Google Chromebook slide signals ebbing global demand for PCs

Hello everyone, welcome back. Lofty predictions on the longevity of the lockdown-fuelled surge in tech gadget demand are looking shaky. Our Big Story this week courtesy of Nikkei Asia is a scoop on how makers of Google Chromebooks have slashed orders for components. Other industry suppliers have also noticed a slowdown. Is this the first sign of an end to the boom? Elsewhere, Japan’s SoftBank is cutting its exposure to China’s tech sector as the regulatory crackdown intensifies. Will others publicly follow suit? Finally, don’t miss Stephanie Findlay’s wild ride getting an Indian driving license — and what it reveals about the country’s chaotic digitisation push. — Mercedes

The Big Story — Exclusive

The lockdown-spurred boom in PC sales may be ending. Makers of Google Chromebooks, a fast-growing market segment in 2020, have slashed orders for components, according to this exclusive from Nikkei Asia.

Chromebook shipments jumped to 32.5m units last year from 16.7m in 2019, the fastest growth since Google began licensing its Chrome operating system in 2011 to PC companies including Lenovo, HP, Dell, Acer and Asustek Computer.

Key developments: But recently, these PC companies have scaled back the orders they have placed with suppliers by at least 20 per cent, industry executives said. That means about 10m fewer Chromebooks may be shipped this year compared with earlier estimates.

“Earlier this year, we were asked to prepare more components for Chromebooks every day amid the global chip crunch,” said an executive of Genesys Logic, a notebook chip supplier to several computer makers. “But there has been a sudden correction since July.”

Elan Microelectronics, a microcontroller maker supplying almost all laptop makers globally, has also noticed the slowdown.

Upshot: The slowing outlook for Chromebooks derives in part from a decline in demand for remote learning as schools reopen in many countries. As such, it may also signal the end of the lockdown-driven boom.

Mercedes’ top 10

1. SoftBank’s highly competitive, instinct-driven culture is often in conflict with compliance procedures, according to an FT scoop. Separately, the Japanese group is going softly-softly on China. (FT)

2. China topped the US for the first time in the number of academic articles on artificial intelligence cited by others, a measure of the quality of a study. (Nikkei Asia)

3. China is exploring cross-border payments for the digital renminbi — a move the US regards as potentially undermining the dollar. Nikkei Asia investigates. (Nikkei Asia)

4. Writing in Nikkei Asia, Facebook executive Nick Clegg says Asia’s lurch towards digital protectionism is self-defeating. (Nikkei Asia)

5. Indian food delivery group Zomato reported its first earnings as a public company and they were not great — net losses more than tripled. (FT)

6. China’s second-largest music streaming service has scrapped a $1bn IPO in Hong Kong as the country’s regulatory crackdown intensifies. (FT)

7. Shares in Bukalapak, the first Indonesian unicorn to list on the Indonesia Stock Exchange, are on a tear. (Nikkei Asia)

8. South Korea touts self-sufficiency in chips, but two years after Japan levied sanctions, Seoul’s effort to reduce its reliance on its neighbour has stalled. (Nikkei Asia)

9. China’s tech crackdown is simply an extension of the ruthless measures Xi Jinping unleashed on coming to power in 2012, writes Richard McGregor. (Nikkei Asia)

10. A hilarious and illuminating read from the FT’s Delhi correspondent Stephanie Findlay on her year-long journey to get an Indian driver’s licence, and what it reveals about the “messy reality of India’s digital transformation”. (FT)

Our take

The Supreme Court of India may have saved not only Amazon’s India business but also the face of Prime Minister Narendra Modi’s government. The details of the case are crucial because they safeguard the enforceability of cross-border contracts between foreign investors and Indian counterparts.

What happened was this: Amazon filed a petition to the Supreme Court to bar a merger between Future Group and Reliance Industries, two large Indian conglomerates. Amazon’s case was based on a partnership agreement between Amazon and Future, signed in January 2020, which gave Amazon the first right of refusal on Future’s sales of group assets to competitors.

Another clause in the agreement said that any disputes must be resolved in the Singapore arbitration court. So when Future fell into a liquidity crisis during the Covid-19 pandemic and chose Reliance — instead of Amazon — as its white-knight rescuer, Amazon filed a petition in Singapore claiming that Future was in breach of the agreement.

The Singapore International Arbitration Centre ruled in Amazon’s favour and issued an injunction to stop the merger in October last year. But Future Group and Reliance decided to go ahead anyway — prompting Amazon to appeal to the Indian Supreme Court.

Modi, who has been promoting India as a cross-border investment destination, must be thankful for the Supreme Court judges.

— Ken

Smart data

The world’s billionaire factory is feeling tremors from the regulatory assault on technology companies. China has more than 1,000 billionaires, double the number five years ago thanks to the proliferation of successful tech groups. But the FT looked at two dozen Chinese billionaires and found the crackdown has chopped $87bn off the net worth of the sector’s wealthiest tycoons since the beginning of July.

Colin Huang, founder of ecommerce site Pinduoduo, has been the worst affected, with paper losses of $15.6bn, or one-third of his wealth. Pony Ma, founder of internet group Tencent, has lost more than $12bn or 22 per cent of his fortune. Read the full FT story here.

Spotlight

Chang Byung-gyu, founder and chair of South Korea’s biggest gaming group Krafton, says the secret to the company’s success is fearlessness in the face of the unfamiliar. The 48-year-old is part of South Korea’s first generation of tech start-up entrepreneurs, along with Lee Hae-jin, who founded Naver, the country’s top search engine, and Kim Jung-ju of Tokyo-listed game developer Nexon.

Chang himself is not afraid to jump into unknown territory — even in the political sphere. He has advised President Moon Jae-in on science and technology policy and in 2018 visited Pyongyang as part of Moon’s delegation to a summit with North Korean leader Kim Jong Un.

The entrepreneur will need to muster up some of that pluck for another unknown: a disappointing debut as a public company. Krafton shares plunged as much as 20 per cent from their initial public offering price yesterday, a tumble attributed to a high valuation and the threat of Chinese regulation (Tencent is a big backer). As Krafton’s largest shareholder, Chang’s stake was meant to make him South Korea’s 11th richest person based on the IPO price.

At odds with Krafton’s fall was the debut of its peer KakaoBank, which still surged 80 per cent despite high valuation concerns.

Art of the deal

ByteDance is resuscitating its plan to go public — though the owner of the popular TikTok app is taking a cautious approach compared with others such as Didi Chuxing.

The Chinese group, which raised about $5bn in December at a $180bn valuation, is planning to list by early 2022 in Hong Kong, according to an FT scoop. That is assuming ByteDance’s discussions with Chinese authorities reassure officials that enough has been done to protect national security and consumer information. But ByteDance’s decision to pause its IPO plans earlier in the year to ensure compliance bought it some goodwill.

Last but not least, Hong Kong is regarded as a safer route to public markets than the US, where Didi chose to list. Chinese officials have vowed stricter oversight of overseas listings as part of the government’s widening crackdown on the tech sector and increased focus on national security.