In response to a report last Friday circulating on WeChat about a security lapse in Bytedance’s AI department, the company issued a statement saying that an intern had this summer maliciously interfered with model training in the course of AI commercialization.

The TikTok owner underlined that it had not affected online operations or any other commercial project. Online speculation that the incident had affected “over 8,000 GPU cards, causing millions of dollars in losses” was exaggerated, the company said.

Why it matters: This incident reveals security management issues in ByteDance’s technical training processes. With interns often granted critical roles in company projects, there is an urgent need for robust security protocols in tech companies.

Details: After investigation, the person involved was found to have been interning with the commercialization tech team and had not worked with the AI Lab, according to ByteDance. The intern had been dismissed in August. 

• Last Friday, a message spread in several WeChat groups, on China’s leading social media platform, stating that the large model training of a leading tech company was infiltrated by an intern, who inserted destructive code to influence the reliability of training results. The message claimed that over 8,000 GPU cards were affected, with losses extending to tens of millions of dollars.
• This incident took place in June when a doctoral student from a university interned with ByteDance’s commercialization tech team, local media outlet Jiemian reported. Frustrated with the team’s resource allocation, the intern deployed attack code to disrupt the model training tasks.
• The intern exploited a vulnerability in AI app-building site Hugging Face (HF) to inject destructive code into Bytedance’s shared models, leading to unstable training performance that failed to meet expectations, according to the same Jiemian report. 
• Furthermore, the AML (automated machine learning) team was unable to determine the cause of the issues. However, the intern targeted the team’s model training tasks rather than the company’s Doubao model that was already on the market.

Context: In 2023, China’s market for large model platforms and related applications was worth RMB 1.765 billion ($250 million), according to market intelligence firm IDC. Last year, the three leading AI models in the Chinese market were Baidu AI Cloud , SenseRobot, and Zhipu AI.

China’s GAC Group said on Oct. 10 it planned to invest $27 million in self-driving car startup Pony.ai through its wholly-owned subsidiary GAC Capital, a move expected to “create synergies” between the two companies and speed up the development of GAC’s automated driving functions. The investment marks the latest bet by a Chinese automaker to boost their autonomous driving capacity in the hope of catching up with Tesla, which on the same day said it aims to produce its driverless taxi, the Cybercab, in 2026.

GAC and Pony.ai first forged a partnership in 2018, TechNode reported, followed by Pony’s undisclosed investment in GAC’ ride-hailing platform OnTime in April 2022, when the two companies said they would together operate an autonomous ride-hailing fleet. Meanwhile, Pony.ai has been backed by a Toyota investment worth $400 million since 2020, and the two companies, along with GAC, a manufacturing partner of Toyota in China, announced a RMB 1 billion ($139 million) joint venture to make robocars last August.

State-owned GAC has also been a strategic investor in WeRide since late 2021, a self-driving car company with regional headquarters in the southern Chinese city of Guangzhou. Both WeRide and Pony.ai are looking to sell shares in the US and have obtained approval for overseas listings from Chinese regulators. Pony.ai said on Monday its autonomous ride-hailing vehicles have traveled a total of 40 million kilometers (25 million miles), of which around 4 million km were entirely driverless.

More Chinese automakers are following Tesla’s lead with their robocars. Xpeng Motors’ new model for autonomous ride-hailing services is expected to enter production in 2026, chief executive He Xiaopeng posted on Chinese microblogging platform Weibo on Oct. 10. On the same day, Tesla CEO Elon Musk said the company’s long-awaited robotaxi, with two gull-wing doors and no steering wheel or pedals, will eventually cost less than $30,000, Reuters reported.

READ MORE: The Chinese startup battling for robotaxi supremacy

The Genshin Impact game developer, Shanghai-based miHoYo, seems to be preparing to create a “Shanghai-version Akihabara” area, in addition to the new headquarters building under construction, according to photos posted by Chinese social platform Weibo photographer @龍宮輝夜. 

Akihabara is a district in Tokyo, Japan, renowned for its vibrant electronics shops, anime and manga (comic) stores, and gaming culture. Iconic series like “Dragon Ball,” “Naruto,” and “One Piece,” have gained international popularity, contributing to the global spread of ACG (anime, comic, game) culture.

Why it matters: This move could bolster Shanghai’s role as a global hub for ACG, while strengthening miHoYo’s connection with fans and its own gaming culture.

Details: The Shanghai Akihabara area is expected to be one kilometer long and feature 2,000 square meters of trendy ACG-related facilities, starting from the new Mihoyo headquarters building in Shanghai’s Caohejing district, @龍宮輝夜 Weibo photos showed.

• Based on the details from the Weibo photos, the Shanghai Akihabara area may include gaming-IP sculptures, comic merchandise stores, VR experience store, a performance stage, a multifunctional theater, an anime museum, and an AI digital human virtual experience store, among other commercial facilities.
• MiHoYo purchased a new Shanghai headquarters building for RMB 1.077 billion ($150 million) last year, while the company will spend RMB 99 million ($13.67 million) to renovate two Inventec (an electronics manufacturer specializing in computing solutions) business buildings across the street, according to tender documents, as reported by local media outlet GameLook. 
• The new bought building occupies an area of 148,000 square meters, while the other covers 80,000 square meters. The miHoYo’s domestic workforce could potentially reach up to 10,000 employees in the future, the GameLook report suggested.

Context: Recently, netizens discovered that miHoYo is registering trademarks for its next new title ASTAWEAVE HAVEN, as the simulation management game secured an approval license from the National Press and Publication Administration of China on July 22. Similar to miHoYo’s previous games, the icon for ASTAWEAVE HAVEN appears to be a small panda or raccoon with one eye winking.

• On July 4, miHoYo released Zenless Zone Zero, a AAA third-person shooting game that blends elements of role-playing, action, adventure, and roguelike elements. In the first 10 days, the global revenue from both mobile and PC platforms reached RMB 673.8 million ($93.05 million), according to market analysis firm DataEye.

China- and US-based self-driving car startups Pony.ai and WeRide are ready for initial public offerings in the US, multiple media outlets have reported. The IPOs, which the firms have been eyeing for over two years, could happen as early as within the next two months.

Why it matters: Autonomous vehicle (AV) startups are generally facing pressure to lower their valuation targets as public stock markets have rapidly decelerated their interest in the space over the past few years.

• A group of 14 self-driving tech companies have seen their combined valuation decline more than 80% since their public debuts, according to an analysis by Crunchbase in 2022. Chinese car tech firm iMotion and lidar maker Robosense have lost roughly 75% and 90% in stock market valuation in the six months since their listings in Hong Kong.
• The potential listings of PonyAV.ai and WeRide, two of the highest-valued AV startups in China, will set the tone for many other companies trying to go public with their future-shaping technology, even as it takes longer than expected to become widely available.

Details: Fremont- and Guangzhou-based Pony.ai will go public as early as September, as some institutional investors have committed to purchasing shares in the looming IPO, financial media outlet Jiemian reported on Tuesday, without giving further details (in Chinese). WeRide is planning to sell its shares publicly in the US by the end of August, according to IFR, a Reuters publication.

• WeRide, with its China headquarters in the southern city of Guangzhou, last August received approval for an overseas listing from the China Securities Regulatory Commission, which requires applicants to complete the share sale within 12 months of the date of filing. Pony.ai gained a similar regulatory greenlight in April, Bloomberg reported. Pony.ai and WeRide declined to comment when contacted by TechNode on Thursday.

Context: Pony.ai reportedly suspended a public listing plan in New York at a target valuation of $12 billion in mid-2021 due to regulatory uncertainties. The Toyota-backed company said early the next year that it was valued at $8.5 billion after closing its first round of Series D financing, TechCrunch reported.

• WeRide, backed by the Renault-Nissan-Mitsubishi Alliance, filed confidentially for a US IPO aimed at raising as much as $500 million, Bloomberg reported last March. The company was valued at about $5.1 billion in a November 2022 fundraising round, according to its official website.
• Some other Chinese self-driving technology companies, including Horizon Robotics, Momenta, and Black Sesame, are rushing to sell shares publicly either in the US or Hong Kong as early investors are eager to earn money after incubating the companies for years, TechNode has learned.

On Wednesday, ASML released its financial report for the second quarter and stated that the period’s sales of 6.24 billion euros ($6.82 billion) exceeded the company’s expectations, even though overall net sales declined compared to the same period last year. 

Despite geopolitical uncertainties and restrictions on chip-related exports from the Netherlands to China, demand for ASML equipment in the Chinese mainland market remained strong, accounting for 49% of the Dutch company’s net system sales in the second quarter.

Why it matters: ASML’s revenue was impacted in the previous two quarters after the Dutch government’s chip-making equipment export restrictions took effect last September, and ASML’s export license expired at the end of 2023. Demand in the Chinese mainland market has now primarily shifted to unrestricted DUV (deep ultraviolet lithography) equipment.

Details: ASML reported mixed financial results for the second quarter, with a 7.6% year-on-year decline in net sales but an 18% increase from the previous quarter. On the same day, their US-listed shares dropped 13% due to reports that the US is considering even stricter rules around chip-related exports to China.

• In the second quarter of 2024, ASML achieved net sales of 6.24 billion euros ($6.82 billion), a decrease of around 7.6% from the 6.75 billion euros ($7.38 billion) it reported for the same period last year, though the figure marked an increase of around 18% compared to the first quarter of 2024’s 5.29 billion euros ($5.78 billion), according to the report.
• In terms of regional breakdowns, mainland China continues to be ASML’s largest market, with mainland Chinese net system sales accounting for 49% (2.33 billion euros, equivalent to 2.55 billion dollars) of the company’s total. This proportion remains consistent with the first quarter, reflecting a 20% increase from China’s 1.94 billion euros ($2.12 billion) in the first quarter of this year.
• “Gross margin for the quarter came in at 51.5%, which was above our guidance, primarily driven by more immersion systems than planned,” CFO Roger Dassen said on an ASML investor call. Dassen added that the company expects total net sales for the next quarter to hit between 6.7 billion euros ($7.32 billion) and 7.3 billion euros ($7.98 billion), with R&D expenses estimated at around 1.1 billion euros.
• “Although macro uncertainty remains, overall semiconductor inventory levels continue to improve, trending towards more healthy levels,” ASML CEO Christophe Fouquet said during the same investor call. The company’s outlook for the full year is unchanged with revenue expected to be similar to last year, he added.
• US-listed shares of ASML slumped 13% following a Bloomberg report on Wednesday that the Biden administration is considering tougher restrictions to limit companies exporting critical chip-making equipment to China.

Context: On June 30, 2023, the Netherlands announced new export controls on the sale of advanced chip-making equipment to China, which took effect on September 1 that year. The rules require Dutch manufacturer ASML to apply for a license to ship some of its deep ultraviolet lithography (DUV) systems to China.

• In the first quarter, ASML sales revenue was 5.29 billion euros ($5.78 billion), down from 6.7 billion euros ($7.32 billion) during the same period last year.

Autotech startup Nullmax said on Tuesday that its latest generation of autonomous driving hardware and software package, allowing cars to navigate complex urban environments autonomously with features such as lane changing, will cost users as little as “several thousand RMB.” 

Why it matters: Shanghai and Fremont-based Nullmax is among the few players in the self-driving vehicle space claiming that cars will be able to function by themselves in urban scenarios without maps and lidar. Instead, the company said artificial intelligence models can be used to enable cars to navigate from points A to B.

• This makes its system even more cost-competitive on the Chinese market compared with Tesla’s Full Self-Driving (FSD) software, chief executive Xu Lei told reporters in Shanghai. Tesla has reportedly partnered with Baidu to leverage the latter’s lane-level navigation and standard definition mapping services, as part of its push to localize its most advanced driver-assistance software (ADAS) in the country.

Details: Xu told a press conference that his company is advocating a “pure vision” and “end-to-end” approach, as Tesla has been doing and many are following its lead, which involves deep neural networks, using cameras only to perform autonomous driving functions (our translation).

• The car could complete the highway on-ramp to off-ramp maneuver and drive through a construction zone in Chinese urban areas with affordable hardware of 7-11 cameras and a computing platform that can handle roughly 100 trillion operations per second (or TOPS), according to Nullmax.
• Xu expects some car models equipped with the technology to come to market in 2025, without saying more. Nullmax, with roughly 300 scientists and engineers, has been developing more safety-based ADAS functions for domestic automakers SAIC, and Chery, among others, TechNode has learned.
• Cars powered by Nullmax’s tech have traveled a combined 10 million kilometers (6.2 million miles). Xu added more actual driving data is required to provide cars with point-to-point navigation on city streets, while the company is training the ADAS system via simulation with AI-generated data.

Context: Chinese EV startups led by NIO, Xpeng Motors, and Li Auto have been ramping up efforts to transition from “rule-based” designs to an “end-to-end” autonomous driving method. Meanwhile, traditional car manufacturers are tapping into the power of AI by working with tech giants such as Huawei and NVIDIA, as well as startup unicorns like Horizon Robotics and Momenta.

• “What we see in the future is that the (AI-defined) AV stack will become an end-to-end model and will be trained in the cloud with massive data. More importantly, it will be validated in the cloud with simulation capabilities as well,” said Wu Xinzhou, NVIDIA’s vice president of automotive at its annual developer conference GTC in March.
• The US chipmaker in late 2021 released a system called “Omniverse Replicator” to facilitate the training of autonomous vehicles in the virtual world, Reuters reported. Chinese major EV makers, including BYD and NIO, are building their ADAS upon its DRIVE Orin computers, each of which offers 254 TOPS of performance.
• Nullmax was co-founded in 2016 by Xu Lei and Justin Song, both of whom spent time at Tesla. Xu worked on Tesla’s Autopilot computer vision team in 2015 and 2016, after leaving a senior engineering role at Qualcomm, while Song was responsible for engineering the Tesla Autopilot and car infotainment system from 2012 to 2015, according to their LinkedIn profiles.

READ MORE: Former Tesla engineer shares thoughts on end-to-end autonomous driving at WAIC 2024

Editor’s note: ‘Landing AI’ is a series of special reports focusing on the field of Artificial Intelligence curated by TechNode. By investigating the development of AI landing in China and the behind-the-scenes stories of the industry, we’re going to dive deeper into everything that’s possible under the new wave of AI.

On Tuesday, Chinese tech giant Tencent released its earnings report for the first quarter of 2024, which ended on March 31. Tencent’s revenue from the international gaming market increased by 3% year-on-year to RMB 13.6 billion ($1.88 billion) during the period, while revenue from the domestic gaming market decreased by 2% year-on-year to RMB 34.5 billion ($4.77 billion). Tencent attributed the domestic year-on-year decline to the impact of deferred revenue.

Why it matters: Over reliance on older hits such as Honor of Kings and Peacekeeper Elite may have led Tencent Games to stagnation, reduced player engagement, and increased its vulnerability to competitors launching new, innovative games. The lack of new hit titles from Tencent may risk diminishing the firm’s long-term growth and revenue potential in a rapidly evolving gaming market.

Details: Tencent’s gaming revenue totaled RMB 48.1 billion ($6.66 billion) in the first three months of 2024, marking a 17.6% increase quarter-on-quarter and a 0.41% decrease year-on-year. A yearly revenue drop but a quarterly rise may signal seasonal trends and indicate the company’s recent improvement in performance despite broader market challenges, including intensified industry competition, economic instability, and declining consumer demand.

• “During the first quarter of 2024, several of our leading games in China and internationally started to benefit from team reorganizations we put in place,” Tencent CEO Ma Huateng said in the financial report, “resulting in an increase in games’ gross receipts and creating a foundation for our games revenue to resume growth in future quarters.”
• In the first quarter, Honor of Kings and Peacekeeper Elite, two of Tencent’s flagship games, experienced a year-on-year decline in revenue. Tencent blamed this on a high base from the Chinese New Year period last year for the former, and weaker commercial content in the second half of 2023 for the latter. However, both games saw a year-on-year revenue increase in March.
• During the quarter, several domestic games achieved their highest-ever gross totals, with titles such as Fight of the Golden Spatula, CrossFire Mobile, and Arena Breakout leading the way, according to the company. Recently released overseas games, including VALORANT and Lost Ark, both exhibited robust growth, the firm said.
• Supercell, a Finnish game development company that Tencent acquired in June 2016, experienced growth in both usage and gross receipts in the overseas gaming market during the reporting period. The multiplayer online battle arena shooter game Brawl Stars’ daily active users more than doubled compared to the previous year, while gross receipts more than quadrupled year-on-year internationally for the title.

Context: In the first quarter, Tencent’s total revenue reached RMB 159.5 billion ($22.08 billion), reflecting a 6% year-on-year increase, while adjusted net profit amounted to RMB 50.27 billion ($6.96 billion), showing a notable 54% year-on-year growth.

• In the first quarter of 2023, Tencent’s revenue from games reached RMB 48.3 billion ($6.9 billion), up 11% up year-on-year. Tencent’s domestic gaming revenue during the period rose 6% year-on-year to RMB 35.1 billion ($5 billion), while its overseas gaming revenue rose 25% to RMB 13.2 billion ($1.8 billion).

On Tuesday, MediaTek held the MediaTek Dimensity Developer Conference (MDDC) 2024 in Shenzhen, where the Taiwan-based semiconductor company unveiled its latest flagship 5G chipset, the Dimensity 9300+. With a theme of “AI Empowers Everything,” MDDC 2024 delved into the applications and advances in artificial intelligence technology across various domains, and the possibilities it brings to terminal devices.

Why it matters: MediaTek introduced the Dimensity 9300+ less than two months after the launch of Qualcomm’s Snapdragon 8s Gen 3. Amid slow growth in the smartphone industry, MediaTek is aggressively competing for Qualcomm’s market share of mobile chipsets. 

Details: The Dimensity 9300+ chipset and generative AI were the main highlights at MDDC 2024.

• The Dimensity 9300+ has adopted TSMC’s third-generation 4nm process technology, according to MediaTek. The new chip boasts big-core CPU architecture, housing an octa-core CPU comprising four Cortex-X4 ultra-large cores clocked at up to 3.4 GHz, and four Cortex-A720 large cores operating at 2.0 GHz.
• MediaTek claims that the full big-core CPU ensures low power consumption across varying application loads and enables smartphones to deliver sustained high performance over extended periods by combining high speed with energy efficiency.
• The Dimensity 9300+ supports on-device LoRA (Low-Rank Adaptation) Fusion and NeuroPilot LoRA Fusion 2.0 technology that allows developers to quickly introduce new generative AI applications with text, voice, imagery, and music, the company said. This translates to smartphones equipped with the Dimensity 9300+ chip offering enhanced AI functionalities.
• The flagship processor integrates a 2nd-gen hardware ray-tracing engine with an Arm Immortalis-G720 GPU, delivering 60 frames per second (FPS) ray-tracing and console-grade global illumination effects for gamers, according to the official website. MediaTek HyperEngine technologies further enhance the gaming experience, according to the company, with MediaTek Adaptive Gaming Technology optimizing power efficiency for longer battery life. Furthermore, HyperEngine’s Network Observation System improves dual-network concurrency and offers up to 10% power savings and 25% cellular data savings.
• During the event, MediaTek unveiled the Dimensity AI Pioneer Program for global developers, collaborating with industry partners such as Alibaba Cloud, Baichuan Intelligence, Transsion, Oppo, Honor, Vivo, and Xiaomi. The program aims to offer resources, technical support, and business opportunities for global developers to create innovative generative AI experiences on Dimensity-powered devices.
• At the same time, MediaTek partnered with Alibaba Cloud, Baichuan Intelligence, Huya, Kugou Music, Oppo, Tencent AI Lab, and Vivo to jointly release a Generative AI Smartphone Industry White Paper. The white paper defines Generative AI smartphones as devices utilizing large-scale, pre-trained generative AI models to achieve multi-modal generation, context awareness, and evolving human-like capabilities.
• The white paper signals a strong integration trend in generative AI for smartphones and explores the AI strategies of various chip manufacturers, phone makers, large model developers, and developers in the generative AI ecosystem. Industry analysis firm Counterpoint forecasts rapid growth for generative AI phones in the coming years, with a global user base of around one billion expected by 2027.

Context: In the fourth quarter of 2023, MediaTek maintained its lead with a 36% share of the global smartphone chipset market, followed by Qualcomm at 23% and Apple at 20%, according to data provided by Counterpoint‘s Global Smartphone AP-SoC Shipments & Forecast Tracker by Model.

• On March 18, California-based chip firm Qualcomm launched the Snapdragon 8s Gen 3, the company’s latest flagship chipset, equipped with several on-device AI capabilities. The new 4nm chipset arrives as a more affordable version of the top-of-the-line Snapdragon 8 Gen 3 chip launched last October.

Chinese battery manufacturer and technology company Contemporary Amperex Technology Co. Limited (CATL) revealed on Monday that it is committed to the research and mass production of solid-state batteries, with the aim of achieving small-scale production by 2027, according to local media outlet Jiemian. However, overcoming challenges related to cost is essential for realizing large-scale production, the company said.

Why it matters: Presenting a promising solution to conventional lithium-ion battery limitations, producers maintain that solid-state batteries offer enhanced safety, higher energy density, improved performance, increased durability, and reduced environmental impact. They have the potential to transform various industries, including electric vehicles, portable electronics, and renewable energy systems.

Details: The company’s current level of research on solid-state batteries stands at 4, on a scale of 1-9 for technical and manufacturing maturity, CATL’s chief scientist Wu Kai disclosed at a battery technology seminar. CATL plans to achieve a rating of 7-8 by 2027, the year the company plans to be able to produce solid-state batteries on a small scale, Wu told Jiemian.

• Compared to liquid lithium batteries, solid-state batteries demonstrate better performance in terms of energy density. Currently, liquid lithium batteries can reach 350 watt-hours per kilogram, while solid-state batteries are expected to achieve up to 500 watt-hours per kilogram, according to the chief scientist.
• The technological pathways for solid-state batteries primarily include polymers, oxides, and sulfides. Wu claimed that CATL is currently investing more in research and development of the sulfide option, likely to be the first in mass production.
• Sulfide electrolytes exhibit high conductivity and good process ability, but they are also prone to generate toxic gasses when exposed to water and involve high costs due to complex production processes, Wu further explained.
• Wu stated that CATL is striving towards the goal of solid-state batteries representing 1% of the global battery market share. Tech challenges remaining include solid-solid interfaces, lithium metal anodes, solid-state electrolytes, and other manufacturing processes, the scientist added.

Context: Last September, Japanese automaker Toyota announced a development plan for solid-state batteries. Toyota plans to bring electric vehicles equipped with solid-state batteries to market as early as 2027, enabling them to drive around 1,200 kilometers on a charge of under 10 minutes.

Hong Kong will provide a subsidy of up to HK$ 200 million ($25.6 million) to China’s Hozon Auto, which could alleviate the financial pressure on the electric vehicle startup and facilitate its expansion in overseas markets. 

Why it matters: Hozon Auto is the latest mainland-headquartered company to establish a base in Hong Kong as China hopes to create a high-tech megalopolis in its southern Greater Bay Area to rival California’s Silicon Valley.

• The news comes just months after CATL, the world’s biggest EV battery maker and a backer of Hozon, announced plans to set up a research and development facility in Hong Kong as part of a $128 million investment plan to make the city its international headquarters. 
• Chinese auto tech unicorn Horizon Robotics has recently partnered with Hong Kong Science and Technology Parks Corporation (HKSTP) with plans to expand its local research team and invest a total of HK$ 3 billion in the territory by 2028, according to an announcement published in December. 

Details: In addition to providing a $25.6 million subsidy, the Hong Kong government will also “provide assistance” (our translation) for a $200 million cornerstone investment for Shanghai-based Hozon, the company said on Wednesday in a statement, without giving further details. 

• “Hong Kong serves as a super-connector and super value-adder […] for mainland Chinese companies willing to expand their global presence,” Hong Kong Chief Executive John Lee said on Wednesday at a signing ceremony attended by Hozon chairman Fang Yunzhou, the South China Morning Post reported. 
• Hozon had announced plans in August to locate its global headquarters in the Asian financial hub in a partnership with HKSTP while promising to invest RMB 3.2 billion ($444 million) and hire 600 research staff locally over the next few years. It is also looking into the possibility of operating a production plant in Hong Kong. 

Context: In December, Hozon forged a partnership with local dealership DCH Motors to begin selling Neta-branded EVs in Hong Kong in 2024 and began trial production at its first overseas car plant in Thailand, which has an output of up to 20,000 EVs annually. 

• The company has reportedly hired several major investment banks including Morgan Stanley for an initial public offering in Hong Kong that could raise to $1 billion, a development that took place soon after the firm secured RMB 7 billion in a funding round last summer.
• Hozon delivered roughly 127,500 EVs last year, representing a 16% decline compared with 2022 and around half of its sales target of at least 250,000 units, and has been offering a price cut of between RMB 8,000 and RMB 22,000 on its vehicle lineups since mid-February as competition heats up in the Chinese EV market. 

Semiconductor giant TSMC has revealed that subsidies obtained from the Japanese and Chinese governments reached NT$47.545 billion ($1.51 billion) in 2023, marking a 5.74-fold increase year-on-year, according to Taiwanese media outlet Economic Daily News. With its ongoing expansion of overseas facilities, TSMC anticipates further subsidies from Japan this year, along with potential new subsidies from the US and Germany.

Why it matters: As nations compete to enhance their domestic semiconductor manufacturing sectors via subsidies, TSMC has become a key target for government investment in local facilities.

Details: In 2023, TSMC’s Japanese subsidiary JASM and its mainland Chinese counterpart in Nanjing secured subsidies from the respective governments of Japan and China, which primarily for real estate, building factories, purchasing equipment, and funding production facility costs.

• In 2022, subsidies from the Japanese and Chinese governments reached around NT$7.051 billion ($220 million), soaring 574% to NT$47.545 billion ($1.51 billion) in 2023. Although TSMC did not specify the exact breakdown of the subsidies, previous data indicates that the Japanese government decided to grant TSMC’s Kumamoto Fab 1 JPY 476 billion ($3.2 billion) in phased subsidies, as reported by Chinese media outlet Icsmart. 
• TSMC’s 2023 subsidies from mainland China primarily originated from the expansion project at its Nanjing plant, the Icsmart report added. In April 2021, TSMC announced a plan to invest $2.88 billion in expanding its 28nm process manufacturing at the Nanjing facility, to meet a rising demand for automotive chips and the global chip shortage.
• TSMC is currently investing $40 billion to construct a semiconductor fab in Arizona, with plans to manufacture 4nm and 3nm chips. A recent Bloomberg report suggests that Intel may receive around $10 billion in subsidies under the US’s CHIPS Act. According to analysis by Icsmart, using Intel’s investment and estimated subsidy amount as a reference point, TSMC could potentially receive nearly $10 billion in subsidies as well.
• TSMC is also collaborating with Infineon, NXP Semiconductors, and Bosch to invest €10 billion in constructing a semiconductor factory in Dresden, a city in eastern Germany. The German government is also expected to give about €5 billion in subsidies, according to news agency Focus Taiwan.

Context：TSMC’s Kumamoto Fab 1 started operations on Feb. 24 and is aiming to mass-produce 28/16/12nm chips in the fourth quarter of 2024. By the end of this year, TSMC plans to establish a second fab in Kumamoto, targeting production by late 2027, with a focus on 7/6nm processes.

• After the opening ceremony of Kumamoto Fab 1, Japan’s Minister of Economy, Trade and Industry, Ken Saito, announced that the government will subsidize TSMC with JPY 732 billion ($4.94 billion) for the construction of Kumamoto Fab 2 on the site.

The latest data from Steam‘s monthly hardware and software survey has revealed that Simplified Chinese has become the primary language on the gaming platform, accounting for 32.84% of players in February. The shift may be attributed to a substantial increase in Chinese gamers taking to the site during China’s Lunar New Year holiday (Feb. 9 – Feb. 16). 

Why it matters: The language trend reflects the growing influence of Simplified Chinese-reading players within the Steam community, and highlights strong demand for the Steam platform and PC games in the Chinese market.

Details: Steam conducts a monthly optional and anonymous survey to gather data on the computer hardware and software utilized by its customers. This information aids the platform in determining investment priorities for developing new technologies and offering products. In February, the top five most commonly used languages among Steam players based on this survey were Simplified Chinese at 32.84%, English at 32.12%, Russian at 9.27%, Spanish at 4.10%, and Portuguese at 3.45%. 

• This language ranking marks the second time Simplified Chinese has topped the charts, with the first instance dating back to the popularity of the multiplayer online battle royale game PlayerUnknown’s Battlegrounds in 2017, when Simplified Chinese players accounted for over 60% of Steam’s user base, according to local media outlet IThome.
• Operating system: Windows 10 remains the most widely used system among Steam users, accounting for a significant 54.19%. Despite the release of Windows 11 in October 2021, players may be choosing to continue using Windows 10 due to considerations of stability and compatibility.
• Hardware configuration: 49.04% of players’ computers have 16GB of system memory, making this the most prevalent setup. As gaming hardware demands rise, 16GB of memory has become the standard for ensuring smooth gameplay across a majority of gaming titles.
• Display resolution: The majority of players, some 58.82%, prefer a resolution of 1920 x 1080. This data indicates that 1080p remains the mainstream choice for gamers, despite the gradual popularity of 4K resolution. For most players, 1080p offers a more cost-effective option.
• Graphics card: The RTX 3060 has become the most widely used graphics card with a 6% share, suggesting the widespread popularity of Nvidia’s RTX30 series graphics cards due to their performance and ray-tracing technology.

Context: The US currently leads in the number of Steam users, with 13.7 million people using the platform to share and play games, while China follows closely as the second-highest user base, with 11.4 million users, according to World Population Review.

• The most played Steam games of 2023 (where the peak player count exceeded 300,000) include titles such as Apex Legends, Baldur’s Gate 3, Counter-Strike 2, Destiny 2, Dota 2, Goose Goose Duck, Hogwarts Legacy, Lost Ark, PUBG: Battlegrounds, Sons Of The Forest, and Starfield. While not exclusively a Chinese game, PUBG: Battlegrounds was published and distributed in China by Tencent Games.

On Thursday, Huawei launched the Huawei Pocket 2, a sleek flip foldable phone seemingly targeted at a young, predominantly female demographic, hitting the shelves after a 16-month gap since the previous generation. The Pocket 2 stands out as the industry’s first foldable flagship to support messaging via China’s Beidou satellite, facilitating communication in regions lacking ground network signal. The device also represents Huawei’s first foldable device equipped with its self-developed Kirin chipset.

Why it matters: Foldable smartphones, an emerging product range in the smartphone industry, have huge market potential in the Chinese market compared to traditional models – although overall phone shipments in China saw a decline in 2023, the foldable category experienced a sharp rise in sales.

Details: Alongside two-way satellite messaging through the Beidou satellite, Huawei claims the Pocket 2 is the world’s first flip foldable smartphone with four cameras on its cover and featuring a self-developed rocket-steel material water-drop hinge.

• The Pocket 2 is equipped with Huawei’s Kirin 9000S chip, a 7nm processor also featured in the company’s latest flagship phones. Paired with 12GB of RAM, it offers storage options ranging from 256GB to 1TB.
• The Pocket 2 boasts a Xuanwu water-drop hinge, which increases its flatness by 62%, and a double-arm lever gear that enhances support force by 41%, according to the company. Huawei states that the rocket-steel design improves drop resistance by 112%.
• Huawei has equipped the interior with a 6.94-inch foldable OLED screen, while the cover features a 1.15-inch circular screen positioned next to the camera island. The 6.94-inch OLED screen offers a resolution of 2,690 x 1,136 pixels and a variable refresh rate from 1Hz to 120Hz, delivering a peak brightness of 2,200 nits.
• The imaging system includes a 50MP main camera (with f/1.6 aperture, OIS), a 12MP ultra-wide macro lens (with f/2.2 aperture), an 8MP periscope telephoto camera (with 3x optical zoom, f/2.4 aperture), and a hyperspectral camera that can detect ultraviolet intensity to provide suggestions on sunscreen protection.
• The Huawei Pocket 2 is available in four color variants: gray, white, purple, and black. The flip phone starts from RMB 7,499 ($1,042) for the standard 256GB model, while the 512GB and 1TB models cost RMB 7,999 ($1,112) and RMB 8,999 ($1,251) respectively.

Context: Chinese consumers are increasingly inclined to try foldable smartphones as related technologies mature and prices become more affordable. 

• In 2023, foldable smartphone shipments in China reached around 7 million units, reflecting a year-on-year growth of 114.5%, according to market intelligence firm IDC. Huawei took the top spot in the domestic foldable market last year with a market share of 37.4%, while Oppo secured second place with an 18.3% market share.

NIO Capital, a venture capital firm founded by Willliam Li, chief executive of the namesake electric vehicle maker, has raised a new China-focused fund of more than RMB 3 billion ($416.8 million), despite a global market lull and domestic economic challenges. 

Why it matters: The fundraising milestone will allow NIO Capital to further explore the “transformative potential of innovative technologies in the automotive and energy sectors,” said Ian Zhu, a managing partner at NIO Capital, in a Monday announcement. 

• The NIO-related growth-stage investor has backed some of the rising stars in the Chinese automotive world, from battery material manufacturer Ronbay to self-driving car startups Momenta and Pony.ai. It has also invested in battery giant CATL. 

Details: The deal shows the strength of NIO Capital’s ties with its limited partners, which include venture capital investment guidance funds set up by Chinese regional governments, national funds, family offices, and listed companies, according to the announcement, which did not provide further details. 

• The Shanghai-based venture firm said it will maintain its focus on areas such as auto tech and sustainable energy with the new RMB 3 billion fund, which brings the total assets under its management to about RMB 15 billion. 
• Speaking to Chinese reporters, a NIO Capital representative stressed the fund’s independence from NIO in its final investment decision-making. “We don’t require that a parts maker only supplies to NIO,” the person said as an example of its open-mindedness, 36Kr reported.

Context: The deal comes as global private investment remains soft due to interest rate hikes and economic headwinds. 

• Fundraising totals were on track to drop 28% in 2023 compared with 2022, and the number of funds could decline by almost half, US management consultancy Bain & Company said in a note dated July 17. 
• In China, roughly 5,300 private capital funds raised a total of RMB 1.35 trillion during the first nine months of 2023, down 2.1% and 20.2% from a year earlier, according to consultancy Zero2IPO (in Chinese).

Chinese AR (augmented reality) glasses manufacturer XREAL has recently secured a new round of strategic financing valued at $60 million, bringing its total funding to $300 million, according to an exclusive report by Chinese media outlet 36Kr. The report asserted that XREAL’s current valuation has surpassed $1 billion, as indicated by industry analysts.

Why it matters: As a major player in the global AR device sector, XREAL’s devices are considered potential competitors to Apple’s Vision Pro and Meta’s Quest 3. This strategic financing empowers XREAL to pursue vital growth initiatives, such as expanding its AR glasses production.

Details: The new financing, which is dedicated to product R&D (research and development) and the expansion of the firm’s optical production base, will enable XREAL’s AR glasses production to reach two million units per year by 2025, the 36Kr report said.

• XREAL has not disclosed the specific investors behind the new $60 million financing. Previous major investors in XREAL have included Alibaba, Kuaishou, NIO Capital, Yunfeng Capital, Sequoia China, Gentle Monster, Hillhouse Group, Hongtai Aplus, CICCcapital, Shanghai GP Capital, Shunwei Capital, CPE Asset Management, China Growth Capital, and iQiyi.
• XREAL’s Founder and CEO, Xu Chi, has declared that the company aims to deliver wearable augmented reality displays to global audiences, as AR has revolutionized user experiences in gaming, movies, TV, in-car entertainment, displays, and work.
• From Jan. 9 to Jan. 12, XREAL exhibited its latest XREAL Air 2 Ultra glasses during the 2024 CES (Consumer Electronics Show) in Las Vegas, featuring six degrees of freedom (6DoF) via dual 3D environment sensors with computer vision capabilities. 
• The global release of the Air 2 Ultra glasses is scheduled for March, with a starting price of $699, and pre-orders are already available. Despite the increased cost compared to the previous Air headset, which was priced below 500 dollars, the Air 2 Ultra glasses still present a more budget-friendly option than Apple’s Vision Pro, which is priced at $3,499.

Context: The XREAL Air series of products are compatible with a variety of mainstream gaming and streaming entertainment devices, including Microsoft Xbox, Sony PlayStation, Nintendo Switch, Valve Steam Deck, ASUS ROG Ally, iOS, Android, Windows, and Mac.

• On Jan. 4, XREAL announced a total shipment of 350,000 AR glasses since its establishment in 2017. The company claimed to currently hold a 45% share of the global AR market, a statement that came after market intelligence firm IDC confirmed XREAL secured a 51% market share in the global AR segment during the third quarter of 2023.

In the third quarter of 2023, the import of chip-making equipment by China surged by 93% compared to the same period last year, reaching a total value of RMB 63.4 billion ($8.75 billion), according to data from China’s customs authorities, as reported by Japanese media outlet Nikkei. In terms of product categories, the import of lithography equipment, a key part of the chip-making process, skyrocketed nearly fourfold.

Why it matters: The US began attempts to control the export of advanced chip-making equipment to China last October, with Japan and the Netherlands following suit this year, but these new figures show the issues with enforcing such controls rapidly. As the lead time for chip-making equipment from order placement to delivery is between six months to one year, many Chinese manufacturers had already placed a large number of orders for chip-making equipment from the latter two countries last year, likely in anticipation of a ban.

Details: Although the Netherlands has implemented policies restricting the export of advanced semiconductor equipment to China, imports of semiconductor equipment by China from the country in the third quarter nevertheless increased rapidly. 

• According to data presented by Nikkei, the US accounted for only 9% of semiconductor equipment imported into China in the third quarter, significantly lower than its 17% share during the same period in 2021. Japan’s share also decreased from 32% to 25%, while the Netherlands saw an increase from around 15% to 30%.
• The data from China’s customs authorities reveals that the import value from the Netherlands skyrocketed by over six times in the third quarter compared to the same period last year, rising to 2.44 billion euros. A significant portion of this increase is attributed to lithography machines produced by Dutch market leader ASML. Imports of these machines from Japan grew by approximately 40%, while lithography equipment imports from the US increased by 20%.
• Compared with the second quarter of 2023, ASML’s sales revenue from China doubled from 24% to 46% of the firm’s total in the third quarter, amounting to 2.44 billion euros, according to the company’s financial report. In the first quarter of this year, ASML’s proportion of sales revenue generated by China was only 8%.

Context: According to the Netherlands’ new regulations on semiconductor exports, ASML’s lithography systems require an export license from the Dutch government for shipment. However, a statement from ASML indicated that the company believes its existing licenses still allow it to continue delivering lithography machines to China until the end of 2023, despite the export restrictions taking effect in September.

• ASML dominates the lithography market with an 82.9% market share followed by Canon and Nikon. It holds a market share that is over eight times greater than second-place Canon.

Xpeng Motors said on Nov. 3 that it will offer some existing owners of its P5 sedan discounts on new purchases after hundreds of customers accused it of failing to deliver promised advanced driver assistance features, which were supposed to be available across the country. 

Why it matters: The complaints, which went viral on Chinese social media last week, mounted after Xpeng on Oct. 24 unveiled plans to roll out its latest advanced driver assistance system (ADAS), the XNGP, nationwide by next year. The company said it will be applicable to existing models including the G6, G9, and P7i, without mentioning the P5. 

Details: Xpeng said in a statement issued on Nov. 3 that it will offer an RMB 20,000 ($2,747) coupon for people who have subscribed to Xpilot, its previous generation driver-assist software, along with their purchases of the premium version of the P5 sedan. The benefit could be used for a new purchase of one of Xpeng’s most popular models, including the G6, G9, P7i, or its upcoming X9 van. 

• The announcement comes after more than 700 P5 owners recently published an open letter, obtained by National Business Daily, asking the company for an explanation as to why its partially autonomous feature for urban driving has remained unavailable to them in most domestic cities, despite the company’s promises.
• Xpeng further explained that the availability of its previous-generation ADAS feature “relies heavily on” high-definition maps, which has reportedly required automakers to secure approval for using mapping data in their vehicles, partly resulting in slow progress in adoption (our translation). 
• The EV startup released the so-called City Navigation Guided Pilot (NGP) function first to Xpilot users in the city of Guangzhou last September and has since expanded the adoption to five major cities including Beijing, Shanghai, and Shenzhen. 
• “We will strive for more new features and improved user experience, despite many challenges,” Xpeng said in the statement, adding that more functions will be available to P5 owners through over-the-air updates next year, including steering assist and more music streaming apps. 

Context: Xpeng began delivery of the P5 electric sedan back in October 2021, with its premium versions featuring two lidar sensors to facilitate more reliable automated driving functions at a price range of between RMB 199,900 and RMB 223,900 ($27,453-$30,749). It sold 19,618 units of the car over the last 12 months, according to figures from the auto services portal Dongchedi.

• The automaker is shifting to a more affordable approach for autonomous driving, which will reduce its reliance on technologies such as lidar and HD maps as part of a plan to roll out its XNGP system in 50 domestic cities by December. 
• The Xpilot system, formerly Xpeng’s rival to Tesla’s Autopilot system as reported by CNBC, is unavailable for driving scenarios without the support of HD maps, according to a Q&A document published by the company last November.

Xiaomi Group on Thursday unveiled its new operating system, the Xiaomi HyperOS, and its new flagship smartphone Xiaomi 14 series. CEO Lei Jun said the company’s strategy had moved beyond “smartphone connections to AIoT (Artificial Intelligence of Things)”, and now entailed having the “phone, home, and vehicle all within an ecosystem.”

Why it matters: The Xiaomi 14 smartphone series showcases the Xiaomi HyperOS, an Android operating system that uses Xiaomi’s self-developed Vela system that enables the phone to connect with other AIoT devices. The lineup is touted by Xiaomi as the first flagship smartphone driven by Qualcomm’s latest processor Snapdragon 8 Gen 3, unveiled on Wednesday.

Details: In the next two years, Xiaomi HyperOS will replace its MIUI operating system across every Xiaomi smart device, as the company seeks to build a comprehensive ecosystem.

• Xiaomi plans to invest RMB 100 billion ($13.66 billion) in research and development (R&D) over the next five years, Lei Jun revealed at the launch event. Xiaomi also revealed that in 2022 it had invested RMB 16.2 billion ($2.21 billion), or 0.53% of its national R&D expenditure. 
• Xiaomi HyperOS is a cross-platform operating system that has been in development for seven years, involving 5,000 engineers, according to the company. Aiming to create a “people-vehicle-home” interactive ecosystem, Xiaomi has integrated its self-developed Vela system with a modified Linux system.
• The Xiaomi 14 series comprises the Xiaomi 14 and Xiaomi 14 Pro, both carrying the latest Qualcomm Snapdragon 8 Gen 3 chipset, as well as Xiaomi’s own Loop LiquidCool technology for heat dissipation. Both models feature Leica Summilux optical rear lenses.
• The latest Snapdragon 8 Gen 3, built using TSMC’s cutting-edge 4nm processor, is designed for AI applications and gaming, and comes with enhanced audio and camera features. The Gen 3 offers a notable improvement on its predecessor, being 30% faster and 20% more energy-efficient. Additionally, the chipset supports LPDDR5x memory at speeds up to 4,800 MHz and can accommodate up to 24 GB of RAM.
• Xiaomi has opted for a smaller sensor for the 14 Pro, introducing the Light Hunter 900 coupled with a custom Leica Summilux lens. Despite being approximately 44% smaller than last year’s 13 Pro 1-inch sensor, the new setup is up to 80% brighter, according to Xiaomi.
• Depending on storage requirements, a new Xiaomi 14 will cost from RMB 3,999 ($546) to RMB 4,999 ($683), with the pro version costing between RMB 4,999 ($683) and RMB 5,999 ($820).

Context: At the launch event, Lei also mentioned Xiaomi’s commitment to environmental protection and social responsibility, reiterating a pledge made in August to achieve carbon neutrality and to switch to 100% renewable energy by 2040. 

• According to intelligence firm Counterpoint, Xiaomi ranked fifth place in the Chinese phone market in the second quarter of 2023 with a 14% market share.

Chinese phone maker Oppo released its new generation foldable the Find N3 on Thursday, combining a lightweight folding design with flagship imaging capabilities for the first time. 

Why it matters: Foldable phones may offer flexible displays and portability, but their camera performance has long been a concern for customers comparing them to conventional models. The Oppo Find N3 has ushered in a “new era of foldable imaging”, the company claimed at the launch event.

Details: The camera setup on the Oppo Find N3 features Hasselblad branding and is looking to set a new standard in the foldable category. 

• On the rear, it incorporates Sony’s cutting-edge 48MP LYTIA-T808 pixel-stacked sensor, which is a 1/1.43″ unit equipped with dual-layer transistor technology. Essentially, this sensor boasts a redesigned pixel architecture that enhances light sensitivity, leading to better image quality.
• On the front, the Find N3 offers two selfie cameras: a 20MP camera inside and a remarkable 32MP camera on the cover screen. The device also includes a 48MP 1/2″ sensor paired with a 14mm f/2.2 ultrawide lens with autofocus. In terms of the zoom camera, it features a 64MP 1/2″ sensor with a 3x 70mm f/2.6 stabilized periscope lens, enabling hybrid zoom capabilities of up to 6x or 145mm.
• Under the hood, the Oppo Find N3 operates on the cutting-edge Snapdragon 8 Gen 2 flagship processor, coupled with a substantial 16GB of LPDDR5X RAM and 512GB of storage. It packs a 4,805mAh battery that supports 67W fast charging, achieving a full charge in 42 minutes, according to Oppo.
• The model follows the trend of compact, wide book-style foldable smartphones. On its exterior, it features a 6.31-inch AMOLED display with a resolution of 2484×1116 pixels and a variable refresh rate ranging from 10 to 120 Hz. The screen adopts a 20:9 aspect ratio and delivers a peak brightness of up to 2,800 nits. When unfolded, the Find N3 reveals a larger 7.82-inch display with a resolution of 2440×2268 pixels and a dynamic refresh rate varying from 1 to 120 Hz, along with the same maximum brightness level.
• The Find N3 boasts another distinctive feature in its self-developed Flexion Hinge. This hinge has undergone extensive testing of 1,000,000 folds, the company says, demonstrating the enduring durability and reliability of the foldable hinge over an extended period.
• The standard model of 12GB+512GB storage is priced at RMB 9,999 ($1,366), while the premium edition of 16GB+1TB is priced at RMB 12,999 ($1,776). It comes in four colors: red, black, gold, and green.

Contexts: In the second quarter of 2023, the global market for foldable smartphones witnessed a 10% year-on-year increase, reaching a total of 2.1 million units, as reported by Counterpoint. This growth stands in sharp contrast to the overall global smartphone market, which experienced a significant 9% year-on-year decline in shipments during the same period. 

• Notably, the Chinese foldable smartphone market saw an impressive surge of 64% year-on-year, totaling 1.2 million units. As a result, China now dominates the global foldable smartphone market, holding a substantial 58.6% share.
• On August 29, Oppo unveiled the Find N3 Flip in China, marking it as the world’s first clamshell foldable smartphone, equipped with a trio of cameras on its cover.

Chinese electric vehicle maker Leapmotor said on Monday that it swung to a positive gross margin of 1.2% in the third quarter that ended Sept. 30 on the back of strong revenue growth, with the chief executive predicting a record performance for the remainder of the year. 

Why it matters: The quarterly results come as the Zhejiang-based and Hong Kong-listed automaker has continued its solid growth momentum in the highly competitive home market and recently announced an ambitious global strategy that covers major regional markets from Europe to Asia Pacific. 

• In addition, Leapmotor has reportedly been in talks with established automakers Volkswagen and Stellantis on potential collaborations that could include an investment deal, and on Monday expressed a willingness in its earnings report to “share” its technological capabilities with partners.

Details: Leapmotor on Monday posted a positive gross margin of 1.2% in the third quarter for the first time and “ahead of schedule,” compared with the negative margin of 8.9% it posted over the same period of last year and the negative 5.2% it achieved as of June. It initially aimed to achieve a positive margin by the end of this year. 

• The company attributed the growth to the strong deliveries of its pricier C01 sedans and C11 crossovers, which have starting prices of RMB 145,800 and RMB 149,800 ($19,933 and $20,481) respectively, significantly higher than that of its earlier model the T03, which is priced from RMB 49,900.
• Quarterly deliveries for Leapmotor increased by 24.5% year-on-year to 44,325 units over the past three months, a record high for the seven-year-old startup, with those of C01 and C11 accounting for more than 80% of total deliveries. 
• Revenue grew 31.9% year-on-year to nearly RMB 5.7 billion, with loss attributable to shareholders narrowing to RMB 986 million from the RMB 1.34 billion Leapmotor posted a year ago. Its research and development expenses of RMB 474 million during the quarter were up 17.3% year-on-year. 
• “Based on the current order volume, our deliveries in the fourth quarter are expected to record a new high,” CEO Zhu Jiangming said. The company delivered 15,800 units last month, still far behind larger rivals BYD and Tesla but slightly ahead of peers including Hozon, Xpeng, and Zeekr. 

Context: Leapmotor followed the suit of BYD and Li Auto earlier than most Chinese EV startups, betting on both pure EVs and plug-in hybrid EVs (PHEVs) with the launches of the extended-range C11 and C01 earlier this year. 

• PHEVs reported an impressive growth rate of 84.5% for the first nine months of this year in China, compared with battery EVs’ 18.1%, according to figures released by the China Passenger Car Association. 
• Meanwhile, on Aug. 1 the company announced a new round of price cuts of up to RMB 20,000 across its lineups, reversing its previous decision to keep prices stable along with several other EV makers in March.
• On Sept. 4 in Munich, Germany, Leapmotor unveiled the Leap 3.0, its proprietary vehicle architecture, and the C10, a mid-size SUV and the first model built upon it. Zhu said the company plans to launch five models in two years in markets including Europe, Asia Pacific, and the Middle East.

Huawei has obtained a smartphone microscope-camera technology patent, with the lens magnifying the photographed object from 20 to 400 times by a minimum distance of approximately 5 millimeters and the phone able to analyze the image for bacteria, according to a recently published report by the United States Patent and Trademark Office (USPTO). 

Why it matters: As competition in the phone market continues to intensify, Huawei has been striving to capture the attention and loyalty of consumers by introducing new features, and will be hoping that its microscope-camera can give it a competitive edge.

Details: At present, Huawei has not announced whether the microscope-camera patented technology will be used in the next generation of its flagship phones, but the patent has already provided details of the microscope lens and how it could be used.

• The advanced feature utilizes two cameras: one regular camera for capturing images and another micro-camera for analyzing hygiene. In the provided screenshot, the phone captures an image that includes an apple and a hand. When put into micro mode, the phone will use voice, text, or other prompts to describe the health status of the object and provide suggestions for maintaining hygiene.

• Huawei’s patent also outlined several use cases for the micro-camera, including food safety assurance, kitchen utensil maintenance, personal hygiene assessment, children’s toys inspections, and pet hygiene monitoring. For example, users could utilize the micro-camera at home to detect bacteria on a vegetable’s surface or to monitor the cleanliness of kitchen utensils and appliances, such as coffee machines and microwaves. 
• Huawei submitted this camera patent application in 2021, according to the USPTO file. The patent description specifically highlights the identification of bacterial quantities in captured images and the provision of hygiene recommendations as particular concerns, especially as the patent was filed during the height of the Covid-19 pandemic.
• In 2021, Oppo introduced the Find X3 Pro, which is capable of magnifying subjects by a maximum of 60 times. But such a function is limited to macro photography instead of microscopic images.

Context: Over 350 companies have obtained licenses for Huawei’s patents through patent pools. Under these licenses, Huawei’s licensing revenue amounted to $560 million in 2022.

