Xiaomi – Page 4 – Product Management Confabulation

April 14, 2022

Wrapped in red tape, China’s startups give up their mainland dreams

Like many ambitious Chinese who graduated college abroad during the 2010s and aspired to be the next Jack Ma or Pony Ma, Lucas returned to his motherland to build his own internet startup. Two years into running the business, however, his enthusiasm has waned. The regulatory risks and compliance costs affecting his company have become too high to justify building a China-centric product, prompting him to look abroad for growth.

(Lucas is the founder’s pseudonym due to the sensitivity of discussing regulations. We are unable to specify what his company does as that would compromise his identity.)

In the past few years, China has introduced a litany of policies to assert more control over its internet sector. Verticals from fintech, social media, gaming, e-commerce to live streaming have increasingly come under regulatory fire for their unscrupulous growth and the social issues they produce. Now, that scrutiny is propelling startups that had once thought they had a future for funding and growth in China to go overseas.

Observers argue that the crackdown on consumer internet giants like Alibaba and Didi is meant to spur domestic innovation in “hard” technology, like semiconductors and industrial robots, that will help China compete on the global stage. Beijing wants to curb the power of internet giants, especially those generating structural problems like lending products that put young consumers in debt, games that cause addiction, and online education services that widen the wealth gap.

Such policies may have initially set out to rein in the internet behemoths, but they have also ended up crippling the growth of budding startups like Lucas’s, which face mounting compliance costs and operational hurdles in China.

Three other China-founded consumer internet startups that spoke with TechCrunch said they are also leaving the Chinese market behind due to heightened regulatory uncertainty. Four investors told us that portfolio companies that focus on online education, fintech, and video games are making a similar pivot to target international users.

While Web3-focused entrepreneurs from across the road are racing to revolutionize the digital space, the industry has fallen out of the picture in China, where strict censorship and a sweeping ban on cryptocurrency have eliminated the potential for decentralized services, which are at the core of Web3, to thrive. The fear that another vertical may face clampdown looms large in China’s startup community.

Tightening grip

Regulations targeting tech companies are nothing new in China, but for years, many policies were vaguely phrased or not enforced. “The authorities were keeping one eye closed when things used to be laxer,” said Lucas.

For the vigilant entrepreneurs, Beijing’s shelving of Ant Group’s initial public offering in 2020 was the first alarm bell, indicating the era in which China’s internet firms had the authority’s green light to grow at breakneck speed ended. The suspension came as the government made “major changes in the fintech regulatory environment,” which subsequently led to a restructuring at Ant and brought it under strict financial regulations.

Last year, a government investigation into Didi over its cross-border data sharing practice again underscored Beijing’s determination to tighten control over what it once deemed its “internet darlings.”

Smaller startups also feel the impact. Internet platforms of all sizes now face severe fines and even service suspension if they fail to institute the required content censorship and data storing mechanisms, which could easily cost up to several million yuan (1 USD = 6.4 yuan) a year for an early-stage, data-rich startup, two founders told us.

It isn’t just the compliance costs that are hobbling growth. The unpredictable nature of censorship — phrases or images that are tolerated one day can be deemed political and illegal the next — puts enormous pressure on young, cash-strapped companies to figure out the boundary of what is acceptable online.

“Venture capital firms in China, especially USD funds, didn’t use to care whether a startup made money or not in the beginning. As long as the company was seeing miraculous growth, it could take care of monetization later. But this formula has stopped working because any app can be taken down at any time,” said Lucas.

Tencent-backed Jike, a social network popular in the Chinese VC and startup community, was abruptly shuttered for a year before relaunching in 2020. The reason for its suspension was never disclosed, though many speculated it was due to censorship.

For many Chinese entrepreneurs, going public in the US, which has the world’s largest stock exchanges, is the ultimate goal, which would allow them to eventually cash out and generate more capital for scaling. But that route is also looking dimmer. In December, China’s cybersecurity regulator said internet platform operators with data of more than one million individuals [within China] must undergo a pre-IPO review before listing abroad. If the regulator decides the platform poses national security threats, the IPO will be stalled.

Around the same time, China’s securities authority proposed that a company, regardless of where it’s incorporated, must go through a filing process with the Chinese government if its main management mostly consists of Chinese nationals or executives who live in China, and whose main business operation is in China.

