones through the car’s infotainment screen. Huawei earlier announced a similar Super Terminal feature, while Geely claimed such capabilities with the recent launch of its new Meizu flagship series and operating system, Flyeme Auto.

It is worth pointing out that the feature is different from screen mirroring, as it actually creates a “doppelganger” of the Nio Phone on the in-car dashboard so that users can use the smartphone and the in-car system simultaneously yet separately. 

With its first self-branded device, Nio is one of the few Chinese automakers capable of integrating users’ smartphones with their car’s infotainment system at the operating system level. Such integration for Aito and Geely was enabled by their respective smartphone partners Huawei and Meizu. 

Specifications and prices

The Nio Phone is powered by a Qualcomm high-end Snapdragon 8 Gen 2 processor, the same as existing flagship offerings such as Xiaomi’s Mi 13, Oppo’s Reno 11 Pro, and the Meizu 20. It also comes with a 6.81-inch 2K+E6 Samsung screen, providing a resolution of 3,200 x 1,440 pixels, a 120Hz refresh rate, and a peak brightness of 1,800nits.

The device features a triple-camera system that includes three 50MP cameras and has a large battery of 5,200mAh, supporting 50 W wireless charging and 10 W reverse charging. An entry-level version weighs 212 grams and measures 165.19 x 75.54 x 8.9mm. 

The Nio Phone’s three versions come in seven colors, and are priced between RMB 6,499 and RMB 7,499 ($890-$1,027). Shipment is scheduled for Sept. 28. For comparison, Huawei’s latest Mate 60 Pro flagship phone costs from RMB 6,499, while Apple on Sept. 15 began selling its iPhone 15 series with a starting price of RMB 5,999 in China. 

The Indian Ministry of Finance informed the Indian parliament that prominent Chinese smartphone manufacturers, including Xiaomi, Vivo, and Oppo, evaded tariffs and illegally remitted a minimum of 80 billion rupees ($980 million) in India, according to a CNBC report on July 21. The report also stated that the Indian tax authorities were able to retrace only 18% of the total amount evaded by these companies.

Why it matters: With its vast population and rapid economic development, India has become an attractive destination for numerous international enterprises seeking to enter the local market. In recent years, Chinese mobile phone manufacturers have achieved significant success in the Indian market. However, the issue of tax evasion has gradually emerged as a prominent concern, drawing the attention of Indian authorities.

Details: According to the CNBC report, Chinese mobile phone brands are accused of evading taxes by manipulating financial data, engaging in fictitious transactions, and overpaying fees to affiliated companies. 

• India’s Ministry of Finance reported that the combined turnover of Chinese phone brands in India, which also includes Transsion, Realme, and OnePlus, amounted to 15 billion rupees ($180 million) from 2021 to 2022, leading to the creation of 75,000 employment opportunities for local citizens. Furthermore, these companies have employed 80,000 sales and operation staff across India.
• Xiaomi’s total tax evasion reached 11.37 billion rupees ($140 million) during 2019-2023, while Oppo evaded tariffs to the value of 44.03 billion rupees ($540 million), according to Indian authorities. 
• The Indian Ministry of Finance claimed that there have been a total of 13 similar cases involving tax evasion on goods and services by these companies from July 2017 to June 2023. Specifically, Xiaomi was reported to have paid interest amounting to 3.17 million rupees ($39,000) and a fine of 1.33 million rupees ($15,000) from 2019 to 2020.
• In April 2022, Indian authorities accused Xiaomi of illegally transferring money to foreign entities in the form of royalty payments since 2015, freezing the company’s funds of 55 billion rupees ($680 million) in the bank accounts of its Indian subsidiaries. Xiaomi refuted these allegations and stated that these royalty payments were made for the licensed technology and intellectual property used in the Indian versions of its products. Despite Xiaomi’s re-appeal to address the situation, the Indian government rejected the firm’s demand to unfreeze its funds.
• In July 2022, India’s financial crime agency blocked 119 bank accounts linked to Vivo’s India business, which collectively held 4.65 billion rupees ($58.76 million). This move came as part of an investigation into alleged money laundering activities. The Indian authorities conducted raids at 48 locations belonging to Vivo and 23 entities connected to the company. The allegations suggested that the proceeds of Vivo India’s sales were being transferred out of the country to evade taxes. While Vivo presented arguments in their defense and managed to recover access to the bank accounts, they were required to pay a guarantee of $119 million to the Indian government.
• In July 2022, the Directorate of Revenue Intelligence (DRI) stated that Oppo’s Indian subsidiary had improperly obtained tax-free benefits amounting to 29.81 billion rupees ($360 million) through false declarations of certain imported goods.

Context: According to market analyst firm Canalys, four Chinese phone brands entered the top five by market share in India in the second quarter of 2023, behind Korean brand Samsung. Vivo was second, shipping 6.4 million units, and Xiaomi held the third spot by shipping 5.4 million units, while Realme and Oppo (excluding its sub-brand OnePlus) ranked fourth and fifth by shipping 4.3 million and 3.7 million units respectively.

Major Chinese phone brands operating in India including Xiaomi, Oppo, Vivo, and Realme, are being required by Indian authorities to appoint Indian nationals in executive roles such as chief executive officer (CEO), chief operating officer (CPO), chief financial officer (CFO), and chief technical officer (CTO), according to Indian media outlet ET Telecom.

Why it matters: In light of ongoing geopolitical tensions, India and China have increased scrutiny of each other’s businesses, causing significant economic turbulence in recent years. The Indian government has again tightened restrictions on Chinese technology companies in the last few months, with experts predicting this will inevitably dampen investment by Chinese companies in the Indian market. 

Details: The tussle between Indian authorities and Xiaomi has been escalating since the former launched an investigation into the latter last year. On June 9, the Enforcement Directorate (ED), an Indian financial law enforcement agency, issued a show-cause notice to Xiaomi India chief financial officer Sameer Rao, former global vice president Manu Kumar Jain, and three banks for alleged illegal remittances of 55.51 billion rupees ($673.2 million), according to a report by Indian news agency Press Trust of India. 

• On June 13, the Indian government requested major Chinese phone brands involve local companies in the manufacturing process and develop local distributors for exports, according to Indian media outlet ABP News.
• On the same day, Xiaomi India responded to this announcement by saying that the company’s operations were compliant with local laws and regulations, according to Chinese media outlet National Business Daily. 
• Last April, the ED summoned former Xiaomi global vice president Jain, who resigned this January, to cooperate with the federal investigation, alleging that the company had made illegal remittances by falsely presenting them as royalty payments to foreign entities. Xiaomi has since claimed that the royalty payments were for in-licensed technologies and intellectual property applied to Indian phone products.
• As part of the investigation, it is possible that the substantive frozen funds from three banks – Citibank, HSBC Bank and Deutsche Bank AG – may be confiscated by ED.

Context: In the first quarter of 2023, the top three phone brands in India were Samsung (with 20% of the market), Vivo (18%), and Xiaomi (17%), according to research platform TechInsights. Chinese phone brands account for about 50% of sales in the Indian phone market.

• Last December, a Vivo shipment of 27,000 cellphones from India to neighboring markets was detained by Indian officials. The shipment, worth nearly $15 million, was delayed for over a week because of an alleged misdeclaration of the device models and their value.
• Last June, the Indian government issued a show-cause notice to Oppo for allegedly evading customs duty of $550 million. Oppo says it has cooperated with the investigation since then; a final ruling in the case has not yet been announced.

On Thursday, Xiaomi released a Disney-themed Civi 3 to celebrate Disney’s 100th anniversary. The limited-edition phone is based on Xiaomi’s mid-range Civi 3, which debuted in China on May 25. The limited edition model incorporates elements from Disney’s classic Mickey Mouse character into the design and features a Disney 100 logo on the back. 

Why it matters: As China faces a slowdown in consumer electronics consumption, phone makers are looking for new ways to encourage sales and brand exposure. 

Details: The limited edition phone marks the first collaborative product between Xiaomi and Disney. It is also the first time that a phone brand has cooperated with Disney on actual device design. Currently, Xiaomi’s Disney 100th anniversary series products are offered exclusively in China, with a global launch yet to be announced.

• In addition to the device design and a Disney-themed phone case, the limited edition Civi 3 offers a built-in Mickey theme, including a charging animation, lock screen clocks, wallpaper, filter, and stickers. In terms of hardware, it sticks with the same specs as the ordinary Civi 3 model.

• The limited edition Civi 3’s back panel houses a triple camera setup positioned at the top-left corner and is encircled by a Mickey Mouse design and the Disney 100 logo.
• The device only comes in a 12GB + 512GB storage and is priced at RMB 2,899 ($407). The whole package includes the mobile phone, customized stickers, exclusive limited certificates, customized card pins, and Mickey-themed phone cases.
• The phone is equipped with a MediaTek Dimensity 8200 Ultra chipset, a 4,500 mAh battery, 67W fast charging, and a 6.55-inch OLED curved screen with a 120Hz refresh rate. Additionally, the camera boasts a 50MP Sony IMX800 sensor with an f/1.77 aperture and optical image stabilization (OIS). 
• In celebration of Disney’s 100th anniversary, Xiaomi also unveiled a range of Disney anime-style products, including Xiaomi true wireless noise cancellation headphones 3, a 10,000mAh charger, Xiaomi smart band 8, and a 20-inch travel case.

Context: On March 28, Redmi, a subsidiary owned by Xiaomi, launched the world’s first Harry Potter-themed smartphone. The Redmi Note 12 Turbo Harry Potter edition comes with customized Harry Potter design elements such as the lightning scar, golden snitch, and the iconic Hogwarts logo.

On Thursday, Xiaomi released the upper-end version of its flagship phone, the Xiaomi 13 Ultra. Working with Leica, the Chinese smartphone maker is attempting to position the device as more like professional camera in a smartphone rather than a smartphone with powerful cameras. The 13 Ultra features a rear camera with four lenses, while the main camera uses a 50MP 1-inch Sony IMX989 sensor, offering a physical aperture that opens as wide as f/1.9. The phone is priced from RMB 5,999 to RMB 7,299 ($870 to $1,142). 

Why it matters: This update to the Ultra series, which has long been Xiaomi’s smartphone offering, indicates the firm’s continuing ambition to push smartphones more into the realm of professional camera devices, with photography seen as the main selling point over other functionalities.  

Details: To back up its pro-camera ambition, the Xiaomi 13 Ultra cameras use Leica’s newly designed Vario-Summicron lens, with the device also offering manual aperture and optical stabilization. Xiaomi has also added professional photography accessories, including a wireless handle with built-in buttons and dial to give the phone a more camera-like grip.  

• The main camera of the phone features a one-inch 50MP Sony IMX989 sensor with a variable aperture, optical image stabilization (OIS), and Leica’s Vario-Summicron lens. Users can manually change the physical aperture on the main camera from f/1.9 to f/4.0, allowing for greater depth of field or more light. Three supporting 50MP rear cameras include a 75mm telephoto camera, a 120mm super-telephoto camera, and a wide-angle 12mm camera with macro mode. 
• Summicron indicates a maximum lens aperture of f/2.0. The term was originally assigned to the most popular focal lengths in Leica’s M-System: 28 mm, 35 mm, 50 mm, 75 mm, and 90 mm, according to Leica. 
• Xiaomi is also offering professional photography kits to accompany the phone for an extra $116. These photography kits include a protective case made of nano-skin technology and a wireless photography handle, giving users a physical shutter button. The protective case also comes with a 67mm adapter ring for the camera, allowing users to attach other lenses, and comes with a lens cap and camera strap. 
• The 13 Ultra is equipped with a 6.73-inch dust and water-resistant 1440-pixel OLED screen and is powered by a Snapdragon 8 Gen 2 processor. The 5,000mAh battery can be fast-charged wirelessly.
• The 13 Ultra is released in China this month, ahead of its launch in international markets. The device comes with a vegan leather coating in green, black, or white and offers three storage options: 12GM RAM + 256GB, 16GM RAM + 512GB, 16GB RAM + 1TB.

Context: Xiaomi’s income slid significantly in 2022, totaling RMB 280 billion ($40.68 billion), a decrease of 14.7% year-on-year, according to its financial results. But the firm said it had still managed to increase investment in research and development. In 2022, Xiaomi invested about RMB 16 billion ($2.32 billion) in R&D, an increase of 21% year-on-year, CEO and founder Lei Jun announced at this week’s launch event. Lei reiterated that the brand’s focus on the high-end phone market will not change in the long term. Lei estimated that the firm’s investment will reach RMB 200 billion ($29 billion) this year.

• Xiaomi’s financial report for the fourth quarter of 2022 shows that the company’s high-end smartphone shipments increased by 6.8% year-on-year during the period.
• Xiaomi and Leica first announced their collaboration on advanced camera-centric smartphones last year. The 12S Ultra became the first Xiaomi smartphone to offer an entirely new imaging system developed by Leica when it was released in November.

Oppo released two flagship phones, the Find X6 and the Find X6 Pro, at its new product launch event on Tuesday afternoon. The Find X6 series features a triple camera design, with a wide angle lens with large 1-inch sensor, a periscope telephoto lens, and an ultra wide angle lens, as Oppo looks to dramatically upgrade its products’ imaging capabilities. 

Why it matters: In the past two years, rivals Vivo and Xiaomi have made significant progress in imaging, with the latter working with Leica for example, while Oppo’s camera systems have been seen as lagging behind as the company prioritized aesthetics. The new Find X6 phones, which are being positioned as high-end flagship models, are an attempt to regain the ground lost.

Details: The new X6 series was launched in the mainland China market only on Tuesday with prices starting from RMB 4,499 ($652). Equipped with three main cameras and advanced optical technology, the Find X6 series brings what Oppo claimed is “unprecedented image quality to both photo and video shooting on all three cameras.” 

• With its 1-inch sensor, the Find X6 Pro’s wide camera has the largest photosensitive sensor area of any smartphone camera. Similarly, the phone’s ultra wide camera is larger than any wide-angle smartphone camera to date. The two cameras are joined by a periscope telephoto camera, which is designed to capture images in low-light environments. 
• In terms of performance, the Oppo Find X6 uses the Dimensity 9200 flagship chip, while the Pro is powered with the Snapdragon 8 Gen 2. Both models have LPDDR5X memory and USF 4.0 flash memory. In addition, the Find X6 series is equipped with Oppo’s self-developed MariSilicon X chip, which is tailor made to improve imaging quality.
• Compared with its predecessor the Find X5 Pro, the Find X6 series offers a very different approach to design. Crafted from glass and aluminum, the centerpiece rounded lens module gives the Find X6 series a sleek appearance. The Find X6 features a 6.74-inch OLED screen, with a resolution of 2,772 by 1,240 pixels and supporting a peak brightness of 1,450 nit. The Find X6 Pro features a 6.82-inch screen with a 120Hz refresh rate and a resolution of 3,168 by 1,440, supporting a peak brightness of 2,500 nit.
• In addition to its flagship phones, Oppo also launched wireless noise-canceling earbuds Enco Free3 and its Oppo Pad2 at the event.

Context: According to market analysis platform StatCounter, Oppo accounted for 5.53% of China’s mobile phone market in February 2023, with Vivo making up 8.15% and Xiaomi 7.14%. 

• Oppo’s two main domestic rivals have both focused on imaging technology in recent years. In December 2022, Xiaomi launched its flagship Xiaomi 13 series phones with Leica optics.
• Vivo launched its flagship series the X90 for the global market last month, partnering with optical giant Zeiss to develop its camera sensors and lenses.

OnePlus, a Chinese phone brand owned by Oppo, revealed its new Ace 2V at a product launch on Tuesday, highlighting its high performance stats and low price tag as it looks to accrue market share in a segment long dominated by Xiaomi.

Why it matters: The Ace 2V provides a new threat to Xiaomi’s Redmi series when it comes to price sensitive consumers, a field where the latter has traditionally excelled. The basic Redmi K60 model is priced at RMB 2,999; the standard Ace 2V undercuts it by RMB 700. 

• Lu Weibing, Xiaomi’s president, announced a price cut for the Redmi K60 series on his Weibo account on Feb. 7, the same day that the OnePlus Ace 2V was revealed. A week later, president of OnePlus China Li Jie posted on his Weibo account, “Don’t give in to mediocrity, this is a victory for effort,” and “We won’t sacrifice specs and user experience to profit” (our translations).

Details: The Ace 2V phone began pre-sales on Mar. 7, though is currently only available in China. According to OnePlus, it will be renamed OnePlus Nord 3 in overseas markets, but its global release date is as yet unknown.

• OnePlus has priced its three Ace 2V models (12GB RAM + 256GB, 16GB RAM + 256GB and 16GB RAM + 512GB) at RMB 2,299, RMB 2,499 and RMB 2,799 respectively.
• The OnePlus Ace 2V offers a Dimensity 9000 chip, 12/16 GB of RAM and 256/512 GB of UFS 3.1 storage. At a press conference demonstration, the OnePlus Ace 2V achieved a score of 1.05 million on the AnTuTu software benchmarking system, the highest of any Dimensity 9000 phone to date. The company says that such specs will ensure a smooth gaming experience.
• The phone features support for 5G, Wi-Fi 6, Bluetooth 5.3, NFC, and several navigation systems. It includes an infrared port and 80W fast charging port, with a battery capacity of 5,000 mAh. It also offers a 6.74-inch OLED display with 2,772 x 1,240 resolution and a 120Hz refresh rate and comes with a three camera system featuring a 64 megapixel main camera, 8 megapixel ultra-wide angle lens, and 2 megapixel macro lens.

Context: In December last year, major Chinese phone maker Oppo announced that it would be investing RMB 10 billion ($1.43 billion) over three years as part of a “dual primary” strategy aimed at enhancing and clarifying OnePlus’ status. The two firms merged in 2021. 

• According to data from technology market research firm Counterpoint, Oppo was the third highest selling smartphone brand in China in the fourth quarter of 2022, taking 16% of the market and ranking behind Apple and Vivo. Oppo’s sales figures include those for OnePlus. Xiaomi’s market share was 12% for the same period. 
• In December, it was reported that Xiaomi was undertaking large-scale layoffs after a persistent decline in its phone sales over the course of 2022.

Major Chinese consumer electronics brands have a strong presence at this year’s Mobile World Congress 2023 (MWC 2023) in Barcelona, as China reopens after three years of Covid-19 related restrictions.

The industry event brings together the world’s leading telecom operators and equipment manufacturers to showcase their latest products and technologies, including 6G, WiFi-7, satellite communication, and brand new consumer electronics devices. This year’s conference is expected to attract 80,000 attendees over the course of its four days, with more than 2,000 exhibitors from around the world, according to MWC.

Chinese gadget makers Honor, Huawei, Xiaomi, Oppo, and ZTE all showcased new products at the conference. Here’s a rundown of what they had to offer. 

1. HONOR

Honor launched its Magic Vs Foldable to the global market at the event. The foldable phone was first released in China three months ago. The Magic Vs Foldable is powered by a Snapdragon 8+ Gen 1 chip, Android 13 Magic UI 7.1 system, and a 5000mAh battery and comes with 66W fast charging and dual symmetrical speakers. It supports a 1920Hz PWM high-frequency eye protection mode and has a 6.45-inch 120Hz external screen with up to 1200nit brightness, as well as a 7.9-inch 90Hz 800nit interior screen with 2K HD resolution. Its cameras include a rear 54-megapixel main camera, a 50-megapixel ultra-wide angle lens, and 3x optical zoom lens. The phone was launched with a price tag of 1,599 euros (RMB 11,753) for 12GB+512GB storage, and comes in two color options: cyan and black.

2. HUAWEI

Huawei released the industry’s first commercial 50G PON (Passive Optical Network) at this year’s MWC, which can process signals without power supply. The nodes within the PON are composed of delicate and compact optical fiber components. The Chinese telecom giant says that the 50G PON can meet the increasing bandwidth requirements of offices, campuses, industrial sites, enterprises, and households.

Huawei also released their FTTR F30 (Fiber to the Room), which it claims is the industry’s first all-optical home networking product based on C-WAN architecture. C-WAN stands for Classified Wide Area Network, which features five major updates:

• A design upgrade with four colors and three installation modes.
• A speed improvement with hardware acceleration and 2000Mbps for the whole house.
• A coverage upgrade with multi-beam smart antenna coverage increased by about 30%.
• Improved roaming with unique SRCN (Seamless Roaming Coordinated Network) for senseless roaming.
• A concurrency upgrade with multi-terminal collaboration technology, which allows a maximum of 128 devices to be connected simultaneously.
  

3. Xiaomi

Xiaomi displayed its new wireless AR glasses at the conference. The glasses feature two Micro-OLED screens supporting 1,200 nits of brightness and full HD FHD visuals. Three forward-facing cameras map the surroundings directly in front of the wearer. The AR glasses are lightweight, made of carbon fiber and magnesium alloy, and run on Xiaomi’s self-developed silicon-oxygen anode battery, which weighs less than conventional lithium-ion. 

The glasses are powered by a Qualcomm Snapdragon XR2 Gen 1 chip and have no storage, so they must be connected to a device. The advertised latency is only 50ms. According to testers from the Chinese gadget review site ITHome, after 20 minutes of video watching, the latency is indeed very low with barely any lag and no degradation in picture quality.

In addition, Xiaomi also unveiled the BE7000, a high-performance WiFi 7 router. Equipped with Qualcomm Networking Pro 820, the quad-core A73 1.5GHz processor delivers 28,800 DMIPS of computing power, outperforming most flagship WiFi 6 routers on the market. It also comes with four 2.5G ports and one USB 3.0.

4. Oppo

Oppo brought its Find N2 series to MWC, as well as the self-developed Mariana MariSilicon Y chip, smart glasses Air Glass 2, home health detector OHealth H1, and its 45W liquid cooled radiator.

In addition, Oppo also showcased its first router product, the Wi-Fi 6 Router AX5400. The router uses Qualcomm’s 216 immersive home networking platform to support Wi-Fi 6 AX5400 standard and dual bands of 2.4GHz and 5GHz. Its high-gain antenna, combined with Oppo’s own anti-jamming algorithm and network directional acceleration technology, can boost Wi-Fi signal coverage and make connections more stable, the company says.

The Find N2 Flip series overseas version was initially launched in London on Feb. 28, at a starting price of 899 euros. But Oppo ensured it got plenty of attention at MWC as well by bringing in retired footballers Michael Owen and Luis Garcia to announce that the Oppo Find N2 Flip is now the official UEFA Champions League phone.

5. ZTE

ZTE launched the nubia Pad 3D tablet, in collaboration with Leia Inc., a company that develops naked-eye 3D technology. The Chinese firm says the tablet can support rich 3D application scenarios such as AI face tracking, real-time perspective matching, and real-time AI content processing, transforming 2D into 3D, thanks to Leia’s original 3D light field display technology and powerful AI computing engine.

It has a large 12.4-inch 2.5K screen and four panoramic speakers from Dolby. With a rich 3D content ecosystem, ZTE says that the nubia Pad 3D allows users to enjoy the industry’s first 3D enhanced video chat, private 3D cinema, and immersive 3D games. The tablet is powered by a Snapdragon 888 chip and a 9070mAh battery, and features a 33W quick-charge combination.

Chinese phone maker Xiaomi unveiled its new Xiaomi 13 Series at a release event on Dec. 11, with camera systems from Leica and nine colors for the standard version and four for the Pro version. The new addition to the brand’s annually-updated flagship offering, the Xiaomi 13 series has a price range of RMB 3,999 to RMB 6,299 ($572.97 to $902.51).

Why it matters: Xiaomi’s flagship is a key indicator of the firm’s intention to appeal to a more premium market segment, with top-of-the-range specs and relatively affordable prices. 

• The adoption of a high-speed UFS 4.0 storage chip suggests that the use of this chip could be a regular offering for forthcoming Android flagships.
• The standard version of the Xiaomi 13 has an iPhone-like design with a flat-side frame, which has rarely been used in high-end Android phones in recent years. This rule-breaking design might help it stand out among its rivals.

Details: The Xiaomi 13 series come with top specs in major areas, including a Qualcomm Snapdragon 8 Gen 2 chipset, a high-brightness display, and cameras with a large sensor.

• For display, the two models support a 120 Hz refresh rate and 1,900 nites peak brightness, which comes courtesy of a new generation of illuminating materials. However, the standard version is equipped with a smaller 6.36-inch display (compared to 6.73 inches for the Pro model) and does not support LTPO adaptive refresh rate.
• The two models both feature Leica technology in hardware and software form for their cameras, including lens and color profiles. However, like its predecessor, the 12S series, the large 1-inch CMOS is exclusive to the most expensive model, which is co-developed with Sony. The Xiaomi 13 Pro also features special optical tech – floating focus – with its 75 mm lens, powering super close-up shots.
• The Xiaomi 13 is equipped with a 4500 mAh battery and a 67 W wired charging speed, while the Xiaomi 13 Pro comes with a larger 4820 mAh battery, supporting 120 W charging speed via wires. Both models feature 50 W wireless charging and 10 W reverse charging.
• The series will be available on Dec. 14 via Xiaomi’s official channels in mainland China, offering up to 12 GB RAM and 512GB storage. 
• Xiaomi has suggested they will introduce the series to overseas markets, with more details yet to be revealed. 

Context: Xiaomi is the third-largest phone vendor globally by shipments in the third quarter, accounting for 14% of the market, according to hardware insight firm Canalys.

• The phone maker generated RMB 70.47 billion in the third quarter of 2022, a 9.7% yearly decline, and its phone shipments also fell 8.4% year-on-year to 40.2 million units amid a global slowdown in consumer electronics.

Xiaomi sees slowing sales across all its main offerings, from smartphones, AIoT, and internet service, its third-quarter earnings report shows. The smartphone and electronics maker reported quarterly revenue of RMB 70.5 billion ($9.9 billion), a 9.7% yearly decline.

Why it matters: As electronics makers around the world navigate a market downturn,  Xiaomi, the world’s third-largest phone maker, can provide investors and rivals some clues for the bumpy ride ahead.

Smartphone: Among the three sectors mentioned above, the smartphone business saw the largest yearly drop of 11.1%, shipping 8.8% fewer units in the third quarter, according to Counterpoint Research. Selling prices also saw a 2.2% quarterly decrease, averaging RMB 1,058 per unit.

• Xiaomi’s strategy of developing a vast network of offline stores in China took a hit due to frequent Covid outbreaks and strict control measures, making it less competitive compared to rivals like Oppo, Vivo, and Honor, the report said.
• The company’s performance during the Chinese shopping holiday Singles Day was also weaker this year, with an 11.9% yearly sales drop.
• “Overseas shipments accounted for more than 75% of Xiaomi’s total shipments. The sluggish macro environment, inflation, and foreign exchange fluctuations also took a toll on Xiaomi’s sales in the overseas market. On the bright side, we see that Xiaomi is continuously growing its market share in Europe, Latin America, and the Middle East,” analyst Mengmeng Zhang from Counterpoint Research wrote.

IoT and lifestyle: Xiaomi’s IoT and lifestyle business had a 9% yearly revenue decrease and a 4% quarterly fall due to “weak consumer sentiment.” However, the firm posted a 39.5% increase in connected IoT devices year on year, reaching 558.3 million as of Sept. 30.

• “Despite the segment’s slowing growth, Xiaomi made strong progress in smart home appliances, such as air conditioners, refrigerators, and washing machines, with yearly revenue growing 70%. Smart home appliances are necessities that can better withstand economic downturns,” Ivan Lam, senior analyst of Counterpoint Research said. Lam expected Xiaomi’s home appliances to continue driving demand, especially among younger customers.

Internet services: Xiaomi’s internet service also performed flat, with a 3.7% yearly decrease but a slight 1.4% increase from the last quarter. 

• “Although the monthly active users of MIUI have reached record highs both globally and in China, monetizing the traffic is challenging during the difficult macro environment and will likely carry through to 2023,” commented Archie Zhang, an analyst at Counterpoint Research.

Context: Despite market pressure, the firm is committed to investing in research and development: Spending in this sector saw a 25.1% yearly increase in the third quarter of 2022. One successful example of such an investment is the development of the innovative 1-inch camera CMOS, co-worked with Sony. Xiaomi covered half of the $15 billion developing expense, according to Xiaomi CEO Lei Jun’s post on Weibo.

• The firm’s growth strategy aims to push its products to a more premium market and lift prices of its upcoming Xiaomi 13 phones by 15% to 20%, according to Chinese media outlet The Paper.

Xiaomi launched the 12S Pro in China in early July. The phone is the mid-range offering in Xiaomi’s new 12S lineup (including the 12S, 12S Pro, and 12S Ultra), which updates annually and targets a broad range of mid-end to high-end users. The series is also the first Xiaomi phones to use Leica lenses. TechNode got a hold of the 12S Pro and spent a week using and testing it. Below are our thoughts on the phone. 

The phone can be a solid choice as a primary daily device. The Leica-branded cameras can lure photography lovers, and the 12S Pro’s specs offer a quality entertainment experience. We would also recommend it to avid gamers and video watchers.

Pleasant holding experience

Xiaomi 12S Pro has curved edges from the back case to the front display, with a metal frame in the middle. The model has a higher width-to-height ratio, narrow enough to hold with one hand. The curved edges help reduce discomfort.

The back case is made of delicately frosted glasses, which, in combination with the white color, will be free from fingerprints. 

Gaming and video experience

The phone runs on Qualcomm’s latest flagship processor, Snapdragon 8 Gen 1+, and its power excels. 

We played Genshin Impact, a detailed sandbox mobile game known for demanding high device specs, and it ran quite smoothly on the device under the highest graphic preset. After almost two hours of gameplay, it rarely dropped frames, and the phone temperature remained relatively consistent, with the back case feeling a little heated. Antutu, a popular Chinese benchmark app, reads around 36 degrees Celsius of CPU without workload and up to 50 degrees Celsius after two hours of Genshin Impact gameplay. The metal frame lets out more heat than the back case. We would describe it as “warm” rather than “burning.” 

The phone has a 6.73-inch punch-hole display with 3200 x 1440 pixels. It also comes with a high 120 Hz refresh rate. A highlight we enjoy is the phone’s 20:9 display ratio. The phone offers a better experience for watching videos, considering most popular films display at around a 21:9 ratio.

The display can also achieve a 1,500-nit peak and a 1,000-nit general maximum brightness. A benefit lies in the outdoors experience with this phone, especially in bright, sunny environments. We tested it in such bright lighting conditions, and it offers decent display quality – the color looks normal, and the phone didn’t overheat when operating with the display set to maximum brightness.

The phone can also handle 4K HDR videos quite well in high-contrast scenes, showing details in both shadows and highlights. The dual speaker with Dolby Atom enhances the entertainment experience even further.

Built-in Leica profiles for the camera

A key highlight of the phone is its Leica lens and software. The phone comes with various Leica color profiles. In Photo mode, there are two default options: Leica Authentic and Leica Vibrant. Both modes offer a sharp, vivid look. The colors are punchy yet not too overwhelming, keeping much of the detail in the dark and highlighted areas.

There are two additional monochromatic Leica profiles listed in the filters tab. The high contrast one – Leica HC – provides the distinctive black and white look that Leica is known for. If you are a fan of black and white photography and perhaps a fan of Japanese street photographer Daido Moriyama’s work, this would be a fun filter to explore. 

When it comes to the portrait mode on the rear camera, however, Xiaomi 12S Pro’s algorithm-driven bokeh falls short. It couldn’t always recognize the edge of many subjects, including human hair and other complex scenes. Therefore, we recommend shooting at a lower aperture to improve this issue.

The phone has three rear cameras, offering a range from teleport to ultrawide with five times optical and 20 times digital zoom capacity. We shot in different zoom ranges from a single perspective to demo how it works.

We use the main rear camera to do a standard test of its optical performance in a 16:9 frame to put some extra pressure on the lenses. A notable takeaway is the slight chromatic aberration that appears in high contrast areas. But overall, the image is quite sharp from the center to the corners. 

The front camera takes good quality shots most of the time and comes with a built-in beautification feature to offer choices, making you look better in pictures. However, the phone’s algorithm tends to overexpose when using the front camera, losing details in the highlights. After upgrading the system, the issue improved a little so it could be more of a preset preference issue rather than a bug. 

Long battery life, ultra-fast charging, and multi-tasking 

The phone is equipped with a 4600 mAh large battery, with 120 W speed charge support. Battery life is not a concern for daily use, and we were surprised by the efficiency of the fast charging feature. 

Furthermore, the phone’s battery holds up in demanding situations. For example, after two and a half hours of demanding gaming in the highest image quality, with 75% display brightness and Wi-Fi on, the battery went down 34%. Streaming a movie for two and a half hours using the same settings consumed 25% battery life.

Under these conditions,  the phone should theoretically give you over seven hours of demanding gameplay and 10 hours of streaming video playback.

When it comes to charging, the 12S Pro took only 4 minutes to charge from 20% to 40%. From 20% to full, it only took 23 minutes using the 120 W charger that comes in the box, if you close all apps. The phone lets out surprisingly little heat during the charging process, which is impressive because such a high wattage charging speed will generally lead to overheating. 

The phone’s large 12 GB RAM is a plus to the processor. We opened 20 apps, including news apps, social apps, and Chrome, and all work seamlessly in the background.

The phone system will automatically kill some inactive apps to save battery when you open power-intensive apps or games or lock the phone. But you can easily resume any previously opened app without much delay, thanks to its powerful processing and high-speed storage chips.  

Conclusion 

As a premium Android phone, Xiaomi 12S Pro has a low-key design and feels good in the hands. The performance, battery life, and charging capacity are more than enough for daily usage. You can play popular game titles like Diablo Immortal and Genshin Impact in the best image quality without experiencing frame drops. The new Leica camera system also performs well most of the time. 

It should be a phone that fits the bill for most Android users for daily use. Below, TechNode summarized the main advantages and drawbacks of the Xiaomi 12S Pro. 

Pros 

• Curved body design, feels good in the hand
• Brillant performance when gaming. Impressive heat control
• Large battery and 120 W fast charging
• Vivid photos with Lecia profiles
• A relatively competitive price

Cons

• Algorithm-driven bokeh does not always work as expected
• Charging when playing games can cause overheating issues
• Less promising image quality when shooting with the telephoto lens

Chinese smartphone maker Xiaomi revealed a new foldable smartphone, the Xiaomi Mix Fold 2, at a product launch event on Thursday, boasting a folded thickness that is close to that of a regular phone, thanks to its new screen and hinge design.

Why it matters: The Mix Fold 2 is also intended as a challenge to foldable phone giant Samsung, which launched its new Galaxy Z Fold 4 this week. Xiaomi’s model is cheaper, has a larger battery and screen, and a much faster charging speed.

Details: With a price range of RMB 8,999 to RMB11,699 ($1,336 to $1,736), the phone adopts an inner folding design with a 6.56-inch outer display and an 8.02-inch inner screen. Both displays support 120 Hz refresh rate, 1,000 nits maximal brightness, and Dolby Vision. 

• The phone uses Samsung for its inner display, offering a resolution of 2160×1914 pixels and POL-LESS technology, which Xiaomi claims gives the phone’s inner display 33% more light transmittance and 25% less battery consumption.
• The phone is equipped with a self-developed micro waterdrop hinge, which allows for a smaller bending radius and thinner screen modules, enabling a lighter and thinner hinge design.
• The Mix Fold 2 is 5.4 mm when unfolded and 11.2 mm when folded and weighs 262 grams.
• The device also features Leica-branded cameras, a partnership that was first introduced in Xiaomi’s recent 12S series. It has a 50-megapixel main camera, a 13-megapixel ultra-wide angle camera, and an 8-megapixel telephoto camera with two times optical zoom.
• In the core performance specs, the phone is built with Qualcomm’s new high-end 4nm processor Snapdragon 8+ Gen 1 and UFS 3.1 high-speed storage chips with a large vapor chamber panel for cooling. 
• The foldable phone comes with a 4,500 mAh battery with a 67 W charging speed. For comparison, the Samsung Galaxy Z Fold 4 only has a 4,400 mAh battery with a 25 W charging speed.

Context: Xiaomi introduced its Mix Fold 1 in early 2021, with the model becoming the seventh highest-selling foldable phone in the world in 2021, just behind Huawei’s Mate X2, according to a report from Omdia.

• Samsung dominates the international foldable phone market, with a 88% share in 2021, according to Omdia’s report. But in China, Huawei accounted for 53.7% of all foldable phone sales in the second quarter of 2022, shipping 351,000 units, while Xiaomi took 4.6% of the market during the same period, according to CINNO Research. 

On Monday, Xiaomi introduced a new series of high-end smartphones, 12S, using Sony imaging sensors and Leica lenses. The premium 12S series models are priced from RMB 3,999 to RMB 6,999 ($598 to $1046).

Why it matters: With the new series, Xiaomi has hoped to compete with rivals by offering high-end smartphones at a competitive price. The firm has focused the series on quality lenses and imaging capabilities. 

• Xiaomi’s new series is the first to use Qualcomm’s latest processor, making them potentially the fastest among all Android phones. 

Details: The three models – the Xiaomi 12S, 12S Pro, and 12S Ultra – share the same processor, coming with slight differences in other specs like charging speed, cameras, display specs, and cooling system. The three models will be available on Wednesday exclusively in China, coming in two colors for Ultra and four for the other two models, according to Android Authority.

• The phone uses Qualcomm’s latest processor Snapdragon 8+ Gen 1. Xiaomi 12S Pro’s theoretical performance exceeds all existing Android phones, scoring 1.1 million points on Antutu, a benchmarking app.
• The camera is an upgrade from the Xiaomi 12 series. Featuring Leica lenses, the series are the first Xiaomi phones after Xiaomi announced a long-term strategic cooperation with Leica in May. 
• The 12S series features Leica’s lens and imaging profiles, while the Ultra version comes with special camera lens materials, such as new materials and aspherical lenses, to achieve better imaging quality. The Xiaomi 12S Ultra has three cameras from 13mm to 120mm. 
• The Ultra model also adopts a relatively largest 1-inch CMOS imaging sensor – the Sony IMX989 – behind the main camera. Such a large sensor helps deliver better imaging performance, especially in low light. Other brands like Sony and Sharp attempted to adopt a large imaging sensor on smartphones, but the two brands have relatively small smartphone shipments. 
• The 12S series’ screen specs follow industry standards and have fewer highlights. The Xiaomi 12S Pro and Ultra feature a 6.73-inch LTPO display with a curved edge design, supporting adaptive refresh rate and 2k resolution. The display can also present content with up to 1,500 nit peak brightness and native 10-bit color depth, providing a rich color range and smooth transition, which the brand says guarantees an HDR entertainment experience.
• For battery and charging, the Xiaomi 12S Ultra will be the first model equipped with the new Xiaomi Surge G1 battery management chipset. It has a large 4860 mAh battery, but its charging speed is 44% slower than the Xiaomi 12S Pro’s 100 W fast charging.
• The three models all support 50 W wireless charging and 10 W reverse charging. 

Context: Chinese phone makers have often relied on partnerships with notable camera or lens makers to broaden their appeal. Huawei previously partnered with Leica for imaging systems in smartphones. 

• Vivo has partnered with Zeiss, another notable German optical giant, to design camera systems since 2020.
• Meanwhile, OnePlus teamed up with Hasselblad on phone camera optimization in March 2021. 
• In February, Oppo also announced to work with Hasselblad.

Chinese smartphone maker Xiaomi released the Redmi Note 11T Pro and Pro+ on Tuesday, priced at RMB 1,799-2,499 ($270-$374). The new models mark a further move into higher-end markets for the sub-brand Redmi, which was previously focused primarily on budget devices.

Why it matters: The new series is indicative of the maturation of Xiaomi’s phone offerings, which have found significant popularity in China and in developing markets overseas. The new Redmi Note phones, targeted at middle- and high-end customers, will intensify competition between Xiaomi and rival brands such as Oppo’s Realme.

Details: The newly released Redmi Note series promises higher specs than previous Xiaomi models without abandoning the brand’s affordable image.

• The new phone features a highly-rated MediaTek Dimensity 8100 processor, produced by TSMC’s 5nm process and an efficient cooling solution.
• The Redmi Note 11T Pro and Redmi Note 11T Pro+ come with a 6.6-inch 144 Hz LCD screen, which changes tone according to the environment; however, the screen is a downgrade from the Redmi Note 11 released in February.
• The two models are distinguished by their battery capacity and charging speed. The plus version has a 4,400 mAh battery which is smaller than the pro’s 5,080 mAh. However, the plus version features a much faster wire charging speed thanks to its in-house Surge P1 charging chip, which charges 79% faster than the pro model.
• As for the cameras, the new phones have a 64 million pixel primary camera alongside additional wide-angle and macro cameras. 
• Other features include Dolby-supported dual speakers, high-resolution audio verification from Sony, Bluetooth 5.3 and Wi-Fi 6 capability, and an infrared remote control feature for home appliances.

Context: Xiaomi is the third-largest mobile vendor globally after Samsung and Apple, with a  12.8% of the global smartphone market share in April, according to web analytics firm StatCounter.

• Xiaomi initially launched the Redmi brand to sell budget devices, but in 2019, it began moves to attract more medium and high-end customers.
• Redmi said on its social media accounts on Tuesday that sales of its Note series had hit 280 million units in total worldwide. 
• Xiaomi’s phone sales have been driven chiefly by emerging markets outside its home market. The company is the highest-selling phone brand in India, accounting for a quarter of all sales in the country. In contrast, it occupied just 1.4% of the North American market in April 2022, according to StatCounter.

The annual meetings of the National People’s Congress (NPC) and the advisory Chinese People’s Political Consultative Conference (CPPCC) being held this week are most important for the windows they provide into the government’s economic targets and policy priorities in the coming year. 

But the so-called “two sessions” meetings also enable some top private enterprise executives who are members of the two bodies to present recommendations for policy directions publicly. This year, airing perspectives from tech industries were founders of Tencent, Baidu, NetEase, Xiaomi, and Geely. Their recommendations perhaps won’t be taken up by government authorities this year but might merit serious official consideration in future years.

READ MORE: China’s Two Sessions 2022: More 5G, rural e-commerce, semiconductors, and other tech priorities

Risky new technologies

In his ninth year as an NPC delegate, Pony Ma, founder and CEO of Tencent, urged more emphasis on the digitalization of pillar industries, standardized processes, and customized support for specialized high-tech enterprises. He also warned about the market risks inherent in the emerging sectors of the metaverse, non-fungible tokens (NFTs), and Web 3.

With regulatory risks remaining a major concern for tech giants, the billionaire’s comments largely aligned with the government’s bigger picture initiatives ranging from digital transformation to the call for large enterprises to fulfill their social responsibilities and work toward carbon neutrality. Ma made no comments about online gaming, a key revenue source for his company and an area in which many other delegates advocated for harsher regulation.

Ma also called for the government to build a social emergency network for sending disaster warnings and coordinating rescue resources by learning from the flood relief experiences in Henan and Shanxi last year. He suggested mobilizing local groups like community volunteers, food and package delivery workers, and ride-hailing drivers to be trained for natural emergencies.