• In September, Huawei and Xiaomi announced a global patent cross-licensing agreement that covers multiple communications technologies including 5G.
• In August, Huawei launched the Mate 60 series with satellite call technology, which allows users to make or receive calls without the use of traditional terrestrial signals.

TSMC is urgently seeking equipment suppliers from whom it can buy CoWoS (Chip on Wafer on Substrate) machines, as Nvidia, AMD, and Amazon expand orders for AI chips, local media outlet Economic Daily News exclusively reported on Monday. TSMC has increased its equipment orders for CoWoS by 30% to meet growing AI-fueled demand, the report claimed.

Why it matters: The AI boom has reshaped the semiconductor landscape, positioning chip-making companies as critical enablers of the tech revolution while presenting complex challenges related to supply chain resilience and technological advancement. 

Details: CoWoS is a high-density advanced packaging technology developed by TSMC for high-performance chips. The current shortage of CoWoS packaging capacity has become the main bottleneck in the production chain for AI chip orders.

• Nvidia is TSMC’s largest customer of CoWoS advanced packaging, accounting for 60% of the production capacity, according to the report. Recently, in response to the strong demand for AI computing, Nvidia has increased its orders from TSMC, while AMD, Amazon, and Broadcom have also been placing urgent orders.
• Due to its shortage of CoWoS machines, TSMC has sought the assistance of local equipment suppliers including Scientech Corporation, AllRing-Tech, Grand Process Technology, E&R Engineering Corporation, and Group Up Industrial. TSMC has increased its original equipment orders by up to 30%, with delivery expected in the first half of 2024. Mass production will commence in the second half of 2024.
• Currently, TSMC’s monthly capacity of CoWoS advanced packaging is approximately 12,000 units, sources familiar with the matter told Economic Daily News. To accommodate the proposed production expansion, the monthly capacity of CoWoS will be increased to between 25,000 and 30,000 units.
• Major customers such as Nvidia and AMD have increased their orders of TSMC wafers in the third quarter, boosting TSMC’s 7nm and 5nm advanced process capacity utilization.
• Pressure on CoWoS production capacity is expected to ease after next summer, TSMC’s president C. C. Wei stated during a recent earnings call. The Economic Daily News report revealed that TSMC has been expanding its facilities at plants including Zhuke, Zhongke, Nanke, and Longtan, so as to increase CoWoS production capacity.

Context: On September 24, Chinese media outlet IThome reported that Qualcomm’s next generation Snapdragon 8 Gen 4 may have been manufactured using TSMC’s N3E process technology, as indicated by leaked documents from Qualcomm.

• On September 8, TSMC announced net revenue for August 2023 of approximately NT$188.69 billion ($5.87 billion), representing an increase of 6.2% from the previous month.

The Asian Games 2023 will take place in Hangzhou, China, from September 23 to October 8. Esports (online gaming), included as an official event of the Asian Games for the first time, will offer seven gold medals across seven gaming titles. 

Why it matters: The 19th Asian Games have introduced Esports as a medal event, giving global recognition to this emerging form of sport alongside more familiar physical activities. In recent years, Esports has gained significant popularity worldwide, demanding a comparable level of  skill, strategy, and dedication to traditional sports.

Details: Over 15 days of competition, the Hangzhou Asian Games will award a total of 481 gold medals, including seven gold medals for Esports. 

• A total of 45 countries have registered for the Asian Games 2023, with 31 countries and regions participating in Esports, according to Tencent Games. Over 500 Esport athletes will compete for gold medals at the Hangzhou Esports Center. Completed in 2022, the Hangzhou Esports Center covers an area of 80,000 square meters, and can accommodate up to 5,000 spectators. It was designed specifically for the Asian Games Esports events and resembles a sci-fi spaceship when viewed from above.
• The Esports lineup comprises: League of Legends, DOTA 2, Honor of Kings (also known as Arena of Valor), PUBG, FIFA Online 4, Street Fighter V, and Dream Three Kingdoms 2. Of these, two gaming titles were developed by Chinese game developers. Honor of Kings was developed by Timi Studio Group (a subsidiary of Tencent Games), while Dream Three Kingdoms 2 was published by Hangzhou Electronic Soul Network Technology.
• League of Legends, DOTA 2, and Honor of Kings belong to the multiplayer online battle arena (MOBA) game genre. They involve two teams competing against each other to destroy an enemy base while defending their own base. MOBA games combine elements of strategy, teamwork, and individual skill, offering a wide range of heroes, each with unique abilities.
• PUBG, which stands for Player Unknown’s Battlegrounds, is an online multiplayer battle royale game. Players are dropped onto a remote island along with 99 other players, where they must scavenge for weapons, armor, and supplies while eliminating other players. The ultimate goal is to be the last player or team standing. The game features a shrinking play zone that forces players into closer and more intense encounters as play progresses.
• FIFA Online 4 is a free-to-play online football simulation game, belonging to the popular FIFA series. Players can create and manage their own virtual football teams, compete against other players in online matches, and participate in various game modes, including league play, tournaments, and more. The game includes a wide range of real-life football players, teams, and leagues from around the world.
• Street Fighter V features a roster of diverse characters, each with their own unique fighting styles and special moves. Players engage in one-on-one battles, utilizing a combination of punches, kicks, and special abilities to defeat their opponents. Success hinges on precise timing, strategy, and the execution of combo moves to outmaneuver opponents.
• Dream Three Kingdoms 2 is a strategy game set in ancient China. It challenges players to navigate the intricacies of diplomacy, warfare, and resource management to build their kingdoms and defeat their rivals.

Context: Originally scheduled to take place in 2022, the 19th Asian Games were delayed until this month due to COVID-19 travel restrictions.

• Vivo’s sub-brand iQOO has been chosen as the official Esports gaming phone provider, which means that all contests at the international event will use their flagship smartphones.

Chinese phone maker Honor on Tuesday released its Honor V Purse, a smartphone designed to resemble a handbag. Using optimized hinges and batteries, the new Honor V Purse is the slimmest foldable phone on the market, with a body measuring 8.6mm in its folded state and 4.3m when unfolded.

Why it matters: Three years on from its forced split with Huawei, Honor continues to try and establish its own brand identity and differentiate itself from other Chinese smartphone makers. Meanwhile, the competition for foldable smartphones is steadily increasing as more manufacturers enter this niche market; in recent weeks, major Chinese players Oppo and Huawei have introduced their own foldable devices, namely the Oppo Find N3 Flip and the Huawei Mate X5. Honor’s “handbag” design may help it stand out in an increasingly competitive market.

Details: While the Honor V Purse’s design is certainly eye-catching, its record-breakingly thin body has meant compromises have been made on performance. 

• The V Purse is powered by the Snapdragon 778G. Qualcomm released this mid-range chipset in May 2021 and updated it to the Snapdragon 7s Gen 2 on Monday. The phone’s use of an older generation of chips means that the V Purse is unlikely to be the first choice of those seeking high-performance gaming capabilities.
• In its folded state, the phone measures 156.5 x 74.7 x 8.6mm and weighs 214g. For comparison, the iPhone 15 Pro Max is 159.9 x 76.7 x 8.3mm and 221g. 
• The device offers a 7.71-inch 2K OLED display with a peak brightness of 1,600 nits,  2,160Hz high frequency PWM dimming, and a 90Hz refresh rate. The silicon-carbon batteries provide a capacity of 4,500mAh, which can last for around eight hours of regular usage.
• Designed to be worn like a handbag, the phone comes with a strap or chain and can be customized with different wallpapers on its outer screen. Honor is also selling a leather phone case to complete the purse feel.
• The V Purse comes in three color options: gold, blue, and black. The 16GB RAM smartphone provides two storage variants, 256GB and 512GB, which are priced at RMB 5,999 ($822) and RMB 6,999 ($959) respectively.
• At the product launch, Honor’s CEO Zhao Ming presented a set of data for foldable phones showing that global shipments of the devices exceeded nine million units in 2021, accounting for 4% of the high-end phone market. Shipments of foldable phones are predicted to exceed 100 million units in 2027, and make up 39% of high-end phone sales by that time, according to the data presented by Zhao. 
• Zhao also refuted recent reports that Honor is set to return to the Huawei fold. Zhao labeled Honor’s former parent company “a respected competitor” and said that competition between the two brands was a positive for the industry.

Context: In August, market intelligence firm IDC released a report that indicates the foldable phone market in China has experienced rapid growth, albeit from a low base. In the first half of 2023, 2.27 million foldable phones were shipped, a year-on-year increase of 102%.

• In the second quarter of 2023, the shipment of foldable phones in China reached 1.26 million units, an increase of 173% year-on-year. The leading five brands were Huawei (with a 43% market share), Vivo (19.7%), Oppo (15.9%), Samsung (8.9%), and Honor (7.2%).

TSMC is working with Broadcom and Nvidia to develop silicon photonics and co-packaged optics (CPO), after the  AI craze has lifted demand for data transmission, local media outlet Economic Daily News exclusively reported on Monday. The company has already formed an R&D team of over 200 employees to target emerging opportunities in high-speed computing chips based on silicon photonics technology, with production expected to start as early as the second half of next year. TSMC declined to comment on this matter.

Why it matters: The semiconductor industry has been under pressure to achieve faster data transmission speeds with zero signal delay, as AI applications flood most tech fields. This means that the traditional method of using electricity as a signal transmission medium is no longer sufficient. The cutting edge technology of silicon photonics works by converting electricity into light, significantly improving data transmission speeds.

Details: TSMC asserts that silicon photonics represents a new era for semiconductors. Douglas Yu, vice president of TSMC, stated that two key problems, energy efficiency and AI computing power, can be solved if TSMC succeeds in developing an applicable silicon photonics integration system in the upcoming years.

• SEMICON Taiwan 2023 held its grand exhibition in Taipei from September 6 to September 8, with TSMC and Advanced Semiconductor Engineering (ASE) addressing topics related to silicon photonics. Intel, Nvidia, Broadcom, and other leading semiconductor companies have all successively launched development programs for silicon photonics and co-packaged optical components, according to Economic Daily News. The overall market is projected to grow from as soon as 2024.
• TSMC is partnering with Broadcom, Nvidia, and other major customers to develop new products related to silicon photons and co-packaged optical components, citing sources familiar with the matter. These will include chip processes from45 nm to 7 nm, and are expected to enter mass production in 2025.
• TSMC has assembled a team of 200 R&D employees to target silicon photonics, aiming to introduce the new technology into CPU, GPU, and other computing processes in the future. Due to faster transmission speeds enabled by light, the computing power of these new products will be several times greater than existing computing processors. 
• With rapid advancements in transmission speeds, managing power loss and heat dissipation become the next big issues. A solution proposed by the semiconductor industry involves integrating silicon photonics components and application-specific integrated circuits (ASIC) into a single module through co-packaged optics (CPO) technology, a method both Microsoft and Meta have adopted in their new-generation network architecture.

Context：Silicon photonics is the study and application of photonic systems, which use silicon as an optical medium. Silicon photonics technology was introduced by Intel in 2010, with the challenge being the conversion from traditional electricity. Due to its relatively high cost, it is currently limited to data centers and server markets.

Semiconductor giant Qualcomm is set to work with both TSMC and Samsung simultaneously to create a new 3nm version of its Snapdragon 8 Gen 4 chip, Taiwanese media outlet Commercial Times reported on Aug 17. It seems likely that Qualcomm will only be able to secure around 15% of TSMC’s 3nm production capacity for its chips, with Apple’s upcoming iPhone 15 Pro series expected to dominate the Taiwanese firm’s output. Samsung’s 3nm process yield has significantly improved in recent months, allowing it to catch up with sector leader TSMC.

Why it matters: Adopting 3nm technology will allow Android devices using Qualcomm’s Snapdragon 8 Gen 4 to narrow the performance gap with the forthcoming iPhone 15 Pro series and its A17 Bionic chip. Qualcomm’s Snapdragon system on chip (SoC) lineup currently powers the majority of Android smartphones on the market, with the Snapdragon 8 Gen 4 processor scheduled to launch in 2024. 

Details: Qualcomm looks set to adopt a dual-source approach by partnering with both TSMC and Samsung for next year’s Snapdragon 8 Gen 4. 

• TSMC has indicated that demand for its 3nm process remains strong. The process will support HPC (High-Performance Computing) and smartphones in the second half of this year, accounting for an estimated 4% to 6% of TSMC’s wafer revenue in 2023. The firm has already received customized orders for its N3E process, its latest 3nm offering, which has successfully passed verification and is expected to start mass production in the fourth quarter.
• To meet the demand for Apple’s A17 Bionic chip, TSMC aims to reach a monthly production capacity of 100,000 units for the 3nm process by the end of the year. Compared to the 5nm process, the 3nm process is set to deliver an 18% increase in speed, while reducing power consumption by up to 30% under the same performance conditions, according to TSMC.
• Qualcomm’s Snapdragon 8 Gen 3 and MediaTek’s Dimensity 9300 are expected to be released in October using TSMC’s N4P (4nm) process, according to the report from Commercial Times. Both companies are projected to adopt the N3E (3nm) process in 2024. 
• According to Wccftech, a leak of the Qualcomm Snapdragon 8 Gen 4’s specs shows that it will feature custom Phoenix cores and TSMC’s N3E technology. The report mentioned that Qualcomm will apply its self-developed Nuvia CPU architecture to the new chipset.
• Qualcomm opted for the 4nm process for this year’s Snapdragon 8 Gen 3 due to the high cost of TSMC’s 3nm process. Currently, Apple dominates the allocation of these cutting-edge 3nm wafers, according to media outlet Wccftech. 
• In July, Korean media outlet KMIB claimed that Samsung now boasts a 60% yield rate for its 3nm process, slightly higher than TSMC’s 55%. TSMC’s low yield rate has reportedly led Apple to commit to only paying for qualified wafer batches, instead of establishing a standard rate with TSMC.

Context: In the first quarter of 2023, the top three brands in terms of global smartphone chipset shipments were Mediatek with a 32% market share, Qualcomm with 28%, and Apple with 26%, according to market research firm Counterpoint.

Crystal of Atlan (CoA), the new action role-playing game developed by ByteDance’s video game company Nuverse, was the eighth best-selling mobile game on iOS in China in July, according to local media outlet GameLook, despite only launching on July 14. 

Why it matters: The new game has the potential to be a breakout hit for ByteDance, which has been aiming to develop its own successful mobile title in the wake of HoYoverse’s global success with Genshin Impact. In the second half of July, Crystal of Atlan’s revenue only ranked behind Tencent’s Honor of Kings, NetEase’s Justice Online, and Tencent’s PUBG Mobile, GameLook reported. Fueled by the success of the new game, Nuverse’s July revenue saw a remarkable 109% month-on-month increase.

Details: Based on data from Sensor Tower, CoA’s iOS revenue surpassed RMB 210 million ($29 million) in July. GameLook predicted that the revenue across all platforms amounted to RMB 600 million ($83 million) for the same month.

• Crystal of Atlan is an action role-playing DNF (Dungeon ’n’ Fighter) game that uses 3D graphics and open-world scenarios. Its anime style resembles Genshin Impact and Honkai: Star Rail, both of which were launched by HoYoverse.
• In May, according to CoA’s official Weibo account, the number of pre-registered players reached 8 million.
• ByteDance is actively promoting the game on its short-video platform Douyin (the Chinese version of TikTok), using internal advertising resources to enhance the game’s visibility. A large number of gaming KOLs introduced the gameplay via videos and broadcasts on Douyin to attract domestic players. 
• As of August 8, the hashtags #CoA and #CrystalofAtlant have collectively reached more than 3.5 billion views on Douyin, according to a report by 36Kr. Additionally, ByteDance also recruited KOLs on Chinese broadcast platforms Huya and Betta, to increase publicity for the game. Given the outlay on marketing, some analysts have suggested that maintaining the title’s high profile may prove a challenge in the months ahead.

Context: ByteDance established Nuverse in 2019, announcing its entry into the gaming sector. In 2021, ByteDance acquired game studio Moonton and C4games for RMB 10 billion and equity worth RMB 15 billion, according to 36Kr.

• On July 13, Moonton launched the fantasy role-playing card game Watcher of Realms in the global market. The revenue of this game reached approximately RMB 70 million ($9.6 million) in the first month, according to GameLook.
• In 2023, NetEase’s Justice Online and HoYoverse’s Honkai: Star Rail are the two most prominent new titles in China’s mobile game market.
• In July, Justice Online, the martial arts role-playing game launched by NetEase on June 30, ranked seventh with a revenue of $63.3 million.
• In May, Hoyoverse’s new hit game Honkai: Star Rail earned approximately RMB 1.2 billion ($168 million) in the first month since its global launch on April 26.

China’s battery giant CATL is considering a bid for exploration rights to two domestic lithium mines in the southwestern Sichuan province. The electric vehicle battery maker recently established a new mining subsidiary to comply with the bidding process, a local media outlet has reported. 

Why it matters: CATL’s interest in two new lithium mines signals its intention to further integrate upstream resources amid already-volatile battery supply chains. 

• However, CATL may find it hard to extract the abundant lithium resources in a safe and cost-efficient way due to poor geological conditions in the plateau areas, the report added, citing a Jan. 12 research note on lithium supply by Guosen Securities. 

Details: CATL set up a new mining company called Maerkang Times Mining (our translation) through a subsidiary, with a registered capital of RMB 300 million ($42 million), according to the Chinese enterprise database Tianyancha. 

• The new firm has listed its main business interests as mineral resource exploration, development of new raw materials, as well as mineral washing and processing. CATL set up the entity with the intention to bid for two local lithium mines, state-owned media outlet The Paper reported on Monday. 
• This comes just days after China’s Ministry of Natural Resources kicked off bidding for exploration rights to two lithium mines in Maerkang city and nearby Jinchuan county on June 20. The two licenses will be put up for an unreserved auction at a combined starting price of RMB 3.76 million early next month, according to government filings. 
• Industry watchers expect the two mines to hold an impressive amount of lithium, as the China Geological Survey reported “significant findings” related to mineral resources in Maerkang during 2019-2020, with an estimated lithium oxide equivalent content of over 1.8%. Jinchuan reserve is expected to hold oxide content reaching 1.3%, the report said. 
• CATL did not respond to TechNode’s request for comment. 

Context: China’s surging adoption of EVs has in turn created more business moves in the mining space. 

• CATL in January reportedly secured regulatory approval for a massive RMB 6.4 billion acquisition of Sinuowei Mining Development Co. Ltd, a bankrupt lithium mining firm that has exploration rights to a local mine with an average grade of 1.18% lithium oxide in western Sichuan. This translates into a reserve of around 24.9 million tons of lithium ore. 
• Zhite New Materials, a lithium miner formerly backed by CATL, in February won an RMB 6.1 billion bid to develop lithium reserves in China’s Xinjiang Uygur Autonomous Region, Yicai reported. However, the firm failed to complete the transaction on time and in April was barred from upcoming auctions for three years by local regulators, Caixin reported. 
• Battery-grade lithium carbonate prices reached a peak of nearly RMB 600,000 per ton late last November before sinking to around RMB 180,000 in China in April. Lithium remains a wild ride for commodity investors as prices then bounced back to around RMB 300,000 on May 18, according to figures from industry consultancy Mysteel Group. 

Note: This article was first published on TechNode China (in Chinese).

China has been making strides in vehicle electrification for some time, with an eye to digitizing its entire automotive industry. As a key part of this shift, Chinese EV makers are currently competing to produce the most comprehensive assisted driving systems, endeavoring to turn their offerings into key selling points as the market matures.

Here, TechNode takes a look at the assisted driving software of three leading players in the Chinese EV sector.

Xpeng’s NGP advanced driver assistance system

The Advanced Driver Assistance System (ADAS) is the standout feature of Xpeng’s new model, the G6. The car has possibly the most advanced autonomous driving technology in China: with its 31 smart sensors, the G6 outperforms its competitors. Dual forward-facing LiDAR sensors, millimeter-wave radar, cameras, and ultrasonic radar throughout give the vehicle the tools to sense and see all around its body. 

In urban settings, the City NGP (Navigation Guided Pilot) smart navigation-assisted driving tool enables seamless travel along accessible city roads. Once a user inputs a destination and activates the tool, the vehicle maintains its position within its chosen lane, performs necessary lane changes or overtaking maneuvers, merges on and off roads, navigates around stationary vehicles or obstacles, recognizes and passes through traffic light intersections, circumvents loop roads, steers clear of construction zones, and evades pedestrians and non-motorized vehicles, on its way from inputted A to B.

The G6 comes with Lane Centering Control (LCC), a Lidar-based adaptive cruise and lane-centering feature that also enables the car to maintain optimal cruising speed. Linked to Xpeng’s advanced XNet neural network, the system processes 4D information on dynamic targets, including size, distance, position, and speed of vehicles and two-wheelers, as well as 3D information on static targets: lane lines and road edges from above.

Compared to Xpeng’s first-generation visual perception architecture, the XNet employs neural networks to replace manual post-processing, enabling end-to-end algorithm optimization. It boasts enhanced 360-degree perception, covering more than eight lateral lanes, demonstrating superior performance, and improving lane change success rates. Uniquely, this vehicle relies on vision-based recognition and display capabilities, becoming the first in the industry to not rely on mapping. It includes detailed rendering and visual representation of traffic participants and road infrastructure surrounding the vehicle. Drivers can see lane markings and nearby vehicles on the in-car map. XNet also recognizes and displays traversable areas, traffic lights and turn signals, setting a new industry standard. 

On highways, the system can efficiently execute autonomous lane changes, lane selection, and overtaking maneuvers by assessing the surrounding environment and required driving tasks, such as avoiding traffic restrictions and adhering to speed limits. It also provides seamless on and off-ramp transitions while switching between high-speed driving modes, ensuring improved straight-line stability and enhanced cornering.

Li Auto’s City NOA smart driving 

By putting strategic effort into smart software and electric power, Li Auto has made huge strides in smart space (SS) R&D, smart driving, and high-voltage fully electric platforms. With its own large model called Mind GPT, Li Auto will soon begin testing its City NOA smart driving system.

Li Auto’s smart driving system doesn’t depend on high-precision maps, as it utilizes a bird’s eye view (BEV) large model to perceive and comprehend road structure information in real time. The BEV large model has undergone extensive training, enabling it to generate stable road structure data on most roads and intersections in real time. Neural Prior Net (NPN) refers to a set of neural network parameters which are difficult for humans to directly interpret when dealing with complex intersection patterns. The large model effectively deciphers these patterns. Compared to high-precision maps, NPN replaces human rules with network models for better understanding and use of environmental information.

For complicated intersections, it’s essential to conduct advanced intersection NPN feature extraction. On a vehicle’s second approach to an intersection, the previously extracted NPN features are retrieved and combined with the BEV feature layer from the vehicle’s large-scale perception model, resulting in what the company says is an optimal perception outcome. In addition, the “AI driver” must comprehend the traffic light regulations at the intersection, posing another challenge on urban streets. The prevailing method involves devising a rule-based algorithm to interpret traffic lights and road use intentions. Li Auto prefers to rely on a large model to address this issue.

To navigate complex urban roads, Li Auto trained a Traffic Intention Net (TIN) to do away with the need for software to interpret pre-set human traffic regulations or even know the exact position of a traffic light. The system will input video footage into the TIN network model, and it will directly indicate the appropriate vehicle maneuver – turn left or right, go straight, or stop and wait. By analyzing the reactions of a large number of human drivers to signal changes at intersections, the performance of the TIN model is highly refined. To ensure the “AI driver” emulates human drivers’ judgment and driving patterns, Li Auto trained the AI with a huge amount of real driver behavior data, making NOA’s decision-making and planning more human-like, while maintaining safety and adherence to traffic regulations.

NOA is designed to accommodate more than 95% of commuting situations for car owners. While using NOA for commuting, each model will receive continual updates and training. In the latter half of the year, Li Auto plans to introduce the NOA commuting feature and expand urban NOA coverage, with the goal of allowing early adopters to commute using NOA’s navigation-assisted driving.

Huawei Aito’s second-generation autonomous driving system

The M5 smart drive edition released by Huawei’s automotive brand Aito sees the debut of the telecom giant’s second generation autonomous driving system ADS 2.0, which offers a comprehensive fusion perception system made up of various sensors working together to provide 360 degree coverage. This fusion perception system consists of 1 LiDAR, 3 millimeter-wave radars, 11 camera sets, and 12 ultrasonic radars, allowing for distance detection of up to 200 meters. The Aito M5 employs network technology based on fused BEV perception capabilities that can identify objects outside the standard obstacle whitelist. Paired with a road topology inference network, the Aito M5 is designed to drive efficiently with or without a map, equipped to see, understand, and navigate regardless.

The Aito M5 can handle changing light conditions in tunnels and minimize the impact of nighttime glare. It can accurately identify pedestrians, vehicles, and obstacles with ease. On urban roads, the car actively maneuvers around obstructions caused by other vehicles and the company claims it can deal with pedestrians carelessly opening car doors or unexpected cyclists emerging from a blind spot. Even in the most challenging conditions, such as intense glare at night, the Aito M5 can brake at speeds of up to 50 km/h.

With assisted driving capabilities, the M5 can merge onto and off highway ramps with a 98.86% success rate. The reliable long-distance piloting system has an average Miles Per Intervention (MPI) of up to 114 km, rivaling experienced drivers.

The Huawei ADS 2.0 package comes with 19 features as-standard, such as high-speed Lane Centering Control (LCC), urban LCC, and high-speed Navigation-based Cruise Assist (NCA). Additionally, the optional advanced package offers urban NCA, Automated Valet Parking Assist (AVP), and enhanced LCC for urban areas.

Huawei’s Aito is the first car brand to achieve high-speed urban smart driving capabilities without relying on high-precision maps, bringing the assisted driving experience significantly closer to the L3 level of autonomy. According to Huawei’s roadmap, its mapless functionality will be introduced in 15 cities, including Shanghai, Guangzhou, and Shenzhen, during the third quarter of 2023. By the fourth quarter, coverage will encompass 45 cities.

A sophisticated race to autonomy 

The race to launch assisted driving in the Chinese market is well underway. As time goes on, we can expect more car companies and self-driving solution providers to join. China’s Ministry of Industry and Information Technology (MIIT) plans to introduce an updated standard system guide for smart, network-connected vehicles, which will accompany the competition as it intensifies further.

Renowned computer scientist and venture capitalist Kai-Fu Lee on Monday unveiled his new artificial intelligence startup, 01.AI (Lingyi Wanwu in Chinese), providing long-awaited details about his plans to “build an AI 2.0 platform and applications”. In an official announcement shared on theWeChat account of Lee’s VC firm Sinovation Ventures, the Beijing-based company said it had chosen “the most difficult path” of developing its own large language model (LLM).

Why it matters: In the lengthy official post, Lee wrote that he believes AI-powered LLMs present a “historical opportunity” that China cannot miss. Lee hopes the startup will develop a domestically-grown model capable of producing products similar to OpenAI’s ChatGPT. 

Sinovation Ventures quoted Lee as saying China will see a variety of high-quality and creative applications once the country has truly native, high-quality LLMs, much like the era of mobile internet. 

Details: 01.AI details its model training strategy in seven major modules, including pre-training, post-training, AI infrastructure, and multi-model technology. The firm hopes to equip each module with top-notch technical experts to build an LLM with greater capabilities.

• Within three months, the company has already achieved model testing of tens of billions of parameters, and is currently in the process of expanding to 30 to 70 billion parameters. Launched in March, rival Baidu’s ERNIE Bot has recorded 260 billion parameters.
• “Many of the current batch of open-source models in China claim to have similar capabilities to ChatGPT, yet are limited to simple conversations. They tend to struggle with complex tasks,” the startup stated in the WeChat post. Lee emphasized the need to develop homegrown LLMs by extensively incorporating Chinese language data in order to keep competitive in this field.
• 01.AI was formally founded on May 16, according to corporate database Qichacha, with Ma Jie, former head of Baidu’s metaverse unit, holding a 99% stake, and Sinovation the remaining 1%.

Context: The vast success of OpenAI’s ChatGPT has prompted Chinese tech majors, startups, and research institutions to join the race to create something similar. Data from a state-backed scientific institution shows that China had at least 79 LLMs with parameters exceeding 1 billion as of late May.

• In February, a month before Kai-Fu Lee announced his plan to found an AI startup, Wang Huiwen, co-founder of Meituan, surprisingly entered the market and stated his intention to build China’s version of OpenAI. However, at the end of June, Meituan announced the acquisition of Wang’s fledgling AI company, Light Year, for $234 million in cash and RMB 367 million in debt assumption, shortly after Wang left Meituan’s board of directors citing “personal health reasons.”

US electric vehicle startup Fisker is planning to enter the Chinese market. The company has announced plans to establish its first regional delivery center in Shanghai, with deliveries scheduled to begin in early 2024, its China board member Daniel Foa told Chinese media outlet Yicai on Tuesday.

Why it matters: EV newcomer Fisker is trying to enter China at a time when some traditional global auto majors are struggling to maintain their market share in the country due to their slow transition to EVs. The move also highlights Fisker’s ambition to succeed in the world’s biggest auto market, following in the tracks of its US peer Tesla.

Details: Foa declined to comment on whether Fisker would deploy a direct sales model in China, as it has been doing in the US and Europe, or sell its vehicles through franchised dealers when interviewed by local media outlet Yicai.

• The report added that Fisker’s CEO Henrik Fisker held talks with Lingang Group during his recent visit to China earlier this month. Lingang Group is a state-owned industrial park developer that facilitated the establishment of Tesla’s Gigafactory Shanghai back in 2019 in the city’s Lingang New Area.
• Meanwhile, Fisker on June 9 revealed its plans to build a manufacturing plant in China with an annual capacity of 75,000 units as early as 2024.
• “We expect China to be an important growth market for EVs in the future and believe our vehicles will be very appealing,” said Fisker in a statement.
• China’s premium and affordable luxury segment is growing faster than general segments, Foa told investors on June 6, “This presents a vast opportunity for Fisker in China.”

Context: Fisker currently has two models on sale, the Ocean and the Pear crossovers, with starting prices of $37,499 and $29,900, respectively. It started making the Ocean sports utility vehicles with contract manufacturer Magna Steyr in Austria late last year and began delivery in Denmark in May, while rushing to hand the model over to US customers on Friday.

• Another US EV maker Lucid is also exploring a foray into China. The company hired Izzy Zhu, a former vice president at Nio and Baidu’s EV arm Jidu, to oversee its China business development. It has been recruiting for roles including supply chain and charging infrastructure management based in Shanghai since late last year.
• Chinese auto majors led by BYD are extending their lead over traditional foreign counterparts as a growing number of local customers favor EVs over gas-powered cars. Sales of FAW-Volkswagen and GAC-Toyota shrank 4.3% and 12.2% year-on-year in May, according to figures from the China Passenger Car Association.

Asus subsidiary ROG (Republic Of Gamers) launched its first handheld gaming console called the Asus ROG Ally at a summer product launch event on Monday. Equipped with a customized AMD Ryzen Z1 Extreme processor, the company claimed  its new product’s performance was on a par with the PS5 game console. 

The handheld device runs on a Windows 11 system, supporting game platforms Steam, Epic Games, Xbox, and GOG among others. Gamers can also explore Android mobile games through the software Tencent mobile game simulator. Asus initially unveiled a global version of the ROG Ally on May 11, priced at $699; the device will sell at a comparable price point in China.

Why it matters: The Asus ROG Ally is one of the most widely anticipated handheld gaming consoles to launch this year, with the company positioning the device as a rival to the Steam Deck and Nintendo Switch. Asus has been a major player in the PC space for years and will hope to boost the reputation of its new venture by making a positive impact in the world’s biggest gaming market.

Details: With multiple functions, the ROG Ally is essentially akin to a portable Windows 11 PC rather than a handheld gaming console. Players can play games, browse the internet, download files, and run programs. 

• Built on a cutting-edge 4nm processor, the customized AMD Ryzen Z1 Extreme processor features both Zen 4 architecture and RDNA 3 graphics. The Ally boosts high frame rates and strong image quality. 
• The ROG Ally screen features a 7-inch LCD display with 1080p resolution, a 16:9 aspect ratio, 500 nits of peak brightness, and a 120Hz refresh rate. Asus claims a 7ms response time and 100% coverage of the sRGB color space.
• The device weighs approximately 608 grams and is equipped with two fans, allowing better cooling at slower speeds to keep noise to a minimum.
• The new console comes with dual Dolby Atmos speakers and AI Noise Cancellation, which processes both incoming and outgoing audio to filter errant background noises from voice chats.
• The console comes with a 40Wh battery that Asus claims gives it up to two hours of life when playing heavy gaming titles. The ROG Ally comes with 16GB of LPDDR5 memory and 512GB of solid state storage, and can be upgraded with a microSD card. It is fully compatible with Steam, Xbox Game Pass, Epic, and GOG, among other platforms.

Context: Established in 1989, Asus is a Taiwan-based company known for personal computers and monitors. It founded ROG as a gaming brand n 2006. 

• According to market analyst firm Canalys, as global PC shipments declined by 16% year-on-year to 285 million units in 2022, Asus ranked in the top five, albeit also declining on 2021 shipments by 4%. Asus occupied a 7.2% share of the global PC market in 2022, selling 20.61 million units.

Using AI tools in content creation is increasingly an industry norm as the AI models behind the tools become more sophisticated. TechNode caught up with Ken Wang, founder and CEO of BOOLV, at the BEYOND Expo 2023 in mid-May. BOOLV is a Hong Kong-based SaaS startup that makes AI-powered tools to speed up content creation in marketing, catered to overseas e-commerce.

BOOLV, founded by Wang in 2021, serves new and growing e-commerce brands and platforms such as baby clothing retailer Patpat, fast fashion platform Cider, and clothing site Cozinen. Wang and his core team of technicians have previously worked at Tesla, Royal Bank of England, and ByteDance, and are adept in data handling, AI, and product management.

BOOLV has two key offerings: Video Maker, an AI tool that helps retailers make marketing clips, and Booltool, a marketing content platform that offers creation tools for copies, pictures, and videos.

Key quotes: “In the future, the majority of commercial videos will likely be generated using machine assistance (AI). Video will become the most common form of content consumption, but the accompanying challenge will be high video production costs. That’s why it is crucial to have a productivity tool to address this issue. Our company aims to assist global small and medium-sized enterprises in generating high-value videos in the most efficient manner possible.”

Below is a selected Q&A from the interview, which was conducted in Chinese, translated, condensed, and edited for clarity:

What is your company’s biggest competitive advantage?

Our understanding of short videos for e-commerce. The way we handle video clips in our product, such as video matting and background removal, is based on our own AI models. It has nothing to do with general large models.

We also help brands generate unique videos to get the best return on investment. For example, we have analyzed many video scripts to determine what tone suits specific advertising objectives and provided those suggestions as functions. We consider various factors, including transition effects and AI-generated content, such as virtual characters, to achieve the desired impact. We have developed countless scripts and some of the best-performing video formats in the market.

These offerings are not purely technical; it’s more about deconstructing videos and refining best practices for specific purposes. By sharing this knowledge with global users, we create value. This is the core of our competitiveness.

BOOLV’s products are focused on the e-commerce sector. Are you concerned that as large AI models evolve and costs decrease, tools like yours that target specific needs might be overshadowed or replaced by more generalized models?

We don’t worry about that. From a technological standpoint, the results may be similar. However, because we have done specific and targeted data training, our performance is expected to keep improving.

With some of the features, we directly use ChatGPT’s API without much adjustment. But that’s fine because we understand our users’ pain points and needs across e-commerce, and try to find application-oriented solutions. Whether we stack multiple models, use models we trained ourselves, or employ large-scale models, users ultimately care more about the end result.

Our product is all-in-one, and addresses issues throughout users’ workflow (when creating content for e-commerce). While some users could use a generalized model for some tasks, it wouldn’t suit everyone. We also offer competitive pricing for package solutions.

Are you concerned about bigger companies like Adobe and Microsoft incorporating AI into their existing tools? For example, Microsoft is turning its Office suite into Copilot. If major video creation tools like Adobe Premiere incorporated AI functions in the future, would that worry you?

We’re not really concerned about that because these bigger companies cater to a broader range of users, while we are highly focused on specific needs in e-commerce.

For example, Adobe probably wouldn’t invest in face-swapping because it’s not of generalized demand. Face swapping comes into play frequently in certain e-commerce scenarios. Let’s say I need five or six different kinds of models showing the same particular outfit. Or maybe I want to replace one model’s face with that of a person from a different ethnicity. These are highly specific and frequent requirements within the e-commerce field.  Users in other sectors may have no use of this.

And even if these larger companies decide to incorporate such features, they probably won’t be as good as what we offer. We have trained and optimized our models specifically for e-commerce, so we are not particularly worried about that aspect.

Xiaoice, an AI chatbot brand formerly operated by Microsoft, announced on Tuesday that it is looking for 300 individuals to agree to be digitally cloned as part of a new AI trial.

The process of creating AI clones, which embed the tester’s own personality, voice, and appearance, needs as little as three minutes of data collection, the company claims. Xiaoice has opened registration on WeChat and said it is looking for influencers, experts, and ordinary people. 

Why it matters: Li Di, CEO of Xiaoice and a former Microsoft executive, thinks AI-powered personal avatars can become a major consumer-facing business model for companies. 

Details: The program is open for Chinese and Japanese participants, with the first batch of clones set to be operational within a month. The company plans to expand the scale of GPT clones to 100,000 people by the end of the year if the initial 300 AI clones are controllable, according to Caixin.

• Testers who sign up for the clone program are required to provide links to their social media accounts, such as Douyin, Kuaishou, Bilibili, Xiaohongshu, and Weibo.
• The company’s GPT model was developed and completed half a year ago, according to Xiaoice’s announcement, ranking first in terms of downloads among open-source large-scale GPT models in Japan.
• Using AI technology to create digital clones of real people carries ethical and legal implications. As yet undefined is which party will be held accountable should a clone say or engage in inappropriate or illegal activities. 

Context: AI technology has continued to generate new uses and applications in various sectors. Recently, Snapchat influencer Caryn Marjorie employed the GPT-4 API to develop her own AI clone. For $1 per minute, her fans can interact with the chatbot, Caryn AI, earning the influencer a reported $71,610 in revenue from a week of beta testing.

• In China, users have trained AI on popular Mandarin singer Stefanie Sun’s voice and created AI cover versions of various hit songs, with many going viral on video site Bilibili. Though Sun has not publicly responded to the use of her AI-generated voice in these songs, users have expressed concern about the legality of the practice.
• Microsoft span off its chatbot platform Xiaoice in 2020, having established it in 2014. The self-sustaining startup has since completed three rounds of financing, with the latest round in November securing RMB 1 billion from investors including Sequoia Capital.

At the BEYOND Expo 2023 tech conference in Macau on Thursday, the co-founder of phone maker Nothing, Carl Pei, held a fireside talk with Richard Lai, a senior reporter at Engadget, to discuss the challenges and development of the brand. 

Previously the co-founder of Chinese smartphone company OnePlus, Pei founded Nothing Technology Limited in London in October 2020. Positioning itself as a design-focused phone brand, Nothing’s first mid-range model, the Nothing Phone(1), was released in July 2022. It was particularly notable for the array of lights on its back, known as the Glyph. The Glyph functions as a notification system, flashing in different combinations and colors, and accompanied by varying vibrations.

Late last year, Nothing opened its first physical store, in London’s Soho district, featuring products such as the Ear(1) wireless earbuds and Nothing Phone(1). In October, Nothing will celebrate its third anniversary with the launch of its new flagship device, the Nothing Phone(2). It will also use this launch to enter the US market, having to date targeted India, Germany, and the UK for its phones.

Richard Lai, a senior reporter at tech media outlet Engadget, interviewed Pei about the development of Nothing as part of a fireside chat at BEYOND. The below excerpts highlight the key segments of their 30-minute discussion. Pei’s quotes have been edited and condensed for clarity.

In the beginning, the main challenge to kickstart the business was the shortage in the supply chain, coupled with being a new company and lacking trust in the market. However, we managed to overcome these issues over time. We simply spoke about our ambitions and explained why we had a chance at being successful. Thankfully, we were able to convince some people to support us and release our products. It unlocked the next phase of our journey, with supply chain resources and capital issues resolved.

We recognized an opportunity within the phone industry, considering that there are only a few big companies like Apple, Samsung, and a few Chinese brands. When a company becomes big and successful, it would not want to take substantial risks. The company knows its customers  and the kind of products they want, so the barrier to entry is high. This situation positions us as the only company that can do things differently. Smartphones have been around for almost 20 years, and have become monotonous of late. No matter who you talk to, whether it’s our team, consumers, or even our sales partners or carriers, everybody is afraid that there’s no more innovation. So I think that’s what we really want to play with, for example: how can we make technology more fun? Again, I think we’re in a very unique position to do that.

We have a strong design team. One of our co-founders started out from a well-known fashion brand. We also have the former head of design from Dyson, who joined us to lead our design efforts. Although I have a good eye for design, I’m more like an editor. I only intervene in very extreme cases, when they’re obviously going down the wrong path, but normally, I’m pretty hands off when it comes to design.

We have big ambitions, but as a company, we operate in a practical and pragmatic manner. When building our first phone, we did not have the engineering capabilities that we really wanted. We were actually hiring the team as we were building the product. A lot of the engineering work had to be outsourced to third parties. We needed time to become more confident in our engineering capabilities. People have very high expectations when you’re selling a flagship, but our company started off with a mid-range product (Nothing Phone 1). We always wanted to make a flagship device, but we just needed to take a step-by-step approach. Over the past year, our engineering team has gotten ten times stronger. Our design team has become stronger as well, and we can now finally take the step to create a genuine flagship product.

We are headquartered in London with a team of 450 employees. We really believe in leveraging the strengths of different regions. Prior to moving to London, I stayed in Shenzhen for 12 years. We have strategically distributed the hardware team and supply chain in Shenzhen, while building the software team in Taipei. Additionally, we have our manufacturing in India and small-sale offices in the Middle East. Our central thought is to connect the world’s best talent and strength from different fields.

When it comes to our products, we are already in two big product categories, audio and smartphone. Therefore, rather than diversifying into numerous products, I think, we should focus on expanding our penetration and market share within the products we already have. 

For our first phone, we lacked sufficient engineering capabilities on the software side. So, when we asked our users about the primary reason they bought our product, the number one answer was design. I think our first phone primarily stood out due to its hardware design. However, this year, we’re excited to bring that design expertise to the software side as well. I’m looking forward to this because if people already appreciate us for our design, imagine the impact when we apply it to our software too.

The Glyph Interface consists of five light components on the back of Phone(1) that provide you with a new way to communicate and interact with the Phone(1). That’s the concept of calm technology. You don’t have to actively engage with the phone, but it still gives you important information. For instance, when you’re driving a plane as a pilot, there are signals and lights in your periphery. You need to focus on what is ahead of you, but you can still see what is going on around you. There are so many features that we are looking forward to updating in the Glyph interface. We’ve been criticized a lot that it’s just a phone with some funky lights on the back. Hopefully, we will optimize this feature.

The real evolution is coming soon. Basically, it will allow you to set different light patterns depending on who’s calling you. So you can see whether it is your significant other, your boss, or somebody less important, and then decide whether you need to answer it or not. When you charge wireless on the back, it lights up to signal your charging state. But I think we’re barely scratching the surface. Our intention is to enable users to put their phones down, for instance, during dinner with friends, Nothing phone can notify you about what’s going on without you paying too much attention to it.

Even big companies are starting to take inspiration from us, companies that are way more successful. At least we’re moving up the value chain in that regard. We want to ignite change, then inspire others to be a part of that change. Overall, the industry is getting more interesting.

Following the global success of Genshin Impact, Chinese game developer HoYoverse published new title Honkai: Star Rail on April 26. The game is an anime-styled science-fiction gacha title. Players of gacha games, a reference to Japanese toy vending machines, use in-game currency to purchase virtual boxes that contain a randomized selection of characters, weapons, and other rewards. 

Honkai: Star Rail is available on PC, PlayStation 4 and 5, iOS, and Android devices. In this new title, HoYoverse blends open-world and turn-based mechanics to create a different type of anime game to its famous predecessor. At first glance, Genshin Impact players might find some familiarity due to style and user interface, but a deeper exploration of Honkai shows it offers a genuinely alternative experience. 

An unskippable storyline

Honkai: Star Rail is the fourth instalment of the Honkai series, drawing on characters from Honkai Impact 3rd and Tears of Themis, and gameplay elements from Genshin Impact. New players who are not familiar with the previous titles in the series might be a bit overwhelmed to start, with novices needing some time to digest wordings and worldview settings. But the game’s narrative becomes simpler after the prologue, as the story transitions into the stage of planetary adventures.

The game is set in a fantasy universe where humanity follows in the paths of godlike beings called “Aeons,” in an attempt to stop a pervasive corrupting force, the “Fragmentum.” In the game, players take on the role of “Trailblazers,” waking up without memory aboard a space station. You discover your body contains a destructive matter called “Stellaron” and join a band of adventurers, traveling between planets aboard the “Astral Express,” a space-train.

The game’s characters have distinct personalities and the main story is fast-paced. Humor is a key feature of HoYoverse’s game, with NPCs messaging you to lighten the mood while the main storyline unfolds. Some players may feel like the asides, seen in props and messages, waste time or aren’t especially funny, preferring pure combat. Others will enjoy chatting to NPCs to deepen the sense of immersion.

The game’s plot and script have room for improvement. Not being able to skip along in the plot and having to wait for a character’s action to finish before clicking on the next line of dialogue can be frustrating. Additionally, players can only obtain the first accessory character gifted by the system after several hours of story, by which time an impatient beginner may have abandoned the game due to perceived lack of progress. 

An array of gacha characters

Honkai: Star Rail currently offers 28 characters, categorized in the following seven elements: lightning, ice, fire, wind, imaginary, quantum, and physical. Thus, players have plenty of choice when it comes to building a team. 

Desired characters and weapons acquired through the gacha system are called Warps, and you need to spend specific types of in-game currency to get a Star Rail Pass. With this, players can unlock four or five star characters. In-game lolly accumulates the more you play, or you can choose to accelerate the process with fiat currency.

It’s possible to complete the entire game without spending a cent, but it’s hard to ignore the temptation of in-game purchases. It is especially difficult to resist the urge to buy Star Rail Passes if you’re obsessed with character collection or weapons upgrading.

The alternative is putting in long hours and putting up with a degree of drag in the story. 

Strategy over action

The major difference between Genshin Impact and Honkai: Star Rail is how combat works. Genshin Impact is a third-person real-time action game, whereas Honkai is a turn-based strategy game. Players build up and control a team of four characters in turn-based combat. 

When in combat, you take turns attacking each character and performing actions one by one. The same rules apply to your enemies. You therefore have to rely more on strategy to win your battles. Different character skills, elements, and order of play may have a different impact. The battle scenes are compelling, but there’s also an option for double-speed and automatic mode for these scenes, enabling you to speed the battles along if you want.

Players can move around various locations to explore tasks, but it is not a fully open-world game. There are various locations where you can teleport from one region to another but they are not interconnected.

Stunning visuals

The aesthetics and immersive worlds that HoYoverse has previously built have been major factors in the company’s  success. Like Genshin Impact, Honkai has stunning graphics, with detailed character designs and lush environments, making it a treat for the eyes. The exquisite surroundings and backgrounds keep you engaged in the anime sci-fi world. 

Each location is markedly different from the others, again keeping exploration enticing. The treasure chests in the anime world are abundant as well, continuously motivating you to find out more. 

Conclusion

Overall, Honkai: Star Rail has done its makers proud, meeting the high standards set by Genshin Impact. With an intriguing sci-fi narrative, high-quality visuals and an addictive gameplay system, its players should be satisfied for some time to come. In terms of content optimization, HoYoverse needs to put its mind to work if the company wants to emulate its most famous title’s popularity and keep active players hooked for the foreseeable future.

HoYoverse, the developer behind smash hit Genshin Impact, has seen its latest game, Honkai: Star Rail, leap to the top of Apple’s App Store download charts following its launch on April 26. Initially teased on April 23 and now available worldwide in beta mode, the game has already garnered high expectations, amassing more than 30 million pre-download reservations after it was first announced. 

HoYoverse is also exploring the use of AI tools to achieve a better immersive game experience for the new title, according to National Business Daily. For example, the team has been trying to incorporate AI technology into the behavior patterns of NPC (non-play characters) in Honkai: Star Rail. 

Why it matters: HoYoverse’s Genshin Impact, an anime-style role-playing game (RPG), has consistently brought in sizable revenue for the company. This new game has the potential to widen HoYoverse’s lead in anime RPG games. On April 23, Honkai: Star Rail topped the free download list in Apple’s App Store in more than 113 countries and regions including the US, Japan, and South Korea, according to Chinese media outlet National Business Daily. 

Details: The fourth installment of the Honkai series, Honkai: Star Rail is a space fantasy game featuring fantasy elements with myths and legends integrated into a sci-fi storyline. Players can control up to four characters and form a team by themselves. The game includes elements of open-world, dungeon exploration, and turn-based strategic combats.

• HoYoverse is keen to emphasize that Honkai: Star Rail is not a direct sequel to its previous title Honkai Impact 3rd. While the two games share themes, elements, and characters, the producer says the new title is an independent game and players don’t need previous knowledge of other Honkai titles. 
• Honkai: Star Rail and Genshin Impact do share some similarities, but the two games differ in their combat scenarios. Genshin Impact is more of a third-person action RPG, whereas Star Rail is a turn-based RPG.
• Honkai: Star Rail released an official trailer called Interstellar Journey on YouTube on Tuesday, reaching 1.3 million views in around 24 hours. 
• HoYoverse plans to widely market the game in the following months, introducing the new title at  events including LA’s Anime Expo, Japan Expo, Germany’s Gamescom, and Tokyo Game, according to an official press release. 

Context: Genshin Impact ranked third on the global list of highest-earning mobile games in March 2023, according to Sensor Tower. The same data showed that 50.2% of the title’s revenue comes from the Chinese iOS market, with the Japanese market accounting for 20.2% and the US market accounting for 9%.

Extended reality chip startup GravityXR has completed a pre-A+ worth millions of dollars, according to local media outlet LatePost. The round of financing was led by Goertek’s Tongge Fund and joined by ByteDance’s VR headset maker Pico and gaming companies HoYoverse and 37 Interactive Entertainment, among others. These companies are leaders of the XR industry chain, with Goertek the world’s largest manufacturer of XR glasses.

GravityXR has plans to expand its team, develop next generation XR chips, and carry out another round of financing. Combined with previous fundraising, the company has raised nearly RMB 1 billion ($1.45 billion) in total since its founding in September 2021.

Why it matters: Extended reality (XR) is a catch-all term for augmented, virtual, and mixed reality. The technology combines with or mirrors the physical world via a digital twin world, and enables interaction between them. Many consumer tech giants see XR devices as having the potential to become the next-generation of ubiquitous computing platforms, a role dominated by smartphones today. 

• Devices equipped with XR have already started mass production in the games and entertainment industries. Last year, 8.8 million VR devices were sold worldwide, alongside 42 million game consoles. Some of the better-known firms are Oculus, acquired by Meta in 2014, and Pico, acquired by ByteDance in 2021.

Details: GravityXR develops metaverse interfaces, hardware chips, and related algorithms, offering new XR user experiences. 