To help startups bypass potential restrictions over their pursuit of overseas listings, many VC firms in China are now advising their portfolio companies to pursue international markets instead. Some are even providing foreign citizenship applications for entrepreneurs as part of the post-investment service, we learned from a founder and an investor.

A startup’s success, Lucas lamented, now hinges partly on whether the founder can predict the direction of Chinese policies and follow them through. “We entrepreneurs shouldn’t be expected to be political scientists. We should be left alone to focus on building the product.”

Going to the sea

As the regulatory environment becomes increasingly stifling, young companies in China find it more difficult to emulate the success of their predecessors like Alibaba and Tencent, which started out two decades ago. Some have no choice but to abandon their China dreams. But on the bright side of things, consumer internet models that have proven successful in China, such as bike-sharing, virtual gifting, social commerce, and grocery delivery, also provide a useful playbook for the rest of the world.

“We believe that many Chinese pioneered or popularized technology-enabled business models are better suited for emerging markets, far more so than models coming in from the United States,” suggested Ben Harburg, managing partner at MSA Capital, which invests in global startups inspired by China’s tech industry.

“I think everyone would love to be some variation of Ant Group in terms of having money markets, loans, payments, merchant to peer, peer to peer [services],” the investor added. “Everything within the China mobile-first fintech ecosystem is very much an exemplar for the rest of the world.”

Chinese startups going global, or what’s called “chuhai”, literally “going to the sea,” have gone through several transformations over the past two decades. They went from exporting cheap electronics, creating a foreign version of something that is successful in China, like Tencent’s mobile game Honor of Kings, to building services and products that are devised to compete globally from day one.

“Companies in the past were globalizing based off of their successful model and examples in China, then taking the same product overseas,” observed Rilly Chen, who previously worked on Ant’s international investment team.

“Whereas now, we are seeing more companies who build their products for international customers at the get-go, but the infrastructure and engineering basis still rests in China.”

Smartphone makers Xiaomi and Oppo, and apps like selfie beautifier Meitu and TikTok are notable players of the earlier generations, whereas fast fashion upstart Shein exemplifies the latter category of companies that operate mostly out of China while serving international customers.

Going to the sea is no small feat. TikTok’s saga in the US, where the Trump administration intended to force a sale of the short video app, shows how a Chinese app with enormous global success can get caught up in geopolitical tensions. Stringent privacy rules in developed regions, like Europe’s GDPR, also pose new challenges to Chinese founders with little exposure to overseas compliance practices.

The current wave of Chinese startups going global tends to have Western-educated, bilingual founders born in the 1990s like Lucas. As they charge into new frontiers, they bring with them lessons from home, potentially helping to evangelize China’s tech business models and culture. At the same time, their home market is missing out on the service and creativity of these young, ambitious entrepreneurs driven away by the country’s regulatory storm.

“I think that [Chinese companies globalizing] is quite positive, but at the same time, I would also caveat with the fact that there is going to be potentially a brain drain in China, especially in sectors where Chinese entrepreneurs have found it difficult to navigate the blurred lines of regulation,” said Wise’s Chen.

March 29, 2022

AR glasses maker Nreal nabs $200M funding in 12 months

China’s augmented reality startup Nreal is on a roll. The company, which hopes to bring AR to the masses by making bright-color, lightweight smart glasses, has just received $60 million in a Series C extension round, bringing its total funding in the last 12 months to a handsome $200 million.

The new investment is led by Alibaba, which has historically been a more hands-on but less active corporate investor than its archrival Tencent. The Chinese e-commerce giant has a reputation for acquiring controlling stakes in startups that can potentially be a complementary piece to its giant retail ecosystem.

Alibaba’s investment in Nreal, however, is purely financial. In theory, the two could have generated strategic synergies. One could easily imagine Alibaba hooking Nreal up with its gaming and video streaming units, or even having it develop smart glasses for its millions of food delivery riders — who recently began wearing voice-controlled helmets. But with the onset of China’s antitrust crackdown, the country’s tech behemoths have no doubt become more cautious with any investment that can be perceived as encouraging unfair competition.

