Tag: EC East Asia

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How are global chipmakers preparing for the US-China chip war?

Great results can be achieved with small forces,” Sun Tzu wrote in “The Art of War” some 2,500 years ago.

That quote is so old it’s now an adage. But it appears the U.S. isn’t content to wager that small actions can achieve the wide-ranging impacts necessary to gain an edge over China in the development of AI and machine learning technologies.

After implementing sweeping restrictions on the export of semiconductors to China last October, the U.S.’ recent deal with Japan and the Netherlands to restrict the export of vital semiconductor parts and chip-making technologies to China is throwing the $600 billion global semiconductor industry into turmoil.

The implications of these restrictions are broad, given that China accounts for approximately 80% of the world’s electronics production and is a large consumer of semiconductors. To make things even more complicated, nearly every major chipmaker has Chinese customers.

But Washington doesn’t seem to be concerned with the worries of global chipmakers or near-term supply chain volatility. It’s looking far to the future: It wants to choke out China’s ability to develop and access AI technology while diversifying its sources of the increasingly important semiconductor.

The United States’ aggressive moves are about “AI dominance, which underpins what many call the fifth industrial revolution, and ultimately, about global economic leadership in the next few decades,” according to Josep Bori, research director at GlobalData.

And the recent deal with Japan and the Netherlands, which includes “preventing legacy deep ultraviolet (DUV) machine exports and outright advanced AI chips,” targets China’s semiconductor business and its ability to develop its AI technology well beyond just hardware, Bori said.

You can’t make pancakes without a pan

You see, while China makes a ton of different semiconductors, it doesn’t have some of the advanced equipment that’s needed to make the fastest processors, chips and memory storage devices.

Manufacturers in the country import a lot of the chips and equipment from companies across the world, including Taiwan’s TSMC; the U.S.’ Intel, Nvidia, and AMD; South Korea’s SK Hynix and Samsung; the Netherlands’ ASML Holdings; and Japan’s Nikon and Tokyo Electron.

This, to an extent, means that Chinese manufacturers like Semiconductor Manufacturing International Corporation (SMIC) rely heavily on the global semiconductor industry for the machines to make high-end chips.

According to Bori, a number of the high-end logic and memory chips are made using extreme ultraviolet (EUV) and deep ultraviolet (DUV) lithography machines.

“Initially, the [U.S.’ export] bans to China only affected EUV machines, used for the most advanced process nodes, such as 3 nm, 5 nm, and 7 nm,” Bori said.

This played into the U.S.’ strategy to slow Chinese companies’ advances in AI, machine learning and other cutting-edge tech. Basically, the smaller the distance between each transistor, the faster and more power-efficient a chip becomes. The smallest process nodes, such as 3 nm, 5 nm and 7 nm, are used to develop artificial intelligence systems, smartphones, cloud data centers and self-driving cars and are used in military applications.

But the January agreement targets older DUV machines that could let Chinese manufacturers make 14 nm chips, as well as 18 nm DRAM chips and NAND flash chips with more than 128 layers, Bori added. DUV machines let you make chips at the 14 nanometer, 28 nanometer and larger process nodes; such chips are commonly used in automobiles, industrial equipment and home appliances.

How are global chipmakers preparing for the US-China chip war? by Kate Park originally published on TechCrunch

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The seas are getting even rougher for Chinese startups

The third quarter was far from favorable for Chinese startups looking to raise money. Data shows that for upstart tech companies in the country, Q3 2022 was the worst time to raise venture capital since Q1 2020, with far less capital invested than either the rest of 2020 and 2021, or for most of 2018 and 2019.

China is hardly alone in seeing its domestic startup scene see slowing capital inflows, but recent news puts the country-specific information into new context: Given today’s Chinese tech share sell-off, there is fresh pressure on technology companies’ valuations in the country, and that could impact startup fundraising.

If China saw fundraising decrease 10% in Q4 2022 from Q3 2022 — measured in dollar terms, not the number of funding events — we’d see startups facing the slowest quarter since the onset of 2018, according to CB Insights data. A steeper decline would put Q4 2022 as the nadir in the nation for the last five years.

