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Tech at the mercy of politics and a global EV scramble

Hi everyone, this is Kenji from Hong Kong. We are witnessing a new round of Sino-US rivalry after US House Speaker Nancy Pelosi visited Taiwan and met President Tsai Ing-wen and key semiconductor industry executives. Outraged that Washington’s top official has landed on the self-governing island for 25 years, Beijing is already flexing its military muscles in the surrounding waters, and more sanctions are expected.

The diplomatic bombshell coincides with the annual secret meeting of the Communist Party’s top leadership and elders in the coastal town of Beidaihe, some 300 km east of Beijing. It is always extremely difficult to know what is happening behind the bamboo curtain, but geopolitical tensions with the US will certainly be on the agenda.

It becomes even clearer how strongly the tech industry is intertwined with politics. Adding to the potential fallout from the Pelosi tour and the outcome of the Beidaihe conclave, global chipmakers are being forced to choose between Washington and Beijing, while Chinese tech players are under continued pressure to stick to the party line. Close monitoring of political developments remains crucial to keep an eye on the sector.

Pushed around by politics

Chips and politics are becoming increasingly intertwined, as evidenced by recent developments in the world’s two largest economies.

Ahead of her Asian tour, spokeswoman Pelosi signed the $280 billion Chips and Science Act last Friday, which includes $52 billion in funding to boost the U.S. semiconductor sector. Major chipmakers, including Taiwan’s TSMC and South Korea’s Samsung, welcomed the legislation, which rarely enjoyed bipartisan support.

However, the subsidies come at a price – restrictions on physical investments in China and certain other countries for up to a decade. According to a joint report by Nikkei Asia, the potential harm to companies that break the rules could be severe Cheng Tingfang, Lauly Li and Yifan Yu.

“Penalties can include not only loss of funding, but also other penalties ‘in the national interest,’ which is pretty broad language,” said Clinton Yu, a Washington-based attorney with Barnes & Thornburg. Other experts say the legislation could be a prelude to even more scrutiny of foreign investment by chipmakers.

Meanwhile, China is escalating a crackdown on its own tech sector. The country’s top corruption slayer last week arrested at least three leading figures instrumental in developing the domestic chip industry, including a government minister. In addition, China’s recently revised antitrust law tightens scrutiny over tech companies.

As government scrutiny increases, global tech companies need to be ever more cautious.

More Missfresh glitches

Fired employees and investors are lining up to sue collapsed Chinese grocery delivery company Missfresh and the Wall Street underwriters who marketed its $300 million worth of shares in New York last year.

Employees are scrambling to collect overdue salaries, while US investors are hoping to recoup some of their losses by claiming that the start-up, its executives and underwriters have violated securities laws. Nian Liu, Ryan McMorrow and Gloria Li write for the Financial Times.

In recent days, hundreds of Missfresh employees have sneaked into labor arbitration courts in Beijing and Shanghai as they attempt to recover salaries owed in June and July and force the company to pay severance pay.

The problem, a Missfresh executive told employees last week, is that a proposed financing plan for a coal mining company has failed and Missfresh is out of money.

The issuance has taken Nasdaq-listed shares of Missfresh from $13 a share at last June’s trading price to 10 cents Monday, causing investors like Juan Chen to lose massively.

Chen lost most of the $68,000 he invested in Missfresh stock and is the lead plaintiff in a class action lawsuit against the company. The lawsuit alleges Missfresh deceived investors with falsified sales figures in its IPO prospectus and names banks that launched the company, such as JPMorgan and Citigroup, as co-defendants.

His argument is supported by a Missfresh SEC filing in July, which admitted that sales figures in its financial statements had been overstated.

Losing steam already?

Japan, long a global laggard in e-commerce, has been gaining ground quickly in recent years, in large part due to the impact of the pandemic. However, according to Tokyo-based big data analyst Nowcast, that momentum is already lost. The e-commerce consumption index has leveled off this year and even declined for two months through June.

A statement, write Nikkeis Hiroki Obayashi and Kazuya Manabe, is that consumers are just tired of shopping on their smartphones. To revive momentum, some industry figures are proposing closer integration of online and brick-and-mortar stores, especially as Japan’s Covid-19 restrictions are gradually eased. Tomoyuki Mochizuki, vice president of e-commerce consultancy Itsumo, believes that “the role of physical stores will increase.”

But even if the e-commerce sector regains momentum, the lack of delivery staff remains a potential bottleneck. Retailers like Seiyu and Rakuten Group have begun trials using self-driving robots to deliver fresh groceries and packaged meals.

The race has started

With electrification taking center stage in the auto industry, traditional players are pushing into new markets. As Tesla and a handful of local manufacturers compete in China, Nikkei has learned that Germany’s ZF, the world’s third-largest auto parts maker, will enter Japan’s commercial electric vehicle market with a goal of producing 10,000 units by 2030.

Hyundai Motor, meanwhile, made a comeback in Japan after a 12-year hiatus, this time with its strategic sports utility EV Ioniq 5. With the opening of its first directly operated customer service center in Yokohama last week, the South Korean automaker aims to create another crack in a market , on which his previous petrol-powered strategy failed.

And while its home market is being targeted by foreign players, Toyota Motor has reached an agreement to gain access to a US lithium mine to help it compete in the global EV race. Its joint venture with Panasonic Holdings is entitled to 4,000 tons of lithium carbonate annually over five years from 2025.

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  1. India’s Reliance Jio outperforms Airtel and Vodafone in 5G auction spend (Nikkei Asia)

  2. Alibaba is “struggling” to keep the New York listing despite being on the SEC watch list (FT)

  3. Indonesian company Indika Energy is preparing an “affordable” e-motorcycle venture (Nikkei Asia)

  4. South Korean app nicknamed “honest LinkedIn” wants to monetize big tech (Nikkei Asia)

  5. Investors fear India has passed peak outsourcing (FT)

  6. Samsung is trying to reassure the markets about the competitiveness of semiconductors (FT)

  7. China’s top tech companies on course for worst quarterly earnings ever (Nikkei Asia)

  8. Lex – Taiwan/Pelosi: Push to choose US or China puts TSMC in dire straits (FT)

  9. Rising inventories at Japanese electronic parts makers are fueling fears of production cuts (Nikkei Asia)

  10. Samsung and SK Hynix rethink China exposure under US chips law (FT)

#techAsia is coordinated by Katherine Creel of Nikkei Asia in Tokyo, with support from the FT Tech Desk in London.

Register here at Nikkei Asia to receive #techAsia every week. The editors can be reached at techasia@nex.nikkei.co.jp

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