Plus, Nreal, which was founded by Magic Leap veteran Chi Xu, already has a club of notable partners. Some of its strategic investors are Chinese electric vehicle upstart Nio, short video app Kuaishou — TikTok’s nemesis in China and Baidu-backed video streaming platform iQIYI. Qualcomm is not an investor but supplies cutting-edge Snapdragon processors to the hardware maker and works closely with it to build a developer ecosystem. Nreal is also backed by renowned institutional investors, including Sequoia China, Jack Ma’s Yunfeng Capital, Xiaomi founder Lei Jun’s Shunwei Capital, as well as private equity giants Hillhouse, CPE and CICC Capital.

Despite being China-based, Nreal hasn’t targeted its home market but has instead first tested the consumer appetite in six overseas countries, including Japan and the U.S. The smart glasses maker has relied on partnering with local carriers to tout its devices. In the U.S., for example, Verizon is helping to sell Nreal’s mixed reality glasses Light, which has a relatively affordable price tag of $600 and can be plugged into a 5G-compatible Android device.

With the proceeds from its latest round, Nreal will finally make a foray into China this year. The funding will also be spent on R&D and growing its ecosystem of content and apps, which will be critical to user adoption.

China watches and learns from the US in AR/VR competition

March 9, 2022

For China bulls like Jim Breyer, Russia ties present “geopolitical challenges and questions”

China has emerged as one of the most powerful countries in the world. Now, its close ties with Russia, against which the rest of the world has swiftly united since its invasion last week of Ukraine, has put the world’s most populous country in a precarious position.

It’s not so comfortable for foreign proponents of China, either.

While many investors with longstanding relationships in the country, such as the private equity firm Carlyle and the venture firm Sequoia Capital, have demonstrated their ongoing commitment to the region — even in the face of the Chinese government’s year-long private-sector crackdown in pursuit of “common prosperity” — China’s ongoing support of the most reviled leader on the globe could potentially prove a step too far for even the country’s most passionate supporters.

In conversation earlier today with Jim Breyer, the famed billionaire VC who has been happily investing in China for the last 17 years — including through numerous funds he has jointly raised with the Chinese venture firm IDG Capital Partners and across bets that have included Baidu, Tencent, Xiaomi, and, more recently, Binance — he sounded concerned about the changing landscape, even as he spoke in characteristically measured tones about what is unfolding in Europe.

We’ll have more from that wide-ranging conversation soon, but some quick notes from our chat as it pertains to China follow, edited lightly for length.

In 2018, I sat down with Doug Leone of Sequoia Capital, to talk about the firm’s China strategy. Numerous venture firms headed there around 2005, then turned around and left. Sequoia stayed and did well. At the time of our sit-down, the market wasn’t fully opened. American companies were being asked to make a lot of concessions, including censoring the content. But at least you could still make a lot of money on China’s founders and startups. Then came last year’s changes, which made even betting on Chinese startups more challenging. What do you make of the changing landscape?

Doug and I talk about it often. For sure, the last 18 to 24 months in China has been challenging in a number of ways. Cross-border investments and partnerships, about two years ago, completely stopped [whereas for many years] there was strong cross-border investing. My partners and I were the Series A investors in Baidu and Tencent — we were very fortunate — and the Tencent network and the Baidu network in China is extraordinary, with a number of entrepreneurs who have come out of those companies. But now they’re focused on the Chinese domestic market. If you look at what the change has been, it is largely a focus on the Chinese market.

There are certain areas like sustainability and health care and medicine that I am personally passionate about, and I’m hopeful that in the future, we can get back to cooperating — at the United States and China level — in areas like sustainability, and healthcare and medicine. But for sure, it has become a far more complex environment. The investments that the IDG team is making are in areas like sustainability, health care, medicine — and focused on domestic markets. By and large, that’s been a very significant change.

You are still actively involved there.

I’m very happy to have been part of the investment community for the last 16 years, and I fully am passionate about continuing that for many years. I’m involved with the Tsinghua University School of Economics and Management Advisory board, which is really a wonderful who’s-who list of American executives. I was the chair until a year ago, and Tim Cook is now the chair. We did not get together in China over the last year and a half. That’s been via Zoom. But those meetings will start up again later this year.

What did you think when Jack Ma went “missing” in the fall of 2020 after he criticized the Chinese financial system ahead of Ant Group’s expected [and since shelved] IPO?

I was stunned. I’ve known Jack for many years, he’s an extraordinary talent, and I was completely surprised. Simple as that. I think that, if anything, we’re seeing the importance of companies adhering to the ‘middle of the road’ politically. And that’s true in many parts of the world that have prevented mutual cooperation from occurring the way, in some cases, that we were on a path to mutually cooperate.

