Google goes full-speed on developing its own chips

Hi everyone — James here in Hong Kong. We have a strong scoop for you to kick off this week: Google is going all-in on developing its own chips (The Big Story). But that isn’t the only trend that looks set to recast the world of Asia tech. The blizzard of recent Chinese tech regulations does not make for the most scintillating read but it will affect an awful lot (Our take, When sages speak). And don’t miss a south-east Asian success story in Latin America (Smart data). Till next week, be sure to take care.

The Big Story — Exclusive

Google is going all-in on chip development. The US tech giant plans to start using self-developed central processing units for its laptop and tablet computers, which run on its Chrome operating system, around 2023, according to this Nikkei Asia exclusive.

Google has already announced plans to use in-house processor chips for the first time in its upcoming Pixel 6 smartphone series.

Key implications: Google’s growing focus on developing its own chips comes as global rivals pursue a similar strategy to differentiate their offerings. Amazon, Facebook, Microsoft, Tesla, Baidu and Alibaba are all racing to build their own semiconductors to power their cloud services and electronic products.

“We found that all the tech titans are joining the foray to building their custom chips because in that way they could program their own features into those chips that could meet its specific needs,” said Eric Tseng, chief analyst with Isaiah Research.

Google is hiring chip engineers around the world, including in Israel, India, Taiwan and the US, according to supply chain executives, employees and company job postings. The company has already hired chip talent away from critical suppliers including Intel, Qualcomm and MediaTek, according to research.

Upshot: If Google can develop chips that enhance its operating systems, it could reap big rewards. Most of the world’s top smartphone makers, including Samsung, Xiaomi, Oppo and Vivo, use Google’s Android OS for their handsets. Google has also licensed its Chrome OS to HP, Dell, Acer, AsusTek, Lenovo and Samsung to build Chromebooks, which are lightweight laptops targeted toward the education market.

Mercedes’ top 10

1. Exclusive: Production of Apple’s upcoming smartwatch has been delayed in China because of its complicated design, Nikkei Asia has learned.

2. Exclusive: Huawei has almost doubled the amount of Chinese-made components in its latest smartphone, according to this teardown. (Nikkei Asia)

3. South Korea will be the first country to bar Apple and Google from requiring users to pay for apps with their own in-app purchasing systems, setting a global precedent. (FT)

4. SenseTime, China’s biggest artificial intelligence software provider, is going public in Hong Kong with a valuation one observer estimated at $12bn. (FT)

5. Dutch investment group Prosus is buying Indian payments start-up BillDesk for $4.7bn, in one of the country’s biggest payments deals. (FT)

6. Meituan’s chief executive has become the latest Chinese tech tycoon to mirror Xi Jinping’s recent rhetoric on wealth redistribution. (FT)

7. Chinese children will only be allowed to play video games for one hour on Fridays, Saturdays and Sundays under new rules. (FT)

8. Uber is planning to expand its grocery and non-food delivery business in Japan, targeting deliveries in 30 minutes or less. (Nikkei Asia)

9. This is an excellent piece on how India’s shift away from democracy is making the country Silicon Valley’s biggest headache. (BuzzFeed)

10. The high-cost battle to capture south-east Asia’s e-wallet market has claimed a big casualty: Singaporean start-up Razer. (Nikkei Asia)

Our take

China’s new draft rules on algorithms reveal the diverse aims of Beijing’s recent regulatory clampdown.

Control is the overriding priority. One provision in the draft requires platforms to “orient towards mainstream values” and “actively transmit positive energy”. In other words, they should support — and certainly not oppose — the messaging of the Chinese Communist party.

But the rules are not solely concerned with shoring up the power of the CCP. They also recognise that China’s social stability rests on ensuring life is tolerable for the country’s 1.4bn Chinese people.

Several clauses aim to protect consumers. Algorithms that encourage addictive behaviour are to be banned, as are those that entice users to spend large amounts of money or charge “unreasonably” differentiated prices for the same product or service. In addition, one clause says that providers must give users the right to opt out of receiving personalised recommendations.

The CCP has no intention of ceding much power to algorithms. But it also wants algorithms to serve people — not the other way around. In that regard, regulators in the west could learn a thing or two.

— James

Smart data

It did not take south-east Asian ecommerce company Shopee long to start making waves in Brazil. In the space of two years, it has managed to become the most downloaded shopping app in the Latin American country, leading year-to-date numbers over companies such as local rival MercadoLibre and even Alibaba’s AliExpress. Can Shopee, owned by Singapore-headquartered Sea, eventually dominate Latin America’s $105bn ecommerce market the same way it conquered south-east Asia? Read more in this FT deep dive.

Spotlight

Kei Uruma, Mitsubishi Electric’s new chief executive, has a plan to correct the Japanese industrial group’s flawed corporate culture.

Uruma, who was tapped to lead the company in late July after his predecessor resigned over falsified inspection data, will make outside directors a majority of the board and set up a team to reform its culture in response to a slew of quality control scandals.

Mitsubishi Electric will also move personnel between departments more often — a shift for the company, where employees usually stay in the fields to which they were first assigned. “By moving people around, we hope to connect divisions horizontally,” Uruma said in a Nikkei Asia interview.

“We had called on people to report problems” voluntarily, trusting that they would do the right thing, Uruma said. “We know now that there are things that don’t come out this way.”

There have been many false starts for improving corporate governance at some of Japan’s biggest companies. Decades of fraud and a string of unfulfilled vows to shape up in the wake of previous scandals mean that Uruma has a long, hard road ahead to regain customer and investor trust.

When sages speak

• For China tech regulation junkies — and let’s face it, there is no better time to be one — here is a very useful summary of the most important moves this year, courtesy of PingWest. For extra insights on algorithms, this thread by Kendra Schaefer, tech analyst at Trivium in Beijing, is great.

• China’s data security law, which takes effect today, will affect all business operators in the country. Jacqueline Lee at CSIS gives a good rundown of its scope and impact.

• About 64 per cent of smartphones sold in Africa were made by Chinese companies. Breakdown here.

• Will the CCP’s ever-stronger influence over Chinese tech companies influence the way those groups are received abroad? Gaurav Tyagi has this perspective for India’s ORF think-tank.