Tue. Jul 5th, 2022

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Hello, Kenji here from Hong Kong. While our neighboring city, Shenzhen, has been under Covid lockdown, causing stock prices to plunge (Nian’s Top 10), China’s grand strategy for chip self-sufficiency seems unhindered (Big Story). China is harvesting US data, warns an American scholar, but decoupling is not a solution (Our Take). Please take care and see you next week.

The Big Story – Exclusive

China is taking key steps towards semiconductor self-sufficiency. Two of Apple’s most important product assemblers, including the mighty Luxshare, are moving into chip packaging – dovetailing with Beijing’s call to build a fully independent chip industry.

Key developments: Luxshare will build chip systems-in-package (SiP) for Apple’s AirPods earbuds after it won a substantial number of orders for the component at the expense of Taiwanese and US rivals, sources said.

Goertek, another Apple supplier, is also eyeing the chip assembly business but due to technical difficulties has so far gained far fewer orders on that front than Luxshare has, the sources said.

The chip assembly that Luxshare is tapping into is less advanced than the chip packaging that top chipmakers like Samsung, Intel and Taiwan Semiconductor Manufacturing Company are betting on, but it still requires a significant amount of technical know-how.

Upshot“It’s not a surprise to see Chinese companies like Luxshare and Goertek step up their efforts in building semiconductor-related capabilities,” said Chiu Shih-fang, a veteran supply chain analyst. “It has become a nationwide movement for Chinese tech suppliers to build a self-reliant chip supply chain amid the geopolitical uncertainties.”

Nian’s top 10

  1. Chinese tech stocks see their worst week in a year as regulatory scrutiny in China and the US rises. (FT)

  2. Japan’s SoftBank quits Indonesia’s project to relocate its capital. (Nikkei Asia)

  3. Pro-Russia content on Chinese social media pose ESG dilemma for foreign investors. (FT)

  4. China’s tech hub Shenzhen orders a Covid-19 lockdown, shutting down Foxconn’s iPhone factories. (FT)

  5. Exclusive: Chinese authorities grant a permit to the electric vehicle unit of embattled real estate company Evergrande. (Nikkei Asia)

  6. Kashmir’s young entrepreneurs are developing apps to fill the gaps left by big companies that give the restive region a wide berth. (Nikkei Asia)

  7. Taiwan raided eight Chinese companies, accusing them of illegally poaching Taiwanese tech talent. (Nikkei Asia)

  8. South Korea’s SK Innovation and Ford Motor of the US team up to build an automotive battery plant in Turkey. (Nikkei Asia)

  9. India bans a unit of Paytm, backed by Japan’s SoftBank, from signing up new customers – sending the company shares plunging. (FT)

  10. China’s development of homegrown mRNA vaccine hits obstacles, putting further strain on its “zero-covid” policy. (Nikkei Asia)

A female visitor wearing a face mask walks past a row of three EV vehicles on display

Evergrande Group’s Hengchi electric vehicles are displayed during a media day at the Auto Shanghai show in April 2021 © Aly Song / Reuters

Our take

The strategic importance of data in our time is indisputable. Some say it is the “new oil”. That is precisely why conflict over who controls data is intensifying, especially in the context of the US-China rivalry.

Aynne Kokas, media studies professor at the University of Virginia, warns in her latest book that China is winning at what she calls “data trafficking.” This concept describes “an exploitative process that leverages fragmented corporate data security policies that have limited user consent or acknowledgment of how the data has been shared”. In this way, data from the US and elsewhere can be “exploited and taken across borders” to China.

Speaking at a forum sponsored by the University of Tokyo, Kokas said a combination of factors has brought China’s advances on this front. “Failure of US government leadership, Silicon Valley’s aspiration for data, and Wall Street’s addiction to growth have fueled the expansion of China’s digital realm,” she said. This has been coupled with an aggressive data policy pursued by Beijing, through legislation and various pressures exerted on companies seeking to do business in the country. The Chinese government has gained “sovereignty over corporate data generated by US corporations”.

However, Kokas does not see the decoupling of the two powers as a solution, because “not having a flow of data would mean a shutdown of the global tech economy, which I do not think is advisable or feasible.”

What she suggests is learning from the global fight against climate change. “Like (combating) climate change, data regulatory issues are something that need to happen at every level,” she said. The issue is not only about policymakers or academics but also about consumers. Consumers who sacrifice their data may benefit from more convenient services but they pay a price in terms of privacy.

– Kenji

Smart data

Column chart of Daily volume ($ mn) showing Trading on OpenSea in decline

Internet collectibles ranging from cartoon apes to artsy doodles have plunged in value as real-world conflict and a broader cryptocurrency slump begins to unwind one of the past year’s biggest speculative frenzies.

Digital items known as non-fungible tokens (NFTs) burst into mainstream culture last year, as several animal collections including Bored Ape Yacht Club, Cool Cats and Pudgy Penguins spiked in price, aided by celebrity endorsements and social media hype. By the end of 2021, nearly $ 41bn had been spent on NFTs – making the market almost as valuable as the global art market.

Daily trading volumes on OpenSea – the biggest marketplace for NFTs and popular among Asian traders – have plummeted 80 per cent to roughly $ 50mn in March, just a month after they reached a record peak of $ 248mn in February.


Billionaire Xiang Guangda must have needed nerves of steel, which his company produces, when he saw the price of nickel trading above $ 100,000 a ton last week. It had doubled in just two days.

Nickel is a key input for producing stainless steel and electric vehicle batteries. The recent rally is driven by fears of shortages as Russia, a major producer, faces tightening economic sanctions over its invasion of Ukraine.

The unprecedented rally sent Xiang’s company Tsingshan Holdingsone of the world’s biggest nickel and stainless steel producers, scrambling to cover a short position that threatened to leave it facing billions of dollars in losses.

Xiang was quoted by local media as blaming unnamed foreigners for the company’s situation while insisting that China’s state supported Tsingshan. The company later said it had covered its short position and secured a credit lifeline. Analysts think that Xiang’s political connections were likely to have played a key role in the rescue mission.

Tsingshan was founded in 1988 by Xiang and his wife as a car door and window manufacturer. It pivoted to produce stainless steel and nickel, riding the wave of China’s industrial transformation. Tsingshan’s production centers now spread across China, Indonesia, India, Zimbabwe and the US, generating an annual revenue of $ 55.7bn.

Art of the deal

GoTo, Indonesia’s biggest start-up, is shooting for a market valuation of $ 29bn. The company plans to raise up to $ 1.3bn in an initial public offering, as it looks to shrug off a global decline in technology stocks and lure investors who want to cash in on the country’s booming digital economy.

The group, formed last year following an $ 18bn merger of superapp Gojek and ecommerce business Tokopediasaid this week it planned to list on the Indonesia Stock Exchange next month.

The IPO follows a wave of fundraising by Indonesian start-ups, including the recent listing of ecommerce business Bukalapakthe biggest ever on the Indonesian stock market.

GoTo raised $ 1.3bn in a private funding round in November led by the Abu Dhabi Investment Authority that valued the company at $ 28.5bn, according to people familiar with the deal, so the hoped-for IPO valuation would only slightly exceed that.

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