I can’t predict the future of politics in the U.S., Europe, the Middle East, China, but [politics] for sure has become a more important factor in terms of how one thinks about global investing. My view is there are some areas that are so important for all of us — again sustainability, medicine, health care — and that’s where I see areas of real cooperation and hope. I’m optimistic that we will find more and more ways to cooperate around the world, but for sure, it’s extraordinarily challenging right now.

How does this war in Ukraine change the calculation for you, if at all? China is obviously friendly with Russia, and Russia is very unpopular right now.

Well, of course. I think there are a number of challenges. I’m on the board of Blackstone; I speaking to you from the Blackstone offices here in New York. [There are many] geopolitical challenges and questions.

Within China, the vast majority of investments that we’ve made over the last 18 to 24 months in the areas of health care, medicine and sustainability — themes that are global and fundamentally important and that be the set of themes for the Chinese investments.

In the U.S., [my firm has] for the last six years, gone very deep and very big in artificial intelligence and now in quantum technologies. And my belief is the U.S. is the world leader and will only accelerate its lead in and around areas like artificial intelligence and quantum technologies.

Europe has become a big challenge, of course, with all that’s going on with the huge slowdown in a number of the European economies. There are a number of fintech investments I’ve made in Europe. I see growth there but also a significant slowing of what the revenue growth will be this year and next due to a lot of what we’re currently all experiencing firsthand with the Russian invasion of the Ukraine.

You may remember, but my parents were born and raised in Hungary. In 1956, they were students in Budapest. The Russian tanks entered Budapest, they spent six months in Vienna at the University of Vienna and then my mom and dad came to the United States in 1957. I’m a huge believer in immigrants being phenomenal entrepreneurs and leaders, and a huge believer that [entrepreneurship] is best accomplished in the United States of any area.

January 20, 2022

Changes to corporate investing rules could diminish China’s resilient venture landscape

Since the Ant Group IPO was canceled by central authorities, China’s government has been on a regulatory tear.

You know the broad outlines: After a lengthy period of growth, capital investment and aggressive business practices, China’s central government spent much of 2021 reining in its technology sector. While some of the actions were reasonable from an antitrust perspective, many of the changes to the country’s tech sector appeared more punitive toward entities viewed as too powerful.

The for-profit edtech sector got hit. Didi was effectively executed after it had the audacity to go public in the United States. Video game time for kids was cut, gaming titles left unapproved, algorithms put under the microscope, and more. The business climate for building tech companies under the new “Common Prosperity” push in the country appeared to take a dramatic turn for the worse.

As a result of the changes, the value of many well-known Chinese technology companies suffered.

Although the exit window for China-built tech companies is seemingly constricting to only domestic exchanges, and the space made available in the economy for tech companies to build and innovate apparently shrinking, venture capital activity was strong last year in the country.

We were surprised to see it as 2021 entered its final months, just as we were surprised when we got the full-year numbers.

But there was more. ByteDance recently “dissolved its strategic investment team, sending worrying messages to other internet giants that have expanded aggressively by investing in other companies,” TechCrunch reported. Why did TikTok’s parent company do so? We explained:

At the beginning of this year, ByteDance reviewed its “businesses’ needs” and decided to “reduce investments in areas that are not key business focuses,” a company spokesperson said in a statement. …

The “restructuring” still stirred up a wave of panic in the industry. China’s cyberspace regulator has drafted new guidelines that will require its “internet behemoths” to get its approval before undertaking any investments or fundraisings, Reuters reported. Some Chinese media outlets reported similar drafted rules.

Hot damn.

Obviously, we’re still sorting out precisely what is going on, but it appears that the ability of large Chinese tech companies to deploy capital at will into smaller companies is rapidly coming to a close.

From this juncture, our question is simple: Will government regulations slowing Big Tech investments into smaller companies in China shake up its larger venture capital market? Let’s talk about it.

Tracking corporate venture capital investment in China

The answer to our question is yes, but perhaps not lethally.

Tracking just how important corporate venture capital is to the Chinese VC scene is an interesting problem to crack. One way to view the data is to look at the list of most active investors in private Chinese tech companies in the last year.