Green transport and cultural IP

Robin Li, founder and CEO of Baidu, focused his remarks on autonomous driving and green computation. He urged the government to give more support so China can take the lead in commercializing fully autonomous driving. Specifically, he suggested government support for companies testing autonomous cars without safety drivers, preparing roads for automated cars, and building smart transportation infrastructure.

Li also proposed the creation of more green AI services as a way to achieve China’s goal of reaching carbon neutrality by 2060. China should optimize AI algorithms to minimize carbon emissions and develop big models that cut energy consumption. He also recommended public data centers set up ways to measure their carbon emissions.

According to NetEase founder and CEO Ding Lei, building a global intellectual property (IP) platform for exchanging cultural IP, digital video, and musical content should be a national priority. It’s an area that NetEase, the parent of popular music and video streamer NetEase Cloud Music, has already tapped this year with the launch of the beat trading platform BeatSoul in January.

Ding also called for more research on sodium-ion batteries as an alternative to the more popular lithium-ion ones to lower the price of batteries. In addition, recycling and rental services for lithium-ion batteries were also proposed as possible measures to address the issue.

Recycling, recharging, swapping 

Lei Jun, co-founder and chairman of Xiaomi, recommended the government improve consumer electronic waste recycling and set unified standards for monitoring carbon emissions of new energy vehicles (NEVs). Not coincidentally, the smartphone maker made plans to build its own electric vehicles last year.   

Lei called to consolidate three core processes (trading of used products, reproducing, and scrap dismantling) into one recycling system. Government should pay more attention to safeguarding former owners’ privacy in the recycling process, Lei said, by setting up third-party organizations to erase personal data found in second-hand devices. 

Lei urged the government to build high-voltage fast-charging stations for NEVs on a large scale. He also suggested the government build a national platform to help different companies jointly develop fast charging and other essential techs.

Li Shufu, founder and chairman of automaker Geely, proposed that battery-swapping stations be built across the country, so more people could adopt NEVs without worrying about finding charging stations. 

Li called for regulators, industry groups, and market players to establish unified and generalized standards for swapping technologies. The government should green light rules to speed up approval for swap stations’ land use and cut red tape involved in getting permits to sell swappable electric vehicles (EVs), Li said. 

Although Tesla CEO Elon Musk views battery swapping as an “unlikely” solution and many others worry about the technology’s scaling problems, Chinese companies are jumping into the market in the hope that the service can work at scale in the world’s biggest EV market. Separation of the battery from the vehicle, along with battery-leasing options offered by carmakers, could also reduce the upfront purchase price of EVs, which could increase competitiveness and boost adoption. Beijing showed its support for the technology by defining swap stations as complementary to charging facilities in its “new infrastructure” investment plan for 2020.

Chilye, a Chinese startup that develops high-voltage battery systems for electric vehicles (EVs), has raised around RMB 100 million ($15.7 million) from a group of investors led by Xiaomi, the latest move of the Chinese smartphone maker joining the EV race.

Why it matters: Leading automakers have been embracing high-voltage battery systems, a technology that enables fewer charging times when using fast chargers and a longer driving range with better energy efficiency and lighter car weight, according to Otmar Bitsche, a director at Porsche’s research unit.

Details: Apart from Xiaomi, other investors include private equity firm Yonghua Capital and state-backed Oriza Holdings, according to a Thursday statement (in Chinese).

• Chilye said that the proceeds from the round will be spent on researching and developing high-voltage car battery systems and ramping up manufacturing for commercial products without revealing further details.
• Xiaomi will continue to invest in “prominent domestic companies” in the EV supply chain. The company sees great potential for China’s auto components segment boosted by smart EVs, according to Sun Changxu, a partner at Xiaomi’s industry investment fund (our translation).
• Headquartered in the eastern city of Suzhou, Chilye said it has secured clients including “multiple mainstream automakers” and will have the production capacity to equip 3 million EVs with its products annually by mid-2022.

Context: Xiaomi has set a target of mass-producing its first consumer EV model during the first half of 2024 and recently poached a senior executive from state-owned automaker BAIC Motor to lead its EV project.

• Xpeng Motors is also transitioning to high-voltage technology with the recent debut of its second electric SUV model, the G9, scheduled for delivery starting September. The company claims it will be China’s first mass-produced vehicle model featuring an 800-volt electrical system.
• Xpeng, backed by Alibaba and Xiaomi, added that an 800V power system and its proprietary superchargers will allow its vehicles to have a 200-kilometer (125-mile) driving range with only five minutes of charging.

Xiaomi has hired Yu Liguo, a former senior executive at state-owned automaker BAIC Motor, to lead its autonomous electric vehicle (EV) project. The move brings a highly-experienced executive from the traditional auto industry to the 12-year-old smartphone maker.

Why it matters: The hire is the latest sign that Xiaomi is serious about venturing into the EV industry.

Details: Yu has come aboard as vice president of Xiaomi’s auto unit and a “political commissar” at its Beijing headquarters, according to an internal letter published Friday and obtained by Chinese media outlet 36Kr.

• Yu will be tasked with leading Xiaomi’s car-making project and managing the development and implementation of key business goals, and will report directly to CEO Lei Jun, a person with direct knowledge of the matter confirmed with TechNode on Monday.
• Yu will also play a major role in talent management of the auto unit and report his daily work as a “commissar” to Liu De, a senior vice president and head of Xiaomi’s organization department, the person said.
• Yu began his career at BAIC in 2012 and worked as the president of Arcfox, an EV unit of BAIC, from 2020-2021. His leadership of the EV program at Daimler’s Chinese manufacturing partner resulted in the launch of the Alpha S vehicle, its flagship electric sedan co-developed with Chinese telecommunication giant Huawei in early 2021.

Context: The news comes just months after Li Tianyuan, a former exterior designer of BMW’s electric vehicle the iX, joined Xiaomi, an appointment that was made public via a group photo of the firm’s corporate executives posted by CEO Lei Jun last September.

• The Chinese smartphone giant is targeting the first half of 2024 to produce passenger EV that could include its own assisted driving technology, Lei told investors last October, six months after unveiling Xiaomi’s $1.5 billion auto investment plan.
• Xiaomi will face significant competition in the transportation space, with a host of startups jostling for a place in the EV market alongside banner brands such as Tesla and General Motors Wuling.

Read more: Drive I/O | Chips, batteries, AV: Xiaomi’s most high-profile auto investments of the year

Among a rash of Chinese tech behemoths venturing into the car manufacturing business over the past year, newcomer Xiaomi may pose the most serious competitive threat to other carmakers. With a strong brand name and a dominant position in the country’s consumer electronics market, a Xiaomi car has the potential to turn the automobile and mobility industry upside down in the coming decade.

Now the Chinese smartphone giant is saying a Xiaomi car will be coming in the next few years. Speaking at Xiaomi’s annual investor day on Oct. 19, Chief Executive Lei Jun said the company is aiming to mass produce its first electric vehicle model for consumers in the first half of 2024. The company reportedly (in Chinese) has a master plan for its auto business, eyeing a total sales target of 900,000 vehicles within three years of production. That number would be almost equivalent to China’s total EV sales in 2019.

Bottom line: The auto industry has been uncharted territory for Xiaomi, but boss and founder Lei, 51, is setting wildly ambitious goals for the car-making project, which he calls “my last major entrepreneurial project.” A latecomer to the transition from fossil-fueled vehicles to the future of electric and autonomous mobility, Xiaomi is largely unprepared (in Chinese), even compared to newbie entrants such as Baidu and Huawei. To catch up, the company is pouring billions of RMB into the sector and placing some big bets on multiple startups as it attempts to build a complete auto supply chain.

Here’s a look at some of the company’s biggest deals in the auto industry. 

Chipmaking: Black Sesame

Black Sesame Technologies, a five-year-old Chinese auto-chip startup, announced on Sept. 22 that it had raised “hundreds of millions of dollars” from Xiaomi and other investors. Black Sesame became the smartphone maker’s first big bet in auto-chip designing. One of Xiaomi’s investor affiliates, Hubei Xiaomi Changjiang Industrial Investment Fund, led a Series C investment announced the same day as the strategic investment, which valued Black Sesame at over $2 billion.

Already backed by renowned investors including auto major SAIC, Black Sesame is one of the three domestic companies with the potential to develop high-performance central processors for next-generation electric and connected vehicles, an investment manager who declined to be named told TechNode in September. The other two domestic chip powerhouses are considered to be Huawei and Horizon Robotics. China’s consistent pursuit of self-sufficiency in chip manufacturing may be what made Black Sesame an attractive deal for Xiaomi, this person added.

Xiaomi and Black Sesame have yet to share details about any potential collaboration. And yet the Chinese chipmaking upstart in April unveiled its powerful A1000 Pro chipset. The chipset claims to have a processing speed of 196 trillion operations per second (TOPs), which would outperform Tesla’s full self-driving (FSD) computer running at 144 TOPs. Black Sesame also said its four-chip full autonomous driving system will be capable of a range of applications such as highway and urban driving. The system is scheduled for release with mass production vehicles by the end of 2022.

Autonomous driving: Deepmotion

Following the announcement of its own electric vehicles in March, the only acquisition that Xiaomi has publicly made known to date was its $77.37 million buyout in August of Deepmotion, a Chinese self-driving startup with Microsoft roots. Acquiring the team of a well-known but struggling software startup is expected to help Xiaomi to absorb the talent inside of the company and finally discover a path to develop its branded consumer vehicles with autonomous driving capabilities.

Founded by four computer scientists from Microsoft Research Asia, the biggest overseas research arm of the US tech company, Deepmotion in mid-2017 began working on high-definition 3D maps and localization functions for autonomous vehicles (AVs). However, the company never obtained the required license for surveying and mapping from the central government. It later pivoted to develop AI algorithms and software that enable the use of HD maps and camera sensors for vehicles to navigate the roads.

Thus, the hints are strong: Xiaomi will probably adopt a very conventional approach to self-driving technology by using multiple sensors to help AVs navigate, competing head-to-head against players such as Nio and Xpeng Motors in this space.

In separate moves, the Chinese smartphone maker earlier this year invested in Geometrical Pal, another startup that develops software solutions for radar sensors used in AVs, while also backing Zongmu Technology, a company with a specialty in software development for self-parking functions.

Lidar: Hesai

Xiaomi in June made news again by co-leading the $300 million investment in a top Chinese lidar supplier, making its first bet on what has been heralded as a crucial component enabling self-driving cars to perceive the world. The company, called Hesai, has long been among the highest funded lidar companies worldwide; its products are used in most Chinese self-driving cars. At least 10 out of the top 15 robotaxi developers worldwide are reportedly (in Chinese) among its clients, including Baidu and Didi.

China’s highest-valued lidar startup, Hesai used to develop mechanical spinning lidar sensors for self-driving prototype vehicles. They were usually perched on car roofs with a set of rotating laser sensors housed in motorized turntables to provide 360-degree vision. Such bulky rotating sensors are too unreliable and expensive for mass production vehicles. Hesai in 2019 therefore launched a more compact, solid-state lidar unit which it claims could spot small, dark objects at a range beyond 300 meters.

Chinese automakers and their lidar partners have been working to include lidar, still an immature technology compared with cameras and radar, in their future production vehicles for accommodating high levels of automation. Hesai said in a June statement that the $300 million war chest would be used to accelerate mass delivery of its solid-state lidar units to multiple auto clients without elaborating further. Xiaomi did not reveal details of a possible deal with the company. 

READ MORE: Lidar is hard—but it’s coming soon 

Batteries: Svolt

Partnering with battery makers has become a critical piece of automakers’ plans to secure enough battery supplies as they produce millions of EVs in the next few years, and Xiaomi is no exception. The smartphone giant has actually invested in four Chinese companies across the battery supply chain. In its most recent bet, the company joined a group of investors to pump RMB 10.3 billion ($1.6 billion) into Svolt, a battery maker formed by automaker Great Wall Motor.

The Series B, led by Bank of China Group Investment with participation by IDG Capital and others, has reportedly (in Chinese) pushed Svolt’s valuation to about RMB 36 billion—some 38% higher than just six months ago. A distant rival to the likes of CATL and BYD, three-year-old Svolt is stepping up efforts to jostle for market share with plans to increase its production capacity to over 200 gigawatt-hours (GWh) by 2025. That would be one-third of the capacity of market leader CATL.

As China’s EV sales continue to grow at an astonishing pace, Xiaomi, like many other automakers, is rushing to build a sustainable supply chain to make sure its future models won’t be held up by a battery crunch. Previously, the consumer electronics company had poured RMB 375 million into Ganfeng LiEnergy, the battery-making unit of lithium producer Ganfeng Lithium, according to a statement (in Chinese) released on Jul. 31. Another Chinese battery maker, CALB, also raised an undisclosed amount of funding from Xiaomi and others last December, reported Shanghai Securities News (in Chinese).

Conclusion

In a matter of months, Xiaomi has rapidly acquired capabilities, ranging from software development to chip manufacturing, which could facilitate the company’s ambitious plan to build a complete supply chain under its control and finally make EVs on its own.

However, the consumer electronics giant, still new to auto making, faces the formidable challenges of pulling together these partners from various sectors, managing an entire auto supply chain, and navigating persistent global supply disruptions. Furthermore, Xiaomi has yet to reveal where it intends to manufacture its EVs, triggering speculations about possible contract manufacturing with carmakers such as Great Wall Motor, while peers Baidu and Huawei moved quickly to partner with Geely and BAIC, respectively.

Previously an investor in both Nio and Xpeng Motors, Xiaomi now finds itself competing against these established EV makers. Nio and Xpeng earlier this year hit notable milestones, each delivering more than 100,000 vehicles to customers. Even farther ahead are the dominant EV market players, Tesla and GM’s Wuling. These automakers are all well prepared to defend their territories from attacks by upstarts like Xiaomi. The race will stretch long into the future.

China Tech Investor is a weekly look at China’s tech companies through the lens of investment. Each week, hosts Elliott Zaagman and James Hull go through their watch list of publicly listed tech companies and also interview experts on issues affecting the macroeconomy and the stock prices of China’s tech companies.

Make sure you don’t miss anything. Check out our lineup of China tech podcasts.

In this episode, the guys are joined by regular guest Michael Norris to review some Q2 earnings highlights of Kuaishou, Tencent, and Xiaomi: The three companies have faced dramatically different fates in recent months, and their trajectories may offer insights into the current state of China’s tech and its regulatory overhaul.

Hosts may have interest in some of the stocks discussed. The discussion should not be construed as investment advice or a solicitation of services.

Watchlist:

• Tencent
• Alibaba
• Baidu
• Bilibili
• Xiaomi
• JD.com
• Pinduoduo
• Meituan-Dianping
• Kuaishou

Hosts:

• Elliott Zaagman– @elliottzaagman
• James Hull– @jameshullx

Guest:

• Michael Norris – @briefnorris

Editor:

• Peter Isachenko

Podcast information:

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• Music: “Hey Ho” by Steve Jackson, Royalty Free Music

Chinese smartphone maker Xiaomi on Wednesday announced that it had registered a car company called Xiaomi Qiche, or Xiaomi EV Company Limited. The electric vehicle (EV) business has a starting capital of RMB 10 billion ($1.5 billion), with Xiaomi’s co-founder and chairman, Lei Jun, as the CEO. 

Why it matters: Xiaomi is the world’s second-largest smartphone maker by market share; its entry into the growing EV market may bring new competition to existing upstarts like Nio, Xpeng, and Li Auto. 

5 facts about Xiaomi’s new electric car company:

• Xiaomi wholly owns Xiaomi EV. The new subsidiary is headquartered in Beijing’s southwestern economic-technological development area, known as the Yizhuang area.
• According to Chinese enterprise information database Tianyancha.com, the EV subsidiary will focus on making and developing alternative energy vehicles, and their parts and accessories. It is also allowed to make electric motors, electric machines, electric signal equipment, lithium batteries, and vehicle software. 
• In March, Xiaomi said it planned to invest $10 billion into the EV subsidiary over the next 10 years.
• Since Xiaomi announced plans to make EVs in March, the company has hired about 300 of 20,000 applicants for the EV subsidiary and is seeking more staff.  
• Lei Jun, chairman of Xiaomi and CEO of Xiaomi EV, showed a group photo of himself along with 16 core staff members when announcing the new company. They include Wang Xiang, partner and president of Xiaomi; Liu De, co-founder and vice president of Xiaomi; Zhang Feng, partner and Xiaomi group chief of staff; Xiaomi CFO Alain Lam; and Tianyuan Li, a former exterior designer of BMW’s electric vehicle iX. According to a report by Chinese media LatePost (in Chinese), the core member photo omitted some senior members of the EV team hired from other automotive companies.

Smartphone giant Xiaomi on Wednesday announced that it is acquiring Deepmotion, a Beijing-based startup that develops digital mapping technology for autonomous vehicles. 

Why it matters: The acquisition is Xiaomi’s latest move in its bid to build its own intelligent connected cars. An expansion into China’s auto sector could greatly expand Xiaomi’s mobile ecosystem and create new revenue streams for the company.

Details: Xiaomi has reached an agreement to acquire Deepmotion Tech Ltd in a cash-and-stock deal valued at $77.37 million, according to the smartphone maker’s quarterly results, released Wednesday. The company did not reveal when it expects the deal to close.

• In an earnings call on Wednesday, Xiaomi’s president Wang Xiang said the purchase is aimed at accelerating the consumer electronics giant’s plan to develop autonomous driving technologies, which Wang called the most crucial part of intelligent and electric vehicles.
• Wang added that the company has been aggressively recruiting automotive engineers, and has established its self-driving team with a batch of 500 experts after kicking off its electric vehicle project in March.

Context: Xiaomi has struck several deals to invest in autonomous driving startups in recent months, as the Chinese tech giant ramps up its efforts to develop driverless car technology and mass produce  its first EV in the next three years.

• The company earlier this month raised its stakes in Geometrical Pal, a startup that develops software solutions that allow radar sensors in AVs to sense the environment. Xiaomi also invested in self-driving software developer Zongmu Technology in June, Bloomberg reported.
• Deepmotion was formed in mid-2017 by four computer scientists from Microsoft Research Asia, the research arm of the US tech company in the Asia Pacific region. In March 2018, the startup raised “dozens of millions of US dollars” from venture capital firms Redpoint China Ventures and Source Code Capital.

On June 21, Nuclei System Technology, a Shanghai-based RISC-V chip designer, closed a Series B of more than RMB 100 million (around $15.5 million). The financing round was the firm’s third  in the past year, according to local media reports. Backers of the company included state-owned China Electronics Technology Group and smartphone maker Xiaomi.

Founded in 2018, Nuclei System Technology is one of the largest Chinese companies designing chips using RISC-V, an open-source chip architecture that is gaining popularity among Chinese companies. While the basic RISC-V architecture is free to use, Nuclei’s designs are customized based on real-world needs and are ready to be manufactured. The company’s products are already being used by some of the country’s most popular payment systems, like Alipay and UnionPay.

Nuclei is just the latest example of a rush into the RISC-V space in China. RISC-V is an  alternative to mainstream architectures like x86 and Arm, which are proprietary.  It was long considered a “hobbyist architecture.” Now, China’s semiconductor industry is taking RISC-V seriously. Alibaba and some of the country’s largest chipmakers are joining the bandwagon, rolling out RISC-V-based processors. 

That’s because RISC-V has given Chinese chip designers an alternative to the two dominant architectures:  US chipmaker Intel owns x86, and Japan’s SoftBank owns Arm Holdings, Ltd.. An open-source architecture could free chipmakers from relying on other architecture designers and spending high licensing fees.  

For now, RISC-V remains something  of a hipster architecture. But major companies are already experimenting with it for smartphones, and experts say it could be mature within a decade.

A lightweight architecture, RISC-V is expected to appear first in devices on the internet of things (IoT). It also has potential in data centers, especially those for the purpose of machine learning (ML) and artificial intelligence (AI), because of its ability to modify source code.  Chinese e-commerce giant Alibaba has made a phone prototype based on RISC-V that can execute simple tasks, though it is still an experiment. 

But most importantly, China’s chip industry is embracing RISC-V due to fear that its access to foreign-owned architecture might be blocked in geopolitical conflicts. The move coincides with the Chinese government’s push to replace foreign-made software, operating systems, and infrastructure for the public services and key industries(notably banking) , with homemade solutions—which are often based on open-source projects.

Nuclei said in a marketing blurb on its website that one of its advantages is that it’s “homegrown and self-reliant.”

“At present, the copyrights of mainstream architectures like x86 and Arm belong to US company Intel and Japanese company SoftBank, respectively,” said Wu Di, an analyst at Changsha-based brokerage Chasing Securities. “There is a growing risk of being restricted from using the architectures as the US strengthens its grip on Chinese tech companies.”

Sanction free

Another feature that distinguishes RISC-V from Arm and x86 is its business model. RISC-V’s open-source license is called Creative Commons Attribution 4.0 International. That means anyone can put it into commercial use, modify its code, and distribute copies without cost.

By comparison, both x86 and Arm are proprietary architectures. Currently, there are only three companies licensed to manufacture x86-architecture processors: US companies Intel and AMD and Taiwanese chipmaker VIA. UK-based Arm Ltd. has adopted a looser commercial license system, giving chipmakers worldwide the ability to design processors based on the architecture. As of September 2020, Arm had issued licenses to more than 150 Chinese chipmakers, including Chinese telecommunications equipment giant Huawei, according to local media reports (in Chinese). 

Being open-source also means that RISC-V is not subject to export controls. In May 2019, Arm told staff to stop working with Huawei after the Chinese firm was hit by a US sanction. In March, Arm said it will “potentially” be able to license its latest generation of the Arm architecture to Huawei. 

Huawei’s two-year-long drama with the US government leaves Chinese companies feeling that they can’t count on access to foreign-owned proprietary ISAs. 

Major players

RISC-V is still new to China’s chip industry and most companies in the sector are startups. Here are four Chinese semiconductor companies that are working with the architecture.

Nuclei System Technology is a semiconductor design company and provider of commercial RISC-V processor IP.

• Nuclei was founded in 2018 by Synopsys and Marvell veteran Hu Zhenbo. Hu told a forum (in Chinese) in 2018 that China had realized “self-sufficiency” in chip design, and the real problem that dogged China’s semiconductor industry was “the lack of ISAs.”
• “RISC-V offers a new opportunity for China. RISC-V is likely to become a new mainstream architecture worldwide in the future and it is completely open. It will enable China to truly achieve the production of a mainstream and homegrown processor core,” he said at the time.
• Nuclei has rolled out several generations of chip designs that can be used in IoT and manufacturing, according to its website. The company said its designs have been used to build trusted execution environments (TEE) for fintech giant Ant Group’s payment platform Alipay and financial services corporation UnionPay.

GigaDevice, one of China’s largest manufacturers of nonvolatile memory (NVM), in 2019 launched a general-purpose microcontroller based on RISC-V. A microcontroller is a device that is widely used in IoT.

• The company is China’s largest maker of microcontrollers for IoT devices. It shipped (in Chinese) more than 200 million microcontrollers in 2020. Not all of the company’s microcontrollers are based on RISC-V.

Rivai, a Shenzhen-based startup, is a fabless chipmaker that designs RISC-V processors for IoT devices and artificial intelligence applications like robots and smart speakers.

• The company said on its website (in Chinese) that it is backed by Chinese search engine Baidu and Kai-Fu Lee’s Sinovation Ventures, but it didn’t specify the amount or time of the investment.
• Rivai was founded in 2018 by Tan Zhangxi. Tan is also the co-director of the RISC-V International Open Source Laboratory (RIOS Lab) at Tsinghua-Berkeley Shenzhen Institute.
• Tan told Chinese media in an interview in January that RISC-V is “not a cheap alternative to Arm” because it can do a lot of things that can’t be done by Arm. “As the demand for customization increases, RISC-V is expected to generate a market for high-end IP customization that is different from the Arm era,” he said.

E-commerce giant Alibaba’s chip unit, T-Head, in July 2019 released its first RISC-V-based processor design, Xuantie 910. The company said it can be applied to the design of chips for fifth-generation (5G) wireless networks, artificial intelligence, as well as autonomous driving.

• In May, the company announced (in Chinese) its second RISC-V-based processor, Xuantie 907. The company said at the launch that its Xuantie-series processors had cumulatively shipped more than 200 million units by the end of 2020. Most of T-Head’s Xuantie-series processors are based on architectures other than RISC-V.

State of play

Despite the promise, only a few Chinese companies have so far mass-produced processors based on RISC-V. Most of those processors are used in IoT devices, like surveillance cameras and smart refrigerators, rather than more sophisticated devices like smartphones and personal computers.

GigaDevice, a Chinese memory chipmaker, in 2019 launched its GD32V-series processors based on RISC-V. The company said the processors are mainly for devices like vehicular Global Positioning System (GPS) trackers, alarm systems, and point of sale (POS) devices, according to its website (in Chinese).

In January, T-Head, Alibaba’s chip unit, said it had  tested the Android mobile operating system on its RISC-V-based processor. However, the prototype system could only run simple apps like the clock and mail apps, but not complex operations like games.

RISC-V’s future in China

RISC-V is not coming to smartphones and laptops any time soon, but Chinese experts say RISC-V could emerge as a major ISA within the next decade.

One of the biggest problems for the 11-year-old architecture is the lack of an ecosystem, both in hardware and software. That includes systems on a chip (SoCs), developer boards, design tools, and the operating systems running on the chips.

Wu, the analyst at Chasing Securities, used the Android operating system as an analogy to argue that an ecosystem will not be a problem for RISC-V. 

“The RISC-V architecture is simple, efficient, free, and open, which also gives it a competitive advantage. In the face of the proprietary Symbian operating system, Android became one of the major OSs for mobile devices in the following decade by taking advantage of its open-source features,” he said, referring to a once-might mobile operating system on Nokia phones.

However, RISC-V is still a niche in China’s semiconductor market. Around 95% of Chinese-designed chips were based on the Arm architecture as of September 2020, according to a local media report.

Even if a RISC-V ecosystem readily arises for IoT devices, there are bigger obstacles to widespread RISC-V adoption.  “The hardest market to establish an ecosystem for is actually mobile, followed by desktop and server,” Allan He, vice chairman of China Software Industry Association’s Embedded Systems Association, told local media in 2019.

It will take a concerted effort (in Chinese) by chip designers to build up RISC-V’s ecosystem, said Hu Kangqiao, chief executive of Hexin Hulian, a Beijing-based company that designs home appliance chips based on RISC-V. “When the number of manufacturers designing RISC-V chips is in the same order of magnitude as ARM, it means that the RISC-V’s ecosystem is mature,” Hu said in 2020.

“That will take approximately five to 10 years,” he predicted. 

Chinese smartphone maker Xiaomi said Wednesday a US district court has ordered the Defense Department to lift a ban on American investment in the company.

Why it matters: Xiaomi has evidently shaken off a geopolitical burden that have weighed down its shares since earlier this year. It is unlikely that the Biden administration will appeal against the decision.

• Xiaomi was placed on a list of “Communist Chinese military companies (CCMC)” by the outgoing Trump administration on Jan. 15, a week before it left office.

• A similar move against China’s three major telecom companies led to their delisting from US stock markets in May.

Details: The US District Court for the District of Columbia issued a ruling ordering the US Department of Defense to remove Xiaomi from the CCMC list, said the smartphone maker in a filing (in Chinese) to the Hong Kong exchange on Wednesday.

• The order “officially revoked all restrictions on the purchase or holding of the company’s securities by US investors,” said Xiaomi.
• The company is “an open, transparent, publicly traded, independently operated and managed corporation,” it said.
• The Biden Administration has previously said it won’t challenge a ruling by a federal judge that temporarily blocked enforcement of the blacklisting.

Context: An executive order signed by US President Donald Trump in November bans American investment in companies that it deemed owned, controlled, or affiliated with China’s military.

• In February, Xiaomi filed a lawsuit against the US government over the decision to add it to the CCMC list. Xiaomi said that it believes its inclusion was “factually incorrect and has deprived the company of legal due process.”
• In March, a federal judge temporarily blocked enforcement of the ban on the company, calling the decision to blacklist Xiaomi “deeply flawed.” Xiaomi is not state-owned.
• China’s three state-owned telecom operators, China Mobile, China Unicom, and China Telecom, said on May 8 that they would be delisted by the New York Stock Exchange on May 18. The three firms were added to the CCMC list by the Trump administration last year.

Last week, UK-based semiconductor design company Arm announced plans for the next generation of chips. The v9 architecture comes ten years after the release of v8, which is currently the standard used for mobile phone central processing units (CPUs) and many other processors.

There are some good articles on the new features v9 brings to the table, most notably the Realms feature, which promises to increase security by running applications while data is protected from inspection or intrusion by the host or any other software running on that host. The new architecture will also bring AI/ML extensions for AI support across its CPUs, network processing units (NPUs), and graphics processing units (GPUs), and the ability to improve performance by accelerating workloads in a CPU environment in ways that previously required external hard accelerators.

Licensing architecture

I’ve written an overview of major architectures in China elsewhere, but here’s a brief recap: Many Chinese companies design Arm-based chips, but most will license complete Arm cores on a single-use or multi-use basis, so they don’t have to design a core themselves.

More ambitious chip design companies may get an architecture license, which allows the licensee to change the design itself. This is what you need to create a customized core like the Kirin line of phone CPUs, designed by Huawei’s HiSilicon for use in its phones. But it’s difficult to build a core from scratch, so you have to be highly skilled.

Currently, only two companies in China have an architecture license for v8: Huawei and Phytium Technology, a fabless chip design company focused on Arm server chips..

Notably absent

Arm’s press release included several quotes from high-profile partners around the world, including representatives of three major Chinese smartphone brands; Xiaomi CEO Lei Jun, Vivo CTO Shi Yujian, and Oppo Head of Research Levin Liu. Notably absent were Huawei and Phytium Technology.

Both Huawei and Phytium previously bought architectural licenses from Arm, in part as a way to advertise their independence and control. To help them sell such a message Arm also created Arm China, a separate company that has its own issues.

The smartphone makers that did make the press release, have never been architectural licensees of Arm v8. This could change as they look to develop their own chips. All these companies have been investing heavily in building their own internal chip design capabilities.

However, I think for the time being they will stick with application processors from Qualcomm or MediaTek. As part of Arm’s presentation MediaTek announced that its first smartphone chip using the v9 architecture will be available by the end of 2021, sooner than any Chinese handset OEM would be able to design their own. That’s a lot sooner than they’re likely to be able to make their own.

Chinese handset companies will likely license Arm cores for individual designs, such as Xiaomi’s recent image signal processor design. Xiaomi’s previous attempt at an application processor was somewhat of a failure, and it makes sense for the company and others like Oppo and Vivo to focus first on simpler designs that can help them differentiate their products and also help them gain valuable real-world chip design experience.

So what are we to make of the absence of current licensees Huawei and Phytium? Are they not considered key partners, can they license v9 architecture, and does it even make sense for them to?

Can Huawei buy the v9 architecture?

Huawei has struggled to access semiconductors and IP since the US placed it on a list of companies which require licenses to buy US or US-linked technology. The absence of either company in Arm’s presser could imply that one or both won’t be able to upgrade to v9.

In response to such speculation, Arm has said that it can continue to license its IP to China including Huawei, concluding that its IP is of UK-origin and so not subject to the US ban. Ian Smythe, vice-president of solutions marketing at Arm said, “Following a comprehensive review, Arm has determined that its Arm v9 architecture is not subject to the US Export Administration Regulations,” adding that Arm had informed US government agencies of this conclusion.

That might not be the last word for Huawei. Ultimately, the US government may conclude that Arm’s Austin facility, which contributes to a lot of its high-performance architectures, means that Arm’s IP is sufficiently of US-origin to face export restrictions.

Phytium on thin ice

Phytium is not on the export ban list, and as such does not face the same restrictions as Huawei. However, it is on a list of “military-linked” companies that face restrictions on cross-border investments.

Also, the Washington Post reported today that that the Trump administration was planning to put Phytium on an export blacklist, but “ran out of time”. The article also reported Phytium chips are used at supercomputing centers that design advanced weapons systems for the People’s Liberation Army. This could heighten Washington’s scrutiny of the company, potentially leading to sanctions.

My best guess is that they will go ahead and secure a v9 license without much trouble, but they may be trying to keep a low profile in the hope that the US will not decide to target them. Watch this space.

Now or never

An architectural license gives Huawei and Phytium a certain amount of security: Once granted, the license is permanent, meaning Huawei would be able to continue designing new v9 chips indefinitely whatever actions Washington takes. But under present circumstances it might not be too useful.

An architectural license does not mean the licensee is licensing a specific core. They receive a set of specs for Arm’s cores and a testing suite. This allows the licensee to customize their own processor to fit their application. They can make cores that are faster, smaller, or less power hungry than standard Arm cores, or otherwise differentiated from standard Arm licensees.

Qualcomm and Apple rely on such licenses to create their chips, as did Huawei for its Kirin series. There are only a handful of such licensees globally, mainly because it costs a lot and requires a lot of time and internal expertise to create your own custom Arm core, while there are perfectly good cores available to license at a much cheaper price.

A license alone isn’t enough to make chips. If Huawei is able to buy an architectural license and does so, it still has no access to the EDA tools it needs and the fabs to actually manufacture a high-end Arm-based chip.

But it could be now or never. As competing companies move to v9, Huawei’s v8 license will soon be obsolete. It could actually make sense for the company to go in on an architectural license it can’t use for now in the hope that further down the line either restrictions on the company are removed or domestic self-sufficiency gets to a point where Huawei can get back into the high-end chip game.

With Nvidia’s acquisition of Arm also on the horizon, Arm could soon become a US-owned company. It could make sense for Huawei to lock in access to its IP now, although the same concerns could also motivate China to block the deal.

Conclusions

Access to IP is a chokepoint for semiconductors in China. As I’ve written before, RISC-V may help with this to some extent, but it isn’t as mature as Arm yet, and processor cores are just one of many different types of IP within a chip.

Despite RISC-V’s growth, Arm’s v9 architecture will be a core component for handset, server, IoT and automotive chips for the coming decade. For Huawei it may make sense to get in now, while it still can.

For its part, Arm will want to be free to license to Chinese companies and will be happy to take Huawei’s money. However, the reach of the US government can be long and if the Nvidia acquisition goes through I struggle to see companies on the entity list being allowed access. 

Some domestic analysts argue that Huawei should not rely on architectural licenses. “You may get a v9 license this time, but what about v10 or v11, etc? Does endlessly licensing foreign IP mean independence?” (my translation).

It would be strange to see China without any Arm architectural licensees, but that is a prospect.

We may also see new Arm licensees. Perhaps the likes of Oppo or Vivo will decide it makes sense for them. We all know they are investing huge sums into their own IC design capabilities.

Chinese tech giant Xiaomi is throwing its hat into the red-hot electric vehicle market with a RMB 10 billion ($1.52 billion) investment to set up a fully owned subsidiary for its auto business, to be led by chief executive Lei Jun.

Founder and CEO Lei at a press event in Beijing on Tuesday said Xiaomi had decided to strike out on its own on EVs in an effort to operate an ecosystem that will provide seamless user experience, and will not consider outside funding. Lei said he was aware of the complexities of making cars with extreme capital intensity, saying that the company is now ready to pour money into the project and face losses over a long-term period.

“We look forward to the day when Xiaomi cars will run on roads across the globe… This would be the last startup project in my career and I shall stake all I have to work this out,” the 52-year-old serial entrepreneur said (our translation). In an announcement published Tuesday, Xiaomi said the company plans to invest a total of $10 billion in the project over the next 10 years.

Following in Apple’s footsteps, Xiaomi has pledged to develop high-quality EVs with a “best-in-class” connected device ecosystem for global customers, according to Lei. The world’s fourth-biggest smartphone maker recorded shipments of nearly 150 million units in 2020 with an annual growth rate of 19%. Sales for competitors Samsung and Huawei shrank a respective 14% and 22%, according to figures from Canalys.

Xiaomi also boasted of having one of the world’s biggest Internet-of-Things (IoT) platforms, connecting 325 million smart home appliances as of last year, excluding handsets and laptops. It has also remained the top-selling television set maker in China since 2019, accounting for around 20% of market share, according to data compiled by Beijing-based consultancy All View Cloud (AVC).

However, the Chinese consumer electronics giant is seeking new sources of growth amid a slowing market. Its IoT and consumer products segment slowed sharply to 8.6% annually last year from 41.7% in 2019. The company also missed analyst revenue estimates for the fourth quarter, according to Bloomberg.

In the meantime, the global automotive industry is undergoing a landmark transition, and the shift to battery-electric, self-driving cars from traditional, internal-combustion vehicles has reached a major inflection point. China is expected to maintain its global leadership in EV production and adoption. IHS Markit forecasted that China will regain growth momentum at double-digit rates in 2021 and beyond, as the government continues to push the EV industry forward and consumer demand recovers.

Xiaomi has long been rumored to be plotting a move into the booming, crowded EV market. Last week it denied a Reuters report that it was in discussions with Chinese automaker Great Wall Motors for contract manufacturing. Shunwei Capital, a venture capital firm formed by Lei, invested in Nio in its Series A back in 2015 and became an early investor in Xpeng Motors two years later.

Baidu is also accelerating the push into the market. In January it set up a joint venture with automaker Geely. The Chinese search company has set a goal to launch its first own-brand EV within three years, chief executive Robin Li said during an earnings call last month.

Chinese smartphone maker Xiaomi is planning to make electric vehicles, according to a Chinese media report. This move could make it the latest entrant into the country’s exploding electric vehicle market, with founder and CEO Lei Jun reportedly leading the project.

Why it matters: The reported entry of Xiaomi, often dubbed “the Apple of China,” could shake up the entire auto industry. Its success in the consumer electronics market has given it high brand awareness among domestic consumers.

Details: After years of indecision, Xiaomi is about to give its electric car project the go-ahead, Chinese media LatePost reported Friday, citing “people familiar with the matter.” Sources cautioned that the company’s plans are still at an early stage and subject to change.

• LatePost’s sources said that Xiaomi began a project code-named “Micar” in 2018 to explore own-brand cars. The project was launched after founder Lei Jun’s visited Elon Musk in the US back in 2013.
• A Xiaomi spokesperson did not respond to TechNode’s request for comment.

Context: Xiaomi has made investments in home-grown EV brands before, leading the $400 million Series C of Xpeng Motors as a strategic investor in late 2019. Prior to that, Shunwei Capital, a venture capital firm founded by Lei, backed Nio’s Series A in 2015.

• The smartphone maker also boasts an advanced voice recognition technology, reaching partnerships first with state-owned FAW Group in 2018, later with Geely and Mercedes Benz in 2019 for the adoption of its voice-activated virtual assistant. It is still a small player, with iFlytek currently leading with 40% of the in-car voice assistant segment.
• Xiaomi has been looking for approaches to expand its presence in car connectivity, including partnerships with automakers in contract manufacturing, Jin Di, consulting director at market research firm Ipsos, told TechNode on Friday.
• Chinese new energy vehicle market reported strong sales of 1.37 million units in 2020, representing a 11% year-on-year growth despite business disruptions associated with the global pandemic, according to figures from the China Association of Automobile Manufacturers.
• Last month, search engine company Baidu revealed plans to make EVs in partnership with Volvo’s parent Geely.

China produced a scant 5.9% of semiconductors it used in 2020, according to a report published Thursday, indicating significant reliance on foreign technology as the country pushes for independence on chips.

Why it matters: China, the world’s largest semiconductor market, is determined to increase domestic production of chips, and plans to make 70% of chips it uses by 2025.

Details: China’s integrated circuit (IC) market increased 9% to $143.4 billion in 2020 compared with a year earlier, according to a Thursday report by market research firm IC Insights. China-headquartered firms, however, only made $8.3 billion worth of ICs sold in the country in the same year, the report said.

• Around 15.9% of ICs sold in China in 2020 were made locally, but most of them were made by foreign companies with wafer fabrication plants in the country, such as Taiwan Semiconductors Manufacturing Company, SK Hynix, and Samsung. Together, such firms made around 10% of chips sold in China last year.
• IC Insights estimated in the report that 60% of semiconductors produced in China were components for exported products. The country is home to some of the largest smartphone makers in the world, including Xiaomi, Huawei, and Oppo.
• Programmable logic devices, which are used to store the logic pattern integrated onto chips during programming, was the largest segment of China’s IC market in 2020, accounting for 26% of total wafers sold.
• Strong sales of smartphones and other computing systems during the pandemic drove growth in microprocessors, which was the second-largest IC product segment in China last year, according to IC Insights. The category grew 12% last year to $32.7 billion.

Context: In December, the US added China’s largest chipmaker, Shanghai-based Semiconductors Manufacturing International Corp (SMIC), to an “Entity List” that effectively cut the company off from American technology.

• Huawei, the world’s largest maker of telecommunications equipment, has been been plagued by US sanctions. The company has now essentially been cut off a supply of advanced semiconductors.

Chinese smartphone maker Xiaomi said on Sunday it had sued the US government over a move by the Trump administration which bars American investment in the company.

Why it matters: This is the first legal challenge launched by Chinese firms on the Trump administration’s investment blacklist. The US Department of Defense (DOD) alleges that the entities are “Communist Chinese military companies,” meaning they are owned or controlled by the People’s Liberation Army.

• Chinese tech companies have won legal challenges against the US government sanctions before. In December, a district judge fully blocked the Trump administration’s attempt to ban the Chinese video-sharing app TikTok in the US.
• But Huawei, a Xiaomi rival, has found little respite pursuing legal challenges. In February, a federal judge rejected Huawei’s constitutional challenge to a US law that restricts it from doing business with US federal agencies.

Details: Xiaomi said in a statement filed with the Hong Kong exchange on Sunday that it had filed proceedings in the US District Court for the District of Columbia against the DOD and the Department of the Treasury on Friday. 

• Xiaomi said that it believes its inclusion on the blacklist was “factually incorrect and has deprived the company of legal due process.”
• The firm has asked the court to declare the decision illegal and to reverse the course, it said.
• Defendants of the suit also include the US defense secretary, Lloyd Austin, and Janet Yellen, the Treasury secretary, according to a court filing.
• The DOD didn’t “provide any explanation for its decision to designate Xiaomi as a Communist Chinese military company,” nor did it give Xiaomi any opportunity to explain, the company said in the court filing on Friday.
• Xiaomi denied any allegations that it is owned, controlled, or does business with China’s defense industry.
• The Defense and Treasury haven’t responded to the lawsuit.

Context: An executive order signed by former US President Donald Trump in November bans American investment in companies that are deemed to be linked with the Chinese military.

• American investors will be prohibited from buying Xiaomi shares and will have to divest their holdings by November, according to the executive order.

Chinese tech giants typically focus on the consumer market. But their appetite for semiconductors is growing. 

These deals highlight a trend: Chinese tech giants are trying to secure their future growth by making investments in the semiconductors industry.

