Alibaba backtracks and Altman speaks

Hello, this is Kenji from Hong Kong.

Tencent Holdings, the most valuable mainland Chinese listed company, came under the spotlight this week in an unexpected way — via an Instagram post by Agnes Chow, a prominent Hong Kong pro-democracy activist.

Chow said in a post late Sunday night that she had been forced to pay a visit to Tencent’s headquarters in Shenzhen, accompanied by five national security officers from Hong Kong. According to her, the trip was a precondition for getting her passport back so that she could leave to study in Canada.

Chow was convicted of participating in an unauthorised assembly during protests in 2019 and had been under strict bail terms since being released from prison in June 2021. In Sunday’s message, posted from Toronto, she said her visit to Tencent had been arranged to make her “understand the ‘development of science and technology of the motherland’” .

Her revelation comes at a time when economists and analysts are struggling to find positive signs in the Chinese economy and markets, including the outlook for tech shares.

Fidelity International believes a series of policy support measures will bring about “controlled stabilisation and a cyclical recovery”, according to Salman Ahmed, its global head of macro and strategic asset allocation. BlackRock’s Thomas Taw has a different take, saying more “clarity” regarding growth prospects is needed and that investors still lack confidence in the property sector.

Slow going

The slowdown in the Chinese economy is putting pressure on inventory levels at major global manufacturers, including robot makers and other tech companies, according to Nikkei’s Kentaro Tsutsumi, who analysed the financial figures of 4,353 companies with comparable data acquired from QUICK-FactSet.

Their total inventories stood at $2.12tn as of the end of September, 28 per cent higher than the pre-Covid level at the end of 2019. Companies around the world stockpiled inventory in response to supply chain disruptions during the pandemic, and that level has yet to come down.

On average, it took companies 87.2 days to run through their stock on hand in the July-September quarter, the highest level for the past decade apart from the April-June quarter in 2020, the early phase of the Covid pandemic.

Decelerating sales in China has been a major cause.

Japanese robot maker Fanuc, which counts China as its single largest market, said the inventory adjustment for factory automation equipment is taking longer than expected in Asia’s biggest economy. Air conditioner maker Daikin Industries, another Japanese company with a significant presence in China, has been struggling “with the difficult conditions in the real estate sector [and] clearing distributor inventory has been difficult industry-wide.”

A new power source

Apple wants the batteries for its next generation of iPhones to be made in India in a sign that the world’s most valuable company is moving fast to build up its supply chain in the world’s most populous country, write the Financial Times’ Qianer Liu and John Reed.

The maker of iPhones has informed component suppliers of its preference to source batteries for its forthcoming 16 model from Indian factories, according to two people close to Apple, as the US tech giant seeks to diversify its supply chain and shift more manufacturing out of China.

Apple has encouraged battery manufacturers such as Desay of China to establish new factories in India, they said, while Taiwanese supplier Simplo Technology has been asked to scale up its production in India for future orders, according to three people familiar with the situation.

Apple made its latest iPhone 15 model in India and China at plants run by Taiwanese contract manufacturers Foxconn, Pegatron and Wistron, the last of which is selling its mobile phone plant outside Bengaluru in southern India to Tata, as that group mounts its bid to become a full-fledged Apple contractor.

The US company has been trying to unwind its longstanding dependence on China for manufacturing and supply chains, against the backdrop of growing trade and political tensions between Washington and Beijing.

The California-based company’s build-up in India aligns with the Narendra Modi government’s “Make in India” manufacturing drive. In recent months, Apple has also sought to increase output from its plants in Vietnam.

Spin-off called off

Alibaba Group has called off a plan to spin off its cloud unit, a segment that was supposed to be a bright spot for the company.

The company cited “uncertainties” over its ability to procure advanced artificial intelligence chips due to tightened US export controls for the decision, but not everyone is convinced by that argument, Nikkei Asia’s Cissy Zhou writes.

For one, critics argue, the tighter export rules hardly came as a surprise. They also point out that Alibaba’s cloud business has been slowing.

This slowdown comes despite rapid growth in China’s overall cloud market, which is expected to surpass the 1 trillion yuan mark in 2025, according to the China Academy of Information and Communications Technology.

By revenue, Alibaba is still China’s largest provider of public cloud services, which are offered via the internet and can be purchased and used by anyone. But competition from Huawei and Tencent is only intensifying, at a time when Alibaba is also feeling the heat on the ecommerce front from fast-growing rivals like PDD.

Bug hunting

Sam Altman, CEO of ChatGPT creator OpenAI, made one of his first public appearances since the boardroom drama last month that saw him ousted and reinstated in a matter of days.

Altman put in an appearance via video link at an artificial intelligence event in Ho Chi Minh City on Wednesday. Nikkei Asia’s Lien Hoang covered his talk at the conference hosted by VinAI, a unit of the country’s largest conglomerate Vingroup.

One of the key takeaways: The Microsoft-backed company is rethinking its hybrid of profit-and-non-profit corporate structure.

“The structure clearly has some bugs in it, and our new board is thinking really carefully about what the best corporate structure for our mission should be,” Altman told the audience.

The question of whether he was actually engaged in a secret AI project that supposedly triggered his removal from the board also came up, but he flatly refused to comment.

Suggested reads

1. TikTok owner ByteDance to buy back shares after amassing $50bn cash pile (FT)

2. Japan adds Chinese nuclear weapons lab and others to WMD concern list (Nikkei Asia)

3. Jack Ma urges ‘change and reform’ at Alibaba (FT)

4. TikTok nears deal with Indonesia’s GoTo to restart ecommerce business (FT)

5. In EV tax rules, US prefers China decoupling over decarbonisation (Nikkei Asia)

6. South Korean display industry still paying a heavy price for Chinese deal (FT)

7. Taiwan outlines five critical tech fields under its protection (Nikkei Asia)

8. South Korea test-fires solid-fuel rocket and puts satellite into orbit (Nikkei Asia)

9. US judge blocks first-ever state ban on TikTok (FT)

10. GIC-backed Coda offers fresh alternative to Big Tech app stores (Nikkei Asia)

#techAsia is co-ordinated by Nikkei Asia’s Katherine Creel in Tokyo, with assistance from the FT tech desk in London.

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