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Asia Tech Review: May 20 2019

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Welcome back, This week the newsletter focus is on America vs Huawei and the key takeaways you need t
 
May 20 · Issue #115 · View online
Asia Tech Review
Welcome back,
This week the newsletter focus is on America vs Huawei and the key takeaways you need to know.
On the news front, last week saw a triple earnings slam from BAT in China – where Alibaba and Tencent’s investor calls overlapped, and Baidu didn’t do well – a SoftBank Vision Fund investment in India, two new investment funds in Southeast Asia, and an explainer of just how big Twitter is in Japan.
I’ll see you next week – enjoy…

4 key details from the US crippling of Huawei
The Trump administration dropped the hammer on its hardest salvo against Huawei, this past week. The US government has added Huawei to a blacklist that prevents it and its affiliate organizations by buying tech and components from US suppliers without government approval.
I read extensively around the news and, whether you agree or not, there are four critical points that will ultimately weigh on the impact.
US component sale ban, ending $11 billion in trade
First up, a real blow for Huawei is that US component makers are now banned from doing business with the Chinese firm. That critical became Huawei relies on them to build its telecom network gear which is bought and used by mobile operators, for example infrastructure that enables 5G networks.
That’s the business Huawei is best known – and feared – for and it accounted for just over half (52%) of its 721 billion CNY ($107.4 billion) revenue in 2018 (alongside enterprise-related sales), according to numbers released by Huawei earlier this year. Technically, the consumer device unit is now the largest single segment at $52 billion in annual revenue but more on that later.
Huawei's 2018 sales as reported by the company, which says KPMG is its auditor
Out of fear of a ban, Huawei has reportedly stockpiled a year’s supply of components, sources told The Nikkei, and it is moving to find new sources to offset a reliance on the US. That’s not an easy thing to do at such short notice.
Those component makers, for example, make $11 billion in revenue each year selling to Huawei, according to Huawei board member Catherine Chen in an op-ed in the New York Times.
“A total ban on Huawei equipment could eliminate tens of thousands of American jobs,” wrote Chen.
Impact on rural America
The complication isn’t just that existing trade will be disrupted, but there are already millions of Americans who rely on Huawei. While the current administration has made no secret of its disdain for Huawei – and before it ZTE – but Huawei kit has used for infrastructure in parts of rural America.
The SCMP looked at one such rollout in Pennsylvania where a service provider that supplies high-speed broadband to 1,000 customers said the cost of replacing its Huawei tech would be “devastating” – the costs would set its business back years and impact customers.
Huawei kit is only said to be behind around 1% of US broadband deployments – many because the US government has long harboured concerns that turned major operators off – but usage spikes in rural areas, as the SCMP report notes.
“About 25 per cent of Rural Wireless Association (RWA) members use telecoms equipment from prohibited Chinese companies named in the NDAA, the Washington DC-based trade association said in its comments to the FCC,” the paper wrote.
Further, the US is reportedly considering easing restrictions for existing Huawei customers, according to Reuters, such is the potential impact.
Huawei may need its Android replacement
The latest wrinkle involves Google which, as part of the US government blacklisting, will seemingly now be prevented from offering Android to Huawei.
Google hasn’t commented officially on the situation, but Reuters reported via sources that “Huawei will only be able to use the public version of Android and will not be able to get access to proprietary apps and services from Google.”
It has already been reported that Huawei is working on an alternative to Google – again, well aware of future risks – and we might get a look at that sooner than we think if this part of the ban – which covers software – is indeed implemented.
Can the US offer others an alternative?
My colleague Jonathan Shieber wrote a short but compelling post that details the challenge of convincing other governments to drop Huawei.
“Huawei continues to make inroads in nations across the emerging markets of Latin America, Eastern Europe, Southeast Asia and Africa, where demand for connectivity is on the rise. Those are regions where the U.S. has plenty of strategic interests, but America’s ability to sway public opinion or entice governments to act against Chinese networking companies could be severely limited by its inability to offer meaningful incentives or alternatives to them,” he wrote.