Funding China’s semiconductor industry also underscores tech giants’ concerns about being cut off from the global semiconductor supply chain after the US effectively banned Huawei from sourcing American-made components. 

Other active chip investors are Tencent and e-commerce behemoth Alibaba, which have focused on investing in the artificial intelligence chips and computer processors that power their cloud computing businesses. Earlier this month, Tencent participated in artificial intelligence chip maker Enflame Technology’s RMB 1.8 billion (around $278.3 million) Series C.

Tencent and Xiaomi have been targets of Trump’s actions against Chinese tech firms, but they have so far not had trouble getting chips.

Increasing investment in semiconductors is also in line with Beijing’s push for self-sufficiency in strategically important technologies. Unlike Huawei, which is locked in geopolitical disputes with the US and is barred from most high-end semiconductors that use American technology, the other companies making these investments are largely free from US sanctions.

China has vowed to produce 75% of all the chips it uses by 2025—and it is putting a lot of money behind this goal. Total VC investments into China’s semiconductor industry quadrupled (in Chinese) in 2020 to RMB 140 billion from the previous year. The country has also set up a series of government-backed funds to support semiconductors startups, including a $29 billion “Big Fund.”

In this issue of VC Roundup, we look into how Chinese tech giants are making investments in semiconductors.

Huawei: The Shenzhen-based telecoms company, which produces everything from smartphones to base stations for next-generation 5G networks, has felt the pain of a shortage of semiconductors. The company may have to stop manufacturing smartphones in the middle of this year if the US doesn’t lift sanctions.

• In April 2019, Huawei set up its Hubble investment unit, led by Bai Yi, the then president of Huawei’s global financial risks control center. The company had RMB 700 million in registered capital when it was founded. In October, Huawei increased the investment unit’s registered capital to RMB 2.7 billion. Hubble has invested in 27 companies so far, all of them in the semiconductor sector.
• In August 2019, three months after Washington added Huawei to a technology export list, Hubble made its first investment in a Hangzhou-based battery integrated circuit (IC) designer.
• In 2020, Hubble invested in 20 semiconductors companies, according to Chinese corporate information platform Tianyancha (in Chinese).
• They include NineCube, a maker of chip-designing tools; ALLSEMI, a semiconductor manufacturing equipment maker; and Onmicro, an IC designer of processors and radio frequency (RF) front-end modules used in handsets.
• Industry insiders believe that Hubble’s investments are linked to Huawei’s plan to “de-Americanize” its supply chain. “The investments are clearly replacing US companies they can no longer get access to,” a chip industry executive told the Financial Times in December.
• Some of Hubble’s investments, such as RF module designers Onmicro and Evisionics, are aimed at replacing US counterparts, like Qorvo and Skyworks, said Stewart Randall, head of electronics and embedded software at Shanghai-based consultancy Intralink. 

But chip design won’t “help too much” if they don’t have access to chip contract manufacturers like Taiwan Semiconductor Manufacturing Company (TSMC) and South Korea’s Samsung, Randall added. TSMC and Samsung are also subject to US export restrictions on Huawei because their production lines contain American technology.

Xiaomi: Xiaomi made its first foray into chips in 2014 when it launched a semiconductor division that focuses on SoC design. In 2017, the unit, called Pinecone, launched its first and only mobile processor, the Surge S1, which was featured in Xiaomi’s Mi 5C smartphone.

• In 2019, Xiaomi began rethinking its chip ambitions by pivoting to investment. In July 2019, it bought a 6% stake in Shanghai-based chip designer VeriSilicon.
• Xiaomi has since become a more active chip investor than Huawei. In 2020, the company funded some 30 early-stage semiconductor firms, most of which are designers of smartphone chips.
• There is some overlap between Xiaomi and Huawei’s portfolios. Both companies have invested in Onmicro and SmartSens Technology, a Shanghai-based digital camera image sensors maker.

Internet companies: E-commerce giant Alibaba is also China’s biggest cloud computing service provider. The company has been pouring money into making silicon for its cloud computing business to reduce reliance on foreign chipmakers such as Intel and Nvidia.

Alibaba’s semiconductor push began in 2017. The company invested in a series of artificial intelligence chip makers such as Cambricon (in Chinese) and DeePhi Technology (in Chinese).

• In April 2018, Alibaba acquired C-sky, a designer of homegrown 32-bit processors for servers. Alibaba then merged C-sky and Damo Academy, an in-house semiconductor research institution founded in 2017 to form T-head, a chip-designing unit.
• T-head’s offerings include the Xuantie processor series and the Wujian SoC Platforms series, which are mainly used to power IoT devices; and the Hanguang neural processing unit (NPU), which is used in servers in Alibaba’s data centers, according to the company’s website.

Artificial intelligence chips have also caught Tencent’s eye. The company participated in three financing rounds for chipmaker Enflame between 2019 and 2021. 

• Tencent is China’s second-largest cloud computing service provider after Alibaba, but the company is not as active in semiconductor investments as Alibaba. 
• Apart from Enflame, the only other semiconductor firm Tencent had a stake in is Shenzhen-based SDMC, a smart television chipmaker. In August, Tencent led a RMB 44 million (in Chinese) financing round in SDMC.
• Internet companies’ investment in semiconductors is a “global phenomenon,” Randall of Intralink told TechNode. “Facebook, Google, Amazon, etc. all have their own chip teams now. Alibaba and Tencent followed this trend,” he said.

A mixed picture: While the US hasn’t targeted the majority of Chinese tech giants with technology export restrictions, some companies have already found themselves in the crosshairs of US-China geopolitical disputes. It’s unclear whether their investment strategies will mitigate this risk. Huawei has demonstrated that investing in chips can be more profitable than strategic.

• “For Chinese companies at least it is also some form of protection,” said Randall. “If we get cut off from Nvidia then we at least have some in-house expertise to maybe create something to keep our services running as they grow.”
• But Huawei’s efforts to invest in the domestic semiconductors supply chain didn’t prevent it from being cut off crucial chips it needs to produce smartphones. The company had to sell its budget handset brand Honor in November. Reuters reported this week that Huawei is in early-stage talks to sell its premium smartphone brands P and Mate.
• Randall says these may just be good investments. “Sometimes you can make more profit that way. Like Qualcomm makes more off a Xiaomi phone than Xiaomi,” he said.

Big deals: semiconductors edition

• Jan. 25: Xiaomi injects RMB 200 million into Cvitek, a Beijing-based chip designer for video surveillance equipment.
• Jan 7: Beijing-based AI chip designer Horizon closes a $400 million Series C2 led by British firm Baillie Gifford and Hong Kong-based Aspex Management.
• Jan 5: Enflame closes a RMB 1.8 billion Series C led by state-owned Citic Private Equity and participated by Tencent.
• Dec 28: Huawei’s Hubble investment unit injected more than RMB 10 million into Ninecube.
• Dec 21: Senscomm, a wireless semiconductors designer based in Jiangsu province, closes a RMB 150 million Series A led by Oriza Holdings and Xiaomi.

China Tech Investor is a weekly look at China’s tech companies through the lens of investment. Each week, hosts Elliott Zaagman and James Hull go through their watch list of publicly listed tech companies and also interview experts on issues affecting the macroeconomy and the stock prices of China’s tech companies.

Make sure you don’t miss anything. Check out our lineup of China tech podcasts.

In this episode, James and Elliott review the winners and losers of 2020, what they got right and what they got wrong, as well as the lessons they learned. They also look forward to the rest of 2021, anticipating trends, as well as companies to watch. They discuss Bilibili, Alibaba, Ant, Xiaomi, Baidu, and more.

Hosts may have interest in some of the stocks discussed. The discussion should not be construed as investment advice or a solicitation of services.

Watchlist:

• Tencent
• Alibaba
• Baidu
• Bilibili
• Xiaomi
• JD
• Pinduoduo
• Meituan-Dianping

Hosts:

• Elliott Zaagman– @elliottzaagman
• James Hull– @jameshullx

Editor:

• Peter Isachenko

Podcast information:

• iTunes
• Spotify
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• Music: “Hey Ho” by Steve Jackson, Royalty Free Music

Shares of Chinese smartphone maker Xiaomi plunged 11% on Friday morning after the Trump administration added it to a blacklist, forcing Americans to divest holdings and barring share purchases.

Why it matters: Xiaomi is the second-largest smartphone maker in the Chinese market and ranks fourth globally. The company has been caught in US-China geopolitical tensions for the first time, its troubles bearing resemblance to its main rival Huawei.

• However, Xiaomi is unlikely to face the same degree of US restrictions as Huawei, which has been essentially barred from the global high-end semiconductor supply chain. The Trump administration will end next week and there is no sign that it will place export restrictions on Xiaomi.
• A similar move against some Chinese telecom companies had led to their potential  delisting from US stock markets. Xiaomi is listed in Hong Kong, indicating that the price plunge on Friday could be shareholder panic selling.

Details: The US Department of Defense on Thursday added Xiaomi and eight other Chinese firms to a list of “Communist Chinese military companies,” according to a statement on its website. An executive order signed by US President Donald Trump in November bans American investment in such companies.

• Other companies added to the list include Commercial Aircraft Corporation of China, a state-backed aircraft maker; Gowin Semiconductor, a Guangzhou-based chip designer; and Beijing Zhongguancun Development Investment Center, a government-led venture capital firm.
• Shares of Xiaomi in Hong Kong dropped more than 11% on Friday morning.
• Xiaomi said in a statement Friday that it had confirmed that it is “not owned, controlled, or affiliated with the Chinese military,” and that the company’s products are all for “civilian and commercial use.”
• A Xiaomi representative did not immediately respond to a request for comment.
• US investors will be prohibited from buying Xiaomi shares and will have to divest their holdings by November, according to the executive order.

Context: Xiaomi shares reached a historical high of HKD 35.3 (around $4.6) on Jan. 5, driven by strong sales and a weakened Huawei. Market research firm Trendforce expects Xiaomi will be ranked the world’s third-largest smartphone vendor in 2021 while Huawei, which ranked third in last year, will fall to seventh this year.

• The Trump administration reportedly considered adding other Chinese tech giants including Alibaba, Tencent, and Baidu into the investment blacklist. All three companies are listed on US stock markets.
• On Wednesday, the Wall Street Journal reported that the US had decided to not to add them to the blacklist.

Update: This article has been updated to include a statement from Xiaomi and to correct a typographic error.

Chinese telecommunications giant Huawei, once the world’s largest handset vendor, will fall to seventh place in global smartphone shipment rankings in 2021 according to a report published Tuesday.

Why it matters: Huawei is losing its status as a smartphone powerhouse following US sanctions over the past two years. The company has been cut off from the global semiconductor supply chain and now relies on stockpiles to maintain production. To increase its chances of survival, it sold in November its budget handset brand Honor, which is now becoming a rival. 

Details: Huawei is expected to ship 45 million smartphones in 2021, ranking seventh among global vendors, according to a Trendforce report published Tuesday. Huawei shipped 170 million units in 2020, ranking third globally, according to the report.

• The changes in Huawei’s smartphone sales owe both to the US export restrictions and the Honor spin-off, according to Trendforce.
• Honor will become a direct competitor, thus making it harder for Huawei to regain market share for smartphones, the report said.
• Samsung will remain the world’s largest smartphone vendor and Apple will retain the second slot, said the report. Chinese company Xiaomi, which ranked fourth in 2020, will become the third-largest smartphone vendor in 2021. 
• Global smartphone shipments dropped 11% year on year in 2020 to 1.25 billion units, Trendforce said. The number is expected to increase by 9% to 1.36 billion this year.

Context: Huawei was briefly ranked the world’s largest smartphone vendor in the second quarter of 2020, according to market research firm IDC. The company’s smartphone shipments then plunged 22% in the three months ended September to 51.9 million units, causing it to fall to second place on the top smartphone vendor list for the quarter.

• Huawei has also lost access to popular Google services and apps including YouTube and Gmail because of a US trade ban in May 2019, making its handsets less appealing to overseas consumers.

What do the global empires of China’s tech giants look like? I began asking myself this question months before starting Expanding Empires, a reporting effort to map out the global tech investment footprint of China’s biggest investors. Now, we’re bringing it to an end.

Over the past six months, I’ve scraped, analyzed, and visualized data to provide a better picture of where China’s biggest tech companies are investing, how the geopolitical climate has led to dramatic shifts in their focus, and where they might be headed next. 

Funding rounds in which Chinese tech companies have participated—or in numerous cases, lead—have created some of the world’s biggest tech giants. In the US, these include mobility companies Uber, Tesla, and Lyft; in India, Paytm, Flipkart, and Bigbasket; and in Southeast Asia, e-commerce giants Lazada and Sea Limited. 

For the final edition of Expanding Empires, we look back at where overseas China tech investment started, how things have changed, and where it’s going. While each company has its own trajectory, there are some broad trends that appear to be defining China’s involvement in the global tech industry. 

The early days

It all started in the US. In 2008, just months before the housing bubble burst, before Lehman Brothers collapsed, before the global economy plummeted into a deep recession, Tencent bet on a little-known gaming studio in San Francisco. 

An $11 million investment in Outspark set the tone for Tencent’s rapid expansion abroad. The Chinese company would soon become the biggest gaming firm in the world. But more importantly, the investment marked the beginning of China’s scramble for a foothold in the US tech industry.

By 2015, seven years after Tencent’s first US investment, Chinese tech giants including Tencent, Alibaba, Baidu, and Xiaomi had taken part in nearly 40 funding rounds worth a combined $2.4 billion for US companies. 

China’s investment footprint in the US was largely driven by Tencent and Alibaba, and some of the funding rounds in which these companies took part were massive. In 2016, Alibaba participated in a $1 billion round for mobility firm Lyft. Two years later, Tencent took part in a $9 billion round for Uber. 

The list of big ticket names goes on: Tencent invested in Tesla, Reddit, and Universal Music Group. Alibaba plowed money in Magic Leap, Snap, and participated in several rounds for Lyft. 

Tencent is unique among its Chinese counterparts—it’s far more global. The company has funded more than 140 companies outside China—double that of Alibaba. Many of these were early-stage investments. 

2015 to 2017 marked a spring in Chinese tech investment in the US. By the end of 2017, Chinese companies had taken part in more than 100 rounds for US companies, totalling more than $9 billion. 

But by 2018, that had all begun to change.

READ MORE:
66 startups: How Alibaba spends billions on global investments
From funded to funder: how Tencent places its VC bets

The great switcheroo

Chinese tech companies’ investments appeared to be paying off. Valuations of companies they had invested in soared. They were participating in funding rounds with unprecedented frequency. 

In 2016, Alibaba, Tencent, and Baidu took part in 20 rounds for US companies. But by 2019, that had fallen to a meagre three. 

What had happened? One reason is the allure of Asia’s developing markets. But another is politics.

The Trump administration had become increasingly critical of China, and began pushing back against some of the country’s biggest tech companies. Chinese telecommunications giants ZTE and Huawei quickly fell victim to US scrutiny. Washington’s offensive nearly killed ZTE after the company was found to have violated American sanctions against Iran and North Korea.

But the scrutiny also extended to foreign investments in the US—particularly those that came from China. 

In late 2018, the US changed its foreign investment rules and began scrutinizing deals for non-controlling stakes in US firms. Previously, investment reviews only took place when a foreign firm took a majority stake in a US company. 

The changes were directed firmly at Chinese companies, as lawmakers feared their investments were abetting tech transfers from the US to China. 

The US-China Investment Project estimates that Chinese venture funding in the US totaled $400 million in the first quarter of 2020, down from $640 million during the same period in 2019, and $1 billion in 2018. A global pandemic beginning in China also contributed to this fall.

The resulting dropoff in investment was “distinctively Chinese,” according to a report by the US-China Investment Project. Despite the decrease in Chinese investment, overall funding of US startups largely remained the same. 

Driven away from the US by increased regulation and attracted by the potential of big returns from developing markets, China tech quickly turned to the other side of the Pacific, honing in on South and Southeast Asia. 

READ MORE:
Before the bans, China tech investment turned away from US

Alibaba had seen potential for growth in Southeast Asia and India for years. In 2016, the company bought Southeast Asia’s biggest e-commerce company: Singapore-headquartered Lazada. 

The deal was Alibaba’s biggest overseas investment. It followed up a year later with another $1 billion investment, upping its stake from 51% to 83%. Then, in 2018, it plowed in another $2 billion.

The move to Southeast Asia coincided with its pull back from America. Between 2010 and 2015 Alibaba participated in 17 US-based rounds. But since 2018, that number dropped to five. During the same period, Alibaba has taken part in 19 rounds in India and eight in Southeast Asia.

Tencent made similar moves, though the majority of its investments are in the US. The company first invested in Southeast Asia in 2016, when it participated in a round for internet platform provider Sea Limited for an undisclosed amount. It followed up with an additional $1.4 billion round in 2019. Sea runs some of the region’s biggest online platforms including e-commerce service Shoppee and gaming platform Garena. 

Tech investment proxy wars

Since then, Tencent and Alibaba have divided up Southeast Asia and India. The battle between these two companies—as well as Xiaomi—is focused on fintech and e-commerce.

Despite Alibaba and Tencent operating their own digital payment platforms in several countries across Southeast Asia, the two companies have backed more than a dozen e-wallets in the region and India—and no one startup is backed by both.

Alibaba and Tencent have taken different approaches when backing e-wallets. While Alibaba backs a mix of conglomerates that run e-wallets as part of a wider business, as well as fintech-first companies, Tencent has only backed the conglomerates. 

In Southeast Asia, on the side of Alibaba and its fintech affiliate Ant Group are Myanmar’s Wave Money, Thailand’s Truemoney, as well as Lazada and internet service platform Grab, which run e-wallets as part of their business. In India, the two Chinese companies have funded Paytm. 

Meanwhile, Tencent has backed Sea Limited, which operates Airpay and Shopeepay; Gojek and its Gopay system in Southeast Asia; as well as Swiggy Wallet and Ola Wallet in India. 

But it’s not just fintech. For Chinese companies, the stakes for tech investment are high in India and Southeast Asia at large.

“These investments are building the muscles for a world-class clash of titans—with the big guys competing head to head and local players serving as proxies for the foreign giants,” consultancy Bain & Company said in a report describing the scramble for market share in the region.

READ MORE:
Chinese tech giants have tens of billions at stake in India
Proxy war? Alibaba, Tencent draw lines across Southeast Asian unicorn scene

Untapped markets

While the US has made it more difficult for Chinese companies to invest and competition in Southeast Asia heats up, another market has caught the attention of China’s tech companies: Africa.

Home to 1.3 billion people and six of the world’s ten fastest growing economies, the continent has a thriving tech scene. Firms like Huawei and ZTE have a long history in Africa. Roughtly 70% of all 4G base stations on the continent are made by Huawei.

But as connectivity across the continent improves, other Chinese companies have seen opportunities in providing—and backing—digital services. 

Tencent, gaming giant Netease, Meituan, and smartphone maker Transsion have already bet on African companies. Meanwhile, Alibaba has taken a different approach by launching training programs for aspiring African entrepreneurs. 

Their presence on the continent is still modest, but has grown steadily since 2018, with 2019 seeing record amounts of Chinese involvement in Africa’s tech sector. 

“Africa is often still a greenfields continent where Chinese companies have a more equal or better chance to compete,” Africa Analysis’ Dobek Pater told the South China Morning Post last year. 

Transsion, which controls around 40% of the continent’s smartphone market, has started delving into digital services in Africa. In 2015, the company launched music streaming service Boomplay through a joint venture with Netease. Primarily focused on the African market, 85% of its users come from Nigeria, Ghana, Kenya, and Tanzania.

Startups in Africa raised a total of $2 billion in 2019, according to data from global investment firm Partech. While a small percentage of the total came from China, Africa has seen an increase in attention from Chinese investors. 

Chinese-owned, Norway-based software company Opera in 2017 pledged to invest $100 million in Africa’s digital economy. The company later launched Opay, a super app that included payments and delivery services, in Nigeria. 

Meanwhile, Africa-focused fintech platform Palmpay launched in Nigeria after receiving $40 million in investment from Transsion and Netease. The deal also meant that Palmpay would come pre-installed on 40 million on Transsion’s phones this year. 

Ant Group, which runs one of China’s most popular payment platforms, has also taken notice. In 2019, the company partnered with Flutterwave, a Silicon Valley- and Lagos-based fintech company, adding Alipay as a payment method for Flutterwave’s 60,000 merchants. Ant has also partnered with South African mobile operator Vodacom to launch a payments app in the country. 

READ MORE:
China tech in Africa: flip phones to fintech

From sanctions on Chinese companies in the US to uncertainty from app bans in India, Chinese tech investors have had a rough ride. But there have also been many successes. In some cases, the effects of their influence have been subtle, quietly backing startups worldwide. In others, like Alibaba’s takeover of Lazada, their funding has allowed them to take massive portions of a developing market. 

So what’s next? One of the world’s largest continents. Only time will tell how the battles between these Chinese companies, as well as with their US counterparts, will play out. 

Xiaomi reported on Tuesday better-than-expected revenue of RMB 72.2 billion (around $11 billion) for the third quarter, the fastest growth the Chinese smartphone maker has seen since its 2018 listing.

Why it matters: The strong performance shows how the Beijing-based company has benefited following US sanctions imposed on its archrival Huawei. Xiaomi’s global smartphone shipments grew 45% year on year to 47.1 million units in the third quarter while Huawei’s fell 23% year on year to 51.7 million units, according to market research firm Canalys.

• However, Xiaomi President Wang Xiang warned of a “supply chain shortage” in the fourth quarter during an earnings call late Tuesday. Wang did not provide further details but said the difficulty could last until next year.
• Unlike Huawei, which has been essentially cut off from the global semiconductor supply chain because of US sanctions, Xiaomi is free of geopolitical tensions. 

Details: Revenue for the world’s third-biggest smartphone vendor in the September quarter grew 34.5% year on year, said the company in a filing with the Hong Kong exchange Tuesday.

• More than half of Xiaomi’s third-quarter revenue came from overseas markets, which grew 52.1% year on year to RMB 39.8 billion, the company said. Its smartphone shipments in Europe grew 90.7% year on year in the same period, seizing an 18.7% market share, said the company, citing Canalys data.
• Xiaomi’s adjusted net income for the quarter grew 18.9% year on year to RMB 4.1 billion, according to the unaudited results. Shares of the company more than doubled this year.

Context: Xiaomi beat Apple to rank the world’s third-largest smartphone vendor in the third quarter behind South Korea’s Samsung and Huawei, according to Canalys.

• The company is also expected to benefit from the sale of Honor, Huawei’s budget phone brand, just last week. Analysts suggested that the company could gain around 15 million units in additional smartphone shipments because of Honor’s exit.
• Xiaomi’s Wang said during the Tuesday earnings call that the company has no plans to change its market strategy because of the Honor sale. “We were also informed by the media that Huawei sold Honor. Anyway, our strategy is unchanged and I don’t see the necessity to change it,” he said.

China’s Cyberspace Administration has cracked down on eight mobile browsers, ordering them to stamp out clickbait and misinformation.

Why it matters: By targeting the largest platforms, the authorities are sending out a signal to other smaller browsers that they may be next in line. Platforms that do not change their practices likely face suspensions or bans. 

Details: The order affects Alibaba-backed UC, Tencent’s QQ, Huawei, Qihoo’s 360, Tencent-backed Sogou, Xiaomi, Vivo, and OPPO.

• The announcement says (in Chinese) that browsers have spread “chaos” by amplifying unofficial media sources and disseminating news that violates regulations. 
• It criticizes browsers for editorializing articles to misrepresent policies that impact people’s livelihoods and spreading rumors.
• It also singles out problems like creating clickbait through exaggeration, sadfishing, or smearing. On QQ’s homepage on Oct. 27, for instance, one top post was “No hope! Western media: No saving Huawei.”
• Also under fire is information that is vulgar, graphic, or gossipy and against “socialist core values.”
• Browsers must submit plans on how they will rectify their practices and conduct self-scrutiny by Oct. 28. They will also have to submit reports on the results of these assessments and their content operation system specifications by Nov. 9.
• Huawei and QQ have already issued statements promising to clear up their browsers of questionable content. 

Context: Unlike the US where services are protected from liability for content published on their platforms, China holds companies accountable for content that appears on their home pages. Mobile web browsers wield distinct power: 872 million people in China access the internet through their mobile phones, and browser home pages have become key to their news-reading habits. 

China Tech Investor is a weekly look at China’s tech companies through the lens of investment. Each week, hosts Elliott Zaagman and James Hull go through their watch list of publicly listed tech companies and also interview experts on issues affecting the macroeconomy and the stock prices of China’s tech companies.

Make sure you don’t miss anything. Check out our lineup of China tech podcasts

Elliott and James welcome IDC’s VP of Device Research Bryan Ma to the show. They discuss how Xiaomi is benefiting from Huawei’s international troubles, the foothold they continue to establish in India and SE Asia, and how the pandemic has been a surprisingly good year for PC makers.

For a map of the Xiaomi ecosystem, and more information on its web of product partners, check out VC Roundup | How big China tech uses investments to build empires.

Hosts may have interests in some of the stocks discussed. The discussion should not be construed as investment advice or a solicitation of services.

Get the PDF of the China Consumer Index.

Watchlist:

• Tencent
• Alibaba
• Baidu
• iQiyi
• Xiaomi
• JD
• Pinduoduo
• Meituan-Dianping
• Luckin Coffee

Hosts:

• Elliott Zaagman– @elliottzaagman
• James Hull– @jameshullx

Guest:             

• Bryan Ma– @bryanbma

Editor:

• Peter Isachenko

Podcast information:

• iTunes
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• Music: “Hey Ho” by Steve Jackson, Royalty Free Music

Chinese smartphone maker Huawei is in talks with several Chinese electronics companies to sell parts of its Honor smartphone unit, Reuters reported Wednesday.

Details: Digital China, a Shenzhen-based cloud service provider, has become the frontrunner in the contest to buy Huawei’s Honor business. Other suitors include Chinese electronics maker TCL and budget smartphone maker Xiaomi, according to Reuters, citing people familiar with the matter.

• The deal could include the Honor brand, research and development capabilities, and related supply chain management business.
• The deal may be an all-cash sale and could worth somewhere between RMB 15 billion (around $2.2 billion) and RMB 25 billion, one of the sources said.
• Honor is a budget smartphone brand that Huawei established in 2013. The business mostly operates independently from Huawei, Reuters said.
• Huawei has been heavily restricted from accessing advanced semiconductors that are crucial to its smartphone production. A change of owner may help Honor circumvent the restrictions, according to Kuo Ming-chi, an analyst at TF International Securities.

Go deeper: Exclusive: Huawei in talks to sell parts of its Honor smartphone business – sources – Reuters

Huawei’s long-awaited Android replacement is here. On Sept. 10, the company announced that its in-house mobile operating system, the Harmony OS, will be available on handsets starting next year.

The announcement came just days ahead of a US Commerce Department deadline which cut the company off from all possible sources of high-end chips, critical for its smartphone and carrier businesses. Analysts said the company may have to halt hardware production starting in the middle of next year.

The company first debuted Harmony OS in August 2019, shortly after new Huawei devices lost access to Google services on the official version of Android as a result of a May 2019 US ban. Harmony was widely seen as an alternative to Google’s Android mobile operating system, but at first Huawei only deployed it on devices like smart television sets and smart watches.

Starting from scratch

A third operating system outside of Apple’s iOS and Google’s Android could be an important source of revenue for Huawei’s consumer business to offset losses in hardware sales. In 2019, income from mobile services accounted for 10.5% of Google parent company Alphabet’s revenues and 17.8% of Apple’s, according to TechNode’s calculations.

Experts say that it will be difficult for Huawei to generate material revenue from the new operating system. The company faces challenges ranging from establishing a profitable business model to attracting app developers. If Huawei can no longer make smartphones, persuading other phone makers to adopt the system will prove challenging, they said.

Both Google and Apple take a 30% cut from transactions made on their platforms, which include sales of apps and digital content, as well as in-app purchases.

But there is a difference in China which makes earning revenue more difficult, according to Rich Bishop, chief executive officer of Appinchina, a company that helps overseas developers distribute their apps in China.

“All of the [third-party Android] app stores in China only make money from games. For any non-gaming apps, they don’t charge any fee.”

“But if they are able to make Harmony OS successful, for example, they have 500 million people around the world using Harmony OS to download apps and games from the Huawei store, then potentially they could make a lot of money,” Bishop explained.

“But that really depends on whether they can persuade everybody to sign up to Harmony OS.”

Will Huawei convince developers?

It is relatively easy for a developer to convert an Android app to a Harmony OS app, Bishop said. “Huawei obviously is a massive company with a lot of resources, and they are working very hard to try to persuade as many developers as possible to set up a Harmony version of their apps,” he said.

But according to Richard Yu, president of Huawei’s consumer business, the company’s mobile service ecosystem now has around 1.8 million developers, but only 96,000 apps. Most of these developers have yet to make an app for Harmony OS.

“Most developers are basically going to wait and see because they don’t particularly want to start assigning resources to develop for a third mobile OS,” Bishop said.

“I think they are just gonna see how successful the ecosystem is and whether other companies are making good money from Harmony OS, and then they may decide to develop Harmony OS apps too.”

Weighing politics and competition

The other challenge Huawei faces in promoting the Harmony OS is attracting new users. It is now the world’s largest smartphone vendor, but its handset capacity is under huge pressure because of the semiconductor restrictions.

Rumors spread that Huawei smartphone peers Xiaomi, Oppo, and Vivo could adopt Harmony OS, with a number of articles in Chinese either predicting that they would or calling upon them to do so in support of the company. Huawei denied that it had reached a deal to put Harmony on competitors’ phones, but none of the other companies have commented.

But they would have to be very patriotic to support a competitor.

“Smartphone makers like Xiaomi, Oppo, and Vivo have been facing great pressure from Huawei in the past year after it shifted its focus on the domestic market,” Will Wong, analyst at market research firm IDC, told TechNode. 

“If they adopt Harmony OS, they are essentially helping Huawei. So I think the possibility is low.”

Bishop of Appinchina agrees. “I don’t think that other domestic manufacturers like Xiaomi and Oppo would want to use Harmony OS, because obviously, it is a much weaker ecosystem than Android. And it’s run by a competitor, Huawei,” he said.

Both Wong and Bishop reckon that the only reasons that other Chinese phone makers would use Harmony OS would be “political.”

“I don’t think Huawei’s competitors will say ‘absolutely no,’ to Harmony OS because the political risk is a very important factor in today’s market,” said Wong.

“The only way I can really see it working is if the Chinese government, because of the US-China decoupling, says: ‘all right, China needs its own mobile OS.’ And therefore, they kind of require every Chinese manufacturer to offer Harmony OS or to have it as an option,” said Bishop.

On Wednesday, Zhang Pingan, president of Huawei’s consumer cloud business unit, told reporters that the ecosystem of Harmony OS is always “open” to other smartphone makers.

“I think we will work together with all hardware makers to build a better ecosystem and help developers avoid switching back and forth between different platforms,” he said.

The global economic downturn caused by Covid-19 was always going to hit the smartphone market. But as smartphone makers shifted their conferences online, pandemic conditions eased up in China, making it the only phone market in the world that saw sequential growth in the second quarter of the year.

A ‘new’ 5G Iphone?

Apple’s Chief Financial Officer Luca Maestri told investors on a recent call, “Last year we started selling new Iphones in late September; this year we expect supply to be available a few weeks later.” The new phone may launch on time, but delivery and sales will face delays.

It may well be that Tim Cook isn’t worried about the delay. Last year, even though Apple was forced to accept price cuts and massive discounts, the new Iphone 11 became one of the best-selling phones in China. Alongside it came the revamped Iphone SE, whose strong value for money made it the most popular Apple model in the world. Global shipments of the new Iphone SE reportedly reached 12-14 million units in Q2 2020.

The success of these two phones gives Apple reason for confidence. According to data from market research firm CINNO, in Q2 2020, Iphone sales in China increased 62% year-on-year to 13 million units.

With this momentum, the launch of the 5G Iphone, expected in fall 2020, is hotly anticipated.

5G is becoming an essential selling point in the Chinese market. Statistics from the China Academy of Information and Communications Technology show that domestic 5G mobile phone shipments reached 13.911 million units in July. The data shows that 5G smartphones accounted for 62.4% of domestic mobile phone sales, exceeding 60% of the total for the second consecutive month.

The wave of 5G replacements is likely to build over the next few months. Analysis by research firm Counterpoint suggests that more than 50% of global 5G phone sales this year will come from China.

The survival of Huawei

At the end of March, Huawei rotating chairman Xu Zhijun said that 2020 was Huawei’s most difficult year, and called for the company to come together to overcome its difficulties.

When it rains, it pours.

According to international media reports, Huawei’s temporary reprieve from a ban on importing US technology expired on Aug. 13 this year. There has been no word of a renewal.

Its relationship with the Google Play Store has been severely disrupted. Huawei devices that came with pre-installed Google mobile services can still download and update Google applications through other channels. But newly released phones, such as the P40, cannot use such services.

Huawei is working to mitigate the loss of the Google Play Store. Its phones come equipped with a Huawei suite of mobile services, and a homegrown operating system called HarmonyOS, or HongmengOS in Chinese, is coming to smartphones in early 2021, the company announced Sept. 3.

On the existing foundations of the HarmonyOS ecosystem, breaking into overseas markets may take a while. Few of the world’s most popular apps are available in Huawei’s app store, although some can be installed independently. Richard Yu has predicted that apps like Facebook will eventually join the Huawei app store.

Harder to evade are the US’s new restrictions on the company’s semiconductor supply chains.

Huawei’s executive director Richard Yu said at the China Informatization Hundreds Conference 2020 that due to the second round of sanctions by the United States, Huawei will lose its chip making capacity on Sept. 15. As a result, the company’s smartphone shipments this year might be fewer than last year’s 240 million, Yu said.

The dwindling supply of chips will severely challenge Huawei’s market competitiveness in the phone business. Coupled with the ban on overseas GMS services, its vitality in overseas markets has been struck a heavy blow, and this has cast a long shadow over Huawei’s confident New Year vision.

Xiaomi at ten: a fork in the road

When Covid-19 hit China, Xiaomi’s shipments were already lowest among the four leading manufacturers, which also include Huawei, Oppo, and Vivo.

Despite strength in online sales channels, the epidemic era hasn’t been kind to it. In Q2 2020, the company accounted for only 10.4%, or 9.1 million, of the 87.8 million smartphone units shipped in China, its 21.9% year-on-year drop in sales second worst among the major brands, data from IDC said.

Xiaomi’s setbacks overseas have been worse as it lost production and order capacity due to the virus. In India, one of its strongest markets, Xiaomi’s overall shipments fell 48.7% year-on-year.

Xiaomi models do not have a reputation for value, and it hasn’t come up with an alluring flagship model to attract consumer attention. Its surround-screen model , announced with much fanfare last year, was indefinitely delayed in 2020. The same holds true for chips. After the first generation of its phone chips was released in 2017, Xiaomi hasn’t released any plans for a second generation.

Xiaomi also lags its peers in R&D spending. In 2019, Oppo and Vivo both increased their R&D spend to RMB 10 billion ($1.46 billion) . Xiaomi only invested RMB 7.5 billion in 2019, and plans to reach RMB 10 billion this year.

Lei Jun, Xiaomi’s co-founder and CEO, has pursued business diversification for a while. But despite growth in IoT sales prior to 2020, Xiaomi remains a smartphone company. Its handset shipments account for 50.1% of its total revenue.

Internet of Things (IoT) products have performed well in recent years. But even in this market, Xiaomi is slowing down, weighed down by excessive reliance on hardware sales and the complicated supply chain logistics of selling hundreds of products. Its Q1 2020 earnings report shows little growth in IoT.

Oppo is diversifying

Meanwhile, Oppo has increased its investments overseas and established a semiconductor company called Zheku Technology.

Zheku may be Oppo’s way out. The company has always focused on marketing and offline channels and has suffered a lot during the Covid year. Its eye-catching advertisements—often seen on other manufacturers’ gadgets—are increasingly unable to cover up performance shortcomings. These are now compounded by anti-China sentiment in India, which sent shipments to India plummeting in the second quarter by 51% year-on-year. Oppo has lost more than any other of the top five brands in India.

For Oppo, this year may be the most difficult since it got into smartphones. This is despite Oppo’s accomplishments in 2019: reorganizing its product line, strengthening finances, establishing an independent chip department, developing independent sub-brand Realme, and launching IoT products; it also began to increase R&D to compete with its rivals.

A painful readjustment is now necessary. In the face of these challenges, Oppo recently announced that OnePlus founder and CEO Pete Lau (who will remain founder and CEO of OnePlus) has returned as senior vice president of shared parent company Ouga Holdings, and is fully responsible for the Ouga ecosystem’s product planning and experience, including Oppo.

In desperate times, Oppo is rallying its troops, and wants to reorganize its product line by bringing back veterans of the brand, strengthen differentiation, guard its market share, and regain the attention of its customers—who have very much glanced away.

Chinese scooter maker Ninebot on Tuesday gained final approval from the Shanghai Stock Exchange to register on the bourse’s Nasdaq-style STAR Market, according to a notice on the board’s website.

Why it matters: The Beijing-based company, incorporated in the Cayman Islands, is expected to become the first foreign-registered company with a variable-interest entity (VIE) structure to list on a stock exchange in Mainland China.

• The STAR Market, which opened for trading a year ago, has allowed VIEs and unprofitable companies to list, in a bid to lure Chinese tech companies home from New York.
• The effort started to pay off: Alibaba’s fintech affiliate Ant Group on Monday announced a dual-listing plan to IPO on the STAR Market and the Hong Kong Exchange.

Details: Ninebot has been allowed to submit registration filings to the China Securities Regulatory Commission, the country’s top securities watchdog, for a final review, the STAR Market’s website shows (in Chinese).

• Ninebot plans to issue around 7 billion Chinese Depository Receipts (CDRs) through its custodian bank, raising more than RMB 2 billion (around $287 million) from the domestic market. CDRs are shares of non-Chinese companies that are allowed to trade on China’s financial markets, functioning similarly to American Depositary Receipts.

Context: Founded in 2014, Ninebot is now the world’s largest vendor of electric scooters. The company snapped up failing American personal-transport manufacturer Segway in 2015.

• Chinese smartphone maker Xiaomi owns around 22% of Ninebot. The scooter maker is also one of the so-called “Xiaomi ecosystem enterprises”—companies that leverage Xiaomi’s retail channels to sell their products.
• Ninebot lists Xiaomi as an important customer with related-party sales to Xiaomi accounting for 52.3% of its total revenue in 2019, according to its prospectus.
• The company booked revenue of RMB 4.6 billion and a net loss of RMB 459 million in 2019.

Bytedance’s mega app Tiktok has been removed from Android and Apple app stores in India, its second-largest market, following a Monday ban on 59 Chinese apps on national security concerns. The ban comes two weeks after a border clash with China left 20 Indian soldiers dead. 

Among those blacklisted are popular Chinese apps like Tiktok, Wechat, Baidu Maps, Baidu Translate, Sina Corp’s microblogging platform Weibo, as well as mobile games Mobile Legends Bang Bang and Clash of Kings. Other banned apps popular in India include Chinese-owned e-commerce platforms Shein and Club Factory, Bytedance’s social media app Helo, and Alibaba’s UC Browser. 

A door slammed shut: Losing access to India’s market is a blow for Chinese companies like Bytedance, which aim to ride India’s rapid growth in mobile internet penetration.

• India’s mobile app market is still developing, and rapidly. Smartphone users in India are projected to double to 1.25 billion by 2024 from 610 million in 2018, according to India-based think tank Gateway House. Between 2016 and 2018, the number of app downloads increased by 165%.
• Some companies have made big bets on the Indian market: Alibaba’s fintech arm Ant Financial has invested close to $2.7 billion in seven companies, while Tencent has spread $2 billion across 15 firms.
• A big loser from this decision will be Bytedance, the owner of Tiktok. According to Sensor Tower, 30% of Tiktok’s more than 2 billion global downloads come from India.

The companies react: Bytedance told TechNode that its team of 2,000 employees in India “is committed to working with the government to demonstrate our dedication to user security and our commitment to the country overall.”

• Club Factory, which has more than 100 million monthly active users in the country, told TechNode that it was compliant with privacy practices and had “provided direct employment to hundreds of people in India.”
• “We have always been willing and continue to remain committed to working with the Government to resolve any concerns,” the company added.
• Spokespersons from Tencent, Xiaomi, and Baidu declined to comment. Alibaba had not responded to requests for comment as of publication.

Collateral damage: Many analysts see this decision as a direct reaction to the border clash, bolstered by other factors like protectionism.

• “I would say that it’s more of a nationalist response,” said Hamsini Hariharan, host of the States of Anarchy podcast, which focuses on global affairs and Indian foreign policy.
• She continued, “I think the government wanted to just send a message that they weren’t taking the border lying down, and they figured the Chinese apps were a good way to do it.”
• Deep K. Datta-Ray, visiting senior fellow at the Singapore-based S. Rajaratnam School of International Studies, concurred that the ban was “in the first instance a tit-for-tat response to Chinese actions along the border.”

Protecting our own: However, Datta-Ray added that “these actions are in keeping with a generally isolationist and nativist approach” on India’s part, as seen in moves such as its withdrawal from the mega free trade agreement known as the Regional Comprehensive Economic Partnership in late 2019.

Nationalist tide: The app ban follows a China-India border clash in the Himalayas that left 20 Indian soldiers dead, the first time in nearly 50 years that Indian soldiers had been killed on the border.

• That clash stoked anti-China sentiment in India, with a former Indian ambassador to China calling it a “turning point,” although not a “breaking point,” in Sino-Indian relations.
• In May, an app called “Remove China Apps” rose to the top of India’s Android store amid growing China-India tensions. That app was itself removed from the Google Play store on June 3.
• On June 17, national intelligence agencies in India asked the government to block 52 mobile apps by Chinese developers, informing the current ban.
• People in India “have already been talking about boycotting goods from China,” Hariharan told TechNode, and so “this current ban of the apps is just part of that nationalist wave.”

Swing state, swung: In the context of US-China tech tensions, some analysts have interpreted this ban as a loss for China.

• For China, India “was almost a tech ‘swing state,’” Rush Doshi, director of the China Strategy Initiative at the Brookings Institution, said on Twitter. “But with bans on these apps and new restrictions on Huawei, that strategy is seriously imperiled.”
• In April 2020, Chicago-based think tank Macro Polo compared the top 10 apps from different countries in 2015 and 2019, and concluded that “Chinese apps have taken the lead in by far the largest emerging market: India.”
• In 2015, three of the top 10 apps in India were from China. By 2019, that had risen to six: Tiktok, video-based social media platform Likee, Bytedance’s Helo, file sharing app Shareit, and Alibaba’s UC Browser and video sharing app Vmate.
• Though some of those names may not be familiar, they totaled 982 million downloads combined during the year.
• However, India has swung back and forth on China, and this may not be the closing act. In April 2019, Tiktok was banned in India for two weeks for allegedly spreading pornography, but made a swift comeback upon its return to the app store.