January 18, 2022

Apple returns to No. 1 as global smartphone shipments grapple with supply chain concerns

Supply chain issues continue to have a major impact on smartphone manufacturers per newly released figures from analyst firm Canalys — global shipments grew only 1% year over year in the final quarter of 2021. The numbers come on the tail of Q3 reports, which saw an overall drop of 6%, citing similar issues over component supply.

The firm also factors in a resurgence of COVID-19, courtesy of the omicron variant, which has sent a number of locals into shutdown reminiscent of the pandemic’s early days roughly two years ago. Canalys notes that this impact is greatest among the smaller manufacturers in the market, who have had the greatest issues finding new suppliers.

“Component manufacturers are eking out additional production, but it will take years for major foundries to significantly increase chip capacity,” the firm’s Mobility VP Nicole Peng said in a statement tied to the new figures. “Smartphone brands are already innovating to make the most of their circumstances, tweaking device specs in response to available materials, approaching emerging chipmakers to secure new sources for ICs, focusing product lines on the best-selling models and staggering new product releases.”

Image Credits: Canalys

Larger companies remain less impacted overall by shortages and bottlenecks. The quarter also saw Apple return to the overall top spot in the global market, after three quarters away. The company’s rise is attributed to the success of the iPhone 13 and an extremely solid performance in Mainland China — the world’s largest smartphone market.

Apple’s overall marketshare ticked up from 12% to 23% of the market since last quarter. The previous drop owed in part, to the company’s trouble meeting demand in a number of regions in recent quarters.

“Apple’s supply chain is starting to recover, but it was still forced to cut production in Q4 amid shortages of key components and could not make enough iPhones to meet demand,” says analyst Sanyam Chaurasia. “In prioritized markets, it maintained adequate delivery times, but in some markets its customers had to wait to get their hands on the latest iPhones.”

Samsung, meanwhile, dropped to second, from 23% to 20% of the total market. Chinese manufacturers Xiaomi, Oppo and Vivo rounded out the top five for Q4.

January 13, 2022

Yahaha Studios, a platform for building no-code, immersive games, raised $50M in 3 rounds ahead of its launch this year

The success of Roblox and other user-created gaming experiences like Overwolf have democratized the concept of making games and have taken it into the mainstream. Now, a startup founded by veterans from Unity, Microsoft and EA that is building a new platform for creators to build immersive games, and related communities around like-minded people, is gearing up to launch later this year. Ahead of that, it is disclosing a healthy $50 million in funding.

Yahaha Studios, an Espoo, Finland-based startup with R&D based in Shanghai, has yet to launch a commercial product. But it describes what it is building as a no-code “metaverse for games”, where people can come together in communities to build and play games combing virtual and real-world elements.

The $50 million that it has raised, to be clear, is not new funding: it was pulled together in a period of six months, across three rounds, nearly two years ago, all in 2020.

The company tells me that “round 1” was led by 5Y Capital; “round 2” was led by HillHouse, and “round 3” was led by Coatue. Early investors participated in subsequent rounds, and other backers include ZhenFund, Bertelsmann Asia Investments, BiliBili and Xiaomi. The funding, we’ve confirmed, values Yahaha in the range of $300 million to $500 million (“few hundred millions” is the phrase that was used when we asked).

While Yahaha Studios may still be months from launch, in the meantime it has been quietly running a Discord community with a small group (around 220) of early users. The company tells me that an alpha version of the product will be launching in Q2 of this year. It is not planning to raise any more funding ahead of that, a spokesperson tells me.

“Metaverse” has very quickly become a very over-used word, and a number of companies claim to be blazing trails into this nebulous space, with its promises of combining augmented and virtual reality technologies to create entirely new kinds of digital experiences, gaming and otherwise. It looks like Yahaha has managed to stand apart from the crowd, and found investor attention early on, for a couple of reasons.

First of all, there are the company’s founders — Chris Zhu (CEO), Pengfei Zhang (COO) and Hao Min (CTO) — who all worked together as engineers at cross-platform gaming engine Unity, and have years of experience behind them.

Zhang has been living in Finland for the last 15 years, and this is how the company got started there, but that is not the only reason for basing Yahaha in Espoo: with companies like Supercell also originating in the Helsinki suburb, there is a strong ecosystem in the region for building teams and tapping into new gaming innovations.