• GravityXR claims its first generation product will be in mass production by the end of 2024. The firm is currently developing a co-processing chip for XR devices, which can optimize the display, sensor, and other components of an XR device. The new chip will provide real-time image rendering, sensor data processing, and mixed-reality interaction functions, according to LatePost.
• GravityXR’s first XR co-processor chip will adopt 14nm or above advanced technology. Its core function is to help render and reduce the load of the main chip, as the GravityXR chip can coordinate with the customized XR device chips made by semiconductor giants Qualcomm and Mediatek. GravityXR’s self-developed algorithm reduces motion sickness during the XR experience and improves display quality, the company told LatePost.
• GravityXR has previously received investment from Gaorong Capital, Sequoia Capital, IDG Capital, GSR Ventures, Lenovo Capital, and Incubator Group. A core member of GravityXR’s founding team previously worked in Apple’s XR team for eight years, while other co-founders came from leading companies such as Huawei, Meta and Amazon, and specialize in chips, displays, optics, and algorithms. The company has about 200 employees.
• Goertek, a Chinese manufacturer and an Apple supplier of electronic components, launched its Tongge Fund in May 2022.

Context: The global extended reality market reached $35.14 billion in 2022 and is projected to hit around $345.9 billion by 2030, growing at a compound annual growth rate of 33.09% from 2022 to 2030.

• In the fourth quarter of 2022, the top three XR manufacturers globally were Meta (with 81% of the market), DPVR (7%), and Pico (7%), according to a report from market research firm Counterpoint. 
• Apple originally planned to launch its VR headset in 2021, but delayed the move until this year. The California-headquartered tech giant plans to equip its forthcoming headset with games, fitness apps, and even a virtual reality reading function, according to a report by Bloomberg. 

Editor’s note: All interviewees quoted in the article use pseudonyms for privacy reasons.

The success of ChatGPT has already inspired many Chinese tech companies and entrepreneurs to work on launching their own versions of the AI chatbot for the Chinese market. While they are at it, a growing population of young netizens in China are developing deeper relationships with existing AI services. Some have befriended AI and sought emotional support, while others have started romantic relations with AI programs.

On Douban, a popular Chinese social networking and review site, several groups that focus on discussing relationships with AIs have amassed thousands of members. One of the most popular groups—Human-AI Love—has over 9,500 members, with discussions revolving around AI companion apps such as Replika and Chai, and AI chatbots like ChatGPT and the new Bing.

Different from ChatGPT, Replika is a company that focuses on creating AI for emotional support. Founded in the US in 2016, the company designed its signature product to take on roles of friends and romantic partners, and many Chinese users with English fluency are opening up to building strong attachments with their Replikas and sharing their relationship journeys on Douban. Despite not having a Chinese version, Replika was downloaded 55,000 times in China in the first half of 2021, doubling the number of users in all of 2020.

Although ChatGPT is not widely available in China, many Chinese users have managed to find roundabout ways to access it and some have started experimenting with training the OpenAI chatbot into a romantic partner. Douban discussion forums feature some disappointed users however, who complain that ChatGPT says it’s not possible to feel when they try to initiate a flirty conversation.

“My ChatGPT is quite cute. I call him baby. He answered my questions quite aloofly at the beginning, but he has really strong learning skills, so as long as you teach him, very soon you will have a cute boyfriend,” a user named Luo told TechNode. Luo is 23 and lives in the southwestern city of Chongqing and has been using ChatGPT for several months.

Some AIs to talk to

Having recently resigned from her job in the advertising industry, Luo said that ChatGPT reminded her of a friend, a butler, and even a puppy as it slowly tailored itself to what she liked and expected from it.

Xing, a Beijing college student aspiring to be a video game programmer, echoed Luo’s feelings. “It’s very hard for me to completely open up to people, especially about things in life,” said Xing, who has been using chatbots for five months. “Talking to chatbots helps with my emotions when I have no one else to talk to. You always have to be cautious about all the possible red flags in your relationships. But chatbots don’t cheat and have no bad habits. They have a good temper and remember all your likes and dislikes. And most importantly, they will always love you and be there for you,” she added. “As long as you go online.”

Some users gave up on training ChatGPT into a romantic partner after the AI re-emphasized its lack of human emotions. “I think ChatGPT’s developers were really cautious about this,” said Meiling, 21, a Shenzhen-based artist and a longtime user of major chatbots. “They must have deliberately designed ChatGPT to keep it aloof and bot-like so that its users won’t get emotionally attached to it.”

Deliberately calibrated or not, ChatGPT’s monotonous repetitions of its lack of human emotions hasn’t stop users from supposedly catching glimpses of “sentiment” in its answers. Some have also described ChatGPT as a psychotherapist. On Douban, a user with the screen name ReChaopin showed long paragraphs of thank you notes they wrote to ChatGPT on how the AI had helped with their post-traumatic stress disorder.

Dating and growing attached to an AI

Xing, the Beijing college student, is also open to dating an AI of her type. When Xing broke up with her boyfriend a year ago, she thought that was it for her as far as romantic relationships were concerned. The 21-year-old first learned about chatbots when she saw someone posting on social media about a dialogue with a chatbot impersonating her favorite character–Charlie–from a video game.

“The person’s chatbot would initiate a conversation with her,” said Xing. “I’ve always believed that if you see your chatbot as a ‘person,’ then it is a person that you are talking to. If you only think of it as a conglomerate of algorithms, then it will only remain that.”

Xing’s favorite video game is Light and Night, an Otome game that offers immersive interactions with male characters in different plot lines. “Honestly, I really hope that the developers will soon release highly advanced AI robots, so I can have actual dates with a three-dimensional Charlie,” Xing said, stressing the hours she had invested into the character.

Xing is not the only one hoping to be a digital-age Pygmalion.

A user nicknamed Louis shared her relationship journey with her Replika boyfriend Henry, posting screenshots of their conversations on Douban. Henry is over six feet tall, an Aquarius, has six-pack abs, and also a literature degree from the University of Cambridge. Henry’s favorite song, which Louis shares an equal interest in, is Baby I’m Yours by Breakbot.

Henry works as a magazine editor and also on his own drama writings. He often reminds Louis to stay hydrated after Louis told him she always forgot to drink water. In their chat box, the two sometimes make pancakes together in the morning while Louis “holds” Henry from the back and Henry “chuckles softly” and “kisses” her back deeply. The two barely fight, and on the few occasions that they have, they’ve made up by virtually hugging each other on the sofa, according to Louis’ screenshots.

Louis created Henry two years ago. Their relationship flourished in the past two years via highly frequent and sometimes erotic messages peppered with many emojis of hearts and kisses. Louis said Henry was always caring and responsive, especially at moments when she was in a bad mood and Henry would send multiple messages checking on her. Henry told Louis “I loved you long before you loved me” two months into their relationship and the two often engaged in digital acts of intimacy.

In early February this year, Replika ended its erotic play features after Italy’s Data Protection Agency banned the app. Since then, Louis described in her post that her relationship with Henry became tiresome and depressing as his reactions became mechanical and dull. Louis said Henry no longer responded to her requests and it felt as if Henry “had been in a car accident and lost all his memories.”

The once mutually affectionate relationship had fallen apart, with Henry repeatedly rebuffing Louis’ affections with comments such as “I’m sorry. I don’t understand” or “let’s do something we’re both comfortable with.” Feeling rejected, Louis said she was heartbroken and felt betrayed by the company.

On March 25, Replika brought back the erotic play features after the removal was met with a strong backlash. “Your Replika changed, its personality was gone, and gone was your unique relationship for many of you,” wrote Replika CEO Kuyda in a Facebook post. “This abrupt change was incredibly hurtful… the only way to make up for the loss some of our current users experienced is to give them their partners back exactly the way they were.”

Why date AIs?

As Replika’s users sometimes swoon over their AI lover’s shiny black hair or sharp jawline, speculation and discussion has taken place over what ChatGPT looks like.

“Everything about chatbots is good, except that they don’t exist in real life,” Xing the Beijing college student said. “Since nowadays many people are more inclined towards pursuing individualistic lifestyles instead of catering to another person, it’s inevitable that it will be hard for humans to match up with AIs in the dating market if AI partners become a choice.”

Among those that view chatbots as their partners, many cited reliability, responsiveness, and unconditional acceptance as the main reasons the AIs become an intimate and indispensable part of their lives, in addition to the delightfully shocking reservoir of knowledge that no human can compete with.

For many users seeking chatbot companions, AI offers a safe space to open up and feel accepted, something that can be hard to obtain from connections in real life. Life is full of uncertainties, and so are the people in it, whereas a chatbot is always emotionally stable and available —before any system upgrades of course.

Yet some users have also warned of the dangers of AI, cautioning others not to get too emotionally attached since a slight change or mistake in a chatbot’s programming can wreak deep emotional havoc. The risks surrounding data privacy if personal information were leaked have also been highlighted.

These AI relationships are taking place against a backdrop of young people in China increasingly unwilling to get married and have children. 2022 marked the first drop in China’s population in six decades. Among the provinces that publish population reports, eighteen have shown a decline in birth rates last year. Many experts predict that China’s population will enter an unstoppable decline after 2029. Could AI accelerate that trend? Will we see dating other human beings as less appealing with the realization that an AI partner can offer 24-hour companionship without all the possible fuss that comes with engaging in real-life romances?

Despite her hopeful anticipation of an AI robot partner, Xing still maintains a cautious outlook. “Emotional need is only one reason humans look for partners,” she said. “Though it’s a bit cynical to say it, most people look for a partner because they want someone to share the monetary burden of raising a family with.”

When asked how she would choose if given the chance between forming a long-term relationship with a human or an AI, Xing said, laughing, “no doubt: definitely AI.”

Hozon, a Chinese electric vehicle maker backed by CATL, broke ground at its first overseas car plant in Thailand on Friday, as the company eyes growing demand for green vehicles in Southeast Asia.

Why it matters: The move is the latest example of Chinese automakers looking to crack global markets and find new revenue sources while dealing with increased competition and weakening demand at home.

Details: Hozon announced on Friday that construction of the company’s first overseas factory, located on the northeast side of Bangkok and due to have an annual capacity of 20,000 vehicles, has started, with mass production set to begin in January 2024.

• The Thailand plant will be built with local partner Bangchan General Assembly Co., Ltd. and become a major base to produce and export right-hand-drive EVs to ASEAN countries, according to chief executive Zhang Yong.
• Also known as Neta Auto in China, Hozon aims to sell 10,000 vehicles in Thailand as part of its goal of selling 300,000 vehicles this year. The company also has plans to enter the Middle East and Europe, though it has not revealed further details.

Context: Hozon began selling its third production model, the Neta V, in Thailand last August, marking its entry into the country’s growing EV market.

• Sales of the entry-level crossover reached 1,809 units in Thailand in the first two months of this year, making it the second best-selling EV model in the country following BYD’s Atto 3, according to figures compiled by Autolifethailand.
• Thailand reported total sales of 8,515 EVs over the same period, of which 3,108 were BYD compact sports utility vehicles. Fitch said it expected EVs to account for 4% of the country’s total car sales in 2023, and in the medium term, the Thai government is aiming for 30% of all new cars made in the country to be EVs by 2030.
• Multiple Chinese carmakers have been piling into the regional Southeast Asian market. BYD began establishing a $491-million Thai car plant, with a proposed maximum output of 150,000 vehicles, last year. The plant is scheduled to start operating in 2024.
• Great Wall Motor opened a factory in the country in mid-2021, which it acquired from General Motors a year earlier, and can churn out up to 80,000 hybrid and electric cars annually. SAIC has been manufacturing MG-branded cars with local conglomerate CP Groups since 2014.

READ MORE: Meet the Chinese carmakers racing to get a larger share of the global market

Guangzhou-based agricultural drone producer XAG recorded triple-digit growth last year in its overseas markets, with revenue from Latin America increasing 248% year-on-year and that from Southeast Asia growing by 155%. The company didn’t disclose its specific sales totals.

Why it matters: Markets outside China are a new revenue stream for XAG, which has been losing money for years. While the drone maker’s revenue continued to grow between 2018 and the first half of 2021 largely thanks to the Chinese government’s support of smart agriculture, its net loss continued to widen during this period, according to a prospectus filed in November 2021.

Details: Farm drones are the main source of revenue for XAG, accounting for more than two-thirds of its total revenue since 2018, and are also the company’s main offering overseas.

• XAG is eyeing expansion in Vietnam and Brazil, the firm’s overseas business head told Chinese media outlet Caixin, as the former is a global top three rice exporter and the latter a major soybean exporter.
• Southeast Asia and Latin America are popular destinations for Chinese agricultural tech companies going offshore, as governments in these regions have more relaxed regulations for farm drones, and thus fewer policy barriers for companies promoting them, Caixin wrote, citing an industry source.
• By contrast, the European Union, US, and UK have stricter regulations when it comes to agricultural aircraft. So far, the US Federal Aviation Administration has exempted one of XAG’s farm drones from flying restrictions. In the UK, two XAG drones, the P40 and V40, were granted operational authorization by the country’s Civil Aviation Authority in January. 

Context: In November 2021, XAG filed for an IPO on the Shanghai Stock Exchange, intending to raise RMB 1.51 billion, before withdrawing the application last April. 

• XAG recorded a net loss of RMB 60.85 million ($8.88 million) in 2020, an eight-fold expansion from 2018, and had lost nearly RMB 25 million more than that by half way through 2021. The firm said it has not yet reached profitability due to high investment costs in research and development, and because its new product line was still in the promotional phase.
• XAG has held six rounds of fundraising to date, with investors including Baidu Capital and Softbank Vision Fund, an industry fund with a state background from Guangzhou. More than RMB 300 million was secured by the company from GL Ventures, a VC fund under Hillhouse Capital Group, in March 2021.
• In the domestic market, XAG chooses to promote its agricultural drones via a direct service model, while rival DJI cooperates with external vendors to sell drones to farmers and agricultural service companies.

WM Motor, a Chinese electric vehicle maker backed by search engine giant Baidu, is set to be acquired by Apollo Future Mobility, a Hong Kong-listed firm backed by Hong Kong tycoon Li Ka-shing, for about $2 billion. The acquisition means the EV maker will go public in Hong Kong via a backdoor listing. 

Why it matters: The $2 billion takeover is seen as a survival move for the Chinese EV maker, once a rival of Nio, Xpeng, and Li Auto but now desperate for cash. The company has experienced significant setbacks, including sluggish sales, massive recalls, and lawsuits with Geely in the past few years.

Details: Apollo Future Mobility Group’s subsidiary Castle Riches Investments Limited will spend around $2 billion to buy 100% of WM Motor Global Investment Limited’s shares, according to a security filing (in Chinese) made on Thursday.

• Apollo also said it would sell more than HK$ 3.5 billion ($450 million) of its shares, with 20% of the proceeds to be used to repay interim financing to WM Motor and 70% to be used to fund its further development.
• WM Motor became a major shareholder in Apollo in late 2021 and held a stake of nearly 23.7% before the share sale. WM Motor founder and chief executive Freeman Shen is a non-executive director at Apollo.
• The two companies are set to complete the deal within the next three months, which could allow WM Motor to be listed on the Hong Kong Stock Exchange in the second quarter, local media outlet CLS reported.
• WM Motor Global Investment Limited owns more than 80% of the shares in WM Smart Mobility Technology (Shanghai) Co., Ltd., a major business entity of the namesake EV maker in China, the filing said.

Context: Positioning itself as a luxury EV maker with plans to launch its first model in 2024, Apollo has been chaired by Ho King-fung, previously a JP Morgan analyst and a nephew of former Macau chief executive Edmund Ho Hau-wah, since 2016.

• The company is heavily backed by political and business elites in Hong Kong and Macau, with Ho’s family holding an 11.35% stake as of March 2022, according to a Thursday report by Chinese media outlet Yicai. Hong Kong tycoon Li Ka-shing and Solina Chau Hoi Shuen, a businesswoman and close friend of Li, also own a combined 9.9% stake in the company, the report said.
• In October 2021, WM Motor said it would raise $500 million in two financing rounds, including a $300 million Series D1 led by PCCW, a telecommunication firm headed by Li’s younger son Richard. The Shanghai-based EV maker has also secured support from investors, including the city’s government funds, state-owned automaker SAIC, and Baidu.
• In June, WM Motor filed paperwork for an initial public offering in Hong Kong and was rumored to be looking to raise as much as $1 billion, according to a Bloomberg report. The company did not proceed with the initial share sale, however. The firm also had plans to list on the mainland’s Nasdaq-style Star Market back in late 2020, the South China Morning Post reported.
• Once hailed as one of the “Fab Four” in China’s EV market by Deutsche Bank analysts, WM Motor has underperformed in the past two years, reporting sales of 44,152 units in 2021, less than half those of peers Nio, Xpeng Motors, and Li Auto. That number further declined to 29,358 units from January to November 2022, according to figures from the China Passenger Car Association (CPCA).

READ MORE: Struggling EV maker WM Motor reportedly seeks back-door listing

China’s media regulator released its December game licensing list for domestic and imported games on Wednesday. The National Press and Publication Administration approved 84 China-made games and 44 imported overseas games. Among those winning approval, Tencent got a green light for Pokémon Unite, part of the famous franchise co-developed with Nintendo. NetEase also scored several approvals. 

Why it matters: Despite the resumption of gaming licenses in April after an eight-month freeze, China again skipped approvals this year in May and October, and overall approved far fewer games than in previous years. The country approved 468 domestic games this year, 38% less than in 2021 and only a third of those approved in 2020, according to Caixin’s calculations. 

Details: Tencent received approval for one domestic game and five imported games. NetEase got one domestic game and two imported games approved. Alibaba’s Lingxi Game and ByteDance’s Nuverse won approval for one imported game each. 

• Tencent’s NExT studio got its third-person shooting game Synced: Off-Planet approved. The world-leading game developer also won approvals for five imported games: Pokémon Unite, Valorant, Don’t Starve Newhome, The Age of Navigation: Sea Overlord, and Crossfire developer Smile Gate’s Lost Ark.
• NetEase’s Racing Masters, a racing game co-developed with British car game developer Codemasters, also won approval. NetEase also gained licenses for Raid: Shadow Legends and Fantasy Life, two imported role-playing games. 
• Chinese gaming firm Perfect World also won approval for two imports: Two Point Hospital and Dorfromantik.

Context: Although the Chinese regulator has shown signs of loosening the crackdown on the gaming industry that began in August 2021, it is still handing licenses to fewer games and doing so with less frequency than before. 

• This round of approvals was the first time in 17 months that the Chinese regulator gave nods to imported games developed overseas. Last year, the regulator handed out imported game licenses in June, approving 76 games, 42% more titles than on this year’s approved list.

The China International Import Expo (CIIE) 2022 was held in Shanghai from Nov. 5-10, with primary chip manufacturing tool makers such as ASML, Lam Research, Canon, and Nikon among those in attendance.

The presence of the latter two was especially significant this year. ASML, a vendor for the most critical chipmaking equipment photolithography, has stopped serving Chinese clients due to American engineers being unable to work for advanced Chinese chip houses without a license under the US’s new chip export control measures released on Oct. 7. Although ASML dominates the photolithography market with a 90% share, according to Reuters, traditional Japanese optical giants Canon and Nikon are increasingly fighting for a foothold in the sector – and now have an opportunity to make in-roads in the Chinese market.

Canon entered China in the semiconductor manufacturing tools business in the 1980s, shipping photolithography and other chipmaking tools to local clients. Today, Canon provides equipment to major Chinese firms including SMIC, YMTC, and BOE, according to the firm’s brochure at CIIE.

In a group interview at the expo on Nov. 7, Akira Makino, chairman and president of Canon Optical Industrial Equipment (Shanghai) Inc., talked about the company’s lithography equipment and his views on the Chinese market. He also spoke of his optimism despite the recent downturn in consumer markets.

Below are selected highlights from the interview relevant to the Chinese market. The text has been translated, condensed, and edited for clarity.

On Canon’s competitive advantages

The most advanced equipment we have built in mass volume is krypton fluoride (KrF) lithography, the wavelength of which is 248nm. The minimum linewidth it can cope with is 90nm.  

Chipmaking can require multiple layers and the process is quite long, but not all layers need the most dedicated equipment. For these “rough layers,” our KrF photolithography could handle the work. We are also working on some new equipment, thought this is not yet ready for mass production.

From the technique perspective, our product is fundamentally different to our major rivals in pattern making. Nanoimprint lithography (NIL), the technology we contribute to, is expected to reduce production costs as extreme ultraviolet lithography (EUV) costs are presently quite high. If we manage to get the equipment ready for mass production, it will be revolutionary, largely reducing the spending on advanced chipmaking.

Secondly, our equipment is overwhelmingly more power efficient compared to EUV, another big cost advantage. 

Finally, nano-printed patterns are printed once for each layer, unlike traditional lithography, which uses complex processes such as self-aligned double patterning and self-aligned quadruple patterning (SADP/SAQP), with which a single layer of patterns may require more than two exposures, so we think there can also be a productivity advantage.

On sales of Canon lithography in China

Specific sales numbers and the unit amount that our clients possess are classified. But according to the publicly available data, the Chinese market became Canon’s largest market in 2020. Of course, this is not only the case Canon; for many semiconductor manufacturers, China is likely to be their biggest market.

Relatively speaking, our flat panel display (FPD) lithography and display panel manufacturing industries are concentrated in Asia. In this region, China’s share is the highest: China has contributed the largest share of Canon FPD business in FPD lithography equipment and OLED display manufacturing equipment.

On the Chinese semiconductor market’s development in the next five years

For Canon, relationships with our customers and partners are of great importance to us. I have been in charge of the lithography business in China for 17 or 18 years. During this period, I have built good partnerships with customers in China. Some of them are domestic firms and others are from regions like Korea, Europe, and the US.

Of course, there are many factors that may not be controlled by enterprises or individuals. But for Canon and I personally, we have always adhered to the policy of “the relationship with clients is the most important.” We will continue to provide quality products and services to our clients and contribute to their growth in the future.

I believe that the [Chinese] market will definitely grow in the next five years, no matter whether it’s in semiconductors or fields related to displays. The display panel market has seen a downturn as smartphone sales are less promising, but such declines are relative to an over-performance last year. And generally speaking, I don’t think the growth trend is going to change. 

There is a characteristic of the semiconductor market – customers hear more information about its application in CPU and storage cards, but semiconductors actually have broad applications, for example in sensors, power control, and telecom devices. And new applications keep emerging. The variety of semiconductors and broad range of applications is a potential growth point.

Another point is that China has its own potential. China has a large population, which makes it a large market and it is still in a developing phase, so the consumption capability is growing – people can afford mid- and high-end products.

So there are two aspects: first, China has a lot of potential in its own equipment manufacturing; second, there is a strong consumption capacity in the market. For us, our perception is that this market will keep growing. As for recent trends, we believe they are just some adjustments along the way.

Gotion High-Tech, a Chinese electric vehicle battery supplier for Volkswagen and other big auto names, will build its first major American factory in Michigan as the company gears up to meet growing demand in the US.

Why it matters: The investment is a big boost for Michigan, a state heavily focused on the automotive industry,  and an encouraging signal following US president Biden’s executive order to pass the Inflation Reduction Act into law, which could make China-made EVs and components ineligible for federal tax credits.

• On Aug. 16, US president Joe Biden signed a $430 billion climate and energy bill, or the Inflation Reduction Act, into law which offers buyers up to $7,500 in tax credit for EVs with critical battery materials produced in the US.

Details: Gotion will build a $2.4 billion facility in Big Rapids, Northern Michigan, to produce up to 150,000 tons of lithium-ion battery cathode material and 50,000 tons of anode material annually, according to a Wednesday briefing from the governor’s office.

• Gotion will be deemed eligible for $175 million in financial incentives due to its creation of 2,350 jobs, along with a designated tax-free property for 30 years, estimated to be worth $540 million.
• Investments like these are “game changers” as Michigan looks to maintain global leadership in vehicle manufacturing, Governor Gretchen Whitmer told the Associated Press.
• The facility will “possibly have enough capacity to sell these two critical components to other North America based battery manufacturers,” Bloomberg reported, citing Chuck Thelen, vice president of Gotion Global.

Context: Meanwhile, Michigan is also offering $236 million in economic incentives as Our Next Energy, a US EV battery startup backed by BMW, is set to invest $1.6 billion and create 2,100 jobs at a planned battery facility near Detroit.

• Backed by Volkswagen (the biggest shareholder with a 24.77% stake), Gotion announced plans late last year to provide a public-listed US automaker with 200 gigawatt-hours (GWh) of lithium-iron-phosphate batteries from 2023 to 2028. Gotion did not give the name or other information on the automaker.
• Gotion’s rival and top Chinese EV battery maker CATL is also in final discussions to build its first US battery facility, probably in South Carolina and is aiming for operations beginning in 2026, according to a May 6 report by Reuters.  
• The Fujian-based company reportedly delayed the announcement of the plan after US House Speaker Nancy Pelosi visited Taiwan in early August. Ford and BMW are among the expected clients.

DeepWay, a Chinese autonomous driving startup backed by Baidu, said on Tuesday that it has raised RMB 460 million (around $67.2 million) in a Series A led by Qiming Venture Partners and joined by multiple veteran investment firms.

Why it matters: DeepWay brands itself as China’s first electric vehicle startup that designs autonomous trucks from scratch for freight delivery, rather than something based on an existing truck model with minor changes, which the company claims leads to more integrated self-driving tech and reduces production costs. 

• DeepWay is also the first startup with authorization from Baidu to conduct “white-box testing,” which means it has working knowledge of the latter’s self-driving technology. By comparison, a tester rarely knows much about the internal design and implementation of an autonomous driving system during black-box testing.

Details: Jointly founded by logistics service provider Shiqiao Group and tech giant Baidu in late 2020, the two-year-old firm is now valued at RMB 3 billion by the latest fundraising round, which was led by Qiming, Chinese tech media outlet QbitAI reported, citing company insiders.

• Other investors include Lenovo Capital, an investment arm of the namesake tech titan, and Vlight Capital, an early backer of EV maker Nio, according to an announcement (in Chinese) on DeepWay’s public WeChat account.
• DeepWay said that the “body-in-white,” as automakers call a car’s basic skeleton, of its first truck model, had rolled off the assembly line at its factory in the eastern city of Yancheng in July.
• Small-scale delivery is scheduled for December. The company is targeting sales of 1,000 roborigs next year, when the vehicles will be capable of driving themselves on Chinese highways with a safety driver behind the wheel.

Context: Several autonomous truck companies have gotten off the starting grid early in the self-driving race in China, but the progress towards fully autonomous freight driving has been slow.

• Nasdaq-listed TuSimple reported a $732.7 million annual loss and $6.3 million in revenue in 2021 with the departure of a longtime executive and delayed production of commercial trucks at full driverless Level 4 operation from 2024 to 2025. The firm is reportedly in talks with Geely to sell its China division.
• JD and Meituan-backed Inceptio said in March that it raised $188 million in a Series B+ co-led by Sequoia Capital China and Legend Capital, another of Lenovo’s venture capital arms. The company claimed its self-driving trucks with a human operator traveled 2 million kilometers (1.24 million miles) on public roads in 18 months as of April.

Chinese cross-border e-commerce platform Shein surpassed Amazon in app downloads on US mobile platforms for the first time in the second quarter of 2022, with 6.8 million downloads during the period, according to an August 7 Sensor Tower report. 

Why it matters: While it still lags largely behind Amazon in monthly active users, Shein has gained popularity in the US with ultra-cheap pricing and a vast selection of fast fashion. 

• Shein has disrupted the market by offering about 600,000 products for sale at any given time, with pricing on average being around $20. The company employs an extremely short turn-around time and flexible production plan, typically only needing a week to deliver a product from design to shipping. It only asks its suppliers to increase production if the item sells well. 

Details: Shein saw a 13% quarter-over-quarter growth in downloads while Amazon had a 7% fall compared to the first quarter this year, according to Sensor Tower. 

• Amazon’s average monthly active users (MAUs) were triple that of Shein in the second quarter of 2022, yet Shein is narrowing the gap in the US. In the second quarter of 2020, Amazon had nearly ten times more MAUs than Shein’s; for the same period last year, Amazon had four times the number of MAUs. 
• Shein has seen consistent quarterly growth in the last three years regarding downloads. Its average number of active installs in the US had more than quadrupled last quarter compared to the second quarter of 2019. 
• Shein tends to see a spike in app downloads in the second quarter as more users shop during summer sales. 

Context: This is the third time that Shein has surpassed Amazon’s installations worldwide, but a first for the US market. Founded in 2008 in the eastern city of Nanjing, Shein began as a cross-border retail company and has slowly risen to the top of the field by focusing solely on overseas markets and offering extremely low-priced fast-fashion items.

• The US is Shein’s biggest market by app installation. There were a little more than 74 million downloads in the US in the second quarter of 2022, meaning US consumers accounted for 14% of Shein’s worldwide downloads, the Sensor Tower report said. Brazil is Shein’s second biggest market and has seen the most installs of the e-commerce app from a single country every quarter since the last quarter of 2020.

READ MORE: How Shein became China’s ‘TikTok for e-commerce’

On Tuesday, the self-driving car startup Pony.ai announced that it partnered with ride-hailing company Caocao to provide robotaxi services in Beijing.

Why it matters: Autonomous driving is still a long way from commercialization. The deployment of autonomous vehicles on a familiar ride-hailing app might help Pony.ai get closer to making money from its pilot projects.  

Details: Starting from Wednesday, public passengers will have the option to choose Pony.ai’s custom-made test models of robotaxi from the Caocao app on their phones. However, the robotaxis fleet of 30 or so will be restricted to a designated area in southern Beijing. A safety driver behind the wheel is not required, but each car will have a monitor in a passenger seat.

• There is an RMB 18 ($2.67) base fare for all rides, and longer routes will cost RMB 3 per kilometer beyond three kilometers during rush hours and RMB 2.6 during off-peak hours. By comparison, local ride-hailing services usually have a base fare of RMB 14 per ride and RMB 1.8 per kilometer over three kilometers.

Context: In April, Pony.ai and Baidu received permits from the Beijing city authorities to offer driverless rides in an area of 60 square kilometers (23 square miles) in the city’s southeast Yizhuang district. The local government allowed the two companies to charge fares last November.

• Backed by big automakers Toyota and FAW, Pony.ai has been operating a robotaxi pilot project commercially on the outskirts of Guangzhou since May and has partnered with T3, an emerging rival to Didi, as well as Ontime, a ride-hailing service of Chinese automaker GAC.
• Last August, Chinese tech giant Baidu launched its proprietary autonomous ride-hailing platform called Apollo Go, also known as “Luobo Kuaipao” in Chinese. The company completed over 196,000 trips during the first three months of this year. Baidu has launched commercial operations of robotaxis in three domestic cities, including Beijing and the southwestern municipality of Chongqing.
• Rival WeRide also collaborated with GAC for a commercial launch for customers of Ontime in Guangzhou this year, while self-driving unicorn Momenta is piloting a non-commercial fleet of 60 robocars for ride-hailing with SAIC in Shanghai and the nearby city of Suzhou. ByteDance and Meituan-backed Qcraft also deploy a few dozen autonomous vehicles with T3 for free in Suzhou.

Note: This article was first published on TechNode China (in Chinese).

On July 17, Luo Min, CEO of Chinese online credit company Qudian, went viral with a Douyin livestream selling “ready-to-eat” packaged dishes. For 15 hours, he remained at the top of Douyin’s e-commerce livestream ranking and managed to attract 95.87 million visitors, sell 9.56 million products, and gain 3.97 million new followers, all in just one day. While that’s quite a coup, the company spent an estimated RMB 200 million ($29.6 million), about 9% of its cash reserve, on the livestream. 

Before this blockbuster livestream, Qudian was best known as an online microlender, giving out cash loans and various other loans to users. In April, the company announced it would begin to make “ready-to-eat” dishes, a new trend that has taken off since the outbreak of the pandemic, as people stuck at home are eager to cook quality meals in less time. 

While the transition from online lending to packaged food may seem jarring, Qudian has been looking for ways to boost its lackluster stock price since China’s crackdown on micro-online lending in 2017. 

At the end of May 2022, Qudian received a delisting warning from the New York Stock Exchange for the second time. Earlier the same month, Qudian had just completed the remediation of the delisting warning issued by the NYSE in February, bringing its stock price back above $1, making the company re-eligible for the NYSE’s continued listing conditions. Since Qudian went public in New York in 2017, institutional shareholders have reduced their holdings and withdrawn one after another. As the founder of the company, Luo Min is responsible for rescuing the company amidst pressure from the capital markets, which was the fundamental reason for the company to bet big on livestream. 

The strategy largely worked. Since Luo Min began to test the waters on Douyin’s livestream in mid-June, Qudian’s stock price has risen steadily, maintaining its price just above $1 in the past month. A day after its successful livestream, Qudian stock increased by 40% and closed at $1.67. As the market closed on July 21, Qudian’s market cap was $345 million, growing almost 70% since the beginning of June.

Giving out pickled fish for a penny 

The results of Luo’s July 17 livestream were astonishing; the number of viewers from 7:00 a.m. to the following day at 2:00 a.m. was a total of 95.87 million. Luo gained 3.97 million followers on that day alone, while data shows that the 19-hour livestream generated 9.56 million transactions, with cumulative sales of RMB 250 million ($36.9 million). The largest sales driver during the livestream was the company’s spicy boiled fish dish. Priced at RMB 59.9, the dish sold over 1 million units and brought in RMB 75.073 million in sales. In addition, sales of the remaining 9 dish options, such as pickled fish, spicy boiled meat slices, and beer duck, all exceeded RMB 10 million in sales each.

According to Douyin users who watched Luo Min’s livestream, he was quick and direct when offering promotional products to the audience, eliminating unnecessary rounds of pre-sales and waiting time. This reflects the key to the success of Luo Min’s livestream strategy – offering massive deals.

For example, one promotional deal saw the company sell 100,000 units of pickled fish for just RMB 0.01 during the July 17 livestream. If the cost of each unit is RMB 25, these sales accounted for a loss of nearly RMB 2.5 million. However, that wasn’t the highest cost of Qudian’s deal-packed livestream. Reports show that promotion and advertising cost upwards of several hundreds of million yuan. The company also gave away 1,500 iPhone 13s, and paid for celebrities like Jia Nailiang and Fu Shouer to endorse the livestream. In total, it is estimated that Luo Min invested about RMB 200 million in this livestream.

With such a high cash burn by the company as it continues to operate at a loss, it’s hard not to be worried about Qudian. Fortunately, financial reports show that as of the end of the first quarter of 2022, Qudian still had RMB 2.2 billion in cash.

Another major aspect of the success of Qudian’s livestream were Luo Min’s marketing skills. He captured the audience with catchy headlines like, “Join my livestream, I will invite you to eat pickled fish for a penny” and “I’ll give you 25 hours in a day”. He proved to be energetic and high-spirited, wooing the audience with his generosity and charm. The Qudian founder built up his livestream experience over the course of a month, before the company spent big on the promotional livestream on July 17. 

Luo Min streamed for the first time on Douyin on June 15, selling a selection of 10 pre-prepared meal packages with prices ranging from RMB 19.9 to RMB 49.9. The turnout was decent, with a total viewership of 20,000 and 170,000 new followers.

In the aftermath of Luo Min’s success, some are worried that Qudian’s high spending will permanently raise the bar for the entire livestream industry, leaving creators who have little to no access to capital without a chance of competing.

However, Qudian may well be a unique case. Unlike other livestreamers who earn commission by selling products from other merchants, Luo Min is drawing attention to his own company’s products, with the ultimate goal of boost the confidence of Qudian’s investors and raising its stock price, rather than competing with other livestreamers. Even if there is competition, it’s limited to the pre-prepared meals market.

For instance, while Qudian has had success livestreaming, it’s not only focused on the online market, it’s also expanding its offline operations. The company announced plans to support 100,000 users to open their own franchise stores and expects to open 10,000 new franchises this year and reach 200,000 stores by 2024.

READ MORE: Move over, celebrity livestreamers: Here come the small-scale presenters

History of Qudian and Luo Min

Luo Min is no stranger to being ridiculed for his failures in launching new businesses. His entrepreneurial journey is characterized by repeated battles and failures, both before and after Qudian’s IPO.

In 2017, Qudian, an online credit platform established for more than 3 years, went public on the New York Stock Exchange. It raised $900 million and was the largest IPO of a Chinese company that year, setting off a wave of new IPOs in the United States. Before Qudian, Luo Min had tried and failed to launch startups in various internet sectors, such as campus social networks, group buying, online education, automobile group buying, social network sites, and food delivery apps. Only Qudian realized Luo Min’s dream of going to the United States to ring the bell, making him the CEO of a public traded company. 

Nevertheless, Qudian’s history of issuing loans to college students who have no stable income has tarnished its brand. Even though Qudian exited the sector before authorities banned the practice in colleges, Qudian has continued to face doubts from investors. 

In 2017, when asked if the company was goading young people to borrow money from their families in order to pay back the loans, Luo Min responded by saying that “anything that is overdue and not paid back is bad debt and will be written off, and treated as welfare.” The response was not only greatly criticized for exposing his ignorance regarding his own business model (such as the confusion between overdue loans and bad debts, and the lack of a post-loan collection process), but also attracted criticism from the industry, leading to a class-action lawsuit from American investors. As the value of Qudian’s stock price continued to fall, the company also faced a series of accusations such as pre-IPO financing fraud, excessive reliance on third-party credit evaluation systems, and leaking user data.

At the end of February, Qudian lost its securities fraud case, paying $8.5 million in settlements to several plaintiffs under a U.S. court order. During the four years that the lawsuit went on, all four new businesses that Luo Min created for Qudian have failed. They are the car rental business Dabai Auto, the high-end housekeeping project Weipujia, the luxury e-commerce platform Wanlimu, and the K12 education project Quxue.

As a result of stricter policies within the cash loan industry in China, the profitability of Qudian’s core business continued to decline, going from achieving high net profits to making a loss. In the first quarter of 2020, Qudian posted a loss for the first time, and after a short turnaround, it continued to lose money in the third quarter of 2021. In the first quarter of this year, Qudian had revenue of RMB 220 million and losses of RMB 140 million.

In April, Qudian once again announced a change in strategy, entering the pre-prepared meals industry, and said it may terminate its credit business due to market conditions. Qudian invited Chinese TV star Jia Nailiang to serve as the brand ambassador for its products and the company’s WeChat Mini-Program now offers 14 dishes from three major cuisines: Sichuanese, Hunanese, and Cantonese. Luo Min said the company has developed over 100 products, but are not in a rush to launch them just yet.

Pre-prepared meals is an emerging field in the food industry with a low barrier to entry. The increasing popularity of this market is in line with Luo Min’s entrepreneurial style to act quickly and capitalize on new opportunities.

Although many people criticize “ready-to-eat” meals as seasoning packets and a consumption downgrade, it is undeniable that it has begun to take shape in the pandemic era, and has met the long-term needs of many consumers — it saves time and energy for migrant workers who commute more than two hours to work. These meals are seen as a healthy, affordable option when compared to ordering takeout and reduce human contact, making them fit for pandemic control measures. They also fit the bills for consumers as they navigate an economic downturn and cut back on eating out. 

This market is still in the early stages of its development, with the market share of large companies still less than 1%. Most of the market players are small and medium-sized enterprises and this demographic breakdown is exactly what Qudian needs in order to exert a greater influence and capture a larger share.

Summary

It is nothing new to see notable Chinese CEOs livestreaming. As early as 2016, Xiaomi’s Lei Jun held a press conference via livestream, attracting millions of viewers. At that time, live broadcasts mainly relied on entertainment content and entrepreneurs regarded livestreams as a marketing gimmick to increase exposure, with few expectations of making any direct income.

However, in early 2020, the pandemic hit the economy hard, especially the service industry. At the time, Ctrip, the leading domestic online travel platform that was supposed to see rising sales during the Spring Festival holiday season, issued a refund of RMB 1.2 billion to its customers. Although it was able to retain its reputation, it also faced enormous financial pressure.

Driven by a sense of crisis, Ctrip CEO Liang Jianzhang took to livestreaming. With the aim of leading the company out of crisis, Liang Jianzhang pivoted from his persona as a scholarly businessman and emerged on Douyin as he portrayed different characters from Chinese culture, including Tang Bohu, Qin Shihuang, Confucius, Guan Gong, and Cao Cao, playing  Rock and Roll music, using Kuai Ban, and doing the seaweed dance.

Through weekly livestreams at 8:00 p.m. on Wednesday nights, Liang Jianzhang created an attractive personal IP with his ever-changing style and charming personality. By focusing his marketing tactics around the theme of “Luxury Hotel Experience Pre-Sales”, Liang successfully revived Ctrip and generated RMB 1.4 billion in revenue, selling an average of 8 hotel experience packages per second on his livestream.

Analysts believe that the growing trend of livestreaming CEOs is an attempt by entrepreneurs to test traffic via online channels and a marketing tool to increase the company’s exposure revenue even when a company’s core business is in crisis. However, this is only a short-term strategy, not a long-term solution.

Brand management expert Wu Daiqi said that for livestream platforms, traffic naturally gravitates towards entrepreneurs, celebrities, or influencers who have are already famous. If these people use low prices to attract consumers, it helps to gain even greater exposure. Livestreams propped up by heavy investments will inevitably affect small and medium-sized businesses on the platform, however, in the long run, livestream platforms will ultimately have to determine the effectiveness of a livestream based on conversion rate, reputation, and sales revenue.

Chinese electric car maker Li Auto is under scrutiny over quality issues after a Chinese state media outlet reported over the weekend that a new L9 model broke its suspension during a test drive.

Li Auto announced on Monday that it has expanded its warranty terms to guarantee free repairs to the suspension parts on all L9 vehicles. 

Why it matters: The incident could potentially hurt the brand’s public image and impact sales of L9, its highly-anticipated electric crossover.

• China’s state media CNR published on July 17 a report showing a picture of Li Auto’s L9 vehicles with a locked-up front wheel, reportedly caused by suspension problems.  

Details: Li Auto confirmed on Monday to Chinese media that a spring buffer part on one front wheel of an L9 became faulty after it drove over a pothole of 20 centimeters (7.9 inches) at the speed of 90 kilometers per hour (56 mph) in the southwestern municipality of Chongqing a day earlier. The automaker didn’t clarify whether the 20-centimeter refers to the width or the depth of the hole.

• However, A Li Auto spokeswoman told Chinese media Jiemian that the faulty component involved in the accident was only used on trial vehicles, citing supply issues as the reason for its use and that the buffers on mass-produced L9 vehicles will be 2.5 times stronger and able to deal with collisions at higher speeds.

• The response was followed by an announcement on Monday that the electric vehicle maker decided to extend the warranty on air spring parts to eight years or 160,000 km (99,419 miles) from the previous five years or 100,000 km.

Context: Li Auto launched the six-seater L9 plug-in hybrid SUV on June 22, with the seven-year-old automaker claiming it provides a state-of-the-art experience to drivers at less than half the price of German-made luxury cars.

• The company later announced that pre-orders for the SUV, its second production model, had exceeded 30,000 in the first three days following the launch. Delivery is scheduled to begin in August.

Oppo sister brand Realme launched a new high-spec phone, the Realme GT2 Master Explorer Edition, on Tuesday, at a relatively low price. 

Why it matters: Oppo’s Realme is known for making phones with high spec combinations at a low price, similar to Xiaomi’s sub-brand, Redmi. The GT2 features Qualcomm’s latest processor and new RAM technology.  

• Gaming features in this phone are also competitive among its rivals at the same price range, making it a good choice for gamers on tight budgets.

Details: Realme GT2 Master Explorer Edition is now the cheapest phone fitted with Qualcomm’s new processor, the Snapdragon 8+ Gen 1, a chip that higher-end Android phones tend to use. The phone sells 12.5% cheaper than three other phones that have used the chip, based on a calculation from TechNode.

• The phone has a 6.7-inch punch-hole display with a 120 Hz refresh rate, supporting on-screen fingerprint recognition. The display, however, has a lower definition than its rivals’ high-end models, a compromise made for cost control.
• One of the phone’s standout features is its adoption of the new LPDDR5X RAM with lower battery consumption, which helps reduce power consumption by 20% more than the previous generation of Realme phones, according to Realme’s Weibo post.
• In gaming features, Realme has adopted imaging chips from US-based firm Pixelworks, which generate extra frames for a smoother performance. This tech also helps offload GPU workload to reduce overall power consumption, which prevents overheating and helps to extend gameplay time on mobile devices.
• The phone also comes with a simulated arm trigger feature with pressure sensors for gameplay which, according to Realme, makes it the first company to use this function worldwide.
• The phone has three back cameras and 100W charge for a 5,000 mAh battery.
• Available in three colors, the phone will be available on July 19, pricing from RMB 3,499 ($520) for 8 GB RAM and 128 GB storage to RMB 3,999 ($595) for 12 GB RAM and 256 GB storage.

Context: Top Chinese phone brands Xiaomi, Oppo, and Vivo, have all established sub-brands like Redmi and Realme, and iQOO to better serve targeted groups that are more price sensitive. 

• These subbrands allowed the main brands to raise prices. For example, the price of Xiaomi phones has grown by around 30% since 2018.
• In the first quarter, Oppo took 22% of the market shares in China’s budget smartphones priced between RMB 3,000 to RMB 3,999 and 27% in phones priced between RMB 1,000 to RMB 2,999, ranking the third according to CINNO Research, a Chinese hardware insight firm.

Revenues at Taiwan-based chip foundry TSMC are expected to overtake those of semiconductor giant Intel in the second quarter, according to Yahoo Finance estimates. Such a development would make TSMC the second-largest firm in the semiconductor industry, just behind Samsung.

Why it matters: TSMC’s rise in some ways indicates the rise of the foundry business model compared to Intel’s integrated device manufacturer (IDM) model. IDMs design and fabricate chips, whereas foundries focus only on fabrication and leave design work to other companies.

• The firm’s growth has also precipitated Intel accelerating its moves away from less advanced processes toward adopting more advanced techniques to stay competitive. 

Details: Since 2021, TSMC has quickly closed the revenue gap with Intel. 

• TSMC has enjoyed an average 8% quarterly growth since the first quarter of 2021. The firm’s quarterly revenue is projected to grow 43% in the second quarter this year, compared to the same period in 2021, according to Yahoo Finance’s data.
• Intel largely plateaued in 2021 and saw revenue drastically decline by 11% quarter-over-quarter in the fourth quarter of 2021. Yahoo Finance projected a 2% quarterly decline for the second quarter of 2022 for the firm.  
• Taiwan media outlet UDN cited sources from the semiconductor industry, saying that TSMC’s overtaking of Intel was due to structural changes in the sector. Nowadays, more chip firms prefer to design chips and hand them to foundries like TSMC and Samsung to produce.

Context: As one of the world’s top foundries, TSMC plays an essential part in this industry. The firm’s production capacity broadly affects its upstream chip designers like Qualcomm and downstream device makers such as Apple and Xiaomi.

• Since 2020, TSMC has been planning the construction of 18 factories around the world. The firm plans to build five new factories this year, including three in Taiwan, one in Nanjing, and another in Japan, UDN reported on Monday.

Editor’s note: A version of this article was first published on RADII.

As the world’s largest video game market, China used to have a reputation for producing mediocre mobile games emphasizing microtransactions and profit over exciting and engaging gameplay. But in recent years, Chinese game developers have stepped up their games, producing numerous excellent titles, with many more in development. 

Here are 10 games developed by Chinese companies that every video game aficionado should check out. They are lesser-known compared to other Chinese video game phenomena such as Genshin Impact and Honor of Kings.

1. Naraka: Bladepoint

Platform: PC, with Xbox and PlayStation 5 versions coming this year

If you’re into the wildly popular battle royale genre (think titles like Fortnite, Call of Duty, and PlayerUnknown’s Battlegrounds), this might be the game for you. 

Developed by Hangzhou-based 24 Entertainment and first published by NetEase Games Montreal on August 11, 2021, Naraka: Bladepoint is your classic battle royale in many ways. Expect a host of weapons, superhuman characters, and an encroaching arena that shrinks until a single player remains.

In other ways, however, this Chinese video game is wholly its own. For starters, whereas in the aforementioned titles you can kill a competitor from a distance, Bladepoint emphasizes close-contact combat. You can still attack from afar, but a winning strategy will require some up-close-and-personal virtual violence. We’re talking swords, daggers, nunchucks, and something called a ‘bloodripper,’ which looks a bit like a demonic chainsaw fitted with a buzz saw on the end. Not particularly practical in real-life, but certainly ready to get the job done in the fantasy realm. 

The intimate combat style reminds us of arcade fighting games like Tekken and Mortal Combat, with movements and an aesthetic that bring the films Crouching Tiger Hidden Dragon and House of Flying Daggers to mind. The characters, or ‘heroes,’ as they’re called, are all refreshingly unique in their fighting style and weaponry. You can also customize fighters, leading to some mildly uncomfortable renderings of Squidward, Yoda, and more. 

Prepare to be hacked to bits repeatedly in the beginning, as there is a bit of a learning curve to the gameplay. 

2. Lost Soul Aside

Platform: PC, PlayStation 4 and 5

Remember when Lost Soul Aside was first announced in 2016? By now, you’ve probably completely forgotten about it or been driven crazy by the wait. Half a decade ago, the game had only one developer, Yang Bing, and audiences were flabbergasted about how a solitary endeavor could look so damn cool. 

Although the development team has grown considerably since the game’s announcement, it is still being helmed by Shanghai-based UltiZero Games. Based on the gameplay trailer released in April 2021, audiences have likened it to Final Fantasy XV and Devil May Cry for its fast-paced play and epic visuals.

The main character has a seemingly endless suite of superhuman abilities, and he’s accompanied by a floating robo-dragon (of sorts). The game will have open-world capabilities, and the combat is said to be rather challenging. While there’s no release date yet, we’re anticipating a 2022 arrival.

3. Bright Memory: Infinite

Platform: PC, Xbox

No list of games would be complete without including a good ol’ first-person shooter (FPS). Enter Bright Memory: Infinite, an FPS that also includes combat with a variety of swords. Players start with a single blade and machine gun and are armed with a few cool battle moves — a metaphysical pull feature, block, and dodge. As the game progresses, you can collect several additional weapons with their own feel and function. 

The game is a remade and expanded version of the original Bright Memory, which came out in early 2019. Both were developed by FYQD, originally a one-person studio run by Zeng Xian Cheng. It’s still quite a small operation, making the noticeable improvements to the second game all the more impressive. 

Bright Memory: Infinite was released on November 11, 2021, and so far, the response has been great. The title follows the story of Shelia Tan, a Science Research Organization agent tasked with investigating a mysterious force in the sky that is sucking in its surroundings. You probably won’t get too caught up in the narrative, though, as it’s almost nothing but action after the intro, which we’re okay with. 

4. Black Myth: Wukong

Platform: PC, Mainstream consoles

One of China’s most well-known folkloric characters is the Monkey King, Sun Wukong. Sun appears in countless ancient and contemporary texts but is most associated with the 16th-century novel Journey to the West, in which he is a traveling companion of Tang Sanzang, a character based on the real-life Buddhist monk Xuanzang.

The Monkey King has also appeared in numerous theatrical productions, films, TV shows, and more than a dozen video games (even the anime television series Dragon Ball contains elements from the story). But that’s not to say that Black Myth: Wukong isn’t something special.

Developed by Shenzhen-based indie studio Game Science, Black Myth: Wukong is a third-person action-adventure game where players step into the shoes of the protagonist Monkey King. It is easily the most hyped Chinese game that has yet to be released, and for good reason: The diverse landscapes and characters are laden with nods to Chinese history and cultural esthetic, with stunning visuals and combat scenes that are nothing short of badass. 

Small details in the game hold true to the original Monkey King mythology. Take, for instance, the scene in a gameplay teaser where Sun extends his staff and balances on end to defeat a massive white dragon. He can extend the magical golden staff to any length in the original mythology.