Why are Chinese tech stocks suffering today? After a period when the sale of the nation’s equities onshore was at least somewhat meddled with, the value of major and minor Chinese tech companies fell today in the wake of the Chinese Communist Party’s every-five-year confab. This time ’round, current Chinese Premier Xi Jinping secured not only another five years in power, he also solidified a cabinet of like-minded allies.

The context is clear: The Xi method of managing China remains ascendant. And investors in tech companies, still licking wounds brought on by a regulatory barrage led by Xi — which included some reasonable ideas like dismantling certain anti-competitive practices along with some less enticing policies — are not enthused.

The result? A bloodbath (American share price changes as of the time of publishing):

The seas are getting even rougher for Chinese startups by Alex Wilhelm originally published on TechCrunch

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What’s driving China’s autonomous vehicle frenzy?

China’s autonomous vehicle industry first started seeing some traction around 2016, when a bunch of ambitious startups mushroomed following advances in lidar, computing and machine learning. But the nascent sector was still driving in low gear, as the people working on the tech mostly had computer science backgrounds, and there weren’t many with extensive experience in the automobile industry.

Everyone wanted to build robotaxis at the time, recalls Hongquan Jiang, chairman and managing partner at Boyuan Capital, Bosch’s newly minted venture capital arm in China. “Back then, if you told people you were doing Level 2.5 or 3 [the human driver is expected to take over], you would be scorned. But people in the industry quickly realized Level 4 [the driver can take a nap in most circumstances] was still a distant dream,” Jiang told TechCrunch.

Regardless, these founders’ ambitions kept them on the path, and the industry is finally seeing a resurgence in China. Unlike the previous generation of founders, the space is now seeing more automobile expertise flow in. This generation also seems to be more pragmatic, and rather than shooting for the stars, they’re focused on market demand.

A lot of things can happen in China because of government support, but not necessarily elsewhere. Hongquan Jiang

This focus is reaping fitting rewards for startups. The industry saw a period of unprecedented acceleration in 2021, with over $8.5 billion invested in robotaxi startups, self-driving truck developers, lidar makers, smart electric car manufacturers, and chipmakers focused on vehicle automation, according to Crunchbase.

Investors these days have good reason to throw money at this industry, too: Sensors are getting cheaper and more capable, talent from the AI and automotive industries is coalescing, the government has introduced a slew of beneficial policies, and demand is rising as China prepares to cope with a drop in its working-age population.

There’s no fear when the state’s got your back

Momenta has a strategic partnership with the government of Suzhou, its home city, to put robotaxi fleets on the city’s roads. Image Credits: Momenta

Like other sectors that depend on public infrastructure, companies working to put driverless taxis, trucks and buses on the road in China have benefited greatly from government support.

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To cool down China’s overheated robotics industry, go back to the basics

He Huang Contributor
He Huang is a partner at Northern Light Venture Capital supporting early-stage enterprise companies.

It’s been a tumultuous few years, but China’s manufacturing industry is now on the rebound. Once an industry characterized by low-end manufacturing and intensive labor, it has transformed into a high-end manufacturing hub aided by technology.

Automation and robotics has the potential to modernize China’s manufacturing while improving labor efficiency and alleviating labor shortages. Predictably, companies and investors want to capitalize on this trend.

Robotics has been a hot sector for a while, but its popularity has shot up over the past couple of years. The sector recorded investments and financing of $6 billion in 2021, according to statistics from market research firms, and is expected to double in size in five years.

However, it’s unknown when these investments will provide a suitable return. Robotics is experiencing the biggest bubble in China’s venture capital industry, and is riddled with speculation and overvalued companies. Compared with similar investment bubbles over the last 10 years, this one is larger in scale, longer in duration, and could be more devastating than any before.

The price-to-earnings ratio is no longer applicable for many listed companies, and the market-to-sales ratio has also gone out the window. He Huang

However, the “bust” is entirely avoidable. Investors and companies need to go back to business basics and resist the industry’s typical impatience for exits on both sides of the negotiation table.

