Hello and welcome back, Mercedes here from Singapore. We have gone from the year of blockbuster semiconductor M&A to starting 2021 with a chips shortage thanks to a demand surge during the pandemic. The trend is especially apparent in the auto industry. Our Big Story focuses on how more pain is coming for automakers in the form of higher chip prices, which will put a dent in their bottom lines. Another top story this week is a scoop on how Apple is moving more production out of China. Enjoy!
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Taiwan’s big chipmakers are considering price rises. As a global semiconductor shortage boosts their pricing power, TSMC, UMC and other chipmakers are preparing for another round of price increases mainly for automotive chips, writes Yu Nakamura, Nikkei staff writer.
The shortage has already afflicted a host of automakers including Volkswagen, General Motors and Honda, according to this piece in the Financial Times. Fiat Chrysler and more than a dozen other carmakers have been forced to slow down production this year because of the chip supply drought.
Key implications: The expected increase in chip prices is likely to put a dent in auto companies’ profits.
The last round of price increases — which saw jumps of 10 to 15 per cent — took place last autumn. The new rises, if they materialise, are expected to be phased in from the second half of February to March.
Vanguard International Semiconductor, a TSMC-backed company that makes auto chips, is considering price increases of up to 15 per cent.
Upshot: The shortage has been driven by an unexpectedly sharp recovery in the number of people buying cars, stockpiling by some Chinese companies in the face of US sanctions and strong demand from the personal computer, game console and smartphone industries as people stay at home during the pandemic.
Has the construction of China’s vast high-speed railway network been worth it? asks James Kynge, editor of #techAsia. The folks at the MacroPolo think-tank in Chicago have done a fascinating piece of work that seeks to answer this thorny question. Check out the calculations here, along with an excellent interactive map.
Let’s not beat around the bush: the answer is yes. Of course, the Chinese government has long billed it as a runaway success. But other commentators have looked at the HSR’s debts of half a trillion US dollars, controversies over alleged intellectual property theft and a fatal accident that killed at least 38 people.
However, judged in financial terms, the HSR network — which comprises 22,000 miles of track carrying nearly 1,000 trains transporting 6m people each day — has indeed been a success. The HSR network has conferred a net benefit of $378bn to the Chinese economy and has an annual return on investment of 6.5 per cent, according to MacroPolo’s calculations.
Such findings have broad implications. The carbon emissions of high-speed rail are far lower per passenger than air travel, adding to the impetus to build more track. Indeed, Beijing already has plans to expand its HSR network by 6,000 miles by 2025.
Ant Group’s technology guru and Alipay developer Ni Xingjun had high hopes for the $100m acquisition of US biometric security company EyeVerify in 2016. Now Ant is selling the prized asset amid heightened tensions between Beijing and Washington.
Mr Ni, Ant’s chief technology officer, was one of Alipay’s early architects. The executive took the reins of the investment, which is currently a subsidiary of Ant-owned Zoloz Global. The company scans pictures of its users’ eyeballs as a password for mobile services and its technology is used by banks including Wells Fargo. For Ant, it was a crucial deal to help it develop its own biometric technology capability and end its reliance on third-party vendors.
Experts said EyeVerify was targeted by some in the Trump administration as a personal data security concern, a trend likely to continue under the Biden presidency. (Ant insiders say EyeVerify’s data from eyeball scans remain on smartphones.)
Either way, Ant’s EyeVerify acquisition was one of the only successful attempts at expanding its US footprint, after a deal to buy money transfer company MoneyGram in 2018 was blocked by US regulators. The sale would be further evidence of how Ant, which is facing regulatory restrictions in China, is refocusing its attention back on its domestic business.
Major US fund managers including BlackRock and Fidelity are among 10 cornerstone investors in Chinese short-video platform Kuaishou’s $5.4bn initial public offering — the largest tech IPO since Uber.
The enthusiasm contrasts with the narrative of “decoupling” between the US and China. Indeed, US-based institutional investors have agreed to invest $1.39bn, or a quarter of the entire offering by the Tencent-backed company, according to a term sheet seen by Nikkei Asia.
Los Angeles-based Capital Group is the biggest cornerstone investor with $500m, Invesco and Fidelity are chipping in $270m each, BlackRock has earmarked $225m and Morgan Stanley Investment Management is coming in with $125m, the term sheet showed. Singapore’s GIC and Temasek, the Abu Dhabi Investment Authority, the Canada Pension Plan Investment Board and Chinese buyout company Boyu Capital round out the cornerstone investors.
For more, the FT’s Lex explains why Kuaishou is vulnerable in the longer term to Beijing’s tightening control on the tech sector.
Start-up funding slowed in south-east Asia last year as the pandemic clouded the region's economic growth prospects and made investors more cautious.
According to data compiled by DealStreetAsia, the region’s start-ups raised a total of $8.6bn in 2020, down 2 per cent from 2019. This contrasts with the brisk start-up investment trends in the US, where start-up funding rose 13 per cent to $156.2bn in 2020, according to a PitchBook report.