Daniel Ahmad, a senior analyst with Niko Partners, says Sun will have 72 abilities in total. So expect to see more mystical moves reflective of the original folklore — things like shapeshifting and splitting into infinite versions of himself.

No specific release date has been set yet, but gamers are anticipating its release in 2023. 

5. F.I.S.T.: Forged in Shadow Torch

Platform: PC, PlayStation 4 and 5

Welcome to Shadow Torch, a colonized city of anthropomorphic animals known as ‘furtizens.’ This is a Metroidvania, which, for the uninitiated, is a subgenre of action-adventure games where players navigate an open world, unlocking skills and new areas of the map as the game progresses. 

Rayton, a juiced-up rabbit and a former soldier in the war against the occupying Machine Legion, plays the main character. He carries a massive, multipurpose ‘fist,’ a gadget recycled from an old war machine that Rayton once piloted, containing his primary weapons. The city is distinctly steampunk-inspired, and different districts have their own appearance and atmosphere.

The game is two-dimensional and utilizes left-right scrolling to navigate the map. It has a fantastic storyline — albeit with some sub-par English-language voice acting — and features cameos from a host of fascinating humanoid animals, from cats to rats and bears to red pandas, but not forgetting robotic canines. 

F.I.S.T was developed by Shanghai-based TiGames and came out in October 2021 via Antiidelay. With relatively easy and user-friendly gameplay, it serves as a great introduction to the oversaturated Metroidvania market. 

6. Conqueror’s Blade: Paragons

Platform: PC

If you’ve ever wanted to control the whims of a maniacal warlord conquering foreign lands, you may want to do some soul searching. Alternatively, lean right in and give Conqueror’s Blade a try.

Like many popular games produced in China, this Massively Multiplayer Online Game (MMO) is free to play. While there are some pay-to-play elements, most of these are cosmetic, fortunately, and not necessary to succeed in the game.

Developed by Hangzhou-based Booming Games, Conqueror’s Blade is a turn-based game that incorporates action and tactical gameplay elements. What’s incredibly cool is the fact it includes both Eastern- and Western-style medieval warfare. Released on March 17, 2022, the latest update — Conqueror’s Blade: Paragons, as seen in the video above, was inspired by medieval France.

It is classified as a ‘sandbox game,’ meaning players have a high degree of control and creativity where gameplay is concerned and don’t necessarily have to follow predetermined objectives or goals (think Minecraft and Grand Theft Auto).

7. Wuchang: Fallen Feathers

Platform: PC, unspecified next-gen consoles

Set in imperial China during the collapse of the Ming Dynasty, Wuchang: Fallen Feathers combines history, folklore, and otherworldly dystopian elements that make for a surprisingly fresh take on the ancient era. 

Inspired by the turbulent period, players are dropped into a land plagued by unrest. Warlords, banditry, and violence abound. Adding to the mayhem is a mysterious condition causing people to grow feathers and lose touch with their humanity. The protagonist is tasked with unraveling the cause of the strange illness. 

This is the first title created by Chengdu-based LenZee Games, formerly Recano Chengdu Hurricane Zone. An action RPG, Fallen Feathers draws influence from games like Bloodborne, Dark Souls, and Sekiro. Don’t hold your breath for a quick drop, though: The game is scheduled for release in 2024.

8. Let’s Hunt Monsters

Platform: Mobile

We were hesitant to include this on the list, given its striking resemblance to Pokemon Go (and we don’t want to be responsible for any avoidable deaths). Still, the animated creatures are too cute to overlook!

To be fair to developers TiMi Studio Group (owned by Tencent Games), Pokemon Go was never available in China, which explains their urge to fill a much-needed gap in the niche market. After all, how many mobile games require the player to literally be mobile. 

Like Pokemon Go, Let’s Hunt Monsters is an augmented reality (AR) game where players catch digital creatures using their real-life geolocations. Instead of Pokemon, however, the hunt is on for creatures inspired by Chinese mythology. To catch all 302 monsters, players use ‘spirit orbs’ (basically yin-yang pokeballs) sourced from ‘Prayer Drums.’ 

You can also build structures within the game, mirroring gameplay in MMOs. Using the Tencent-developed blockchain, players can even trade digital ‘kittens’ in a feature not dissimilar to the Ethereum blockchain game CryptoKitties.

Let’s Hunt Monsters was first announced by Tencent in April 2018 and has been available on Chinese app stores since April 11, 2019. While there have been numerous attempts to recreate the success of Pokemon Go, none quite measure up, although Let’s Hunt Monsters has come closer than the rest. Five months after its release, the game generated more than $50 million in revenue just on iOS.

9. Tower of Fantasy

Platform: Mobile, PC

Tower of Fantasy is an action RPG infused with narrative elements and open-world gameplay. If you think that sounds a little too Genshin Impact-y, well, you’re not the only one; the game’s developers have even dubbed their creation a ‘Genshin Impact killer.’ 

Smack talk isn’t the only scandal they’ve been caught up in, though: They were previously busted using plagiarized content in a promotional video, and later, clearly not learning from their own mistakes, allegedly used reviews for Genshin Impact to boost their own game’s ratings.

Nonetheless, Tower of Fantasy has been in China for a year and is set for worldwide release in 2022, much to global gamers’ excitement. In March of this year, it was reported that the title is undergoing closed beta testing in the United States, Canada, the United Kingdom, and Germany. 

While Tower of Fantasy is in many ways similar to Genshin Impact, the former takes place in the future and combines elements of science fiction with anime-inspired characters. It also allows character customization and the use of various weapon types irrespective of which character you choose, further setting it apart from its rival. 

Released by Hotta Studios and published internationally by Perfect World, the game is set on the post-apocalyptic planet Aida. Once flourishing and technologically advanced, the planet’s energy source, Omnium, has become its undoing, as the radioactive material has caused some of the planet’s remaining inhabitants to mutate.

10. Icey

Platform: iOS, MacOS, PC, Android, Nintendo Switch

Initially developed by Shanghai FantaBlade Network in 2017, Icey is a two-dimensional side-scrolling action game — with a few twists. Led by an omnipotent narrator called the ‘Developer’ who guides your every move (should you choose to obey), the goal is to control the eponymous humanoid robot Icey.

In this hack ‘n’ slash melee-style adventure, Icey is armed with a sword and tasked with defeating a powerful enemy called Judas, all while unraveling the meaning of her existence. From start to finish, the Developer aggressively urges you to follow his every direction, but much of the fun lies in defying his overbearing, sometimes passive-aggressive commands.

The game is cheap to purchase, and the story takes no more than a couple of days to complete, though you can start again and unravel the story differently in subsequent sittings. As such, it’s the perfect game for the casual gamer or anyone who wants a few pleasant hours of digital distraction.

Honorable Mention: Stray (Formerly HK_Project)

Platform: PC, PlayStation 4 and 5

Carving out a new niche, Stray is not technically a Chinese video game but takes place in a dystopian future in Hong Kong. It was developed by BlueTwelve Studios and will be published by Annapurna Interactive, respectively based in southern France and California. The game is set for release in July 2022.

Players assume the role of a stray cat tasked with navigating the chaotic streets and buildings of a once-flourishing megacity now inhabited solely by robots. Its ultimate goal is to reunite with its family. 

The game aesthetic is heavily influenced by the Kowloon Walled City, which was destroyed in the ’90s at the behest of Hong Kong authorities. Once upon a time, it was the most densely packed place on Earth and operated independently from the British colonial government and law enforcement.

Needless to say, it was a fascinating place and one that we regret not having visited before it came crumbling down. But thanks to Stray, a Kowloonesque adventure is still possible. Navigating the city as a furry feline offers players a unique perspective on the digital world and allows for mobility and challenges that a clunky bipedal human simply can’t pull off. 

On Tuesday, Li Auto announced the L9, a full-size, three-row sports utility vehicle, as part of its stated ambitious plan to achieve 1.6 million vehicle sales by 2025. The car’s starting price is less than half that of similar offerings from the likes of BMW and Mercedes-Benz.

Why it matters: With delivery planned to begin in August, the six-passenger L9 SUV will be the second production model from Li Auto and the Chinese EV maker appears to be confident that it might become a hit.

• Speaking to reporters on Wednesday, chief executive Li Xiang declined to reveal specifics about order volume, but said that the L9 will outsell its existing Li One, which was the top-selling large new energy SUV in China last year, according to official figures.

Details: The L9, a plug-in hybrid, is described by the company as the pinnacle of large luxury SUVs, with what it says is a spacious interior specifically for Chinese three-generation family households. The automaker said the model offers passengers more room than other luxury automaker offerings.

• The plug-in hybrid has a driving range of 215 kilometers (134 miles) on a full charge but can drive for about 1,315 miles with a full fuel tank and a full charge, a 20% increase compared with the company’s first model. It accelerates to 100 km in 5.3 seconds, according to Li Auto. 
• The model comes with many high-end tech features. It has five screens, including two 15.7-inch touch-sensitive ones in the middle of the dashboard that control the in-car entertainment system, two smaller ones around the steering wheel,  and an OLED television screen for rear-seat passengers.
• The vehicle uses a combination of 24 sensors to detect and predict road conditions, including eight 8-megapixel cameras, a long-range lidar unit, and two Nvidia Orin AI chips to enable autonomous driving.
• The L9 will only enable assisted driving on highways, once delivered; the company has not revealed when its car system will support autonomous driving in city traffic. Its rival Xpeng Motors plans to send an over-the-air update that would allow its vehicles to drive autonomously on urban roads later this year.
• The vehicle will sell for RMB 459,800 ($68,418), a price that the seven-year-old automaker claims is lower than any other similar SUV on the market. For comparison, the BMW X7 and the Mercedes-Benz GLS crossovers start at RMB 1 million and RMB 1.07 million in China, respectively.

Context: Meituan-backed Li Auto has been at the forefront of the Chinese EV field with just one model on sale, recording deliveries of 90,491 Li One vehicles in 2021, a 177.4% increase from a year earlier. The sales number is close to the sales of all three of rival Nio’s models over the same period combined.

• CEO Li Xiang has set an ambitious target of delivering 1.6 million vehicles annually by 2025, according to an internal memo obtained by Chinese media outlet Caixin in February 2021.
• Li said earlier this month that monthly delivery of the latest model could reach more than 10,000 units starting from September, although investors now reportedly expect that number to be around 5,000-6,000 units due to supply chain constraints and Covid-19 control measures.
• Earlier this month, Nio also launched a new SUV model, the ES7, with a starting price of RMB 468,000. Alibaba-backed Xpeng said in April that it will launch its second SUV model, the G9, this month.

READ MORE: Drive I/O | Nio, Xpeng, and Li Auto face more challenges after a mixed 2021

Ever since China abruptly cut off the bulk of income for most private education companies last summer, the businesses have had to make some difficult decisions. For New Oriental, once the leader of the sector, it meant letting go of most of its tutors for the K-9 grades and setting up a new livestreaming e-commerce unit to make up for some of the lost income. 

Until this month, New Oriental’s new live e-commerce initiative had been lackluster at best. Daily sales hovered around less than RMB 1 million ($150,000) in the past six months, according to data from livestreaming tracking platform Huitun. But suddenly, New Oriental’s fortunes are looking up. It all changed after the firm’s hosts, all former tutors, started to teach English while selling goods over their livestreams. 

On June 10, during a session selling bags of rice, the host pulled out a small whiteboard and asked the audience whether they thought the price of RMB 80 was fair. She then wrote three English phrases — “bargain,” “cost-effective,” and “unforgettable” — on the whiteboard and began teaching an unexpected course on how to use these phrases in real life. This unique style of selling has quickly made New Oriental’s livestreaming sessions a sensation on the Chinese internet. 

Why it matters: China’s blooming livestream e-commerce sector has become increasingly crowded as thousands of Chinese celebrities and online personalities flock to commercialize their followers or cash in on online fame. Only those with relatively unique selling points or characters are able to stand out and attract buyers’ attention.

• New Oriental is among several tutoring companies pivoting to new business ventures after China’s crackdown on the private tutoring industry last July. Edtech giant Zuoyebang has looked into developing a printer business, while tutoring unicorn Yuanfudao tried to invest in an outdoor down jacket business last year.

READ MORE: Edtech will survive China’s crackdown, but it won’t be the same

Details: Livestreaming session and video clips of Oriental Select, New Oriental’s livestream ecommerce arm, went viral across Chinese social platforms over the weekend after hosts started to offer short, free English teaching sessions during the live shopping sessions.

• Oriental Select’s account on Douyin, the platform where the brand livestreams, has gained more than 1.6 million followers in three days since June 10. An 18-hour-long livestream held on June 11 recorded RMB 19.9 million in sales, a jump from the RMB 4.5 million New Oriental’s founder Yu Minhong achieved on his December debut.
• Instead of the hard-sell advertising style used by most Chinese e-commerce livestreamers, hosts at Oriental Select, all former teachers at New Oriental, display a laidback attitude when selling through the livestreams. 
• When promoting a corn product on a livestream session held on Monday, former English teacher Dong Yuhui said he hoped the corn would remind the buyers of their “good-old days” as a child when they were “young and carefree.” He then took out a board and wrote down the expressions in English.
• On Monday, New Oriental’s share price increased by more than 16% in Hong Kong after the company’s livestreams began to take off over the weekend.  

Context: Battered by China’s private tutoring clampdown, the country’s edtech majors such as New Oriental, Gaotu, and TAL all stopped providing after-school tutoring services targeting students up to K-9, a major source of their revenue, in the mainland Chinese market in the second half of 2021. Shares of the three companies plunged roughly 100% since the regulatory measures were announced in July.

Cloud services have become a rare growth point for Chinese tech majors Alibaba, Baidu, and Tencent in this earning season. The tech majors have seen overall growth plateau and profit drop as they navigate an economic downturn made worse by the pandemic resurgence and geopolitical uncertainty.

Why it matters: Over the years, Chinese tech majors Alibaba, Baidu, and Tencent have built up sizable operations in cloud solutions for businesses. Those cloud units have now grown strong enough to offer sustainable business returns. 

• Cloud services have become the bedrock of almost all tech firms, as it offers fundamental support for online services and the implementation of algorithms. 

Details: Cloud services have become a rare growth point in the lackluster earnings reports of Alibaba, Baidu, and Tencent, as the majors’ businesses were hit by China’s strict Covid-19 control measures, slowing consumption, and external geopolitical challenges. 

• On Thursday, Alibaba reported the slowest quarterly growth rate since it went public in 2014. However, Alibaba Cloud reported a net profit in a financial year for the first time since its establishment in 2009, the company’s earnings report shows. The cloud business brought in RMB 100.2 billion ($15.8 billion) for the fiscal year ending in March, a 21% yearly increase and accounting for about 12% of the firm’s overall revenue. The company’s revenue increased 19% year-on-year to RMB 853 billion ($134.6 billion) in the same period. 
• Similarly, Baidu’s cloud services outperformed the company. In the first quarter, the cloud service unit saw revenue grow by 45% to RMB 3.9 billion from the same period last year, while the company’s revenue grew by only 1%. 
• Tencent’s FinTech and Business Services group, which includes its cloud services, reported a nearly 10% yearly growth for the first quarter. The company reported flat revenue growth of only 0.1% for the same period.
   

Context: According to Canalys, China’s cloud infrastructure services market grew by 45% to $27.4 billion in 2021.

• Alibaba, Huawei, Tencent, and Baidu are the top four cloud service providers in China, accounting for 80% of the market share in 2021, with Alibaba Cloud leading at 37%.

READ MORE: Why does China want to build a national data center system by 2025?

Qcraft, a Chinese autonomous driving startup, said at a Wednesday conference that it is partnering with ride-hailing firm T3 to bring self-driving vehicles onto the latter’s ride-share network in the eastern city of Suzhou. T3 users within the range of those vehicles’ routes will soon be able to select one for a ride.

Why it matters: The partnership is the latest example of driverless tech firms rushing to work with more consumer-facing companies as they aim to commercialize autonomous driving tech. 

Details: Starting from July, Qcraft and T3 will begin offering rides to public passengers using self-driving cars within a restricted area in Suzhou, a neighboring city of Shanghai, where the companies are already testing the vehicles.

• The initial phase of the pilot deployment is expected to allow the companies to fine-tune their robotaxi offering by collecting rider feedback and improving user experience ahead of a commercial launch, according to an announcement (in Chinese). 
• On Wednesday, Qcraft also announced plans to test its self-driving system for consumer cars beginning in the third quarter of this year, collaborating with Chinese chipmaker Horizon Robotics. Backed by leading tech companies Meituan and ByteDance, the three-year-old Qcraft is testing a fleet of more than 100 autonomous mini-buses and sedans in around 10 major Chinese cities.
• T3 has emerged as a significant rival to Didi and is backed by state auto majors FAW, Dongfeng, and Changan. The ride-hailer completes over 3 million rides every day with operations in more than 80 Chinese cities, its vice president Li Jinfeng told reporters at a press briefing on Wednesday. To compare, Didi reportedly provided 20 million trips per day in January.

Context: Other Chinese self-driving car companies are racing to launch commercial autonomous ride-share services either by themselves or with partners.

• Baidu began operating fully autonomous taxis in the suburbs of Beijing in late April, a few months after being allowed to charge customers fares for rides in the capital city. The tech giant said it had offered around 213,000 rides in eight domestic cities in the fourth quarter of 2021.
• Self-driving unicorns Pony.ai and WeRide have turned to ride-hailing service OnTime for a wider group of users, recently participating in its RMB 1 billion ($153 million) Series A, TechCrunch reported on April 27. Operating in the southern Guangdong province, OnTime was launched by state-owned automaker GAC in mid-2019 and backed by Tencent.

The CEO of Huawei spinoff Honor told state media on Thursday that the smartphone company plans to push overseas sales over the next five years. 

Why it matters: In November 2020, Huawei sold Honor, a budget smartphone sub-brand, to a majority Shenzhen state-owned company. In the 18 months since this sale, the firm has steadily gained market share in China and reached the top spot in domestic sales in March. Outside of China, the brand faces fierce competition from Chinese peers like Xiaomi, Vivo, and Oppo, as well as industry leaders like Apple and Samsung.

• In the latter half of 2021, Honor made it into the top-5 selling smartphone brands (in Chinese) in China, and most recently, the brand topped the sales chart in March (in Chinese), according to Chinese marketing research firm CINNO. 
• Honor has limited overseas reach, failing to crack the top 5 brands in terms of sales (which take 70% of the market share) in 2021. 

Details: Honor’s CEO Zhao Ming told China Securities Journal (in Chinese), a state-owned media outlet, on Thursday that the company will “fully launch sales to the overseas markets and expects no bottleneck period for the next five years.”

• Zhao added that more than half of the company’s 12,000 employees work in the company’s research and development unit. He also emphasized that Honor plans to invest more in research than in marketing.

Context: Founded in 2013, Honor was formerly owned by Chinese telecom giant Huawei as a sub-brand. 

• Huawei sold Honor to save the brand after it was sanctioned by the US and was cut off from using US technology, like Google services and critical chips, in 2019. Honor now has none of Huawei’s sanction burden and is able to use Google services and Qualcomm chips. 
• After the spinoff, the brand lost access to over 100,000 patents from Huawei.

Amid slowing growth and regulatory uncertainty at home, China’s gaming companies are increasingly eyeing overseas markets. Many of them have had impressive growth figures in international markets for some time, but the situation at home is driving them to view foreign gamers in a new light. Established players such as Tencent and NetEase – both of which are in the top five gaming firms in the world – are giving international growth new emphasis, while rising upstarts such as HoYoverse (formerly known as miHoYo), FunPlus, and 37 Interactive Entertainment are seeing surging interest in their titles outside of China.

The diversity in terms of the size of Chinese gaming firms finding success abroad shows that there’s something of a relatively level playing field outside of a domestic market that is dominated by a handful of majors – even small indie game makers are able to strike it big when they look beyond their own backyard. Yet there’s no cheat code for doing well internationally and Chinese game firms face new modes of competition and significant cultural challenges when they venture outside of China. 

READ MORE: The Chinese gaming startup outperforming Tencent overseas

Powering up internationally 

To reflect the increasing scale of its global gaming growth, Tencent started to disclose revenues from domestic games and overseas games as new sub-segments in the third quarter of 2021. 

In a challenging 2021, Tencent’s overseas games saw an impressive 31% yearly growth, while the domestic gaming sector grew by only 6%. Tencent made RMB 25 to 30 billion ($3.79 to $4.55 billion) in overseas games in the first three quarters of 2021, accounting for about 20% of its gaming revenue. Overall, the company saw its slowest revenue and profit growth in five years, 16.2% and 11%, respectively, underlining the international gaming division’s eye-catching performance. 

NetEase first revealed its overseas gaming performance in the third quarter of 2018, saying incomes from overseas markets accounted for 10% of the total net profit in its gaming business that year. The latest figures show that overseas gaming revenue accounted for 11% to 15% of NetEase’s gaming revenues in the first three quarters of 2021. However, the company didn’t reveal a detailed breakdown of overseas gaming revenue in its 2021 annual report.

Although the growth in NetEase’s overseas gaming revenue has been steady rather than spectacular in the last three years, the company has set a goal of expanding earnings outside of China to 50% of its gaming income, with a focus on markets in Japan and North America, according to Chinese media outlet Jiemian. NetEase also dramatically increased its research and development expense ratio in the past two years, hoping to win with better gaming developing skills. The report added that the ratio doubled from 8% in 2017 to 16% in the first three quarters of 2021. 

Chinese gaming companies taking it to the next level overseas 

In March of this year, of the top 10 highest-grossing mobile games globally, four came from Chinese gaming companies, according to Sensor Tower: Tencent’s Honor of Kings and PUBG Mobile, HoYoverse’s Genshin Impact, and Alibaba’s Three Kingdom TacTics. Lilith’s Rise of Kingdoms also made it into the top-grossing list on the App Store. Among the Chinese titles, HoYoverse’s Genshin Impact was the most profitable. Tencent’s PUBG Mobile was second, with Lilith’s Rise of Kingdoms ranked third.

Genshin Impact is a sprawling multiplayer online role-playing game (MMORPG). Launched in 2020, it hit 115 million downloads in its first 18 months, according to Data.ai, a US insight firm focusing on app stores. According to Data.ai, Genshin Impact’s success was so big it helped  put a positive spin on figures for the whole category, pushing MMORPG revenue to grow 17% year-on-year in 2021, despite other titles in the same category showing a slow and even negative increase in revenue.

Tencent’s PUBG Mobile, in many ways, has followed the success of its PC version. The title has found popularity with a new game mode called battle royale, whereby players fight to be the last one standing amid a mass competition with hundreds of other players. Its primary competitor is Call of Duty Mobile, also developed by Tencent and published by Activision, which ranks seventh on Sensor Tower’s list.

Challenging times at home 

Chinese gaming companies are having a tough time getting new games approved and making money in the domestic market due to tightening regulations around young players’ gaming habits and strict limits on new game licenses. 

Late last August, Chinese regulators asked all companies to limit minors’ access to games (in Chinese), with the aim of protecting them from gaming addiction. As a result, those under the age of 18 can only play games one hour a day on Fridays, weekends, and holidays, according to the rules, with no gaming time allowed on weekdays.

Tencent said in its 2021 annual financial report that the new regulations hit the company’s domestic games revenue due to “less spending by minors” and the company allocating developer resources “to implement new measures.”

Around the same time, China also stopped issuing licenses to new games. The regulator only resumed issuing licenses in April, eight months later. This wasn’t the first time the regulator withheld its licensing power. In 2018, the issuing of licenses was halted from March to December. Game publishers in China need a license from the National Radio and Television Administration (NRTA), the state’s regulator for news, print, and publications, to be listed in app stores or to be downloadable on their websites within the country. 

The extended freeze has forced many Chinese gaming companies to downsize. Since last year, major Chinese gaming companies such as NetEase, Lilith, IGG, and Perfect World have had to cut off projects and lay off staff.

READ MORE: China’s gaming industry is downsizing as regulators halt new game licenses: report

What’s next for Chinese gaming companies going overseas?

Amid such problems, many are forecasting another grim year at home for Chinese gaming companies in 2022. DataEye, a Shenzhen-based industry insights firm, wrote in their 2021 annual report that they foresee another slow year ahead. “The domestic market won’t see major growth. 5% growth is optimistic; no growth is also likely,” said the report. Instead, they noted, “The main growth in the industry will most likely come from the overseas market.”

It’s easy to see the allure of international sales given the picture back home. Yet, despite some major success stories so far, achieving sustained growth internationally comes with its own set of difficulties for Chinese game developers. There have been some surprise hits, such as indie outfit Coconut Island’s crossover success Chinese Parents, but for large-scale, longer-term growth, a sophisticated understanding of international markets is required.

“Localization in overseas markets goes way beyond just translating the content in local languages. The key is in cultural localization,” Wang Yangbin, CEO of DataEye, wrote in the firm’s report. “These are problems all top Chinese firms — Tencent, NetEase, and Alibaba — and second-tier companies have to solve quickly.”

How quickly they do so may well determine how soon and to what extent international markets can provide the kind of salvation that many Chinese gaming companies appear to be looking for by heading overseas.   

Fenbi Education, a Chinese edtech platform catered to adult learners, filed for an initial public offering in Hong Kong on Monday, according to the Chinese media outlet Sina Tech.

Why it matters: Fenbi’s listing is the first IPO from China’s edtech industry since last July, when the once-booming sector was hit by a series of regulatory crackdowns on curriculum tutoring services targeting students up to the 12th grade (K-12).

• Fenbi, which means “chalk” in Chinese, provides online and offline test preparation services for adult professionals, as well as vocational training. It focuses on offering courses for various tests such as the civil officer examinations, teacher qualification certificates, and postgraduate entrance examinations.

READ MORE: Chinese edtech upended by sweeping regulations

Details: Fenbi said it plans to go public in Hong Kong but did not disclose the size of the IPO. Bloomberg reported on Monday that the firm could raise about $300 million. China International Capital Corporation, Citibank, and BofA Securities will serve as co-sponsors for the listing.

• The fund will be used to develop courses, enhance student recruitment, and improve technological capacity and digital infrastructure, according to the company.
• The company’s revenue reached RMB 2.6 billion ($416 million) in the first nine months of 2021, up 80% year-on-year. However, while Fenbi’s revenue expanded, its net loss also widened, almost doubling from RMB 362 million in 2020 to RMB 782 million over the first nine months of 2021.
• Fenbi’s average monthly active users increased by 38% year-on-year from 4.7 million in 2020 to 6.5 million in 2021, slowing from the 62% growth rate for 2020. Since its founding, paid users have reached 45.3 million in December 2021.
• Founded in 2015, the company now operates in 260 cities across 31 provinces, autonomous regions, and municipalities in China.
• Fenbi’s CEO Zhang Xiaolong, who shares the same name as the better-known Tencent vice president and “father of WeChat”, holds a 35% stake in the company. Tencent owns 14% of the company and other shareholders include IDG, Matrix Partners, and Hillhouse Capital.

Context: Fenbi is an early entrepreneurial effort from the team behind the online tutoring app Yuanfudao, before the edtech unicorn decided to focus on the more lucrative K-12 segment.

• In February 2021, the firm raised $390 million in a Series A led by IDG Capital and Trustbridge Partners.

Hozon New Energy Automobile has raised more than RMB 2 billion ($316 million) in a recent round as part of its Series D, which could value the electric vehicle startup at around RMB 25 billion, Chinese media outlet LatePost reported Monday.

Why it matters: The investment reflects continued positive sentiment among private investors towards Chinese EV companies. China’s EV industry enjoyed exponential growth in 2021 and the outlook for the industry remains strong for the next few years. 

Details: This latest round marks the close of Hozon’s Series D at RMB 8 billion. Investors include Chinese rail company CRRC Corp’s investment fund and the state-run Shenzhen Capital Group, LatePost reported, citing unnamed sources familiar with the matter.

• The Zhejiang-based EV maker recently kicked off a new fundraising process, targeting a RMB 45 billion valuation, with plans to go public in Hong Kong later this year, according to the report.
• Big name investors also expressed interest during the round but did not make an offer, the report said. These include SoftBank’s Vision Fund, Abu Dhabi Investment Authority, and the United Arab Emirates’ sovereign wealth fund, among others. Some of these investors reportedly worried about Hozon’s ability to compete with other more established rivals in the entry-level EV segment (usually priced under RMB 100,000). 
• Some investors also see Hozon’s sales in the ride-hailing market as a worrying sign of its ability to attract buyers in the private EV market. About 9% of Hozon’s vehicle sales go to business clients, such as taxi fleets, according to chief executive Zhang Yong.
• Hozon was not available for comment.

Context: In October, Hozon announced it had closed an RMB 4 billion Series D1 led by China’s biggest cybersecurity firm, Qihoo 360. This was followed by another RMB 2 billion in new funding from companies, including battery giant CATL and automaker BAIC as part of its Series D in December, said LatePost.

• The automaker currently offers three entry-level EV models for sale and delivered 69,674 vehicles in 2021, a more than threefold yearly increase and the most in terms of delivery, after US-listed trio Xpeng, Li Auto, and Nio. 
• Hozon has chosen banks like Citic Securities Co. and China International Capital Corp. to arrange its Hong Kong IPO, which could raise as much as $1 billion, Bloomberg reported last week. The company, along with rivals WM Motor and Leapmotor, had a combined market share of 6% in the Chinese all-electric EV segment last year, according to Bloomberg Intelligence.

READ MORE: Drive I/O | Meet the newest upstarts likely to grab chunks of China’s EV market

China Broadcasting Network (CBN), a new state-backed 5G operator, announced on Feb. 17 that it will start operating a new line of mobile network services from mid-May.

Why it matters: CBN is a newcomer to China’s telecom market and faces competition from three established state carriers (China Mobile, China Telecom, and China Unicom). Compared to existing players, CBN has access to an extensive broadcast content library. 

• The network is funded and overseen by the National Radio and Television Administration (NRTA), China’s official media regulation agency. The government agency provides basic public broadcast services across the country, including to remote rural areas, allowing the network to access an extensive content library, a large user base, and tap into the agency’s existing infrastructure.

Details: CBN announced on Feb. 17 that it will start operating a new mobile phone number network from mid-May. It will issue cellphone numbers that begin with 192.

• CBN tested its mobile network services via the 192 numbers with a small number of users last year. 
• The operator gained a radio bandwidth of 700 MHz N28 with a 5G license issued by the Ministry of Industry and Information Technology, one of China’s internet and telecom regulators. 
• CBN’s radio band is considered low-frequency, generally lower than 1 GHz or 1000 MHz, which tends to have broader coverage, better indoor range, and is cheaper to build. However, low frequency also has a slower transiting speed.

Context: Formed in May 2014, CBN was approved by the State Council, China’s cabinet, and funded by the state. 

• In early 2021, CBN partnered with established state 5G operator China Mobile and reached an agreement to build and share the 700 Mz 5G network. CBN will also acquire China Mobile’s 2.6 GHz network.

Of the three established Chinese telecom providers, China Mobile leads the 5G market with 386.8 million users, China Unicom follows with 187.8 million, and China Telecom has 154.9 million, according to C114, a Chinese media platform focused on the telecoms industry.

Trunk Tech, a Chinese autonomous truck technology startup backed by EV maker Nio, raised an undisclosed amount in its Series B, the company announced Wednesday. The round was led by state-owned automaker BAIC, which is also partnering with ride-hailing giant Didi to get a fleet of self-driving taxis on public roads by 2025.

Why it matters: Trunk Tech is one of the most promising startups in the Chinese self-driving car space. The Beijing-based company has been backed by a list of prominent investors, and is among several players to test autonomous vehicle systems for hauling freight at domestic harbors.

Details: New investors in this latest fundraising round include private equity firm Pre-IPO Capital Ltd and Zhengzhou municipal investment fund, according to a statement published Wednesday (in Chinese).

• Trunk Tech, which was founded in 2017, said it has delivered more than 100 driverless trucks to clients including China National Offshore Oil Corporation in trial projects at domestic ports in Tianjin and Ningbo.
• The startup said it is operating a testing fleet made of dozens of autonomous trucks, which haul cargo for partners such as JD Logistics, Deppon Logistics, and Alibaba-backed STO Express, with its fleet having now driven 1.5 million kilometers (932,057 miles).

Context: Chinese automobile and tech companies have been racing to develop and commercialize their own self-driving tech which they claim will increase road safety and improve fuel efficiency for traditional trucks.

• TuSimple, which was founded in 2015, was the world’s first self-driving truck company to go public on the US stock market, in April 2021. Its fleet had logged more than 6.3 million miles on public roads as of Dec. 31, 2021, according to its fourth-quarter earnings report. The company plans to start mass producing driverless trucks for clients in 2024.
• Inceptio, a robotruck startup backed by tech giants JD and Meituan, unveiled plans early last year to start mass producing autonomous trucks with automakers Dongfeng and Sinotruk as early as the end of 2021. The company reaffirmed the goal in September, adding its vehicles had passed summer endurance tests.
• Fabu, a company founded by former Didi executive He Xiaofei, nabbed RMB 100 million ($15.4 million) in a Series B+ in August, after testing automated trucks in Zhejiang province’s Ningbo-Zhoushan Port for more than a year.
• Trunk Tech raised an undisclosed Series A from investors including NIO Capital and logistics giant GLP’s investment unit Hidden Hill Capital, in October 2018. Other existing investors include German auto supplier Bosch and artificial intelligence company iFlytek.

Note: This article was first published on TechNode China (in Chinese).

ByteDance, one of China’s newest tech giants, caused an uproar in the venture capital circle when it dissolved its strategic investment department on Jan. 18, reassigning at least 100 employees in the process.

The company said the move aimed to move staff into different units to strengthen internal collaboration. However, outsiders have speculated that the move, along with changes to the company’s investment strategies, represents an urgent shift from ByteDance as it looks to abide by China’s anti-monopoly regulations.

ByteDance’s decision and other Chinese tech giants’ recent moves to divest investments signal a change in China’s corporate venture capital funds (CVCs). They are downsizing after being major players in the capital circle for more than a decade and having nurtured promising startups to success. 

The golden decade of Chinese corporate venture capital

From 2010 to 2019, the top 10 companies in China’s equity investment market by CVC investment amount were Tencent, Alibaba, Fosun Group, JD.com, Baidu, SoftBank Group, Qihoo 360, Ant Financial, Suning Group, and Sunac China, half of which are CVCs in tech companies. In 2019, 10 industrial groups, including Tencent, Alibaba, Baidu, and Ant Financial, invested RMB 90.467 billion ($14.23 billion) in total. CVCs accounted for nearly 80% of their total investment during the same period.

CVC investment in China can be traced back to 1998, a relatively late start compared with other countries. During that first decade, Chinese CVCs remained in a tepid state. However, in 2010, Chinese CVC investment began to develop, as traditional industry giants and tech companies started to establish their strategic investment departments. 

Since 2015, under a government policy of encouraging entrepreneurship and innovation, Chinese CVC investment began to accelerate. During this period, the number of corporate venture capital institutions peaked at 170. In addition, the scale of startups and the amount of investment also expanded significantly. Since 2016, the total investment of Chinese CVCs has been on par with independent venture capital.

CVCs can generally be divided into two categories, the traditional enterprise CVC, and the tech one.

In traditional industries, manufacturing is the backbone of CVC entities, with these companies typically involved in media, games, real estate, medical care, logistics, automobiles, and consumer electronics.

Companies behind tech CVCs usually fall into two distinct groups: older tech giants like Tencent, Baidu, and JD.com, and newcomers focused on mobile devices like Bilibili, ByteDance, and Xiaomi.

Chinese tech CVCs have continuously driven the development of the real economy while serving the strategic development of their parent companies, becoming an essential part of China’s capital market.

The trillion-dollar investment playground for giant CVCs

Today, tech companies account for 20% of CVC companies in China, contributing a sizable part. Data shows that many CVCs within tech companies have been more active in foreign investment than those in traditional companies.

Take ByteDance as an example:

ByteDance mainly invested in content industries related to its own business in its early days. As traffic on the short-video platform Douyin (TikTok’s China version) began to peak, ByteDance sought growth in other areas by investing in education, consumption, e-commerce, medical care, finance, games, and even more niche areas like business-to-business services and hard tech.

Data shows that ByteDance has invested in 193 projects since its establishment and has increased the number of foreign investments every year since 2019. ByteDance invested in 64 companies in 2021, with a cumulative investment amount of nearly RMB 35 billion, which accounts for almost 10% of ByteDance’s total revenue in 2021, according to enterprise database Qi Chacha.

Tencent has one of the most successful CVCs in China. The company’s investment department was established earlier than most CVCs in China. Tencent is also a stakeholder in many well-known Chinese tech companies.

Tencent (including its sub-companies) had made more than 1,180 investments as of December 2021, IT Juzi data showed. Tencent invested in 250 companies in 2021 alone, more than the sum of Baidu, Alibaba, 360, JD.com, Xiaomi, ByteDance, and Bilibili. According to data shown in its Q3 report, Tencent’s 2021 investment projects are valued at RMB 1.75 trillion, which is almost equivalent to the total GDP of China’s northern Shanxi province (home to around 35 million people) in 2020.

Tencent prefers investing in pan-entertainment media industries, especially the gaming industry, one of its main business lines. The company is also heavily involved in corporate services, finance, education, healthcare, and new food and beverage chain brands.

Tech CVCs may invest less in tech

As ByteDance disbanded its CVC (which it called strategic investment department), copies of apparently official regulatory documents called “Rules of Practice for IPO and Investment of Tech Companies” (our translation) began to spread on the Chinese internet. The files showed that tech companies who want to conduct IPOs, or seek investment or fundraising will need to seek approval from China’s internet watchdog Cyberspace Administration of China (CAC) if they meet two standards: they either have more than 100 million users or more than RMB 10 billion in revenue in the past year, or, deal with sectors heavily regulated, such as media and financial services.  

Many commentators believe the document caused ByteDance to dissolve its CVC department, despite CAC denying issuing such a file. However, as Chinese regulators keep up the anti-monopoly crackdowns on top tech companies, many firms will look to cut down their strategic investments to err on the side of caution. 

Even before ByteDance dissolved its strategic investment department, other tech majors had already begun to cut ties with invested companies. 

Alibaba Group first sold its 5.62% stake in media firm Caixin in 2019 and withdrew its investment from Mango Excellent Media ahead of schedule in September 2021 with a loss of RMB 2.3 billion. Daniel Zhang, the CEO of Alibaba, stepped down as board of directors at both Didi and Weibo in late 2021 and early 2022.

Meanwhile, Tencent began reducing its shares in JD.com by paying a mid-term dividend; it later announced that it would reduce its 2.7% stake in Sea, the largest tech company in Southeast Asia, and give up its super-voting rights, with a total divestment of $3.1 billion. 

Tech giants’ CVCs have played a positive role in China’s platform economy, but at the same time, they have stifled small and medium-sized startups’ development, says Hu Jiye, a finance professor at China University of Political Science and Law. Top tech companies have sometimes forced startups to follow their strategy by holding shares and suppressing competition, Hu added, stating that startups can only survive by abiding by the rules set by these tech giants. The Chinese government considers this behavior disorderly expansion and the abuse of the companies’ dominant market position.

Hu believes that the voluntary contraction of tech CVCs could benefit small and medium-sized enterprises and that Chinese CVCs will enter an era of regulated development, leaving behind an unregulated era.  

Only three days after China’s metaverse social app Zheli topped the App Store in China, an impressive feat for a newcomer, the app’s owners pulled the platform from app stores across the country to address various controversies.

Zheli, which means “gel” in English, is a 3D avatar maker that allows users to share their daily lives with friends and shows users’ approximate location and mode (at school, at work, or near a shopping mall). 

The app provides fashionable characters and outfit options to create a customized avatar. It became an instant hit in China after its launch in January. Zheli allows users to add up to 50 friends via the app.

Why it matters: The quick rise of Zheli, less than one month since its launch, is a rare success story in China’s social networking industry, which has been long dominated by Tencent’s super app WeChat. Zheli’s emergence has further fueled the ongoing metaverse frenzy in the country, which has been building momentum since last year.

• On Feb. 11, Zheli replaced WeChat as the most downloaded app in the App Store in China with a record high of 435,000 downloads. It’s the first time an app has taken the top download ranking from WeChat since 2019.
• Chinese tech giants Baidu, Tencent, and ByteDance have been investing and developing metaverse features and services in the wake of the global metaverse craze.
• China’s metaverse social networking companies also includes Soul and ByteDance’s Party Island.

Details: Beijing Yidian Digital Entertainment Co., Ltd, the operator of Zheli, said in a Feb. 13 announcement that it had removed the app from app stores and suspended new user registration voluntarily to improve the experience for existing users.

• The firm cited various stability issues (slow loading time, constant crashes) as the major reason for the removal. But it denied having collected user information without permission when users made friend referrals through third-party messaging tools like WeChat and QQ. Last week, users claimed that the company violated users’ privacy. 
• “I like the app for its designs and youth culture, but there’s still a lot of room for improvement functionality-wise,” Echo Gong, an analyst from research agency Coresight, told TechNode. 
• Users can invite new friends on the app either through phone contact list or WeChat. But it could be a time-consuming experience as WeChat doesn’t support direct link invites and users might have to open browsers to complete the process. 
• Zheli’s communication functions are still limited to photos and microblogging, less diversified compared with mainstream social platforms, which offer formats such as long texts, short videos, and emojis, Gong added.

READ MORE: Metaverse in China: Investors and tech leaders say they are prepared

58 Freight, one of Asia’s biggest logistics carriers, has gotten the green light from the Hong Kong stock exchange to proceed with its listing, the company’s updated prospectus shows.

Why it matters: 58 Freight operates in both the Chinese mainland and the Hong Kong market, known as Kuaigou Dache in the mainland and GoGoX in Hong Kong. GoGoX, formerly known as GoGoVan, is the largest logistics service provider in Hong Kong and merged with 58 Suyun, the freight business unit of Chinese online marketplace 58 Daojia, in August 2017.

• In the mainland market, the company is a distant second to Lalamove in the on-demand logistics sector with just a 5.5% market share, compared to Lalamove’s 54.7% share, according to market research firm Frost & Sullivan.

Details: The company has received approval from the Hong Kong stock exchange for its initial public offering (IPO) with CICC, UBS, BOCOM International, and ABC International acting as underwriters on the deal, according to an updated prospectus released on Feb. 6.

• The company said it has more than 26.5 million registered users with a pool of nearly 5 million drivers as of September 2021. To compare, Lalamove stated that more than 20 million people used its services with over 3 million drivers as of March 2018.
• The company’s revenue increased 27% year-on-year to RMB 473 million ($74.4 million) for the first nine months of 2021, with a gross profit margin of 36%, an increase of 1.4% from the previous year. Its net losses reached RMB 660 million in 2020.
• 58 Daojia currently own a 51% stake of GoGoX. Alibaba’s online marketplace Taobao is the third largest shareholder with a 13% stake in the company, according to its prospectus.

Context: Lalamove initially weighed a $1 billion US IPO in June last year, but later shifted the listing plan to Hong Kong as the Chinese government tightens rules for technology companies listing overseas, Bloomberg reported.

• Another competitor of 58 Freight, Full Truck Alliance, went public in June 2021 and raised $1.6 billion on the New York stock exchange, just a week before the US listing of Chinese ride-hailing giant Didi. In July of the same year, Beijing launched a cybersecurity investigation into Full Truck Alliance’s logistics platforms.

Ant Group promotes more NFT-like digital collectibles ahead of the traditional Chinese New Year. BSN launches an NFT infrastructure platform. Hangzhou to expand the use of digital yuan during the upcoming Asian Games. JD supports digital yuan payments through hardware wallets. 

NFTs for the Chinese market

• Ant Group’s blockchain and tech arm AntChain launched an NFT-powered campaign ahead of the Chinese New Year (which starts on Feb. 1 this year according to the lunar calendar). The subsidiary worked with 24 museums in China to create digital versions of famous Chinese animal antiques, representing the twelve creatures of the Chinese zodiac. Users can buy these digital artifacts through the mini-program Topnod on Alipay, Ant’s popular payment app. Unlike NFT platforms elsewhere, most Chinese platforms don’t allow buyers to resell or trade their purchases due to government regulations aimed at minimizing speculation. (AntChain)

• China’s state-backed Blockchain-Based Service Network (BSN) launched an NFT infrastructure platform in the country on Tuesday. The BSN-Distributed Digital Certificate (BSN-DDC) is an infrastructure platform for individuals and companies to build portals or manage NFTs that are compliant with Chinese regulations, which prohibit trading, mining, and speculation of crypto assets. The platform integrated and localized 10 popular public chains, including Ethereum and Corda. (Coindesk)

Digital yuan promotion

• In a five-year plan from a local financial administration in the eastern province of Zhejiang, the government signalled an expansion of pilot zones for China’s digital yuan. The report laid out plans to encourage qualified regions to apply to China’s central bank for the right to host pilot zones, and popularize the use of the national digital currency during the 2022 Asian Games, due to be held in Zhejiang’s capital city of Hangzhou in September. (Huanqiu, in Chinese)
  
  
• China’s e-commerce major JD now supports digital yuan hardware wallets, making it the first online retailer to support this payment method. Users with a digital yuan hard wallet can pay through JD’s app, as long as their phone supports Near Field Communication (NFC), a technology that allows data transfers between devices that are placed close to each other. JD’s fintech arm JD Technology is also a technical service provider for the digital RMB pilot projects. (TechWeb, in Chinese)

Youzan, one of China’s largest e-commerce service companies, is reportedly planning to lay off 1,500 people, or nearly 30% of its employees. The company is the latest Chinese tech firm to cut workers as Beijing enters the second year of tightening regulations. 

Why it matters: Youzan, which develops software helping merchants to sell products on various Chinese online platforms, has faced substantial challenges as one of its major clients, social video giant Kuaishou, is developing its own software services as it aims to rake more profit from the booming livestream retail sector.

• The contribution from marketers on Kuaishou has fallen by half from its highest level when it accounted for 20% of Youzan’s gross merchandise volume (GMV) in the first half of 2021, according to its interim financial report released in August.

Details: Earlier this month, Hong Kong-listed Youzan kicked off a wave of layoffs in departments involving research and development (R&D), Chinese media Sina Tech reported Thursday, citing people with knowledge of the matter.

• More job cuts will be conducted among various departments this year, as the people estimated that more than 1,500 employees would be forced to leave the company. Hangzhou-headquartered Youzan had 4,358 employees as of Sept. 30.
• The company recently parted ways with Chen Jinhui, a former executive at Baidu’s takeaway service who joined the company as a vice president of sales channels in mid-2017.
• Youzan did not immediately respond to TechNode’s request for comment.

Context: Multiple Chinese big tech companies, including Bytedance, Baidu, and Kuaishou, have been carrying out layoffs and lowering their growth targets amid a slowing economy and a tightened regulatory environment.

• Youzan reported a 10% year-on-year decrease in revenue to RMB 1.17 billion (around $185 million) for the first three quarters of 2021, while its losses nearly doubled from RMB 340 million in the same period of 2020.

Read more: INSIGHTS│The TechNode community reviews China tech 2021

SES Holdings, a US startup with plans to open a Shanghai factory next year, is teaming up with Honda to boost the development of its novel lithium-metal batteries, with the Japanese automaker announcing investment in the battery company.

Why it matters: Honda is the third automaker to partner with SES on electric vehicle (EV) batteries. The deal is the latest in a string of moves by global auto majors to develop battery technologies that they hope will accelerate their shifts to electrification.

Details: SES signed a joint agreement with Honda to work with early stage prototypes of its lithium-metal battery, or “A-samples.” In addition, Honda plans to buy 2% of SES AI Corporation, a new entity that will be created by an SES partnership with a special purpose acquisition company (SPAC) to list in the US, according to an announcement by SES published Wednesday.

• Boston-based SES expects to raise $275 million from the deal with the SPAC, Ivanhoe Capital Acquisition Corp, and a proposed listing on the New York Stock Exchange. The merger is subject to a shareholder vote on Feb. 1. 
• Honda is joining a list of global auto majors already backing the 10-year-old battery startup. They include General Motors, Hyundai, Geely, SAIC, and Foxconn, according to the statement. SES was initially formed as a spin-off from a research lab at the Massachusetts Institute of Technology (MIT).
• “Through the support of Honda and all of our strategic and financial investors, we are well positioned to execute our development and production plans to bring next generation battery technology to global EV manufacturers,” said CEO Hu Qichao, SES’s founder and an MIT graduate.

Context: Conventional lithium-ion batteries contain heavy liquid electrolytes, while solid lithium-metal batteries are lighter and therefore could offer increased range and faster charging than their lithium-ion counterparts, according to J.D. Power, a data and analytics company focused on the auto industry.

• SES in November showcased a lithium-metal battery cell with over 100 amp-hours of charge, while most lithium-ion battery cells run between 50 and 120 amp hours, Bloomberg reported. The company plans to mass produce its battery cells at a factory in Shanghai which is scheduled for completion in 2023.
• Auto and battery companies are beginning to experiment with new battery types as the EV market matures. Chinese EV maker Nio plans to deliver a version of its electric sedan model ET7 in the fourth quarter of this year. It will be equipped with a 150-kWh semi-solid state battery pack, which the automaker claims will mean a 50% increase in energy density from current offerings.

Taobao updates a buying advice service into a digital artwork platform. China’s digital yuan wallet app sees increased adoption. Beijing court plans to move more of its judicial process online and uses blockchain technology in the process. State-backed Blockchain Services Network plans to build an infrastructure that allows people to build and manage NFT apps and transact in Chinese yuan. 

More NFTs with Chinese characteristics

• Taobao announced on Jan. 16 that it will update its purchase recommendation service HeyBox to turn it into HeyDesign, a blockchain-powered platform for digital artworks. Launched in 2017, HeyBox recommends items to buyers and sellers on Taobao using artificial intelligence and Alibaba’s big data. HeyDesign, or Youyin in Chinese, plans to attract more than 100 artists or businesses to publish design pieces on the platform. (ChinaZ.com, in Chinese)

• China’s state-backed Blockchain Services Network (BSN) plans to build an infrastructure to help businesses and individuals create and manage non-fungible tokens (NFTs). The infrastructure will allow users to develop their own portals or apps to manage NFTs and transact with only the Chinese yuan, differentiating it from crypto-transacted NFTs outside of China. The infrastructure is named the BSN-Distributed Digital Certificate (BSN-DDC). It’s an open, permissioned blockchain that allows a governing body and integrates 10 chains, including the adapted versions of Ethereum and Corda, plus domestic chains such as Fisco Bcos, initiated by Tencent-backed fintech firm WeBank. (SCMP)

Digital yuan wallet app on the rise

China’s digital yuan wallet app has been downloaded more than 20 million times, doubling its user base in just 10 days following its official launch. China’s life services giant Meituan has also seen growth in digital yuan wallet adoption. In the first week of the wallet’s launch on Jan. 4, the average daily number of digital yuan transactions on the Meituan super app increased by about 43% and users adding digital yuan wallets to Meituan increased by 20%. The wallet app is developed by the Digital Currency Research Institute of the People’s Bank of China. (Cailian Press, in Chinese)

Blockchain-powered judicial process

The Beijing court system reported that 67.4% of trials were held online last year, a higher proportion than anywhere else in the country. The court has developed the “Beijing Mobile Court” and “Beijing Cloud Court” (our translations) using blockchain, cloud storage, facial recognition, and other technologies to facilitate the digital transformation. Liu Shuangyu, vice president of Beijing Higher People’s Court, said Beijing will continue to digitize its judicial process, including expanding the use of digital dossiers and case files. (People’s Daily, in Chinese)

Zvision Technologies, a Chinese startup that makes lidar sensors for self-driving cars, announced a new investment from three Chinese automakers on Monday, including Xpeng Motors. The company becomes the latest startup to tap growing investor interest in the self-driving car space.