Firewall goes up: It isn’t entirely clear how the ban will be implemented. Some apps have already been taken down from app stores, but actively restricting their use would require additional steps.

• Tiktok appears to have been removed from the Apple and Google stores in India, TechNode sources in India have confirmed.
• However, that won’t stop people who have already downloaded the apps from continuing to use them. Some reports say to expect restrictions from internet service providers that will require virtual private networks (VPNs) to get around. 
• The Indian Express states that this notice “is expected to be followed by instructions to Internet service providers to block these apps,” but it’s unclear when that will be implemented. 
• As of now, TechNode sources in India are able to use apps like Wechat and Cam Scanner without a VPN, and can still access e-commerce websites like Shein from desktop browsers.
• According to Datta-Ray, “India has chosen a low-denomination item, apps, and a masked response… because China is by far, in a stronger position.” At the end of the day, that means despite an intensification “in name,” “business might very well continue as usual.”

The board of Chinese smartphone maker Xiaomi passed Tuesday a resolution on share buybacks, paving the way for the company to repurchase up to $4.3 billion in shares.

Why it matters: Tuesday’s announcement is part of the company’s broader efforts to boost investor confidence.

• The company’s share prices have lost nearly a third of their value since debuting on the Hong Kong stock exchange in July 2018, hurt by a slowing smartphone market and low margins in its hardware business—the company’s biggest source of revenue.
• Xiaomi share prices surged 8.7% during Wednesday’s morning trading session.

Details: Xiaomi’s board of directors has approved a resolution allowing the company to repurchase up to 10% of its issued shares, according to a statement filed with the Hong Kong stock exchange on Tuesday.

• Xiaomi has issued 24.1 billion shares, according to the filing, meaning the company could buy back up to 2.4 billion shares. The value of that 10% of shares as of Wednesday was HK$33.1 billion (around $4.3 billion).
• The resolution allows the company to repurchase shares, but it has not yet announced a plan. A Xiaomi representative declined to comment.

Context: The Beijing-based company is looking to roll out a more aggressive share buyback initiative following an earlier plan announced in September to repurchase up to HK$12 billion (around $1.6 billion) worth of stock in an effort to halt its decline in value.

• The company has executed nearly 20 buybacks since the September announcement. In April, it spent nearly HK$500 million on two buybacks on two consecutive days.
• Shares have climbed 65% since the announcement. However, they remain at two-thirds the value of the initial public offering price.
• The company said in March its revenue for the fourth quarter rose 27.1% year on year to RMB 56.5 billion (around $8 billion), with RMB 66 billion in cash reserves as of end-2019.

In April, a cybersecurity researcher showed that Xiaomi was collecting heaps of user data without users’ authorization. The Chinese smartphone maker responded that the data was aggregated and therefore couldn’t be used to identify users. 

China’s privacy framework

Starting in 2017, China has set up a strict privacy regime that strongly resembles Europe’s General Data Protection Regulation (GDPR). Chinese lawmakers have established reasonable privacy-related obligations for businesses that collect and handle data.

Read more: Dust has yet to settle two years after China’s landmark cybersecurity law

Several statutes in Chinese law guarantee the right to privacy: the Cybersecurity Law, the Consumer Protection Law, and the Criminal Law. Accompanying regulations and standards, including the Personal Data Security Specification (PDSS), outline detailed requirements for collecting and handling personal data. 

The PDSS is the most comprehensive explanation of China’s privacy rules. It describes a system similar to Europe’s GDPR. Both require businesses to obtain consent before collecting user data. Both guarantee the consumers’ right to correct and erase their data. 

Under the two regulations, businesses must follow the “least necessary” principle. They should collect no more data than what is absolutely necessary for their business functions, and store the data no longer than needed to achieve the stated purpose.

In China, data localization rules require businesses to ask the authorization of local Public Security Bureaus before transferring personal data abroad. 

Chinese authorities have started to enforce privacy rules. In July 2019, a special government group found that 30 apps had no privacy policy. It gave them 30 days to rectify their practices. The apps included the Bank of China app, dating app Tantan, and social media platform Renren. 

The privacy loophole

Despite ramped up implementation, there is one situation in which PDSS rules don’t apply. If consumer data is “anonymous,” it is not considered personal data, and consequently is not subject to privacy regulations. The EU makes a similar exception to its privacy rules for anonymous data.

Both regimes require “full anonymity,” which involves more than removing names. If people can be identified from a processed data set, whether alone or in combination with other databases, then the data is not considered anonymous.

This requirement is where the trouble begins. Neither framework explains how to reach full anonymization, so interpretation is up to the courts. 

In Europe, the definition of anonymization is rather narrow. In 2018, the Danish data protection agency, interpreting anonymity under GDPR, concluded that deleting names associated with taxi trips was not anonymization. 

But in China, interpreting “full anonymization” is a different story. 

Vague definition

Chinese courts are worrisomely gullible about claims of anonymization, a recent court judgment suggests. 

Alibaba’s Taobao sells marketing analytics products to Taobao merchants to help them improve their business strategy. Anhui-based Meijing Information Technology buys that data from merchants who have originally purchased it from Taobao. It then uses it to sell cheaper, competing products. 

In 2017, the e-commerce giant sued Meijing for unfair competition. In its defense, Meijing argued that the data in question was “personal data” belonging to Taobao’s users, and not to Taobao. 

The court sided with Taobao, distinguishing between personal data and “big data,” which results from aggregating large amounts of personal data. This aggregated personal data is Taobao’s property, the court ruled.

A year later, Meijing applied for retrial, claiming that Taobao’s collection of personal data did not comply with privacy laws. In 2018, a second court judgment by the Intermediate People’s Court of Hangzhou, Alibaba’s home city, upheld the previous decision. 

The Hangzhou court ruled that the user information Taobao collects is not personal data, because it “cannot be used to identify the personal identity of individuals, alone or in combination with other data.” The court recognized that Taobao collects “behavioral traces of user browsing, searching, purchases, transactions, as well as label data such as their gender, occupation, area and personal preferences.” 

In 2019, a third judgment by Zhejiang Higher People’s Court upheld this interpretation, setting precedent for future rulings on data collection.

A tall order 

It is far from certain that such data cannot lead to re-identification, the work of researchers around the world suggests. A group of researchers from University of Louvain and Imperial College London warned that anonymized datasets can often be reverse-engineered to identify individuals. A paper published in Nature in 2019 showed it is possible to correctly re-identify 99.98 percent of Americans in any available anonymized dataset by using just 15 characteristics, including age, gender, and marital status. 

Taobao’s data sets are much richer and, by extension, almost certainly not fully anonymous.

There is usually a trade-off between data granularity and its usefulness. Researchers call this the “privacy-utility trade-off”. Companies want data to be as granular as possible. But the more granular it is, the easier it is to use it to identify individuals. Real anonymization lies somewhere in the middle of this trade-off, but further away from full granularity than is often thought.

The Chinese courts’ broad interpretation of anonymity runs the risk of defeating the purpose of China’s privacy regulations by providing a loophole to companies. It allows them to collect more data than they need and handle it sloppily with only fig leaf anonymization. 

In case of massive data breaches like Equifax in 2017 or in China only five months ago, malicious actors can use stolen data to harm re-identified users.  

Smartphone sales in China fell 22% in the first quarter as a result of the Covid-19 outbreak, according to a report released Wednesday, with embattled Chinese smartphone maker Huawei the only manufacturer that saw a growth in the quarter.

Why it matters: The coronavirus outbreak has accelerated a downward trend in the world’s largest smartphone market.

• Analysts had forecasted a year-on-year drop of 15% to 20% in China’s Q1 smartphone shipments caused by delayed factory reopenings in February.
• The report by market research firm Counterpoint Research also attributed the decline to “dismal sales” in February. But e-commerce platforms, it said, have helped smartphone vendors to recover some of the losses.

“The drastic fall in Q1 China market was primarily dragged down by the dismal sales of smartphones in February (-35% YoY)… However, during the lockdown period in China, local e-commerce giants such as Alibaba and JD.com managed to sustain efficient business operations and delivery services in major Chinese cities outside of Hubei province. For the strong support from these e-commerce players, China’s smartphone sales appeared less negative than our original expectation.”

—Flora Tang, research analyst at Counterpoint Research

Details: Huawei was the only smartphone vendor in the top five that posted positive year-on-year growth of 6% in the first quarter, according to the report. The Shenzhen-based company retained the top spot in China’s smartphone market with 39% share.

• Sales of Apple’s iPhones fell 1% in the first quarter compared with the same period a year ago. The company sold less than half a million iPhones in China in February. However, sales surged in March, rocketing 406% from February to around 2.5 million units.
• Sales of smartphones compatible with 5G networks grew 120% compared with the previous quarter, the report said, as Chinese carriers step up efforts to build more 5G base stations in urban areas.
• “We expect 5G smartphones to rise to account for over 40% of total smartphone sales in China by the end of 2020,” said Mengmeng Zheng, research analyst at Counterpoint.

Context: Huawei said last week its total revenue for the first quarter grew only 1.4% year on year to RMB 182.2 billion (around $25.7 billion). During the same period, China’s GDP contracted 6.8%.

• In a bid to boost sales, Huawei has teamed up with food delivery platform Meituan, allowing consumers to order its smartphones and tablets and receive them within an hour from flagship stores.
• Observers were not optimistic about China’s smartphone market over the long term. According to a recent report by market research firm Strategy Analytics, 37% of Chinese consumers have delayed plans to upgrade their handsets.

Xiaomi has hired the president of an online bank to lead the smartphone maker’s budding consumer finance business, the company announced Thursday.

Why it matters: The Beijing-based company is actively seeking new growth opportunities outside smartphones as global handset sales shrink. The company has been trying to leverage its massive global handset user base to boost other business segments such as personal cloud service and consumer finance service.

• Xiaomi has long been planning to spin off its finance business into an independent entity—similar to Alibaba’s division of Ant Financial, which has grown into one of the world’s largest tech startups with an implied valuation of $200 billion.

Details: Xiaomi has appointed Zhao Weixing, the former president at Sichuan Xinwang Bank, as the vice president of its fintech branch, the company said on social media platform Weibo (in Chinese) Thursday.

• Zhao has served as a top executive at China Minsheng Bank, Shanghai Pudong Development Bank, and the Bank of Hangzhou, the company said.
• Founded in 2016, Sichuan Xinwang Bank is China’s third online banking firm following Tencent-backed Webank and Alibaba-backed Zhejiang E-Commerce Bank.
• Xiaomi owns a 29.5% stake in Sichuan Xinwang Bank, according to corporate information platform Tianyancha (in Chinese).
• Zhao will report to Hong Feng, chairman of Xiaomi’s fintech branch, the company said.
• Sichuan Xinwang Bank told Chinese news outlet Caixin that Zhao would continue participating in the bank’s development “by other means” despite his departure.

Context: In January, Chinese regulators gave Xiaomi the green light to set up a consumer finance company in the southwest municipality of Chongqing.

• The company, however, has yet acquired a consumer finance license, which allows holders to lend money to consumers. In March 2019, it had to break up a peer-to-peer (P2P) lending subsidiary based in Zhuhai, Guangdong province amid a nationwide crackdown on online lending.
• Amid the domestic regulation uncertainty, the company is simultaneously eyeing fintech markets overseas.
• The company acquired its digital banking license in Singapore in January and was said to be in talks to expand its financial product offering in India late last year.

Chinese smartphone maker Xiaomi has spent $64.5 million on buying back its shares in the past two days, company filings show.

Why it matters: The buybacks come during a slump in Asian markets, with Hong Kong’s Hang Seng Index falling 1.9% on Wednesday and the Japanese market benchmark Nikkei 225 index down by 1.7%.

• Shares of Xiaomi have climbed 4.6% since Tuesday when the company announced the first buyback.
• The share repurchases are also part of measures taken by the company to boost investor confidence.
• The global smartphone market is expected to be severely hit by the coronavirus outbreak.
• Official data has shown a 36.4% dent in China’s handset sales in the first quarter.

Details: Xiaomi spent HKD 250 million (around $32.3 million) on a share buyback on Wednesday following a similar repurchase of HKD 249.6 million on Tuesday, according to company filings to the Hong Kong bourse.

• The buybacks are part of Xiaomi’s previous plan to repurchase up to HKD 12 billion worth of stock that they announced in September.
• The company said in a statement in September that the plan would “broadcast the company’s confidence in its own business outlook and prospects, and will benefit the company as well as its shareholders.”

Context: Shares of Xiaomi have dropped by nearly 20% since March, canceling out the company’s gain since its HKD 12 billion share repurchase announcement.

• The company said last month its revenue for the fourth quarter rose 27.1% year on year to RMB 56.5 billion (around $8 billion) while it booked net income of RMB 2.3 billion in the period, a year-on-year increase of 26.5%.
• Xiaomi’s cash reserve was RMB 66 billion (around $9.3 billion) as of the end of 2019, according to the company’s annual results released last month.

Watch: We got our hands on Xiaomi’s new super secret phone. Here’s our review.

Handset sales in China surged 241% in March compared with the previous month though were still down 23% from a year earlier, according to official data released Monday.

Why it matters: China’s handset consumption has started to recover from the Covid-19 pandemic but its aftershocks continued to weigh.

• The turnaround is partially because local smartphone makers refreshed their handset lineups in March, including Huawei’s P40 flagship and Xiaomi’s budget phone, the Redmi Note 9 Pro. In total, smartphone makers launched 34 new models in March, accounting for 87.2% of the new handsets launched in the first quarter, according to data released by China’s Ministry of Information Industry and Technology (MIIT).

Details: China’s handset sales in March were 21.8 million units including 6.2 million which are 5G compatible, according to the MIIT.

• Apple’s iPhones saw a surge in demand during the month as sales rose 406% from February to around 2.5 million units, according to MIIT data and TechNode’s calculations.
• Total handset sales in the country dropped 36.4% year on year to 49 million units in the first quarter, according to the data.

Context: Despite the rebound in monthly sales, observers were not optimistic about China’s smartphone market over the long term. According to a recent report by market research firm Strategy Analytics, 37% of Chinese consumers have delayed plans to upgrade their handsets.

• “The supply chain and full ecosystem may be back up to speed as we enter Q2, 2020 but it is clear that a significant portion of consumers are not yet ready to return to previous patterns and purchase intentions. Operators, vendors and retailers will have to work extra hard to persuade hesitant smartphone owners that new devices and new 5G services are worth making an investment in relative to other priorities,” Linda Sui, director of smartphone research at Strategy Analytics, said in the report.
• In a bid to boost sales, Huawei has teamed up with food delivery platform Meituan to allow consumers to order its smartphones and tablets and receive them within an hour from flagship stores.

China’s three major telecommunications operators jointly launched Wednesday a 5G-powered messaging service. The service enables users to send rich communication messages using the next-generation wireless technology.

Why it matters: The feature could pose a big threat to existing instant messaging players such as WeChat by leveraging the huge user base of China Mobile, China Telecom, and China Unicom.

• The three carriers had a combined subscriber base of 1.6 billion as of the end of 2019, which is more than the country’s population.
• The new feature is also likely to remove the barrier of rich communication services (RCS) between iOS and Android devices. The two ecosystems of mobile phones both have their RCS known as Apple’s iMessage and Android Messages. However, they don’t communicate with each other.

Details: The three state-owned carriers published Wednesday a 5G messaging service white paper advocating smartphone makers to support the new function and provided technical details on how to integrate it with their handsets.

• The function is designed to replace current text messaging service with a system that allows mobile users to send text, images, voice messages, and files to their contacts without downloading any additional apps.
• Users can also buy tickets and book flights by sending messages, according to the white paper. Other functions of the service include mobile payment, group chat, and services based on location.
• Smartphone makers including Huawei, Xiaomi, ZTE, and Samsung have announced that their future handsets will be compatible with the service.

Context: The rise of instant messaging services such as WeChat means Chinese telcos are making less revenue from text messages. SMS income for Chinese carriers had been dropping consecutively from 2014 to 2017, but saw a slight rise of 0.02% year on year in 2019, according to China’s Ministry of Industry and Information Technology (in Chinese).

• China in November launched its commercial 5G service. Chinese media has reported that the country boasts 10 million 5G users as of January.
• According to our analysis of Strategy Analytics and Counterpoint data, around 8.93 million 5G phones were sold in China in 2019.
• In 2013, China Telecom and Chinese internet company Netease jointly launched an instant messaging app called Yixin in a bid to challenge the dominance of Tencent’s WeChat. The app allows mobile users to use it without consuming any mobile data, including subscribers of China Mobile and China Unicom.
• However, the WeChat clone failed to colonize WeChat’s market share. The app was only downloaded 60,000 times by smartphone users in February, according to Sensor Tower. During the same period of time, WeChat saw its downloads reaching 4 million.

TechNode editor David Cohen got a surprise parcel today along with the grocery deliveries: a sneak peak at Xiaomi’s newest phone, evidently developed under cover during the virus.

The Ovoid marks a bold change in design direction from previous phones—breaking with conventions that go back to the original iPhone. We’re excited to start learning new routines—how about you?

Xiaomi has said that it will begin trials of its virtual bank Airstar, in a signal that the smartphone maker is looking to grow its presence in consumer finance and compete with other Chinese tech giants like Ant Financial and Tencent. 

Why this matters: While best known as the world’s fourth-largest smartphone brand, Xiaomi has made its fintech ambitions clear. The virtual bank is a JV with AMTD Group, Asia’s largest independent investment banking firm, and Xiaomi owns 90% of the shares.

• Xiaomi’s ambitions to leverage its foothold in IoT—its platform is connected to 151 million active mobile devices, which it says is the largest in the world—and broaden its existing fintech offering in China and beyond.

Details: The pilot allows 2,000 employees from Airstar, Xiaomi, and AMTD Group and their friends and relatives to try out (in Chinese) virtual banking tools and give feedback.

• Airstar presents itself as a zero service fee retail business. Hong Kong residents can create an account in five minutes with no minimum deposit required.
• Airstar will start with two products. One offers an interest rate of up to 1% per annum for saving deposits of between HK$500,000 and HK$1 million. It protects deposits up to a maximum amount of HK$500,000.
• Customers can also place savings in time deposits and choose their deposit maturity dates themselves, such as eight, 19, or 27-day time deposit. They can settle fixed term deposits at any time in advance without charge. 
• Unsecured lending products will be available to customers with transparent pricing. Interest will accrue on a daily basis. The loan price is transparent and the interest rate compounded daily. Customers can repay in advance without paying any handling fees. 

Context: The Hong Kong Monetary Authority’s Fintech Supervisory Sandbox will oversee the pilot.

• The HKMA issued eight virtual banking licenses to companies including Ant Financial, Tencent, JD.com and insurance giant Ping An. 
• AMTD is planning an initial public offering of its digital assets for later this year. It wants to serve retail banking customers and small and medium enterprises in the wider Asia region, and is currently competing for licenses in other jurisdictions. 

Xiaomi said Tuesday it has resumed production capacity by 80% to 90%. However, they also warned that demand for smartphones in overseas markets would be hit by the spread of Covid-19 in March and April.

Why it matters: The Beijing-based smartphone maker has a strong presence in overseas markets such as India and Europe. It is likely to see a drop in sales in the first half of the year as the pandemic spreads around the world.

• The company is selling the idea that smartphones are necessary goods and demand will bounce back after the pandemic is over.
• “Smartphone is becoming a basic necessity and the demand for it should resume soon in India and Europe. We are optimistic about the growth in overseas markets,” Wang Xiang, president of Xiaomi, told reporters and analysts in an earnings call Tuesday.

Read more: Xiaomi wants to be exempted from an e-commerce ban in India

Details: Xiaomi’s production was severely impacted in February when the coronavirus outbreak intensified in China, but its production capacity has been resumed to 80% to 90% of the normal state, according to Wang.

• He said sales of smartphones in the domestic market have also bounced back to 80% to 90%.
• Wang expects that the demand for smartphones in India and Europe will see a drop in March and April, but expects a recovery to begin by May.
• The company said Tuesday its revenue for the fourth quarter rose 27.1% year on year to RMB 56.5 billion (around $8 billion), slightly higher than analysts’ average estimation of RMB 54.9 billion.
• The company booked a net income of RMB 2.3 billion in the period, a year-on-year increase of 26.5%.
• Revenues at Xiaomi’s smartphone business rose 22.8% year on year to RMB 30.8 billion in the quarter.
• The company said it sold 32.6 million smartphones in the quarter, a 30.5% rise compared with the same period of 2018. Its smartphone shipments for last year were 124.6 million units in total.

Context: Market research firm IDC estimated that smartphone sales in China may fall as much as 40% in the first quarter compared with the same period last year.

• Xiaomi’s share price has dropped more than 22% since the beginning of March.
• To avoid sales loss in India, Xiaomi’s biggest overseas market, the company has asked New Delhi to list smartphones as an essential commodity so that they can be sold on e-commerce platforms during the nationwide lockdown in India.

Chinese handset makers including Xiaomi and Realme are asking the Indian government to list smartphones as an essential commodity so that they can be sold on e-commerce platforms during the nationwide lockdown in India.

Why it matters: India is one of the most important overseas markets for many Chinese smartphone makers, and a 21-day national lockdown in the country, starting Wednesday, is expected to severely hit handset sales.

• E-commerce deliveries of essential and necessary goods such as food and medical equipment will be excluded from India’s curfew restrictions during the lockdown, according to local newspaper, The Economic Times.

Details: Xiaomi and Realme have united with two industrial bodies to seek an exemption for deliveries of smartphone along with other electronic devices during the national lockdown, The Economic Times reported on Monday.

• The letter, written by local industry representatives the Manufacturers’ Association of Information Technology (MAIT) and India Cellular & Electronics Association (ICEA) on March 27, also seeks to remove restrictions on the movements of electronics components for inland and export purposes.
• “Smartphones today are probably the most essential items after food and groceries that anybody needs. We can increase social distancing and reduce the number of people going out if everyone is using a smartphone,” Manu Kumar Jain, the managing director of Xiaomi India, told The Economic Times.

Context: Xiaomi is India’s biggest smartphone vendor with a market share of 27% in the fourth quarter, while Realme is the fifth-largest with an 8% market share.

• South Korean smartphone makers Samsung and LG have suspended their factories in India on requests from local government, ZDNet reported last week.
• Smartphone sales in China dropped 54.7% year on year in February when the country was essentially locked down because of the coronavirus outbreak. The figure will likely fall 40% in the first quarter compared with the same period last year, according to market data firm IDC.

2020 did not start well. Covid-19 has created upheaval around the world and, while it started in China, the outbreak seems almost under control in the Middle Kingdom. Most of TechNode is back in China. As restrictions loosen, we’re all asking when will things go back to normal? What does the new normal look like? What happens in China may offer a rough timeline for the rest of the world, as well.

In order to answer that question, we’re working on compiling a list of indicators, including search queries, store openings, travel, and manufacturing. We’re planning to launch our Normalcy Tracker next week, but, for members, here’s a preview of what we’re seeing.

Bottom line: Everyone wants to go back to the “China dream” as soon as possible, including the government. Covid-19, provincial lockdowns, aggressive community isolation, and home quarantines have left their mark. The government, however, is close to declaring victory: travel restrictions for Hubei province have been lifted (except Wuhan), Beijing is telling its residents they can stop wearing masks, and many provinces are telling kids they can come back to school. However, it will be until at least June before the consumer market starts looking like it did pre-Covid. For industries that rely on global trade, the new normal hangover could be even longer: If the rest of the world is like China, then we’re looking at September this year before the global demand for China’s exports picks up again.

A brief timeline:

• Jan 21: Zhong Nanshan, known for discovering the SARS virus, confirms person-to-person transmission of SARS-CoV-19.
• Jan 23: Hubei, including Wuhan, goes into lockdown.
• Feb 3: Extended Chinese New Year ends. China’s workforce begins remote work.
• Feb 15: Hangzhou is the first city to end lockdown, with help from QR codes. 
• Feb 15: Beijing announces mandatory 14-day at-home-quarantine for anyone returning to the city from inside China.
• Feb 24: Seven provinces lower their emergency level.
• Feb 26: Beijing announces all passengers arriving to the city from abroad must also undergo 14-day at-home-quarantine.
• Mar 3: Interprovincial travel restored in Yangzi River Delta as Shanghai, Jiangsu, Zhejiang, and Anhui sign a regional health Schengen-type deal.
• Mar 26: China announces that foreign nationals will no longer be allowed to enter the country, except in rare circumstances.
• Mar 26: The same day, China also announces a severe limitation on inbound and outbound flights. 

Searching for normalcy: China wants to know when they can go back to work and school:

• In a Feb. 18 report, Baidu said that “return to work”-related search queries increased eight-fold month on month, while those related to Covid-19 had started to decline.
• In terms of industries, online education saw the greatest increases in searches on Baidu, ballooning nearly 250% compared to January as Chinese people looked to get their children’s education back on track while the effects of the outbreak subsided.

Travel coming back—within provinces: Tomb-sweeping day, a national three-day holiday, is right around the corner. Data from travel platforms suggests China is ready to travel again:

• Fliggy, Alibaba’s travel booking app, shows railway and attraction ticket purchases for the week ending March 23 doubled from the week before.
• As of March 17, tickets to nearly 1,500 popular tourist areas could be bought online, and 40% of the country’s top tourist spots had reopened.
• Around 80% of hotels have reopened in most provinces, according to online travel site Trip.com. The hotel reopening rate in eastern Anhui and Zhejiang provinces, southern Guangxi region as well as central Hunan and northern Shanxi provinces reached 95%.
• Qunar said that user searches for the upcoming May 1 holiday had increased by nearly 80% in a week. 
• One big caveat: Most of the uptick in bookings are for travel within the buyers’ province. 
• And: China’s tourism revenue is expected to drop by RMB 1.18 trillion (around $168 billion) in 2020, according to the China Tourism Academy. 

Spring shoots for retail: Major retailers, including Apple and Xiaomi, are coming back to life:

• Apple has reopened all of its 42 stores in China after they were shut in early February after China imposed measures to stop the spread of Covid-19. The company has gradually been reopening its stores since mid-February. 
• Xiaomi said on Thursday last week that it had reopened 1,800 stores across the country and 80% of its suppliers had resumed work. The company said that it plans to maintain a steady product release pace. 
• Ikea has also opened all of its stores except one, in Wuhan. The company has a total of 30 standard-format stores, two experience stores, and three LIVAT shopping centers in China. 

Factories are revved up, but who’s buying? Factory owners are keen to get production lines back up:

• 90% of firms in Guangdong  province had resumed operations as of March 2.
• In total, 209 companies that are major suppliers to Huawei, 21 suppliers to ZTE, 167 suppliers to Mida, and 343 suppliers for GAC Group, have been given the go ahead to recruit workers.
• China’s second-biggest automaker, Dongfeng Motor, resumed limited operations in Wuhan on March 11.
• However: Overseas orders are taking a big hit as Covid-19 chews through trading partners.
• Good Will Watch Case Manufacturing, a supplier to Fossil, has said they are putting their workers (over 600) on leave for at least three months.

A new normal? Tech companies, workers, parents, and regular people all want to get back to normal, but that will look quite different from just a few months ago. 

• Checkpoints at residential communities, consumer-facing businesses, and office buildings are still in effect.
• Offices are still far from full (with some even banning foreigners from entering).
• Cinemas and other performance halls are still closed despite bars, restaurants, and cafes re-opening.
• Tencent is cooperating with provincial CDC offices to launch a health QR code system for students returning to school. Under this system, each school can stick a passcode at its entrance which parents can then scan for unimpeded access.
• Alibaba’s fintech affiliate Alipay said on Wednesday that all cities in eastern Zhejiang, southwestern Sichuan, and southern Hainan provinces have adopted its health code system. The system is currently going national after being adopted in 200 cities.

Watch this space! This was just a preview of what we’re tracking. We’ll have the full new normal dashboard up on the site soon.

Read More:

• How China built its health surveillance system
• How China is using QR code apps to contain Covid-19
• How the Virus Got Out
• A third of coronavirus cases may be ‘silent carriers’, classified Chinese data suggests
• How much toilet paper?

Huawei will launch in Europe next week its first smartphone that will run on the company’s in-house service framework instead of Google’s, as the Chinese handset giant moves to offset a US trade ban’s impact on its overseas smartphone sales.

Why it matters: The move marks Huawei’s efforts as the world’s second-largest smartphone maker to challenge Google’s dominance in the Android ecosystem in markets outside of China.

• Experts believe that a lack of Google apps and services will slash the appeal of its new phones in the western markets such as Europe, the company’s biggest overseas smartphone market. 
• The company has seen its smartphone shipments drop by 16% in the third quarter and 7% in the fourth quarter, according to market research firm Canalys.

Details: The Shenzhen-based company has chosen not to substitute the open-source Android mobile operating system that its handsets all run on. Instead, it developed alternatives to popular Google apps and services that it lost access to as a result of a US trade blacklisting that took place in May.

• Huawei will launch its Honor V30 smartphone series which uses Huawei Mobile Services (HMS) next week in European markets, Chinese media Beijing News reported on Monday, citing the Honor department within the company.
• An alternative to the Google Mobile Services framework, HMS provides mobile applications corresponding to Google offerings. They include Huawei App Gallery, a mobile wallet, Huawei Video, and a music app.
• The V30 is also the first Honor smartphone that is compatible with the next-generation 5G network. Honor is a Huawei budget sub-brand.
• The company will hold a product event in Europe though the Mobile World Congress (MWC) was canceled, according to the report.
• A Huawei spokesperson declined to comment.
• The company said in a statement last week that it would hold “online and regional events to show Huawei’s latest products and solutions” in Barcelona after the MWC cancellation announcement.

Context: Huawei has accelerated its pace to promote HMS and lure more developers to its app platform.

• It was reported earlier this month that the company had teamed up with Xiaomi and Oppo to form an alternative to Google’s Play store.
• The company released last month a new version of HMS, adding capabilities such as Quick Response (QR) code extraction, near-field communication (NFC), and identity authentication.

China’s biggest smartphone makers are delaying new product launches that had been scheduled around the Mobile World Congress (MWC) after the event organizer announced it was calling off the world’s largest mobile phone trade show this year.

Why it matters: The annual event held in Barcelona is one of the most important stages for Chinese smartphone makers to unveil new products to an international audience. The exhibition’s cancellation and forced delays for product launches could hurt revenues from overseas markets, compounding expected losses in domestic sales brought by the Covid-19 outbreak.

• Panic about the Covid-19 epidemic has led to a 70% drop of smartphone shipments for offline channels in China during the Spring Festival holiday, a major shopping season in the country, Fang Jing, chief analyst at Cinda Securities, told TechNode in an interview last week.
• He predicted that the overall smartphone shipment figures in China would drop by 15% to 20% year on year in the first quarter.

Details: GSMA, the MWC organizer, announced Wednesday that the event this year was cancelled due fears about the virus outbreak in China which has spread to countries in Europe and North America.

• Chinese smartphone makers, including Huawei, Xiaomi, and Oppo, had plans to launch new products in Barcelona around the event which was scheduled to run from Feb. 24 to 27.
• Vivo, the world’s fifth-largest smartphone vendor, said in a statement sent to TechNode on Thursday that the company had decided to reschedule the product launch of its Find X2 smartphone from Jan. 22 to March.
• The Dongguan-based company told TechNode on Tuesday that it planned to attend the MWC and that it had sent some staff to Barcelona ahead of time for self-quarantine purposes.
• Huawei said last week that it would attend the tech conference as planned. The world’s second-largest smartphone maker usually makes major product releases for overseas markets during the MWC. A Huawei spokesman declined to disclose to TechNode whether the company had plans to do so this year.
• Xiaomi planned to hold a press conference on Feb. 23 in Barcelona to release its new flagship smartphone, the Mi 10. The handset will be launched in China via livestream on Thursday afternoon. A Xiaomi spokesman did not say whether the Barcelona launch will be canceled or delayed.

Context: Multiple telecommunication firms including Ericsson, Nokia, Intel, LG, Sony, and Amazon, as well as hardware companies had pulled out from the MWC prior to GSMA’s announcement.

• The GSMA also holds an MWC designed for Chinese companies and audiences in Shanghai every year. This year’s MWC Shanghai will be held from June 30 to July 2, according to its website. It is unknown whether this event will also be affected.

Top Chinese smartphone makers including Xiaomi, Huawei, Oppo, and Vivo are teaming up to form an alternative to Google’s Play store to distribute Android apps to users outside China, Reuters reported Thursday.

Why it matters: The four Chinese handset giants together accounted for around 40% of global smartphone shipments in the fourth quarter, underscoring the potential for the partnership to take a chunk of business from Google’s Play store in the international Android app distribution market.

• Huawei’s ban from accessing Google services or apps on its new phones is a strong motivating factor for the world’s second-largest smartphone maker to create a Play store alternative.
• Xiaomi, Oppo, and Vivo, however, are not restricted by the ban and have full access to Google’s services overseas.

Details: The four companies are forming a group known as the Global Developer Service Alliance (GDSA) which aims to make it easier for developers of games, music, movies, and other apps to market their products in overseas markets, according to the Reuters report citing anonymous sources.

• The GDSA was initially aiming to launch in March, but it is unclear how the plan will be affected by the recent coronavirus outbreak.
• The alliance plans to offer its services to developers in nine “regions” including Russia, India, and Indonesia, according to its website.
• The website, however, does not list Huawei as a member.
• A Xiaomi spokesman told Reuters that the GDSA “solely serves to facilitate the uploading of apps by developers to respective app stores of Xiaomi, OPPO and Vivo simultaneously.” The spokesman denied that Huawei was involved in the alliance.

Context: The four companies use respective self-developed Android app stores in addition to third party app stores in the China market because Google services are not accessible in the country.

• Huawei has been actively looking for replacements since it lost access to Google apps and services. The company updated last month its developer tools in efforts to lure more developers to work on its Huawei Mobile Service ecosystem.
• The company released in August its Harmony operating system as an Android alternative. However, company executives have said that Huawei is still using Android as a “first choice.”

This article was co-authored by Wei Sheng.

China’s tech stocks have dropped sharply since Jan. 13, when an epidemic disease known as novel coronavirus went global. On Tuesday Feb. 3, they started to recover, but most have a long way to recover from January losses.

E-commerce giant Meituan Dianping opened at HK$109.20 (about $14) on Jan. 13, dropped to HK$99.50 by the end of the day Feb. 3, and has climbed back to HK$100.50.

The stock rise coincided with a strong monetary boost from Beijing on Tuesday. The People’s Bank of China injected RMB 400 billion (about $57 billion) of liquidity to the banking system and strengthened the yuan exchange rate to support the economy.

The liquidity injection was the largest in the past year, sending a strong message to markets that the government will support the Chinese economy during the virus outbreak.

Manufacturers of surgical masks, now widely used and sometimes mandated in China for protection against airborne viruses, have seen a surge in share prices. Stock for three Chinese firms TechNode analyzed have gained 40% in share price since Jan. 13, indicating that investors expect a prolonged health crisis.

But things are looking up this week in tech. Stocks on Shanghai’s tech board started to climb on Tuesday, gaining back on the past few weeks’ losses. The benchmark SSE Composite Index, in which the STAR Market is listed, has gained close to 3% since Tuesday.

China’s Nasdaq-style STAR Market has been on a roller coaster ride after it reopened on Monday. Most shares dropped during the first day of trading after the week-long break with 43 out of 79 listing companies seeing their share prices reach the tech board’s daily limit of 20% downside.

E-commerce bounceback

The e-commerce sector has been hit the hardest among those analyzed, as expectations for consumption were low in the past few weeks. Share prices of the six companies TechNode analyzed saw a 9.4% decrease on average until Feb. 3, and have since won back 5.4%.

Millions of people are staying at home this week due to obligatory work-from-home policies, adding on the fact that fears of the virus spreading is running high. But fear of the virus might prove beneficial for e-commerce companies.

“Alibaba and Meituan’s share prices dipped slightly, but are now on an upward trajectory, as investors price in how important e-commerce will be over the coming months,” Michael Norris, leader of research and strategy at AgencyChina, told TechNode.

Cities across China have ordered entertainment venues to shut down and shopping malls to take strict entry measures during the Spring Festival break which went from Jan. 23 through Feb. 2 after a last-minute extension.

“Over the coming weeks, the default for many folks’ consumption will be e-commerce,” Norris said. E-commerce and delivery platforms have already implemented “no-contact delivery,” meaning the delivery driver doesn’t come in person with the person receiving the goods. This scheme meets consumer desires and “the stock market has responded positively to these developments,” Norris said.

Luckin Coffee shares have dropped by 29%, from $44.17 on Jan. 13 to $31.35 on Feb. 3, the biggest drop among the companies analyzed. On Saturday, the US investment firm Muddy Waters delivered a further blow to China’s largest coffee chain, saying that it believes the company is inflating sales numbers. Luckin Coffee stock has increased by 24.56% this week, recovering to $39.05.

Luckin shares dip further despite refuting fraud claims

Shoppers going online

Smartphones and telecommunications companies have also seen a drop. The five companies TechNode analyzed showed a 2.3% decrease since Feb. 13.

“We predict the overall smartphone shipment in China to drop by 15% to 20% year on year in the first quarter,” said Fang Jing, chief analyst at Cinda Securities, a Beijing-based investment firm.

The drop is attributable to the government’s calls remain during the Spring Festival holiday in an effort to contain the spread of the virus, Fang said.

The holiday is usually considered a barometer of Chinese private consumption because of the traditions of gift-giving and family reunions. However, fears of the deadly coronavirus that has killed 491 people and sickened 24,363, based on official data, have kept shoppers away from the streets.

“We have seen shipments of smartphones through offline channels drop by 70% during the Spring Festival holiday,” said Fang. “If the situation is not going to take a turn for the better, the percentage will likely increase.”

Instead, people are going online for electronics consumption. Online shipments of smartphones are expected to account for as much as 40% in the first quarter, Fang said, adding that the proportion was only 28% in the same period last year.

With a small store footprint, Xiaomi relies on online sales, which makes it a strong contender for the coming months when e-commerce will become an even bigger pillar of consumption. Its stock climbed 3.29% in the time period analyzed, making it the only rising stock in the smartphones and telcos category.

Compounding on Xiaomi’s relatively good outlook in China, are good results in India. The Beijing-based company remains the top smartphone brand in India, according to research by market intelligence firm Canalys published on Jan. 29.

Supply chain delays

The epidemic also creates challenges and disruptions for supply chains in China, especially after authorities in some big cities announced rules barring companies from resuming operations for a certain period of time following the break.

Companies in Shanghai, for example, are not allowed to re-open offices before Feb. 10, meaning either remote work or a longer holiday. In the meantime, jobs that require the physical presence of employees, like factories, remain closed.

DingTalk, WeChat Work overburdened as hundreds of millions work remotely

Car manufacturer Hyundai had to close all its factories in South Korea after it ran out of critical components coming from China. The world’s fifth-largest automaker said it would take three to four weeks to switch to parts made outside China.

“We expect that most consumer electronics manufacturers will resume operations on Feb. 9 or Feb. 10, which means a delay of roughly one week,” said Fang.

“But, given that the first quarter is always a low season for electronics consumption in the year, the impact is limited. We expect that orders affected by the delay will account for less than 2% of smartphone makers’ annual orders.”

CORRECTION: An earlier version of this article erroneously reported Meituan Dianping’s stock price as though it were listed in US dollars. The company’s shares are priced in Hong Kong dollars.

Chinese regulators have given smartphone maker Xiaomi the green light to set up a consumer finance company in Chongqing, a municipality in the southwest of the country, according to an announcement on Friday.

Why it matters: Xiaomi’s consumer finance unit is becoming increasingly important as it looks to compete with other large Chinese tech companies which have piled into the lucrative consumer finance sector.

• In March, Xiaomi’s micro-finance unit in Zhuhai had its business license rescinded amid a nationwide crackdown on online lending. Xiaomi also has a micro-finance subsidiary in Chongqing, but its relationship with the newly approved consumer finance company is unclear.
• Shortly before its 2018 initial public offering on the Hong Kong stock exchange, Xiaomi revealed that it planned to spin off its finance business into an independent entity. Many interpreted the move as a way for the financial arm go public.
• Consumer finance provides the company another user gateway as the growth of its smartphone business slows.

Details: The China Banking and Insurance Regulatory Commission said the new entity should be established within six months of the approval dated Jan. 10.

• The key shareholders are Chongqing Rural Commercial Bank (CRCB), and three other Chongqing-based companies. Proposed registered capital is set at RMB 1.5 billion ($218.6 million).
• Chinese media reported in November that Xiaomi would become the 28th company in the country to acquire a consumer finance license, joining Baidu, Alibaba, and many others.
• Xiaomi told Chinese media that setting up the new company will help it to gain a firmer foothold in Chongqing, and it expects to expand consumer finance across the country.

Context: Xiaomi has been plotting the move for a year.

• Xiaomi and Chongqing’s Jiangbei district government inked a cooperation agreement to set up the consumer finance company in May 2018.
• In November, CRCB obtained regulatory approval to set up the consumer finance joint venture with an investment of RMB 450 million, or a 30% stake.
• Xiaomi’s financial product portfolio includes consumer loans, supply chain finance, fintech, third-party payments, online insurance, and digital banking.
• The company is eyeing lucrative fintech markets overseas. The company acquired its digital banking license in Singapore earlier this month and was said to be in talks to expand its financial product offering in India late last year.
• Chongqing is one of China’s four municipalities along with Beijing, Shanghai, and Tianjin which are directly controlled by the central government. A commercial hub for southwest China, it is considered the regional base for Alibaba’s and Ant Financial’s operations in the region.

Xiaomi is spinning off a premium smartphone brand it created for users in India as an independent company, a company executive announced on Friday.

Why it matters: The Beijing-based smartphone maker began its multi-brand strategy in 2018 in a bid to target different user segments and drive growth for its biggest business. Smartphones accounted for 60% of the company’s revenue in the third quarter.

• Xiaomi sub-brands also include gaming phone Black Shark, budget phone brand Redmi, and Meitu, a smartphone brand it licensed from a selfie app maker.
• The Poco brand has produced just one phone, the Rs 20,999 (around $295.6) Poco F1, which debuted in 2018 with the aim to take on high-end players in India such as Samsung, Huawei, and Apple.
• Xiaomi is the biggest smartphone vendor in the country holding market share of roughly 26% as of the third quarter of 2019. Redmi phones are its most popular offerings in India.

Details: Xiaomi global vice president Manu Kumar Jain said in a tweet that Poco had “grown into its own identity” and will become independent from Xiaomi.