The company has confirmed that the Yahaha platform was built in partnership with Unity, a link that in turn will help onboard more creators and more cross-platform gameplay and communities.

Second of all, there is the concept behind Yahaha itself, which focuses on two popular themes in tech at the moment: user-generated content and no-code development. UGC has been a popular part of online entertainment for decades at this point, but platforms like TikTok and Instagram have really given rise to a new focus on “creators”, people building huge audiences and businesses around the content that they are generating.

While platforms like Twitch and Discord have made celebrities out of game players, we haven’t really yet had much in the way of platforms that make it easy for creators to build massive communities around actual games (Roblox partly addresses this but doesn’t feel like a social platform). This is what Yahaha seems to hope to become, and if it works, it could be on to something very interesting.

Building the platform on a “no-code” framework, meanwhile, is what will help make Yahaha potentially used by more people. While a lot of the application of no-code has been in the area of enterprise IT (where people can, for example, easily build integrations between CRMs and accounting software), it’s interesting to see more of it making its way into consumer-focused services, specifically to serve creator communities.

“Achieving an investment of $50 million is incredibly exciting for us,” said CEO Chris Zhu in a statement. “Yahaha Studios has a key part to play in ushering in the next generation of entertainment as the metaverse continues to grow. Connecting users around the world through virtual entertainment, YAHAHA offers a unique creative and social experience to game developers and gamers alike. Through YAHAHA we are empowering creators at all levels, from established developers to those making their first game. Everyone can be a creator in our virtual world. We’re really looking forward to fully launching this year, growing our team and bringing the first stage of our vision for the future of content creation to life.”

November 9, 2021

Qualcomm launches new AR dev kit, acquires Clay AIR

Qualcomm today launched a new developer platform for building head-worn augmented reality experiences: the Snapdragon Spaces XR Developer Platform. The only supported hardware for the platform is currently Lenovo’s ThinkReality A3 smart glasses (paired with a Motorola phone), but it will expand to include hardware from Oppo and Xiaomi in the first half of 2022.

To build out the software ecosystem, Qualcomm lined up a wide range of partners, including Epic Games’s Unreal Engine, Niantic’s Lightship platform, Unity, Viacom CBS and others. Deutsche Telekom and T-Mobile U.S. are also partnering with Qualcomm to support startups that use Snapdragon Spaces through the hubraum program.

Image Credits: Qualcomm

For now, only a small number of developers will have access to the program. These currently include the likes of Felix & Paul Studios, holo|one, Overlay, Scope AR, TRIPP, Tiny Rebel Games, NZXR, forwARdgame, Resolution Games and TriggerGlobal. It plans to make the platform generally available in the spring of next year.

The company also today announced that it has acquired “the team and certain technology assets from HINS SAS and its wholly owned subsidiary, Clay AIR, Inc.” for its hand tracking and gesture recognition solutions. This is in addition to Qualcomm’s acquisition of Wikitude in 2019, another move that helped it jumpstart its AR efforts.

“Dating back to 2007, we had R&D programs, looking into augmented reality with algorithms like VIO [visual-inertial odometry] on smartphones,” said Hugo Swart, Qualcomm’s vice president and GM of XR, in a press briefing ahead of today’s announcement. “We enabled, through the last decade, devices like ODG. In 2014, we created new chips dedicated to virtual reality and augmented reality — and we are here for the long run. We know that we’re not there — it’s still going to require investment until we get to the holy grail of AR glasses that can do both fully immersive and augmented experiences.”

Image Credits: Qualcomm

Today’s platform is able to support features like local anchors and persistence, hand tracking, object recognition and tracking, plane detection, occlusion spatial mapping and meshing.

With this platform, Qualcomm wants to lower the barriers for developers to build AR experiences. They will get access to documentation, sample code, tutorial and additional tooling to quickly build basic AR applications. To further help companies who want to build for this ecosystem, Qualcomm is also opening up an additional program, dubbed Pathfinder. With this, they will get early access software tools and hardware development kits, additional funding for their projects and co-marketing and promotion from Qualcomm.

November 2, 2021

ByteDance reorganization offers glimpse into TikTok parent’s future

ByteDance has long been celebrated as an “app factory” for its proven model of churning out apps and monetizing them through a robust backend of shared resources, from engineering to marketing support. The result is a rank of household apps — Douyin and Toutiao in China and TikTok in the rest of the world.