Understanding the market

With the influx of capital investment, we’re seeing a partial and cyclical overheating of the market in China. Many investors caught in this investment tide are replicating the software investment model, because many institutions that invested in Internet startups are also aggressively entering this field.

So what’s behind this surge? Everything from China’s government policy to the launch of the Science and Technology Innovation board, which has opened a convenient exit channel. Compounding the surge is the drive to upgrade China’s industrial structure.

It’s crucial, however, that investors do not apply software investment rules to industrial technology investments. For one, the investment to exit period is different. Investment in robotics and other industrial technologies is relatively long-term compared to internet companies. Internet companies can go public in three to five years after investment, but industrial technology firms are likely to take twice as long or more to go public.

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How our SaaS startup broke into the Japanese market without a physical presence

Barnabas Birmacher Contributor
Barnabas Birmacher is the CEO of Bitrise.

Breaking into Japan is often one of the biggest challenges a growing tech company will encounter. The country is home to some of the world’s most advanced software and hardware leaders. For the startups that cater to these companies, “cracking Japan” is inevitably part of their growth and expansion roadmaps.

But the barriers to entry are high. From language and culture differences to the need to tailor offerings for a Japanese audience, many early-stage tech companies write off Japan as impossible or too difficult to break into, even if the country is inevitably part of their growth and expansion roadmap.

In 2014, our company attracted its first Japanese client when we were featured on product discovery platform Product Hunt. While this initial awareness got us on users’ radar, awareness alone wasn’t enough to sustain and grow a reliable pipeline. We grew this initial interest to 400+ of our highest paying clients over the past eight years by making community — both virtual and in-person — central to our offering and our approach to relationship-building, all without having a dedicated presence in the county.

As a SaaS company with a community-led growth model, our journey to breaking into Japan might be different to companies with other models, but the core tenets remain the same. Here’s what we learned along the way.

Follow the first user(s)

The tech community in Japan is extremely active and interconnected, so a single customer can play a disproportionately large role in facilitating your expansion there. Our experience is that if the first users like it, they’ll be your number one ambassadors. If they don’t, their indifference will also speak volumes. With this in mind, your product should be ready for prime time before you begin working with Japanese prospects. Japan is not a testing ground for MVP products.

As much as companies want to “be in Japan,” they don’t always spend enough time in the country.

Once you have even the smallest amount of traction or market adoption, consider setting up Japanese-language mention tracking. It can be surprising how quickly – and publicly – word about good technology will proliferate through social channels.

Our first user was a developer at one of Japan’s largest emerging tech companies. As Bitrise began spreading throughout his organization, we began seeing a number of new customers organically popping up at other companies as well.

Through our mention tracking service (we use Mention.com), we were able to see how the user adoption we were experiencing directly correlated with local discussions about us on social media.

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As Yahoo leaves China, an accelerating stream of exits

TechCrunch held events in China as recently as 2019, following several years of hosting conferences in the country’s hardware capital, Shenzhen. In the wake of today’s news, TechCrunch.com is no longer available for regular access in China.

How quickly things change.

This morning, global media noted weekend-news that Yahoo, TechCrunch’s parent company, is pulling its remaining services from China. The move follows decisions by other major American companies to also end certain operations from China, including Microsoft and Epic Games.

According to an official Yahoo statement, due to an “increasingly challenging business and legal environment in China, Yahoo’s suite of services will no longer be accessible from mainland China” as of the start of the month. The news was first disclosed over the weekend, albeit to muted note and coverage.

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Yahoo added in the same comment that it “remains committed to the rights of our users including a free and open internet” — about as direct a dig against the Chinese government that you will find from a corporation that operates globally.

The recent decisions to limit or end the availability of certain international products in China’s mainland area follows a deluge of regulatory changes aimed at curbing the power of domestic technology companies, changes to rules regarding media, and more. The revamps include changes to video game access for youths, the culture of celebrity fan clubs, and for-profit educational products aimed at students not yet in university.