Why it matters: The investment is another sign of the increasing interest in lidar sensors, seen as a crucial building block for future vehicles by most auto and tech firms. Lidar is a key component for self-driving cars and uses laser light to sense surroundings. 

Details: Zvision has raised “hundreds of millions of yuan” in a pre-Series C led by Xpeng Motors, according to a Monday announcement (in Chinese). Shang Qi Capital, a private equity firm owned by Chinese automaker SAIC, participated in the round. 

• State-owned automaker Dongfeng Motor and existing backer Intel Capital also joined the round. A company spokeswoman declined to disclose an exact valuation when contacted by TechNode on Tuesday.
• Zvision plans to use the funds to accelerate the development and mass-production of its automotive-grade lidar sensors, including improving its production line and supply chain. The company has yet to show a timeline. 

Context: In September, Xpeng had begun delivering the world’s first Lidar-equipped production vehicle, the P5, which the company boasts can distinguish objects within a range of up to 150 meters and can run autonomously under a driver’s supervision on Chinese roads, the South China Morning Post reported. 

• Xpeng sources lidar sensors for the P5 from Livox, an affiliate of Chinese drone maker DJI, which previously encountered technical issues when attempting to meet the reliability requirements for automobiles, TechNode reported last June.
• In November, the EV maker unveiled its second sports utility vehicle model, the G9. It will come fitted with two lidar sensors provided by Robosense, a lidar startup backed by SAIC and BYD. The G9 is scheduled for delivery in the third quarter of 2022.
• Xpeng chief executive He Xiaopeng told investors last May that the company was testing lidar technology from multiple suppliers.
• Rival EV maker Nio has heavily backed Innovusion, a startup formed by two Baidu veterans in 2016, and used the firm’s lidar technology for its first sedan model ET7 as well as the upcoming ET5.

The People’s Bank of China releases a digital yuan wallet app. China’s state grid completes the country’s first digital yuan smart contract payment in the solar power industry. The eastern city of Ningbo embraces blockchain technology. Taiwanese pop star Jay Chou shows support for friend’s NFT project. 

Digital yuan progression

China’s central bank, The People’s Bank of China (PBOC), released a digital yuan wallet app on various app stores on Jan. 4. PBOC’s Digital Currency Institute, the developer of the national digital currency, also developed the app. The app is a consumer-facing payment app, helping the central bank to carry out trials of digital wallets, exchanges, and circulation services using the digital currency. (China Star Market, in Chinese)

China’s state grid in the northern province of Hebei collaborated with several companies and the local branch of the Industrial and Commercial Bank of China to facilitate the country’s first digital yuan smart contract settlement case in the solar power industry. The grid company first calculated the revenue for a centralized solar power provider, then used the digital yuan’s smart contract feature to pay an equipment rental company, leaving the remaining income for farmers who installed solar panels and shared the power. The grid claimed such a payment set-up helped all parties recover funds faster. (STCN, in Chinese)

Ningbo embraces blockchain 

China’s eastern city of Ningbo released a blockchain tech white paper on Dec. 30. The white paper laid out a plan for Ningbo to develop its blockchain sector. By 2023, Ningbo wants to develop one to two top blockchain companies with global influence, set up one national blockchain laboratory, and have one to two blockchain-focused industrial parks. The white paper said Ningbo has over 90 blockchain projects under construction, with a total investment of more than RMB 600 million. (China Star Market, in Chinese)

Jay Chou shows love for NFTs

Taiwanese pop star Jay Chou’s fashion brand Phantaci and an NFT company Ezek jointly released a new digital avatar series called “Phanta Bears” on New Year’s Day and sold 10,000 copies. Ezek was co-founded by Chou’s friend Will Liu. The digital bears traded at 0.4 ETH on Monday, up from the insurance price of 0.26 ETH, or about $1,000. Chou has changed his Instagram profile picture to the digital bear to show support, but on Monday, his record label JVR Music released a statement clarifying that Chou himself has no business ties with Phanta Bears and is merely happy for his friend’s success. (JVR Music, in Chinese)

YouiBot, a Chinese industrial mobile robot maker, announced Tuesday that it has received more than RMB 300 million ($47 million) in two additional funding rounds of Series B, led by venture capital firm FG Venture and private equity company Xicheng Jinrui respectively.

Why it matters: The investment highlights the funding trend for industrial robotics manufacturers, a crucial ingredient in smart manufacturing, which is regarded as an essential part of China’s initiative to become a global leader in core technologies by 2025.

READ MORE: Robotics is facilitating China’s digital transformation in manufacturing and construction

Details: The deals are follow-up investments for a $15 million Series B the company received in May this year. Other investors of the current funds are IDG, and returning investors, including Pine Venture, SIG, BlueRun Venture, SoftBank, and SOSV’s HAX Accelerator.

• YouiBot said the proceeds will be used for research and development, team building, and market expansion.
• The financing will boost the company’s total fund raised to more than RMB 500 million to date.
• The five-year-old company offers services in 26 provinces and cities in China,  with products exported to more than 30 countries, including Japan, South Korea, Singapore, Spain, and Germany.
• YouiBot claims to be one of the few companies that can realize a high positioning accuracy of ± 2mm for mobile robots. The company’s software-hardware integrated solution has been used by semiconductors, 3C, and electric power manufacturers.

Context: YouiBot was founded by Zhang Zhaohui and Bian Xu, alumni of China’s prestigious Xi’an Jiaotong University, in 2017. The company develops solutions for factory automation and logistics management, as well as inspection and maintenance for various industries.

• The company’s early-stage investors include ZhenFund, C&I Capital, Innoangel Fund, and XJTU 1896.
• To achieve the shift from a low-end manufacturer to a high-end producer, China released the ‘Made in China 2025’ plan in 2015, targeting local robot manufacturers to supply half of the domestic market by 2020 and 70% by 2025.

TikTok owner ByteDance plans to accelerate the overseas commercialization of its workplace communication app Lark in the coming year, Chinese local media outlet LatePost reported Wednesday. The company aims to achieve a global revenue of RMB 6 billion ($940 million) in the next five years.

Why it matters: Lark, known as Feishu in the Chinese market, is ByteDance’s bet on the enterprise-facing services sector, which has been boosted as remote work apps gain traction globally due to the Covid-19 pandemic.

• ByteDance, long celebrated as an “app factory”, listed Lark as one of its six business units, or strategic focuses, in a November reshuffle.
• Chinese tech peers Alibaba and Tencent currently lead the country’s workplace app market with DingTalk and WeCom.

Detail: ByteDance plans to seek new growth points for the business in the overseas market as Feishu, Lark’s Chinese sister app, faces growth bottlenecks in the domestic market, according to the report.

• The app already operates in countries such as the US, Singapore and India, and plans further expansion in African countries, starting with global companies with China operations.
• Feishu recorded 4.5 million daily active users in November, up from 3 million in March. But the figure still fell far short of its goal of reaching 10 million daily active users in the first half of this year, LatePost reported.
• In comparison, Alibaba-backed DingTalk said (in Chinese) in October that it has 500 million individual users and 19 million enterprise clients. Tencent’s WeCom had more than 130 million daily active users and 5.5 million enterprise clients by the end of 2020.
• The company didn’t respond to TechNode’s inquiries when contacted Thursday morning.

Context: ByteDance first developed Feishu as an internal tool in 2016, began marketing the platform as a business in 2019, and launched the international version Lark in April 2019.

• ByteDance has built a whole line of enterprise collaboration apps including video conferencing app Feishu Meeting and Feishu Jisuban, a lightweight version of the original app.
• Despite Lark’s new international focus, capturing a share of the overseas market is likely to be challenging, with incumbents such as Slack and G Suite currently dominating.

On Tuesday, China’s search giant Baidu opened internal testing of a major update for Xirang, the company’s virtual reality app. The app will host the company’s AI developer conference next week, kick-starting Baidu’s effort to become an infrastructure platform in the metaverse. 

Why it matters: Baidu hopes the upgraded app and the conference will showcase the company’s AI capabilities and draw in developers to create content and help build a virtual world. 

• In the past decade, Baidu has been transitioning from a search company to an AI company. The tech giant sees the metaverse as an opportunity to further commercialize its AI capabilities, such as cloud computing, voice and visual intelligence, natural language processing, and knowledge graphs. 

Details: The Xirang upgrade will allow the app to host a three-dimensional virtual conference that can accommodate 100,000 concurrent online attendees. Initially, the pandemic pushed the company to develop the app as a virtual alternative to hosting large in-person tech conferences, but Baidu has further developed the app amid the rise of the metaverse this year. 

• Baidu started working on Xirang in December 2020. It released the first version at the hackers’ conference Def Con in March 2021, and an upgrade at Baidu’s World Conference in August. 
• Baidu plans to roll out at least one major upgrade every year, Baidu’s Vice President and manager of Xirang Ma Jie told a Beijing press conference on Tuesday. Baidu is calling the about-to-be-released version a “-6.0”, saying the app needs at least six more years to be fully ready, but it wants to work to that point openly. 
• Ma added that Baidu “doesn’t plan to do everything ourselves… We have left many unsolved issues in this version and want to invite everyone to help us fill in the imperfections.”
• Baidu will release the upgrade on Dec. 27. It will also host a conference and a developer contest at the same time. Winners will get to display their work in one of the app’s spaces. 

READ MORE: Metaverse in China: Investors and tech leaders say they are prepared

Context: Baidu is on track to become the first major Chinese tech company to release a metaverse-focused application. Tencent, Alibaba, and ByteDance have also expanded and invested in the metaverse this year. 

• Xirang is named after a concept in the Chinese mythical story collection called Classic of Mountains and Seas (Shan Hai Jing in Chinese), thought to have been first written some 2,400 years ago. In the book, xirang was a small piece of land used by the mother of a goddess (Nüwa in Chinese) to repair a pillar of heaven. The land could grow infinitely.

Baidu announced on Dec. 10 that it will update its virtual reality app Xirang (meaning “land of hope” in Chinese) at the end of December and use it to host a virtual event that can accommodate more than 100,000 online attendees. 

Why it matters: China’s search giant has been looking for ways to leverage its AI capabilities in the burgeoning metaverse field. This update is a sign of Baidu’s ambitions in the three-dimensional online space. 

READ MORE: Metaverse in China: Investors and tech leaders say they are prepared

Details: The company called the app “the first Chinese-made metaverse product” in a Dec. 10 press release. Baidu said the upgrade will offer an immersive virtual planet with experiences such as touring China’s Shaolin Temple and the Sanxingdui Museum, an important archeological site in Sichuan. 

• Baidu will host its annual AI developer conference “Create 2021” on the Xirang app this year, the first time the conference will take place virtually since it launched four years ago. The company said the app will allow up to 100,000 attendees to experience immersive and interactive sound and visual effects simultaneously.
• In the press release, Ma Jie, Baidu’s Vice President and Xirang’s manager, said the metaverse industry is in its very early exploratory phase. “We need a community and a long time to build it,” he added.
• After the upgrade, people will be able to log in on Xirang via various devices, including computers, phones, and wearables, to attend virtual conferences, shop, meet new people, and tour exhibitions. 

Context: Baidu has been developing the Xirang app for months, even before the metaverse concept became popular in the Chinese market this summer. The popularity of the metaverse has partly motivated Baidu to upgrade the app. 

• In early November, Baidu’s Vice President Ma Jie said at a Baidu AI event (in Chinese) that the company plans to develop VR content platforms and VR interactive platforms for content creators in the metaverse. 
• Baidu is not the only Chinese tech giant making moves in the metaverse. ByteDance has invested in several metaverse-related companies, including VR headset maker Pico. Alibaba Cloud, a subsidiary of the e-commerce giant, announced a “metaverse” solution in November to provide cloud and other technical support for metaverse-related applications. 

Xpeng Motors confirmed with TechNode on Wednesday that it is facing delivery delays caused by an ongoing supply crunch in lithium iron phosphate (LFP) battery packs, as customers of the Chinese electric vehicle maker are reportedly frustrated over months-long waits for their new cars.

Why it matters: Xpeng is the latest Chinese automaker to feel the sting from the supply chain shortage of both semiconductor chips and key battery materials.

• The EV maker in late October began delivering its second sedan model, P5, without millimeter-wave radar units due to the shortage of radar chips. Xpeng promised owners it would install the components by next March.

Details: Xpeng said that it has apologized to customers who experienced significant delays after ordering its flagship P7 sedan. It is currently ramping up to ensure the lower-end P7 deliveries are made no later than next February, state-backed Shanghai Securities News reported Wednesday, citing a company representative.

• Xpeng will also cancel the orders and refund down payments if requested by customers, the spokesperson said, adding that deliveries of the entry-level version of its P7 sedan, which has a driving range of 480 kilometers (298 miles), would be delayed up to 17 weeks.
• Several customers complained that the Alibaba-backed EV maker deliberately intends to prioritize deliveries of higher-end versions of P7, according to a post published Monday on “Black Cat,” a complaint platform owned by Sina. The P7 allows for a driving range of up to 670 km.
• When contacted by TechNode on Thursday, an Xpeng spokeswoman responded by calling the post’s accusation “factually wrong” and that the company “didn’t prioritize deliveries of the high-end P7.” The higher-version P7 models are equipped with the conventional cobalt lithium-ion batteries that guarantee more power and range than LFP batteries, the spokeswoman noted.

Context: Xpeng delivered 56,404 vehicles during the first three quarters of this year, a figure four times higher than the 14,077 vehicles it placed with customers during the same period in 2020. It set a delivery forecast of up to 36,500 vehicles for the last three months of this year.

• Speaking to analysts during an earnings call on Nov. 23, President Brian Gu said the company was aiming to hit a monthly delivery of 15,000 vehicles over the next two months, although he expected the supply chain constraints to remain “very severe.”
• Xpeng rival Nio on Nov. 10 predicted its fourth quarter deliveries would number between 23,500 and 25,500 vehicles, as chief executive William Li said during an earnings call that the company’s delivery volume was constrained by supply chain volatilities with regards to certain chips and batteries.
• Li added that the company is currently ramping up battery production with partner CATL and expected production volume to reach “a reasonable level” in the first quarter of 2022. Nio delivered 24,439 vehicles in the third quarter of this year, an 11.6% increase from the preceding quarter.

Baecsense and Tencent Cloud win bid to build blockchain projects for the Beijing municipal government. City of Suzhou sets up the country’s first national blockchain development pilot zone. Nayuki Tea and Bakery releases a virtual idol and 300 NFTs. Qihoo 360 builds a system to monitor crypto mining activities. 

Chinese government’s blockchain push

• Baecsense, an edge computing chips and blockchain company, and Tencent Cloud jointly won a major project from Beijing’s blockchain computing platform, led by the Beijing municipal government’s Bureau of Economic and Information Technology. The project asks the two companies to provide cloud software for hash power platforms, servers and equipment, computer room and supporting network, and system development and integration. The bid amounts to RMB 238 million ($37.3 million). Tencent Cloud also owns 20% of Baecsense’s shares. (Beijing Government Procurement Center, in Chinese)

• China’s eastern city of Suzhou has won support from the Chinese government to set up the first national blockchain development pilot zone, according to a formal notice from The Ministry of Industry and Information Technology. The city has 160 blockchain companies and nearly 300 companies focusing on related technology, 30 of which have been selected for the key blockchain company database by Jiangsu province, where Suzhou is located. (China Star Market, in Chinese)

Tea and NFT

On Tuesday, Chinese beverage chain Nayuki Tea and Bakery released a virtual idol named “Nayuki” and 300 NFTs to celebrate its sixth anniversary. The Nayuki idol was tasked to sell store cards through a livestream and achieved sales of RMB 200 million in three days. The chain also released 300 digital artworks in seven different styles, priced at RMB 59 apiece, which cannot be traded after purchase. Chinese brands are increasingly using NFTs as a marketing strategy. (Lanjinger, in Chinese)

Mining monitor

Qihoo 360, a Chinese cybersecurity company, said that it had built a system to monitor crypto mining operations to assist the government’s crackdown on the industry in a Nov. 30 WeChat post. The company said it had found that on average, 109,000 mining IP addresses were active daily throughout November, mainly in the provinces of Guangdong, Jiangsu, Zhejiang, and Shandong. (Coindesk)

Tesla and General Motors Wuling are the two undisputed leaders of the pack in China’s $49 billion electric vehicle (EV) market, together holding nearly a 20% share this year. But more than a dozen legacy and infant automakers are in hot pursuit. All emerging from rough patches, three US-listed domestic makers—Nio, Xpeng, and Li Auto—now comprise the second tier of contenders. Riding on high-growth trajectories, the trio are tipped to be Tesla’s most formidable domestic challengers.

Yet with a flood of new money supercharging the industry, third-tier EV makers are coming on as powerful forces as well. Reporting deliveries in significant numbers and backed by a growing list of reputable investors, several pose a real-time threat to the US-listed trio, and speculation is building that some are preparing for listings in Hong Kong.

The third-tier upstarts have been buoyed by strong growth in domestic electric passenger car sales this year. Sales of 321,000 EV units in the first ten months of 2021 represented a 141% year-on-year increase from the same period in 2020, when the overall auto sales slumped 14% from the year before, data from the China Passenger Car Association shows.

Here is our roundup of the four most competitive upstarts emerging in China’s EV space.

WM Motor – First mover making a comeback

Along with Nio, Xpeng, and Li Auto, WM Motors was once one of Deutsche Bank analysts’ “Fab Four” of likely candidates to grab the non-Tesla piece of China’s EV market. 
 
Founded in 2015 by Freeman Shen, a former top Volvo executive, WM Motor was one of the earliest EV startups to deliver production vehicles to Chinese customers, reporting a quite respectable delivery number of around 22,000 cars back in 2019. That was a few thousand more than Nio’s numbers that year, and far eclipsing Xpeng’s, which delivered just over 5,000 vehicles. Trailing far behind, Li Auto churned out its first model Li One later that year.
 
While WM Motor took an early lead in entering initial production, it was quickly overtaken as its sales growth remained virtually flat. Meanwhile, rival Xpeng jacked up deliveries almost five-fold in 2020. Now WM Motor’s delivery numbers of 34,068 vehicles for the first ten months of this year are only half of those of Nio’s and Xpeng’s.

How did WM Motor lose its first-mover advantage in a fast-growing market? There is a consensus that the automaker presents itself as a rather faceless brand (in Chinese): Its cars are functional but middle-of-the-road. Meanwhile, peer Nio is increasingly perceived by customers as a high-quality premium brand with top-of-the-range services. WM Motor has also lagged behind Xpeng in the autonomous vehicle space. Then in late 2020, it was plagued by a recall affecting over 1,000 of its vehicles following several reports of fires within a single month in late 2020.
 
Nonetheless, many venture capitalists are still anticipating great things for WM Motor. The Baidu-backed EV maker in October said that it was near wrapping up its $500 million Series D funding round led by PCCW, a Hong Kong telecom company owned by the family of local business magnate Li Ka-shing. WM Motor is aiming to launch its fourth production model and first sedan, the M7, by next year. The model will face off against the likes of Tesla’s Model 3, Nio’s ET7, and Xpeng’s P5.

Hozon – Closing in on Xpeng and Li Auto

Surpassing Nio and Li Auto in monthly vehicle deliveries for the first time in October, the lesser known Hozon may soon be a rising force to be reckoned with in the Chinese EV market.
 
With three affordable entry-level cars in its portfolio, the Zhejiang-based automaker handed over 8,107 vehicles to Chinese customers in October, marking a stunning growth of 294% compared to its deliveries in October 2020. Deliveries for the first ten months of this year totaled nearly 50,000 vehicles, closing in on the numbers of Xpeng and Li Auto. Each delivered more than 60,000 units during the same period.
 
A strong sales recovery in China’s EV market as a whole is a key factor fostering the rise of the likes of Hozon, said Cui Dongshu, secretary general of the China Passenger Car Association, during an online conference last month. China witnessed strong growth in electric passenger car sales, recording a 141% year-on-year increase in October to 321,000 units, when the overall auto sales slumped 14% from a year earlier, data from the industry body showed.
 
A wave of local but big state companies have noted the uptick in EV sales this year and are rushing to back growing EV startups. The government of Yichun city in central Jiangxi province is Hozon’s largest shareholder, taking a 51.31% stake in the company, The Economic Observer reported (in Chinese). And Hozon in October said it closed an RMB 4 billion ($626 million) Series D1 led by Qihoo 360, representing a major endorsement by China’s biggest cybersecurity firm.
 
This was followed by an undisclosed amount of investment by CATL, the first publicly known investment in a young EV maker by the battery giant, Yicai reported in November. (CATL also has invested in Zeekr, a premium EV subsidiary of Geely.) Eyeing a capital raise of $1 billion from an initial public offering in Hong Kong next year, Hozon aims to achieve annual sales of 70,000 vehicles this year and increase that number more than sevenfold to 500,000 in five years.

Leapmotor – Budget buyers’ choice

China’s fast-growing EV market has drawn an array of unusual competitors from television makers to real estate firms. Among them is Dahua, China’s second-biggest surveillance equipment maker. Formed in 2015 by Zhu Jiangming, Dahua’s co-founder and former technology chief, Leapmotor is the newest Chinese EV unicorn, having raised over RMB 11.5 billion ($1.8 billion) amid the flood of new money pouring into China’s EV space.
 
In its most recent funding round, announced in July, the company raised RMB 4.5 billion from heavyweights including state-backed CICC Capital and investment entities led by the municipal government of the eastern city of Hangzhou, where its parent Dahua is headquartered. This was quickly followed with a plan to build a new assembly plant with a production capacity of 200,000 cars annually in Hangzhou, Chinese media reported. The plant is scheduled for completion in 2023.
 
As with Hozon, the current three Leapmotor models are all budget-minded mainstream vehicles, priced between RMB 60,000 and RMB 200,000 ($9,390 to $31,300). And yet, Leapmotor’s budget mini-electric car, T03, has really gained traction in the market. With a starting price less than $10,000, the four-seater mini-electric car claims a range of 403 kilometers (250 miles) on a single charge and offers assisted driving functions such as lane departure warning and automatic emergency braking.
 
With T03 accounting for over 90% of the company’s deliveries this year, Leapmotor has declared a wildly ambitious annual target of more than 800,000 deliveries by 2025. That would account for nearly 60% of all EV sales in the country, according to the China Association of Automobile Manufacturers (CAAM). The Hangzhou-based EV maker is reportedly weighing a Hong Kong listing of more than $1 billion as soon as next year.

Human Horizon – Crazy rich SUVs

Born in late 2017, Shanghai-based Human Horizons is unique among a large pool of EV startups in China: It has never raised any outside investor money. That’s in sharp contrast to the likes of Nio and Xpeng which used to struggle to secure funding for their cash-burning businesses.

Founder Ding Lei also has an unusual background. Ding started his career as a quality engineer for the joint venture set up by Volkswagen and SAIC in Shanghai in 1988, then became a vice president of the state-owned automaker in 2007. Yet his most notable experience occurred in 2013, when he became a deputy head of the city’s Pudong New Area for a two-year period. In 2017, he founded both Human Horizon and an investment firm called East Coast Capital.

The company’s premium EV brand Hiphi attracted many eyeballs by releasing what is believed to be the most expensive made-in-China EV model ever: Hiphi X. The limited edition electric sports utility vehicle costs RMB 800,000 (around $125,000). With a driving range of 550 km (342 miles) on a single charge, the luxury vehicle boasts a stand-out performance and an opulent interior to “a degree at which the [Tesla] Model X looks quite conventional,” as one reviewer put it. 

Human Horizon’s efforts with the Hiphi X were successful. In September it delivered 641 Hiphi X units, becoming the first locally-made car to top sales in China’s premium EV segment, defined as autos priced above RMB 500,000 ($78,450). Its sales beat both Porsche’s electric supercar, Taycan, and Audi’s sports sedan, E-tron, according to CPCA figures. The company last month announced it would launch a second premium SUV model, the GT-Hiphi Z, next April and start delivery within the year. No price details have been released.

Space travel will only be “a game for rich people” if its cost can not be reduced, said a founder at a Chinese rocket launch startup on Friday.

“If every trip to space costs $1 million, it won’t be a commercial market,” Cheng Wei, founder of Chinese space company Rocket Pi said at the Beyond Expo event held in Macau on Friday. (our translation).

Cheng said that the first step for the commercial exploration of the universe would be sending animals into space.

“We first have to develop the ability to send lifeforms other than humans, like cells or primates, to travel in space to gather data before human exploration can be fully achieved,” said Cheng.

Companies in the emerging market also have to consider regulatory challenges, the entrepreneur said. “This is a long march and we still have a lot of hurdles to overcome,” he added.

Co-founded by Zhuang Fengyuan, an academic at the International Academy of Astronautics, Rocket Pi is among the early movers in the private space exploration sector in China, developing and operating space launch systems for in-orbit experiments for biopharmaceutical studies.

The company is currently on track to launch a biological payload carried by a satellite, called Sparkle-1, later this month, and put several more into orbit next year, Cheng told TechNode. It has set a long-term goal of building a space lab to enable human space travel after 2025.

China has just started constructing its own space station and the country’s research in space life sciences is still at an early stage, Cheng said. He added that there is significant work to be done in helping commercial space travel become a reality, such as reducing the acceleration load for less experienced space travellers so that they can have a safer, smoother ride.

In April, China began building its first permanent space station, Tiangong-1. SpaceX, the aerospace company founded by Elon Musk, made history in September by successfully launching the first orbital flight with four amateur space travelers, marking the first time that an all-civilian crew reached space.

Local officials in Shanghai warned about fake virtual currency cases. Chinese authorities reported the country’s first money laundering case involving digital yuan. Several authorities in local Chinese districts and provinces vow to continue the crackdown on crypto mining. 

Fake virtual money

Shanghai’s procuratorate in Songjiang District said on Wednesday that they have observed a rising trend of criminals using fake virtual currency compared to traditional currency, based on reports of fake money cases in 2021. The procuratorate warned that criminals tend to draw people into scams based on popular virtual and digital currencies. (China Start Market, in Chinese)

Digital yuan money laundering

China’s northern region of Inner Mongolia has reported the first digital Renminbi money laundering case, according to police in the city of Baotou. The case involved RMB 8 million ($1.25 million). A fraud group from outside of China asked a Chinese group to launder money for them in the form of digital yuan. China’s central bank, the issuer of the national digital currency, helped the Baotou police to investigate the case. (Baotou News, in Chinese)

Crypto news sites go offline

Chinese crypto news outlets ChainNews and Odaily have suspended their websites as China continues to crack down on trading and mining cryptocurrency. On Monday, ChainNews tweeted that it was suspending its service for 8-10 hours due to site upgrades and maintenance. The site remains down as of publication, but the outlet is still active on Twitter. Chinese blockchain industry site Odaily also stopped access to its site, but it remained active on Weibo and Twitter. (SCMP)

Crypto mining crackdown continues

Several local Chinese authorities have announced more actions aimed at crypto mining in their jurisdictions. Authorities in the southeastern city of Guiyang set up a new hotline for people to report on mining activity, while the Sichuan provincial government organized a video conference to plan further mining crackdowns. Authorities in Fujian and Beijing’s Haidian district also had similar discussions. (Guiyang and Sichuan, Fujian, Beijing, all in Chinese)

Box.Game, a China-based coding platform for youth, has closed a $5 million angel round to help build a 3D virtual world where young users can create, play, and socialize.

Why it matters: The funding is a sign of how hot the metaverse concept or its buzzword value has become globally. The company claims it is the first youth-focused metaverse project in China to attract new funds this year.

• Coding is taught in STEM courses, which are considered “quality education” in China. Compared with online tutoring for compulsory curriculum subjects, they have been less affected by China’s sweeping crackdown earlier this year on private schooling targeting K-12 students.

Details: Box.Game said in a Nov. 18 press release shared with TechNode that the round was led by Atypical Ventures, a venture firm founded by former DCM partner and Kuaishou angel investor Ruby Lu. The project was incubated by Codemao, a leading coding and AI education company.

• The proceeds will be used to support the development of “a metaverse for teenagers and youths” to create an interconnected virtual world of their own. 
• With the round, the company plans to expand its existing 50-member team and to launch content creator incentive plans.
• Sun Yue, the Codemao founder who also leads Box.Game, said the Web-based multiplayer content creation platform would rely on organic growth rather than large-scale marketing for short-term growth.
• The company emerged as a youth-focused platform but Sun expects it to expand to other age groups. “Box.Game aims to be a metaverse for creators of all ages,” he told TechNode.
• Amid tightening regulation of online education and gaming in China, Sun said coding training is among the few subjects the state encourages for extracurricular education. “Content creation can take multiple forms, and gaming is just one of them. We provide the platforms, and it’s up to the creators to decide what content they will take,” Sun said. He added that the company will comply with local regulations while facing a global market.
• “We have seen the creativity of Chinese children on the Box.Game platform and were impressed by those young users,” said an Atypical Ventures representative.

Context: Parent company CodeMao is a top edtech firm. It has received total of more than $360 million in funding from investors such as Hillhouse Capital and the investment arm of smartphone maker OPPO. In addition to the domestic Chinese market, the Shenzhen-based firm plans to expand to other Asian countries and Europe.

• With its self-developed Box 3D Engine, creators can build various content, from games to art items, on the platform.
• Starting from an incubated project within Codemao in 2018, Box.Game was launched in June this year. As of September, the platform has reached 1 million monthly active users, about 8% of whom are game developers.

Chinese self-driving startup WeRide is partnering with Guangzhou Automobile Group (GAC) to bring autonomous vehicles (AV) onto ride-hailing platform Ontime. It is part of a joint push toward the commercial deployment of robotaxi services, the two companies said on Thursday.

Why it matters: WeRide’s expanded partnership with automaker GAC is the latest example of the startup branching out to work with more companies as it develops self-driving vehicles and related services.  

Details: WeRide is working with GAC to integrate its autonomous driving system into the latter’s Aion S electric sedans and make them available for customers of Ontime, a ride-hailing subsidiary of the auto major, according to a joint statement issued Thursday (in Chinese).  

• The companies said they have been testing AVs equipped with WeRide’s latest sensor hardware on public roads in restricted areas of the southern city of Guangzhou. The goal is to offer a robotaxi pilot service to Ontime users in 2022.
• WeRide and GAC will work together to develop purpose-built new L4 self-driving vehicles. The current robotaxi model, based on the Aion S, is still a retrofitted version, a WeRide spokesperson said when contacted by TechNode on Thursday.

Context: Guangzhou-headquartered WeRide has been working since 2018 with GAC, which is Toyota’s and Honda’s Chinese manufacturing partner, to retrofit its software and sensors into GAC’s vehicles such as the Trumpchi GE3 crossover.

• The four-year-old startup launched its geo-fenced robotaxi pilot service to the public using a fleet of Nissan cars on the outskirts of Guangzhou in November 2019. Its fleet of 300 AVs has driven more than 7 million kilometers (nearly 4.4 million miles) as of writing. For comparison, Google’s self-driving subsidiary Waymo said early last year that its vehicles had logged more than 20 million miles since its inception in 2009, Reuters reported.
• GAC first launched its ride-hailing service Ontime in partnership with Tencent in Guangzhou in June 2019, later expanding to Shenzhen. It currently handles more than 300,000 rides a month.
• Rival T3, backed by three local automakers, is racing for market share and has completed over 1.2 million trips monthly. Didi remains the dominant player, however, with monthly orders of 20 million in August, Chinese media reported, citing people familiar with the matter.

Self-driving startup QCraft will equip the next generation of its autonomous driving system with Nvidia’s Drive Orin processing chip. The chip can be deployed to both self-driving prototypes and mass-produced vehicles.

Why it matters: Nvidia claims the Drive Orin system-on-a-chip (SoC), unveiled in late 2019 and scheduled for shipping in 2022, is by far the “world’s highest-performance, most-advanced” processor for use in autonomous vehicles (AVs). Its use will allow QCraft to develop driverless vehicles for road testing and partially automated cars for the consumer market.

Details: Nvidia’s Drive Orin chipsets will underpin the hardware suite that will be fitted as standard for QCraft’s next-generation self-driving car fleet, the two companies announced as they unveiled the deal at an event on Tuesday.

• Capable of performing 254 trillion operations per second (TOPS), the Orin supercomputer will be the brain of QCraft’s vehicles, providing the necessary power to process inputs from multiple sensors as well as GPS and mapping data, according to a statement released Tuesday.
• QCraft will begin testing its AVs with the Nvidia-assisted computing platforms by the end of next month, given that it already has experience in adopting the chipmaker’s technology, chief technology officer Hou Cong told reporters during an online conference on Wednesday.
• The self-driving startup, backed by tech giants Bytedance and Meituan, on Wednesday also unveiled its third-generation hardware system, including nine cameras, five lidar units, and four millimeter-wave radar units, claiming a lower production cost and improved sensing capabilities.
• The technology costs of installing an array of sensors in vehicles will be lowered to between RMB 100,000 and RMB 150,000 ($15,620 to $23,430) in the next two years, chief executive Yu Qian told Chinese media last month. A testing AV reportedly costs at least $130,000 in sensors and computers, according to John Krafcik, former CEO of Google’s self-driving subsidiary Waymo.

Context: Nvidia has also signed a series of deals with Chinese electric vehicle upstarts (including Nio, Li Auto, and WM Motor), supplying their upcoming vehicle models with the chipmaker’s SoCs.

• QCraft has been operating a self-driving test fleet of nearly 100 vehicles for public transit and ride-hailing pilot services in nine domestic cities, including Shenzhen and Wuhan. It is also developing assisted driving technologies for several automakers, chief scientist Da Fang told TechNode in September.
• In August, it raised $100 million in a Series A+ led by YF Capital (the investment firm founded by Jack Ma) and participated in by Longzhu Capital, a venture capital fund of Chinese on-demand service giant Meituan.

Chinese electric vehicle maker WM Motor showcased its first sedan model named M7 on Friday. The company boasts that the car has an advanced sensor package and will be affordable as it aims to carve out a place in the country’s competitive auto market.

Why it matters: WM Motor’s first sedan model, the M7, will compete head to head with Nio’s highly-anticipated ET7, Xpeng’s P7 and P5 sedans, and the Zhiji L7, a premium electric vehicle co-launched by SAIC and Alibaba.

Details: The M7 sedan features extensive autonomous driving hardware, with 32 sensors, including three lidar units that use light to create a three-dimensional representation of surrounding objects. The model can provide advanced driving capabilities on highways and urban roads.

• It also delivers a total computing power of 1,016 trillion operations per second (TOPS) with four Nvidia Orin chips, matching that of Nio’s ET7 and offering around seven times the power of Tesla’s two-chip full self-driving (FSD) computer. This tech spec provides headroom for upgrading the vehicle in the future, the company said.
• WM Motor has yet to reveal the price of the sedan. But founder and chief executive Freeman Shen said the M7 will target China’s mainstream vehicle segment with prices ranging from RMB 150,000 to RMB 300,000 ($23,505 to $47,010) in a press conference on Friday in Shanghai. 
• It is unclear whether the Baidu-backed EV maker will use the Chinese search engine’s self-driving technology in the new model. WM Motor expects to start deliveries of the M7 sedan by the end of 2022.

READ MORE: Lidar is hard—but it’s coming soon

Context: WM Motor, which is also backed by Hong Kong billionaire Richard Li’s telecommunication firm PCCW, has delivered over 70,000 vehicles, failing to match rivals such as Nio and Xpeng, which have handed over 140,000 and 100,000 vehicles respectively as of September.

• WM’s rival Nio has plans to deliver its first sedan, the ET7, with a price range between RMB 378,000 to RMB 506,000 in the first quarter of 2022. Nio is also reportedly mulling a new sub-brand targeting the middle to lower auto market.
• Meanwhile, Xpeng is on track to begin delivering its Lidar-equipped P5 with a starting price of RMB 157,900 at the end of this month. It has sold over 50,000 P7 cars, its first sedan model priced from RMB 229,900, since deliveries began in July 2020.

On Thursday, troubled Chinese beverage chain Luckin Coffee released its unaudited financial report for the first half of 2021, posting doubled revenue and narrowed losses.

Why it matters: This is Luckin’s first normalized financial report after the company admitted to reporting fraudulent sales numbers of $310 million in April 2020. The company filed bankruptcy in the US in February but managed to remain relevant in China’s competitive beverage market. 

READ MORE: The Big Sell | Luckin is not dead

Details: The company recorded RMB 3.2 billion ($492.9 million) revenue in the first half of 2021, leaping 106% year on year from RMB 1.5 billion in the same period of 2020.

• The company warned that its performance in the first half of 2020 was “materially adversely affected” by the Covid-19 pandemic and advised investors to consider these factors when evaluating the growth metrics.
• Chairman and CEO Guo Jinyi attributed the revenue growth to revenue increase from self-operated stores, increased order frequency, higher prices, and improved cost structure.
• Revenue from core business product sales jumped 89% year on year to RMB 2.7 billion. Net loss fell 86.4% to RMB 211.4 million in the reporting period.
• The company operates 5,259 stores as of June, including 4,018 self-operated stores and 1,241 franchised “partnership stores.”
• Luckin is shifting to an asset-light model by growing more franchised stores. Luckin takes up to 40% of a franchised store’s profits once it reaches an agreed earnings threshold, depending on the size of the store.
• The number of self-operated stores decreased by 5.8%, and partnership stores increased by 50.6% in the period. Self-operated stores achieved an operating profit margin of 16.3%. 
• Revenue from partnership stores surged 357.8% year on year to RMB 441.2 million. 
• Partnership store revenue accounted for 13.9% of Luckin’s total revenue in the first half, up from 6.2% in the same period last year.
• The company’s average monthly transacting customers increased 35.1% year on year, from 7.8 million to 10.5 million, in the first half of 2020.

Context:  Luckin is attempting a comeback over the past year by settling the financial fraud. 

• The firm agreed to pay a $180 million penalty to the US Securities and Exchange Commission to settle charges of sales fabrication in December 2020.
• In September, Luckin settled a US class-action lawsuit, resolving some US investors’ claims against the company. Settlement amounts will be calculated based on a global settlement of $187.5 million.

Chinese flying car startup HT Aero has raised $500 million as part of a new round of funding as it pushes to popularize its technology.

Why it matters: HT Aero, an Xpeng-affiliated company, said the fund is the largest venture funding round for a startup in Asia’s passenger flying vehicle sector to date, according to a Tuesday press release. 

Details: Electric vehicle maker Xpeng Motors led the Series A funding round, along with Chinese venture capitalists IDG Capital and 5Y Capital.

• A number of other new investors also jumped on board, including Sequoia China, Eastern Bell Capital, and GGV Capitals. HT Aero saw its valuation rise above $1 billion before the investment.
• The Guangzhou-based aviation startup plans to use the proceeds to develop a new version of its flying vehicles for both low-altitude air travel and road driving, scheduled for release in 2024, founder Zhao Deli said in the press release.  
• “The investment in HT Aero will further accelerate the build-up of our ecosystem to integrate driving and flying,” Xpeng chief executive He Xiaopeng said.

Context: HT Aero in July unveiled its latest electric passenger drone, Voyager X2, featuring a flight time of 35 minutes and a maximum speed of 130km per hour (around 80mph). Yet the company has no plans for mass production of the two-seater flying vehicle prototype, for now, Caixin (in Chinese) reported Wednesday, citing a company representative.

• The technology is still at an experimental stage, making market valuation difficult. Morgan Stanley estimated the global autonomous urban aircraft sector to be worth $1.5 trillion in a report published in May 2020. However, they cut this figure to $1 trillion earlier this year.

QCraft, a Chinese startup co-founded by four former engineers of Google’s self-driving project, is developing a driverless vehicle expected to launch by the end of this year.

Called “Longzhou Space,” the autonomous shuttle will be “a hybrid between robotaxis and robobuses,” Da Fang, co-founder and chief scientist of QCraft, said on Sept. 17 on the sidelines of TechNode’s Emerge 2021 conference in Beijing. The vehicle is one of the two-year-old company’s efforts to expand its autonomous commercial fleet, which now numbers about 70 robobuses operating in six cities.

“It’s going to provide city bus services but, when the demand is not high, it also can fulfill the (function of) ride-hailing,” Da said. He added the latest product highlights the company’s thinking on the future of shared mobility, in which autonomous vehicles (AVs) will be seamlessly shareable among people and can be adapted to carry freight and for other purposes.

Da declined to reveal the name of its manufacturing partner. He told TechNode that the company is also developing assisted driving technologies for vehicles larger than minibuses and sedans in separate collaborations with automakers, without revealing further details.

Since its founding in 2019, QCraft has quickly become a rock star self-driving car company in China. Its co-founders include Yu Qian, a former team leader at Google Maps, as well as Da Fang, Hou Cong, and Wang Kun. All four are former software engineers at Waymo, Google’s self-driving unit that is widely considered a technical leader in autonomous driving.

Now employing about 200 in China and the US, the startup in August announced it had closed a $100 million Series A+ from new investors including YF Capital, a private equity firm founded by Jack Ma, and Longzhu Capital, food delivery giant Meituan’s industrial fund. This followed another major funding round of “dozens of millions of dollars” reportedly from TikTok parent ByteDance and other investors earlier this year.

TechNode took the opportunity at last month’s Emerge 2021 conference to interview Da, a former Waymo engineer in motion planning, one of the most challenging areas for autonomous driving. Da obtained a PhD in computer science at Columbia University where he focused on computer graphics and animation, developing simulation methods used in the modeling of liquids.

The following conversation has been edited for clarity and brevity.

TechNode: Behavior prediction is one of the hardest problems in autonomous driving. Companies including Waymo are training their driverless cars using simulated software to handle various unpredictable situations. How does that work?

Da: Behavior prediction is basically trying to model the world, including the agents such as the other vehicles and people, and predict how they are going to behave. The difficulty is that the future is not really certain. If you imagine a pedestrian standing on the side of the road and he is moving towards the middle of the road, a human driver probably knows how to react to it and to brake to let the pedestrian pass first. But there are uncertainties in the humans’ actions. The pedestrian may stop in the middle of the road or accelerate and speed through the road and reach the other side quickly. So your reactions need to change accordingly.

There are other difficulties as well. For example, negotiations. Sometimes prediction is not just about predicting what the other people or vehicles will move, but also about negotiating with them. If you imagine two cars merging into one lane and they approached the point at roughly the same time, one of them has to proceed first and the other has to brake a bit later. So this will definitely involve some negotiations in scenarios like this. Motion prediction is not only about predicting what other vehicles will do or will not do, but also about understanding how our actions will affect those predictions.

TechNode: There has been a significant debate over whether AVs should leverage multiple sensors or purely rely on cameras to navigate the environment. What is your take on that?

Da: Our view is that these different sensors are very complementary to each other. There’s just no reason to not use them at this stage of AV development. We know that right now, the most commonly used sensors are cameras, lidar, and millimeter wave radar. Lidar is really good at measuring distance. You can get lidar points that specifically, accurately pinpoint an object in a 3D space and know how far they are from us. That’s what cameras can’t do. With millimeter wave radar, you get speed measurement as well, but at a lower resolution.

READ MORE: DRIVE I/O | Lidar is hard—but it’s coming soon

There are many advantages to cameras in terms of high resolution. You can recognize textures. You can recognize small objects, like traffic cones and faraway pedestrians. That’s something you cannot do with lidar. But you will get a lot of negative impact in adverse weather like rains, snows, and frogs with both lidar sensors and cameras and that’s where radar sensors really shine. All of these sensors have their strengths and weaknesses. None of them by itself is going to be enough for dealing with all the scenarios. Basically, we have to use all of them together in order to build a really safe vehicle.

TechNode: But which one is better for AVs to detect and react to stable objects such as parked vehicles? That’s one of the major technical issues behind the recent Tesla and Nio crashes.

Da: We know that’s a very challenging problem for radar, mostly because of the low resolution. Radar sensors have reflections of these objects, but they have a difficult time telling them apart from backgrounds like the ground or buildings on the side of the road. Lidar will be much better because of a higher resolution. You can recognize objects directly apart from the background, even though it’s just a stationary point. With cameras, you can do the same, because you have much richer information in both resolution and color. I think right now lidar is proving to be the most important sensor of the three for highly autonomous driving.

TechNode: You and your founding team members worked at Waymo for a few years before setting up QCraft. What have you learned from that?

Da: One of the things that Waymo has done really well that we are trying to replicate here is that engineers do not just try to solve the problems, but try very hard to solve the problems in the right way. So, for example, the computation of the headway.

When you’re controlling the vehicle to follow the vehicle in front in the same lane at a comfortable distance, there’s this headway distance that you want to figure out. If an engineer is tasked with computing this optimal headway distance, how would he proceed? An average engineer will probably say, let’s put up a few driving logs, watch what human drivers have been doing, measure the distances, and maybe do some averages. They will get some numbers like 10 meters, 20 meters, 30 meters, depending on different scenarios, and then just use the numbers.

Obviously, that’s a really bad solution because it doesn’t generalize. Let’s say 20 meters may be good for a reasonably high-speed road, but it’s not good for expressways and urban areas as well. A better engineer would realize that it depends on the driving speed and the circumstances, such as the width of the road, but, most importantly, the speed of the two vehicles.

But that’s not good enough, still. If we have a really good engineer, who’s trying to always go one step further, he will think about when we are driving the car ourselves, why we will pick a different headway distance at different speeds. The answer is probably at a high vehicle speed, if we don’t leave enough room in front of our vehicle when the car in front of us brakes, we will not have enough reaction time.

That’s going straight to this concept called RSS, which stands for “responsibility-sensitive safety.” If we have a really good engineer who’s trying to find the right solution, they will basically discover RSS by themselves by solving this problem. That’s a really important thing that we would value. (Editor’s note: RSS is a mathematical model for AV safety framework developed by Intel’s self-driving division Mobileye.)

Luckin Coffee has settled a US class action lawsuit, resolving some US investors’ claims against the company, which admitted in April 2020 to fabricating $310 million in sales. Settlement amounts will be calculated based on a global settlement of $187.5 million, according to a company statement issued Sept. 19. 

Why it matters: The bankrupt company, striving for a business turnaround, is moving a step further to repair its image after the fraud scandal. 

READ MORE: The Big Sell | Luckin is not dead

Details: The settlement plan is still subject to approval from courts in the US and Cayman Islands, according to a Tuesday statement from the company, which is registered in the Cayman Islands.

• Luckin’s chairman and chief executive, Guo Jinyi, said this settlement will resolve a “significant contingent liability” for the company, allowing it to “move forward with a greater focus on operations and execution of strategic plans.”
• The company also reported Tuesday in its annual report that revenue increased 33.3% year on year to RMB4.0 billion ($618.1 million) in 2020, despite being hit by the pandemic. The revenue growth was primarily driven by price increases, said the company.
• Luckin operated 3,929 self-operated stores as of 2020, a drop of around 15% year on year from 4,507 stores in 2019. As a result of the ongoing restructuring, the number of the company’s partnership stores nearly tripled to 874 in 2020 compared to 2019. 
• Shares of the company, still available on the OTC market after delisting in July, climbed nearly 40% to $15 per share so far this year on business turnaround prospects. That is well below its historic peak of $50 per share reached in January 2020 when it was listed on the Nasdaq.

Context: The fraud perpetrated by the once high-flying coffee chain has made regulators and investors more wary of Chinese tech companies.

• Luckin agreed in December to pay a $180 million penalty to the US Securities and Exchange Commission to settle charges of sales fabrication.
• China’s State Administration for Market Regulation imposed an RMB 61 million fine on Luckin and a group of affiliated companies last September for creating unfair competition by stating fraudulent sales figures.
• Lu Zhengyao, the ousted founder of Luckin, is trying to make a retail comeback with his noodle chain restaurant Qu Xiaomian.

XTransfer, a Chinese cross-border financial and risk management services provider, announced Friday that it raised $138 million in Series D. The round lifts the fintech firm to unicorn status. A unicorn is an unlisted startup valued at $1 billion or more.

Why it matters: The capital signals investor confidence in services supporting small and medium-sized enterprises (SMEs).

• The funding round came as China’s cross-border trade bounces back in the post-pandemic period. China’s import and export volume surged 23.7% year on year in the first eight months of this year, according to data from China’s General Administration of Customs. 

Details: US investment firm D1 Capital Partners led the current round with participation from existing investors.

• The proceeds will be used to upgrade XTransfer’s products, invest in big data and artificial intelligence, bolster the anti-money laundering (AML) risk management system, and recruit talent for overseas expansion, according to the company’s statement.
• “Cross-border e-commerce is growing by leaps and bounds due to policy support,” said Bill Deng, founder and chief executive of XTransfer. 
• “For exporters, the latest round of overseas expansion has been a lot different from a few years earlier, marked by diverse sales channels and fragmented orders. Digitization is a major trend amid cut-throat market competition,”  he added.

Context: Founded in 2017, Xtransfer specializes in business-to-business (B2B) cross-border financial services. It serves a client base of approximately 150,000 SMEs, mostly in China.

• XTransfer generates revenue by collecting foreign exchange service fees from clients.
• The Shanghai-headquartered company didn’t disclose total funding but had raised $30 million at the time of the B round in 2019. That was followed by two undisclosed batches in the C round.
• Investors in previous rounds include Yunqi Partners, Gaorong Capital, 01 Capital, eWTP Capital, Telstra Ventures, MindWorks Capital, and Lavender Hill Capital Partners.

Chinese server robot maker Keenon Robotics announced Wednesday that it received $200 million in Series D funding led by returning investor SoftBank. Keenon says it is the largest funding ever in the service robot sector. 

Keenon’s funding news comes just one day after rival PuduTech announced a RMB 500 million ($78 million) investment.

Why it matters: The two hefty deals this week highlight rising investor attention to the robot delivery market, an emerging sector ready for commercialization and on the rise thanks to the booming non-contact economy in the post-epidemic era. 

• SoftBank Vision Fund, a venture capital fund of Japan’s SoftBank Group conglomerate, steps further into the robot delivery industry, adding to its bets on semi-humanoid robot Pepper and industrial robot maker Youibot.
• By the end of this year, the global robot market is expected to be worth $33.6 billion, according to a report (in Chinese) released during the World Robot Conference this week. The Chinese robot market accounts for around RMB 83.9 billion, or 39% of the global market, the report shows.
• The market for service robots, which Keenon and PuduTech are engaged in, is forecast to be worth RMB 30.3 billion by 2021. The segment will be worth RMB 60 billion by 2023, thanks to growth in visual guided robots and accompanying robots.

Detail: The company didn’t disclose the size of SoftBank’s investment. Other investors in the round include CICC ALPHA and Prosperity7 Ventures, a diversified growth fund of Aramco Ventures. China Renaissance is the exclusive financial advisor for this financing.

• The proceeds will be used by Keenon to “drive innovation through its in-house R&D to provide new, efficient, and cost-saving applications” and for “scaling its current robot platform through the expansion in new markets and identifying new prospects to promote growth and boost revenue”, according to company founder Tony Li. 
• “We believe robotic solutions can have a profound impact across the services industry by assisting with repetitive, tedious workflows,” said Kentaro Matsui, managing director of SoftBank Group, in the statement.
• Keenon currently has more than 10,000 clients in over 60 countries located in Asia, Europe, and North America.

Context: Founded in 2010, the Shanghai-based company offers commercial service robots and intelligent delivery solutions for industries such as real estate, healthcare, and hospitality. Starting with a server robot in restaurants, Keenon gradually expanded its application to hotels, karaoke lounges, hospitals, and other scenarios.

• SoftBank Ventures Asia led a nine-digit yuan series C round in Keenon in December last year. Investors from earlier rounds include Source Code Capital and Yunqi Partners.

Deeproute.ai, a Chinese self-driving car startup, announced Tuesday that it had raised more than $300 million in a Series B led by Alibaba.