In the meantime, the firm has prided itself on its “flat” internal organization with a flurry of self-governing products. As of September 2020, Zhang had 14 executives reporting to him, according to data compiled by The Information.

But as the firm continues to flourish, its stewards recognized that a structural shakeup is needed to fit its ballooning size. That change has come. ByteDance will group its apps and operations under six new “business units”, according to an internal document seen by TechCrunch Tuesday.

Notably, Shou Zi Chew, currently chief executive at TikTok, will no longer be ByteDance’s chief financial officer. Chew, a banking executive who previously worked at Xiaomi as CFO, joined ByteDance in March as its CFO and was made TikTok’s CEO in May.

At the time of his appointment as the new finance boss, speculation was rife that Chew was brought in to work on ByteDance’s initial public offering.

But the debacle of Ant Group’s planned IPO and later Didi’s regulatory overhaul have dimmed the prospects of Chinese internet firms seeking public listings. The other and perhaps more difficult question for ByteDance is: Which of the company’s units will be listed, and where?

Rubo Liang, a co-founder of ByteDance, has taken over Zhang Yiming as the firm’s CEO.

The six newly minted business units are useful indicators of ByteDance’s strategic focuses in the foreseeable future. They are:

TikTok: This unit will manage the video-sharing app and any business spawned by it, such as the firm’s e-commerce operations outside China.

Douyin: The eponymous app is the Chinese version of TikTok and is now officially the name of a standalone business unit overseeing ByteDance’s lucrative ad-powered content businesses in China. Xigua, which features longer videos, and Toutiao, the firm’s popular news aggregator, will be folded under the unit.

Dali Education: Dali was created in 2020 as ByteDance’s foray into the online learning sector. It now oversees the firm’s vocational learning, education hardware (like a lamp that allows busy parents to remotely keep their kids’ company during homework time), and campus learning initiatives.

Lark: Lark, a workplace collaboration software, is ByteDance’s ambition to put Slack and G Suite in one and part of the company’s B2B bet.

BytePlus: This is essentially the infrastructure piece of ByteDance’s B2B endeavor. The unit sells AI and data tools to enterprise clients.

Nuverse: It’s ByteDance’s game development and publishing unit, which also manages titles intended for overseas markets. Gaming companies in China are increasingly seeking growth abroad amid regulatory uncertainties.

How ByteDance plans to crack the gaming industry

TikTok’s identity

The inception of a TikTok business unit is noteworthy. ByteDance has been distancing TikTok from the rest of its Chinese businesses ever since concerns from the West rose over the video app’s links to the Chinese government. TikTok says it stores all its data in the U.S. with backup servers in Singapore, rather than Beijing where its parent company is headquartered.

These measures aren’t enough to appease U.S. regulators’ worries. In its first-ever congressional hearing in the United States, TikTok faced tough questions and was repeatedly asked to clarify its semantics.

Senator Ted Cruz pressed the firm to address whether Beijing ByteDance Technology is “part of” TikTok’s “corporate group,” a term used in TikTok’s privacy policy, which states that the app “may share all of the information we collect with a parent, subsidiary, or other affiliate of our corporate group.”

TikTok’s representative maintained that TikTok has “no affiliation” with Beijing ByteDance Technology, ByteDance’s Chinese entity in which the government took a stake and board seat this year. That wording did not satisfy the Senator.

September 26, 2021

China roundup: Meng Wanzhou’s release and Huawei’s future

Hello and welcome back to TechCrunch’s China roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world.

On Friday, Huawei’s chief financial executive Meng Wanzhou was released from house arrest in Vancouver after reaching a breakthrough deal with the U.S. Justice Department. Chinese startups that announced major funding rounds this week include Momenta, a Daimler-backed autonomous driving startup, Nreal, an augmented reality company, and Hai Robotics, a warehouse robotics maker.

Landmark deal

Meng, the daughter of Huawei’s founder Ren Zhengfei, entered an agreement with the U.S. Justice Department in which she admitted to some wrongdoing while prosecutors deferred wire and bank fraud charges against her and could dismiss the indictment in 2022.

In 2018, Meng was arrested in Vancouver, Canada on suspicion she violated U.S. trade sanctions against Iran. Over the years, her case has become an irritant in straining U.S.-China relations. Around the time Meng took off for Shenzhen, home to Huawei’s headquarters, on Friday, China released two Canadians who have been detained on spying charges. Beijing has repeatedly denied connections between the detention of the two Canadians and Meng’s arrest.

