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Tencent’s Stock Tumbled after Trump Banned WeChat

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that, as soon as U.S. President Trump officially signed the executive order to ban WeChat (in 45 days), the stock price of WeChat’s owner, Tencent, instantly suffered a free fall of 10 percent on the Hong Kong Stock Exchange (HKSE). The loss of market value was the equivalent of HK$500 billion (around US$64.5 billion). In the meantime, the bad news also brought down SMIC (China’s largest chip maker) by over ten percent, Alibaba by six percent, and Xiaomi by five percent. These were all happening with the background of Mike Pompeo’s repetitive mention of the so-called Clean 5G Network plan on August 5. This is part of the U.S. effort to remove Chinese-made “untrusted” apps from the U.S. digital networks. The Chinese Ministry of Foreign Affairs expressed its strong opposition to these unfair political moves designed solely to sustain the U.S. monopoly in the high-tech industry. The new U.S. executive orders are directly against market rules and are a threat to the safety of the global supply chain.

Source: Sina, August 7, 2020
https://finance.sina.com.cn/stock/hkstock/marketalerts/2020-08-07/doc-iivhuipn7334222.shtml

Huawei Faces Kirin Chip Reserve Shortage Due to U.S. Sanctions

On August 7, at the “2020 China Info 100 Summit,” Yu Chengdong, CEO of Huawei’s consumer business, admitted that, due to U.S. sanctions, Huawei will not be able to produce new powerful chips. Huawei’s flagship mobile phone Mate40 will be released next month. The Kirin 9000 chip will be the last high-end Kirin chip and Huawei will stop its production after September 15. Chinese media said in May of this year that the key chips that Huawei has stocked could last for two years. However, on August 7, Yu said that, because of the sanctions, the inventory of chips will be insufficient to meet the demand. The sales of Huawei mobile phones this year is therefore expected to be lower than last year. Yu also acknowledged that the upcoming Mate40 will not be accepted in the west because it cannot connect to the Google series of services. That is because of Google’s withdrawal of Huawei’s Android license last year.

In addition, the US, the U.K., and Australia announced sanctions this year; Huawei is prohibited from participating in the 5G networks in their countries. New Zealand also rejected a wireless communications company’s decision to use Huawei equipment. Japan’s Yomiuri Shimbun reported that Japan will follow the U.S. to extend the exclusion of products from Chinese telecommunications equipment manufacturers including Huawei and ZTE.

Source: Epoch Times, August 7, 2020
https://www.epochtimes.com/gb/20/8/7/n12314739.htm

Samsung Closed Its Last PC Factory in China

Voice of America (VOA) Chinese Edition recently reported that, on August 1, Samsung announced  that it is closing its last personal computer manufacturing factory in China – Samsung Electronics Suzhou Computer. Over 800 employees may see their contracts end. The Suzhou factory was established in 2002. It is Samsung’s only laptop manufacturing factory in the world. Last year, Samsung closed its last cellphone manufacturing factory in China and moved to Vietnam. That closure had a major economic impact locally. Now Samsung has only two factories left in China. One makes LCD displays and the other makes DRAM memory chips. Experts pointed out that, in the past two years, with the trade war, the coronavirus pandemic, and the worsening U.S.-China relations, the global supply chain is rapidly moving out of China and moving to countries such as Vietnam, India and Mexico. The trend is especially clear for companies from the United States, Japan, South Korea and Europe. At the same time, China’s low labor cost advantage has been weakening as well.

Source: VOA Chinese, August 1, 2020
https://www.voacantonese.com/a/samsung-to-halt-production-at-its-last-computer-factory-in-hina/5526722.html

Three Major Portuguese Telecom Operators Refuse to Use Huawei 5G

Well-known Chinese news site Tencent News recently reported that all three Portuguese telecommunications operators, NOS, Altice and Vodafone, announced they will not use Huawei’s 5G technology in their 5G networks. This is the fourth European country, after Britain, France, and Italy, to refuse to use Huawei 5G. The three companies explained that the reason for their choice was purely technical. The decision was made despite an estimated total financial loss of 1.1 billion Euros and a no-risk conclusion of a government risk assessment. In the meantime, Huawei has lost its primary chip supplier TSMC, due to the U.S. ban based on the use of U.S. technology. It appears Huawei is slowly losing the entire European market. The latest data showed that the European company Ericsson has signed 99 contracts for 5G deployments. This achievement surpassed Huawei, making Ericsson the world’s number one 5G supplier.

Source: Tencent News, July 31, 2020
https://xw.qq.com/partner/standard/20200731A0UIIJ/20200731A0UIIJ00?ADTAG=standard&pgv_ref=standard

China’s Chip Maker Saw Its Stock Price Fall; Lost 24 Percent in First Week

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that China’s top semiconductor manufacturer SMIC had its IPO in Shanghai on July 16. One week later, the stock price dropped by 24 percent. SMIC’s stock in the Hong Kong Stock Exchange fell 33 percent at the same time. With the United States imposing sanctions on Huawei, SMIC is Huawei’s only hope for its critical chip supply. However, SMIC’s technology is three generations behind the market leader – Taiwan’s TSMC, which was Huawei’s primary chip manufacturer. SMIC, headquartered in Shanghai, voluntarily withdrew from the U.S. stock market in June 2019. Between 2005 and 2010, SMIC was accused of stealing TSMC’s intellectual property and settled the lawsuit by paying TSMC nearly US$400 million and surrendered eight percent of its company’s stock to TSMC.