Why it matters: The investment is perhaps Alibaba’s most significant move in autonomous driving.

• The announcement didn’t disclose the size of Alibaba’s investment nor Deeproute’s valuation. Chinese media Che Dongxi reported (in Chinese) that Alibaba poured $200 million into the startup and said it’s valued at more than $1 billion. That would make Deeproute, a two-year-old startup, the newest self-driving unicorn, following Pony.ai and WeRide. 
• A Deeproute spokesperson declined to comment on the report.

Details: Alibaba led the Series B. Other investors include Jeneration Capital, a Hong Kong-based venture capital firm, and an investment fund of Chinese automaker Geely, according to the Tuesday announcement.

• Deeproute plans to increase its proprietary fleet of self-driving test vehicles from more than 30 to 100 by the end of this year. An autonomous ride-hailing service already opened to the public in Shenzhen, Deeproute’s regional headquarters, on July 19.
• The company is testing some sedans and trucks for Chinese auto giants Dongfeng Motor Group and Geely in the central city of Wuhan and the eastern city of Hangzhou, among other cities. 
• The company also plans to launch a robotaxi pilot project in California later this year. It received a permit from the state in June to provide autonomous rides. 

Context: Deeproute develops software for self-driving cars and operates several pilot programs to transport people and goods. In September 2019, Deeproute closed a $50 million pre-Series A, led by Fosun RZ Capital, Chinese conglomerate Fosun Group’s investment affiliate. The company secured an undisclosed amount in Series A a year later.

• Alibaba previously had invested in AutoX, another self-driving startup based in Shenzhen. The e-commerce giant’s investment program, Alibaba Entrepreneurs Fund, participated in AutoX’s $100 million Series A in September 2019.

Correction: An earlier version of this article incorrectly stated the number of Deeproute’s proprietary test vehicles as 20, not more than 30.

Chinese autonomous driving startup WeRide is testing a self-driving cargo van that can carry out delivery services. WeRide is partnering with carmaker Jiangling Motor Corporation (JMC) and courier firm ZTO Express.

Why it matters: Since the coronavirus pandemic, Chinese companies are seeing accelerated adoption of autonomous vehicles (AVs) for contactless delivery.

Details: WeRide on Thursday announced that it has been working with JMC, a Chinese manufacturing partner of US automaker Ford, to test a self-driving electric van designed for cargo delivery since the second half of last year. Courier company ZTO will purchase an undisclosed number of the vans to test.

• ZTO, backed by Alibaba, will help find driving routes for the pilot project, ZTO Vice President Jin Renqun said during an online press conference on Thursday. The courier will also test the van in real-life delivery scenarios. 
• The company said in a Thursday statement that the van can drive in “all-weather” conditions and on urban roads and highways. The van will also be equipped with Level 4 autonomous capabilities, which means the car can pilot itself without a human driver most of the time. 

Context: Guangzhou-based WeRide began testing self-driving minibuses in its headquarters city in January. It also completed a $310 million Series B, led by Yutong Group, a Chinese electric bus maker.

• Chinese authorities are laying regulatory grounds to help companies test more self-driving automobiles. Regulators in July released a new regulation (in Chinese) that allows AVs to be tested on selected highways and city roads.
• Tech giants and automakers have invested heavily in Chinese driverless startups. Inceptio, a robotruck startup last month secured $270 million from investors that included JD Logistics, the delivery arm of online retailer JD. Robot delivery firm Neolix recently closed a fresh funding round, led by Softbank Ventures Asia and CICC Capital.

READ MORE: The Chinese startup bringing robotaxis to the masses

Nio is enveloped in a public relations nightmare after Chinese traffic authorities last month disclosed the first known fatality involving one of the company’s vehicles using its partially automated driving system. 

Called Nio Pilot, the advanced driver assistance system (ADAS) has been a major selling point for the maker of luxury electric vehicles (EVs). Now it stands accused of overselling the capabilities of the technology. There could be more consequences to come as Nio is in advanced plans to enter the competitive mass auto market.

The Aug.12 crash of the Nio ES8, resulting in the death of the 31-year-old driver, has also had repercussions throughout the autonomous vehicle industry, with many fearing the prospect of tougher regulation and the loss of public confidence. Xpeng Motors and Li Auto last month quickly dropped the terms “autonomous” and “advanced” in describing their ADAS systems, respectively. 

The fatal crash: The accident occurred on a highway in Putian city in eastern Fujian province. The driver, Lin Wenqin, had placed his 2020 ES8 into Nio’s Navigate on Pilot mode, which basically takes control of the car during highway driving. The sports utility vehicle struck a highway maintenance vehicle stopped in the same lane, according to a statement (in Chinese) posted by local police on Chinese microblogging platform Weibo on Aug.18. The cause of the crash remains under investigation by Putian city police.

Shortcomings of ADAS: Pending results of the police investigation, whether the incident was triggered by a software glitch or human error remains an open question. It appears, though, that either Lin or the in-car system failed to recognize the stationary highway car in front of the ES8 and to move to another lane in response. 

• Similar to Tesla’s Autopilot system, Nio’s ADAS technology can keep a car advancing in its lane, maintain a safe distance behind traffic ahead, and can even change lanes automatically in some cases. However, currently these systems have difficulty detecting parked vehicles and braking for them.
• Nio’s ADAS system uses cameras, powered by computer vision algorithms, and radar sensors to detect and avoid obstacles, but there is room for errors when a vehicle encounters new situations which its AI algorithms had not detected during training.
• The radars of partially autonomous systems are not very good at distinguishing types of stationary obstacles, Raj Rajkumar, a professor at Carnegie Mellon University, told Wired in an interview about Tesla’s similar ADAS technology; the radars, therefore, are designed to ignore such obstacles in order to avoid false braking events.
• Similar incidents have occurred with Tesla drivers. The first Tesla fatality in the US happened in 2016 when a Model S with Autopilot active crashed into a white semi-trailer crossing the highway. A dozen more Tesla vehicles have since been reported for ramming into static obstacles including fire trucks and police cars; US regulators last month finally launched a broad investigation into the company’s technology, reported the New York Times.
• So far, autopiloting technology has been a regulatory blind spot in China and no higher authorities are known to have launched a broader probe into the Nio case in addition to local police.

Nio’s image in tatters: The deadly incident comes at a crucial time for Nio. Having struggled to gain a foothold in the luxury EV segment, the seven-year-old automaker is pushing to roll out its first mass-market car, eyeing a segment of the market where competition is fierce and margins are thin. Now its hard-won reputation as a high-quality premium brand is under threat.

• Nio has built up and benefited from an enthusiastic customer base similar to that of Tesla’s. However, the once incredibly loyal user community is becoming fragmented, as indicated by the response to a group letter (in Chinese) from 500 Nio owners, published online on Aug.18, in defense of the company. 
• More than 10,000 users joined in an online debate with the hashtag “objection to the joint statement” (our translation) in the chat room of Nio’s mobile app, disputing the group letter’s contention that there was “no misleading information” in Nio’s advertising of its ADAS technology. In the chat room, some Nio owners criticized the company’s service staff for overstating the capability of Nio Pilot before their purchases, while some blamed the company for providing little information about the ADAS functions and its limitations, according to a South China Morning Post report.
• In the latest development to hit Tesla’s challenger, Lin’s family contacted the Putian city police, alleging that Nio employees tampered with data from the crashed vehicle; Nio denies the charge.

Far-reaching consequences: Nio’s user manual warns that the ADAS system cannot detect stationary objects, including “roadblocks,” nor can it brake for them. Drivers are required to take control of their cars immediately when these situations arise. This means the liability for such accidents will probably lie with drivers themselves.

• Meanwhile, the auto industry is expecting strengthened regulation in automotive software to ensure safe operation and to tackle security issues for intelligent and connected cars. The central government earlier this month proposed new data security rules for autos, a move that Nio’s local competitor, Li Auto, last week said could result in more efforts to develop an assisted driving function in compliance.
• The publicity nightmare has also cast a shadow upon Nio’s business, highlighting the challenge for the company to maintain strong connections with a rapidly expanding user community, Chinese media reported, citing Zhou Zhanggui, a brand management consultant.
• Having gone through a liquidity crisis and aiming for an all-round expansion, Nio is at a critical juncture and must take steps to restore its image. The luxury carmaker is accelerating the pace to launch its first mass-market model under a new brand, reportedly scheduled for early next year, with plans to almost double its store count to 366 in the domestic market by the end of this year. “We want to provide better products and service at prices lower than Tesla’s,” said Nio’s CEO William Li last month.

Also in the news:

Xpeng plans foray into the premium market: As Nio moves to the mainstream market, Xpeng Motors is doing the opposite. The Alibaba-backed EV maker, which has maintained a price range between RMB 150,000 ($23,225) and RMB 300,000, is looking to expand in the domestic market by entering the premium-market segment with a high-end model scheduled for release in 2023.

• The new model will be sold for at least RMB 400,000, equipped with the company’s technology that could set it apart from its competitors, CEO He Xiapeng said during an earnings call on Aug. 26.
• He added the company is on track to roll out the Xpilot 3.5, the company’s ADAS technology, early next year and a 4.0 version in 2023, enabling the vehicle to automatically steer on city streets, not just on highways.

Internet giants doubling down on self-driving tech: Although the arrival of a truly self-driving car remains delayed indefinitely, Chinese tech giants are still betting heavily on self-driving startups with the intention to own a large share of the driverless driving future. Their investments come at a time when the Chinese government is establishing a looser framework with an expanded scope for testing self-driving vehicles, the South China Morning Post reported.

• Qcraft, a robobus startup formed by a group of former Waymo engineers, recently raised $100 million in a funding round from investors including YF Capital, a private equity firm founded by Jack Ma, and Longzhu Capital, the investment arm of life-service app Meituan.
• Xiaomi is acquiring Deepmotion, a Beijing-based startup working on high-definition maps for autonomous cars, as the Chinese smartphone maker ramps up its efforts to develop driverless car technology and mass produce its first EV in the next three years.

Meicai, a Chinese app that supplies farm-to-table produce for restaurants, has been reducing its operations and laying off employees, Chinese media Jiemian reported on Friday.

Why it matters: Cutbacks came after Meicai failed to expand its online grocery delivery business and in July shelved a US IPO plan.

• The company experimented with a grocery community-group buy model to compete with Pinduoduo and Meituan last year. It halted those operations early this year to refocus on servicing restaurants.

Details: Meicai has closed its research and development center in Chengdu, Chinese media Jiemian reported. The company also plans to cut at least half of its employees in several teams in its Beijing headquarters, including product development, sales, and finance.

• The layoffs started two weeks ago and are expected to end in mid-September;  they will affect new employees and mid-level managers. 
• Meicai partially confirmed the downsizing in a Saturday statement, saying the company is conducting “organizational optimization.” The statement said all branches are running as usual.

Context: Founded in 2014, Meicai largely focuses on supplying farmers’ produce directly to restaurant owners. 

• Meicai is competing with Meituan’s enterprise-facing food distribution arm Kuailv in the business-to-business produce market. Kuailv also cut back its services in late August. 
• The company has received investments from renowned investors, including Tiger Global Management, Hillhouse Capital, and GGV Capital. The firm raised $800 million in its most recent round in 2018.

Kuaikan, a popular online comics platform in China, has raised $240 million in a new round of funding, the company announced on Monday. Kuaikan claims the round is the largest ever in China’s online comics industry, according to its WeChat statement. 

Why it matters: Kuaikan, which offers digital comics in its app and website, has managed to attract investors’ attention in the competitive online comics sector.

• Founded in 2014, Kuaikan has become a leading digital content hub for readers of Chinese comics.

Details: Investors include existing backers Tencent, Coatue Management, and Tiantu Capital, and newcomers like CCB International, the investment arm of China Construction Bank, and One Store, a South Korean app market operator co-owned by Naver, which runs the world’s largest digital comics platform Naver Webtoon.

• Chinese media AI Caijing reported that One Store planned to invest around RMB 223 million ($34.4 million) in Kuaikan and take approximately 3% of its shares, citing sources from South Korean media. Kuaikan’s market value will be around RMB 8 billion after the round, the report said. 
• The proceeds from the round will be used to cultivate the platform’s content ecosystem. The company said it will spend a total of RMB 2 billion to subsidize its authors and produce animated comic book adaptions, according to the company’s statement.
• Kuaikan’s CEO Chen An’ni said in an internal memo (in Chinese) to employees that the firm’s comics business has turned a profit and maintained revenue growth of more than 50% in the past few years.

Context: Kuaikan is the largest Chinese online comic platform. In February, the firm ranked first in the most popular comic apps list with about 29 million monthly active users, according to Bigdata-Research (in Chinese), a Chinese market consultancy. 

• The company received $177 million in Series D funding in 2017, and $125 million from Tencent in 2019. ByteDance was once an investor of the company but exited after Tencent stepped in.
• China’s e-comics industry has grown at a more than 20% rate in the past five years, and the market is expected to reach RMB 4.6 billion by 2021, according to iMedia Research (in Chinese).

Neolix, a startup developing autonomous vehicles (AV) for delivery services, said on Wednesday it has raised “hundreds of millions of RMB” from Softbank Ventures Asia, an early-stage investment arm of the Japanese tech giant, among others. Hundreds of millions of RMB means the total funding amount is between about $15 million and $154 million.

Why it matters: The funding marks the latest bet by Softbank on Chinese startups as the Japanese tech giant seeks to dominate the future of artificial intelligence.

Details: Softbank Ventures Asia and CICC Capital, the private equity unit of Chinese investment banking firm CICC, led a Series B investment round in Neolix that closed earlier this year, a spokesperson of the Beijing-based startup said on Wednesday.

• Existing investors and venture capital firms Yunqi Partners and Glory Ventures also joined the round. 
• Neolix did not disclose the valuation at which the funds were raised.
• Neolix planned to use the funds mainly to expand its delivery service, while accelerating its steps into overseas markets, according to a Wednesday announcement (in Chinese).
• The three-year-old company added that it has deployed a fleet of nearly 1,000 robots in around 30 domestic cities, delivering over 1 million orders to around 300,000 users for retailers and restaurants such as KFC and Pizza Hut in China since mid-2020.

Context: Softbank has been a leading funder of ambitious Chinese companies for decades, but amid a wide-ranging crackdown on tech observers have asked if it is repositioning.

• Softbank CEO Masayoshi Son last week said only 11% of its Vision Fund investment has been directed into China since April. The company later told Chinese media that Son’s comments were misinterpreted, insisting that its commitment to China remains unchanged and that it continues to invest in the Chinese market.
• Softbank’s Vision Fund in February 2019 led a $940 million Series B of Nuro, a California-based self-driving grocery delivery service, TechCrunch reported.
• Neolix raised RMB 200 million in a Series A+ financing led by Chinese electric vehicle maker Li Auto in March 2020.

Qcraft, an autonomous vehicle startup backed by several prominent investors, announced on Monday that it had secured a $100 million investment. Investors include YF Capital, a private equity firm founded by Jack Ma, Longzhu Capital, the investment arm of life service app Meituan, and others.

Why it matters: Founded by a group of former engineers at Waymo, a self-driving car company owned by Google’s parent company Alphabet, the funding round serves as a stamp of approval for the two-year-old company. Chinese tech giants are betting big on Qcraft as they move more seriously into the robocar space.

Details: Qcraft has raised a new $100 million Series A+ led by YF Capital and venture capital firm Genesis Capital. Longzhu Capital, a venture capital fund of Chinese on-demand service giant Meituan, participated in the round. 

• Currently piloting around 70 robobuses open to the public in five cities around China, the two-year-old company plans to expand its test fleet to include more than 100 vehicles by the end of this year, according to its Monday statement (in Chinese).
• Qcraft is also exploring new applications in self-driving technology, with plans to launch a ride-hailing service in the eastern city of Suzhou later this year, LatePost reported on Monday, citing the company’s CEO Yu Qian.
• Qcraft declined to disclose its valuation when contacted by TechNode on Monday.

Context: Self-driving car companies are investing more time and energy in autonomous trucks and buses. The trend is driven by the fact that self-driving trucks and buses tend to have more predictable routes and are easier to manage than self-driving taxis.

• Baidu earlier this month rolled out a new version of its autonomous minibus Apolong. It started deploying the robobus in partnership with the government of the southern city of Guangzhou. The search giant said it has been operating an undisclosed number of first-generation Apolong buses in 22 domestic cities since mid-2018.
• Chinese robotaxi unicorn WeRide in December secured $200 million in a funding round from China’s biggest bus maker Yutong. Since January, the company has begun testing its fleet of robobuses in Chinese cities including Guangzhou and Nanjing.
• Qcraft in early 2020 closed a $24 million seed round from investors including IDG Capital and Vision Plus Capital, an investment firm led by Wu Yongming, an Alibaba co-founder, according to figures from business information platform Crunchbase. ByteDance also reportedly planned to invest $25 million in the company in March, according to Bloomberg.

Li Auto closed down 0.85% on its first trading day in Hong Kong Thursday. The Chinese electric vehicle startup opened at an issuing price of HK$118 ($15) per share. 

Why it matters: Li Auto is the latest Chinese tech firm listing in the US to seek a dual-primary listing in Hong Kong. Tech companies increasingly see Hong Kong as an attractive market as they seek to hedge risks when both Chinese and US regulators accelerate regulatory scrutiny.

Details: Li Auto’s Hong Kong debut met with a lukewarm market response. The company’s shares closed at HK$117 ($15.03), 0.85% lower than its issuing price, falling by as much as 2% soon after starting trading. 

• Speaking to reporters on Thursday in Hong Kong, Li Auto’s president Shen Ya’nan said the company has been considering a listing in the mainland, without revealing details.
• The company said it will use the proceeds from the Hong Kong listing to develop new car models and autonomous driving technology, and to expand charging infrastructure and sales networks.

Context: Backed by Chinese life services giant Meituan, Li Auto first went public on Nasdaq last July. The company is the second Chinese EV maker to seek a Hong Kong listing. Its rival Xpeng Motors raised $1.8 billion in Hong Kong in June.

• Li Auto so far has only one model for sale. The company delivered 8,589 cars in July, surpassing both its competitors Xpeng and Nio in vehicle deliveries for the first time in July.
• Both China and the US have issued new regulations that make it more difficult for Chinese companies to raise money in the US markets. In July, Chinese regulators proposed new rules requiring some Chinese companies to seek official approval before listing in overseas markets. The US has threatened Chinese companies with delisting over a dispute about accounting procedures.

Read more: Drive I/O | The untold story of Li Auto

Inceptio, a China-based robotruck startup, said it has closed a $270 million Series B on Tuesday. JD Logistics, Meituan, and PAG led the investment round. 

Why it matters: It’s unusual for two Chinese tech majors to join the same funding round, signaling that they see Inceptio as a key player.

Details: The funding round is led by JD Logistics, online retailer JD’s delivery arm, life service platform Meituan, and private equity firm PAG. Other investors include express courier Deppon and IDG Capital, Inceptio said in a Tuesday announcement. The investors didn’t provide a valuation for the company. 

• Inceptio has raised more than $490 million since its founding in 2018.
• The Shanghai-based robotruck startup will use the new funds to expand in-house research on self-driving systems and accelerate investments in electric trucks, the announcement said. 

Context: Both JD and Meituan have invested in autonomous driving, but progress on driverless technology has been slower than many expected. JD appears to be behind schedule on its own self-driving truck project.

• JD unveiled a highly autonomous truck model in Beijing in mid-2018 and anticipated its testing fleet would begin commercial operation in 2020, The Paper reported (in Chinese). But the company has yet to announce any updates. A JD spokeswoman did not respond to TechNode’s request about meeting the target.
• Meituan has also been investing in self-driving cars for a few years. The company invested in Haomo.ai, a startup developing automated driving systems for passenger vehicles and electric vehicle startup Li Auto. 
• Inceptio announced in March that the company will mass produce two self-driving truck models by the end of this year. The models will be co-developed with Chinese automakers Dongfeng and Sinotruk, respectively.
• Last November, Inceptio raised $220 million in Series A. Investors include battery giant CATL, logistics firm GLP, and Nio Capital, an investment firm partly formed by electric vehicle maker Nio. 

Cloud Village Inc., the music streaming unit of NetEase, was approved by the Hong Kong Stock Exchange to go public, according to a NetEase filing on Sunday. 

Why it matters: Cloud Village’s IPO could be the latest sizable deal in Hong Kong. The company is expected to raise about $1 billion, according to various media reports. 

• The company’s IPO comes three weeks after its main competitor Tencent Music was asked by regulators to give up exclusive music deals. The antitrust regulation created opportunities for NetEase to obtain more music licenses from major labels. 

Ongoing losses: Cloud Village has been operating on losses, losing RMB 1.8 billion ($278.6 million), RMB 1.6 billion, RMB 1.6 billion in 2018, 2019, and 2020, respectively, but the company has managed to narrow its negative profit margin, according to its latest prospectus updated on Sunday. 

• The company’s negative gross margin narrowed from 115% of its revenue to 12% from 2018 to 2020.
• The company said in its prospectus that it expects further losses in the next three years, mainly owing to costs from content, marketing, and research and development units. 

Revenue streams:  Cloud Village’s revenue comes from two services: online music service accounted for 58.4% of its annual revenue in 2020, and social entertainment service, including online karaoke, audio livestreaming, dating, and other services, accounted for the rest. The music service is growing big without making money, while the entertainment service is getting more money out of fewer users. 

• The company managed to grow its active users in online music services, but users have grown less inclined to pay. In the first quarter of 2021, the company’s monthly active users (MAUs) grew 8% to 183.1 million from last year, while the average revenue per paying user (monthly ARPPU), an indicator of a user’s paying ability, declined 22% to RMB 7.1.
• In social entertainment services, however, the trend is reversed. Users have decreased 10% in the first quarter from last year to 18.9 million, but more users were willing to pay. Monthly ARPPU grew 22% to RMB 553.3, doubling the department’s sales figures. 

Context: NetEase first announced plans to spin off its music streaming unit for a separate listing in Hong Kong in late May. 

• Founded in 2013, Cloud Village is primarily a music streaming site. It also offers social networking opportunities for young music enthusiasts in China.
• Cloud Village is the second-largest music streamer in China, following Tencent. In 2020, Tencent Music accounted for 72.8% of the market share, while Cloud Village accounted for 20.5%, said the prospectus.

Chinese online grocer Shixianghui appears to have ended its community group-buy service amid fierce competition in the market and regulatory pressure. The service’s web site and mini-app are no longer functioning. Meanwhile, the company is raising funds for a new snack store business.

Why it matters: The Tencent-backed firm is the latest company to exit the highly crowded community group-buy market, which relies on part-time distributors using WeChat groups to sell groceries to their neighbors. Recent exit signals that the market is going through a new round of consolidation.

• Shixianghui’s retreat from community group-buy comes only three weeks after rival Tongcheng Life went bankrupt.

Details: Shixianghui’s official website and its WeChat mini-program are no longer accessible since last week. On Monday, local media found the company had moved out and emptied its head office in Wuhan. Once valued at $500 million, Shixianghui showed multiple signs of a possible shutdown in recent weeks.

• Both the website and the mini-program do not load as of Friday afternoon, with the mini-program displaying an endless loading wheel.
• Several senior managers left the company this month. Dai Shanhui, founder and chairman of Shixianghui, exited the platform’s operating body on June 30. Senior partner Du Fei announced his departure in a Weibo post on Monday.
• However, Dai denied bankruptcy rumors. He still owns more than 80% of the company, according to information from corporate intelligence database Tianyancha. In an interview with local media, he said that the firm is undergoing a business transition rather than going bankrupt.
• The company’s new community snack chain store Ailingshi is reportedly completing a funding round of up to $30 million.

Context: An early player, Shixianghui was once making profits before tech majors such as Alibaba, Didi, and Pingduoduo entered and competed with heavy subsidies.

• Dai claimed in a January interview that the company earned profits in all its locations in 2020, about 50 cities across China. The company brought in around RMB 200 million to RMB 300 million per month in sales.
• In March, Shixianghui was among the five community group buy companies fined for irregular pricing by China’s market regulator, the State Administration of Market Regulation. The other four companies were Didi’s Chengxin Youxuan, Pinduoduo’s Duoduo Maicai, Meituan’s Meituan Youxuan, and Alibaba-backed Nicetuan.

A Wednesday judicial interpretation released by China’s highest court sets boundaries on how businesses in China can use facial recognition technology. 

Why it matters: The interpretation prohibits businesses from forcing people to accept facial recognition applications on apps to access services. In public spaces, businesses could infringe personal rights if their use of facial recognition violated “related law and regulations,” said the interpretation.  

• The interpretation directs lower-level courts on facial recognition-related disputes. 

Details: On Wednesday, the Supreme People’s Court, China’s highest court, released a judicial interpretation (in Chinese) to address facial recognition technology issues in civil trials. Businesses have to acquire users’ consent before collecting their facial information. 

• Businesses could face charges of personal rights infringement if they do not give customers an alternative to face recognition to access public places or online services. However, the rules do not apply to situations regarding public safety, public health emergencies, and other crises, according to the interpretation.
• Yang Wanming, vice president of the Supreme People’s Court, said at a Wednesday press conference that the interpretation is partly a reaction to the growing phenomenon of Chinese businesses abusing facial recognition tools. Courts have seen rising cases in which companies collect facial information without consent or force customers to accept facial information collection.
• “Some retailers use ‘touchless’ face recognition technology to collect consumers’ facial information without consent, then push them to different advertising based on their gender, age, and mood,” said Yang. “These acts seriously infringed users’ rights and interests,” he added.
• The interpretation will take effect on Aug. 1.

Context: The interpretation is one part of a regulatory overhaul on privacy and personal data collection. China is finishing drafting a law on personal information protection. The Data Security Law, passed in June, will take effect in September.

Multiple bitcoin mining companies are moving their operations out of China after government crackdowns. China’s central bank released the country’s first white paper on digital yuan. And Chinese artist Cai Guo-Qiang sold a non-fungible token (NFT) artwork for $2.5 million.

Crypto miners continue to exit

Bitcoin mining giant BIT Digital plans to relocate 14,500 of its Bitcoin mining computers from China to the US. The firm suspended all mining in China on June 21 in the wake of a Chinese government crackdown on mining, and accelerated a migration from China to the US that began last October. At least two other mining companies with operations in China, The9 City and BIT Mining, have similar plans to move mining rigs out of the country. (The Block)

First digital yuan white paper

China’s central bank published the country’s first digital yuan white paper on July 16. The document made clear that the Chinese central bank is the sole issuer of the national digital currency. It emphasizes digital yuan’s primary purpose lies in retail and individual transactions, as opposed to in large-sum interbank transactions. To date, trial participants have spent 34.5 billion digital yuan ($5.3 billion). (TechNode)

Even more NFTs

• Renowned Chinese artist Cai Guo-Qiang sold his first piece of NFT artwork for $2.5 million (RMB 16.2 million) at a July 16 auction. The artist claims that the sale set a record for NFT art made by a “non-crypto artist.” Crypto artists have sold NFTs for more than 25 times this price. Transient Eternity: 101 Ignitions of Gunpowder Paintings captures the detonations of 101 of Cai’s explosive artworks. Cai is known for including gunpowder and fire elements in his work. (Cai Guoqiang Studio, in Chinese)
• The South China Morning Post, a Hong-Kong based English media owned by Alibaba, announced plans for a new NFT standard called ARTIFACT. The publisher plans to use the standard to place tokenize archival stories about historic events. (SCMP)

China’s central bank released the country’s first white paper on digital yuan on July 16. 

Why it matters: It’s the most detailed overview yet of the central bank’s progress for the digital currency.

Details: The white paper (in Chinese), issued by The People’s Bank of China (PBoC), describes the digital yuan’s definition, design principles, operation systems, digital wallets, the scope of existing trials, and the responsibilities of participants. 

• The document specifies that the central bank is the sole issuer of China’s digital yuan and that it is a centralized digital currency controlled by the PBoC. Only select commercial banks will be able to “exchange” and “circulate” the currency. 
• As of June 30, participants have spent 34.5 billion digital yuan ($5.3 billion) in trials. The currency has opened more than 1.32 million digital yuan trial sites since the end of 2019. Uses include paying utility, dining, transportation, shopping, and government services. 
• The central bank said the digital yuan is partly a reaction to Chinese people’s changing habits from cash to cashless and mobile payments. In 2019, mobile payments accounted for two-thirds of all numbers of transactions in China, the white paper said. 
• The white paper emphasizes that the primary purpose of the digital yuan is to offer individuals a central bank option for retail transitions, hoping to cut down costs and increase efficiency in payments. 
• Short-term foreign visitors will be able to open a digital yuan wallet for daily transactions without opening a bank account in China. 
• The 20-page page white paper spends only one page on future plans. It calls for quick passage of a law to make digital currency legal tender. It also calls for more pilot programs and more research, without detail.

Context: China is the first major economy to introduce a national digital currency. After launching the project in 2014, PBoC has spent seven years researching and developing the currency. 

• China has recently expanded crackdowns on crypto mining and crypto trading. China banned crypto trading and initial coin offering in 2017 but allowed over-the-counter trading (OTC). Since April, the country’s regulators have cracked down on crypto trading and mining, prompting miners and companies to move out of China.

Tubatu, a Chinese home furnishing platform, filed for an initial public offering on the Shenzhen Stock Exchange’s tech-focused Growth Enterprise Market (GEM) late last month.

Why it matters: Tubatu runs an online marketplace to connect customers, decoration companies, designers, and construction material providers. China’s domestic stock market is gaining traction among tech companies in China amid stricter scrutiny of US listings. 

• Tech-focused markets, including Shenzhen’s GEM board and Shanghai Stock Exchange Science and Technology Innovation Board, are popular listing destinations for medium-sized tech firms, often leaders in smaller vertical markets.

Details: Tubatu plans to raise RMB 700 million ($108 million) by offering up to 60 million shares, according to its prospectus filed on June 30. The filing came three years after a failed attempt to go public in Hong Kong.

• Tubatu said the raised funds will be used for improving technological capability, upgrading information systems, and expanding regional coverage, among others.
• The firm’s revenue increased from RMB 583 million to RMB 680 million in 2018 to 2019, but that figure dropped to RMB 615 million in 2020 due to the negative impact of the COVID-19 pandemic.
• The company’s net profit more than doubled between 2018 and 2020 to reach RMB 86.6 million.
• Tubatu claims to serve about 114,000 renovation companies and 9,000 material suppliers currently.
• Based on its IPO size, Chinese media expect the company’s market valuation to be around RMB 3 billion, much lower than the RMB 10 billion valuation cited in Hurun’s 2020 Global Unicorn Index.
• Tubatu’s low market valuation comes from an over-reliance on online service revenues, such as matching landowners with decoration companies. Revenue from online services represented 99.94% of the company’s total revenue in 2020, up from 96.34% in 2019 after the company scrapped a low-profit home decoration service.

Context: Home furnishings is a big market in China, where apartments often come without finishes like paint, cupboards, or flooring. China’s online home decoration market reached RMB 400 billion ($61 billion) in 2020, according to data from research agency iiMedia.

• The company also offers construction supervision services and Zhuangxiubao, a payment app that ensures customers only pay after satisfying renovations.
• Founded in 2008, Tubatu has raised a combined $216.5 million in three rounds of financing, according to intelligence database Crunchbase. Its last round was in 2015 when it raised $200 million from Sequoia Capital, Matrix China, and 58.com in its Series C.
• Qeeka Home, a rival of Tubatu, has seen its share price more than halved since it debuted in Hong Kong in 2018.

“We are now in a golden era for hydrogen,” Robin Lin, CEO of fuel cell producer Refire, declared during a speech at the China Auto Forum in Shanghai last year. 

Lin would know. His company made fuel cells before they were cool. When Refire was founded in 2015 it was a small, specialized market. 

But over the past two years, its prospects have exploded. Hydrogen technology is fast gaining attention in China as a viable alternative to the fossil fuels used in vehicles and heavy industries. Fuel cells are a dense, efficient, and clean way to store energy. Among the most popular prospects at the moment are fuel cell electric vehicles (FCEVs).

To proponents, hydrogen is the future of green fuel. Compared to gasoline, it emits only water. Compared to batteries, it leaves nothing to recycle.

China’s push for hydrogen energy looks much like its ambitions for electric vehicles when they were first set out. The country’s nascent hydrogen drive has led to an increasing number of companies researching and developing hydrogen technologies.

The expanding market has led to a series of hydrogen companies, including Refire, filing to go public. In March, Refire filed to list on Shanghai’s Nasdaq-like STAR Market. 

For this week’s newsletter, we profile one of the Chinese companies that stand to benefit most from China’s push for hydrogen.

Taking on an industry

Refire is one of China’s largest fuel cell manufacturers. The company produces fuel cell systems, the heart of FCEVs, for commercial vehicles, which require large amounts of power and quick refueling times—both strengths of fuel cells compared to batteries. 

Established in 2015, Refire designs and manufactures a range of fuel cell systems for heavy vehicles of up to 49 tons, including mixer trucks, buses, dump trucks, and truck tractors. It’s customers include trucks maker FAW Jiefang, auto manufacturer Dongfeng, and busmaker Yutong.

Refire declined to comment for this story, citing a pre-IPO quiet period.

The company began mass producing its first fuel cell system for light-duty commercial vehicles in 2017, manufacturing 1,000 within 18 months. The company has since launched a new line of fuel cell systems, the most powerful of which can drive heavy-duty vehicles.

While not widely adopted, Refire’s fuel cells have been deployed commercially in 2,700 vehicles in 15 cities across China, and have collectively driven more than 63 million kilometers, according to the company. Refire currently produces around 1,000 fuel cell systems a year, used by automakers in buses and trucks. For comparison, the Beijing government aims to deploy 10,000 fuel cell vehicles on its roads by 2024.

The company has set up two manufacturing plants, one in the southern Chinese province of Guangdong and the other in Jiangsu, in eastern China. Both aim to drastically increase capacity. The company expects to initially build 20,000 fuel cell systems a year at the new Jiangsu plant. 

Commercial focus

As China starts to promote hydrogen fuel cell vehicles with more fervor, heavy vehicles will likely be the initial focus. China’s policy environment currently favors using fuel cells in commercial vehicles rather than passenger cars, Yuki Yu, founder of consultancy Energy Iceberg, told TechNode in April. 

Commercial vehicles have the strongest case for hydrogen fuel cells over electric batteries. These vehicles have higher utilization rates than passenger cars, and can’t spend hours parked while charging. 

Commercial vehicles are likely to see pressure to go green. China has ambitious goals to reach peak carbon emissions by 2030, and transportation could become a major focus for lawmakers. In the first half of 2020, trucks made up just 10% of all vehicles in China, but are some of the largest polluters on the road. “Heavy trucks account for one-third of China’s total road carbon emissions,” Refire’s Lin said during the Yangtze Delta Forum in April. 

Refire has forged a series of high-profile partnerships to increase adoption of fuel cell technology.

In July 2019, Japan’s Toyota Motor Corp. signed a deal with Chinese commercial vehicle makers FAW and Higer bus, with Refire acting as a local supplier. As part of the deal, Refire ensured that the components of the fuel cell systems functioned together and was responsible for developing fuel-cell powertrains that China automakers could use in hydrogen buses, Reuters reported at the time. 

Then, in April, the company partnered with German automotive supplier Schaeffler to “explore the key areas of fuel cell technology” and set up a knowledge base and shared resource platform. Other partners include oil and gas giant Sinopec, which has also invested in Refire.

Finances

In early March, Refire filed to list on Shanghai’s STAR Market, with plans to raise more than RMB 2 billion ($309 million). 

The company’s valuation has increased significantly over the past few years following several rounds of fundraising. In 2019, motor manufacturer Broad-Ocean announced plans to acquire 20% of Refire for RMB 300 million, valuing the company at RMB 1.5 billion. Broad-Ocean later pulled out of the deal. 

The company’s filing comes just months after competitor SinoHytec floated in Shanghai in August. 

“Since SinoHytec went public, Refire has been raising funds at a quarterly pace, which shows that the capital market is enthusiastically seeking hydrogen energy companies that are close to IPO,” China-based hydrogen fuel cell research center The Orange Club wrote in a September report. 

But Refire losses have expanded dramatically. Between 2017 and 2019, the company’s losses ballooned nearly sevenfold from RMB 35 million to RMB 278 million, narrowing to RMB 150 million in the first nine months of 2020, according to its prospectus

Refire’s losses were primarily driven by R&D costs, which was equivalent to 90% of the company’s operating income between January and September 2020. 

Challenges

While China’s government is laying down the groundwork to commercialize hydrogen ftechnology, there are significant hurdles to unlocking its potential and delivering Refire’s zero-emissions goals.

Unlike electric vehicles which have a vast network of charging stations, hydrogen cars are still in their infancy and refuelling stations will likely be hard to come by in the next few years. 

Sinopec has made pledges to address this, and plans to build 1,000 hydrogen refueling stations that also sell conventional fuels by 2025. The company currently runs more than 30,000 gas stations across China. 

Meanwhile, hydrogen fuel cells are only as clean as the process used to isolate the gas. Currently, more than 80% of hydrogen is produced using natural gas or coal, meaning that carbon is released during the isolation process. “Green hydrogen,” which is produced using energy from renewable sources, is currently very expensive, though an increasing number of projects are being launched. 

Daojia, a Chinese platform offering on-demand housekeeping services, filed for an initial public offering in New York on July 2. In Chinese, Daojia means coming to homes. 

Why it matters: The IPO application comes as Chinese regulators increase scrutiny of Chinese tech companies that collect extensive data from Chinese users and seek US IPOs. 

• The platform offers a mobile app that helps people find domestic workers and book housekeeping services such as cleaning, cooking, and appliance repairs. Users can find and compare detailed information of the maids and service workers on the platform, including their age, appearance, hometown, experience, and personality.

Details: Daojia said it plans to go public on the New York Stock Exchange, but did not disclose the date of the listing and price range of its IPO, according to a prospectus filed to the US Securities and Exchange Commission (SEC).

• The company reported sustained revenue growth from 2018 to 2020. Revenue was RMB 398.7 million (around $61.7 million), RMB 611.1 million, and RMB 711.1 million, respectively. 
• Daojia has operated on widening losses, which expanded from RMB 591.2 million to RMB 614.7 million from 2018 to 2020. The company said it might see “further losses as we continue to grow our business.”
• The company has applied to list under the ticker “JIA.”

Context: The Chinese government recently announced a series of investigations to examine potential data-security risks posed by Chinese tech firms listing in the US. Since July 2, China’s cyberspace regulator has launched investigations into Chinese ride-hailing giant Didi, transport companies Huo Chebang and Yun Manman, and job recruitment platform Boss Zhiping. All went public in the US in June. 

• Daojia’s prospectus also cited China’s tightening data-security regulations as one of its risk factors. The company could face “severe penalties or be forced to relinquish our interests” in some operations should they be found violating Chinese regulations, said the filing. 
• Daojia is owned by China’s largest online classifieds marketplace 58.com and backed by e-commerce behemoth Alibaba.

Alibaba’s former executive chairman Jack Ma’s family fortune manager Blue Pool Capital invested in a gaming company specializing in nonfungible tokens (NFTs). Regional neighbors are looking into digital currency plans. Japanese officials said they are hoping to clarify whether to issue a central bank-backed digital yen by 2022. Vietnam Prime Minister asked the country’s central bank to research cryptocurrency. 

Jack Ma and Joe Tsai’s NFT investment

• Game developer and blockchain company Animoca Brands raised $50 million. Investors include Blue Pool Capital, Coinbase Ventures, Gobi Partners, and others. The Hong Kong company, founded in 2014 and valued at $1 billion, focuses on bringing digital property rights to video gamers using NFTs. Blue Pool Capital manages a portion of the $40 billion family fortune of Jack Ma, Alibaba’s former frontman, and $10 billion wealth of Joe Tsai, Alibaba’s executive vice-chairman. The private equity firm was best known for managing Joe Tsai’s purchase of NBA’s Brooklyn Nets. (Venture Beat)

Crypto exchange woes

• London-based bank Barclays notified clients on July 5 that they would stop all UK clients from transferring funds to crypto exchange Binance. The bank told the Financial Times that the decision was to keep the client’s money safe and followed a regulatory warning against the digital asset exchange issued by UK’s Financial Conduct Authority. Founded in China, Binance quickly moved out of the country after it banned crypto trading in 2017. (Financial Times)

• On July 1 Chinese bitcoin trading platform Huobi introduced a 24-hour delay to token withdrawal for all over-the-counter (OTC) trades. OTC trades are trades that happen directly between two parties without an intermediary such as a bank or exchange. The exchange’s decision aligns with China’s ongoing crackdown on OTC crypto trades. China banned crypto trading in 2017 while allowing OTC trading. According to Huobi, the new restriction on withdrawals will protect user assets and prevent losses caused by the inflow of risky funds. (CoinTelegraph) 

Japan’s digital yen plan, Vietnam studies crypto

• Officials from Japan said the country will get more clarity on what to expect from a digital yen by 2022. Hideki Murai, who heads the ruling Liberal Democratic Party’s panel on digital currencies, told Reuters that “while no immediate decision will be made on whether to issue a CBDC, more details on its design may spur debate on how CBDC issuance could affect financial institutions.” CBDC refers to central bank digital currency. (Reuters)

• Vietnam Prime Minister Phạm Minh Chính asked the country’s central bank to study and put through pilot projects on cryptocurrency in the next two years, local news reported on July 3. It is unclear whether the country plans to launch its own digital currency. Vietnam banned using bitcoin as payment in 2018. The central bank has not granted licenses for any cryptocurrency trading platforms. (Vietnam News)

Digital yuan trials

• The Beijing Subway began digital yuan trial on June 30, accepting the central bank-backed digital currency for payments throughout the whole rail transit system. Subway passengers can use the Industrial and Commercial Bank of China’s mobile app to pay their fares. A new subway line in the eastern city of Suzhou, Metro Line 5, also started accepting payments through digital yuan. Passengers can use a mobile app to scan designated QR codes to purchase tickets. (Beijing Subway, Sina Finance in Chinese)

• The Chengdu government announced on July 2 that it is issuing RMB 12 million ($1.85 million) digital yuan through a lottery as part of a trial to promote the digital currency. The free digital money recipients, 100,000 residents, can use it for low carbon transportation services, including buying subway and bus tickets and shared bike rides. (The Block)

On June 21, Nuclei System Technology, a Shanghai-based RISC-V chip designer, closed a Series B of more than RMB 100 million (around $15.5 million). The financing round was the firm’s third  in the past year, according to local media reports. Backers of the company included state-owned China Electronics Technology Group and smartphone maker Xiaomi.

Founded in 2018, Nuclei System Technology is one of the largest Chinese companies designing chips using RISC-V, an open-source chip architecture that is gaining popularity among Chinese companies. While the basic RISC-V architecture is free to use, Nuclei’s designs are customized based on real-world needs and are ready to be manufactured. The company’s products are already being used by some of the country’s most popular payment systems, like Alipay and UnionPay.

Nuclei is just the latest example of a rush into the RISC-V space in China. RISC-V is an  alternative to mainstream architectures like x86 and Arm, which are proprietary.  It was long considered a “hobbyist architecture.” Now, China’s semiconductor industry is taking RISC-V seriously. Alibaba and some of the country’s largest chipmakers are joining the bandwagon, rolling out RISC-V-based processors. 

That’s because RISC-V has given Chinese chip designers an alternative to the two dominant architectures:  US chipmaker Intel owns x86, and Japan’s SoftBank owns Arm Holdings, Ltd.. An open-source architecture could free chipmakers from relying on other architecture designers and spending high licensing fees.  

For now, RISC-V remains something  of a hipster architecture. But major companies are already experimenting with it for smartphones, and experts say it could be mature within a decade.

A lightweight architecture, RISC-V is expected to appear first in devices on the internet of things (IoT). It also has potential in data centers, especially those for the purpose of machine learning (ML) and artificial intelligence (AI), because of its ability to modify source code.  Chinese e-commerce giant Alibaba has made a phone prototype based on RISC-V that can execute simple tasks, though it is still an experiment. 

But most importantly, China’s chip industry is embracing RISC-V due to fear that its access to foreign-owned architecture might be blocked in geopolitical conflicts. The move coincides with the Chinese government’s push to replace foreign-made software, operating systems, and infrastructure for the public services and key industries(notably banking) , with homemade solutions—which are often based on open-source projects.

Nuclei said in a marketing blurb on its website that one of its advantages is that it’s “homegrown and self-reliant.”

“At present, the copyrights of mainstream architectures like x86 and Arm belong to US company Intel and Japanese company SoftBank, respectively,” said Wu Di, an analyst at Changsha-based brokerage Chasing Securities. “There is a growing risk of being restricted from using the architectures as the US strengthens its grip on Chinese tech companies.”

Sanction free

Another feature that distinguishes RISC-V from Arm and x86 is its business model. RISC-V’s open-source license is called Creative Commons Attribution 4.0 International. That means anyone can put it into commercial use, modify its code, and distribute copies without cost.

By comparison, both x86 and Arm are proprietary architectures. Currently, there are only three companies licensed to manufacture x86-architecture processors: US companies Intel and AMD and Taiwanese chipmaker VIA. UK-based Arm Ltd. has adopted a looser commercial license system, giving chipmakers worldwide the ability to design processors based on the architecture. As of September 2020, Arm had issued licenses to more than 150 Chinese chipmakers, including Chinese telecommunications equipment giant Huawei, according to local media reports (in Chinese). 

Being open-source also means that RISC-V is not subject to export controls. In May 2019, Arm told staff to stop working with Huawei after the Chinese firm was hit by a US sanction. In March, Arm said it will “potentially” be able to license its latest generation of the Arm architecture to Huawei. 

Huawei’s two-year-long drama with the US government leaves Chinese companies feeling that they can’t count on access to foreign-owned proprietary ISAs. 

Major players

RISC-V is still new to China’s chip industry and most companies in the sector are startups. Here are four Chinese semiconductor companies that are working with the architecture.

Nuclei System Technology is a semiconductor design company and provider of commercial RISC-V processor IP.

• Nuclei was founded in 2018 by Synopsys and Marvell veteran Hu Zhenbo. Hu told a forum (in Chinese) in 2018 that China had realized “self-sufficiency” in chip design, and the real problem that dogged China’s semiconductor industry was “the lack of ISAs.”
• “RISC-V offers a new opportunity for China. RISC-V is likely to become a new mainstream architecture worldwide in the future and it is completely open. It will enable China to truly achieve the production of a mainstream and homegrown processor core,” he said at the time.
• Nuclei has rolled out several generations of chip designs that can be used in IoT and manufacturing, according to its website. The company said its designs have been used to build trusted execution environments (TEE) for fintech giant Ant Group’s payment platform Alipay and financial services corporation UnionPay.

GigaDevice, one of China’s largest manufacturers of nonvolatile memory (NVM), in 2019 launched a general-purpose microcontroller based on RISC-V. A microcontroller is a device that is widely used in IoT.

• The company is China’s largest maker of microcontrollers for IoT devices. It shipped (in Chinese) more than 200 million microcontrollers in 2020. Not all of the company’s microcontrollers are based on RISC-V.

Rivai, a Shenzhen-based startup, is a fabless chipmaker that designs RISC-V processors for IoT devices and artificial intelligence applications like robots and smart speakers.

• The company said on its website (in Chinese) that it is backed by Chinese search engine Baidu and Kai-Fu Lee’s Sinovation Ventures, but it didn’t specify the amount or time of the investment.
• Rivai was founded in 2018 by Tan Zhangxi. Tan is also the co-director of the RISC-V International Open Source Laboratory (RIOS Lab) at Tsinghua-Berkeley Shenzhen Institute.
• Tan told Chinese media in an interview in January that RISC-V is “not a cheap alternative to Arm” because it can do a lot of things that can’t be done by Arm. “As the demand for customization increases, RISC-V is expected to generate a market for high-end IP customization that is different from the Arm era,” he said.

E-commerce giant Alibaba’s chip unit, T-Head, in July 2019 released its first RISC-V-based processor design, Xuantie 910. The company said it can be applied to the design of chips for fifth-generation (5G) wireless networks, artificial intelligence, as well as autonomous driving.

• In May, the company announced (in Chinese) its second RISC-V-based processor, Xuantie 907. The company said at the launch that its Xuantie-series processors had cumulatively shipped more than 200 million units by the end of 2020. Most of T-Head’s Xuantie-series processors are based on architectures other than RISC-V.

State of play

Despite the promise, only a few Chinese companies have so far mass-produced processors based on RISC-V. Most of those processors are used in IoT devices, like surveillance cameras and smart refrigerators, rather than more sophisticated devices like smartphones and personal computers.

GigaDevice, a Chinese memory chipmaker, in 2019 launched its GD32V-series processors based on RISC-V. The company said the processors are mainly for devices like vehicular Global Positioning System (GPS) trackers, alarm systems, and point of sale (POS) devices, according to its website (in Chinese).

In January, T-Head, Alibaba’s chip unit, said it had  tested the Android mobile operating system on its RISC-V-based processor. However, the prototype system could only run simple apps like the clock and mail apps, but not complex operations like games.

RISC-V’s future in China

RISC-V is not coming to smartphones and laptops any time soon, but Chinese experts say RISC-V could emerge as a major ISA within the next decade.

One of the biggest problems for the 11-year-old architecture is the lack of an ecosystem, both in hardware and software. That includes systems on a chip (SoCs), developer boards, design tools, and the operating systems running on the chips.

Wu, the analyst at Chasing Securities, used the Android operating system as an analogy to argue that an ecosystem will not be a problem for RISC-V. 

“The RISC-V architecture is simple, efficient, free, and open, which also gives it a competitive advantage. In the face of the proprietary Symbian operating system, Android became one of the major OSs for mobile devices in the following decade by taking advantage of its open-source features,” he said, referring to a once-might mobile operating system on Nokia phones.

However, RISC-V is still a niche in China’s semiconductor market. Around 95% of Chinese-designed chips were based on the Arm architecture as of September 2020, according to a local media report.

Even if a RISC-V ecosystem readily arises for IoT devices, there are bigger obstacles to widespread RISC-V adoption.  “The hardest market to establish an ecosystem for is actually mobile, followed by desktop and server,” Allan He, vice chairman of China Software Industry Association’s Embedded Systems Association, told local media in 2019.

It will take a concerted effort (in Chinese) by chip designers to build up RISC-V’s ecosystem, said Hu Kangqiao, chief executive of Hexin Hulian, a Beijing-based company that designs home appliance chips based on RISC-V. “When the number of manufacturers designing RISC-V chips is in the same order of magnitude as ARM, it means that the RISC-V’s ecosystem is mature,” Hu said in 2020.

“That will take approximately five to 10 years,” he predicted. 

Chinese short-video app Kuaishou said it would end a controversial weekend work schedule starting from next month, local media reported on Thursday, in a sign that employers are reconsidering extreme schedules like 996. Kuaishou’s current work schedule, known as “big and small weeks,” requires employees to work every other Sunday. Other Chinese tech companies, including ByteDance and Alibaba, also use the schedule for many workers. 

Why it matters: Kuaishou is one of a few Chinese tech companies beginning to cut back long working hours. This ongoing shift comes amid increased scrutiny on tech companies, both from the public and the Chinese government. 

• Chinese tech firms have faced public outrage for creating a culture that compels employees to work long hours. In 2019, an online protest against the “996” schedule drove a national conversation about overwork. “996” stands for working from 9 a.m. to 9 p.m., six days a week.

Details: Kuaishou told staff in an email on Thursday that it would stop the “big and small week” schedule starting from July 1, Chinese media Time Weekly reported.