China’s Belt and Road initiative – which hasn’t all been a success, as an SCMP op-ed pointed out earlier this month – is an interesting pillar that Huawei may lean on.
But speaking for Southeast Asia anecdotally, a lack of US interest coupled with an increase in relations and investment from China has seen the region seemingly turn its allegiance to Beijing, or at least become more open to both sides. And that’s just a personal observation from my decade-and-a-little in Thailand.
China
Baidu reports first quarterly loss since 2005
Luckin raised up to $650 million from its Nasdaq IPO with shares closing up 20% on the first day of trading link
Facebook is said to be considering an investment-led approach to China – that’s not unlike what Google has done in recent years link
Alibaba earnings were a beat and the company returned to growth – executives are bullish on growth as China’s rural continue to come online link
Tencent had a weird quarter, mixing record profit with its slowest growth since going public – but it appears to have weathered the worst in terms of China’s ban on monetizing games link
Huawei officially got into database management following a scoop from The Information last week link
💸Deals 💸 JD.com invested $55M in Jiangsu Xinning Modern Logistics (link) Alibaba invested $635M in furniture firm Macalline (link)
India
Grofers raises $200M led by SoftBank's Vision Fund.
Things are looking up for startup investment in India link
India’s mobile wallet companies are “teetering on the brink of obsolescence” link
A $14 software tool is helping people overcome WhatsApp controls to send out election-related content link
A clutch of global tech firms are putting their Indian plans on hold while they seek assurances over the government’s recently introduced e-commerce law and potential new rules around data link
Google is planning to a new project that’ll bring in-app cashback incentives powered by its Google Pay service – smart because developers want ways to engage users and this will help grow Google Pay link
A look at how Google’s Next Billion User division and its work in India link
Amazon now offers flights in India link
💸Deals 💸 Ikea is poised to invest in Livspace but the deal size isn’t known at this point (link)
Japan
How Twitter became big in Japan 🔒
Sony and Microsoft are exploring a gaming alliance link
Business card management service Sansan is going public link
A little later than most but Line has finally cloned Snapchat link
Japan is running out of phone numbers link
Japan is going all in on QR codes for payments with help from China link 🔒
The Nintendo Switch has outsold Sony’s PS4 in Japan link
Korea
Samsung and Huawei buried their patent hatchet link 🔒
LG has its own AI chip, adopting a strategy Amazon, Facebook and Apple are also pursuing link
Southeast Asia
Vertex Ventures hits $230M first close on new fund for Southeast Asia and India
A profile of rebate startup ShopBack, which raised $45M earlier this year link
Go-Jek is eyeing an expansion into Malaysia link
Honestbee suspended its food delivery and laundry services in Singapore, its HQ, but its core grocery service remains unaffected link
Tokopedia is reportedly in talks to buy agritech startup Sayurbox link and also wedding market place Bridestory (link)
💸Deals 💸 Gree Ventures is now Strive and it has a $130M fund for Southeast Asia and India (link) YouTrip, a challenger banking service in Singapore, raised $25M (link) Venture debt fund InnoVen Ventures raised $200M more for its coffers (link) Saas startup Advotics raised $2.7M (link) BandLab bought music mags NME and Uncut (link) Geniebook raised $1.2M (link)
Outside of Asia Tech
Taiwan legalized gay marriage in what is a first in Asia 🏳️‍🌈 link
An investigation found that the supply chain of a number of Western companies – including Kraft Heinz, Adidas, Coca Cola and Gap – includes factories tied to China’s muslim ’re-education’ camps in Xinjiang link
The knives are already out: A prominent investor claims that the Uber of today lacks innovation link 🔒
Outside of tech: A great read on how a unique real world monkey lab in Puerto Rico is helping us learn more about how humans deal with tragedy link
Photo of the week
Owen Williams ⚡
Anyway, glad that we're fighting with

*checks notes*

...the company that runs a good chunk of the understand internet cables https://t.co/qxEM77krIy
3:55 AM - 20 May 2019
Worth noting that Huawei’s is a major investor in undersea internet cables
Upcoming events
  • E27 Echelon: May 23-34 in Singapore link
  • Tech Sauce: June 19-20 in Bangkok, Thailand link
  • Ignite: 24-25 June in Manila, Philippines link
  • Innovfest Unbound: 27-28 June in Singapore link
  • Wild Digital: 3-4 July in Kuala Lumpur, Malaysia link
  • Rise: July 8-11 in Hong Kong link
  • Deal Street Asia’s PE-VC Summit: 17-18 September in Singapore link
  • Tech In Asia Conference: 8-9 October in Jakarta, Indonesia link
If you run a tech event not listed here or want to recommend an addition, please email me
That's all for now, see you next week!
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