Source: Sina, July 25, 2020
https://bit.ly/3g4065E

Apple’s Second Largest Supplier Plans Move to India

Well-known Chinese news site NetEase (NASDAQ: NTES) recently reported that Pegatron, Apple’s number two manufacturing supplier, is setting up a new factory in India. Pegatron has been looking for a proper location for at least its partial iPhone manufacturing capabilities. Now the company has reportedly registered a branch in India. Another place of interest for Pegatron was Northern Vietnam. Among the three Apple iPhone manufacturers (the other two are Foxconn and Wistron), Pegatron is the only one that does not manufacture in India. Half of Pegatron’s business depends on orders from Apple. The new Pegatron branch was registered in Chennai in eastern India. However, the actual factory location is still being discussed with multiple Indian provincial governments. Once settled, Pegatron will move its equipment. The Indian government has been pushing its “Made in India” strategy for a while now. Back in June, the Indian government announced a US$6.6 billion plan to attract top cellphone manufacturers to invest in India. The goal is to reach a US$190 billion cellphone manufacturing capacity by 2025. India’s current smartphone industrial output is only US$24 billion.

Source: NetEase, July 18, 2020
https://tech.163.com/20/0718/14/FHQSSEPI00097U7S.html

Wechat Article: How Can China Win the Sino-US Technology War If the Chinese Academy of Sciences Is in Constant Trouble?

On June 15, 90 out of 180 researchers from the Institute of Nuclear Energy Safety Technology of the Hefei Institute of Material Science, Chinese Academy of Sciences quit their job on the same day. The news topped the search results in China for a number of days. The Chinese Academy of Sciences website announced that Vice Premier Liu He was urged to launch an investigation into the incident. On July 17, the party cell of the Chinese Academy of Sciences formed a special task team and arrived at the Hefei Institute for an on-site investigation. The initial public information suggested that the incident was related to the former head of the Hefei Institute because most of the researchers went to join him at a different nuclear energy and technology research institution called the “Frontier Development of Science (中科凤麟 http://www.fds.org.cn).” Tencent posted a question asking for comments on why 90 scientists left the Hefei Institute. One of the answers received most of the “likes.” It stated, “There have been no scientific research achievements there even though the institute has a big name. All you do is flatter other people and run unrelated chores including playing volleyball with the boss. Front-line researchers who want to display their talents don’t have the opportunity. People are sidelined if they do not cater to the leadership. Those who couldn’t stand it all left.”

In recent years, there have been an increasing number of research institutions that have not been able to retain talented people. People often complain about receiving low pay and benefits, lacking career advancement, working under high pressure, having long working hours, and dealing with complicated guanxi (inter-personal networks) and bureaucracy. According to the data from the Minister of Science and Technology, China’s total R&D investment in 2019 was 2.17 trillion yuan (US$0.31 trillion). This accounted for 2.19 percent of GDP, which is roughly equivalent to the EU average. However there have been increases in news reports on mishandling and waste of the R&D funding as well as excessive overhead, which is allocated to support a multi-layer bureaucratic system.

A Wechat article stated that, as Huawei is battling with an Eight-Nation Alliance, the failure rate of rocket launches is significantly higher than it was in the prior year and the U.S. could block jet engine purchases. People are therefore concerned about how China can win the Sino-US technology war if the Chinese Academy of Sciences is in constant trouble.

Source: Wechat, July 21, 2020
https://mp.weixin.qq.com/s?__biz=MzA3NzIxNzI4Mw==&mid=2671013850&idx=2&sn=cedd23c72e121395e92dc42a365c79b1&chksm=8595a4b6b2e22da0d34de58461f97316196f5eced680c6ce0236c61143002988e43daa8db0ed&scene=27#wechat_redirect

Top Apple Supplier Foxconn to Invest $1 Billion in India

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that, per a strong request from Apple, its top supplier Foxconn is about to invest US$1 billion in Southern India to expand it manufacturing capacity. With the trouble of trade disputes between China and the United States, as well as the coronavirus impact, this is part of Apple’s quiet plan of moving its manufacturing center out of China. According sources familiar with the plan, Foxconn will establish a new factory in Sriperumbudur – 50 kilometers from Chennai. The factory will mainly be used to assemble the iPhone XR. The investment plan will create around 6,000 new jobs. Some of the other iPhone models currently made in China will move to this new factory as well. Currently Foxconn already has some capabilities in India  to assemble low-end iPhones. Foxconn refused to comment on any news regarding its customers and their products. Apple did not respond to this report either.

Source: Sina, July 12, 2020
https://finance.sina.com.cn/stock/s/2020-07-12/doc-iivhvpwx4949394.shtml