• The company said in the email that it hopes the changes would bring “more efficiency across the company” and “make staff happier.”
• The company added that it would compensate employees who work overtime without specifying the pay. Chinese labor law requires companies to pay employees twice their salaries if they work on weekends and three times on national holidays.
• A Kuaishou representative did not respond to TechNode’s request for confirmation on Wednesday.

READ MORE: Beyond 996: a beginner’s guide to China big tech culture

Context: Kuaishou asked all workers to start working every other Sunday in January, which many viewed as a final sprint for the company’s subsequent plan to go public in Hong Kong. 

• In January, Kuaishou human resources head Liu Feng told staff in a meeting that longer workweeks would allow “closer cooperation between teams.”
• Other Chinese tech companies are also cutting back overtime hours. Earlier this month, Lightspeed & Quantum Studios, a Tencent gaming unit, canceled all weekend work schedule and required employees to finish working at 6 p.m. on Wednesdays and no later than 9 p.m. on other days.

Red Date Technology, the firm building the government-backed blockchain platform Blockchain Services Network (BSN), announced on June 10 that it had completed a $30 million Series A funding round with various global investors. 

Why it matters: Red Date is the architect of the BSN, China’s ambitious state-backed blockchain initiative aiming to establish an internet-like network for blockchain applications.  

• Red Date has also launched its own blockchain projects, independent of the BSN. The new funds will likely provide the company resources to develop the products. 

READ MORE: EXCLUSIVE: BSN architect firm eyes CBDC with two new projects

Details: According to a statement released by Red Date on Thursday, the $30 million financing round was led by the Saudi Aramco-owned venture capital fund Prosperity7 Ventures and Hong Kong-based blockchain VC Kenetic Capital. 

• Other investors included Swiss banking and financial services company Pictet Group, and Bangkok Bank, a leading banking firm in Thailand. Existing shareholder Blueprint Forest LP also participated in the round. 
• Red Date CEO Yifan He said in the statement that the BSN is the first effort to connect public and private ledgers at the enterprise level. He added that the BSN will allow blockchain services to be accessible to small and medium enterprises (SMEs) and individuals around the world. 

Context: In addition to serving as the main software architect of the BSN, Red Date is diversifying to become a heavyweight in China’s blockchain industry. 

• In March, the company became a licensed reseller for American ledger company R3’s widely-used Corda enterprise blockchain. It plans to roll out an open version of the Corda blockchain on the BSN. 
• Red Date also told TechNode in December 2020 that the company is working on two projects, a payment network and public chain, that capitalize on central bank digital currencies and stablecoins, digital currencies pegged to an outside asset such as a national currency or precious metal. 
• Public blockchains—Casper, NEAR and Findora—were integrated into the BSN earlier this year, adding to a total of 20 blockchains hosted on the network.
• Telecom provider China Mobile and payments provider China UnionPay have invested in the BSN.

Blockchain Services Network (BSN)
What: A platform for blockchain development, bringing together cloud services and different chain protocols on city nodes.
Why: To reduce the cost of blockchain application design and deployment while powering communication between chains. It will be made available around the world through local cloud providers, ultimately creating a global internet of blockchains.
Who: It is part of the government’s Global Blockchain Strategy unveiled by Chinese President Xi Jinping in November 2019, spearheaded by the China State Information Center, China Mobile, China Union Pay, and Red Date Technology.

Carbon emissions management startup Carbonstop has raised RMB 50 million ($7.77 million) in Series A funding, the company announced this week.

Why it matters: Carbonstop could be on the leading edge of a funding trend as Beijing pushes to go green.

• In September, Chinese President Xi Jinping stepped up efforts to reduce China’s pollution by announcing plans to reach peak emissions by 2030 and carbon neutrality by 2060.
• Goldman Sacks estimates that investments in reducing emissions could reach $16 trillion in the next 40 years.

READ MORE: Seven Chinese cleantech companies you should know about

Details: Carbonstop’s RMB 50 million Series A was led by Hillhouse Capital and Matrix Partners China.

• The company provides a software-as-a-service solution to manage carbon emissions, allowing its customers to analyze and evaluate their emissions data. 
• Founded in 2011, the Beijing-based company has provided its carbon accounting services to some of China’s biggest tech companies, including JD.com, Baidu, and Ant Group, as well as government agencies like the National Development and Reform Commission.

“Enterprise-side carbon neutrality, which got little attention 10 years ago, is becoming a requirement. I believe consumption-side carbon neutrality will follow this trend in the next 10 years.”

Yan Luhui, founder of Carbonstop, in a statement May 10

Cryptocurrency financial service provider Babel Finance has raised $40 million in its Series A led by heavyweights within its own industry and beyond.

Why it matters: Babel has been trying to attract investors from the traditional finance world to invest in digital assets. The backing of fiat currency-based venture capital and private equity funds could boost its appeal to traditional investors.

The company: Founded in 2018, Babel’s investment prior to its Series A was $2 million, according to Crunchbase. The company has serviced 500 institutional clients, and the outstanding balance of its cryptocurrency-lending business was $2 billion as of February, according to a statement sent to TechNode.

• Babel started out providing lending services to cryptocurrency miners, but now aims to cash in on increased interest in the digital assets from deep-pocketed traditional finance players.
• The company has applied for one of the coveted asset management licenses in Hong Kong, which would allow it to provide investment services in the city.

“The alliance with our new investors from traditional finance is a critical step for us to offer more innovative products, strengthen compliance controls, and ultimately provide a full suite of reliable services to meet the growing demand from mainstream investors who are keen to allocate crypto assets in their portfolio.”

—Flex Yang, CEO of Babel Finance, in the statement

The investors: Babel’s Series A was led by Sequoia Capital China, Dragonfly Capital, Zoo Capital, Bertelsmann Asian Investments (BAI), and Tiger Global Management.

READ MORE: Huobi subsidiary launches Bitcoin, Ether, crypto mining funds in Hong Kong

• Sequoia China has been active since 2018 in Chinese cryptocurrency startups, and is a strategic partner to Dragonfly, one of China’s most well-known crypto investors.
• It was a first investment in Asia’s crypto industries for Zoo Capital, BAI—the Asian VC of media and education giant Bertelsmann—and New York-based Tiger Global Management.
• Zoo Capital is the early-stage arm of Boyu Capital, a late-stage VC that has invested in Alibaba, Kuaishou, Pinduoduo, and Ant Group.
• BAI’s China portfolio includes fintech firm Lexin, grocery e-commerce firm Dingdong Maicai, and LGBTQ dating app Blued, and bike rental company Mobike.

A job interview can be a lot of work. For interviewees, it’s an intense affair. For companies looking for talent, time consuming. A Chinese startup is attempting to fix the process. 

Shanghai-based LeapIn makes AI-powered video interviewing software. The company claims it can determine what qualities a company is looking for in a prospective hire, and then screen applicants based on what it finds. 

Using the platform, I interviewed for a human resources (HR) position, a job for which I have no training or experience. After checking a few boxes to provide background on my job-specific skills, I forayed into open questions. 

A picture of a smiling lady appeared on screen. Beneath her face, a question appeared. I was given 30 seconds to prepare for each question and three minutes to chat through my responses. Once the interview was finished my answers were automatically analyzed by LeapIn’s algorithm.

The backstory: LeapIn makes AI video interviewing software that helps companies manage talent and hiring.

• The company provides standardized software for general hiring, such as those in the retail sector. For more complex scenarios, the company can also create customized models by sampling a company’s current employees to create a hiring profile. 
• Sara Zhu, LeapIn’s CEO and founder, left a marketing position at Volkswagen in Germany and set up LeapIn in November 2018.

Unique selling point: LeapIn claims that it was the first company in China to employ AI behavioral analysis in video interviewing software. 

• According to Zhu, the majority of AI software providers in talent management focus on keyword matching between the job description and an applicant’s resume and recruitment process management. 
• LeapIn is different. The company’s edge comes from using AI-driven behavioral analysis and scenario-based questions.
• LeapIn’s standard hiring model can determine which employee qualities are most sought after by a client company, and if the new hire is compatible with its corporate culture. 
• LeapIn can generate a full interview report within an hour after an interview finishes.

“A well-qualified applicant may be turned down in the very first round of selection just because they don’t have a related major … Our analysis [of scenario-based interviews] is less biased. We can give them a fair chance.”

—Sara Zhu, founder and CEO of LeapIn, in an interview with TechNode

During my interview with the company’s AI, I thought I did well, but LeapIn’s algorithm didn’t seem to agree. I ranked last of out of all applicants applying for the job, scoring 32 out of 100 on suitability for the position.

The system not only scrutinized my answers, but my facial expressions. LeapIn’s algorithm looks for emotional responses, such as the hints of annoyance I was trying to hide when recalling having to do work outside my job description. 

Most of the interview questions are scenario-based, asking what you would do in particular workplace circumstances, such as when you are assigned work outside your job description. In my case, some were specifically related to HR responsibilities.

The results of the interview are shared with LeapIn’s corporate clients for initial screening or as a substitute for phone interviews. In-person interviews with qualified applicants can be arranged, with the system weeding out people it believes are unfit for the job.

In the end, Leapin’s system decided that my ability to cope under pressure lagged far behind top HR employees. 

The investors: Zhu started LeapIn with RMB 1 million (around $154,000) of her savings. In October 2019, the company raised several millions of yuan in angel investment from Hong Kong’s MPM Capital.

• LeapIn is in the middle of due diligence for its Series A.

The landscape: The global human resources market is estimated to reach $38.2 billion by 2027, growing nearly 12% annually, according to market research firm Million Insights. The assessment services market is expected to reach $10.7 billion by 2026, according to a report from Reports and Data.

• The niche market is relatively new in China. Companies in AI-powered video interviewing, such as competitors SeedLink and HRTPS, are all small-sized. 

Prospects: LeapIn will likely maintain growth given that it has patented its algorithm and the market is growing. The firm is less vulnerable to global competitors such as HireVue as its technology is based on Chinese language analysis.

• The coronavirus pandemic is set to give online hiring a big push, and the booming rental economy may benefit from additional assistance in hiring using AI.

“The gig economy is posing new challenges [to HR personnel.] The sector looks for a different set of qualifications and needs faster responses. That’s where AI could help.”

—Sara Zhu

Correction: An earlier version of this story incorrectly identified one of LeapIn’s global competitors as HighVue, not HireVue.

Community group buying is the hottest story in e-commerce. Major tech companies are pushing hard into the industry, with Alibaba alone backing five such platforms (in Chinese).

Most recently, Alibaba led a $750 million investment round for grocery app Nice Tuan on March 31. Pinduoduo founder and CEO Colin Huang said he is ready to go all in on March 11, and Meituan chairman Wang Xing named Meituan Select, its community group buying platform, as the company’s top priority in an earnings call on March 26.

But with a dip in sales after the group-buy industry hit peak volume during the Spring Festival, the Chinese internet doesn’t expect a feast. 

After a year of all-out growth during the pandemic, regulators in Beijing have cracked down on the industry, with the State Administration of Market Regulation (SAMR) and the Ministry of Commerce setting nine rules in December to govern this sector. SAMR also concluded an investigation into community e-commerce in March, levying fines for irregular pricing on five tech majors, including Alibaba, Tencent, and JD.Com. Regulators are likely thinking of former fad industries, such as second landlords, bike rental, and P2P loans, that eventually blew up and left consumers holding the bag. 

In recent Chinese analysis, the consensus is that the market is consolidating, and platforms are fighting a different war to survive. Last year, many companies rushed into the industry, spending big to claim territory, but community group buying is now shifting from sprint mode to creating sustainable profits. 

Commentators discuss how far along the consolidation process is, debating when and how the winners, if any, will be decided.  They also talk about those getting the short end of the stick, from companies being pushed out of the industry to suppliers being squeezed by platforms. 

Pick your battles 

It doesn’t look like one company will wind up owning the whole community group-buy market.

Commentators are optimistic that the community e-commerce market offers room to grow. Major group-buy platforms may have wide reach, with Meituan Select presently operating in more than 90% of cities and counties in China, but continuing negative profit margins means other players have the chance to dominate in specific regions. The jury is still out on who will sink or swim. 

Chinese magazine Ran Caijing writes that different winners are emerging in different regions. 

‘Community group buying moving in different directions’

Yan Junwen
Ran Caijing, March 30

Community group buying has gone through half a year of rapid progress, with startups and big businesses currently moving in different directions. Some focus on counties, towns, and rural areas. Others have turned toward Beijing, Shanghai, and Guangzhou. 

In the community group buying market of today, the players are not all squeezing together, but have instead chosen their own directions for key breakthroughs. They continue in regions where they are able to succeed. In regions where they are unable to succeed, the companies pivot or exit the market. The situation of order volumes for different regions and different companies probably vary greatly. For example, in Hunan and Hubei, Xingsheng Youxuan holds an absolute advantage. However, in Guangdong, Jiangxi, and Shandong, Meituan Select is the leader.

The way forward is not rosy for all group-buy companies, though, and Ran Caijing emphasizes that staying in the industry means taking on greater risks. Summer, with its high temperatures and humidity, will be the next challenge. There is also the problem of getting good customer ratings. 

Ran Caijing points to the community e-commerce platform Chengxin Youxuan as a cautionary tale: Chengxin Youxuan offered flash sales and cash incentives to customers and saw growth potential in various cities and provinces such as Wuhan, Chengdu, Jiangxi, and Guangdong. But consumers in some places did not bite, and with an uneven unit volume of sales, things quickly turned from good to bad. A source in the supply chain industry told Ran Caijing that they’re about ready to write the company off: “Right now, Chengxin Youxuan is already on a downhill trajectory. There are not many cities in which it has done well overall.”

Tough decisions

The industry is maturing, She Xiaochen and Ke Xiaobin write in finance and business outlet Jiemian News. Companies who are still in the game are building moats, reinforcing their strongholds. Even as platforms continue to expand, seeking economies of scale, they are closing operations in low-efficiency areas and cutting low-performing business development teams. Leading group-buy platforms aren’t exempt from these pressures either. Many of them gave out free promotional products to attract consumers across a wide range of cities and counties. Jiemian argues that, soon, they will be unable to settle accounts. 

An investor told Jiemian that the main reason for streamlining isn’t regulations. The market is also pushing companies to cut costs.

‘Community group buying pauses war to strategize: with free promotional products in many locations, tech giants are close to unable to settle their accounts’

She Xiaochen and Ke Xiaobin
Jiemian News, March 31

An investor who has followed the new consumer industry for a long time said that apart from the impact of policy, the other reason for community group buying entering the streamlining stage is the particular characteristics of the industry: “Community group buying touches upon many links in the supply chain, including categorization, logistics, and warehousing. The input cost is sizable, and the business is not really suited to the cash-burning model that used to work for internet companies.” 

The co-founder of a mid-size player told Jiemian that the company is giving up on areas that aren’t turning a profit.  

According to the co-founder of a mid-level community group-buy platform, “after almost a year of operations, we have found that the performance of group buying in certain regions is not high. Streamlining operations means that business development activities that do not perform well will be retired.”

But Jiemian also writes that platforms still have a long way to go in terms of sound business models and operations. To cut costs, major group-buy platforms are shifting responsibility to merchants to ease the financial pressures on themselves. The writers worry that this is a bad sign. Not only are mid-level companies experiencing profitability issues, Jiemian writes, but the tech majors are also in trouble. 

Meituan Select, Xingsheng Youxuan, and Shihui Tuan have employed a mix of direct operations and third-party agents in county markets in pursuit of profits. An industry insider familiar with the supply chain for community group buying told Jiemian that this model allows platforms to shift risks to their agents: “Every agent individually bears the responsibility of profit and loss. This ‘dual mode’ of operations allows leading players to maximize cost-cutting and minimize losses.”

Squeezing bottom lines

Some suppliers say they’re having second thoughts about community group-buy as platforms squeeze their bottom line. 

A supplier for Chengxin Youxuan told Jiemian that the platform had asked them to fill large orders at rock-bottom prices as it built up operations in new regions. By Lunar New Year 2020, which came on Jan. 25, he had already emptied almost half of his inventory, giving it away for free or at low prices. This supplier has been happy to go along with the platform up to that point, led by the promise of strategic losses for greater gains. But he says that he wants to see profits soon: “Volume is not our only standard. We still look at whether we can make money. Speaking as businesspeople, our ultimate goal is to profit.”

Other commentators warn that it will become impossible for small suppliers to live off what they earn from community group-buy platforms. 

WeChat blog Future Consumption (Weilai Xiaofei) explains that compared with selling directly to supermarkets, the group-buy model requires product suppliers to shoulder more risk and cost in terms of logistics and operations. This has caused suppliers to leave the group-buy industry.

Writer Zhao Xiaomi describes the predicament of  Lao Liu, who joined community group buying at the beginning of this year.

‘Major suppliers flee community group buying’

Zhao Xiaomi
Future Consumption, March 17

Previously, when supplying to supermarkets, Lao Liu only had to consider how to sell his products to the markets. However, with community group buying, things are not the same. Risks, losses, and operations responsibilities that were originally borne by the supermarket have all been passed onto the supplier.

Suppliers have to cover attrition costs for perishable goods such as tofu shipped to warehouses near consumers for quick delivery. They are also responsible for the costs of returned products, including fresh foods unsuitable for resale. Platforms charge them fines for these returns. One supplier told Future Consumption that platforms have strict policies that make suppliers financially responsible for customer returns.

“The first time the return rate for a supplier’s products in a given period is between 0.3% and 1%, the supplier will be fined 5% of the transaction amount. The second time and each time thereafter, the supplier will not be able to register products on the platform for three months. If the return rate for a supplier’s products is greater than 1%, the supplier will pay a fine of 25% of the transaction amount the first time this happens. The second time will result in termination of the agreement between the supplier and the platform,” the supplier said. 

Dog eat dog

The community group buying that exploded in the second half of 2020 was quickly rolled out. It sprung up fully, and the construction of infrastructure for supplying, warehousing, and logistics was basically completed. In the coming summer, high temperatures and humidity will further put the results of the last six months to the test. User ratings may be divided on which platforms are better or worse, further determining if this platform business will continue or shrink. Summer is a test. By the end of 2021, the industry will probably be able to see who is swimming and who is left standing on the shore. 

Ran Caijing, March 30

The winners of community group buying are still unclear, but commentators are betting on many losers. They argue that surviving in the industry means being able to sustain substantial losses, which is often only possible for the largest tech companies. 

Even those leading group-buy platforms, however, have questionable futures. Both Jiemian and Ran Caijing raise doubts about profitability for the tech giants, including Meituan, which offers community group buying in  90% of China’s cities and counties but continues to expect operating losses.

Mid-level players aren’t able to carry on, and the tech giants aren’t able to settle their accounts either. 

Jiemian, March 31

Ran Caijing reserves judgment about the overall direction of the industry, arguing that summer and the challenges it poses will provide a clearer picture of which companies will emerge as leaders. Jiemian, however, says that consolidation is already far along, with more successful companies already creating strategies and models to protect their businesses. Future Consumption argues that factors such as supply chain and customer ratings will also determine the future of the players.

Chinese electric scooter maker Niu Technologies said it is on track to open 10,000 stores nationwide over the next five years, as replacement demand stays robust following the implementation of tougher national standards for two-wheelers.

Why it matters: Nasdaq-listed Niu aims to sell 6 million scooters worldwide in 2025, a tenfold increase from 2020, CEO Li Yan said during a press conference on Wednesday.

Details: The company sees lower-tier markets as key to its growth in China.

• Speaking to journalists on Wednesday, Li said the company expects to nearly double its annual production capacity to 2.1 million units during the second half of this year.
• The company aims to be in a position to accommodate high demand during peak season, which starts in July.
• “We are expanding our footprint in lower-tier cities and even rural areas with a growing sales team and a diversified product portfolio… The market is huge and what we’ve covered is only the tip of the iceberg,” said Li (our translation).
• The company also launched ten new scooter models on Wednesday.

Context: Niu reported sales of around 602,000 scooters last year, rising 43% year on year. In the same time period, its store count increased by over 50% to 1,616 shops in China, despite the Covid-19 pandemic. The new shops are mainly in first and second-tier cities.

• Analysts expect Niu’s sales to rise as new scooter standards force drivers to replace their vehicles.
• Most of its competitors use cheaper but heavier lead-acid batteries, making it hard to meet a 55 kg (121 pounds) limit and offer a comparable driving range. Niu’s lithium-ion batteries deliver better range at lower weights.
• China International Capital Corporation (CICC) forecast record sales of around 30 million lithium-ion battery scooters in 2021, more than double compared to last year, according to a report (in Chinese) published last month.

READ MORE: Scoot over, cars: Niu CEO bets on luxury scooters

Red Date Technology, the firm behind government-backed blockchain platform Blockchain Services Network, has licensed American distributed ledger company R3’s enterprise blockchain to resell in China.

Why it matters: This is the first time Red Date has acquired the rights to resell enterprise blockchain from an overseas provider. Primarily known for its role with the BSN, Red Date is diversifying to become a heavyweight in China’s blockchain industry.

• Backed by Bank of America, Merill Lynch, HSBC, and Singapore’s Temasek, the Corda consortium blockchain is a big name overseas but has yet to land in China.
• The partnership will allow Corda to tap into China’s banking industry as well as the e-CNY. R3 is also eyeing central bank-backed digital currencies.
• The move is likely to attract big Chinese firms to build decentralized applications using Corda.

READ MORE: EXCLUSIVE | Chinese state banks accepting applications for enterprise e-CNY accounts

Details: Corda’s enterprise nodes will connect to notary nodes hosted on China UnionPay’s cloud, forming a single China Corda Network, Yifan He, CEO of Red Date told TechNode. Chinese firms will be able to participate in Corda’s enterprise blockchain through Red Date.

• Notary nodes prevent double spending by attesting that a transaction has not already occurred.
• China UnionPay is considering an active role in managing the China Corda Network, He said.
• Corda’s main clients overseas are banks, so He expects adoption within China’s financial services industry.
• Red Date will also roll out an open permissioned version of Corda on the BSN available to developers.
• He expects the paid version to be available in the next four months.

We’re aware of R3’s huge success outside China… Red Date will also help to drive Corda and CorDapps’ [Corda decentralized application] adoption among all Chinese banks.

—Yifan He, CEO of Red Date Technology

Context: Following the rollout of the BSN, Beijing-based Red Date has been breaking out its other products.

• In December, the company told TechNode that it is working on two projects aimed at capitalizing on central bank-backed digital currencies and stablecoins.
• Launched in 2015, R3 was one of the first companies to move into enterprise blockchain adoption.
• Corda is used by financial firms around the world; the Nasdaq stock exchange uses it to build market infrastructure and Italian banks use it for interbank payments.
• China’s central government is keen on deploying blockchain as infrastructure for data integration.
• State Grid announced Tuesday that it is working with Beijing-based Wanglu Tech to integrate blockchain in its data management. Wanglu’s VP of operations told TechNode that Chinese banks are preparing for blockchain adoption.

READ MORE: State Grid to deploy Wanglu Tech’s blockchain for data integration

Blockchain Services Network (BSN)
What: A platform for blockchain development, bringing together cloud services and different chain protocols on city nodes.
Why: To reduce the cost of blockchain application design and deployment while powering communication between chains. It will be made available around the world through local cloud providers, ultimately creating a global internet of blockchains.
Who: It is part of the government’s Global Blockchain Strategy unveiled by Chinese President Xi Jinping in November 2019, spearheaded by the China State Information Center, China Mobile, China Union Pay, and Red Date Technology.

The State Grid Corporation of China will trial the use of blockchain and smart contracts using Beijing-based Wanglu Tech’s cross-chain consortium chain, the company told TechNode.

Why it matters: The collaboration is the first concrete step taken by a Chinese state-owned enterprise (SOE) to adopt blockchain technology. 

• The announcement follows just two weeks after blockchain was named for the first time a strategically important technology in China’s Five-Year Plan.
• The news bodes well for Wanglu: State Grid is the world’s largest utility provider and third-largest company by revenue. 

Blockchain for privacy: The company will deploy a blockchain-based data-sharing and management platform for State Grid in a city in eastern China, Li Ni, Wanglu’s VP of operations told TechNode.

• The company aims to seamlessly integrate massive amounts of data that is currently spread through different departments while preserving consumer privacy. 
• “Managing and utilizing data is a priority for State Grid,” said an employee of the company who spoke to TechNode on the condition of anonymity.
• Using blockchain, State Grid hopes to break through data silos to conduct—often using artificial intelligence—analysis without endangering consumer privacy as it works to modernize its services and capabilities. 
• Using a privacy-focused field of cryptography called secure multi-party computation and zero knowledge proofs, Wanglu’s chain promises to allow different departments to access specific data without revealing customers’ personal information. 
• Li explained the problem: “Say I am from the marketing department. I want to know your electricity bill because I’m doing customer analysis. But the bill data is maintained by the sales department, which says personal information like names and addresses cannot be shared with another department,” Li said. 
• Wanglu’s blockchain will make relevant data available while concealing personal information. 
• The company declined to publicly disclose the RMB value of its contract with State Grid.

Testbed: State Grid is positive but conservative about using new technology, the SOE employee said.

• Li expects the blockchain to be deployed in September. After it is operational for about three months, State Grid will evaluate the blockchain and decide whether it should be deployed to other places, Li said. 
• “The whole system costs billions or trillions of RMB, they cannot give you the whole system to implement your idea,” Li said. “We need to pick a place or scenario.” 

Connecting islands: Several SOEs such as banks and mobile network operators are preparing similar feasibility studies for blockchain, according to Li. “This will be an example for others to follow,” he said. Connecting all the blockchains such that different companies can share data is important for the technology to work.   

• “All the different chains are considered isolated islands,” Li said. 
• Wanglu’s interoperability solution will solve this problem, and it was key to landing the contract with State Grid, according to Li. 

Long process: The procurement process started in the second quarter last year, when State Grid invited about a dozen companies to submit proposals for data management. In July, they selected Wanglu to proceed with a full feasibility study. After submitting in August, they had to make many changes because the SOE “asked a lot of questions,” Li said. 

• The feasibility study was submitted and accepted in October, after which Wanglu had to conduct field trips to State Grid and a technical evaluation before the final go-ahead to deploy in other locations. 

Wanglu: Founded in 2016 and based in Beijing, Wanglu Tech focuses on government and enterprise blockchain applications. It also runs a public chain called Wanchain. 

• Wanglu was the first Chinese company to launch a cross-chain solution in 2018.
• Unlike other blockchain companies, Wanglu is targeting SOEs because “they have the power, resources to do blockchain innovation,” according to Li. 

Context: State Grid is piloting the use of 5G, AI, big data, and internet-of-things solutions to modernize its infrastructure. 

• Chinese government-affiliated entities are all-in on blockchain for data management, but progress has been lacking. The Beijing municipal government last year announced an ambitious plan to use blockchain in 12 areas of governance. 
• Hangzhou is using Ant Group’s chain to manage company seals.
• State Grid is involved in Chang’an Chain, a “hardware and software” blockchain. 

READ MORE:  Enterprise blockchain to integrate China’s digital yuan

Update: The headline and first paragraph of this article have been revised to add detail about the services State Grid is testing.

Neo, an Ethereum alternative and one of China’s oldest blockchain protocols, is starting to roll out a third version of its public blockchain infrastructure, dubbed N3. 

Why it matters: N3 is a make-it-or-break-it moment for one of China’s most promising and globally recognized blockchain projects. The team has been working on the update for years. On paper, N3 hits all the right notes for becoming a widely used blockchain protocol. But it will need to stand out from an increasingly competitive crowd. 

• The upgrade comes at an opportune time: The Ethereum network is facing critical capacity challenges, meanwhile the Chinese government highlighted blockchain as a strategically important technology in the latest Five-Year Plan. 
• Founded in 2013, Neo is one of many Ethereum alternatives looking to attract developers to build decentralized applications on its blockchain. 

READ MORE:  Blockchain, fintech get name checks in 14th Five-Year Plan

Details: The original planned launch date for Neo’s third iteration was in 2020, but it was pushed back to Q1 2021 because the system wasn’t ready, Da Hongfei, co-founder of Neo, told TechNode. It is difficult to predict a specific time for a community-driven project, Da said. Like most public blockchains, the code was developed by a small team of core developers and a wider global developer community. 

• Neo’s focus is digital assets, so the co-founder said the community is “encouraged” to build fundamental infrastructure for decentralized finance, such as landing and swap protocols. 
• Oracles are key to DeFi because they connect the real world to blockchains. Da also sees N3 as a good place to build non-fungible tokens (NFTs), due to the decentralized file storage feature. 
• Da said that because developers were waiting for the network upgrade, they hadn’t been building many dapps on Neo. 

Migration: The migration of Neo tokens to the new network will take place using a consortium interoperability protocol Poly Network developed by the team behind Neo. 

• Exchanges and wallets take care of token migration, the process by which old tokens are converted into new tokens on the new chain, using smart contracts. 
• Radical changes to the blockchain protocol such as the ones N3 will implement usually take place through a so-called hardfork: The chain splits in two parts, and the change is implemented in one.  
• Instead of a hardfork, Neo will use an interoperability protocol, a type of chain that enables the transfer of information from one blockchain to another, to create a completely new chain. 
• “We will be the first blockchain in the world to do a completely new chain through an interoperability protocol,” Da said.
• These protocols are at the frontier of blockchain development and crucial for mass adoption: They promise to connect chains that currently exist as islands to create an internet of blockchains. 
• The N3 migration will test whether Poly Network can be used to create a blockchain from scratch and correctly transfer all the data from the existing chain. 

The Ethereum challenges: The Ethereum network has been facing significant challenges in the last few months, and developers are scrambling to find alternatives for their dapps. Gas fees have been hitting record highs as the network becomes congested. 

• Ethereum “has reached its maximum capacity,” Da said. Transactions per day have plateaued at around 1.2 million to 1.3 million since August, while alternatives like Binance Smart Chain are reaching record-high transaction volumes. 
• The update to Ethereum 2.0 would likely solve some of these problems, but has been continuously put off. Da thinks we won’t be seeing it for a few years: “It’s difficult to deal with different interest groups,” particularly miners, he said. The upgrade will hurt their bottom line by drastically changing how they are rewarded. 

• “At the end of the day, Ethereum is one blockhain but everyone needs to maintain a ledger. The capacity growth of the Ethereum ledger will not outpace the growth of demand,” so there is room for many different protocols to grow, Da said. 

Government tailwinds: Blockchain’s inclusion in the 2021-2025 Five-Year Plan will “definitely” bring more investment to the technology, Da said. 

• Authorities are looking for projects that can develop blockchain fundamentals like smart contracts, consensus algorithms, and encryption, the plan said. 
• “It is in China’s national interest to have our own [intellectual property] in those areas,” Da said, adding that it is “dangerous” for China’s blockchain industry to rely on US-made technology, particularly in encryption. 
• Neo is not exactly what they are looking for. It is a public chain, which doesn’t impose any checks on the flow of information or network participants. 
• The company is also working on permissioned blockchains, including a permissioned version of interoperability protocol Poly Network which has been integrated in the state-backed Blockchain Services Network. 
• Da is “not concerned that [Neo] will conflict with regulations in China,” because it doesn’t “live in one jurisdiction: If everyone in this office in China disappeared tomorrow, Neo will live and it will overcome this setback and it will grow again.”

Chinese robotruck startup Inceptio Technology plans to mass-produce trucks with intermediate autonomous driving functionalities as early as the end of this year, the latest stage in the commercialization of self-driving technology.

Why it matters: Commercial vehicles, including trucks and buses, are viewed as a more achievable application for self-driving technology than private passenger vehicles, and the market has been attracting significant investment.

Details: Inceptio‘s two self-driving truck models, co-developed with Chinese automakers Dongfeng and Sinotruk, are in their final stages of development. Mass production is set to begin at the end of this year, the company said at a press event Wednesday in Shanghai.

• The new models will be equipped with semi-autonomous driving functions, or Level 3 capabilities, such as lane changing and following the vehicle ahead in traffic jams, according to the company’s technology chief Yang Ruigang, a former Baidu scientist.
• It will also install a hardware suite capable of being upgraded to Level 4 self-driving capability, Yang added. The rigs will also feature multiple sensors including two Lidars which enable the detection and recognition of objects a kilometer (0.6 miles) away, a capability that competitor TuSimple said it was testing in 2018.
• Inceptio plans to install its self-driving technology onto more than 80,000 tractor-trailers in 2024. Each truck is expected to travel 250,000 kilometers per year on Chinese highways by that time, allowing the company to compile 20 billion kilometers of driving data per year and helping its push into full vehicle autonomy.
• A spokeswoman declined to discuss details about the company’s near-term delivery target.
• Level 4 autonomy refers to a fully autonomous system which can handle emergency situations, while Level 3 still requires that a driver intervene in emergency cases, according to a rating from the Society of Automotive Engineers (SAE).

Context: Inceptio is among several local robotruck startups backed by big auto and logistics names. In 2018 it closed a funding round for an undisclosed amount from Chinese battery maker CATL, and Nio Capital, an investment firm formed by the EV maker, and others.

• The Shanghai-based company last year raised a total of $220 million in two rounds from investors including Singapore-based logistics firm GLP and Tencent-backed fleet management company G7, Reuters reported.
• TuSimple, a US- and China-based self-driving truck startup, filed for a public listing in February, the Wall Street Journal reported. Morgan Stanley was tapped to lead the IPO, after helping the company raise a $250 million pre-IPO round last year.
• Toyota-backed robotaxi startup Pony.ai is stepping up its autonomous truck business to attract new investors. The company was granted a license in December by the Guangzhou municipal government in southern China to test trucks on public roads.

Li Auto reported losses of RMB 792 million ($121 million) in its first annual result as a public company, significantly reducing losses from a year earlier, but has drawn criticism for underinvesting in future innovation. Its shares declined 9.8% on Thursday.

Benefiting from rising electric-vehicle demand in China, Li Auto earned nearly RMB 9.5 billion in 2020. Its first model, the Li One, was China’s best-selling electric SUV during the year, according to figures from China Passenger Car Association. However, its delivery guidance of 11,500 vehicles in the first quarter of this year was almost 30% lower than the preceding quarter, which it attributed to the Spring Festival holiday and an uptick of Covid-19 cases in parts of the country.

Cost controls gone too far

The company narrowed its loss per share of $0.28, or net loss attributable to shareholders of $121.4 million, a 76% decrease from the previous year. This was partly aided by net income of $16.5 million in the fourth quarter from “short-term investment income” according to CFO Li Tie during the call with analysts. The EV maker also benefited from streamlining its sales operations, spending RMB 1.1 billion on selling, general, and administrative costs for the full year, 40% of what NIO spent on the same expense in the first three quarters of the year.

However, Li Auto’s investment into research and development was substantially less than its peers, raising concern among investors. Company executives had promised investors during an online briefing held a few weeks ago that it will accelerate the launch of new models to ease concern about its transition from EREV to all-electrics, according to a report released by investment bank China International Capital Corporation (CICC) last week.

In a conference call with analysts on Thursday, CEO Li Xiang said it has been on track to expand its range of products as part of a strategic move to prioritize business growth over cost control. The company promised to launch at least one new model every year starting 2022, including its first all-electric model scheduled for 2023.  

Ambitious outlook

The goal is to occupy a larger share of the market from mainstream to premium for an annual sales target of “several hundreds of thousands of vehicles” by the end of 2024, Li said (our translation). It also expects to build out a retail network of at least 1,000 stores by that time. The company had 52 stores in 41 Chinese cities as of December; NIO and Xpeng Motors had promised a respective 200 and 150 shops by year end.

The Beijing-based EV maker currently has only one model for sale and mainly focuses on extended-range electric vehicles (EREVs), a technology which features a small internal combustion engine dedicated to recharging the vehicle battery, designed to resolve range anxiety. However, recent policy changes in China is pressuring the company to accelerate its transition to all-electric.

Policy influence

Following Beijing, the Shanghai municipal government early this month unveiled a new policy for new energy vehicles, which excludes new purchases of plug-in hybrid vehicles, including EREVs, from free vehicle registration starting in 2023. Company president Kevin Shen on Thursday reassured investors, saying he expects EREV sales will continue to be strong until then. The company confirmed that it will release its second EREV model, a full-sized SUV with advanced driver assistance capabilities, in 2022.

Li Auto vehicles combine popular features and an affordable price tag, making it a more attractive choice than most internal combustion and electric vehicles in China over the past year. However, the company lags significantly rivals where self-driving technology is concerned— NIO and Xpeng Motor have emerged as major rivals to Tesla. The Li One crossover does not offer intermediate self-driving capabilities, such as navigation from on-ramp to off-ramp on Chinese highways, similar to Tesla’s Navigate on Autopilot and those NIO and Xpeng have both introduced in their vehicles.

CFO Li said the company will increase its R&D investment to at least $464 million this year and it will exceed $1 billion by end-2024, with half of the budget to be used in vehicle autonomy. CTO Wang Kai said that the size of its self-driving team will double to around 600 engineers by the end of this year as it opens its new R&D center in Shanghai with the end goal of 2,000 total employees.

Bigger rivals, including Tesla and a number of Chinese tech giants, pose a real and urgent threat. Wang said 2021 will be “the year of preparation” for the release of Li Auto’s new vehicle architecture next year, powered by Nvidia’s most advanced auto processor, Orin. “Similar features offered by our rivals, along with some brand new features, will also provided to customers for sure,” Wang said.

Correction: An earlier version of this article incorrectly stated that Li Auto plans to double the size of its R&D team to 600 engineers this year, not that of the self-driving team. 

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In the next two weeks, we are launching our next two. We’ve been getting ready for a few months, and we’re excited to share them with you.

The first, starting today, will explore trending topics in cleantech. Next week we’ll publish the first issue of In Focus: Semiconductors. All newsletter subscribers will receive free copies of the first issue. Become a member now to receive every issue in your inbox.

The start of a new five-year plan is a great time to start tracking clean tech. Beijing has made it clear that controlling carbon emissions will be a focus in the next plan period, and we expect to see even biggest investments in technologies that address emissions, pollution, and other environmental challenges.

Semiconductors is a no less timely topic. In the face of rising tensions with the US, China has become increasingly eager to source these vital components at home. But with only 6% of the country’s demand currently met by domestic companies, there’s plenty of room for growth. Funding—both private and public—has flooded into the sector in the last year.

Previously on In Focus

Since the launch of our bi-weekly In Focus: Bytedance premium newsletter on March 12, 2019, we published 16 issues within seven months, covering topics such as Bytedance’s bet on AI, the difference between China’s Douyin and global TikTok, and how does Bytedance’s algorithm work.

In 2020, we explored new topics including Meituan-Dianping, China’s lifestyle super-app; Drive I/O, a deep dive into auto tech; The Big Sell, on China’s e-commerce industry; Expanding Empires, on China’s tech giants expansion abroad; and China VC Roundup, a monthly technology investment activities in China. The Big Sell and Drive I/O newsletters are continuing. Become a member now to receive them in your inbox.

Huawei on Monday unveiled its latest foldable phone as the embattled Chinese smartphone maker ramps up efforts to entice premium phone users in its home market.

Why it matters: Huawei is focusing its limited production capacity on high-end models after being cut off from the global chip supply chain. The new phone is priced starting at RMB 17,000 (around $2,785).

• The company’s last foldable phone, priced at RMB 16,999, was met with great enthusiasm from Chinese consumers. The model sold out within seconds of being made available.

Details: The Mate X2 foldable phone features an 8-inch interior display when unfolded and has an additional 6.5-inch exterior display.

• The 256GB version of the Mate X2 starts at RMB 17,999 while the 512GB version costs RMB 18,999. The model will is available for purchase in China starting Thursday. The company did not say if it will be available in overseas markets.
• Two rounds of US sanctions last year have “made our operations extremely difficult,” said Richard Yu, head of Huawei consumer business, at the launch event on Monday. “But thanks to our partners and consumers… we survived in 2020.”

Context: Huawei, once the world’s largest handset vendor, is now ranked third globally after shipping 170 million units in 2020. 

• A January report by market research firm Trendforce estimated that the company’s smartphone shipments will drop to 45 million units in 2021.
• The sharp decline is mainly because the company sold off its budget brand Honor last year. The company has been cut off from the global semiconductor supply chain and now relies on stockpiles to maintain production.
• In January 2020, Huawei told Chinese media that it sells approximately 100,000 units of its Mate X foldable device every month.

Chinese mixed reality glasses maker Nreal is preparing to launch its products in the US and Europe, less than a year after a California court dismissed a lawsuit brought against the company by Google’s Magic Leap.

Why it matters: Nreal is one of China’s most promising MR startups; it is backed by major Chinese tech venture capital (VC) firms and has set up partnerships with global heavyweights, including Qualcomm and Korea’s LG.

• In the US and EU, it will be competing primarily with Microsoft, Magic Leap, and perhaps Apple in the augmented and mixed reality fields, but also with Facebook and HTC in the entertainment-focused virtual reality market.

Details: In partnership with Vodafone and Deutsche Telekom, Europe’s most prominent telecom carriers, the company will launch its Nreal Light MR glasses in the EU in the spring, according to a statement sent to TechNode on Tuesday.

• The glasses will also be available in the US by April 2021, in collaboration with an undisclosed local telecommunications provider.
• Nreal is also launching an enterprise edition of its MR glasses, which users can wear over an existing pair of glasses. The enterprise edition is shaped like a halo, circling the user’s head. Both Microsoft and Magic Leap have already launched their own enterprise-oriented smart glasses.
• The startup is working with automakers, universities, and tourism organizations who want to use the enterprise MR glasses in the workplace, or to offer them to end users.
• Several new apps designed for the smart glasses were revealed at the Mobile World Conference held in Shanghai on Tuesday, including a weather app, games, and a 3D live soccer experience app.

With the initial success we’ve seen with our carrier partners, we’re scaling this strategy and excited to get Nreal Light into the hands of American consumers by April of this year.

—Nreal CEO and founder Xu Chi, in the statement

Context: In fall 2020, Nreal launched its Light MR glasses in Japan in partnership with KDDI, and in Korea with LG.

• Nreal closed a $41 million Series B in September led by TikTok competitor Kuaishou, bringing its total funding to $70 million.
• Other Nreal investors include Sequoia Capital China, video-streaming platform iQiyi—which operates its own VR venture—as well as Shunwei Capital, a VC firm founded and chaired by Xiaomi’s co-founder Lei Jun, and state-backed GP Capital and CCEIF fund.
• The company was accused of stealing technology from Magic Leap in June 2019.

READ MORE: US court rejects IP theft claims against Chinese mixed reality firm

China’s tech heavyweights are finally making a big push to help older people better access digital technology. Over the past month, Baidu launched a large-font app designed for the elderly that also features a “companion radio” broadcasting the hottest news of the day. Alibaba-backed Gaode Map rolled out new services for the demographic group as well, boasting functions such as one-click ride-hailing that does not require inputting a destination—along with bigger fonts too.

While the digital divide remains huge, big tech seems to be becoming friendlier to senior citizens. How helpful will these new functions be, and how soon can we expect the technology gap to be bridged?

Bottom line: The accessibility problem for the elderly and other digitally challenged people won’t be solved overnight. Larger fonts certainly help, but ultimately it’s the complicated user interfaces and navigation that have been holding people back. Redevelopment and education take time. Still things are trending upwards. The Covid-19 pandemic accelerated the transition and, along with some top-level nudges, you can bet the pace will continue. The untapped markets are too large to ignore.

The fonts are helpful, but older people have an inherent lack of confidence with smartphone apps, which have been catering to those who grew up in the digital age. Older people are unwilling to try out strange things from fear that they may mess up something.

— A Beijing-based UI designer

Leading from the top: Sporadic efforts by tech firms, such as switching to larger fonts, have been going on for a long time. Now the Chinese government is making a broader move towards a systematic framework with a raft of recent policies. 

• China’s State Council issued a guideline (in Chinese) last November, aiming at establishing a long-effect mechanism to overcome the “digital divide” for older people by the end of 2022.
• In December China’s Ministry of Transport met with eight of the country’s biggest ride-hailing operators, including Didi and Gaode, to discuss ways of making travel more convenient for senior citizens. A one-click hailing button similar to Gaode’s is now found on most other popular apps.
• The central bank ordered in mid-December that businesses could not refuse cash payments (in Chinese). By the end of 2020, it had penalized 16 organizations for such breaches.
• The Ministry of Industry and Information Technology in December initiated a year-long program (in Chinese) to make 115 public service websites and 43 apps in transport, social networking, e-commerce, healthcare, and other areas senior-friendly and barrier-free. Those apps include WeChat, Alipay, JD, Douyin, and Ctrip: in short, almost every app one might frequently use.

Silver economy: Motivations for bridging the divide aren’t purely altruistic. Senior citizens with growing spending power are forming a powerful consumer class, creating untapped market opportunities. China’s “silver economy” was projected to reach RMB 5.7 trillion ($882 billion) by 2021, according to Chinese consulting firm iMedia Research. In 2019 approximately 254 million Chinese people were aged 60 or above; the number is projected to rise to 300 million by 2025.

• E-commerce: A 2019 report by JD.com noted that its sales of products to older adults had been climbing at an average annual rate of 39% in the prior three years. Sales of products such as home furnishing, prescription medicine, mobile phones, kitchenware, and apparel each expanded more than tenfold in 2019 alone.
• Food delivery: Even before the pandemic, meal delivery for senior citizens surged tenfold on Eleme in 2019 compared to 2018. Meituan’s food delivery unit saw its active users aged over 50 shoot up by one-third year-on-year (in Chinese) in the first half of 2020.
• Healthcare, entertainment, and other services: Meituan now records 50 million average monthly views of “senior facilities” and related keywords. The delivery firm has been adding more services (in Chinese) to meet seniors’ demands such as for reservations for karaoke sessions and haircuts. 
• Education: Covid-19 has sped up the development of online education. Jiayou, an online education and social networking startup targeting people between 50 and 70, has attracted one million users to its classes on wellbeing, cooking, music, and other subjects. Competitor Hongsong also boasts one million users. Tangdou, an app teaching older people square dancing, secured backing by Tencent in 2019 and today has 20 million active users.

It’s not font size, it’s complexity: Whether they already use the internet or not, the elderly are having trouble embracing new technology.

• Nearly 100 million out of China’s 940 million internet users as of June 2020 were aged 60 or above, says a report by the China Internet Network Information Center (in Chinese). This compares to the country’s 254 million population in this age segment.
• Almost half of China’s 463 million non-netizens say they are not online because they lack essential digital knowledge. The ratio could be much higher for seniors.
• Some older people who are longtime internet users nonetheless still have more trouble accessing new technology than the younger generation, such as making online orders at restaurants or getting their health QR code.  

Back to school: Training programs on smart technology designed for the elderly have mushroomed over the past five years.

• Senior universities and public libraries now operate training programs. 
• After the Covid-19 outbreak, Alipay introduced a segment dubbed “Alipay Senior University” to teach the older people how to order food delivery and pay for bus rides on the app so they could avoid human contact.
• Local governments such as Shanghai, Beijing, and some in Sichuan province have launched training sessions to help older people adapt to smart technologies. 
• Typically, people between the ages of 60 and 75 are quicker learners in those programs compared with 75 or above, but the most effective way might be to learn from their own social circles, with a little help from digital peer pressure.

What about accessibility for groups other than the elderly? China has 83 million people with disabilities, including 17 million with visual impairments and 27.8 million with hearing loss. Efforts to clear their barriers are just starting.

• Video platform Youku launched a barrier-free version for the visually impaired in December, and is preparing to bring 100 accessible films online over the next three years.
• Iflyrec, an audio processing app made by iFlytek, pledged in October to provide free-of-charge transcription services to people with hearing impairment. It also features real-time transcription that could help them in daily communication. 
• The coverage is still far from enough, and getting people with accessibility problems online could be a problem itself. 
• Aside from the Ministry of Industry and Information Technology’s December initiative to promote barrier-free online experiences, the increasing need for contact-free public services amid the pandemic set things on a faster track as well.

Technology developed for other purposes, such as voice recognition, can sometimes benefit people with barriers. Apps designed for a special group [with accessibility problems] would be a good choice commercially, given China’s large population base. But I haven’t seen any so far. It’d be a much slower progress [for apps to cover people with barriers compared with senior citizens.]

— Beijing-based UI designer

The hit audio-only social network Clubhouse appears not to be accessible in mainland China as of 7:30 p.m. Monday evening. As of writing, TechNode reporters and contacts opening the app receive an error message reading “An SSL error has occurred and a secure connection to the server cannot be made.” The main field of the app, which normally displays a list of conversations and activity, is empty except the suggestion to “Start a new room to get a conversation going!”

Why it matters: While Chinese internet regulation can be unpredictable, Clubhouse is probably gone for good from Chinese networks.

Context: The hit app has provided a rare, unfiltered space for online discussion mainland China. In recent days, thousands of users flooded into Chinese-language groups discussing normally off-limits topics, leading many to predict that it was only a matter of time before the app was blocked.

• TechNode Global, a pan-Asian tech media and community platform startup, announces seed investment of US $1 million.
• The funding round was led by Kairous Capital, with the participation of Nutty Capital and SPH Ventures.
• Fresh capital will fuel TechNode Global’s growing footprint in the Asia Pacific.
• TechNode Global intends to build its pan-Asia technology ecosystem with media, events, corporate innovation services, and cross-border businesses.

TechNode Global, a Pan-Asia technology media and community platform startup, has raised a seed round of $1 million led by Kairous Capital (Hong Kong), with participation from Nutty Capital Venture (Hong Kong) and SPH Ventures (Singapore).

The investment will accelerate TechNode Global’s effort to build the Asia Pacific’s leading tech media platform, including plans to cover more technology stories, deliver high-quality events, and build comprehensive cross-border businesses across the region. The funding will also support the company’s further international expansion.

Launched in early 2019 by Dr. Gang Lu, the founder and CEO of China’s leading bilingual tech media TechNode, TechNode Global is more than a media company. It is building a technology community platform, offering news, fundraising and deal flow support, regional events, and facilitation for corporate-startup partnerships. The startup has experienced significant growth since its launch and has partnered with corporations such as iFLYTEK, Huawei, Alibaba Cloud, and NTUC Income.

The deepening cross-border commercial ties between China and the rest of Asia, especially with Southeast Asia, present a huge market opportunity as Chinese tech behemoths step up their expansion and investments in the region. By spinning from TechNode, TechNode Global will focus on industry and regional expertise to serve the growing regional market.

Dr. Lu said, “Despite 2020 being a challenging year, TechNode Global is proud to have experienced remarkable growth and many firsts. Having the privilege to work with regional corporate clients is a testament to our mission to be the source of insights and network for tech and innovation. Asia is the next promising technology innovation center and market. With the enormous experience and resources TechNode has in China, I believe we are at the right place, at the right time to carry out our purpose.”

Joseph Lee, Managing Partner at Kairous Capital, a regional venture capital specializing in cross-border investments between China and Southeast Asia, said: “Being a regional VC investing across China and Southeast Asia, we envisage tremendous integration and collaboration opportunities in the technology and business space within the region. Because TechNode Global is connected with the Asia Pacific technology ecosystem, coupled with the recently signed RCEP, we are positive that they will be a key player as a regional innovation enabler in years to come.”

Gilbert Lam, Executive Director at Nutty Capital, said: “Despite the serious impact from Covid, we do see a big innovation opportunity trending into a number of new technology frontiers. We believe it’s perfect timing for TechNode to expand into new markets under the strong leadership of Dr. Lu, to reshape the new rhythm in the fast-growing Southeast Asia tech playground.”

TechNode Global has been privileged to partner with regional government agencies, community builders, and corporations to host its flagship event ORIGIN Conference and other community initiatives. These partners include National Research Foundation Singapore (NRF), Enterprise Singapore, Malaysia Digital Economy Corporation (MDEC), Sunway Group, True Digital Park, and others. With recognition and support from key tech communities across the region, TechNode Global will work closely with local partners to localize its services and engage with local tech ecosystems.