• “Poco F1 was an incredibly popular phone. We feel the time is right to let Poco operate on its own,” he said.
• Details of the split have not been disclosed. Xiaomi did not immediately reply to TechNode’s inquiries on Sunday.
• The Poco brand had a team of more than 300 employees working on research and development in Xiaomi’s Shenzhen headquarters, according to a VentureBeat report in 2018 citing company executives.
• The Poco team borrows resources from its parent whenever it deems fit and leverages Xiaomi’s logistics and services infrastructure, the report said.

Xiaomi’s Q3 growth slows amid dwindling smartphone sales, Huawei competition

Context: Xiaomi reported in November the company’s slowest-ever quarterly revenue growth since its July 2018 listing on the Hong Kong stock exchange. It has decelerated in the face of aggressive competition from rival Huawei in China’s saturated smartphone market over the past few quarters.

• The company’s revenue in the third quarter rose to RMB 53.7 billion (around $7.8 billion) from RMB 50.9 billion the same period the year before, a 5.5% year-on-year increase.
• The world’s fourth-largest smartphone maker split off its Redmi smartphone line in January 2019 in a bid to present Xiaomi as a premium brand.

Lenovo and Xiaomi may be in for a legal dispute after the head of the personal computer giant’s smartphone business jumped ship to the smartphone maker on Thursday.

Why it matters: The move followed a leadership reshuffle at the world’s fourth-largest smartphone maker in late November in which the roles of as many as eight high-ranking executives were affected. Xiaomi ceded significant share in the domestic smartphone market to rivals last year, falling to 9% in the third quarter from 12% in Q2, according to market research firm Canalys.

• Chang Cheng, former head of Lenovo’s smartphone unit, announced his departure from Lenovo on Dec. 31. He has more than 3 million followers on China’s social media platform Weibo and has openly criticized Xiaomi’s smartphone offerings, including a comment in March on founder Lei Jun’s Weibo post about the low-end Redmi Note 5 in which Chang called the phone a “bucket” in reference to its thickness.
• Chang’s departure is seen as a blow to Lenovo’s underperforming smartphone business. Revenue for the company’s smartphone division dropped 7% year on year in the quarter ended Sep. 30.

Details: Lenovo said it would take legal action on Thursday, the day Chang announced he had joined Xiaomi.

• The personal computer manufacturer said it has signed non-compete clauses with all of its executives and that it would seek to resolve disputes “within the legal framework” should there be any breaches, according to Chinese business media Yicai, citing a Lenovo spokesperson.
• The Yicai report cited a source close to Xiaomi as saying that Chang left Lenovo without signing a non-compete clause and he was not paid any related compensation.
• Xiaomi declined to comment when contacted by TechNode on Friday. Lenovo did not immediately respond to requests for comment.

Context: Chang joined Lenovo in 2000 as a research and development director at Lenovo’s laptop business unit.

• He became the CEO of ZUK, a smartphone spin-off, in June 2015, and was appointed a Lenovo senior vice president.
• Lenovo’s smartphone business has struggled to gain traction in recent years, even after it bought US-based handset brand Motorola from Google in 2014 for $2.9 billion. Its market share in China has remained less than 1% since 2017.

China became the largest market globally for smart speakers earlier this year with some 10.6 million units shipped in the first quarter. In fact, three of the world’s five leading smart speaker vendors in the third quarter were Chinese, according to market research firm Canalys. 

The top Chinese players are household names: e-commerce giant Alibaba, search operator Baidu, and handset maker Xiaomi. They all rely on a little-known startup called SoundAI for critical voice interaction technology.

The backstory: The Beijing-based startup makes voice recognition and artificial intelligence (AI) software, helping smart speakers from leading manufacturers to listen to and process users’ requests.

• The company’s products include Azero, a voice interaction kit that runs on smart speakers, connected cars, and wearables; Babel, a voice recognition software; and Cimon, an audio processing tool.
• SoundAI raised RMB 200 million ($28.6 million) in its most recent funding round (Series B) in December 2018. It valued the company at RMB 1 billion (around $143 million).
• Chen Xiaoliang, a researcher at the Institute of Acoustics under the Chinese Academy of Sciences, founded the firm in May 2016.

Unique selling point: SoundAI’s technology is found in more than 20 million products, ranging from smart speakers and conference systems to robots and connected cars. It also runs a strong research and development (R&D) arm with more than 1,000 patents secured so far, according to its website.

“Voice is the most natural way of communication, and smart speakers will see great demand in the near future. Our voice technology has been used in the smart speaker offerings from top players including Baidu, Alibaba, Tencent, Huawei, and Xiaomi. Our cooperation with these firms is not easy to replace.”

—Chen Xiaoliang, founder and CEO of SoundAI, in an interview with TechNode

The investors: The company has closed four rounds of investment to date, bringing in investors such as Baidu, FreesFund, Qihoo 360, Aplus Capital, and the Bank of Beijing.

• Qihoo 360, better known as a cybersecurity firm, and Baidu both make smart speakers. Baidu was the third-largest smart speaker vendor globally in the third quarter.

Present condition: The company has a team of around 200 employees, mainly from top Chinese universities such as Tsinghua and Peking University, as well as tech companies including Google, Broadcom, Tencent, and Baidu.

• The company works with 150 companies in sectors ranging from smart home and education to healthcare and manufacturing, according to Chen.
• Current information on the company’s profitability was unavailable at the time of writing.

The landscape: Global smart speaker shipments grew by more than half year on year to hit 34.9 million units in the third quarter, according to market research firm Strategy Analytics. China accounted for 36% of global shipments.

• In the two years since their emergence in the Chinese market, smart speakers have evolved from niche gadgets into one of the most sought after devices in Chinese households.
• Smart speakers are a key item for controlling intelligent home platforms, a booming sector.
• The device’s popularity in China is partly due to a price war waged between the country’s tech heavyweights, with average prices slashed to under $20 from about $100 in 2017.
• Another Strategy Analytics report predicts global consumer spending on smart home-related hardware, services, and installations to reach $103 billion in 2019 and $157 billion in 2023.
• As a voice recognition technology provider, SoundAI shares the market with smart home solution provider Tuya Smart and Unisound, a Qualcomm-backed voice-to-text software maker, among others.

China’s tech giants battle for smart speaker supremacy as price war rages on

Prospects: The company is likely to maintain growth as the smart speaker becomes a fixture in the “vast majority” of Chinese households. Baidu’s recent move to pull out of the price war by cutting subsidies indicates organic demand is increasing.

• SoundAI is on a list of 100 tech companies that Chinese business news platform Sina Finance expects to go public on the STAR Market, the country’s Nasdaq-style tech board on the Shanghai Stock Exchange.

The Chinese market for wearable devices reached 27.15 million units shipped in the third quarter of 2019, up 45.2% from 20.97 million units in the same time period last year, according to a report from market research firm International Data Corporation (IDC). The report predicts the market to reach 200 million units in 2023.

Why it matters: The report highlights the fast growth of China’s wearable devices market, and the fact that Chinese companies are the biggest players in this field.

Details: Xiaomi is leading the market, with a quarter of all shipments, but Huawei saw the biggest increase in shipments. The Shenzhen-based telecoms giant saw its shipments almost double in the last year, doubling its market share from 10.7% in the third quarter of 2018 to 20.7% in the third quarter of 2019.

• The market saw some consolidation in the time period , as the total share of the top five companies grew from 59.8% to 70.2% in that time period.
• BBK Electronics, the parent company of Oppo, is the only company in the top five that saw its market share decrease, from 9.8% to 7.7%.

Context: Xiaomi overtook Apple as China’s largest seller of wearable devices in 2018.

China’s internet regulator, Ministry of Industry and Information Technology (MIIT), on Thursday released the first list of apps that violate regulations on data collection, including those from Chinese technology companies including Tencent, Xiaomi, and Sina Weibo.

Why it matters: The move is part of China’s “rectification” efforts to crack down on mobile app privacy violations, particularly those with large user bases.

• In November, the Chinese regulator announced a two-month-long campaign against illegal data collection practices and user privacy protection issues among mobile apps. The regulator threatened to blacklist and halt operations of noncompliant apps.
• The MIIT said a third-party agency will conduct the inspections that specifically look into apps with high download numbers.

Details: More than 8,000 problematic apps made changes and became compliant during the “self-inspection stage” of the campaign over the past month. However, the regulator found 41 problematic apps that “illegally collect and use personal data, excessively request user authorization, or create unnecessary hurdles for unsubscribing users” (our translation).

• The list includes many popular apps such as Tencent’s QQ and QQ Reading, Xiaomi’s digital finance app Xiaomi Finance, Sina Corp’s sports media platform Sina Sports, news aggregator 36Kr and Sohu News, and inter-city delivery service FlashEX.
• The apps have until Dec. 31 to comply with regulations. The MIIT will take action against apps that fail to make changes.

Apple’s iPhone shipments in China dropped by more than 35% in November compared with the same period last year, Reuters reported, citing a report by Credit Suisse.

Why it matters: The November figures are the iPhone’s second consecutive double-digit decline despite Apple’s efforts to lure more Chinese consumers by significantly lowering the price of its newly released iPhone 11 series.

• Apple priced the iPhone 11 at $50 less than the preceding model following a year of heavily discounting older iPhone models in a bid to offset aggressive competition from Chinese competitors such as Huawei and Oppo.
• The overall Chinese smartphone market declined by 1.5% year on year in November, a modest recovery from the 6.7% year-on-year dip in October, according to a report by the China Academy of Information and Communications Technology.

Details: Total iPhone shipments in China in the September-November period dropped 7.4%, said Credit Suisse analyst Matthew Cabral in the report, citing data from China’s Ministry of Industry and Information Technology.

• Total iPhone shipments in China are down 7.4% year on year in the period from September—when iPhone 11 hit the market—through November, according to the report.
• The analyst also said Apple expects more tariffs imposed on its products sold in the US if the 15% tariffs on billions in Chinese-made goods come into effect on Dec. 15.
• However, Apple could avert the duties after US President Donald Trump signed off on an initial trade agreement with China on Thursday, according to Bloomberg.

Huawei widens lead in China smartphone market after US ban: report

Context: Apple has had a tough time in China this year. The company’s smartphone shipments in China fell 28% year on year in the third quarter, while unit shipments for Huawei, its biggest rival in China, surged 66% in the same period, according to data from market research firm Canalys.

• Apple held 5.2% of China’s smartphone market share in the third quarter, ranking fifth behind Chinese handset makers Huawei, Vivo, Oppo, and Xiaomi.

Xiaomi co-founder and chairman Lei Jun has stepped down as the company president for China, according to an internal company letter, following a drop in smartphone market share since he took the position in May.

Why it matters: Besides Lei, the company reshuffled seven other high-ranking executives within the ranks of the world’s fourth-largest smartphone maker.

• The Beijing-based company’s smartphone shipments in China declined 20% year on year in the second quarter and 33% in Q3 with market share shrinking to 9% from 12% during the six-month timeframe, according to market research firm Canalys.
• Xiaomi’s disappointing performance in the Chinese smartphone market came as rival Huawei ramped up its marketing in China over the past few months to offset weak international sales caused by a US export ban. Huawei nabbed a record 42% market share in China in the third quarter.

Details: Lei retained his roles as the company chairman and CEO while Lu Weibing, the former brand manager for the company’s budget phone spin-off brand Redmi, will replace Lei as the company president for the China region, according to an internal letter sent to Xiaomi staff on Friday, Chinese business newspaper Time Weekly reported on Sunday.

• Wang Xiang, who used to lead the company’s international business, was promoted to president of the company while former president Lin Bin was made vice chairman of the board, according to the letter signed by Lei.
• Former chief finance officer Shou Zi Chew now leads the company’s overseas business.
• Co-founder Li Wanqiang, who used to be in charge of Xiaomi’s marketing and brand strategy, resigned from the company while senior vice president Qi Yan has retired, according to the letter, which also said that they would both retain advisory roles.
• All of the changes took effect on Friday, a company spokesman told TechNode on Monday.

Context: Xiaomi last week reported 5.5% year-on-year growth in Q3 revenue, in the company’s slowest-ever growth since its July 2018 listing in Hong Kong.

• The modest earnings growth is partially due to declining smartphone sales, which dropped 8% year on year during the quarter.
• Despite the decline in the Chinese market, Xiaomi’s international business remains strong, especially in Europe, where the company’s smartphone sales surged 73% year on year in Q3.

Xiaomi’s Q3 growth slows amid dwindling smartphone sales, Huawei competition

Updated: added that Lei Jun will also remain in his role as CEO at Xiaomi.

Chinese tech companies that are better known for e-commerce services or consumer electronics are pivoting towards business-to-business (B2B) models as they look to grab a slice of the promising industrial internet of things (IoT) sector.

B2B IoT is expected to grow into a $1 trillion market in the next five years. It remains emergent and lucrative as factories, carmakers, and telecom players pursue large-scale digital transformation strategies.

JD.com announced a partnership last week with the State Grid to integrate the e-commerce player’s IoT platform with devices and meters at the state-owned utility, in a push to expand its IoT business into the energy sector.

In the same week, Xiaomi announced three IoT kits targeting different industrial businesses, as the Beijing-based electronics maker branched out from consumer-facing IoT efforts and smart home initiatives.

Worldwide spending on IoT is expected to come to $726 billion by the end of this year and hit a staggering $1.1 trillion in 2023, according to market research firm IDC, with an influx of expenditure in industrial segments.

Spending on IoT deployments from three commercial industries—discrete manufacturing, process manufacturing, and transportation—will account for nearly one-third of the worldwide spend total in 2023, said the report.

“While organizations are investing in hardware, software, and services to support their IoT initiatives, their next challenge is finding solutions that help them to manage, process, and analyze the data being generated from all these connected things,” said Carrie MacGillivray, group vice president of IoT research at IDC.

China’s long-awaited nationwide roll-out of commercial 5G last month could encourage companies to accelerate digitalization plans. The next-generation wireless technology promises faster speeds as well as low-latency connections, and is expected to drive growth in IoT technology.

Meanwhile, tech companies are scrambling to replicate their consumer market successes in the industrial IoT sector, and quickly forge out new revenue streams as their B2C segments meet with growth bottlenecks.

Xiaomi reported Wednesday 5.5% year-on-year growth in third-quarter revenue, in the company’s slowest-ever growth since its July 2018 listing in Hong Kong. The slowdown is partially due to declining smartphone sales, which dropped by 8% year on year in the quarter.

Xiaomo and JD’s steps join a trend in China’s internet sector where consumer-facing firms are branching out to B2B segments in the past few years. Social media giant Tencent, which owns WeChat, and e-commerce powerhouse Alibaba both have pushed into areas such as enterprise software and cloud computing.

JD’s energy push

The partnership, officially announced on Nov. 19, will provide the State Grid with access to JD’s IoT platform across its devices and meters on its electrical network nationwide, the e-commerce giant said in a statement to TechNode.

The devices include electricity meters, power distributors, humidity sensors, and temperature sensors, said JD, adding that a centralized IoT platform could “eliminate data islands, while collecting and analyzing information about energy usage across different devices” for its new partner.

The utility’s nationwide power grid operation generates a large amount of data and it requires a platform to handle and analyze it all in an appropriate fashion, John Zhou, head of JD’s IoT division, told TechNode.

“The most important thing is that these devices can provide feedback on their [the State Grid’s] electricity generation, consumption, and storage and be processed in a data center to improve efficiency,” said Zhou.

JD started its IoT venture in 2014 focused around home appliances and it grew into a key contributor to company e-commerce income, said Zhou. The Beijing-based firm expanded into industrial sectors after it gaining enough experience from the consumer market, he added.

“The whole digital economy is extending from the consumer side to the industrial side, so we are also looking for opportunities in the industrial IoT sector,” he said.

Xiaomi’s industrial revolution

On the same day as JD’s announcement, another Beijing firm Xiaomi unveiled a suite of B2B IoT solutions for companies working in the real estate, hospitality, and enterprise services fields.

The hospitality solution will allow hotels to install Xiaomi’s smart speakers, smart television sets, and multifunctional gateways in their guest rooms, Fan Dian, general manager of Xiaomi’s IoT unit, said at an event in Beijing.

The industrial IoT solutions leverage the firm’s successes in the consumer IoT segment, offering products and services found in its smart home ecosystem to businesses.

The enterprise services kit, for example, provides offices with devices such as connected air purifiers and smart light switches, which are already sold to Xiaomi customers as part of its smart home ecosystem.

Founded in 2011 and better known as a handset maker, Xiaomi has been aggressively expanding into IoT. The company announced in January that it would pour over RMB 10 billion (around $1.4 billion) into the development of artificial intelligence and IoT within five years.

Before last week’s announcement, Xiaomi’s IoT strategy was squarely focused on the consumer market with most of its connected devices designed for household use.

The company’s earnings from its IoT and lifestyle segment, which includes sales of smart home devices such as smart television sets, air conditioners, and smart locks, surged 44% annually to hit  RMB 14.9 billion in the second quarter, according to company filings (in Chinese).

“We have to make good use of our existing advantages as we explore the industrial IoT market,” Fan told TechNode on the sidelines of the event.

“But we do have the ability to provide independent solutions for other industries and we will do that at an appropriate time,” he said.

Chinese smartphone maker Xiaomi reported 5.5% year-on-year growth in third quarter revenue on Wednesday, in the company’s slowest-ever growth since its July 2018 listing in Hong Kong.

Why it matters: The underwhelming earnings report reflects the mounting pressure on Xiaomi as it faces aggressive competition from rival Huawei in China’s saturated smartphone market in the past few quarters.

• The Beijing-based company has seen its smartphone shipments in China drop by 33% on an annual basis in the third quarter while those of Huawei expanded 66% year on year for the same time period.
• Overall smartphone sales in China shrank 3% year on year in Q3.
• Xiaomi has looked to European markets, where Huawei phones are restrained by its blocked access to Android as a result of a US trade ban, to make up for weak sales at home.
• The company’s Q3 smartphone shipments in Europe surged 73% year on year to reach 5.5 million units, though still dwarfed by Huawei’s 11.6 million units sold in the region during the same time period.

Details: The company’s revenue in the third quarter rose to RMB 53.66 billion (around $7.6 billion) from RMB 50.85 billion the same period a year earlier, a 5.5% year-on-year increase.

• It generated RMB 3.5 billion in profit during the quarter, a 20.3% increase compared with the same period last year.
• Revenue from smartphones, which accounted for most of Xiaomi’s total revenue, fell 8% year on year to RMB 32.3 billion in the quarter.
• Xiaomi chief finance officer Shou Zi Chew attributed the smartphone sales drop to the bleak smartphone market where wireless operators are upgrading their networks from the current 4G to 5G at an earnings call with analysts on Wednesday.

“We are in a transitional period from 4G to 5G and the smartphone market is under great pressure… We are very confident about the 5G era because we are good at bringing new technologies to consumers” (our translation).

—Shou Zi Chew, at the earnings call on Wednesday

Context: Xiaomi in September launched the country’s cheapest 5G-compatible smartphone, the Mi 9 Pro, at a starting price of RMB 3,699.

• Company chairman Lei Jun announced last week that Xiaomi is building a “smart plant” in Beijing to manufacture its flagship handsets.
• In a further global push, Xiaomi is planning to enter the Japanese smartphone market next year, according to Nikkei.

Xiaomi to launch first manufacturing plant in December: chairman

A consortium of Chinese technology companies has banded together to establish standards for developing facial recognition technology, as concerns grow with the technology’s increased ubiquity.

Why it matters: Facial recognition has become part of everyday life in China, with applications in sectors as far-ranging as public security to retail.

• Nevertheless, its use has sparked heated debate, with some arguing that the technology is being applied to scenarios for which it is unneeded.
• Earlier this month, a university professor from China’s eastern Zheijiang province filed a lawsuit against a wildlife park over being forced to use its facial recognition system to access the facility.

Details: The working group was established on Nov. 20 and is made up of companies including social media and gaming giant Tencent, Alibaba-affiliate Ant Financial, smartphone maker Xiaomi, voice recognition firm iFlytek, and surveillance equipment manufacturer Dahua Technology, among others.

• The group is led by Sensetime, the world’s most valuable artificial intelligence (AI) firm. The US placed the company on a trade blacklist last month over alleged complicity in human rights violations in China.
• The consortium’s aims are to standardize the research and development of facial recognition technologies, ensure safety in its use, and promote “healthier” development of the industry, according to a Sensetime statement.
• The group will also lead and participate in setting up international standards, the company said.
• The move comes following concerns over biometric data theft and a lack of accuracy in properly identifying individuals.
• Sensetime said data leaks come as a result of a lack of specifications for collection, storing, and processing facial data.

Context: Despite the convenience that facial recognition technologies bring, the fallout could be disastrous if facial data falls into the wrong hands.

• For example, a password can be changed if it is compromised while physical features cannot be easily modified if facial data is stolen.
• While a vast majority of commercial applications are opt-in, the Chinese government has increased its focus on using the technology in its vast surveillance apparatus.

Chinese smartphone maker Xiaomi is building a “smart plant” in Beijing to manufacture its flagship handsets, company chairman Lei Jun said at an event on Thursday, with production to begin at the end of December.

Why it matters: The manufacturing plant is a first for Xiaomi, the fourth-largest smartphone maker in the world.

• The announcement comes on the heels of a $21 billion state-backed fund the government established on Monday to boost the country’s manufacturing industry.
• Xiaomi currently depends on original equipment manufacturers (OEMs) such as BYD and Foxconn to produce the millions of handsets it sells every year.

Details: The plant will be capable of producing 1 million smartphones during the initial operation phase, Lei said at the World 5G Conference in Beijing, which the company later said would last one year.

• The so-called “smart plant“ will utilize technologies such as autonomous production lines, 5G-powered robots, big data, and cloud services to increase productivity, Lei said.
• The plant will be able to produce 60 smartphones per minute, and will cover 187,000 square meters, Lei added, an area equivalent to around 35 American football fields.
• The company shipped some 122.6 million smartphones last year, meaning that devices produced by its in-house plant will only produce a small fraction of its smartphone output.

Context: In March, Xiaomi announced its cooperation with Shenzhen-based OEM BYD to mass-produce the Mi 9, the company’s flagship handset launched in February.

• In a 2014 interview with Chinese media outlet Caixin, Lei stated that Xiaomi would not build its own manufacturing plant because the company was focused on smartphone research and development (R & D).
• “Why don’t we let the best manufacturing plants work with us?… I don’t think R & D-oriented companies could do well in manufacturing, nor do I think manufacturing-oriented companies could do well in R & D,” (our translation) Lei said.

Chinese smartphone maker Xiaomi has started to pre-install an earthquake early warning system on a recent version of an operating system installed on its smartphone and television sets, the company announced on Tuesday.

Why it matters: The Beijing-based company is one of the first handset vendors to provide the potentially life-saving service.

• The current earthquake early warning system in China depends on public loudspeakers installed on the streets of cities within China’s seismic zones, according to Wang Tun, director of the Institute of Care-life, a Chengdu-based non-governmental organization that provides the earthquake early warning system to Xiaomi.
• The local government of China’s Sichuan province, a quake-prone province in the southwest, has approved TV and smartphone vendors to provide quake warning services on their devices, but users have to install related apps themselves, Wang told TechNode on Tuesday.

“Earthquakes are small-probability events and people are not willing to install alert apps on their phones when they don’t happen… It is significant that Xiaomi pre-installs the earthquake early warning system on televisions and smartphones, because people will not need to download related apps to be warned of earthquakes” (our translation).

—Wang Tun, to TechNode on Tuesday

Details: The warning system is pre-installed on Xiaomi’s MIUI 11, the company’s user interface (UI) for smartphones and smart TVs based on Google’s Android operating system released on Oct. 22. Devices shipped with the UI installed will receive the alerts, Fan Dian, the general manager of Xiaomi’s Internet of Things (IoT) platform department, said at a tech event in Beijing on Tuesday.

• Current Xiaomi smartphone users can also activate the function by updating their phones to the latest MIUI, according to Xiaomi.
• Devices running MIUI 11 have delivered alerts ahead of a 4.1-magnitude earthquake that hit Yibin, Sichuan, on Nov. 10, said Fan.
• Wang told TechNode that his institute is already in talks with top Chinese smartphone makers, including Oppo and Huawei, to pre-install the system on their phones.
• He believes that the delivery rate of earthquake alerts in quake-prone areas could reach 80% to 90% of the population once the system is installed on handsets from other top smartphone makers—a huge increase compared with the current rate of around 30%.

Context: In June, a 6.0-magnitude earthquake hit Yibin, killing 13 people and injuring 199.

• An early warning system was triggered in the city 10 seconds before the earthquake struck.
• A three-second head start before a tremor hits can prevent 14% of casualties, according to state-run news agency Xinhua.

Chinese smartphone maker Xiaomi is planning to enter the Japanese market next year as the company expands its global presence to offset sluggish market conditions and fierce competition at home.

Why it matters: Revenue for the Beijing-based company grew 15% year on year in the second quarter to RMB 51.9 billion (around $7.4 billion) aided by an increase in overseas sales, which accounted for more than 40% of the company’s total revenue.

• Xiaomi is the biggest smartphone vendor in India, where it outsold all competitors, including global smartphone leader Samsung, to take a 28% market share in the quarter ended June, according to market data provider Counterpoint.
• It is also the fourth-largest smartphone seller in Europe with shipments in the same quarter growing by nearly half to reach 4.3 million units.
• At home, smartphone leader Huawei has encroached on market share from other players over the past two quarters as it steps up marketing efforts in China to offset falling sales in overseas markets.
• Huawei grabbed 42% of China’s smartphone market in the September quarter after shipments rose by nearly two-thirds. Xiaomi during the same time period saw its shipments sink 33% year on year, leaving it with only 9% share.

Details: Wang Xiang, head of Xiaomi’s international operations, disclosed on Monday Xiaomi’s plans to enter the Japanese smartphone market in the next year, according to Nikkei.

• Xiaomi will initially offer multiple models, along with linked wearable devices, in the market through the company’s own sales channels, including online.
• The company eventually hopes to partner with wireless carriers, the main distributors for phones in Japan, said Wang, without mentioning any specific names.
• The company will set up a Japanese subsidiary soon to prepare for the launch, Wang said, declining to provide details about specific products.

Context: In January, Xiaomu announced that it would set up a business unit to expand on the African continent, appointing its Vice President Wang Lingming (no relation) to head up the new unit.

• In February, Xiaomi signed a partnership agreement with Africa’s leading e-commerce platform, the Nigeria-based online marketplace Jumia, to open a Mi official store, gaining access to millions of customers across 14 countries, including Nigeria, Egypt, Kenya, Ivory Coast, Morocco, and Ghana.
• The African market push stagnated after Vice President Wang was sacked from the company for violating a law banning obscene behavior, including public nudity.

Huawei widens lead in China smartphone market after US ban: report

Huawei’s handset shipments in China rose two-thirds during the third quarter, helping the firm to hit a market share of 42%, data from market research firm Canalys shows.

Why it matters: The data indicates that the world’s second-largest smartphone maker has fared well at home despite the US blacklisting that is impairing performance overseas.

• Chinese consumers rallied behind the company after Washington moved to bar the Chinese telecoms giant from doing business with American companies.
• A sense of patriotism is likely to be a key driver of the sales surge as 42.9% of Chinese consumers intend to choose Huawei when switching from iPhones.

Unchanged:

Details: This quarter marks Huawei’s sixth consecutive quarter of double-digit growth, and places the Shenzhen-based company way ahead of its competitors with a 25 percentage-point lead over second-placed Vivo.

• Huawei smartphone shipments in China expanded 66% year on year to 41.5 million units, despite the overall market shrinking 3%.
• As Huawei consolidated its position in the market, all other vendors lost ground. Vivo supplanted Oppo in second place, while Xiaomi fell to fourth, Canalys said.
• Apple kept hold of fifth place in part due to September’s iPhone 11 launch. The new handset made up 40% of its shipments in the period.

“Huawei opened a huge gap between itself and other vendors. Its dominant position gives Huawei a lot of power to negotiate with the supply chain and to increase its wallet share within channel partners.”

-Nicole Peng, vice-president of mobility at Canalys

Context: The US ban, enforced in May, cut off Huawei from key suppliers, including chipmakers and Google’s Android operating system used in its devices.

• In response, Huawei announced it was building its own OS and, most recently, entered the electric vehicle business.
• As Washington officials urge world leaders in politics and business to shun Huawei from 5G networks, Huawei claims to have secured more than 50 contracts worldwide.
• On Monday, a report by the Sunday Times claimed that the UK, one of the US’s closest allies, is preparing to allow Huawei to be involved in the development of next-generation communications.

There are around 35 million households with smart speakers in China, and the device’s popularity is increasing rapidly, according to a report released by market research firm Strategy Analytics on Thursday, with some 59% of respondents saying that they can’t imagine living without the gadget.

Why it matters: In the two years since its emergence in the Chinese market, smart speakers have evolved from niche gadgets into one of the most popular electronic devices in Chinese households, making the country the largest market for the product worldwide.

• The device’s popularity is partially due to a price war between Chinese tech giants including Alibaba, Baidu, and Xiaomi, slashing average prices to under $20 from about $100 in 2017.

“The Chinese market for smart speakers is growing extremely rapidly and this research shows that Chinese consumers love the convenience and entertainment value which smart speakers offer. If what Chinese people say turns out to be true, smart speakers will be in the vast majority of households within the next few years.”

⁠—David Watkins, director of smart speakers and screens at Strategy Analytics

Details: Around 63% of the individuals surveyed who do not currently use a smart speaker plan to buy one within the next year, said the report. Another 22% said they planned to purchase one later.

• Xiaomi is the most well-known brand, with 71% of consumers surveyed recognizing the smartphone maker as having a smart speaker on offer, compared with Huawei at 53%, Baidu at 47%, and Alibaba at 37%.
• More than half of the 1,044 respondents own more than one smart speaker, not unusual in the Chinese market where smart displays account for a third of smart speakers in households.

China’s tech giants battle for smart speaker supremacy as price war rages on

Context: In April, it was reported that Amazon, the world’s largest seller of smart speakers, hired thousands of workers to listen to voice commands from some of its Echo smart speaker users.

• The news sparked privacy concerns among consumers that smart speakers are eavesdropping on conversations. These fears did little to slow worldwide sales, which grew 55% year on year to 26.1 million units in the second quarter, according to research firm Canalys.
• Total shipments in China’s smart speaker market nearly doubled to 12.6 million units in the second quarter, more than twice as large as the US market which shipped 6.1 million units during the same period.
• Baidu, China’s search engine giant, replaced Google in Q2 as the world’s second-largest smart speaker vendor after sales surged 3700% year on year to 4.5 million units.

Daniel Povey, former Johns Hopkins professor and developer of open-source speech recognition toolkit Kaldi, is currently in talks to join smartphone maker Xiaomi to develop a next-generation voice recognition platform for the company.

Why it matters: Xiaomi has sharpened its focus on its smart home ecosystem, which is typically controlled using the device maker’s smart speakers and voice assistant.

•  Johns Hopkins fired Povey after he broke into a student sit-in at the university in May with bolt cutters. The students reportedly locked themselves in the institution’s administration building to protest the university hiring a private police force to maintain order on campus.
• Johns Hopkins said Povey’s actions endangered the university’s students, which led to his dismissal.

“I am very close to signing an agreement to work for Xiaomi in Beijing. Would leave before end of 2019, and would hire a small team there to work on next-gen `PyTorch-y’ Kaldi.”

—Povey on Twitter

Details: Povey, an important figure in the speech recognition field, was originally hired by Facebook after his dismissal from the university. However, he eventually declined the posting when the social media giant added conditions to his contract due to the circumstances under which he left Johns Hopkins.

• Xiaomi was not immediately available for comment when reached by TechNode on Friday.
• In a post on his personal website dated August 16, Povey said that he was seeking opportunities to work for a “Chinese company and maybe get a part-time position at a Chinese university.”
• Xiaomi’s XiaoAi voice assistant is so far only available in Chinese, though Povey’s hiring may hint at the company seeking to expand functionality to other languages.
• The voice assistant had been activated 100 million times since its launch last year, the company’s CEO Lei Jun said in January.

Context: Xiaomi adopted a strategy this year dubbed “Smartphone + AIoT,” or artificial intelligence of things, as it expanded its connected device offering, hoping to combat a slowdown in China’s smartphone market.

• Voice control is central to this strategy as the company adds voice assistant functionality to an increasing number of devices, including washing machines and smart locks.
• Xiaomi said in its first-half results that the AI assistant has around 50 million monthly active users, up 88% year on year.
• Povey is a key developer of Kaldi, an open platform used by researchers and developers for speech-related applications.

Chinese smartphone maker Xiaomi unveiled the country’s cheapest 5G-compatible smartphone on Tuesday as the company seeks to revive its image as an affordable handset brand in the 5G era.

Why it matters: The world’s fourth-largest smartphone maker is looking to offset slowing hardware sales by taking advantage of momentum promised by the impending launch of ultra-fast 5G internet.

• The Beijing-based company has seen its share prices tumble in the past year as it faces stiff competition from rivals such as Huawei and Oppo in a saturated global smartphone market. Its market share in China declined by 20% year on year in the second quarter while Huawei’s share surged 31%, according to market research firm Canalys.
• Worldwide smartphone shipments fell 2.3% year over year in the same period, the seventh consecutive quarter of decline, according to research firm IDC.
• Consumers are still lukewarm about the technology, with 5G smartphones accounting for less than 1% of mobile phones sold in August in China though nine 5G devices are being sold in the country.

Details: The Mi 9 Pro, which debuted on Tuesday at an event in Xiaomi’s headquarters in Beijing, will start at RMB 3,699 (around $520), significantly cheaper than any other 5G smartphones launched in the Chinese market.

• The handset boasts Qualcomm’s Snapdragon 855+ processor, featuring up to 8GB RAM and 512 GB storage.
• Pre-sales will begin 5 pm Tuesday and shipments to Chinese consumers will begin on Friday, according to company founder and CEO Lei Jun.
• The company also announced its newest model, a concept smartphone called the Mi Mix Alpha. The “surround screen” smartphone features a display that curves entirely around the device, leaving only a slender bar on the back to house the camera modules.
• Xiaomi says it is looking to start small-scale production for the 5G device at the end of December and it will hit the market with a RMB 19,999 price tag, though no date was specified, according to a statement the company sent to TechNode on Tuesday.

“This year is the initial phase for 5G smartphones, and the costs for them are higher, that’s why the Mi 9 Pro is more expensive than the Mi 9. Please understand!” (our translation)

—Lei Jun, Xiaomi founder and CEO, at the Xiaomi 9 Pro launch on Tuesday 

Context: Xiaomi launched its first 5G smartphone, the Mi Mix 3 5G, in February at the Mobile World Conference in Barcelona, Spain. The EUR 599 (around $658) device went on sale in Spain and Italy in May but hasn’t arrived at its home market yet.

• Smartphone makers including Huawei, Xiaomi, ZTE, and Samsung are all selling 5G smartphone models in China. Before the Mi 9 Pro, the cheapest 5G smartphone in the Chinese market was the RMB 3,798 iQOO Pro 5G, while Samsung’s Note 10+ 5G is the most expensive at RMB 7,999.
• Experts expect (in Chinese) that prices for 5G handsets will fall as low as RMB 1,000 by 2020.

This story has been updated to include the Mi Mix Alpha announcement and to correct the name of the Mi 9 Pro.

Several popular Chinese wifi routers and networked storage devices contain significant vulnerabilities, that, if exploited, could cause “severe damage,” security researchers have found.

Why it matters: Internet penetration in China has risen dramatically over the past few years, creating a black market for illegally obtained personal data.

• A large number of households and small businesses use vulnerable routers and storage devices.
• Chinese Internet of Things (IoT) devices have in the past been used to launch large-scale cyberattacks using botnets, networks of devices that have effectively been commandeered to inundate websites with fake traffic, causing them to crash.

“The growth of security awareness through programs such as bug bounties may result in vulnerabilities being patched, but their existence in the first place is troubling. Common devices that are deployed in small office and home office environments are likely vulnerable to exploits that can result in severe damage.”

–Independent Security Evaluators (ISE) in its report

Details: ISE researchers found that devices from Xiaomi, Lenovo, Terramaster, and Totolink manufacturer Zioncom could allow attackers to gain access to private networks.

• Once a network has been infiltrated, attackers would be able to monitor the data that gets transmitted to and from devices within the network, gain control of other devices, and launch attacks on targets outside of the compromised network.
• Each device evaluated was found to contain at least one vulnerability that could be used to execute commands on the device or gain access to its administration panel.
• These devices include the Xiaomi Router 3 and a Totolink WiFi router, as well as network-attached storage products from Lenovo and Terramaster.
• The researchers also evaluated products from Netgear, Asus, Synology, and Seagate, all of which were found to be susceptible to attacks.
• Collectively, the vulnerabilities could affect “millions” of people worldwide, the ISE said.

Context: IoT device manufacturers have long been criticized for not implementing adequate measures to effectively protect their users.

• This is also true in China, where companies often take shortcuts to make their products cheaper, thereby sacrificing security.
• In 2017, Chinese-made internet-connected cameras were infected by the notorious Mirai malware to form a botnet that launched a distributed denial-of-service attack on Twitter, Paypal, and Spotify, taking some of the sites offline and resulting in the worst attack of its kind in US history.

Chinese smartphone maker Xiaomi announced on Tuesday a plan to repurchase up to HKD 12 billion (around $1.5 billion) worth of stock in an effort to halt a dramatic decline in share value, which have fallen nearly 50% from its July 2018 initial public offering price.

Why it matters: The growth prospects of the Beijing-based company have been dented by a slowing global smartphone market as its efforts to reinvent as an internet company rather than a hardware manufacturer has struggled to take hold.

• Worldwide smartphone shipments dropped 2.3% year over year in the second quarter in the seventh consecutive quarter of decline, according to market research firm IDC.
• Hong Kong-listed Xiaomi’s share prices have dropped by nearly a third so far this year despite reporting two consecutive quarters of strong revenue growth.

Details: The board of directors believes that a share repurchase will broadcast the company’s confidence in its own business outlook and prospects, and will benefit the company as well as its shareholders, said Xiaomi in a statement (in Chinese) filed to the Stock Exchange of Hong Kong on Tuesday.

• Shares of the company climbed nearly 7% following the announcement.
• The board will also consider further share repurchases depending on market conditions, said the company.

Context: Xiaomi chairman and CEO Lei Jun, as well as chief financial officer Chew Shou Zi, had pledged earlier this year that they wouldn’t sell their Xiaomi shares for another year to stabilize its stock price.

• Last month, Xiaomi co-founder and president Lin Bin sold 41 million shares of the company with a value of HK$373 million over three straight days in a week. He later made a public promise that he will not dispose of any of his stockholding in the company over the next year, in hopes of restoring market confidence in Xiaomi.

China Tech Investor is a weekly look at China’s tech companies through the lens of investment. Each week, hosts Elliott Zaagman and James Hull go through their watch list of publicly listed tech companies and also interview experts on issues affecting the macroeconomy and the stock prices of China’s tech companies.

Make sure you don’t miss anything. Check out our lineup of China tech podcasts.

In this episode of the China Tech Investor Podcast powered by TechNode, the guys welcome back Bloomberg Opinion columnist Tim Culpan to discuss Xiaomi’s weak performance, the oversupply of ad inventory on the Chinese web, and general takeaways from Q2 earnings season. Elliott and James also go over the most recent earnings reports of Baidu, iQiyi, and Pinduoduo.

Please note, the hosts may have interest in some of the stocks discussed. The discussion should not be construed as investment advice or a solicitation of services.

Get the PDF of the China Consumer Index.

Watchlist:

• Tencent
• Alibaba
• Baidu
• iQiyi
• Xiaomi
• com
• Pinduoduo
• Meituan-Dianping

Links

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• Tim Culpan- @tculpan

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• James Hull– @jameshullx

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Xiaomi Tuesday reported its revenue grew 15% year-on-year in the second quarter as the Chinese smartphone maker is selling more higher-priced handsets.

Why it matters: The Beijing-based company is sharpening its focus on the fast-growing premium handset segment as the global smartphone market continues declining.

• Worldwide smartphone shipments dropped by 2.3% year over year in the second quarter, which marked the seventh consecutive quarter of decline, according to market research firm IDC.
• The global shipments of premium smartphones, which cover devices priced above $400, grew 18% in 2018 despite the slowdown in the overall smartphone market, according to research firm Counterpoint.
• Xiaomi said revenues from handsets priced over RMB 2,000 (around $283) accounted 32.3% for its total smartphone sales, while the average prices of its handsets in domestic and overseas markets have grown 13.3% and 6.7%, respectively.

“We are at the eve of explosive growth that will be brought by 5G and we are now in the period of a series of brand adjustments…Xiaomi will invest more in the research and development of middle-to-high-end handsets before the 5G era comes.”

Chew Shou Zi, chief financial officer at Xiaomi, in a conference call with analysts on Tuesday

Details: The company’s revenue in the second quarter rose to RMB 51.95 billion from RMB 45.24 billion a year earlier.

• Net profit for the quarter slumped 87% yearly to RMB 1.96 billion from RMB 14.65 billion a year ago.
• Revenue from its smartphone business grew 5% to RMB 32 billion in the quarter after selling 321 million handsets worldwide.
• The profit margin of its smartphone business rose to 8.1% in the second quarter, compared with 3.3% in the first quarter.

Context: Xiaomi spun off its Redmi, a sub-brand for its budget phones, in January in a bid to focus on the premium handset market.

• The move followed Huawei, the second-largest smartphone vendor in the world, which established a secondary smartphone brand with its budget-priced Honor line in 2013.
• Vivo, China’s second-largest smartphone maker, in February rolled out a premium handset brand iQOO costing more than RMB 5,000.

China Tech Investor is a weekly look at China’s tech companies through the lens of investment. Each week, hosts Elliott Zaagman and James Hull go through their watch list of publicly listed tech companies and also interview experts on issues affecting the macroeconomy and the stock prices of China’s tech companies.

Make sure you don’t miss anything. Check out our lineup of China tech podcasts.

In this episode of the China Tech Investor Podcast powered by TechNode, James and Elliott take a step back and look at the broader trends of 2019 thus far. They also take a look at how each of the stocks on their watch list has performed thus far this year, and attempt to determine where credit or blame should be given for each stock’s performance.

Please note, the hosts may have interest in some of the stocks discussed. The discussion should not be construed as investment advice or a solicitation of services.

Get the PDF of the China Consumer Index.

Watchlist:

• Tencent
• Alibaba
• Baidu
• iQiyi
• Xiaomi
• JD.com
• Pinduoduo
• Meituan-Dianping

Hosts:

• Elliott Zaagman– @elliottzaagman
• James Hull– @jameshullx

Editor

• Peter Isachenko

Podcast information:

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• Music: “Hey Ho” by Steve Jackson, Royalty Free Music

US sanctions on Huawei are beginning to impact the Chinese firm’s business in key markets as handset sales in Europe tumbled 16% year on year in the second quarter, according to a report from market research firm Canalys released on Monday.

