SoftBank faces test of new China strategy

Hi everyone, James here. We have a rare change to our line-up this week. We are delighted to welcome Nian Liu, who is taking over from the wonderful Mercedes, a founding member of the #techAsia team to whom we say a big thank you. It is “Nian’s top 10” selection of the region’s biggest stories that you will read below. Particularly noteworthy, in my view, is India’s $10bn plan to woo global chipmakers — if the money actually materialises, that is. For a fun read, don’t miss the delightful tale of the Japanese toaster maker that tried to move into smartphones. Take care till next week.

The Big Story

A significant test of SoftBank’s China strategy is looming. The huge Japanese investor has a string of Chinese technology companies gearing up for share offerings in Hong Kong, as it looks to turn the corner after big losses last year, as this analysis in Nikkei Asia explores.

Key developments: The new strategy involves a shift from consumer-related and data-sensitive Chinese companies to those less exposed to regulatory risk.

“We’re not investing so much in consumer or media data-sensitive companies at this moment,” SoftBank chair and chief executive Masayoshi Son has said. “But there are many companies the Chinese government is not showing red flags for . . . like in robotics, medicine, B2B, helping small businesses and so on.”

One portfolio company is artificial intelligence group Qingdao AInnovation Technology Group, which kicked off its IPO this week looking to raise up to HK$1.2bn (US$154m). Surgical robot company Edda Healthcare and Technology and human resources software company Beisen also filed applications to list in Hong Kong last week.

Upshot: The IPOs will test the water after the value of SoftBank’s two Vision Funds’ listed portfolios in China fell $2.2bn in the October-to-December quarter, according to one calculation.

Nian’s top 10

1. Japan’s Sony is set to realise its ambitions of becoming an entertainment powerhouse with its much-anticipated video game-turned-movie Uncharted. But distractions lie ahead. (FT)

2. India is wooing global chipmakers with a $10bn package of incentives. (Nikkei Asia)

3. A Hong Kong blockchain gaming start-up has hit a $5bn valuation. (Nikkei Asia)

4. Exclusive: Chinese giant Huawei will sell renewable energy storage batteries in Japan, posing a threat to domestic rivals. (Nikkei Asia)

5. Taiwanese chipmaker TSMC plans to increase its capital expenditure to $44bn this year, far outspending its two biggest competitors, Samsung and Intel. (FT)

6. As cryptocurrencies boom across Thailand, companies are rushing to mine bitcoin despite central bank warnings. (Nikkei Asia)

7. However, Singapore is clamping down on crypto trading advertisements, deeming the business too risky for the public. (Nikkei Asia)

8. Lockdowns in China have dealt a further blow to global supply chains as authorities adhere to Beijing’s “zero-Covid” policy to stamp out local Omicron spread. (FT)

9. Indian start-up LEAD has raised another $100m, becoming the world’s first ed-tech unicorn. The company will use the money to expand affordable education. (Nikkei Asia)

10. Is it easy to jump from selling toasters to smartphones? Not really, as one Japanese cult brand found out. (FT)

Our take

It is becoming an embarrassment. The case against another prominent ethnic Chinese scientist charged under Washington’s “China Initiative” — a federal effort launched in 2018 to counter spying by Beijing — has collapsed.

A federal prosecutor recommended this month that the US Department of Justice dismiss all three charges against Gang Chen, a nanotechnology professor at the Massachusetts Institute of Technology. He had been accused of hiding funding from mainland Chinese bodies on grant disclosure forms.

If the justice department does indeed dismiss the case, Chen would be the eighth person accused under the China Initiative of research integrity violations to walk free before trial, according to a database kept by the MIT Technology Review.

Of course, there have also been several guilty pleas and verdicts under the China Initiative. But the number of cases against Chinese scientists that have unravelled reveals a flawed process that relies too often on flaky evidence or mere innuendo.

The victims are those Chinese scientists who faced the ignominy of espionage accusations for months or years before the cases against them collapsed. Chen, for instance, had been under a cloud of suspicion since January 2020 when he was first detained in the US after returning from a trip to China.

— James

Smart data

The US, China, Russia, India, Japan and South Korea are all planning lunar missions in 2022 and beyond. These moonshots lay bare a growing cosmic competition for resources, technological superiority and national glory.

But looking at the huge lead the US has in terms of spending (see chart) on its space programme, it would be premature to say that it is locked in a “space race” with China.

Nevertheless, that could change if Washington’s plans slip further behind schedule and Beijing accelerates its own, seeing “a window of opportunity to steal the US thunder”, says Malcolm Davis, a senior analyst and space specialist at the Australian Strategic Policy Institute.

“There would be huge prestige for China if it beats the US back to the moon,” Davis said, referring to Washington’s success in planting its flag on the lunar surface in 1969. Nasa’s Artemis program is set for its maiden lift-off this year, with a giant Space Launch System rocket due to hoist an uncrewed Orion spacecraft into lunar orbit.

Spotlight

Former billionaire Anil Ambani faces a fire sale of his assets.

Each of the following will be up for sale: India’s fifth-largest privately owned general insurance company, a stockbroker, a stake in an asset manager and Reliance Capital’s 51 per cent share in a life insurance venture with Japan’s Nippon Life.

A court-appointed administrator has been handed control of Ambani’s Reliance Capital after it defaulted on $3.5bn in debts.

The expected sale is the latest, very public blow to Ambani, 62, whose fortunes have crumbled — in stark contrast to those of his brother Mukesh, with whom he divided their father’s business empire a decade and a half ago.

Ventures from telecoms to energy have gone bust or defaulted on loans, and Ambani has declared himself to have a personal net worth of zero.

When sages speak

• Behind the resolve to win the tech war against the US stand Chinese experts convinced China can take the lead, writes Valarie Tan for Merics, a Berlin-based think-tank.

• Jacob Feldgoise and Matt Sheehan at the Carnegie Endowment for International Peace examine how US businesses view China’s increasing influence over international standards.