Huawei’s comeback and Japan’s time to shine

By News Room On Oct 12, 2023

Hi everyone! This is Cheng Ting-Fang from Taipei. I was invited to a luncheon hosted by a European trade diplomat visiting Taiwan last week. One of the themes at the private roundtable was, “What keeps you awake at night?” Unsurprisingly, everyone talked about US-China tensions and export controls on Huawei, as well as how to reduce geopolitical risks and boost supply chain resilience.

But during a small talk on the Asian economy, another interesting point came up: A Taiwanese professor told us that the hottest topic in academic circles this year was investing in Japanese property thanks to the weakening yen.

Coincidentally, an old friend of mine working in the financial industry recently told me that her team is now scouring Japan for investment opportunities, especially in the manufacturing, electronics and semiconductor sectors.

“Our team now has people dedicated to reading Nikkei in Japanese, Nikkei Asia in English and even Chinese Nikkei because we are eyeing the long-term growth prospects and renaissance of Japan’s world-leading precision manufacturing, chip equipment and materials suppliers,” my fund manager friend said.

These conversations in turn reminded me of two recent chats with tech executives who said now could be the best time to look to Japan for collaborations and investment, as a way to lower dependence on China.

“We’ve woken up from our Chinese dream,” one of the executives said. “Now it’s time to have a new dream. And that dream could be about Japan.”

Huawei’s dream goes on

Huawei wants to take back its share of the domestic smartphone market and restore China’s national pride along the way.

Once the world’s second-largest smartphone maker, the company has been stockpiling components for months and aims to double its smartphone shipments from this year and last to up to 70mn units by 2024, Nikkei Asia’s Cheng Ting-Fang writes. It has been ordering more lenses and print circuit boards than it actually needs, and has also asked Qualcomm of the US — its only 4G mobile chip supplier — to ship all of the chips it ordered for the full year by June, for fear of a fresh Washington crackdown.

At the same time, it’s not surprising that Huawei has been able to secure some 5G mobile chips domestically. Semiconductor Manufacturing International Co had already bought and installed production equipment for 14-nanometer and 7-nm chips as far back as 2018 and 2019, well before the US and its allies began restricting chip tool exports. SMIC is China’s leading chipmaker and a key supplier to Huawei.

Huawei’s comeback plan for smartphones could still hit major hurdles, however, as the US plans to broaden the scope of its already extensive export controls on chipmaking tools and AI chips. Many US lawmakers are urging Washington to completely revoke exemptions and licenses granted to Huawei and Chinese chipmakers such as SMIC.

While the US looks set for tougher measures, however, Europe is wrestling with how to cut its own reliance on China and Chinese tech, Nikkei’s Rhyannon Bartlett-Imadegawa, Mailys Pene-Lassus and Catherine De Beaurepaire write. The European Union and individual member states have taken a number of steps on this front, from blocking Huawei and ZTE from critical 5G infrastructure to reviewing China’s use of electric vehicles subsidies. But the bloc’s heavy trade dependence with China means any “de-risking” moves will be far from simple.

Caught in the middle

Saudi Arabia’s premier scientific institution is collaborating with Chinese universities on developing AI at a time when the Gulf region is becoming a flashpoint for escalating US-China tensions.

Professor Jinchao Xu, an American-Chinese mathematician at Saudi Arabia’s King Abdullah University of Science and Technology (KAUST), has launched AceGPT, an Arabic-focused large language model, in collaboration with the Chinese University of Hong Kong, Shenzhen, and the Shenzhen Research Institute of Big Data.

The partnership is part of Saudi Arabia’s efforts to build cutting-edge AI technology, including supercomputers for developing LLMs, the technology that underpins generative AI systems like ChatGPT, write the Financial Times’ Simeon Kerr and Samer Al-Atrush in Dubai, Qianer Liu in Hong Kong and Madhumita Murgia in London.

However, there are concerns that the collaboration could jeopardise KAUST’s access to the US-made chips needed to power the new technology.

Washington has expanded export license requirements for graphics processing units made by Nvidia and AMD to curb Chinese entities’ access to these sophisticated chips. But the Biden administration has stopped short of restricting such exports to the Middle East, enabling groups there to advance AI development at local institutions. Like Saudi Arabia, the United Arab Emirates also aims to be a regional leader in AI.

The question is whether Riyadh and Abu Dhabi can build on flourishing trade relations with China to include technology transfer without straining ties with Washington, their main security partner.

“Many people involved have raised their concerns to leadership about the Chinese relationships jeopardising the supercomputer,” said one of the people aware of the matter at KAUST. “They don’t want to upset the US government.”

Make-up trouble

When Chinese internet celebrity and livestreamer Austin Li Jiaqi criticised his viewers for “not working hard enough” to afford an $11 eyebrow pencil, he clearly hit a nerve with the country’s youth, many of whom are struggling to find jobs in the post-pandemic economy.

The episode also highlights Li’s complex relationship with Alibaba Group Holding, the ecommerce giant that has helped turn him into a star, writes Cissy Zhou of Nikkei Asia.

Li is famous as the public face of Taobao Live, the livestream selling platform owned by Alibaba. The company does not want to lose such a powerful influencer, but heavy reliance on just a couple of stars also has its risks, as his recent outburst showed. And this was not even his first brush with trouble — he went quiet for several months last year after appearing to make a reference to the Tiananmen Square crackdown, a taboo subject in China.

Even with China’s “Lipstick King” on its platform, Taobao Live has not been able to keep pace with competition from Douyin, owned by ByteDance, and Kuaishou. These two newcomers boast higher sales via live commerce than Taobao Live, although Alibaba remains China’s overall ecommerce leader.

Time to shine?

The Japanese yen briefly fell past 150 against the dollar recently and has stayed around the 149 range this week. The weakening currency could hit local consumers’ buying power and Japan’s retail sector, as it drives up the cost of imports, but it is benefiting almost all other business sectors, from automobiles and semiconductors to banks and energy, Nikkei Asia’s Mitsuru Obe writes.

For most Japanese companies doing business globally, a soft yen is a boon, as it increases the value of overseas earnings when they are repatriated, analysts and economists said. The better sales performance in turn helps lift the stock market and improve investor confidence, and could eventually mean better paychecks for employees in the future, they said. Data from the Bank of Japan’s quarterly Tankan business survey showed sentiment among Japan’s largest companies at historic highs.

There are other signs of a buzz around Japan’s tech sector. BlackRock CEO Larry Fink recently told Nikkei’s Kazuaki Fujita that the world’s largest asset manager is interested in investing in Japan’s clean energy and green tech sectors. And on the domestic front, Fujitsu recently unveiled Japan’s first privately developed quantum computer.

Huawei’s comeback and Japan’s time to shine

Huawei’s dream goes on

Caught in the middle

Make-up trouble

Time to shine?

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