Why it matters: While sales at home surged on patriotic support for the Shenzhen-based firm, demand among European consumers waned after products were cut off from future updates for Google’s Android operating system amid US sanctions.

• Huawei’s domestic shipments soared 38% year on year in the second quarter, which analysts said stemmed from patriotic fervor among Chinese shoppers in response to US restrictions on the company.
• Google has cut Huawei’s access to future updates and services for the Android operating system after the US put Huawei on a trade blacklist in May.
• China blocks most Google services within the country, so Huawei uses a modified version of Android for the domestic market that lacks most popular Google apps such as YouTube and Gmail.
• “No consumers in Europe would want a phone without Google services,” Tiago Alves, vice president of Asia Pacific at Aptoide, a Portugal-based Android app store, told TechNode in an interview.

Details: Despite the drop, Huawei retained its position as the second-largest smartphone vendor in Europe with 8.5 million units shipped in the quarter, trailing South Korea’s Samsung with 18.3 million units.

• Xiaomi’s European shipments grew by nearly half in the period to hit 4.3 million.

“Samsung has been quick to capitalize on Huawei’s US Entity List problems, working behind the scenes to position itself as a stable alternative in conversations with important retailers and operators,”

— Ben Stanton, Canalys senior analyst

Context: Huawei unveiled an Android alternative called HarmonyOS last week, and claims that switching handsets to the new operating system would take only a few days if necessary.

• US sanctions on Huawei show no sign of easing up as the trade conflict with China continues.
• Huawei chairman Liang Hua said last month that the company faces major difficulties ahead and its consumer business will be most affected in the second half.

Huawei’s Hongmeng may not replace Android on smartphones after all

Chinese smartphone manufacturers continued to see explosive growth in India during the second quarter, edging out international competitors as they battle for market share in the world’s second-most populated country, according to data from research firm Canalys.

Why it matters: Chinese smartphone makers are looking abroad to boost sales while shipments in their home market slow as a result of high rates of smartphone penetration and a slowing economy.

• Smartphone shipments were down 6% year on year in China during the first half of 2019, according to CINNO Research.
• Shipments hit a five-year low in 2018, falling 14% compared to the previous year.

Details: Four of the top five most popular smartphone brands in India are Chinese. Xiaomi takes the top spot, controlling nearly a third of the Indian market, up 4% year on year, according to the Canalys report released on Monday.

• Vivo increased its market share to 18% from 11% a year ago. The company sold a total of 5.8 million phones in Q2, up 60%.
• Realme, an Oppo sub-brand, saw its deliveries increase by 2 million units, up 60% compared to the same period last year.
• Meanwhile, South Korean smartphone giant Samsung’s market share shrank by more than a quarter, according to Canalys. Shipments were down by 2.6 million compared to a year ago.

“[Vivo’s] current trajectory would see it displace Samsung by the end of 2019, dealing a major blow to the Korean vendor.”

⁠—Jin Shengtao, Canalys analyst

Context: Chinese smartphone makers are increasingly relying on international sales in order to offset stalling shipments in China, the world’s largest smartphone market.

• In the first quarter, markets outside China accounted for almost 40% of Xiaomi’s total revenue.
• Chinese smartphone makers are diversifying outside of their core offerings to weather the slowdown. Xiaomi has invested heavily in a smart home ecosystem.
• Vivo last year followed suit, launching Jovi IoT.

Vendors in China have shipped 190 million smartphones in the first half of the year, a decline of 6% over the same period last year, according to a report released on Thursday by market research firm CINNO Research.

Why it matters: China, the largest smartphone market in the world, has seen smartphone shipments decline for six consecutive quarters due to high rates of market penetration, and a slowing economy amid the US-China trade war.

• China’s gross domestic product grew at 6.2% in the second quarter, the slowest quarterly growth rate since 1992.
• Analysts have said smartphone vendors were likely to see a turnaround by the end of this year as gadgets with faster fifth-generation cellular network connectivity will drive more smartphone purchases.

Details: Huawei continues to lead the smartphone market with sales up 18.1% in the first half of the year, securing 34.3% of market share, while smartphone shipments for its smaller rival Xiaomi fell 20% year on year during the same period.

• Huawei founder and CEO Ren Zhengfei said in an interview with Yahoo Finance published on Monday that he expects Huawei to ship 30% more handsets globally this year despite being cut off by the US government from its American suppliers.
• Ren also said in early June that the company was preparing for drop of 40 million to 60 million units in international smartphone shipments this year compared with 2018.
• With the forecasted drop in international sales, any gain in overall shipments is attributable to surging domestic sales, consistent with recent data showing that Huawei’s slice of the domestic smartphone market is growing.

Chinese smartphone maker Xiaomi was the youngest company on the Fortune Global 500 list in 2019, placing 468th in the world with 2018 revenue of $26.4 billion, but is facing slowing smartphone sales and sinking share prices since its 2018 initial public offering (IPO).

Why it matters: It took Xiaomi nine years to grow from a startup to one of the world’s largest corporations by revenue, but since its July 2018 listing in Hong Kong, its shares have fallen more than 45.8% and market cap has shrunk by HK$162 billion (around $20.7 billion). Its reputation has faltered from one of China’s rising technology stars that aimed for a $100 billion IPO to a hardware manufacturer facing slowing demand for its main product as it struggles to pivot to other businesses.

• Xiaomi’s share prices have fallen as the global market for smartphones—its core business—slumps. Global shipments of mobile phones are expected to decline by 68 million units, or 3.8%, in 2019 compared with a year ago, according to a report by market research firm Gartner on July 17.

Details: Xiaomi joined a number of other Chinese tech companies on the Fortune list, on which Shenzhen-based telecom equipment giant Huawei was ranked 61st, e-commerce giant Alibaba ranked 182nd, and social media and gaming giant Tencent 237th in the world by revenue.

• The number of companies on the list based in the Greater China region, which includes Chinese mainland, Hong Kong, and Taiwan, reached a record 129. Chinese companies exceeded the number of US companies, 121, for the first time since the debut of the Global 500 in 1990.

Context: Though the smartphone segment comprises the lion’s share of its revenue, Xiaomi has been expanding into other businesses to shore up growth and broaden its profile as an internet company, not just smartphone maker, for a higher valuation.

• The company said in January it would invest more than RMB 10 billion (around $1.45 billion) into the artificial intelligence of things, or AIoT, over the next five years. The term refers to embedding AI applications into infrastructure components which are linked by an internet of things (IoT) network.

Chinese smartphone maker Xiaomi has set up a research and development unit in Finland focusing on camera technologies, according to Finnish media.

Why it matters: The Beijing-based handset maker joins Huawei in setting up a research arm in Tampere, Finland, where there is an abundance of experts thanks to the presence of one-time industry leader Nokia.

• Set up three years ago, Huawei’s Tampere operation focuses on camera, audio, and imaging technologies.
• Huawei has four models in the global top 10 rankings of mobile phone cameras from independent benchmark Dxomark, while Xiaomi has one.
• Nokia once led the market prior to Apple’s entry in 2007.

“At first, Xiaomi Finland Oy will focus on product development for camera technologies in Tampere.”

— Jomio Nikkanen, Director of Xiaomi Finland, to SuomiMobile

Details:

• Xiaomi is investing 2 million euro into the unit, according to registration documents cited by SuomiMobile.
• All of the company’s 2 million shares are registered with Xiaomi Technology Netherlands BV.
• The arm’s business scope includes software, IT systems, telecommunications equipment, and related services, SuomiMobile reported.
• Nokia and Xiaomi previously inked a collaboration agreement two years ago for cross-licensing on essential cellular patents.

小米成功注册“小米快递”商标，要自建物流? – Beijing news

What happened: Chinese smartphone maker Xiaomi has registered a new trademark for “Xiaomi Logistics” under which the company will offer courier and express delivery services in China, according to the Trademark Office of China’s National Intellectual Property Administration. The trademark was approved on June 21 and spans ten years to June 20, 2029. Xiaomi responded to local media that the move was only for brand protection purposes.

Why it’s important: Xiaomi’s move to register a logistics trademark is widely seen as an effort to expand into logistics. Courier service is an important component for Xiaomi, a brand that initially sold online only. The company has been partnering with third-party couriers services like SF Express and YTO Express for delivery. In addition to the trademark, Xiaomi still has to obtain an operating license from the State Post Bureau if it wants to run an in-house logistics business, Zhao Xiaomin, a logistics expert, told Beijing News.

Chinese smartphone giant Xiaomi has fired an employee who used a 3D artist’s work without permission in the company’s promotional campaign, according to a statement by the company on Wednesday.

The Verge reported on Tuesday that Xiaomi used three pieces of art from British 3D artist Peter Tarka in advertisements to promote its devices in Spain.

Tarka told The Verge that he created one of the pieces in May 2018 as part of his Installations collection. Xiaomi’s designer just erased some of the elements from the piece and replaced them with the company’s products, according to the report.

Tarka said he was “100% sure” Xiaomi had used his work and no one from Xiaomi ever reached out about licensing or commissioning his art.

Xiaomi said in the statement that it had dismissed the employee who is responsible with “immediate effect,” and it had reached out to Tarka to apologize.

The content has been removed from Xiaomi Spain’s website.

Xiaomi announced its global expansion plan in 2014 after its China sales slowed due to market saturation and competition from Chinese companies such as Oppo, Vivo, and Huawei. But intellectual property disputes are proving to be an ongoing hurdle in its global expansion plan.

In December 2014, India’s Delhi High Court issued a temporary order and blocked Xiaomi from importing, advertising, and selling smartphones that infringed on eight patents held by Ericsson.

In December 2015, the company was sued by American company Blue Spike LLC, which claimed that Xioami had infringed on its patents with devices such as its Mi 5 and Mi 5 Plus smartphones. The company had been planning to enter the US market prior to the lawsuit but delayed the move until late 2018, according to media reports.

Before it went public on the Hong Kong Exchange in June 2018, a report by research firm Counterpoint said Xiaomi’s business model could be easily replicated by bigger players such as Huawei or Samsung because of its lack of investment in its own intellectual property or research and development.

Xiaomi said in the Wednesday statement that it would further strengthen its internal approval processes to prevent the situation from happening again.

More than four weeks after the Trump administration placed Huawei on a trade blacklist, the stock market is still reacting. Tech companies in China and the United States alike have seen share prices fall.

Huawei’s suppliers and competitors have lost share value since the Trump administration’s ban. Chipmakers NeoPhotonics and Lumentum, and semiconductor firm Qorvo have been hit the worst. NeoPhotonics relies on Huawei for 47% of its revenue, Lumentum and Qorvo for 11%, according to Goldman Sachs data analyzed by Reuters.

Huawei’s American chip suppliers in blue and red; those which depend on Huawei for more than 10% of their revenue in red. In green, Huawei’s international competitors. The semiconductor composite index in purple. (Image credit: TechNode/Eugene Tang)

South Korean electronics giant Samsung has seen its shares increase the most, exceeding 5%. Share prices for other non-Chinese telecom equipment companies have also gained: Finland-based Nokia and Swedish telecom firm Ericsson both rose around 3%. China’s other smartphone and telecom equipment makers, Xiaomi and ZTE, have both lost share value.

Huawei’s American chip suppliers in blue and red; those which depend on Huawei for more than 10% of their revenue in red. The semiconductor composite index in purple. (Image credit: TechNode/Eugene Tang)

Nearly all American chipmakers which supply Huawei with electronic components have seen share prices fall. The composite index for the semiconductor industry declined about 5%.

(Image credit: TechNode/Eugene Tang)

Chinese phone makers have also lost share value, whereas Huawei’s international competitors have seen a steady rise.

Tencent’s cloud computing arm and Xiaomi-backed smart wearable maker Huami have entered a strategic partnership, under which Huami’s smart wearables will support features and apps developed by Tencent, Chinese media reported.

After the upgrade, Tencent’s Xiaowei will be added to the virtual assistant options that users can choose from, Wang Yichao, Huami’s vice president of strategy and communication, told TechNode on Wednesday. Currently, the Huami’s wearables only support Xiaomi’s Xiao AI virtual assistant in China. The international version of Huami’s smart devices support Amazon’s Alexa. Tencent Cloud first unveiled the Xiaowei AI assistant in May at the Tencent Global Digital Ecosystem Summit, where the company said it was exploring more use cases for the technology.

Tencent apps including social app QQ, music streaming platform QQ Music, and translation app Mr. Translator will be gradually rolled out on Huami’s smart devices in the third quarter. Wang said the company does not have an exact timeline yet.

The apps will also be linked with Xiaowei, allowing users voice control over features on smartwatches such as playing music on QQ Music and sending messages on QQ.

Founded in 2013, Huami is hailed as the “Fitbit of China,” and is one of the country’s biggest major smart wearable makers. In 2017, the company shipped more than 11 million units in the first nine months, more than any smart wearable seller in the world.

Huami is a primary smart band and watch manufacturer for Xiaomi, the second-largest smart wearable company by shipment volume. It also has its own smart wearable brand, Amazfit. Chinese smartphone maker Xiaomi owns nearly a fifth of Huami, and its CEO Lei Jun is also a major shareholder of the company.

Huami went public last February and has maintained double-digit revenue growth, although it is decelerating according to the company’s first quarter financial results.

The global smart wearable market is growing rapidly. According to research firm Gartner, worldwide shipments are projected to reach 225 million this year, a nearly 26% year-on-year increase, and China is one of the markets driving that growth.

This week, the company reached a deal with US chip giant Qualcomm, which will create eSIM cards that allow Huami’s devices to make and receive phone calls.

Chinese smartphone maker Xiaomi on Monday said its first-quarter revenue rose 27% from a year earlier to RMB 43.8 billion (around $6.3 billion), driven by steady growth in overseas sales, and exceeding analyst expectations by a solid margin.

Xiaomi’s adjusted net profit for the first quarter increased 22.4% year over year to RMB 2.1 billion.

Xiaomi’s results show that the world’s fourth-largest smartphone maker by sales volume is weathering a shrinking smartphone market in China, the world’s biggest. It is increasing focus on markets such as India and Europe. Markets outside China brought in 38.0% of its total revenue in the first quarter, representing a 34.7% year-on-year increase, according to the company.

A report from research firm Counterpoint showed that Chinese smartphone market sales volume declined 7% year-on-year in the first quarter. Xiaomi said it believed that on-going government stimulus, including the reduction of value-added tax, would “greatly benefit the entire smartphone industry” in China.

On a call with reporters, Xiaomi CFO Shou Zi Chew said that smartphone sales were experiencing a period of decline before the “5G spring” came, but the company was adopting a multi-brand strategy and focusing on expanding business in “selected markets” such as India.

Chew also said the company had not been affected by the recent restriction on Huawei from using Google services on its future Android smartphones, adding that the company had long been developing its own MIUI, an Android-based mobile device operating system.

The company’s smartphone segment recorded approximately RMB 27.0 billion in revenue in the first quarter, representing a year-over-year increase of 16.2%. The company said its smartphone sales volume in the first quarter reached 27.9 million units, exceeding the more than 27.5 million units the company revealed ahead of the earnings report to dispute a low estimate by market research firm IDC.

As of the end-March, the number of internet connected devices excluding smartphones and laptops on Xiaomi’s internet of things (IoT) platform reached 171.0 million units, a year-on-year increase of 70.0%, according to the company. Xiaomi said it would continue to invest more to develop its artificial intelligence-powered IoT platform to enhance the appeal of its products.

独家！小米金融迎来新任CRO，竟然是…… – 新流财经

What happened: Chinese smartphone maker Xiaomi’s consumer finance subsidiary, Xiaomi Finance, has appointed Cao Qiang as its new chief risk officer. Cao previously served a similar role at electronics appliance giant GOME’s financial services arm.

Why it’s important: Chinese media previously reported that Chen Xi, the head of risk and credit and loan services at Xiaomi Finance, would be leaving his post to lead the company’s new virtual banking business in Hong Kong. Xiaomi set up Xiaomi Finance in 2015, though it is still small, contributing less than 1% of the company’s 2018 revenue. The subsidiary—which provides a range of financial services including payment, wealth management, loans, and insurance—accounted for nearly 14% of Xiaomi’s total assets as of March 2018. According to its prospectus, Xiaomi intends to spin off the financial subsidiary into an independent entity. In October, the Xiaomi’s fintech subsidiary made its foray into India, a market where its smartphone business is thriving.

Chinese software company Kingsoft on Wednesday filed its IPO paperwork for an initial public offering on China’s news Nasdaq-style equity board.

Microsoft’s China rival plans to raise RMB 2.05 billion (around $300 million), with no fewer than 101 million shares, 21.91% of the total being issued, according to the prospectus.

The capital will be used towards the upgrading its WPS Office software, a free alternative to Microsoft’s Office suite, fundamental research in artificial intelligence, as well as research and development (R&D) of cloud-based office services, said the company.

WPS Office is widely used by Chinese government bodies. The company said that more than 70 central departments including the foreign ministry as well as more than two-thirds of municipal governmental bodies are among paying clients. State-owned enterprises, such as the Industrial and Commercial Bank (ICBC) and the State Grid Corporation, are subscribers as well.

It also counts some of China’s internet giants as clients. Figures from the IPO filing show that Alibaba is its top client, paying RMB 157 million in subscriptions in 2018, which accounted for 13.9% of the total revenue. Tencent spent RMB 20.5 million on subscriptions in 2018, its fifth-largest client.

Kingsoft reported sales revenue of RMB 1.13 billion in 2018, a 50% increase compared with RMB 753 million the year prior. Net profit grew 45% year on year to RMB 311 million in 2018 with 86.7% gross margin. It also offers free, ad-supported versions on PC and mobile devices to Chinese users, and reported that total monthly active users including those using its free and paid products exceeded 310 million as of December 2018.

“As China has increasing demand for security in information systems especially in for government affairs, military use, and financial institutions… domestic software providers have more advantages and are increasing share in the Chinese market,” (our translation) the company said in the filing.

Founded in 1988 by Qiu Bojun, one of the country’s earliest programmers, the company is now controlled by Lei Jun who holds 12.0% share. Lei joined the Beijing-based company in 1992 as an engineer and took over as chairman of the board in 2011, a year after he established smartphone company Xiaomi in April 2010.

Despite a self-reported 42.8% market share in China’s office software market, Kingsoft lags Microsoft in terms of global sales revenue. Microsoft earned revenue of $9.77 billion in the productivity and business processes segment in 2018. Its revenue for the Office 365 commercial segment increased $2.4 billion and its consumer segment grew $382 million during the year compared with the prior year, according to the company’s annual report.

The US giant said more than 135 million people used Office 365 commercial every month in 2018. Kingsoft, in comparison, said it had 280 million enterprise users during the same time period.

Transsion Holdings, the largest mobile phone vendor in Africa, said it was confident that domestic competitors such as Huawei and Xiaomi wouldn’t present much of a challenge in emerging markets.

In a statement filed Monday to the Shanghai Stock Exchange in response to regulators’ risk inquiries, the Shenzhen-based mobile phone maker said Huawei and Xiaomi will barely impact its businesses in emerging markets such as Africa and India, and that it would retain market share and brand influence as the competition unfolds.

Transsion held 48.7% of Africa’s mobile phone market and 34.3% of its smartphone market in 2018, as well as 6.7% of India’s mobile phone market in the same year, according to research firm IDC. Huawei meanwhile held 9.9% share of the smartphone market in Africa, according to IDC data.

However, documents filed earlier reveal that Transsion may view rivals as more of a risk than expressed in this most recent statement. In its prospectus filed in April, Transsion cited the growing presence of rival phone makers on the African market as a risk to its business. The company filed its application to the Shanghai Stock Exchange’s new tech board on April 1, planning to raise RMB 3.3 billion (around $490 million) in its initial public offering (IPO).

Huawei entered the African smartphone market in 2011 by providing affordable smartphones via retail networks consisting of local telecom carriers. Xiaomi set up a business unit in January to expand on the African continent by cooperating with Africa’s leading e-commerce platform, Jumia.

Transsion has established a research and development system that fits local market demands, a complete after-sales service system, and stable retailing system in emerging markets, said the company in the statement. “We have built competitive barriers in emerging markets,” it added.

Transsion has been selling products in more than 70 countries in regions all over the world and has established partnerships with over 2,000 dealers, according to its prospectus.

Its online services in Africa could help it build a business ecosystem, the company said. Its Spotify-style music streaming service Boomplay has 42 million monthly active users in Africa and is now the dominant music platform in the region.

Transsion said in a statement to TechNode last month that its smartphone operating system (OS), the Android-based Transsion OS, has become a mainstream smartphone system in emerging markets. “Our mobile internet platform based on the vast amount of users and data lays the foundation for Transsion to develop the African market in the future,” said the company.

Troubled Chinese smartphone maker Meizu has recently closed a round of funding from Zhuhai government-backed capital fund Honghua, the latest development for the Xiaomi rival following layoffs, declining sales, and shuttered storefronts.

Rumors about the Zhuhai municipal government takeover began circulating online earlier this week. According to business research platform Qixinbao, Meizu shareholder transfers were completed Thursday. Honghua, the state-owned fund under the Zhuhai High Tech Development Zone, replaced Meizu founder Huang Xiuzhang, also known as Huang Zhang, as the largest shareholder with 50.92% of the total, reported Jiemian.

Meizu later confirmed it received investment of an undisclosed amount from the Zhuhai government-backed capital fund, which now has one director on its board. However, it denied any change to controlling shareholders and maintained that Huang remains in control of the company, reported Tencent Tech.

Meizu was not immediately available for comment.

Company information on Qixinbao is now unavailable, according to a TechNode reporter’s observations on Sunday. The latest figures from Qichacha shows that Honghua ranks seventh with 2.09% in the shareholder list. Huang (49.08%) and Alibaba’s investment subsidiary Hangzhou Meitou (27.23%) remain the two largest shareholders.

Founded by Huang in 2003, Meizu was one of the country’s major music player manufacturers at the time. The Zhuhai-based company ventured into Chinese smartphone market in late 2006, achieving huge success three years later with its first smartphone model, the M8. It earned sales revenue of RMB 500 million ($75 million) over a period of five months in 2009, before Xiaomi was established in 2010 and the launch of Vivo’s first smartphone, the V1, in 2011.

However, Meizu’s first-mover advantages have fallen by the wayside. It reported smartphone shipments of 20 million units in 2017, compared with Xiaomi’s 55 million, Vivo’s 68 million, and Huawei’s 90 million in the same period, reported Chinese media citing IDC. Yan Zhanmeng, research director at Hong Kong-based Counterpoint Technology, said the figure sank to only 8 million units in 2018 “mainly due to the lack of funds” (our translation).

The Chinese smartphone maker has suffered a series of blows over the past year, with executives including co-founder Aber Bai and marketing head Yang Tuo—a former Huawei vice president—stepping down from the company. It has also more than halved the number of stores to fewer than 1,000 from 2,500 in 2016, according to Chinese media. It received $590 million from Alibaba in February 2015, when the Chinese tech giant sought to expand shares for its mobile operating system YunOS. The deal has reportedly lost its relevance since Alibaba renamed YunOS into AliOS and pivoted it into a vehicle system in 2017.

Xiaomi refuted a recent report that estimated its smartphone shipments fell short of the 27.5 million figure the company confirmed it shipped in the first quarter (Q1) of 2019 in a statement filed on Thursday to the Hong Kong Stock Exchange.

Research firm IDC estimated in a report released April 30 that Xiaomi’s smartphone shipment volume for Q1 2019 fell 10.2% year over year to 25.0 million units.

Xiaomi responded in its statement dated Thursday that “some information from certain market research institutions,” which was quoted by several media publications, was “inaccurate and unfair” and misrepresented the company’s actual performance. According to the company, its Q1 smartphone shipments declined 1.8% compared with the same period a year earlier.

Xiaomi also said that the information contained in the statement was not audited, and the finalized data would be included in the company’s Q1 earnings report.

IDC told Chinese media on Saturday that it would update Xiaomi’s Q1 smartphone shipments to 27.5 million units next week.

Major smartphone market research firms such as the US-based Strategy Analytics and Hong Kong-based Counterpoint also recently released reports about global smartphone shipments in Q1.

In these reports, Strategy Analytics said that Xiaomi shipped 27.5 million smartphones in Q1 and Counterpoint estimated 27.8 million units, both indicating the company’s Q1 smartphone shipments  weakened year over year to a limited degree.

Xiaomi Chief Appears to Lose 1 Billion Yuan Bet – Bloomberg

What happened: A storied five-year bet between Xiaomi chairman Lei Jun and Gree Electric chairwoman Dong Mingzhu is due, and the smartphone entrepreneur seems to have lost RMB 1 billion (around $150 million). The wager dates back to Dec. 12, 2013, when Lei bet Dong RMB 1 during a televised event that Xiaomi’s revenue would surpass Gree’s within five years. Dong countered, raising the bet to RMB 1 billion. Home appliance manufacturer Gree on Sunday reported revenue of RMB 198 billion for 2018, beating Xiaomi by about RMB 20 billion.

Why it’s important: Back in 2013 when the bet was made, the two leaders were awarded as examples of successful entrepreneurs in China’s booming tech and industrial industries by state broadcaster CCTV. At that time, Gree outranked Xiaomi in everything from revenue to factories and employees. Lei believed that his online selling strategy would eventually outplay Gree’s home appliance business empire. But it seems that there is no real loser, as Xiaomi has grown into a smartphone giant from a little-known startup in the just five years, selling 118.7 million smartphones in 2018. Lei himself received compensation totaling around RMB 10 billion in 2018.

Chinese Brands Capture a Record 66% of the Indian Smartphone Market in Q1 2019 – Counterpoint

What happened: Chinese smartphone makers controlled a record 66% of the Indian smartphone market in the first quarter of 2019, according to Hong Kong-based Counterpoint Research. The volumes for Chinese brands rose 20% year on year backed by growth from Vivo, Oppo, and Realme. Shipment volumes for Vivo jumped 119%, while Oppo rose 28%. Xiaomi led the market with a record 29% share, though its shipments declined by 2% compared to the same period last year. In the meanwhile, the overall Indian smartphone shipments grew 4% year on year.

Why it’s important: As the market slows in China, India has become a battlefield for Chinese smartphone makers seeking growth. India represents significant opportunity, with its population of 1.3 billion and a relatively low smartphone penetration rate of 36% in 2018, which is expected to reach 60% by 2022. Xiaomi unseated Samsung from the top spot in India’s smartphone market last year, and Chinese makers including Vivo, Oppo, and Transsion occupied four of the top five smartphone brand spots. Collectively, Chinese smartphone manufacturers controlled more than half of the market in the first quarter.

Huawei is moving into the Chinese high-tech venture capital field by establishing a new investment firm in bid to build out its ecosystem, reported PEdaily citing an investor familiar with the company.

According to Chinese business research website Qichacha, Hubble Technologies (our translation) was formed on April 23 in Shenzhen. It is a wholly owned subsidiary of Huawei with registered capital of RMB 700 million ($104 million), and Bai Yi, president of Huawei’s global financial risks control center, was named legal representative and chairman of the company.

Huawei did not respond to requests for comment when contacted by TechNode on Friday.

Many of China’s tech giants have investment arms which invest in a broad range of companies in the country’s internet world. In addition to Alibaba and Tencent, Xiaomi founder Lei Jun established a venture capital firm, Shunwei, in 2012. With a focus on intelligent devices and internet services, Shunwei co-invested with Xiaomi nearly 100 out of the 300 total startups it holds shares in, folding them into the Xiaomi internet of things (IoT) ecosystem.

“The foundation of Hubble Technologies sends a vital message,” Wang Ruchen, founder of Chinese tech media outlet Quark Point, told TechNode on Friday. “As its revenue growth increasingly relies on consumer and IoT businesses, Huawei is now involved in a more complex game. It is true that Huawei has some really big clients in business service sectors including cloud computing, but the company was more focused on research and development (R&D) at ground level, not reaching the top level of devices and applications.”

Huawei has shifted its focus from offering enterprise-facing solutions to consumer businesses amid global concerns about the security of its network equipment. According to its financial results, the company’s sales revenue from its consumer business grew 45.1% year on year to RMB 348.9 billion in 2018, surpassing its carrier business revenue of RMB 294 billion for the first time.

Wang expects that Hubble Technologies will spend a considerable amount to shore up Huawei’s ecosystem. “Innovation in this fragmented market stems from more participants, and Huawei needs to catch up in the construction of its ecosystem,” he explained.

Before the establishment of Hubble Technologies, Huawei’s in-house investment team made just 14 deals over a period of 10 years beginning in 2006, reported PEdaily based on figures from company database website Tianyancha.

The company’s largest investment to date was the acquisition of Huawei Symantec in November 2011, when the Chinese telecommunication giant spent $530 million to take the full ownership of a joint firm formed with the US security giant Symantec. Apart from internet security, Huawei focuses on cloud storage, data centers, and chipmaking.

The Shenzhen-based telecommunications giant invests a massive amount of money into R&D; in 2017 it spent RMB 89.7 billion and in 2018 that number rose to RMB 101.5 billion. R & D spending accounted for around 15% of its total sales revenue.

The significant investment has aroused some disagreement about efficiency in the Chinese tech industry. During an April 2018 press event, Lei said that success in R&D could not be measured by capital. “Almost all significant innovations were achieved by small enterprises,” (our translation) he said, according to a Weibo post by Xu Jieyun, Xiaomi’s head of public relations.

Xiaomi has sold more TV sets online than any other brand in China for two consecutive quarters, Li Xiaoshuang, general manager of Xiaomi TV & Air Conditioning Department, said Tuesday in Beijing.

The Chinese smartphone maker released Tuesday its latest 65-inch Mi TV model named “Mural” (our translation), featuring a customized Samsung 4K panel with a flat back that can be hung on an indoor wall like a painting. Priced at RMB 6,999 ($1,040), it is also Xiaomi’s first TV model equipped with its XiaoAI virtual assistant, which allows users to control the TV using natural human language from a distance of up to 10 meters and without the aid of a remote control.

According to market research firm China Market Monitor, Xiaomi has become the top TV seller for online sales channels for two consecutive quarters beginning October 2018. It accounted for 22.7% of total market sales volume in the first quarter this year, beating Hisense (14.5%) and Skyworth (12.1%), the two established manufacturers that rank first and second place in the offline market.

Also included in the launch were also a new standing air conditioner model C1 for RMB 3,499, a RMB 1,799 treadmill and an electric fan, all of which can be controlled using voice recognition technology. The raft of new products mark the company’s latest push to conquer consumer living rooms using its artificial intelligence of things (AIoT) initiative.

The Beijing-based company launched its “smartphone + AIoT” dual-engine strategy in January announcing that it will invest RMB 10 billion to shore up its internet of things (IoT) ecosystem over the next five years. Television, thanks to a big screen and frequent user interaction, is one of the most strategic consumer electronics products in its ambitious AIoT plan, Xiaomi founder and CEO Lei Jun said.

Chinese smartphone makers, including Huawei and Oppo, are piling into the home intelligence market, as global smartphone shipments decelerate further. Xiaomi sold 118.7 million units with a 29.8% year-on-year increase in 2018, while fourth quarter shipment declined 12.3% compared with the same period a year earlier. By contrast, Xiaomi smart TVs shipment rose sharply in 2018, surging 225.5% year on year to 8.4 million units.

In 2018, Transsion Holdings sold 124 million mobile phones, capturing 48.7% of Africa’s mobile phone market, and 7% worldwide. But the Shenzhen-based mobile phone maker is far from a household name in China, unlike its domestic peers Xiaomi and Huawei. In fact, Transsion has never sold a single mobile phone in China.

On April 1, Africa’s top mobile phone vendor filed an application to go public on Shanghai Stock Exchange’s new tech board, planning to raise RMB 3.3 billion (around $490 million) in its initial public offering (IPO).

Transsion Holdings, which owns three phone brands—Tecno, Itel, and Infinix—held a combined 48.7% share of Africa’s mobile phone market last year, according to its prospectus, citing data from research firm IDC.

But sluggish growth in China is pushing domestic smartphone companies to look elsewhere for growth, and as many are discovering, Africa holds promise. This puts Transsion in a vulnerable position, especially since its low-tech, low-cost phones will find it increasingly difficult to compete with the sleek-yet-affordable smartphones produced by the likes of Huawei and Xiaomi.

The company was founded in 2006 by former employees of Ningbo Bird Company, which was once one of the biggest mobile phone makers in China. Transsion’s co-founder and CEO, Zhu Zhaojiang, was formerly the director of Ningbo Bird’s overseas business unit. Zhu told Chinese media in 2016 that while visiting 90 countries and regions to promote Bird phones, he noticed relatively little mobile phone competition in Africa and saw that it could be a huge market.

In its prospectus, Transsion states that the company is “committed to providing overseas emerging market users with high-quality smart communications terminal devices.” In addition to its dominance in Africa, the company also has 6.7% of India’s mobile phone market.

A year after establishing itself in Africa, the company released the Tecno T780 in Nigeria, becoming the first phone maker to offer a mobile phone with dual SIM card slots. The company even released a phone with four SIM card slots, the Tecno 4Runner, in 2008.

Transsion’s chief marketing officer Liu Junjie attributed the company’s success to its localization strategy. “Most African users have more than one SIM card, but they can’t really afford more than one phone. Seeing this demand, we took the lead in providing dual-SIM card phones in Africa, and they were very popular,” Liu told the Southern Daily (in Chinese).

To avoid expensive call rates between different telecom networks, many African users carry two or more SIM cards and swap them as needed. According to a report by US-based mobile devices research firm ScientiaMobile, around 87% of Kenya’s users used multi-SIM smartphones in 2018, the highest percentage anywhere in the world. In other African countries such as Ghana, Nigeria, and Egypt, more than 70% of smartphone usage originates from devices with multi-SIM functionality.

The Africa opportunity is not lost on other Chinese phone brands.

In response to questions from Technode, Transsion said it continued to observe consumer needs in emerging markets to deliver differentiated products, adding:

“We are happy to see Chinese enterprises entering overseas markets. And we believe that Chinese brands should work together to expand influence worldwide.”

“The strategy of other players, such as Huawei, is to simply sell standard devices to the African market, and the devices are the same as what they sell elsewhere,” Sun Yanbiao, director of Shenzhen-based Mobile No.1 Research Institute, told TechNode. “But Transsion sells devices that are customized for the African market, and this is the company’s main advantage,” he said.

New player

Despite describing itself no less than five times as the “king of Africa’s mobile phone market” in its prospectus, the company cites the growing presence of rival phone makers on the continent as a risk to its business.

Transsion’s advantage derives from its strategy of delivering phones as cheap as $10 to emerging markets. The company’s dominance in these emerging markets comes from selling low-cost units in high volumes.

In 2018, Transsion earned RMB 22.5 billion by selling 124 million mobile phones. Of that total, 72.6% (90 million units) were feature phones—handsets with physical keyboards and limited functionality.

Its smartphone sales were more profitable, but pale in comparison to the revenue of companies such as Huawei, which earned RMB 348.9 billion by selling 206 million smartphones globally in the same year.

As of the end of 2018, Transsion only had 34.3% of Africa’s smartphone market, but that still puts the company ahead of Samsung (22.6%) and Huawei (9.9%), according to an IDC report.

Huawei entered the Africa market in 2011 by launching a smartphone priced from $100 in Nigeria, the continent’s most populous country. Since then, Huawei has been focused on providing affordable smartphones to the continent, hoping to seize market share from feature phone makers.

Huawei also sells its handsets via telecom carriers such as South Africa’s Vodacom and MTN and Nigeria’s Globacom. It is the biggest telecoms equipment supplier in Africa.

Now Transsion faces an additional competitor in the form of Chinese smartphone giant Xiaomi.

Xiaomi announced in January that it would set up a business unit to expand on the African continent, appointing Vice-President Wang Lingming to head up the new unit.

Xiaomi has been selling its handsets in Africa since 2015 by cooperating with local distributors, but this regional unit marks its official debut on the continent.

“In the past few years, China’s mobile phone market has become saturated, so Chinese phone makers are all looking for new markets to absorb their overcapacity,” said smartphone industry blogger Ye Long, who runs the technology blog Miao Telecoms. “The global mobile phone market is in a period of sluggish growth, but Africa is still on a rise.”

Just a few weeks before the announcement of its African unit, Xiaomi had announced that its line of mid-range smartphones, the Redmi, was being spun off as a separate sub-brand. Redmi, along with Xiaomi’s India-focused brand Poco, will continue selling affordable handsets to price-sensitive markets.

In February, Xiaomi signed a partnership agreement with Africa’s leading e-commerce platform, the Nigeria-based online marketplace Jumia, to open a Mi official store to access millions of customers across 14 countries, including Nigeria, Egypt, Kenya, Ivory Coast, Morocco, and Ghana.

Xiaomi’s first release in Africa will be the Redmi Go, which uses the Android Go, a stripped-down operating system developed by Google for lower-end devices.

The average selling price (ASP) of Xiaomi’s smartphones was around $143 in 2018, according to Xiaomi’s annual report from last year. Meanwhile, Transsion smartphones had an ASP of just under $69, with feature phones as low as $9.80 in 2018.

The moves hint that Xiaomi’s strategy in Africa may focus on selling affordable smartphones through e-commerce platforms. “The e-commerce model is part of Xiaomi’s DNA and we believe that working with Jumia will help us bring innovation for everyone across the continent,” Xiaomi vice-president Wang Xiang was quoted in state-run English-language newspaper China Daily.

When contacted by TechNode, Xiaomi’s African business unit declined to comment on its strategy for branching out into the African market.

Peace or war?

As compared with Xiaomi’s e-commerce strategy, Transsion relies more on its massive offline retail networks across the continent.

Transsion’s prospectus states that its sales model depends primarily on dealers and secondarily on network operators. “We have been selling products in over 70 countries and regions all over the world, and have established partnerships with over 2,000 dealers,” said the company.

Transsion seems unlikely to change that approach. According to their prospectus, the company plans to invest as much as RMB 333 million, accounting for 10% of its total funding amount, in building out the information management systems of its 6,000 retail shops across Africa in the next two years.

“Transsion and Xiaomi are eyeing different groups of customers because of the huge gap between their product prices,” said Sun. He added that there was barely any overlap between Transsion’s retail networks and Xiaomi’s e-commerce approach of cooperating with Jumia, whose network only covers relatively well-developed markets such as Nigeria and Kenya.

Sun sees the dynamic between Transsion and Xiaomi as more cooperative than competitive. “The two phone makers are working together to develop the huge African smartphone market,” he said of the current situation.

Still, though Transsion sidestepped the fierce competition in China by exploring emerging markets, it’s indisputable that domestic competitors are now making inroads into its home court.

In the short term, it may enjoy a kind of truce with Xiaomi due to differences in demographic targeting and marketing strategy, but the battle for emerging-market consumers between the two giants seems inevitable.

Ye, the blogger, said that, given Xiaomi’s success in India and its advantage in e-commerce, the company could easily erode Transsion’s current competitive advantage in offline retailing.

“It’s clear that Transsion’s easy days in Africa are coming to an end,” said Ye.

China Tech Investor is a weekly look at China’s tech companies through the lens of investment. Each week, hosts Elliott Zaagman and James Hull go through their watch list of publicly listed tech companies and also interview experts on issues affecting the macroeconomy and the stock prices of China’s tech companies.

Make sure you don’t miss anything. Check out our lineup of China tech podcasts.

Can’t see the player? Check us out on iTunes or Spotify!

In this episode of the China Tech Investor Podcast powered by TechNode, hosts Elliott Zaagman and James Hull talk about Xiaomi’s Q4 earnings report, as the company is selling more smartphones but experienced a jump in inventories at year end and more.

This episode also features an interview with Wall Street Journal’s Jacky Wong, where they discuss China’s new technology board and the implications for investors, companies and China’s capital markets.

Please note, the hosts may have interest in some of the stocks discussed. The discussion should not be construed as investment advice or a solicitation of services.

Watchlist:

• Tencent
• Alibaba
• Baidu
• iQiyi
• Xiaomi
• JD.com
• Pinduoduo
• Meituan-Dianping

Links:

• Xiaomi Q4 earnings notes
• INSIGHTS: Shanghai tech board to push semiconductor independence

Guests:

• Jacky Wong – Wall Street Journal

Hosts:

• Elliott Zaagman – @elliottzaagman
• James Hull – @jameshullx

Editor

• Peter Isachenko

Podcast information:

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• Music: “Hey Ho” by Steve Jackson, Royalty Free Music

Chinese mobile game giant Tencent is in touch with several original design manufacturers (ODMs) to develop its own gaming phone, according to an unconfirmed report (in Chinese) by Chinese media 36Kr.

Citing sources, the report said that the Inlab of Tencent’s Interactive Entertainment Group, the company’s game business division, is working on a gaming phone, which utilizes a Qualcomm processor, and uses hardware from one of the ODMs, the lineup of which is said to include Taiwan-based Asus, Singapore’s Razer, and Xiaomi-backed Blackshark.

The gaming phone may be sold under a Tencent brand or both brands of Tencent and the OMD that makes the phone. The report didn’t give details about the price the phone or when it would be available in the market.

A spokesman for Tencent declined to comment when contacted by TechNode.

The computer and smartphone maker Asus has been negotiating with Tencent to develop a gaming smartphone that highlights Tencent mobile games, according to Taiwanese media Digitimes (in Chinese). But that plan was later interrupted when gaming hardware manufacturer Razer appeared on the scene seeking similar cooperation with Tencent.

The 36Kr report quoted an insider close to Blackshark as saying that the gaming phone maker was still discussing with Tencent to roll out a crossover smartphone, which would use a Qualcomm 855 processor, in the second half of the year.

Blackshark did not reply to TechNode’s request for confirmation.

Tencent, the biggest gaming company in the world, may be seeking areas for growth by entering the gaming hardware as gaming revenues flag amid increased scrutiny of the industry by Chinese authorities. The country’s publication watchdog, the State Administration of Press, Publication, Radio, Film and Television, stopped the approval of all video game titles in March 2018, which was not resumed until the end of the year.

As a result, Tencent’s revenue from gaming fell 4% in the third quarter of 2018 and saw no year-on-year growth in the fourth quarter.

However, making hardware is never easy for internet companies, and competition in the smartphone market is already fierce.

“Across the world, the only internet company that succeeded in the smartphone market in Google… Tencent’s gaming phone plan won’t see any results in the short term,” according to a smartphone industry insider quoted by 36Kr.

Another example is selfie and social app-maker Meitu, which on Monday gave up its loss-making smartphone business by handing it over to Xiaomi, marking an end of its six-year experiment with smartphones.

单日19.3亿元！“手机+AIoT”战略落地 小米9周年米粉节收官 – Sina Finance

What Happened: Chinese smartphone maker Xiaomi recorded RMB 1.9 billion (around $280 million) in sales during the company’s  ninth anniversary promotional event on Tuesday known as the “Mi Fan Festival.” The revenue from the one-day festival nearly doubled revenue generated by the event last year, which totaled RMB 1 billion. Xiaomi said in a statement that sales benefited from the company’s new strategy focusing on the development of smartphones and artificial intelligence of things, or AIoT, though it did not include revenue figures for AIoT devices.