Through a remote court appearance via video on Friday, Meng pleaded not guilty to charges of conspiracy to commit bank fraud, conspiracy to commit wire fraud, bank fraud and wire fraud. However, she admitted to the basic facts underpinning the DOJ’s charges, which include “multiple material misrepresentations to a senior executive of a financial institution regarding Huawei’s business operations in Iran in an effort to preserve Huawei’s banking relationship with the financial institution.”

“Meng Wanzhou, CFO of Huawei Technologies, admitted today that she failed to tell the truth about Huawei’s operations in Iran, and as a result, the financial institution continued to do business with Huawei in violation of U.S. law. Our prosecution team continues to prepare for trial against Huawei, and we look forward to proving our case against the company in court,” said Assistant Attorney General Kenneth A. Polite Jr. of the DOJ’s Criminal Division in a release.

China’s news outlets have largely left out Meng’s confirmation of wrongdoings and internet users rushed to triumph the Huawei executive’s release after three years. Within hours, posts hashtagged #MengWanzhouReturningToMotherland have garnered over 1 billion views on Chinese microblogging platform Weibo.

“We look forward to seeing Meng Wanzhou returning home safely to be reunited with her family. Huawei will continue to defend itself against the allegations in the US District Court for the Eastern District of New York,” the company said in a statement.

Ment said upon her release the past three years have been “a disruptive time” for her as “a mother, a wife and a company executive.” In a statement, she said support from China, both at the governmental and civil level, gave her faith and kept her going during the “dark moments.”

Meng’s return might boost employee morale at Huawei but the telecom equipment and smartphone giant continues to suffer from the aftershocks caused by U.S. sanctions. Huawei will see revenue from its smartphone business drop by at least $30-40 billion in 2021, its chairman Eric Xu said Friday. Once a global handset leader, Huawei has fallen out of the top ranks and been unseated by its Chinese rivals, with Xiaomi overtaking Apple as the second best-selling brand worldwide in Q2.

In 2019, Huawei lost access to critical chip components and software after the Trump Administration put it on an export blacklist. The firm has since stepped up efforts to make its own handset chips and operating system but these technologies have proven hard to come by in a short span of time.

TSMC reportedly stops taking orders from Huawei after new U.S. export controls

Fundings

In other news, General Motors said it will pour $300 million into Chinese autonomous driving technology provider Momenta, which already counts Toyota, Chinese state-backed SAIC Motor and Mercedes-Benz AG among its investors.

Substantial funding has become necessary for competing in China’s autonomous driving race, and coalition with entrenched automakers are even more important as robotaxi upstarts begin testing their commercial viability by deploying advanced or autonomous driving solutions in trucks, buses and passenger cars.

Over the past year, we’ve seen Momenta’s rivals Pony.ai, WeRide, and Deeproute securing financings in the hundreds of million dollars.

Nreal, founded by Magic Leap veteran Xu Chi, said it has raised $100 million to expand overseas and develop new AR products. We covered its $15 million Series A round back in 2019 and the startup has reportedly reached a staggering $700 million valuation as of the current raise, according to CNBC. Nreal has been touting headsets that are more affordable and lightweight to its Western peers.

Lastly, Hai Robotics, a Shenzhen-based startup that makes case handling robots for warehouses, just raised $200 million. Industrial robots are in demand in China as the government calls for greater efficiency to deal with labor shortage in its manufacturing sector. As Huang He, an investor focused on industrial autoamtion, previously told me:

Youngsters these days would rather become food delivery riders than work in a factory. The work that robots replace is the low-skilled type, and those that still can’t be taken up by robots pay well and come with great benefits.

Nonetheless, he warned that the market might be overheated:

There’s this bizarre phenomenon in China, where the most funded and valuable industrial robotic firms are generating less than 30 million yuan in annual revenue and not really heard of by real users in the industry.

In August, another warehouse robotics startup, Syrius, which is also based in the hardware haven of Shenzhen, announced it had raised over $20 million led by ByteDance.

September 14, 2021

Xiaomi launches its own smart glasses, of course

Mariella Moon Contributor

Mariella Moon is an associate editor at Engadget.