In recent quarters, the Chinese market has seen its openings narrow. Films that might have found a release window in the country are failing to make it to market, for example. The context for Yahoo’s decision to leave the country, then, is both broad and deep.

China’s “increasingly challenging business and legal environment”

There’s plenty to choose from when trying to identify what created an “increasingly challenging business and legal environment” for Yahoo. But the fact that it’s closing the curtains this month points at a blatant culprit: the Personal Information Protection Law of the People’s Republic of China (PIPL), which came into effect on November 1.

While it makes sense to compare the PIPL to the EU’s General Data Protection Regulation (GDPR) in terms of what it takes for foreign companies to comply, the comparison only goes so far. Indeed, storing data in the country or having to “pass a security assessment organized by the national cybersecurity authority” before transferring information across borders doesn’t have the same implications when the country in question is China.

Add in the broader flurry of regulatory changes, and it is not hard to see why Epic Games is pulling the plug on Fortnite in China, or why Microsoft earlier announced it was pulling LinkedIn from the Chinese market. In a blog post, the professional network was described as “facing a significantly more challenging operating environment and greater compliance requirements in China” — wording that echoes Yahoo’s statement this weekend.

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Is China building the metaverse?

Catherine D. Henry Contributor
Catherine D. Henry is SVP Growth at Media.Monks, where she advises leading global brands on how to enter the metaverse.

There is a heated debate on the state of the race between the United States and China to dominate in AI. But perhaps the more strategic question is whether China is building the metaverse.

Built upon infrastructural technologies like AI, the metaverse refers to the vast array of digital experiences and ecosystems, from e-commerce and entertainment to social media and work, where we spend more and more of our lives. It’s soon going to be hard to conceive of a world in which much of our social and economic lives are not defined by the rules of the metaverse. To the builder goes the opportunity to establish rules to their own benefit.

In truth, both the U.S. and China are trying to build and lay claim to the metaverse, with other actors such as Europe trying to do so as well, but they simply don’t control enough of the core technologies that make the metaverse possible.

These core technologies include AI, 5G, end-user devices and the sector-straddling super apps that bring everything together — and related technologies such as smartwatches and eyewear. Competence and dominance across these four criteria is what may give China an insurmountable head start over the U.S. in the race to build the future of the virtualized human experience.

China’s AI advantage

The Chinese leadership understands that AI is revolutionizing virtually all aspects of social life, including consumption. AI is a top priority for government and business, and the Chinese government has called for China to achieve major new breakthroughs by 2025 and become the global leader in AI by 2030.

If the metaverse does become the successor to the internet, who builds it, and how, will be extremely important to the future of the economy and society as a whole.

The strategy was initially outlined in the Chinese government’s New Generation Artificial Intelligence Development Plan in 2017. It has since spurred both new policies and billions of dollars of R&D investments from ministries, provincial governments and private companies.

As a result of China’s AI initiatives, the American advantage in the sector has been steadily eroding: In 2017 the U.S. had an 11x lead over China, but by 2019, that lead had come down to 7x. By 2020, the U.S. was left with a narrow lead of 6x. Even this lead has been uncertain, and the ex-chief software officer of the Pentagon went so far as to say that China already had an insurmountable lead in AI and machine learning.

Moreover, some question the American lead when it comes to the availability of training data. In the privacy versus public good debate, the U.S. tends to lean toward privacy, whereas China has long exercised government intervention in maintaining a civil society as a public good.

Finally, China has access to vast data sets to train AI, which presents a significant strategic advantage, especially considering the country’s population of 1.4 billion.

China builds the devices

The capacity to build and ultimately become the preeminent force in the metaverse starts with China’s long-standing and unrivaled dominance of consumer device manufacturing. From smartphones and notebooks to AR and VR headsets, Chinese manufacturers are building the largest portion and widest varieties of the devices that consumers need to access digital platforms and social experiences. The most advanced design and production competencies are likely to already reside in cities like Shenzhen.