Why it’s important: Xiaomi’s annual financial report 2018 showed that revenue from its internet of things (IoT) and lifestyle products segment accounted for 25% of its total revenue, and surged 86.9% year-on-year to RMB 43.8 billion. The company did not disclose total figures for AIoT devices but did include sales volume for specific devices during the event, including the more than 450,000 XiaoAi Speaker units sold, which generated more than RMB 100 million. Xiaomi founder and CEO Lei Jun said in January that the company planned to invest at least RMB 10 billion into the AIoT sector over the next five years.

Lei Jun, Xiaomi’s 50-year-old founder and chief executive, received a compensation package of around RMB 10 billion ($1.5 billion) in 2018, a year capped by slowing handset sales in the fourth quarter and weakened share prices.

According to a corporate filing released Monday, Xiaomi’s highest-paid executive raked in at least RMB 9.8 billion in compensation in 2018, which blossomed at least sixty times the record held the prior year—a maximum of RMB 128 million. When contacted by TechNode on Tuesday, a Xiaomi spokesman confirmed the best-paid “employee” was its founder and CEO Lei Jun, but he declined to provide further details.

Xiaomi’s five highest-paid executives made a total of RMB 10.218 billion during the year ended December 31, 2018, more than 50 times the RMB 196 million collectively earned a year earlier. Four of them were paid between around RMB 26 million (HK$30 million) and RMB 86 million (HK$100 million) each in 2018.

In addition to a compensation package including salaries and bonuses totaling RMB 9.4 million, Lei Jun and the four other executives were rewarded RMB 10.2 billion total in share-based compensation. The figure echoes an earlier announcement released in June, when Xiaomi was in the process of going public in Hong Kong. The company said in April 2018 it issued nearly 64 million class B shares to a separate company controlled by Lei Jun “for his contribution to the company.”

Accordingly, the company recorded more than RMB 9.8 billion as share-based compensation expenses for fiscal 2018. The Chinese tech entrepreneur founded Xiaomi in 2010 and made it into the world’s fifth-largest smartphone maker behind Samsung, Apple, and Huawei, and Oppo, according to research firm IDC.

Despite a 41.3% year-on-year growth in its smartphone sales over the past year, Xiaomi smartphone shipments slumped to 25 million units in the fourth quarter, a 12.3% decrease from the same period a year earlier. To address this deceleration, 2019 marks the year that Xiaomi looks beyond smartphone sales to the artificial intelligence of things or AIoT sector, Lei said during a call with analysts in March. The company’s stock prices closed at HK$11.76 on Monday, nearly half of its record high of HK$22.2 in July.

Xiaomi is forming a new subsidiary to shore up its goal of becoming the next chipmaking powerhouse, part of a RMB 10 billion ($1.5 billion) artificial intelligence of things (AIoT) initiative.

Pinecone, a chipset subsidiary launched in 2014, will be restructured. Part of the team to be split out to form a new company named Dayu (Big Fish, translated literally), according to a company announcement released Tuesday. The newly formed semiconductor company will focus on the research and development (R&D) of chipset solutions in AIoT applications such as smart speakers, while Pinecone will continue to develop mobile computing processors for smartphones.

Xiaomi will hold 25% of Dayu, with the balance to be held by company employees. The new subsidiary may soon start raising funds independently—a number of investment firms had already expressed their interest, and several agencies “have completed due diligence,” Chinese media reported citing an employee.

“Now, the world’s three largest smartphone companies have all achieved chip technologies. We should develop our own technology to be one of the top makers,” Xiaomi CEO Lei Jun said in February 2017 at an event in Beijing. The company had just unveiled its first proprietary mobile chipset, Surge S1, according to Tencent Tech, which the company spent nearly two and a half years developing.

Chinese smartphone makers are building more customized, software-defined system-on-chips (SoCs) for different tasks, such as image processing and video decoding, as they look ahead to 5G and increasingly interconnected smart devices. In late December, Huawei announced that its IoT platform HiLink had connected 300 million devices, including AI speakers and vehicle systems. It also said it would roll out a low-energy usage IoT chip to enhance its cloud-based IoT platform.

Xiaomi, on the other hand, set it sights early this year on “smartphone + AIoT” as the company’s dual-engine growth strategy. It reported an 86.9% year-on-year surge in revenue of its IoT and lifestyle products segment in 2018, more than double the 41.3% year-on-year growth in its smartphone segment during the same period. Global smartphone shipments fell 4.1% in 2018 and China-specific data points to a slowing growth trend, according to research firm IDC, as the market reaches saturation and economic headwinds continue.

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Chinese media have called this year’s Apple product launch event the “softest” one yet. Unlike Apple’s previous hardware-focused launch events, 2019 was all about the services—Apple News+, Apple Arcade, Apple TV and Apple Card. The company is pivoting away from hardware and toward content-based services.

This strategy, however, may ignore the desires of Chinese consumers, who may not have access to these new services.

Only a portion of Apple software products are available in China—iTunes Movies, iBooks Store and Apple News are all blocked on the mainland. After Apple’s March launch event, netizens joked that they looked forward to trying Apple’s new “404 not found” services.

In Shanghai, a consumer said he was not interested in Apple’s new services. “These services are already common in China,” he said. Within the Chinese firewall, citizens have become accustomed to homegrown services—social media platforms like WeChat and Weibo, mobile payments like Alipay and WeChay and a slew of video platforms—many of which they deem superior to Apple’s.

Alipay and WeChat Pay dominate China’s e-payment, and Apple Pay has only a 16% market share.

A worker from Shanghai’s financial area surnamed Qian said, “I think if Apple wants to launch its credit card, it will be difficult for them to expand in the Chinese market.”

Apple does, however, still have loyal fans eager to try hardware the company released a week before the event: the updated iPad mini and iPad Air as well as the new AirPods. A sales representative in a Shanghai Apple store told TechNode there was still a waiting list to purchase the new iPad mini.

While some Chinese citizens still say Apple is their ideal phone, others are ready to switch to Chinese phone brands like Huawei and Xiaomi.

One Shanghai resident surnamed Zhou said, “Overall, mobile phones are just tools… I think domestic phones have reached this level of quality through nonstop hard work. I’m not necessarily saying people who buy Apple products are worshiping foreign things, but it’s a good thing to buy products from your own country.”

携号转网即将全国推行 操作麻烦多或阻碍用户转网积极性 – Securities Daily

What happened: China will implement mobile number portability (MNP) nationally this year, after nine years of trials. The program was initially announced by Chinese Premier Li Keqiang when he delivered his government work report to the National People’s Congress earlier this month. The Ministry of Industry and Information Technology (MIIT) told Chinese media that the MNP program among China’s three wireless carriers would be carried out in the latter half of the year, while the switch to virtual network operators would not be viable until next year.

Why it’s important: The MIIT has given out 15 virtual network operator licenses, including to tech companies like Alibaba and Xiaomi. Demand from Chinese mobile users has been increasing for an easy way to switch their numbers between major wireless carriers and virtual network operators, which provide plans that are almost 60% cheaper than those of the former ones. The number of virtual network operator users reached 80 million by the end of 2018, accounting for only 4.6% of total mobile users, yet it is expected to experience a growth spurt after the MNP program’s final implementation.

Xiaomi Releases Short Video App – Yicai Global

What happened: Following in the footsteps of Bytedance and Tencent, Chinese smartphone maker Xiaomi launched its own short video entertainment app. Zhenjing Video is operated by a company in the southwestern city of Chengdu, in which Xiaomi has a controlling stake. As of Thursday it was still available on Xiaomi and Baidu’s Android app stores but has since been taken down, although a WeChat mini-program by the same name remains live. The app hosted videos ranging from one minute to 10 minutes, plus features such as personalized content and ‘bullet screens’ for displaying comments. Users are currently unable to upload their own videos, however.

Why it’s important: Xiaomi is a latecomer to the short video scene, where Bytedance, as well as tech titans Baidu, Alibaba, and Tencent, are already wrestling for users’ attention spans–either through strategic investment or by producing their own products. However, an app might just make sense for the smartphone maker, which has already built an in-phone ecosystem of internet services from gaming to music to livestreaming. While internet services made up only 9% of all company revenue in 2018, showing 0.5% growth from 2017, it grew 61% compared to the year before. The gross profit margin of Xiaomi’s internet services also grew from 57% to 63%, led by video and live streaming offerings.

This article by Eudora Wang originally appeared on China Money Network, the best data intelligence platform tracking China’s tech and venture capital markets (access requires subscription).

Up Fintech Holding Limited, the parent company of Chinese online brokerage Tiger Brokers, has raised $104 million in a downsized initial public offering (IPO) on the Nasdaq stock exchange on Wednesday, following its homegrown counterpart Futu Holdings Limited who raised $90 million in a New York IPO earlier this month.

The company, listed under the symbol “TIGR,” offered 13 million American depositary shares (ADSs) at $8 apiece, each representing 15 Class A ordinary shares. The share price is above the expected range of $5 to $7, but downsized from the $150 million Up Fintech targeted to raise in late February.

The domestic online retail securities market in China is already the largest in the world. For offshore assets, the country’s online retail trading volume is expected to triple from roughly $445.4 billion in 2018 to about $1.36 trillion in 2022, as per consulting firm Oliver Wyman.

The Tiger Brokers online trading platform, founded in June 2014, allows Chinese investors at home and abroad to trade stocks in the US, Hong Kong, and mainland China markets via the stock connect scheme between Hong Kong and mainland stock exchanges.

The company floated shares in the US as Chinese online brokerage firms have captured the important demographic of young investors for whom more traditional US financial firms are competing with start-ups such as Robinhood. More than 70% of Tiger Brokers’ individual brokers were under the age of 35 by the end of 2018, according to the company’s prospectus. Over 85% made more than $40,000 annually, shows the document.

Before the listing, Up Fintech counted Chinese smartphone maker Xiaomi as its second-largest shareholder with a 14.1% stake, while Interactive Brokers Group, an automated global electronic broker, owned a 7.7% stake. Its founder and former developer of Chinese internet firm NetEase, Wu Tianhua, held an 18.9% stake.

The IPO of Up Fintech followed closely with the listing of its domestic counterpart Futu. The Hong Kong-based Futu—the first Chinse online broker to go public overseas—raised $90 million in a New York IPO on March 9.

Futu, backed by Tencent, Sequoia, and Matrix Partners China, also counts the Chinese young generation as a key source of its customers. According to its prospectus, the average user age of Futu is 35 years old, and about 43.8% of its clients work in the internet industry, information technology, or financial services.

Chinese smartphone maker Xiaomi Corp. announced on Tuesday its first consolidated financial statements since listing in Hong Kong in July, reporting RMB 13.48 billion (around $2 billion) in profit last year, bouncing back from a RMB 43.9 billion loss in 2017.

The Beijing-based company generated revenue of RMB 174.9 billion (around $26 billion) for 2018, representing a year-on-year increase of 52.6%, but missing the RMB 176 billion average estimate from analyst forecasts compiled by Bloomberg.

Xiaomi’s smartphone segment recorded revenue of approximately RMB 113.8 billion ($16.6 billion) in 2018, a 41.3% year-over-year increase, driven by growth in both smartphone sales volume and average selling price. Smartphone shipments saw robust growth, increasing 29.8% year-on-year to 118.7 million units in 2018, a marked difference from the 4.1% year-on-year decline in the global smartphone market, according to figures from International Data Corp (IDC).

Revenue from its IoT and lifestyle products segment surged 86.9% year-on-year to RMB 43.8 billion ($6.5 billion). It shipped 8.4 million smart TVs, representing growth of 225.5% compared with a year earlier. As of the end of 2018, approximately 150.9 million IoT devices (excluding smartphones and laptops) were connected on Xiaomi’s IoT platform, a quarter-over-quarter increase of 14.7% and a year-on-year increase of 193.2%.

While the smartphone segment comprises the lions share of its revenue, Xiaomi aims to be known as an internet company, rather than a hardware manufacturer. It will invest more than RMB 10 billion (around $1.5 billion) into the development of the “artificial intelligence of things,” or AIoT, over the next five years. AIoT refers to embedding AI applications into infrastructure components which are linked by IoT networks, such as an air conditioning unit that adjusts its thermostat based on preferences learned from past use. The company launched its “smartphone + AIoT” dual-engine strategy in January.

“Over the last eight years, our focus was always around smartphones, but this year we have started our smartphones + AIoT as a dual engine,” Xiaomi founder and CEO Lei Jun told analysts on a call Tuesday, according to Nikkei Asian Review. “AIoT is a historic opportunity for us, we can be a pioneer in this very big market segment.”

Xiaomi enters the crowded payments space in India with the launch of Mi Pay – Android Authority

What happened: Chinese smartphone giant Xiaomi announced on Tuesday the rollout of its payment system, Mi Pay, in India following a December launch in beta mode. Through the app, users can make purchases via multiple payment options such as Unified Payments Interface (UPI), credit cards, debit cards, and internet banking. Mi Pay is built on the UPI platform developed by the National Payments Corporation of India (NPCI) and supports over 120 banks, according to the company.  The app will be available soon through Mi Apps, Xiaomi’s Android app store, according to Xiaomi India’s official Twitter account.

Why it’s important: Mi Pay, first introduced in China in 2016, is entering India’s lucrative yet crowded mobile payment space dominated by homegrown mobile payment provider, Paytm, which is backed by Ant Financial. Estimates from 2018 show rapid growth in mobile payment adoption, which rose 39.7% year-on-year to 73.9 million. Many global tech goliaths have entered India’s payment market over the past few years, including Google with Google Pay (formerly Tez), Samsung with its flagship payment service Samsung Pay, and Alibaba with its 30% stake in Paytm.

Chinese phone manufactuer Transsion, a rival to Xiaomi in Africa, is planning to list on the Shanghai new tech board, said China’e biggest state-owned brokerage on Friday.

Citic Securities filed a report Friday confirming that Transsion had completed a mandatory three-month counseling session for its initial public offering (IPO) on Shanghai’s new Science and Technology Innovation board. The brokerage, which is underwriting the IPO, stated in the report that the Chinese phone maker meets listing requirements. Transsion was not available for comment.

Founded in Hong Kong in 2006, Transsion was one of the first phone manufacturers in Africa and is a leader in its feature phone market. Transsion’s three brands—Tecno, Infinix, and Itel—comprised 58.7% of market share by units sold in 2018, according to the latest figures from research firm International Data Corporation (IDC). It also leads the smartphone sector with 34.3% share, followed by Samsung (22.6%) and Huawei (9.9%) respectively.

Xiaomi is also eyeing the phone market in Africa. In January it set up a business unit for the region, aiming to boost its sales on the continent. The company is now turning its attention to growth opportunities in Africa after launching in Spain, France and Italy, said Wang Xiang, Xiaomi senior vice president, at the Mobile World Congress in Barcelona in late February.

The news comes as the Shanghai Stock Exchange began accepting IPO applications for its new tech board on Monday. Some 11 technology companies have already announced their filings, according to state-owned Chinese media Securities Daily, and the first batch of listings is expected to come as early as mid-June.

Pre-listing counseling was implemented in 2006 as a mandatory procedure for filing an IPO in China to ensure that companies are informed about legal obligations, relevant national laws, and regulatory guidelines. Qualified agencies assist companies with compliance in corporate structures and management systems, particularly concerning business operations, information disclosures, and accounting practices.

老虎证券赴美IPO最高募资9100万 小米盈透有意认购 – Sina Finance

What happened: Xiaomi-backed online trading platform Tiger Brokers plans to raise up to $91 million in its US initial public offering (IPO), issuing 13 million American Depository Shares (ADS) at $5 to $7 per share, according to the prospectus updated on Monday. The China-based online brokerage firm will launch the roadshow for its global offering this week, and is targeting end-March for its Nasdaq listing.

Why it’s important: Chinese smartphone maker Xiaomi holds 14.1% of UP Fintech Holding, which runs the Tiger Brokers platform, and Interactive Brokers Group, one of the largest American online brokerages, holds a 7.7% share. Both parties have expressed interest in increasing their holdings. Tiger Brokers aims to expand its global market share beyond that of its rival, Tencent-backed Futu Securities, which went public on Nasdaq on Friday. Its shares surged 9.66% on Monday at the end of the day’s trading. However, neither Futu nor Tiger Brokers have been granted licenses by Chinese regulators to offer trading services in mainland China, according to TMTPOST (in Chinese).

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Xiaomi co-founder and CEO, Lei Jun, warns that Xiaomi phones could get more expensive in future releases as the company attempts to leave behind its reputation for producing cheap hardware.

The company’s flagship Mi 9 phone, launched Feb. 20 in Beijing, is packed with new features: three separate back cameras, a powerful Qualcomm Snapdradon 855 chip, wireless charging—and a slightly higher price tag.

The Mi 9 starts at RMB 2,999 (around $446), while the Transparent Edition sells for RMB 3,999. The stripped-down SE edition starts at RMB 1,999. The previous model, Mi 8, started at RMB 2,699.

Lei said, “Actually, we want to get rid of this reputation that our phones cost less than RMB 2,000. We want to invest more and make better products.”

He added, “I said internally that this might be the last time our price will be under RMB 3,000… In the future our phones might get more expensive—not a lot, but a little more expensive.”

Chinese Premier Li Keqiang announced plans on Tuesday to reduce mobile access costs by at least 30% nationwide as part of a broader push for the country’s digital transformation in a number of sectors, including healthcare, education, and sports.

The country’s largest political event, dubbed the Two Sessions, kicked off on Sunday in Beijing. Chinese corporate executives, including Tencent’s Pony Ma, Robin Li from Baidu, and Xiaomi’s Lei Jun, attend the meetings as delegates.

In his opening remarks at the National People’s Congress (NPC) annual meeting, Premier Li said China will continue to lower the cost of mobile networking services by more than 30% from 2018 by end-year. High-speed broadband services will also be offered across the country, improving experiences for rural-dwelling residents for remote learning tools and medical services.

China’s three major mobile carriers — China Mobile, China Telecom, and China Unicom — had already lowered mobile access costs by more than 60% year-on-year as of the end of November, said state-owned media China Central Television, citing officials from the Chinese Ministry of Industry and Information Technology (MIIT) as saying on Monday.

Chinese tech entrepreneurs supported the call for better access on broadband and mobile, suggesting more government inputs into online public services.

Ding Lei, CEO of gaming giant Netease and Chinese People’s Political Consultative Conference (CPPCC) delegate, proposed “online digital schools” as a way to deliver improved teaching resources from major cities to students in impoverished areas. AI-enabled products and services, including translation devices and oral language evaluation, could be leveraged to promote self-propelled learning, Tencent Tech (in Chinese) reported, citing Ding.

Xiaomi CEO Le Jun suggested the government prioritize establishing policy standards for medical wearable devices and related platforms, according to Chinese media. The NPC representative also appealed for more incentives for applications using the Internet of Things (IoT) in the public health sector.

China is accelerating the pace of 5G network deployment, MIIT Minister Miao Wei told local media, saying the first batch of temporary 5G licenses would “be granted soon.” Several 5G phone models are expected to launch in the second half of this year, although wider 5G adoption is more likely timed for this time next year, Zhang Yunyong, head of research affiliate of China Unicom told Shanghai Securities News.

Xiaomi to triple European store count as Chinese smartphone makers double down on Europe – CNBC

What happened: Xiaomi is accelerating its move in the European market with plans to open more than 150 stores in Western Europe by the end of year. It has nearly 50 shops in the region since opening its first location in Spain in 2017. Wang Xiang, Xiaomi global business head and senior vice president, disclosed its ambitious plan on Tuesday targeting Europe ahead of the US, where carriers play “very important roles” and “a lot of customization ” is needed.

Why it’s important: Chinese companies are challenging the dominance of established phone manufacturing giants in overseas markets. Nearly a third of phone shipments in Europe came from Chinese handset manufacturers, namely Huawei and Xiaomi, who together represented less than a quarter of the market in the same period a year earlier, according to market analysts Canalys. Oppo, another Chinese phone maker, unveiled plans earlier this month to debut in the UK, Turkey and Poland.

Xiaomi has revealed its total sales revenue in overseas markets over the past seven years. The total amounted to $15 billion while Xiaomi also found itself on the top in the Spanish phone market, Wang Xiang, the company’s global business head and senior vice president, at Mobile World Congress (MWC) in Barcelona on Sunday. Prior to that, the company had only revealed audited revenue figures for the past three years in its IPO prospectus.

Despite its flagging sales in the domestic market, the Chinese phone manufacturer witnessed a rapid surge in sales revenue in internationally. In the third quarter of 2018, it reached RMB 22.3 billion (around $3.33 billion) with an 112.7% year-on-year increase, making up 43.9% of its total revenue over that period.

“We spent 15 months becoming the Number One in the open [channel] market in Spain,” Wang said, adding that he expected Xiaomi’s global sales to quickly overtake its performance in China in terms of revenue, as globalization has been one of the company’s “major driving forces.”

Chinese phone manufacturers are upping their global efforts amid a slowing smartphone market. Huawei, Oppo, and Xiaomi all released their first 5G handset models at MWC over the weekend. Huawei’s first foldable Mate X pits it against Samsung’s Galaxy Fold, with a starting price of €2,299 (around $2,600) targeting the first wave of high-end 5G users.

Oppo, on the other hand, is expected to ship its first batch of 5G smartphones to European consumers ahead of Chinese buyers this year, as the company has “made the fastest progress” in Switzerland (in Chinese) with local telecom service provider Swisscom.

At the launch event for its latest flagship model Mi 9 last week, Xiaomi founder and CEO Lei Jun said the company’s main overseas target this year would be Europe, adding that “the US market could wait.” It is also looking to expand its business in Africa by forming an Africa-focused business unit at the beginning of this year.

Figures from research firm Canalys show that Samsung and Apple remain dominant in the European smartphone market with shares of 28.7% and 26%, respectively, in the fourth quarter of 2018. Market share for Huawei and Xiaomi were 23.6% and 6%, respectively.

China’s Xiaomi unveils $680 5G smartphone, sees growth in Africa – Reuters

What happened: Xiaomi, the world’s fourth-largest smartphone manufacturer revealed its first 5G smartphone at a conference in Barcelona. At $680 (about RMB 4,500), the Xiaomi model boasts a new Qualcomm chipset, the same one found in Samsung’s Galaxy 10, a 94.3 screen-to-body ratio and two back cameras which shoot video at 960 frames per second. The Mi Mix 3 5G makes 5G affordable to “normal consumers,” Xiang Wang, the company’s Senior Vice President explained and added that Xiaomi is looking towards Africa as an area with growth potential.

Why it’s important: Last week Huawei and Samsung revealed their newest models adapted for 5G networks, which are priced at $2,600 and $1,980 respectively. Smartphone producers are trying to claim their stake in the next generation of wireless technology, which promises increased speed and decreased latency, paving the way for the Internet of Things. A recent Cisco report expects 5G to account for 422 million mobile connections by 2022. This makes up only 3% of total mobile connections but will account for 12% of internet traffic. Since its founding, Xiaomi has stormed Asian markets, most notably in India, where it overtook Samsung’s phone sales in 2018. In 2017, it launched its products in the UK, Spain, France, and Italy.

In this episode of the China Tech Investor Podcast powered by TechNode, hosts Elliott Zaagman and James Hull talk about Tencent’s investment in Reddit and the potential for China’s adoption of common reporting standards to pay the way for more open capital flows. They also discuss Xiaomi’s continued success in India, Pinduoduo raising more cash, and Chinese tech giants’ big spring festival hongbao giveaways.

Please note, the hosts may have interest in some of the stocks discussed. The discussion should not be construed as investment advice or a solicitation of services.

Watchlist:

· Tencent

· Alibaba

· Baidu

· iQiyi

· Xiaomi

· JD.com

· Pinduoduo

Hosts:

· Elliott Zaagman – @elliottzaagman

· James Hull – @jameshullx

Podcast information:

· iTunes

· RSS Feed

· Music: “Hey Ho” by Steve Jackson, Royalty Free Music

Chinese smartphone maker Xiaomi has restructured its mobile phone business group amid increased competition in the Chinese market, Tencent Tech reports (in Chinese). The move comes one month after the company spun off its budget smartphone sub-brand Redmi.

A new advisory team will be set up under the smartphone business group and led by Zhu Lei, formerly head of sales, combined with an operational team controlling product expenses within the company. Chinese media cited Xiaomi CEO Lei Jun as saying that the restructuring aims to enhance the company’s operation and strategy in its smartphone business.

At the same time, Xiaomi established a department to conduct research and development into new technologies for touch control of mobile phone displays. Lei Jun made the announcements in an internal letter to employees. A Xiaomi spokesperson confirmed the moves to TechNode.

The restructuring follows reports that Xiaomi is abandoning its flat management structure as a means to revive its flagging sales. Xiaomi is reportedly seeking a more systematic organizational structure. An anonymous employee told Caijing that the company is trying to be “more regulated,” and that it has been looking for reasons for its unsatisfactory performance. Xiaomi co-founder Wang Chuan immediately denied the claims.

Despite its overseas success, Xiaomi’s smartphone business has stumbled in 2016, witnessing a 36% decrease in shipment volume compared to the same time period last year. According to research firm the International Data Corporation, Xiaomi’s sales bounced back in 2017 with a 12.4% market share and 32.6% annual increase in shipments, before it decelerated a year later, reaching only 1.3% year-on-year growth in 2018.

雷军：小米9不仅最好看 而且非常能打 – Netease Tech

What happened: Xiaomi has announced they will reveal their flagship model Mi 9 on Feb. 20 in Beijing. Rumors put the starting price at RMB 2999 (roughly $440). Mi 9 will be the “best-looking Xiaomi smartphone model so far”, the Chinese smartphone maker claimed in a WeChat post (in Chinese) on Wednesday. The upcoming flagship will also reportedly be the first model from Xiaomi powered by Qualcomm’s latest processor Snapdragon 855 and comes with three cameras in the back.

Why it’s important: China’s smartphone market has been increasingly competitive for foreign players, as the top four brands are all Chinese in terms of market share. Figures from research firm IDC show that Huawei, OPPO, vivo, and Xiaomi made up roughly 78% of the China market in 2018, up from 66% in 2017. To be released as Samsung’s Galaxy S10 in the US, the Mi 9 will be yet another premium model for Xiaomi, an area where they’ve historically been weak.

Xiaomi has sold 1 million units of its new device Redmi Note 7 in the first month since its launch, as local smartphone makers now scramble to set up new sub-brands amid slowing demand.

“Our new strategy of multiple brands have achieved initial success, considering the great sales results of Redmi’s first smartphone model after independence,” Xiaomi said in an announcement (in Chinese) on Tuesday. It claimed the Redmi Note 7 smartphone sales has crossed 1 million units in mainland China region as of Feb.12.

Xiaomi’s share rose about 5.28% by noon on Wednesday. After the initial IPO frenzy, the company’s stocks have fallen below its initial offering price for over six months.

The Chinese smartphone maker announced on Jan.10 that it was spinning off its lower-end Redmi product line as an independently operated sub-brand. This was followed by the launch of Redmi Note 7 in Beijing five days later, featured a 48-megapixel camera and Qualcomm Snapdragon 660 chipset with a starting price of RMB 999 (around $147).

Redmi Note 7 was sold out of all 100,000 units in about 10 minutes during the first day before it went up for sale again on Jan.18. Xiaomi said the popularity made it believe its brand proposition with cost-efficient products “will be even more compelling in current market conditions.”

Competition in the Chinese smartphone market picking up, as Huawei, Xiaomi, and Oppo have increased their attempts by operating multiple brands. Vivo followed the path by unveiling new sub-brand iQOO on Tuesday, aiming at the higher range of the smartphone market.

According to research firm International Data Corporation (IDC), despite a 10% overall decline in shipment volume in China in 2018, the country’s telecom giant Huawei increased shipment volume by 43.9% year-on-year to 60.5 million over the fourth quarter, compared to 1.4% of Xiaomi and 6.8% of Oppo for the same period.

Huawei Honor president Zhao Ming said on microblogging platform Weibo (in Chinese) in late January that the company had achieved a global sale of 1 million units of its flagship model Honor V20, “far more than they expected.”

China Tech Investor is a weekly look at China’s tech companies through the lens of investment. Each week, hosts Elliott Zaagman and James Hull go through their watch list of publicly listed tech companies and also interview experts on issues affecting the macroeconomy and the stock prices of China’s tech companies.

Make sure you don’t miss anything. Check out our lineup of China tech podcasts.

In this episode of the China Tech Investor Podcast powered by TechNode, hosts Elliott Zaagman and James Hull discuss Vancouver real estate, Wang Qishan in Davos, make a prediction about Baidu and discuss other updates on the watchlist.

Shlomo Freund, the host of the China Business Cast, who has spent 15 years as a cross-border entrepreneur, joins the guys to talk about entrepreneurship in China and managing personal finances to achieve life goals. Shlomo is currently a speaker and mentor, helping individuals eliminate money as a source of financial stress and achieve financial freedom.

The discussion should not be construed as investment advice or a solicitation of services. Please note, the hosts may have positions in the companies discussed.

Watchlist:

• Tencent
• Alibaba
• Baidu
• iQiyi
• Xiaomi
• JD.com
• Pinduoduo

Guests:

• Shlomo Freund from FreeFinancialSelf.com and host of China Business Cast podcast

Hosts:

• Elliott Zaagman – @elliottzaagman
• James Hull – @jameshullx

Producer

• Peter Isachenko

Podcast information:

• RSS Feed
• Music: “Hey Ho” by Steve Jackson, Royalty Free Music

Chinese smartphone maker Xiaomi is looking to expand its presence in Africa amid increased domestic competition and slowing in the Chinese smartphone market, Jiemian reports (in Chinese).

Xiaomi will set up a business unit for the African region to accelerate its expansion on the continent, the company said in an internal letter to its employees. Wang Lingming, vice president of the company, has been appointed head of the new unit and will report to senior vice president and global business head Wang Xiang.

The company has seen success in the overseas market, where it generated more than 40% of its revenue in the third quarter of 2018. It has also steadily expanded in India on the back of its affordable pricing, replacing Samsung as the top industry player in the second half of 2018.

The increased focus on Africa puts the company at odds with well-established rivals on the continent. Founded in Hong Kong in 2006, mobile phone manufacturer Transsion began operating in Africa as early as 2008 and has dominated the regional market since 2014. The company owns three sub-brands—Tecno, Itel and Infinix.

Transsion accounted for nearly 60% of the continent’s feature phone market and 35% of smartphone shipments in Africa during the third quarter of 2018, according to research firm the International Data Corporation (IDC). Samsung and Huawei followed, making up 22% and 10% respectively.

Wang Lingming was previously vice president of Chinese feature phone brand K-Touch, which is also focused on Africa.

The move follows Xiaomi’s restructuring plan from December 2018, when a new business group was established to increase the company’s focus on the domestic market. Xiaomi lagged behind its Chinese rivals in the third quarter of 2018, holding 12% of market share. It trails Vivo, Oppo, Huawei, and Huawei sub-brand Honor. The company’s sales increased by only 1% year-on-year during the same period.

Chinese smartphone maker Xiaomi has repurchased more than 6 million shares as investors sell after a lockup period.

The company bought the Class B shares at an average price of HKD 9.76 ($1.24), totaling nearly HKD 60 million. The company closed at HKD 10.16, up just over 4% compared to Thursday. 

“The board believes that the current financial resources of the group enable it to implement the share repurchase while maintaining a solid financial position,” Xiaomi said in a statement to TechNode, adding its brand proposition with cost-efficient products “will be even more compelling in current market conditions.”

In an annual meeting earlier this month, Xiaomi CEO Lei Jun announced a RMB 10 billion (around $1.5 billion) investment plan in artificial intelligence (AI) and smart devices over the next five years. The company said it has confidence in its business outlook, which is driven by its smartphones and AIoT strategy—a term used to describe the convergence of AI and internet of things technologies.

“Xiaomi shares have been negatively affected since the global consumer electronics market cooled in 2018, and the company intends to provide a boost to the market,” Jin Di, longtime industry watcher and former analyst with research firm the International Data Corporation, told TechNode.

She added that listed companies generally buy back shares at this time of the year, a move that aims to stabilize their market value while showing off cash flow. 

Xiaomi’s share price slumped around 20% in the days preceding the expiry of the company’s six-month lockup period. The company has seen its market value nearly halve since it went public in Hong Kong last July, as China’s “capital winter” starts to bite and the smartphone market slows.

Earlier this week, the company’s share price dropped by 3% following the sale of 231 million Class B shares by an undisclosed investor.

“Xiaomi’s business performance, especially in internet services, wasn’t exciting enough, failing to improve investor confidence and fulfill the promises the company made during its IPO,” said Jin.

Xiaomi shipped nearly 1 billion devices in 2018. Apart from its hardware business, it is also an internet services company, offering online music and movies to around 220 million users. However, these services only accounted for 9.3% of its total revenue in the third quarter of 2018.

Yan Zhanmeng, research director at Counterpoint Technology, a Hong Kong-based market research firm, said he expects a fair increase in the company’s share price in the coming days, though it “would still be mostly decided by the company’s profitability.”

China’s Xiaomi Places a $1.5 Billion Bet on AI and Smart Devices – Bloomberg

What happened: Chinese smartphone manufacturer Xiaomi will invest more than RMB 10 billion (around $1.5 billion) in artificial intelligence and smart devices over the next five years. Xiaomi CEO Lei Jun said the company is looking to increase its focus on AIoT, referring to the combination of artificial intelligence and the internet of things. Xiaomi hopes to increase its revenue from high-value services while focusing on its presence in Europe.

Why it’s important: The company is looking to diversify its revenue streams amid slowing in the global smartphone market, which it expects to pick up again as 5G technologies proliferate. In the meantime, Xiaomi sees the investment as taking action while trade tensions between the US and China brew. The company was once touted as being able to reach a valuation of $100 billion from its IPO in July last year. However, its stock is down 40% since going public

小米战略入股TCL 加强大家电业务供应链能力 – Tencent Tech

What happened: Chinese smartphone maker Xiaomi has purchased more than 65 million shares in electronics giant TCL, amounting to nearly 0.5% of the company. TCL said that the shareholding is aimed at extending the cooperation between the two firms. Last month, TCL signed an agreement with Xiaomi to carry out joint research and invest in high-end hardware components.

Why it is important: China’s smart home device industry is growing fast, with the market expanding to cover not only entertainment hardware, but also devices for home security, lighting, and energy management. The purchase could give rise to more efficient production of Xiaomi’s smart home devices, on which the company has placed increased focus. The investment and cooperation agreement with Xiaomi could also streamline TCL’s move away from consumer electronics, allowing it to focus more on semiconductor and displays. Last month, the company announced plans to restructure after selling its stake in nine of its consumer-facing businesses.

Apple CEO Tim Cook’s letter to investors certainly has come as a surprise, admitting as it did that global sales are weak and that revenue is likely to be $5 billion less than originally projected.

By pointing out that the company’s sales in China are declining and by providing the financial proof that the company has failed to localize effectively, the letter served up even more material to Apple bears.

Clearly, Apple is facing a dire situation—but not for the reasons many people assume. Contrary to what’s widely cited as a reason, including from Cook himself, Apple’s hard time in China is not because of the trade war that’s raging between the US and China. Instead, the company’s woes have been a long time coming.

Cook, and many outside of China, have placed too much emphasis on the trade war for the decline in sales. In the Apple letter and in recent media interviews, Cook blamed the trade war for having a negative impact on China’s economy, and linked this macroeconomic situation to the fall in sales in the market. But this fails to consider the real situation in China’s smartphone market.

The Chinese smartphone market is mature and saturated. To date, most of the growth has come from first-time smartphone buyers. As more Chinese people get onto the mobile internet, and phone quality improves, the total number of purchases will inevitably decline as new purchases and replacement rates decline as well.

There are also so many options on the market. While globally, Apple and Samsung continue to lead (third and first respectively with Huawei coming in second), the amount of competition in China has grown exponentially. And we’re not just talking about budget phones either. Every serious smartphone player, including Huawei, Xiaomi, Oppo, and Vivo, have released their own mid-range and high-end phones.

Apple is no longer the status symbol it used to be in China. Having the latest iPhone is still a big deal and can certainly engender status envy where “keeping up with the Joneses” is still a thing, but Apple products in general have become more ubiquitous. This demonstrates not only Apple’s success in the market, but also the increasing affordability (yes, you heard me right) and ease of access.

As I pointed out in 2017, Apple has not done a good job responding to local expectations. While the US and EU markets may be similar, the China market is full of locally developed hardware and software that do a really good job of solving Chinese pain points.

China also has a thriving second-hand market, not only for used products, but also refurbished electronics and battery replacements, which Cook did mention in the letter.

In addition, the country has a thriving installment-finance market. Almost all the fintech IPOs we saw this past year were companies who built their business on the “not-quite-affluent-but-want-to-spend-like-I-am” set.

Apple has faced these headwinds for some time—even before the current tension over trade. As much as the leaders of both countries would like to take responsibility for such dramatic changes, this just isn’t the case.

That doesn’t mean, however, that the trade war won’t play an increasing role in their declining sales in China. Apple’s American citizenship is now a hindrance. Previously, the Chinese fetish for foreign products helped push Apple to its success, but now the trade war and domestic political situation is beginning to turn people away from American brands in favor of Chinese ones.

Chinese smartphones, for example, not only provide services Chinese consumers now expect, but also produce models of similar build quality to Apple’s at a fraction of the price.

Still, if Apple hopes to reverse its fortunes in China, Cook and senior management need to face up to an uncomfortable reality—that they’ve dropped the ball in China and failed to localize fast enough. Getting it back may be harder than they, and investors, could imagine.

三段式折叠，这或许就是小米即将发布的折叠屏手机 -TechNode Chinese

What happened: Chinese smartphone maker Xiaomi is reportedly working on a foldable design for its latest phone, according to a leaked video. The video, which was posted on Twitter, shows a phone with a Mi App Store, as well as the standard wallpaper from the company’s operating system MIUI 10. TechNode Chinese found the Google Maps location shown in the video displays the device as being in the vicinity of  Xiaomi’s research center in Beijing. Previously, media reported Xiaomi is ordering components for a foldable phone, which is supposed to debut as early as this month.

Why it’s important: Foldable smartphones have long dominated the mobile technology conversation around the globe. Samsung launched its first foldable smartphone in November and is expected to ship it in the first half of this year. Huawei consumer business head Yu Chengdong said in 2017 that the company was researching a foldable smartphone, with a prototype already being developed. After launching its lower-end Redmi smartphone product line as independently operated subbrand, Xiaomi looks eager to accelerate its growth in the premier market, where most of its competitors have the upper hand.

前金立總裁盧偉冰加盟小米 – Engadget

What happened: Xiaomi founder and CEO Lei Jun announced on Wednesday in a Weibo post that Gionee’s former president Lu Weibing has joined the company. Although Lei did not reveal details of Lu’s new role at Xiaomi, speculation suggests that he will lead Meitu’s hardware business, which Xiaomi took over in November. Other reports theorize Lu would likely be in charge of Xiaomi’s international expansion.

Why it’s important: Lu Weibing stepped down as Gionee’s president in 2017 and went on to establish a venture to replace the company’s overseas OEM arm. The Shenzhen-based Gionee filed for bankruptcy near the end of December because it was reportedly unable to pay off debts to its suppliers. Founded in 2002, Gionee gained a reasonable market share in China and several emerging markets including India, Vietnam, and the Philippines in its early years. However, the company has struggled to compete with bigger Chinese brands like Xiaomi, Oppo, and Vivo.

Chinese smartphone maker Oppo has developed 10x zoom functionality, potentially integrating it into its upcoming F19 flagship smartphone’s camera as the company pushes to improve the fidelity of its imaging technology.

Oppo will use its hybrid zoom technology, which utilizes the smartphone’s three rear cameras to create higher quality zoomed images. Hybrid systems use software as well as multiple cameras with varying focal lengths to build an image that preserves fine details at a distance.

Current smartphones on the market feature up to 5x hybrid zoom though vendors including Huawei also have plans for 10x hybrid zoom capabilities. A higher number allows for increased zoom capabilities.

The details of Oppos’s new camera technology were leaked in a patent filing earlier this week. However, additional details have yet to be released.

“The development of this technology is almost mature,” a company spokesperson told TechNode, saying further details would be released in time.

The Chinese smartphone maker debuted its 5x zoom technology at Mobile World Congress in Barcelona last year. The smartphone included two cameras, with one featuring a “periscope structure.” Packed into a 5.7-millimeter lens module for its smartphones, the company claimed the technology would increase its anti-shake performance by 40% and optical image stabilization by 200%. However, the 5x technology has yet to be commercialized.

To set themselves apart from their peers, Chinese smartphone companies have been on focused on improving the capabilities of their smartphone cameras. Huawei plans to launch its first flagship model featuring four cameras and 10x optical zoom technology “sometime next year,” Walter Ji, head of the company’s consumer business for Western Europe revealed last month.

At the same time, rival smartphone manufacturer Xiaomi took over popular selfie app Meitu’s smartphone business. With the selfie app maker’s photo enhancement technologies, Xiaomi CEO Lei Jun seeks to draw more female users away from his competitors.

This week, John and Matt talk with Shai Oster, Asia bureau chief for The Information, about the rash of Chinese IPOs in a down market, looking at Tencent Music, Xiaomi, Pinduoduo, Meituan Dianping. We also talk about the possibilities for Bytedance and Ant Financial IPOs in 2019.

Links

• China Tech Talk 49: The Xiaomi IPO with The Information’s Shai Oster
• What China’s history of overseas tech IPOs says about the current wave
• TechNode IPO coverage
• Sign up for TechNode newsletters
• Subscribe to The Information

• Shai Oster – The Information author page, @beijingscribe 

• John Artman, @knowsnothing, TechNode
• Matthew Brennan, @mbrennanchina ChinaChannel

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• China Tech Talk.com
• Music: “Theme from Penguins on Parade” by Lee Rosevere, Music for Podcasts 3

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Chinese smartphone maker Xiaomi is restructuring its business to focus on the Chinese market, according to an internal letter obtained by Chinese media.

The new China-focused business group has been established in light of the company’s success overseas, a market that generated more than 40% of its revenue in the third quarter. The group is born out of the former Sales and Services Group and is to be led by Wang Chuan, co-founder and senior vice president of Xiaomi. He will report to company CEO Lei Jun.

Two new departments have also been created as a result of the restructuring, one for the offline sale of mobile phones in China and the other for promoting TVs and IoT devices in its digital ecosystem.

The company confirmed news of the restructuring to TechNode, though it refused to provide specific details.

Xiaomi has stressed its determination to focus on the Chinese market. According to Wang Yanhui, head of industry association Mobile China Alliance, the company has been repositioning itself as a premier brand in the Chinese market, as other smartphone players, including Huawei, Oppo, and Vivo, have been trying to grab the attention of higher-end smartphone users with increasing success.

Xiaomi recently launched its Mi 8 smartphone, priced at RMB 2,500 (around $360) for the base model. The company sold more than 6 million units of the flagship device before Oct. 6.

Xiaomi’s product lines are generally more cost efficient than its rivals’. This has led to its success in developing markets like India, where it commanded 30% of the market in the second quarter of this year, according to market research firm Canalys. Last month, the Chinese smartphone maker revealed its plan to increase the number of Xiaomi stores in the country from 500 to 5,000 by the end of 2019.

In the 6th episode of the China Tech Investor Podcast powered by TechNode, hosts Elliott Zaagman and James Hull discuss the G20, how Trump likes his steak, party committees, and look at the cash burn (negative free cash flow) at four watchlist companies. Here’s the cash burn spreadsheet.

They are also joined by Fulbright University professor and Bloomberg Opinion columnist Christopher Balding to discuss the Trump-Xi G20 meeting and party committees in Chinese companies.

The discussion should not be construed as investment advice or a solicitation of services. Please note, the hosts may have positions in the companies discussed. Full disclosure: James is currently considering a long position in JD.com.

Watchlist:

• Tencent
• Alibaba
• Baidu
• iQiyi
• Xiaomi
• JD.com
• Pinduoduo

Guest:

• Chris Balding – Bloomberg Opinion – @baldingsworld

Hosts:

• Elliott Zaagman – @elliottzaagman
• James Hull – @jameshullx

Podcast information:

• RSS Feed
• Music: “Hey Ho” by Steve Jackson, Royalty Free Music

IDC公布2018Q3可穿戴设备出货量 小米力压苹果获得全球第一 – TechWeb

What happened: Xiaomi sold more units of smart wearable devices than any other company in the world in the third quarter of 2018, grabbing more than 21% of market share. According to the International Data Corporation, Xiaomi shipped 6.9 million units in Q3, well ahead of US smartphone maker Apple, which sold 4.2 million devices.

Why it’s important: Xiaomi’s fast-growing sales owe much to its popular fitness tracker, the Mi Band 3, and the company’s growing presence overseas. The Chinese electronics manufacturer has been striving to expand beyond its home turf into lucrative markets including India, Europe, the Middle East, and Africa. The global shipments of wearable devices have grown significantly over the course of this year, reaching 32 million units in the third quarter—up nearly 22% from the previous year.

As China’s smartphone market comes out of its fourth consecutive quarter of year-on-year declines, domestic companies are increasingly placing their bets elsewhere. Besides other parts of Asia, one area of planned growth has been Africa, a recent report by tech research firm IDC shows.

There, the overall phone market has seen a 2.1% decline, accompanying an overall downturn across the world. Smartphone shipments fared better, however, with a 1.3% drop from the previous quarter compared to a global average decline of 6%.

According to DigiTimes, IDC research manager Ramazan Yavuz stated that “There is a new wave of China-based brands aggressively pursuing growth opportunities” across the African continent.

In terms of feature phones–which offer less functionality than smartphones at cheaper prices–three brands under Chinese phone manufacturer Transsion took up 58.2% of market share in the third quarter, with Nokia trailing behind at close to 12%.

The Chinese smartphone maker you’ve never heard of is dominating the African market

When it came to the smartphone market, Transsion again dominated with 34.9% of market share, although Samsung beat it out when it came to the value of phones sold. Huawei placed third both in terms of shipments (10.2%) and value (13%).

Notably, both South Africa and Kenya’s phone markets were up 8% from the second quarter due to increased penetration of low-end and entry-level devices, respectively. In Kenya, the market expanded despite hikes in taxes and fuel prices.

Nigeria, by contrast, saw an 11% drop in shipments due to “slowdown in gov’t spending, ongoing warfare in the country’s northern states, and market uncertainty in the lead up to elections,” IDC analyst George Mbuthia said.

Yavuz added that “These [Chinese] brands have quickly progressed along the learning curve… by addressing the diverse pricing and feature needs of the consumer base.”

Despite the preference for feature phones in rural areas, sellers like Xiaomi, Huawei, and Oppo are attracting more interest among local buyers, according to IDC.

Although Huawei is performing well in terms of phone sales, it’s unclear whether that will also be the case for its grand plans to establish 5G networks across the world. The CEO of South Africa-based telecom company MTN, which partnered with Huawei to conduct the continent’s first 5G outdoor trial in May, told media that actual rollout could be limited in scope.

The US has also urged its allies to stop working with Huawei and fellow Chinese telecom company ZTE due to fears of espionage, leading New Zealand to block Huawei from supplying 5G equipment to the country.

In this episode of the China Tech Investor Podcast powered by TechNode, hosts Elliott Zaagman and James Hull discuss the good, the bad, and the ugly from the series of Q3 earnings reports published last week, with a special focus on watchlist companies JD and Xiaomi.

They are also joined by Sixth Tone business and technology reporter Xue Yijie as they add Pinduoduo to the watchlist, and discuss the rapidly-growing e-commerce firm whose founder describes as “Costco and Disneyland.”

Please note, the hosts may have interest in some of the stocks discussed. The discussion should not be construed as investment advice or a solicitation of services.

Watchlist:

• Tencent
• Alibaba
• Baidu
• iQiyi
• Xiaomi
• JD.com

Guest:

• Xue Yujie – Sixth Tone – @Yujiexuett

Hosts:

• Elliott Zaagman – @elliottzaagman
• James Hull – @jameshullx

Podcast information:

• RSS Feed
• Music: “Hey Ho” by Steve Jackson, Royalty Free Music

Xiaomi CEO Lei Jun announced at the company’s AIoT Developer Conference today that Xiaomi smart speaker Xiao AI has over 34 million monthly active users (MAUs) as of September, local media is reporting (in Chinese). According to Lei, Xiaomi’s smart speakers have been awakened 8 billion times by users to activate around 100 million devices.

Xiao AI is especially popular among China’s “empty nest elderly” and children, says Lei.

AI+IoT has been part of Xiaomi’s core strategy for over 5 years and will continue to be, Lei said. He believes AI+IoT technology will seep into every device within the next 3 to 5 years.

The Chinese smartphone maker has sold more than 132 million IoT devices in the last quarter—selling more consumer electronics devices than any other company in the world, Google and Apple included. According to iResearch, Xiaomi’s global market share of IoT device was 1.7%, bigger than Apple’s 0.9% and Amazon’s 0.9%, and Samsung’s 0.7%.

Separately, Xiaomi also announced a new partnership with furniture giant IKEA to collaborate on smart home appliances and furniture. IKEA’s intelligent lighting system will be integrated with Xiaomi IoT technology as soon as December.

Xiaomi isn’t the only one betting on smart speakers to be the next big consumer electronics trend. Chinese retail giant JD.com launched its first smart home speaker LingLong DingDong in 2016, which was dubbed “China’s answer to Amazon Echo.”

China’s smart speaker market is getting increasingly crowded.

According to technology market research firm Canalys, Chinese e-commerce giant Alibaba shipped 2.2 million Tmall Genie smart speakers in the last quarter, Xiaomi shipped 1.9 million Xiao AI speakers, while Baidu shipped 1 million Xiao DU speakers, beating JD.com who was one of the first to the market.

According to Xiaomi’s third-quarter results, IoT-related businesses contributed approximately RMB 10.805 trillion to its quarterly revenue, representing an 89% percent increase compared to the previous year.

Chinese smartphone maker Xiaomi has started the construction of a new headquarter building located in Wuhan of central China’s Hubei Province. The new Xiaomi Wuhan headquarters will be an R&D center for artificial intelligence, cloud computing, and big data, according to the company. Construction of the new headquarter will be completed in two to three years with plans to accommodate 2,500 employees.

“Wuhan is perfect for an R&D center because it’s conveniently located at central China and has rich talent pool thanks to reputable universities located in the region. With plans to construct a headquarter with up to 10,000 staff, Xiaomi wants to build Wuhan as the new hub in the AI era,” said Xiaomi founder Lei Jun, who is a Wuhan native himself.

The new project comes as part of Xiaomi strategic partnership with Wuhan municipality. In June 2017, Xiaomi, Kingsoft, and Shunwei Capital, two other companies backed by Lei Jun, have reached an agreement for construction of headquarters for the three companies. The companies have moved to Optics Valley, a high tech zone in the city, in November 2017.

After one year of operation, a total of 800 employees from the three companies are working from Wuhan, up from 30 in late 2017, introduced Liu Guojun, executive of Xiaomi Wuhan.

The now Beijing-based Xiaomi has been trying hard to push its current employees to the new headquarter. In an aggressive incentive plan, the company promised that those who make the move can keep their Beijing-level salary – likely significantly higher than average for a second-tier city  – and receive an RMB 30,000 relocation bonus, as well as get help in buying a local home. In return, workers must stay at their new office for at least two years.

At the same time, the company is trying to build a solid team by leveraging on the local talent pool from universities in the city, such as Wuhan University and Huazhong University of Science and Technology.

Xiaomi is among a group of Chinese tech giants that try to escape the crowded tech hubs like Beijing and Shanghai in a bid to reduce operational costs as well as enjoy various perks from second-tier cities. Huawei began relocating staff of several departments from Shenzhen to the Guangdong factory town of Dongguan. Hangzhou-based Alibaba is also establishing regional headquarters in Xi’ an and Nanjing.

Chinese smartphone maker Xiaomi has opened 500 Mi Stores in rural parts of the country and plans to set up 5000 more stores by the end of 2019, according to the company’s press release from earlier this week. The latest retail expansion efforts are part of the company’s push toward offline sales.

The offline segment accounts for nearly 60% of the Indian smartphone market and the rural markets Xiaomi is targeting accounts for 30%, Manu Jain, vice president and managing director of Xiaomi India was cited as saying by local media Business Today. The company sees great untapped potential as the market is “grossly underpenetrated,” said Jain.

Xiaomi has been offering its products through offline retail channels for more than a year and has started moving beyond tier four and five cities in India since earlier this year. The new Mi Stores will serve as Xiaomi’s primary retail locations in rural parts of the country. The Mi Stores on average are no more than 300 square feet, significantly smaller comparing to Mi Home’s retail space which, on average, is four-times larger.

When Xiaomi entered India in 2014, it started with an online-only strategy. The company now is the largest smartphone vendor in India, accounting for over 55% share of the online phone market and around 30% of the Indian smartphone market.

According to research firm IDC’s latest report on mobile phone market, South Korean smartphone maker Samsung, currently the second largest vendor in India, continued to lose share over the past few quarters due to the rapid growth of Chinese smartphone brands such as Xiaomi, Vivo, and OPPO.

Together, Chinese smartphone makers currently dominate the smartphone market India, holding about two-thirds of market share.

Xiaomi takes over Meitu’s struggling selfie-focused phone business–Engadget

What happened: Meitu has announced that it’s entered a strategic partnership with popular smartphone brand Xiaomi. The company best known for its photo-editing app will hand over much of its phone operations to Xiaomi while taking charge of developing image algorithms and tech. Officially, Meitu’s smartphones will get new opportunities for growth while Xiaomi can upgrade its ‘photo experience’ and reach a broader female user demographic.

Why it’s important: The partnership may allow Meitu to play to its strength: enhancing selfies for a largely young, female audience. Business has flagged recently, in part due to demand for a more ‘natural look.’ On top of smaller losses last year, Meitu expects a net loss between RMB950-1,200 million this year. Partnering up with Xiaomi, which reported a net profit this year, may shore up Meitu’s mission to continue spreading its beautifying effects to an ever-wider audience.

At 2018 TechCrunch Shenzhen 2018, Huami Corporation’s Chairman and CEO Wang Huang, spoke on the future of wearable devices. Huami, a Xiaomi eco-chain company, listed on the New York Stock Exchange in February this year. As of last year, Huami shipped 18.1 million units of smart wearable devices globally, and had recorded a total register use base of 56.1 million.

Wang Huang told participants that Huami has produced smart bands since 2014. The third generation Mi Band 3 is equipped with Near Field Communication (NFC) technology that can be used on bus and subway networks in over 160 cities across China, and can also open smart locks.

“Wearable devices have rapidly entered the ecosystem, most significantly in healthcare,” he said. “I believe that one day smart watches will take the place of smartphones.”

While it is true that there has been a craze for smartwatches has gone up over the years, but still when it comes to making a style statement a watch under $200 is more than sufficient to bring out class and complete an attire of a person.

Wang Huang introduced Huami’s self-developed smart wearable AI chip, Huangshan-1, created using open instruction set architecture ISA RISC-V.

“This chip enables Huami to deliver heart rate monitoring, and check for a number of heart complaints,” Wang said. It draws on cloud-based AI to screen for diseases on something as small as a wristband or watch. Even when you are not online, it updates your health stats, he added.

Wang discussed Huami’s market positioning as a company that collects physical data on its clients. As a user-oriented smart device business, Huami collects health data and suggests further services in a closed loop business model.  He said that until the recent Singles’ Day (November 11) shopping festival, Huami had sold more than 30 million units of its Mi Band 2. In the last five months, it has shipped more than 10,000 Mi Band 3s.

Wang said Huami had grown even faster overseas than in China. Europe is now the company’s second largest market. Europeans’ love of sport is a key contributing factor, he said.

Huami is seeking out various partners across the world. The company is working with Israeli firms to develop algorithms, and with Norwegian university research institutes to develop med tech. On a global level, Huami collaborates with Google and other top firms, and is able to leverage channels opened by its partner Xiaomi.

In China, Huami focuses on cooperation with investors and app developers. Wang Huang talked about a maker of smart watches and bands that can monitor elderly care home residents, and about marathon runners who use Huami to monitor their progress at 3-kilometer intervals.

Wang spoke of Huami’s relationship with Xiaomi, its second largest shareholder and main market channel.

“Huami positions itself as a sports and health sector big data firm. Xiaomi positions itself further upstream, as a major IoT platform,” Huang said referring to Internet of Things. The companies work closely together, and have interconnected ecosystems.

Wang said the tech world should watch out for a “revolutionary” new wearable smart device that Huami will launch in 2019.

This story is a translation from TechNode’s Chinese-language sister site. Translator: Heather Mowbray. With contributions from Runhua Zhao. 

小米Q3财报出炉，营收508亿净利29亿大幅超预期 – China Securities Journal

What happened: Smart device manufacturer Xiaomi released unaudited fiscal results for third quarter 2018. The company’s revenues were RMB 50.8 billion ($7.3 billion), up 49.1% year-on-year. According to Xiaomi, including smart home appliances and other services, the company’s international markets revenue grew 112.7% year-on-year to RMB22.3 billion in the period, accounting for 43.9% of Xiaomi’s total revenue for the third quarter 2018. The company’s adjusted profit was RMB2.9 billion, up 17.3% year-on-year.

Why it’s important: The report shows Xiaomi’s capability to globalize and reduce the reliance in domestic markets. As the company expands business operation in internet of things which takes smartphones as a mini data and demand processor controlling devices, the move is crucial to navigate fierce domestic competition. However, local regulation deserves Xiaomi’s serious consideration. During Xiaomi’s recent online special sales event in UK, the company was in criticism of manipulating online order-taking settings to prevent consumers from be able to purchase discounted products.

Xiaomi apologizes for misleading “Flash sale” ad when only 10 units were up for grabs – Gizmo China

What happened: Chinese smartphone maker Xiaomi’s expansion to the UK market hit a roadblock as its first promotional activity got really messed up. To celebrate its entry to the new market, the company launched a flash sale where its flagship models were offered for £1. Thousands of potential buyers were disappointed when the website told them it has “sold out” soon after it has opened. Enraged users called Xiaomi for an explanation on social media. Things got worse when one user find Xiaomi had programmed its website to “sold out” in its website code as soon as the flash sale kicked off. The company Tweeted out an apology via its official apology for the misleading terms.

Why it’s important: The European market is an important part of the globalization plan of Xiaomi, which is trying to expand beyond the market in China and Southeast Asia, where it has built a solid presence. Xiaomi has been expanding in Europe for quite some time now, the company had announced a number of retail stores in Europe this year, including stores in Italy and France, amongst other. The company may need extra efforts to remove the negative first impression in UK consumers.

China’s Xiaomi enters UK with phones, wristband and scooter – BBC

What happened: Xiaomi is opening a brick-and-mortar Mi Store in Westfield London that is due to open on November 18. The Chinese smartphone maker said the initial line-up includes three smartphones, a fitness-tracking wristband, and an electric scooter. Xiaomi’s flagship phone for the UK will be the Mi 8 Pro, which was unveiled for the first time outside of China in the UK capital yesterday.

Why it’s important: Although Xiaomi put a greater focus in China and other Asian markets, it has been making a foray into Western Europe since last November. The company currently has 10 stores operating in Spain and it expanded into France and Italy in May. Xiaomi is hardly alone in Europe. The on-going US-China trade tension has driven quite a few Chinese hardware makers to Europe, including One Plus.

In the second episode of the China Tech Investor Podcast powered by TechNode, hosts Elliott Zaagman and James Hull discuss a new addition to their watchlist with Rui Ma from the Techbuzz China podcast. They also discuss October, trading psychology, and recent earnings releases by iQiyi, Baidu and Alibaba.

As always, the hosts may have interest in some of the stocks discussed.

Please note, the discussion should not be construed as investment advice or a solicitation of services.

Watchlist:

• Tencent
• Alibaba
• Baidu
• iQiyi
• Xiaomi
• JD.com (new addition)

Guest:

• Rui Ma – @ruima, Techbuzz China podcast

Hosts:

• Elliott Zaagman – @elliottzaagman
• James Hull – @jameshullx

Podcast information:

• RSS Feed
• Music: “Hey Ho” by Steve Jackson, Royalty Free Music

Counterpoint Research released earlier today the latest report on global smartphone shipments.

The research shows a 3% annual decline regarding total global shipments. Counterpoint Research suggests that “this is the first time that the global smartphone market has declined for three consecutive quarters.”

Chinese manufacturer Huawei’s global shipments for the period hit 52 million, up 33% year-over-year, making the company the second largest one on the global shipment units list. Xiaomi, which just completed a 100 million global shipments goal for 2018 on October 26, recorded 35.7 million global shipments for the period, up 25% year-over-year.

Oppo and Vivo both report quarterly international shipments over 30 million, making the two and Xiaomi the wining Chinese manufacturers with their own “highest ever shipments in a single quarter”.

Lenovo, a Chinese brand well-known for PC technology, saw a 26% decline in shipment units, and a 25% decline in shipment market share.

Industry leader Samsung remained on top of the list in terms of shipment units (72.3 million) and shipment market share (19%), though both units and share declined year-over-year. Apple’s performance remains flat.

Another highlight of the report is top Chinese smartphone manufacturers’ declining reliance on domestic markets.

Xiaomi’s shipment growth domestically dropped 16%, whereas global shipment growth increased 83%. Xiaomi ranked 4th with a 9% global market share for the period on the global list, but was 38.1% behind Oppo and Vivo which both acquired 21% in-China shipment share on the domestic list.

As Huawei, Apple, and Xiaomi all released new models recently, a report on the 4th quarter and the whole 2018 year will be worth looking forward to.

Xiaomi doesn’t want Lyft using its electric scooters–TechCrunch

What happened: Xiaomi has sent a letter to US ride-rental company Lyft, demanding that it stop using its electric scooters for rental services. In the letter, Xiaomi complained that its brand had been associated with Lyft’s in advertising about the “shared scooters.” The smart device manufacturer also did “not condone Lyft’s unauthorized modification or retrofitting” of scooters, citing legal and consumer safety concerns. Xiaomi has said that it may follow up with legal action over the matter. In response, a Lyft spokesperson said the company is not aware of having used any suppliers’ trademarks in their ads. They added that “Safety modifications, including slowing scooter speeds, have been made to satisfy local regulatory guidelines.”

Why it’s important: Although electric scooter rental is still a fairly new phenomenon in the US, several companies have already entered the field. Among them, Lyft is currently a fairly small player, having only entered three cities so far. It’s not clear why Lyft was singled out, as it isn’t the sole company using Xiaomi scooters; American companies Spin and Bird also use the brand. The letter might be explained in part by Bird’s May announcement that it has an exclusive contract for Xiaomi scooters. However, another scooter rental company later told TechCrunch that they also have a contract, casting some doubt on that claim.

China Fingers Xiaomi, Suning.Com for Tax Dodges – Yicai Global

What happened: China’s Ministry of Finance (MOF) has flagged a group of listed companies for accounting errors, including smartphone maker Xiaomi, retailing giant Suning.com and online video portal Le.com. The regulator’s audit, which covered calendar year 2017, also highlighted key features of the internet sector, including its asset-light business model, the prevalence of interwoven equity and bond investments, separation of management structures from legal entities, and the lack of geographical limits of operations. As a result, several internet firms are funneling profits overseas and thereby evading taxes, the ministry claimed in a statement. In response, Xiaomi said it had already rectified the errors outlined in the report, and denied the allegation that it was transferring profits. Suning blamed poor company practices for the accounting errors.

Why it’s important: China’s internet is on the rise, becoming a major driver for the country’s economy. In the first eight months of this year, internet and related businesses have generated RMB 595.5 billion in revenue, up 20.7% year on year. Opinions are mixed as to how the sector should be treated in terms of tax policy, according to reports in local media citing expert Li Xuhong. Some think looser taxation policies should be adopted for the internet industry, while it is still in the take-off phase, Li said. Others believe the same standards should be applied across sectors to guarantee taxation equality, Li added. MOF’s move to point out some common problems in internet companies may indicate a tightening of taxation policy aimed at the industry.

TechNode is proud to welcome the China Tech Investor podcast to our network. The China Tech Investor podcast is a weekly show featuring Elliott Zaagman, writer and contributor to TechNode, and James Hull, a professional investor.

Each week, the two look at their watchlist and talk about what’s happening with listed Chinese tech companies.

On the inaugural episode of the China Tech Investor Podcast, hosts Elliott Zaagman and James Hull discuss their reasons for starting the podcast and identify the first five companies on their list of Chinese tech stocks to watch.

As always, the hosts may have interest in some of the stocks discussed.

Please note, the discussion should not be construed as investment advice or a solicitation of services.

Watchlist:

• Tencent
• Alibaba
• Baidu
• iQiyi
• Xiaomi

Hosts:

• Elliott Zaagman – @elliottzaagman
• James Hull – @jameshullx

Podcast information:

• RSS feed
• Music: “Hey Ho” by Steve Jackson, Royalty Free Music

The views and opinions discussed on this show do not necessarily reflect the editorial stance of TechNode.

On Tuesday, Umeng.com (友盟+) released a report on China’s smartphone market that reveals Oppo and Vivo, along with Huawei and its sub-brand Honor, dominated the domestic field from January through August of this year.

Apple wasn’t left entirely in the dust but the next-best foreign competitor, Samsung, didn’t make much of an impression in the rankings. According to Umeng’s chart of the top six smartphone brands, Oppo and Vivo were nearly head-to-head with 20.7% and 20.1% of the market, respectively.

Apple follows with a respectable 14.2%, trailed by Huawei. However, if Huawei and its ranking sub-brand Honor are combined, they beat out all other competitors with 22.6% of China’s smartphone market.

Together the top 6 brands took up a large majority of the entire market, fluctuating between a low of 82.6% and a high of 89.6%.

Image credit: Umeng.com

Umeng also ranked brands in order of new users, user retention, and a “competitiveness” measure based on the two previous values.

While Oppo and Vivo proved the strongest in attracting new users, Apple still outranked all other players in terms of user retention, despite a drop from last year. That gave it a boost in the competitiveness chart, where its 79.9 rating fell not far behind Vivo and Oppo.

Image credit: Umeng.com

Huawei, Xiaomi and Honor made up the next tier of top-rankers, while 360 vied with OnePlus, Smartisan, and Meizu (in that order) in the third tier.

In terms of the “competitiveness rating” of individual phone series, Vivo’s X and Oppo’s R ranked the highest, followed by the iPhone 7 line. Huawei and Xiaomi series performed similarly, lagged by Honor and in last place, Meizu.

Image credit: Umeng.com

In the overall market, Umeng reported that new smartphone prices fell mostly in the under-RMB 3,000 range, although RMB4,000-5,000 and under-RMB 1,000 saw new growth.

Not-so-surprisingly, phones and screens in the domestic market have continued to grow in size. Over one-half of new phones from January through August are 5.6 inches or bigger, while some 79% had screens that took up over 70% of the phone body.

Image credit: Umeng.com

And finally, new phones have seen an upgrade in features despite overall “sluggish” growth. Demand for NFC is gradually growing in first-tier cities. Front-facing cameras are now higher-quality than before, most likely reflecting the demand for better-looking selfies.

 China’s Xiaomi Aims Its Priciest Phone at Huawei and Apple – Bloomberg

What happened: Smartphone maker Xiaomi unveiled the MIX 3—it’s most expensive and advanced model so far. With a starting price at RMB 3,299, the new device will go head-to-head with the older iPhone X and Huawei’s P20. The MIX 3 will go on sale in November.

Xiaomi also announced that it expects smartphone shipments to hit 100 million marks by the end of October— two months ahead of its estimates.

Why it’s important: Xiaomi is putting itself against other premium phone makers like Apple, Huawei, and Samsung. With the new MIX 3, the smartphone maker has a better chance at increasing its presence in Europe and the US—the biggest premium phone markets. Xiaomi has been putting more focus on overseas markets post IPO.

雷军宣布：将在故宫举行小米MIX 3发布会–搜狐

What happened: Xiaomi fans in Beijing are no doubt squealing over founder Lei Jun’s announcement that the Mix 3 model will officially launch in the Forbidden City. This morning, Lei posted an event flyer on Weibo with the brief caption, “#Xiaomi Mix 3# launch event, 10/25, see you at the Forbidden City!” (our translation). According to the poster, the event appears to be a partnership between Beijing’s Palace Museum and Xiaomi and will be streamed live on 70 platforms. The theme of the party is in keeping with the Mix 3’s advertising, which has heavily featured the slogan “Art x Technology.”

Why it’s important: With most if not all of the Mix 3 features already “leaked,” the launch event isn’t likely to hold surprises for Xiaomi faithful. However, it may help to build further hype for a device that’s been advertised as one of the world’s first 5G phones, with a maximum RAM of 10 GB. In addition, Xiaomi’s promo video shows a sliding, bezel-less screen that activates with a slight push of a finger. 108,000 units have already been pre-sold on JD.com, and the latest announcement may spur even more fascination with the upcoming model.

Xiaomi Is Reportedly Trying to Shift Staff Out of Beijing–Yicai Global

What happened: According to an alleged internal document circulated online, Beijing-based Xiaomi is offering incentives for staff to move to its Wuhan and Nanjing offices. Those who make the move can keep their Beijing-level salary – likely significantly higher than average for a second-tier city  – and receive an RMB 30,000 relocation bonus, as well as get help in buying a local home.  In addition, Xiaomi would provide over two weeks of hotel accommodation at RMB 400 per night and the opportunity to rent “talent apartments” at subsidized rates. In return, workers must stay at their new office for at least two years.

Why it’s important: After going public in Hong Kong this year, Xiaomi may be feeling secure enough to shift more staff out of the first-tier tech hub of Beijing. In doing so, the electronics manufacturer can not only reduce the cost of employment but also take advantage of various perks that second-tier cities are offering to lure in companies. It’s not the first tech giant to do so: this past summer, due to high costs fellow smartphone maker Huawei began relocating staff of several departments from Shenzhen to the Guangdong factory town of Dongguan.

Chinese smart devices maker Xiaomi is facing internal turmoil when on October 11 the official Weibo of its Nanjing flagship store posted a disturbing post that channels staff dissatisfaction over its management, local media is reporting.

“From today, there will be no Nanjing flagship Mi Store any longer. You [probably referring to Mi Store management] are trampling on the bodies our brothers who work for their meager incomes. Xiaomi is no longer the coolest company in my mind,” says the blog (our translation), which also referred to company’s top management such as founder Lei Jun and company president Lin Bin. The post was removed shortly on the same day.

“We found that the microblog is posted by the employee who operates our Weibo account to vent personal resentment. But the reason behind this incident is still under investigation,” the company told local media.

Under increasing competition from local rivals such as Oppo and Vivo, Xiaomi, which first boomed for its online-only sales model, was forced to set up brick-and-mortar stores to keep up with a changing market, which puts a priority on offline experiences.

At Xiaomi’s annual meeting held in February this year, Lei Jun says the company plans to set up 700 Mi Stores by the end of this year and the company is already halfway to the goal with 500 stores as of present.

Despite the impressive numbers, Xiaomi’s sprawling offline expansion has been shadowed by some organizational problems, which results in internal strains.

Actually, this is not the first time for Xiaomi to face negative coverage for its Mi Store operations. The owner of a Xiaomi franchise store, who was a hardcore fan of Xiaomi, sued the company for not fulfilling the promise of inviting him to a dinner with Lei Jun after he met the sales target.

To some extent, organizational problems aren’t specific to the company’s offline unit. In a previous statement, the smartphone maker announced plans to place younger executives in leadership positions, a step which may help to remove organizational obstacles.

Just three months ago, Xiaomi’s founder Lei Jun promised at a celebration banquet after the company’s IPO that “investors who bought Xiaomi stocks on the first day of the listing will make twice as much money.” These days, however, Xiaomi’s stocks are far from fulfilling that promise.

Since its mid-July peak, Xiaomi shares have fallen more than 40% while its market value has shrunk dramatically.

Shortly after its IPO on July 9, Xiaomi’s market capitalization briefly took over China’s e-commerce platform JD.com rising to HK$443 billion ($56.4 billion) on July 11 breaking into Hong Kong’s top 10 companies. Xiaomi’s current market cap currently stands at HK$288 billion.

Xiaomi was listed in Hong Kong on July 9 for HK$17 rising to a peak of HK$22 shortly after. Yesterday (October 11), the company’s stock plunged nearly 10% closing down 7.99% at HK$12.66. The Chinese smartphone maker’s stocks opened at HK$12.72 today.

The downward trend is not limited to the smartphone maker with many Chinese tech stocks facing a rout partly due to the US-China trade war. On Monday, Tencent’s stocks dropped to a 15-month low erasing almost a third of the company’s market value ($216 billion) since its peak in January. On Wednesday, Alibaba’s stocks hit a 52-week low.

Chinese tech stocks feel early winter chill

Xiaomi’s road to IPO, however, has been rocky even before the trade tensions. The world’s fourth-largest smartphone maker priced an IPO that gave it a valuation of about $54 billion—half of what was originally hoped for.

The company makes 70% of its revenues from smartphones. This has caused concern if the company can compete with the likes of Apple and Samsung and whether it can continue to capture the market among low-priced competitors such as Oppo and Vivo.

Although Lei Jun boasted on Monday with the impressive sales numbers of its new smartphone model Mi 8—6 million units since June— Xiaomi’s overreliance on hardware has made investors jumpy. JP Morgan Chase recently reported that the company’s mobile phone shipments were unlikely to increase significantly citing sluggish growth in demand.

To counter that, Xiaomi has been trying to reinvent itself as an online service provider. Since its IPO, the discussion of “who is Xiaomi” has many trying to compare it with Apple, some with Amazon, and some even with Muji after the company included sofas, vacuum cleaners, and underwear into its offerings.

Xiaomi also announced today that it will be relocating some of its staff from the capital of Beijing to Nanjing and Wuhan. The Wuhan office was set up last year as a “super R&D headquarters” with 10,000 staffers.

The new move seems to fit into the overall makeover Xiaomi is going through. In September, the company announced plans to put younger executives in leadership positions. Lei Jun said that the company will be undergoing a series of internal restructuring. On top of the shuffling of top management, Xiaomi will establish 10 new business units: four internet business units, four hardware products units, a technology platform, and an e-commerce platform.

小米手环测卫生纸心率，怎么就侮辱智商了？–搞机哥

What happened: In a Zhihu forum thread titled “What things make you feel like your IQ is being insulted?” one user replied with a video of Xiaomi’s latest smartwatch, the Mi Band 3, strapped around a toilet paper roll. The clip apparently shows the watch taking the pulse of the paper, showing a heart rate of 86 bpm. The response was shared across social media, leading other netizens to do toilet paper tests on their Apple, Huawei, and Samsung smartwatches, with similar results. The original tester later updated his Zhihu post, adding that he suspects smart watch sellers of including bug-prone features in their products in order to improve user experience or because they “aren’t confident” enough in their watches.

Why it’s important: As the author of the article points out, accidentally taking the pulse of a toilet paper roll doesn’t necessarily negate the accuracy of smartwatches’ heart rate monitors. So far scholarship seems to show that at least some brands are fairly reliable, and Apple even gained FDA clearance for two new heart monitor-related features last month. However, as the incident shows, many consumers still don’t fully understand the technology behind the monitors, which may lead to doubts over their efficacy. Chinese consumers may be additionally on edge thanks to recent health scandals such as the widespread distribution of ineffective vaccines.

After smart band maker Huami, another Xiaomi partner completed its IPO within just one year. Chinese smart home product maker Viomi (云米) landed on Nasdaq September 25 pricing its stocks on the lower end at $9 per share.

Viomi’s shares closed at $9.08 at the first day allowing the company to raise around $103 million through its IPO.

Founded in 2014, the company offers IoT products and smart home appliances which can be controlled not only through an app but also by voice command. The company developed its own smart control platform IoT@Home which has attracted 1.2 million users by the end of June 2018.

A popular product among its 40 product lines is a smart water purifier which made more than 40% of Viomi’s net revenues in the first half of 2018. The company also holds around 1000 patents.

Xiaomi not only supports startups within its ecosystem financially but also helps them to the position in the market. The smartphone maker even has its own crowdfunding platform. This, however, has cast doubt on whether these startups can thrive on their own.

Much like with Huami that debuted on the NYSE in February, one concern for the market is Viomi’s dependence on Xiaomi. Some Viomi investors are also Xiaomi’s including Sequoia Capital. Viomi’s cooperation with Xiaomi is due until December 2018, with no automatic renewal provision.

The company stressed that they would try their best to retain the cooperation with Xiaomi, and warned that any shift in the Viomi-Xiaomi relationship may result in material changes. Chen Xiaoping, founder and CEO at Viomi, thanked Xiaomi’s Lei Jun on the day of the IPO. The company’s net revenues from sales to Xiaomi in 2017 was RMB739.5 million, while the figure for the first half of this year is RMB651.5 million already.

The company said for the first half of 2018, Viomi’s net sales revenue hit RMB 1 billion ($160 million), up 284.4% increase compared to the same period in 2017. Viomi’s net profit for the first half of this year surpassed RMB 70 million, but the company still hopes to use the money the IPO raised to fill the hole of a cash loss of around RMB 18 million made during the same period.

“[The IPO would be] a big alleviation [of current fiscal pressure],” as local media Tencent Tech quoted Guo Meide (in Chinese), vice president at All View Cloud, a cloud-based big data solution provider specializing in the smart home sector.

用户发现小米在英文版 MIUI 的系统设置里植入广告 – TechNode Chinese

What happened: Xiaomi’s popular Android ROM MIUI is drawing complaints from overseas users who found increasing advertisements in the system after updating to the latest 8.9.13 version. A Reddit user says that ad could be found everywhere in MIUI music player, apps and system setting interface.

Why it’s important: The ROM has been praised for its simple design and features, however, it also gets its fair share of criticisms, especially about the advertising policy of the company inside MIUI. Due to the abundance of ads, MIUI is jokingly referred to as “ADUI” by some Chinese users. Although most of the ads can be turned off in settings, it would inevitably harm user experience due to the extra time and attention. Putting ads in apps is a common practice in China, its impact on overseas users, who are not accustomed to the experience, might be greater.

In Wake of Alibaba Succession News, Xiaomi Puts Younger Executives in Leadership Spots– Caixin Global

What happened: Chinese smartphone maker Xiaomi announced plans to put younger executives in leadership positions. In a dozen new appointments made by the company, a group of post-80 executives with an average age of 38.5 years old were named as head of various departments of the company to handle day-to-day operations.

Why it’s important: Xiaomi’s management shift comes on the heel of Alibaba’s management succession plan, which was announced last week. While China’s millennials are becoming its major consumer base, enterprises need to have young decision makers to keep pace with their customers. But for Chinese companies, especially those started around the beginning of this century, their culture is more about the personal identity and culture of the CEO. The tech giants have some serious work ahead for management transitions.

小米启动上市后首次重大组织架构调整：发力互联网和 IoT – 动点科技

What happened: Lei Jun, founder and CEO of Xiaomi, has announced to staff that the company will be undergoing a series of internal restructuring. On top of the shuffling of top management, Xiaomi will establish 10 new business units: four internet business units, four hardware products units, a technology platform, and an e-commerce platform. Lei also noted that the company will put more focus on fostering young managerial talent.

Why it’s important: This is the first internal shake-up after the company’s initial public offering in July. The company is facing no shortage of challenges following its IPO–particularly in the smartphone business where they generated 70% of its revenue. Xiaomi is now facing increasing competition from industry players like Oppo in both the domestic market and overseas. After the internal restructuring, the company will likely be directing more resources into IoT and Internet-related businesses aside from its smartphone business.

Xiaomi backs Indian consumer lending startup ZestMoney in $13.4M deal—TechCrunch

What happened: Chinese smart hardware maker Xiaomi led a $13.4 million round in Indian consumer lending startup ZestMoney. The new capital is an extension to ZestMoney’s recently closed $6.5 million Series A and it takes the company to $22 million raised to date.

Why it’s important: In wake of a globalization initiative, Xiaomi is poised for deep-dive in India where the smartphone maker has recorded impressive growth so far. The investment comes after Xiaomi announced its plan to invest $1 billion in 100 Indian startups by 2022. Fintech is an important area for Xiaomi. The company has invested in several fintech startups including Chinese P2P lending site Jimu Box, online brokerage startup Tiger Brokers, online financial service Caogentouzi, as well as another Indian lending platform KrazyBee.

China Xiaomi’s second-quarter revenue soars 68 percent, driven by smartphones, internet devices – Reuters

What happened: Xiaomi’s second-quarter revenue surged 68.3 percent to RMB 45.3 billion from RMB 26.88 billion, lead by smartphone sales and strong performance of connected devices. Xiaomi reported RMB 30.6 billion in revenues from smartphones and RMB 104 billion from connected devices. The company reported a net profit of RMB 14.63 billion, compared with a net loss of RMB 11.97 billion in the same period last year.

Why it’s important: Shares of Xiaomi jumped 3% to HKD18.22 after market opened in Hong Kong Thursday morning, implying that investors are, at least, not disappointed by Xiaomi’s performances. Xiaomi has been trying to pivot from a smartphone seller to an internet-based firm of which the revenues will mainly come from advertising. Xiaomi’s efforts seemed to be paying off as related revenues grew to RMB 4 billion, a 63.6% increase.

小爱同学月活跃设备破3千万 累计唤醒超50亿次– NetEase

What happened: Xiaomi announced that its voice AI assistant Xiaoai provides service through 30 million monthly smart devices, up over 500% in over the past six months. Xiaoai was “summoned” over 1 billion times this July with the total summoned times over 5 billion.

Why it’s important: Xiaoai was first introduced by way of Xiaomi’s smart speaker last year. But it’s now included on various Xiaomi hardware including Xiaomi’s smartphone, smart speaker, robot cleaner, etc., serving as a connection point for the company’s smartphone solutions. China’s AI assistant sector is relatively untapped while Google is still finding its way back to China and Amazon’s Alexa and Apple’s Siri only provide tarnished service in the country due to language and cultural barriers and lack of integrating hardware. Local tech giants flood in to grab the market. Alibaba rolled out AliGenie voice assistant last year; Baidu launched Raven H and mid-range smart speaker Xiaodu Zaijia; Huawei is developing its own voice assistant for China.

Xiaomi creates new Poco brand to take on Samsung, Huawei in premium smartphone market – South China Morning Post

What happened:  Xiaomi is scheduled to launch a separate smartphone brand Poco to enter world premium Android phone competition. The product will debut in India on August 22. This is not Xiaomi’s first attempt to bring on premium products. Xiaomi launched Mi Mix 2, a model priced around $400, but received a tepid response in India.

Why it’s important: It remains to be seen whether the launch of Poco is a marketing strategy or a genuine new design of product. The company’s premium model Mi Mix 2 received no satisfactory market response in India. To truly enter the high-end smartphone competition, Xiaomi has to show new technology and premium user experience. Meanwhile, if Xiaomi wishes to grab market share currently owned by Samsung, Huawei, or the iPhone, breaking those brands’ existing user stickiness and establishing Xiaomi’s own takes time.

Xiaomi Music has reached a copyright transfer agreement with NetEase Cloud Music, continuing the trend of music sharing among platforms after the government banned unlicensed music streaming in 2015.

The agreement will give Xiaomi access to music from HIM International Music and Tianyue Media, including such artists as SHE, Hebe Tien, Yoga Lin, Power Station, and Where Chou.

While Xiaomi Music is not a dominant player in the market, it was the first Chinese smartphone manufacturer to obtain licensing rights to Warner Music’s catalog, shortly after signing agreements with Sony and Universal.

With a smartphone penetration rate of 92 devices for every 100 individuals, China’s music streaming industry is enormous. Over 86% of users listen to music on their mobile phones, creating an increasingly competitive market for music streaming businesses, which is dominated by players including Kuguo Music and QQ Music.

This competition has resulted in various license infringement lawsuits and counter-suits between QQ Music, NetEase Music, Alibaba’s Xiami Music, and Kuguo Music, and competitors in the market. The turbulence eventually led to the government enforcing the previously mentioned music copyright regulations in 2015.

However, since then there has been a growing number of licensing agreements between platforms. Tencent Music and Entertainment (TME) teamed with Ali Music Group in 2017 on music copyrights. The company then reached a cross-licensing agreement with NetEase Music following copyright disputes.

Total revenue for the music streaming sector amounted to $522 million in 2017 and is expected to grow by 130% to reach nearly $1.2 billion by 2022. The average revenue per user (ARPU) will also see triple-digit growth during the same period, increasing from $0.84 to $1.69.

小米再度破发 “翻倍”将成泡影？ – 上海证券报

What happened: Shares of Chinese smartphone maker Xiaomi dropped below HK$16.8 issue price during an intraday trade on August 2. Xiaomi went public in Hong Kong on July 9, and its shares jumped below the issue price on the IPO day. Lei Jun, CEO of the company, once promised investors who bought Xiaomi shares on the IPO day that their return would double in the future.

Why it’s important: The instability of Xiaomi share prices implies market concerns for Xiaomi’s business, which is in contrast with Lei Jun’s optimism. Lei Jun considered Xiaomi as a big all-round corporation that specializes in hardware, e-commerce, and the Internet. Lei Jun once said Xiaom’ valuation should be that of Tencent multiplied by that of Apple, which, unlike Xiaomi’s tumbling shares, just breached $1 trillion stock market valuation.

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