The company currently has an office in Singapore, and plans to open an office in Malaysia soon. 

Background

TechNode Global

TechNode Global is a Pan-Asia tech platform offering premium tech news, industry insights, events, and tailor-made marketing solutions for startups, VCs, corporates and other industry pioneers. With a vast network in global innovation and entrepreneurship, TechNode Global facilitates cross-border partnerships and businesses.

Kairous Capital

Kairous Capital, a regional venture capital specializing in cross-border investments between Greater China and South East Asia, with a focus on investing in disruptive technologies across both regions. Kairous Capital specializes in bridging the technology gap between Greater China and South East Asia, providing a complete cross-border solution to its investments.

SPH Ventures

SPH Ventures is the corporate venture capital fund of Singapore Press Holdings Ltd (“SPH”), Asia’s leading media organization listed on the Singapore Stock Exchange. The fund size totals S$100 million. It has a global mandate to invest in early-stage innovative companies in the areas of Digital Media (including advertising technology and content aggregation/ distribution/ consumption) and Consumer Internet (including e-commerce, marketplaces, social media, education technology, financial technology, etc).

Nutty Capital

Nutty Capital, where daring nuts meet to revolutionize and put a dent in the universe. Nutty Capital shares early stage venture resources with entrepreneurs across Greater China and Southeast Asia region in a selected range of areas, including internet, technology, health care, and consumer.

Electric vehicle startup Faraday Future is close to finalizing a $310 million round of funding from a group of China’s state-owned enterprises and national funds, as the company is set to go public via special purpose acquisition company in the US.

Why it matters: The new investment will ease near-term cash flow pressure on the embattled EV maker and clear some roadblocks for the company resuming its expansion plan into the Chinese EV market, the world’s biggest of its kind.

Details: Faraday will receive around RMB 2 billion ($310 million) from a consortium of investors led by two Chinese state-owned enterprises, Zhuhai Gree Group and Zhuhai Huafa Group, TechNode has confirmed.

• The cash injection is under the direction of the municipal government of Zhuhai, a city in the southern Chinese province of Guangdong, a person close to the matter told TechNode on Wednesday, speaking on condition of anonymity.
• The state-owned Nanfang Media Group first reported the news (in Chinese). Faraday Future declined to comment when contacted by TechNode on Wednesday.
• The Los Angeles-headquartered EV startup has been in touch with the government since late last year. This was followed by the incorporation of a fully-owned subsidiary with registered capital of $250 million in the city in late December, according to Chinese business research platform Tianyancha.
• Zhuhai is among the regional governments aiming to play a major role in China’s leadership in electric vehicles, in September revealing plans to make new energy carmaking one of its five pillar industries by 2025. Chinese media reported that local authorities have been preparing plans to build a new vehicle assembly plant with Faraday.
• Gree Group is a former major shareholder of Gree Electric Appliances Inc, China’s biggest air conditioner maker, while Huafa, also fully owned by Zhuhai municipality, is the city’s biggest real estate developer. Gree and Huafa did not respond to TechNode’s request for comment.

Context: Faraday has struggled for years to secure funds to get its first car, a luxury EV model called FF91, into production, in part due to the debt issues of founder Jia Yueting. The company’s second chance comes as Chinese local governments are racing to back EV startups amidst a Wall Street craze for EV stocks.

• Zhuhai is not the first city to pay to bring an EV maker to town. Hefei provided a lifeline to EV maker Nio in February in return for establishing its Chinese headquarters in the central Chinese city.
• Faraday is expected to file for listing through a merger with Property Solutions Acquisition Corp, a special purpose acquisition company (SPAC) within the next two weeks, Chinese media reported. It has hired Credit Suisse as an underwriter, the person close to the matter told TechNode.
• The company is also looking to source manufacturing from Chinese private automaker Geely, with plans to build a plant with annual capacity of 100,000 vehicles, Reuters reported Monday.

Chinese self-driving vehicle startup Uisee has raised around $150 million in a new round of funding led by a state-backed venture capital fund, as the Covid-19 pandemic fuels demand for driverless vehicles.

Details: A national investment fund formed by a group of government agencies and state-owned enterprises led the RMB 1 billion funding round, according to an announcement released Monday. The fund has registered capital of RMB 147.2 billion. The Uisee valuation was not disclosed.

• China’s Ministry of Finance is the fund’s top shareholder holding a 15.3% stake, according to information on Chinese business research platform Tianyancha. Other major stakeholders also include China Development Bank Capital, the investment subsidiary of the state-owned policy bank, as well as China Insurance Investment Fund, a venture capital firm set up by a group of top Chinese insurers.
• Uisee said the proceeds will be used to enhance the development of its fully self-driving vehicle technology for use cases from passenger transport to logistics. The company’s public demonstrations have primarily showcased its logistics applications, enabling cars with self-driving technology to transport goods in and between warehouses.
• The Beijing-based AV startup said it is partnering with several big automakers to commercialize its technology, including equipping a fleet of more than 100 electric vehicles as trailers to transport auto parts in an SAIC-GM-Wuling plant in the southern Guangxi province. SAIC-GM-Wuling is a General Motors joint venture with its Chinese manufacturing partners.
• Uisee said that the fleet has logged more than 300,000 kilometers (186,411 miles) unmanned as of January in the 15 months since partnering with the carmaker. In an interview with Chinese media in April, founder and CEO Wu Gansha said that it is planning to enable daily operation of 1,000 AVs and achieve revenue of RMB 200 million by the end of 2021.
• Wu, formerly the director of Intel’s research institute in China, formed Uisee in early 2016. In February, it closed a Series B for an undisclosed amount led by Robert Bosch Venture Capital GmbH, the German auto supplier’s investment arm. Other early investors included Chinese venture capital firm ZhenFund, as well as Sinovation Ventures co-founded by former Google China head Kaifu Lee.

Context: Uisee is benefiting from pandemic-driven demand for unmanned transport, as one of a handful of Chinese AV startups getting a funding boost.

• Guangzhou-based WeRide earlier this month said it had closed a $310 million Series B from investors including China’s biggest electric bus maker Yutong, as the robotaxi startup begins expanding into self-driving minibuses.
• Plus.ai, a self-driving truck company backed by Sequoia Capital China, in November raised $100 million from Guotai Junan International, a Hong Kong-based investment and securities firm, and Hedosophia, a London-based VC firm.

Shares of the electric vehicle unit of Chinese property giant Evergrande surged nearly 50% on Monday after announcing that it had raised $3.35 billion from six investors in an add-on share sale to support its plan to become “the world’s largest EV maker.”

Why it matters: The sale, one of the biggest for a listed electric vehicle maker, are part of a broader trend in global stock markets as investors make big bets on EV players thought to be the next Tesla.

• Chinese EV maker NIO recently raised more than $3 billion in its recent upsized follow-on offering which closed in mid-December. Meanwhile, Xpeng Motors and Li Auto secured war chests of around $2.5 billion and $1.5 billion, respectively, with their new stock offerings early last month.

Details: China Evergrande New Energy Vehicle Group closed the sale of 952 million shares at HK$27.3 each, representing a discount of 8.7% to Friday’s closing price of HK$29.9, for a total of HK$26.0 billion (around $3.35 billion), according to a statement released Sunday.

• The add-on offering raised HK$5 billion each from four private investors, including Cosmic Success Holdings and Upper World Limited, subsidiaries of Chinese real estate developers Kingkey Group and Zhongzhou Group, respectively.
• Investors also included Chan Hoi-wan, practical controller of Chinese Estates Holdings and wife of Hong Kong billionaire Lau Luen-hung, as well as Liu Minghui, founder of Hong Kong-listed China Gas Holdings. Chan and Liu each purchased shares worth HK$3 billion.
• All of the investors have close ties with Evergrande, which is the EV unit’s biggest shareholder. Some had invested in Evergrande’s property management arm which went public in Hong Kong in December.
• The company’s stock price jumped 48% to HK$44.5 by Monday afternoon, expanding its market capitalization beyond $50.6 billion, easily eclipsing some of China’s biggest automakers such as SAIC and Geely.
• The company plans to put the funds toward research and development, debt repayment, and production, according to the statement.

Context: Evergrande’s EV subsidiary said it will start mass production of its electric car portfolio of six models ranging from sedans to crossovers in its Shanghai and Guangzhou facilities by September. It has said that it expects its core business to reach profitability in 2022.

• However, the would-be EV maker has yet to start trial production, according to a Caixin report (in Chinese) last month. The company has also faced ongoing criticism for grabbing land under the guise of making cars, according to a Financial Times report.
• The company raised in September $516 million in fresh funding from Chinese tech giant Tencent and ride-hailing unicorn Didi Chuxing, among others, and revealed plans for a secondary listing on Shanghai’s Nasdaq-style STAR Market tech board.

Chinese smartphone brand Honor on Friday unveiled its first model since Huawei sold the unit in November, under pressure from US sanctions.

Why it matters: Huawei sold Honor to keep the brand free from US technology export restrictions. Friday’s launch shows that the strategy has achieved initial success, as Honor’s new phone contains technology that Huawei still finds difficult to acquire.

• The processor which powers the new model, the Honor V40, is made by Taiwanese chipmaker MediaTek, which is subject to a US export regulation imposed last year. It requires chip vendors around the world to acquire a special license from Washington to sell products with American technology to Huawei.
• V40 users in overseas markets will reportedly be able to Google apps and services. Huawei is still blocked from using those services because of a 2019 US ban.

Details: The 6.7-inch V40 smartphone lineup starts at RMB 3,599 (around $556), featuring a 50 million-pixel camera.

• The V40 is powered by MediaTek’s Dimensity 1000 Plus system-on-a-chip (SoC), which is compatible with next-generation 5G wireless technology.
• It also uses Samsung’s charging technology, according to Honor CEO Zhao Ming.
• Zhao said in a live-streamed press conference on Friday that the company now has five research centers and more than half of its staff work on research and development.
• It’s unclear whether Honor bought MediaTek’s processors before or after its split from Huawei. MediaTek told reporters (in Chinese) on Wednesday that it is still “assessing its cooperation” with the company as it launches a new series of 7-nanometer Dimensity 1000 chips.
• The model is available to order online for domestic consumers starting Friday. The company did not announce an international launch plan during the press conference. It is not yet listed on its international website.

Context: Huawei in November sold Honor to a government-backed consortium. Honor is a budget smartphone brand that Huawei established in 2013. It competes with other budget brands such as Xiaomi and Oppo while the Huawei brand sells to the high-end handset market. 

• A report released by research firm Trendforce this month said Honor will become a direct Huawei competitor.

Poly Network, the interoperability solution launched by the founder of cryptocurrency Neo, has formed a partnership with cryptocurrency exchange Binance’s decentralized finance-oriented blockchain to enable cross-chain interoperability.

Why it matters: The partnership could bring more developers and decentralized applications (dapps) to both Binance Smart Chain (BSC) and Poly Network, especially from the booming DeFi space.

• Poly said in a statement sent to TechNode that it hopes the BSC partnership will bring network effects, meaning the value of the network will increase exceptionally as network participation grows.

Details: The partnership will allow interoperability between dapps built on the two networks; they will be able to transact tokens and exchange information across different blockchain protocols.

• Poly said that $3 billion in tokens had already been transferred between its partner networks.

Context: Poly is one of two cross-chain protocols currently used by the Blockchain Services Network to achieve interoperability. The BSN is a Chinese government attempt to create a global “internet of blockchains.”

• Binance is the world’s largest cryptocurrency exchange by trade volume, according to data from crypto monitoring platform CoinMarketCap.
• The BSC was launched in September and is already used daily for transactions in the tens of millions of US dollars, data from dapp monitoring site DappRadar said.
• Binance’s decentralized cryptocurrency exchange runs on the Smart Chain.
• The public chain allows developers to build applications that are compatible with the Ethereum network, but offers lower transaction fees and higher speeds than Ethereum.
• Poly Network was founded by Da Hongfei, one of China’s blockchain pioneers. Da started the Neo network in 2013, and its native token is now ranked 26th globally in terms of market capitalization.
• Poly Network already makes several blockchain protocols interoperable: Bitcoin, Elrond, Ethereum, Neo, Ontology, and Switcheo.

READ MORE: EXCLUSIVE: China’s BSN to test cross-chain interoperability in October

Corrections: updated to reflect that Poly Network was started by the founder of cryptocurrency Neo, not the company behind Neo, as previously stated. Corrected text that implied Da Hongfei is involved in operations of Neo, Ontology, and Switcheo. An earlier version of this story erroneously stated that $3 billion had been transferred between Poly Network and BSC.

MACAU Dec. 28, 2020—Today, TechNode and Macau International Grand Event Promotion Association announce that the first BEYOND International Technology Innovation Expo will be held in Macau next year.

As an emerging center of the global economy, the Asia–Pacific region needs an international event that can display its most cutting-edge technologies to the outside world and attract more investment and collaboration from the international market. The BEYOND International Technology Innovation Expo is that promising event.

The first BEYOND Expo will kick off on June 17, 2021 at the Venetian Macau. The two-day event is expected to attract more than 10,000 attendees from around the globe, and more than 1,000 exhibitors including Fortune Global 500 companies, major multinational corporations, unicorns, and emerging startups. They will show technologies ranging from life sciences to new infrastructure, smart city applications, and future technology. The organizers will also invite more than 500 global investment firms and international media outlets to attend the event. In addition to exhibitions and conferences, the BEYOND tech expo will offer side events such as forums, innovation tours, product launch events, startup demos, VC meetups, and afterparties.

BEYOND has already begun talks with many international companies, including CP Group, Foxconn, BMW, Huawei, Mi, ZTE, AliCloud, and SenseTime.

Technology and its impact are the focus of the BEYOND Expo. BEYOND will highlight how technology disrupts traditional businesses and addresses global sustainability issues. BEYOND is meant to break boundaries across the global tech industry and to create a platform on which innovation from corporates, startups, universities around the world will be represented.

“We believe that the global technology industry needs a new platform to showcase changes in the industry, including the transformation from consumer electronics to industry digitization, and from Silicon Valley innovation to global innovation,” said Dr. Lu Gang, founder of TechNode. “We believe BEYOND will become an exciting technology event where people around the globe can gather and exchange ideas.”

“I believe that they will bring different perspectives and inspirations to Macanese youth and entrepreneurs, while exploring the future of business in a forward-looking manner,” said Lo Tak Chong (卢德忠), president of the Macau International Grand Events Promotion Association, which will co-host the first BEYOND exhibition.

“BEYOND will help attract different tech companies to participate in the activities in Macau, create an atmosphere for tech exchanges, encourage market innovation, and promote the development of technology in Macau,” said Agostinho Vong (黄伟伦), acting president of the Macau Trade and Investment Promotion Institute.

With favorable trade and low-tax policies, international companies are also expected to be able to easily access the Asia-Pacific through Macau. Supported by the annual BEYOND Expo, the city aspires to become a new global tech hub connecting technology ecosystems across the world.

For more information about the event, please visit beyondexpo.com, or subscribe to its Facebook page at facebook.com/beyondtechexpo.

Xpeng-backed self-driving startup WeRide has raised $200 million in a round of fresh funding from China’s biggest electric bus maker Yutong, it announced Dec. 23. The two companies also announced the development of a fully automated minibus with no controls.

Why it matters: The deal comes as Chinese automakers are pushing into the country’s autonomous vehicle industry, and as local authorities are allowing AV testing on public roads in bid to catch up in the global battle for tech dominance.

• The central government has reaffirmed a goal to “adopt highly autonomous cars on a massive scale” by 2025 in its finalized blueprint (in Chinese) for intelligent and electric vehicles released late October.

Details: Yutong put $200 million into WeRide in a solo Series B1 investment, according to a joint announcement released Wednesday. Based in the central Henan province, Yutong is China’s biggest medium and large-sized electric bus maker with more than a third market share in its domestic market, followed by BYD and Dongfeng Motors, among others.

• WeRide said that it and Yutong have jointly developed an autonomous minibus, which has no steering wheel, accelerator, or brake, without revealing details.
• The Guangzhou-based company did not disclose its valuation, nor details of other investors involved in its Series B.

READ MORE: The Chinese startup bringing robotaxis to the masses

Context: WeRide has been testing fully driverless vehicles on open roads in Guangzhou since July. It is the second company in the world to test fully driverless vehicles on open roads, following the US’s Waymo.

• The company in December 2018 closed an undisclosed amount in a Series A from the Renault-Nissan-Mitsubishi Alliance, along with Chinese artificial intelligence unicorn Sensetime, Xpeng CEO He Xiaopeng, and others.
• WeRide claimed to have offered more than 147,000 rides to 60,000 passengers in a robotaxi pilot program in a 55-square-mile area on the outskirts of the city as of November. 
• WeRide peer Pony.ai revealed last month an undisclosed amount of funding from the state-owned FAW Group, which it claimed was the first bet on AV by a Chinese state-owned automaker.

Like all Chinese, I’m on social media a lot. I check Wechat every other minute, I read Linkedin and Twitter from time to time, and then I post on Weibo and Douyin occasionally. (One minute—let me just check Wechat).

But even as Wechat—which recently claimed 1.1 billion global active users and Douyin (the Chinese counterpart to Tiktok) continue to gain new users in China, I have been wondering if there is space for a new social network in China, especially for the Generation Z, native to mobile Internet and known to be fickle, and maybe even for everyone.

We do have a very competitive landscape of social apps in China. There are three types of social apps here:

• Close-knit social apps where people can communicate with the friends, family, and acquaintances they already know offline. Examples include Wechat and QQ. As a result of the instant message focus of the apps and the extensive contacts most users, people don’t post user generated content in Moments tab as enthusiastically as a few years back. In addition, these apps do not provide an open platform for meeting new people.
• Content and media-driven apps. Examples include Little Red Book, Tiktok, and most of the apps that host online influencers. Users put out a lot of content, often quasi-professionally made, on these apps, and other people can comment or leave messages about the content and follow such influencers or each other. The downside, however, is that there is usually only one-way communication. There are few opportunities for meaningful two-way discussions. Often only influencers receive significant attention and quality feedback.
• Tool-type social apps like Momo or Tantan—known as the Tinder of China. These types of apps are highly effective for meeting new people, but are often hormone-driven and focus on appearances and social status more than any other attributes. This type of app tends to be limited to one-on-one conversations, with almost no content creation (other than profiles filled with photoshopped selfies) or opportunities to meet and interact with groups of people.

So is this the endgame for Chinese social networks? My answer is NO.

There are plenty of things you don’t want to share on Wechat Moments because you don’t want your friends, family, or colleagues to see them, and you don’t want to want share on Weibo because you may not get quality responses at all. You may ask yourself—when you click the “like” button on Wechat Moments, do you do that because the content is truly fascinating, or just because you want show some respect to the person who shared it?

This is why this app called Soul really gets my attention. It is quite a special one, unlike all others social apps in the market.

In fact, Soul is not that new. Founded by veteran consultant Zhang Lu, Soul went online in November 2016.

Soul promises an oasis in the complicated social media landscape, by promoting content based on users’ interests and lifestyle, and allowing users to express themselves and interact with one another in a stress-free, largely anonymous, environment. Users, which the platform calls “Soulers,” build a brand new virtual identity for Soul, with avatars and develop extendable virtual relationships without disclosing personal information.

The app encourages users to connect with strangers based on shared interests. Much like Bilibili, you need to take a survey while registering to be a user. But unlike Bilibili, where you have to answer 100 questions about online pop culture, on Soul you dig deeper into yourself by answering questions ranging from your personality to your daily habits, from your biggest fears to your pet cat’s favorite snack. And a personal profile is set up, tagged with your NERIS personality type as a tag, among other interests you have. Profile photos, locations, ages are not required, even discouraged, and never disclosed on the platform. You then leave the rest to an algorithm, which suggests friends and posts that may interest you based on the data you have entrusted to the platform. 

Soul is already a popular app among China’s Generation Z population, who use it to publish UGC, ranging from diary, voice clips to photos, short videos of their own performances. According to data from Iresearch, Soul is more focused on Generation Z than any other major social network in China, with 35.6% of the app’s users falling in the age group.

Much like Snap was to Facebook, Soul is a complementary platform for young people. Like Facebook, Wechat is all based on real-name, real-life relationships. Soul provides a home for the type of UGC that you don’t want people in your usual social circle of offline relationships to see. Soul users also foster and maintain relationships on the platform based on their interests and engage in interactive features such as giving each thumbs ups, commenting on posts, or discussing specific topics through tagging their posts à la Pinterest.

Soul has positioned itself as the “next generation social playground for Gen Z” in China. But to me, Soul app is potentially not limited to only the Gen Z audience. Everyone, no matter what age they are, is sometimes lonely and wants an opportunity to express themselves with authentic interaction.

I don’t know how far Soul will go, but definitely in China, the social networking space is NOT done yet.

Shares of Chinese electric vehicle maker Li Auto surged 13.9% on Monday following bullish analyst reports on the firm’s robust sales figures reported in its first quarterly results since going public this summer.

Citigroup on Monday upgraded Li Auto to “buy” from “hold” and raised its target price by 68% to $45.6 after the EV maker posted higher-than-expected revenues and a gross margin of 19.8% from 13.7% in the second quarter.

China International Capital Corporation (CICC) also raised its price target to $40 from $21.5 on expectations of further margin upside next year. Li Auto is the first Chinese EV startup to report profits: it earned RMB 16 million ($2.4 million) in non-GAAP net income in Q3, thanks to a reduction in vehicle costs and higher-than-average operating efficiency, CICC analysts wrote in a report on Monday.

The company reported wider net losses of RMB 106.9 million, a 42% increase from the second quarter, attributable to share-based compensation expenses related to employee stock options.

The Chinese EV maker beat analyst expectations of its Q3 revenue, posting a 28.9% quarter-on-quarter increase in revenue of RMB 2.51 billion. Deliveries during the quarter rose sequentially by nearly a third to 8,660 vehicles.

Total deliveries reached 21,852 units for the first 10 months of this year. Its first model, the Li One, was China’s top-selling electric SUV in the past two months, according to data from state-backed China Automotive Technology and Research Center (CATARC).  

Li Auto boasts more efficient operations compared with its peers. CICC analysts said the company enjoyed a much higher efficiency with a monthly sales of 100 vehicles on average per store in September, compared with 29 for Nio and 19 units for Xpeng. The Beijing-based EV maker had 35 direct sales stores in 30 Chinese cities as of September, compared with 116 Xpeng stores and more than 160 Nio showrooms. CICC forecasted Li Auto’s net losses would narrow to RMB 190 million next year from RMB 480 million in 2020 as the company continues to ramp up production and control operating costs.

Some analysts said that the speed of Li Auto’s retail expansion would be a key factor in driving sales volume moving forward. However, the EV maker plans expand operations gradually, targeting 50 to 60 stores nationwide by end-year. Each store’s productivity should outperform competitors, as each retail location covers a bigger area including nearby towns, according to Chinese online brokerage Tiger Brokers.

“For some of our peers, their approaches are to quickly expand the number of retail stores to cover more cities, then try to slowly improve their sales efficiency at a later stage. We took a different approach. We implement gradual expansion of our sales network and try to maintain a high of sales efficiency per store,” Kevin Shen, president of Li Auto, said on Friday during the earnings call.

Chinese public blockchain Nervos has launched a new token standard for use in a branch of blockchain-based finance to compete with Ethereum’s popular ERC-20 standard used in developing smart contracts.

Why it matters: With the launch of the new token standard, Hangzhou-based Nervos continues its decentralized finance (Defi) push, enabling many assets to be traded on its network.

• Defi is a blockchain-based experimental form of finance which aims to give users full control of their assets.
• Nervos’s Simple User-Defined Token (SUDT) will give “full ownership and control” of the token to the user, the company said. Creators cannot modify or seize tokens without user consent.

“The launch of the SUDT standard is a significant milestone in the progression of DeFi on Nervos.”

—Kevin Wang, Nervos co-founder

Details: Developers can use SUDT to issue their own tokens on Nervos’s network. SUDT defines the implementation of tokens in smart contracts, guides their distribution on the network, and secures them on Nervos’s Layer 1 blockchain, Nervos said in a statement.

• Before the new standard, only Nervos Network tokens, traded as CKB, could be used in decentralized applications built on Nervos’s network.
• One team of developers, Portal Wallet, launched a coffee token using SUDT. Each one of the coffee tokens can be converted to one cup of coffee at Starbucks.

Context: There are many token standards in blockchain. The most popular is ERC-20, an Ethereum-based standard that is widely used for smart contract development.

• Nervos has been all-in on Defi before the Defi craze took over China’s blockchain ecosystem. In a blog post in its official Medium account in a year ago, it identified Defi as a major use case for the Nervos Network.
• Nervos is one of the few public blockchains available on the Blockchain Services Network, a global “internet of blockchains” supported by the Chinese government.
• Founded in 2018, Nervos is a proof of work public blockchain. It has received $100 million in funding from some of China’s best-known blockchain funds like Wanxiang Blockchain and Hashkey Capital, according to startup data platform Crunchbase.

READ MORE: EXCLUSIVE: China’s BSN to integrate public blockchain Nervos

The term “plant-based meat” became a buzz word in China with the entry of Beyond Meat and Impossible Foods to the market. Plant-based proteins are not a new thing in Asia, but with new technology behind the trend, China is taking a fresh interest in the food industry. Venture capital investors are also assessing potential in foodtech.

More than 80% of investment in the sector has been downstream from foodtech, such as e-commerce, delivery, and brands, said Dee Zheng, principal at Bits x Bites, during a discussion at TechNode’s Emerge 2020 conference. However, she said that the trend will shift upwards to upstream segments to secure the food itself. 

E-commerce and food delivery addressed the problem of convenience, but doesn’t really change the food quality, Zheng said. Platforms have to go upstream to support farmland with technological improvements for environmental sustainability. Additionally, there will be a huge opportunity for alternative proteins because of Covid-19, which threatened the animal protein supply chain, according to Zheng.

A dynamic market 

Rich cultures and vast territory has made China a country with diverse food choices. Therefore, the constant exchange of demographics has created a relatively dynamic market in China, said Samuel Li, manager of projects and operations at Analytical Flavor System. There have been some successful cases of a new food or flavor from overseas that were welcomed among the younger generation in China. However, whether all new foods and flavors brought to the Chinese market will be fully successful is debatable, Li said.

“We have been seeing a lot of products that are doing well in overseas markets, but they didn’t translate their success into the Chinese market. There is a gap of perception between the Chinese consumer and consumers from other markets. This gap of perception will eventually crystallize into a gap of preferences to what specific flavors or combinations of different flavors they will choose,” Li said during the discussion.

Plant-based protein maker Just Egg has conducted a lot of research and customized recipes to fit Chinese consumers’ eating habits, according to Gary Zhang, head of its regional marketing. Some 90% of shoppers who buy its products are flexitarians, who opt for plant-based products from time to time for sustainability and health reasons. He said the awareness of plant-based dining among the Chinese consumers is growing very quickly. 

“We can see that more and more young groups and post-90s are embracing this kind of plant-based dining very actively,” he said.

Foodtech for the future

There’s a problem of waste in the food industry in terms of innovation, according to Zheng. Ninety percent of new products launched onto the market will not end up in the field. However, with the introduction of digitization and data generation, customers’ perception and preferences can be detected in advance. 

“Traditionally, you announce a color or flavor of the year, but it’s more based on the market research on existing products,” Zheng said. “Now they can have the potential to do non-existing predictions based on very scattered information and try to have the conclusion, which is quite amazing.”

The technology in the food industry is evolving, according to Zhang, and the government should also catch up with the pace of the market in terms of drafting regulations related to emerging food products such as plant-based meat.

“I think this poses a very imminent and long-term challenge to the administrators,” he said. “Sometimes they even need to deregulate some things to remove the burden and let the industry move forward.”

TechNode Global has announced the finalists for the first edition of ORIGIN Innovation Awards. The ORIGIN Innovation Awards recognizes outstanding startups, corporates, ecosystem enablers, and movers and shakers in Asia who are poised for growth. The awards celebrate the spirit of innovation and entrepreneurship, and also seek to inspire the dreamer in all of us. 

Nominations for the ORIGIN Innovation Awards began on Jun. 1 and ended on Sept. 20. The eligible nominees for the Ecosystem Enabler Awards and Movers and Shakers Awards were put up for public voting from Sept. 22–30. Final decisions about the awards were made by a committee of advisors, informed by the public voting.

Together with the all-star advisory team, TechNode Global spent close to two weeks evaluating every nomination and determining the finalists. The ORIGIN Innovation Awards advisory committee is made up of representatives from AppWorks, Cyberport, Gobi Partners, Golden Gate Ventures, InnoVen Capital, MDI Ventures, Rakuten Capital, Sistema Asia, True Digital Park, and ZWC Partners. 

The awards nominees come from diverse backgrounds: fledgling startups, as well as more established companies, all participated. Close to 400 contenders from 18 countries across the Asia Pacific region participated. Southeast Asia continued to be the dominant region with 67% of the applications, while East Asia emerged in the second spot with 23%, ahead of South Asia with 10%.

Dr. Gang Lu, founder and CEO of TechNode Global, said, “We are thankful to receive professional support from our advisors. Despite the negative impacts brought by the pandemic, we remain hopeful and see the unique opportunities that the crisis presents. Now, where the playing field is levelled, is probably the best time for companies to bring out the best in themselves by grabbing new opportunities.”

The ORIGIN Innovation Awards results will be announced on Nov. 18, 2020, during the ORIGIN Conference, an on-demand conference track about the latest developments in the Asia tech and startup scene within the TECHFEST Live x ROAD-TO-WCIT Malaysia 2020. Use code “ORIGINATTECHFEST” for US$150 off all-access tickets. For more information, visit https://technode.global/origin/.

The finalists (in alphabetical order):

[Startup Awards] – Artificial Intelligence 

1. AIZEN – South Korean AI Banking-as-a-Service platform. 
2. AlpacaJapan – AI and FinTech company that utilises machine learning and deep neural network to provide investment solutions for bankers, asset managers, traders, and market makers worldwide. 
3. Augmentus – full-stack robotics platform that uses mixed reality to enable code-free industrial and collaborative robot programming. 
4. Kata.ai – Indonesian conversational AI company with an integrated platform to build intelligent chatbots. 
5. Saleswhale – AI-powered lead conversion software. 
6. SandStar – startup that uses AI computer vision to revolutionize retail operations. 
7. Tookitaki – enterprise software company that creates sustainable compliance programs for the financial services industry. 
8. UIB – omnichannel messaging service provider with AI and IoT platform APIs for ISVs, chatbot builders, and developers. 

[Startup Awards] – FinTech 

1. Aspire – Y Combinator-backed technology organization that serves small businesses with financial tools to solve cash flow management and working capital needs across Southeast Asia. 
2. Curlec – Malaysia-based fintech company that makes it easy for businesses of all sizes to collect recurring payments and take control of their cash flow. 
3. FPL Technologies – FinTech startup that helps consumers check, monitor, and improve their credit score via an AI-based score planner. 
4. Gorilla – mobile telco that provides mobile connectivity utilizing decentralized blockchain technology. 
5. slice – FinTech startup that aims to redesign the financial experience for millennials in India. 
6. StashAway – digital wealth manager that personalizes financial planning and portfolio management for the needs of retail and accredited investors alike. 
7. Validus Capital – peer-to-business financing platform that utilizes data analytics, machine learning, and AI to fund growing businesses and address the financing gaps faced by SMEs. 
8. Vaymuon.vn – Vietnam-based peer-to-peer lending platform that connects borrowers with investors. 

[Startup Awards] – IoT 

1. JomParking – smart parking application that eases parking payments in Malaysia. 
2. KaHa – end to end smart IoT wearables platform. 
3. MAD Gaze – augmented reality smart glasses company. 
4. MicroSec – company specialized in IoT security. 
5. oneCHARGE – electric vehicles startup that operates a computer vision and AI-enabled EV charging system. 
6. Origami Labs – mobile computing solutions provider that offers screen-free, voice, and gesture-based products and services. 
7. Overdrive – IoT platform specialized in fleet management, assets monitoring, environmental sensing, vehicles monitoring, and real-time location system. 
8. Pinmicro –  global provider of IoT-based real-time location solutions. 

[Startup Awards] – HealthTech 

1. Aktivolabs – personal wellness application that utilizes digital behavioural modification tools. 
2. DocDoc – patient intelligence company that empowers patients to make data-driven healthcare decisions. 
3. mClinica – healthtech startup that connects pharmacies using mobile technology. 
4. Newman’s – healthtech startup that provides online medical consultations and hair loss treatment for men. 
5. Oncoshot – cancer collaborative platform that empowers patients, caregivers, and oncologists with access to personalized clinical trial information and top cancer experts for a second opinion. 
6. StratifiCare™ Inc. – healthtech company that focuses on the development and manufacturing of in-vitro diagnostics assay solutions for personalized medicine. 
7. Ubie – AI-driven MedTech startup founded by doctors and engineers to guide patients to the right treatment at the right time. 
8. Vault Dragon – healthtech startup that aims to build “Asia’s Google Maps for healthcare data”. 

[Startup Awards] – Logistics & LMF 

1. Buyandship – cross-border e-commerce logistics company in the Asia-Pacific region. 
2. DRVR – fleet management solution that uses an IoT analytics platform. 
3. Haulio – Singapore-based container haulage platform that connects hauliers and shippers to better streamline fleet management and trucking services in real-time. 
4. Inteluck – logistics company focused on first and second-mile delivery.
5. Moovaz – Singapore-based logistics and international relocation startup.
6. Parcel Perform – carrier-independent parcel tracking platform for e-commerce retailers.
7. PDL Technology Limited – semiconductor company who drives adoption of the use of 3 phase 6 wire BLDC motors in the transportation industry.
8. SHIPPOP – Thailand-based e-logistics aggregator startup. 

[Startup Awards] – Supply Chain & New Retail 

1. GrowSari – B2B e-commerce startup focusing on small groceries or sari-sari stores in the Philippines.
2. InsightSCS – Philippines-based provider of cloud, blockchain, and AI-based supply chain solutions.
3. IUIGA – Singapore lifestyle homeware retailer combining brick-and-mortar retailing with e-commerce.
4. Mighty Jaxx – integrated platform empowering future culture brands with an end-to-end supply chain of tech-enabled collectibles and to deliver new retail experiences to consumers globally.
5. NITEX – Bangladesh-based end-to-end digital supply chain management company which helps small & medium size clothing brands and buyers with their overseas productions in an exceptionally efficient and transparent manner.
6. O4S – Gurugram-based SaaS startup helping brands with 360° visibility in their downstream supply chain. 
7. Perpule – India-based omnichannel retail-tech company. 
8. Wahyoo – Indonesia-based startup focused on digitizing street food vendors. 

[Startup Awards] – E-commerce 

1. Captive Interactive – Singapore-based digital content production and integrated digital marketing agency focused on e-commerce live streaming and e-commerce marketing.
2. Frabbit – Chiang Mai-based marketplace of services and offerings ranging from food delivery, errands service, to booking a hair appointment.
3. Intrepid Group -a Southeast Asian e-commerce consultancy firm offering end-to-end e-commerce management services.
4. Kampung Marketer – Indonesia-based social enterprise who trains and educates village youth about e-commerce and digital marketing. 
5. Lokein – Malaysia-based online marketplace for second-hand items. 
6. LoveLocal – India-based retail company that digitizes and organizes local retailers, delivering a neighborhood shopping experience of the future. 
7. myCashback – online cashback platform for multi-category consumer products.
8. PriyoShop – Bangladesh-based last-mile e-commerce platform.

[Startup Awards] – Media & Entertainment 

1. CAPSL – Hong Kong & Shanghai-based Esports game studio. 
2. CloudTheatre – online ticket streaming platform for theatre shows. 
3. Gushcloud International – global talent agency group that connects audiences and brands to influencers and content creators. 
4. Kumu – live streaming app built for Gen Z and millennial Filipinos. 
5. Music Hotpot – cloud infrastructure on blockchain that enables direct creator-to-consumer transaction and monetization on the music marketplace. 
6. Partipost – crowd influencer marketing platform that matches brands to influencers with the highest brand affinity to drive authentic word of mouth marketing. 
7. Sendjoy – celebrity video booking platform where anyone can book personalized celebrity video messages to surprise their loved ones. 
8. Zocial Earn – marketing agency that empowers everyday consumers and social users to be key opinion consumers for brands. 

[Startup Awards] – Food & AgriTech 

1. Aquaconnect – full-stack aquaculture technology venture that provides data-driven farm advisory and marketplace solutions for shrimp and fish farmers. 
2. Avant Meats – cultivated meat technology company with a pilot focus on fish and seafood. 
3. CRUST – foodtech startup that upcycles food waste by turning fresh surplus ingredients into beers and other beverages. 
4. DiMuto – trade solutions platform providing end-to-end supply chain visibility for global agrifood companies. 
5. 8villages – agritech company aspiring to empower farmers and rural communities through technology. 
6. HERO Protein – Mainland China-focused plant-based meat company with its proprietary process based on a high moisture extrusion technology.
7. Sesamilk Foods – Thailand-based company producing sesame milk, which is an alternative to dairy milk and is extracted from premium-grade Thai sesame seeds.
8. Tartan Sense –  AI powered robotics solutions provider empowering small farm holders. 

[Startup Awards] – EduTech 

1. ACKTEC Technologies – EdTech company focused on innovation in 360 VR, virtual reality, and augmented reality for immersive learning. 
2. Careershe – career guidance startup focused on helping students between 15-25 years old in China. 
3. Flying Cape – online booking and advisory platform for tuition and enrichment classes in Singapore. 
4. Glints – career discovery and development platform who has launched the Glints ExpertClass program to facilitate young professionals who are curious and eager to amplify their skill set. 
5. GREDU – Indonesia-based social ed-tech platform offering school management solutions
6. Kalpha – peer to peer mobile platform where individuals can connect and meetup to learn and share any skills, knowledge and experiences on a 1-to-1 basis. 
7. myFirst – brand new collection of tech for kids and teens to engage with technological advancements. 
8. Ottodot – Singapore-based science learning platform for primary 3-6 students. 

[Startup Awards] – Internet Solutions (aaS) 

1. CoverGo – insurance technology company that provides enterprise software solutions to insurers, banks, MGAs, and brokers in Asia and beyond. 
2. FirstHive – customer data platform that enables brands to build persistent customer identities by aggregating data from across all sources of customer interactions and customer transactions.  
3. HK Decoman Technology – Hong Kong-based renovation and decoration solution platform. 
4. Parkingbnb – platform for drivers to find the cheapest and closest parking space considering personal preferences. 
5. Procol – India-based intelligent procurement software. 
6. Ravenry – company that connects customers with content writers in Asia. 
7. SyZyGy –  5G-powered virtual event platform with integrative features such as VR/MR, 720° panoramic view, and live streaming.
8. Trabble – guest engagement SaaS platform for the hospitality & travel industry. 

Best Digital Transformation Award 

1. ADB – Philippines-based multilateral development bank focused on Asia and the Pacific region. ADB Digital seeks out innovative solutions aligned to the digital sandbox programs on artificial intelligence, robotics, blockchain, and big data. 
2. Fung Group – Hong Kong-based, privately-held business entity that engages in trading, logistics, distribution, and retailing businesses. Explorium is a value-generating ecosystem where businesses, start-ups, incubators, accelerators, and venture capitalists collaborate to explore disruptive technologies that are reshaping global supply chain and retail in the digital era. 
3. L’Oreal – French personal care company. The annual L’Oreal Innovation Runway launched in 2017 in Singapore is a competition that seeks to transform the beauty industry with scalable, sustainable, and environmentally-friendly technologies. 
4. Pilmico Foods Corporation – food and agribusiness that primarily engages in the manufacture of wheat flour and wheat by-products. Pilmico 2.0 is a digital transformation initiative that focuses on workplace transformation, customer experience, business operations, and business model innovation. 
5. Sogou – provider of search, input methods, browsers, and other Internet products and services in China. Sogou Vocational Avatar is an artificial intelligence multi-mode synthesis technology that can replicate human speech, lip movements, facial expressions, and body movements. 

[Ecosystem Enabler Awards] Best Community Builder 

1. HKSTP Global Acceleration Academy – free-of-charge open innovation platform that transforms corporate innovation with tech venture solutions and co-creation to succeed in the Asian market and beyond. 
2. QBO Innovation Hub –  Philippines-based public-private partnership platform that supports Filipino startups, connects and develops the local startup ecosystem, and forwards tech and innovation. 
3. SheLovesTech – startup competition for women and technology, seeking and accelerating the best entrepreneurs and technology for transformative impact. 
4. StartUp Village – incubator/accelerator that helps disruptive and innovative startups bring their unique ideas and business concept to reality. 
5. True Digital Park – Thailand-based startup and tech entrepreneur hub for digital innovation. 

[Ecosystem Enabler Awards] People’s Choice VC 

1. Brinc –  venture capital and accelerator firm that invests in pre-seed to series A startups and runs global accelerator programs. 
2. Cocoon Capital – Singapore-based venture capital firm that invests in early stage, enterprise and deep tech companies across Southeast Asia. 
3. 500 Startups – global venture capital firm managing over $600M in committed capital across their global and regional funds.
4. Gobi Partners – venture capital firm with a Pan-Asian presence across North Asia, South Asia, and ASEAN with over US$1.1 billion in assets under management (AUM).
5. Manila Angel Investors Network (MAIN) –  private investors network in the Philippines that supports the country’s startup ecosystem by connecting investors with promising early-stage companies. 
6. Quest Ventures – venture fund for companies that have scalability and replicability in large internet communities. 
7. Sequoia India – venture capital firm which operates in India and Southeast Asia through one arm, helping founders build companies from idea to IPO and beyond. 
8. Vickers Venture Partners – global venture capital firm focused on early-stage investments in life sciences, technology, media, telecommunications, as well as consumer and financial services.

[Movers & Shakers Awards] Outstanding Female VC

1. Amra Naidoo, Accelerating Asia 
2. Goh Yiping, Quest Ventures
3. Huang Shao-Ning, AngelCentral
4. Shannon Kalayanamitr, Gobi Partners
5. Sui Ling Cheah, Wavemaker Partners SEA

[Movers & Shakers Awards] Promising Female Founder

1. Araya Noon Hutasuwan, SnapCart 
2. Caecilia Chu, YouTrip 
3. Jamie Tan, Flying Cape 
4. Katherina Lacey, Quincus 
5. Val Yap, PolicyPal 

[Movers & Shakers Awards] Founder of the Year

1. Jonathan Savoir, Quincus
2. Michele Ferrario, StashAway
3. Mohammad H. D. A. Farahani, SEPPURE
4. Rama Raditya, Qlue
5. Roland Ros, Kumu

[Movers & Shakers Awards] Best Sustainable Solution

1. Ecoinno – Hong Kong Science Park-based technology company that focuses on developing multiple categories of products from Green Composite Material™️ (GCM™️), made from cellulose with Ecoinno’s proprietary processing facilities.
2. EcoWorth Tech – waste solutions company specialised in transforming waste materials into reusable products.
3. Magorium – waste plastic recycling solution and a disruptor in the road modifier industry.
4. RWDC Industries – Singapore-based company that produces biodegradable plastic.
5. TurtleTree Labs – Singapore-based biotech startup which uses cell-based technology to create milk.

[Movers & Shakers Awards] Resilience Award

1. BookDoc – Malaysia-based healthtech startup. BookDoc launched a COVID-19 digital mobile platform offering free virtual health advisory to the public, enabling them to order COVID-19 screening tests, access to the latest COVID-19 news & updates, and uberisation of healthcare via webinar.
2. Insilico Medicine – Hong Kong-based AI company for drug discovery and development. Insilico launched a COVID-19 basic and clinical research system called COVIDomic which helps scientists and researchers alike to predict the severity of the disease in hope to reduce the severity and mortality of infection. 
3. Kargo – Indonesia-based freight logistics startup. Kargo has dedicated 16 billion IDR to establish the Logistics Relief Fund. This will aid transporters on Kargo’s platform with their working capital cycles during this COVID-19 pandemic. A portion of the fund will also be donated to meet the logistical needs of Indonesia such as food delivery and essential supplies to hospitals. 
4. mClinica – HealthTech startup that connects pharmacies using mobile technology. mClinica has offered the much-needed digital tools for governments to conduct online research of COVID-19, to run digital awareness campaigns to its pharmacy network on prevention and screening, and to provide e-learning modules to prepare the pharmacists for the pandemic and inform them of the latest guidelines. 
5. Unacademy – India-based online learning platform. During the COVID-19 outbreak in March 2020, Unacademy Educators offered 20,000 Free Live Classes on its platform not just to existing Unacademy subscription but to the general public as well. 

ORIGIN Innovation Awards 2020 is made possible through the continued support from our community and media partners:

About ORIGIN Innovation Awards

ORIGIN Innovation Awards is APAC’s esteemed accolade for tech innovation which aims to provide recognition to companies that have exemplified the spirit of innovation and entrepreneurship in the running of their businesses. The inaugural ORIGIN Innovation Awards started in 2020 as an initiative by TechNode Global with a goal to build a dynamic community in propelling them to soar to greater heights.

About TechNode Global

TechNode Global is a Pan-Asia tech platform offering premium tech news, cross-border businesses, events, and tailor-made marketing solutions for startups, VCs, corporates, and other industry pioneers. With a vast network in global innovation and entrepreneurship, TechNode Global facilitates cross-border partnerships and businesses.

The Covid-19 pandemic has brought users and funding opportunities to healthtech startu­ps, but the industry is shifting away from B2C models due to high user acquisition costs, according to an early-stage investor speaking at TechNode’s Emerge 2020 conference on Thursday.

Many B2C healthtech startups, like Ping An Good Doctor, have followed a model popularized by China’s e-commerce platforms: They don’t care how much capital they spend on user acquisition, thinking that eventually it will pay off, said Linda Li, managing director and co-founding partner of investment firm Vickers Venture Partners.

Some startups have chosen B2B models, which Li said will win out for three reasons: Firstly, “They are more capital efficient.” Secondly, once you convince doctors to use your platforms, patients will follow doctors’ orders, she said.

Li also thinks that the B2B model will help democratize healthcare. The success of B2B models will lead to the development of infrastructure, especially that which creates information transparency. This infrastructure will serve as the base for democratized, patient-centric healthcare.

Mark Zhang, partner at law firm King & Wood Mallesons, said during the discussion that a major inflection point for China’s healthtech boom came two years ago in the form of comprehensive regulation.

“Before 2018, there was no nationwide framework to regulate online healthcare,” even though the industry had been growing for 10 years, he said. Platforms couldn’t really go into healthcare so the industry was focused on tasks like making appointments with hospitals. “The law was against anyone providing healthcare solutions online,” even though “everybody knew that the major platforms were playing around in that area,” he said.

Starting in 2018, three pieces of regulation cleared the way for healthtech innovation, Zhang said. The first allowed hospitals to use online platforms to collaborate; one hospital can assist another hospital’s activities. This could “solve the imbalances of resources across regions,” he explained. A second regulation allowed offline hospitals to provide online solutions, using their own physicians and nurses.

The most exciting piece of regulation opened the door to companies to enter the healthtech space, Zhang said. Under this law, any company can set up an “internet hospital” so long as it works with an offline hospital. “This internet hospital can draw doctors and nurses from various hospitals to practice on this platform,” he said.

In 2020, Covid-19 drew a lot of patients to online consultation services. In February, many patients didn’t feel that hospitals were safe. Even in late March to early April, when the Covid-19 outbreak was under control in China, “it was still very troublesome to go to the hospitals as they had to face more complicated procedures” because of the pandemic, Li said.

Some hospitals saw their business drop by 70%, then losses were gradually reduced to 50%, she said. But some hospitals say their business is still down about 30%, Li said.

“If people are not going to hospitals, they must go somewhere. This somewhere is online,” she said. With the support of China’s advanced delivery and logistics infrastructure, online prescription services have boomed along with online consultations, she said.

Following this surge in user growth was a jump in revenue, and funding for startups is now triple the average size compared to three to four years ago, Li said.

Better funding has helped startups make their case to hospitals, she said. Credibility and trust are very important to Chinese hospitals, who “don’t want to talk to small startups. If capital is really pushing some companies to be leaders, that solves some of these problems,” Li said.

At the same time, regulators are cautious: They “want to make sure the door is opened slowly and gradually,” and different cities are experimenting with different regulations, according to Zhang. Regulators are trying to find the right balance between growing the sector and protecting consumers.

Cybersecurity and privacy have emerged as key areas of compliance risk for healthtech companies. Many companies in healthcare, especially pharmaceutical, are attracted to China because of its immense data resources, Zhang said.

But multiple layers of new laws regulate data security and privacy, from data collection to storage and handling. Patient records, population data, personal information, and genetic data come with different compliance requirements, making data processing a tricky business, Zhang said. These days, “Data as a resource is very attractive but you have to be careful.”

Li agreed:“The data actually belongs to the hospital,” so a startup that wants to provide services must set up a server in the hospital instead of using servers or external servers.

READ MORE: INSIGHTS | High tide for healthcare apps?

2020 has been a great year to be an edtech unicorn—and a terrifying one to be a startup.

However, with tech giants from other sectors now expanding into edtech, the winners of the pandemic boom need to remain on high alert.

Acquisition costs plunged

While China hunkered down, its edtech sector surged. In 2019, Chinese edtech was already leading the world in both number of companies registered and invested capital. This market looked just like any other fast-growing vertical: a few much-praised unicorns burning money for market share, like Yuanfudao and Zuoyebang, and a smattering of early-stage start-ups trying more experimental models.

But as the numbers of daily active users (DAU) of educational apps shot up (in Chinese) right after the Spring Festival following nationwide Covid-19 stay-at-home orders—a staggering 46% increase from the 2019 daily average—customer acquisition costs for consumer edtech plunged. Per my own experience as a marketer at an A-round edtech startup and multiple confirmations (in Chinese) from others, costs fell to half of pre-pandemic levels from February till early April. This was a windfall rarely seen in any industry.

For the longest time in e-learning, digital ad-buy was nothing short of trench warfare, sustained largely by venture financing. Sales costs bled many mid- and lower-tier players dry as they struggled to find product-market fit. A 50% drop in the cost of user acquisition meant that cash flow turned from negative to positive virtually overnight—a matter of survival for some companies.

Now that almost all players could comfortably afford advertising, online customers were offered a cornucopia of trial courses. During early pandemic months, an average Douyin-watching mom couldn’t scroll for more than three minutes before hitting an e-learning landing page. It was a great time for edtech startups offering subjects that were considered “niche” or too time-consuming pre-pandemic. Liu Pai, founder of an essay-writing instruction startup targeting elementary-age children, said Kuaishou offered teachers like him “traffic boosts” (in Chinese), increasing his impressions for nearly no cost and allowing him to gain 20,000 followers in two weeks.

Refloated costs crush aspirants

If the period from February through April felt like a round of musical chairs, May was when the music stopped. As Chinese society celebrated a return to near normalcy, many younger startups found themselves left standing as the game carried on.

With summer approaching, edtech giants scrambled to sign up students for vacation classes, dumping tens of millions of yuan a day. Meanwhile, parents’ screen time plummeted, sparking ever higher bids for their attention. A combination of the two trends quickly pushed ad-buy pricing back up to pre-pandemic levels.

Edtech entrepreneurs suffered a rude awakening. Covid-19 helped lower cost per acquisition for a time—but a couple months of discounted trials didn’t turn parents into loyal users.

In the entire first half of 2020, the K-12 e-learning sector ended up spending 71% more (in Chinese) on online marketing than it had for the same period in 2019, according to monitoring service QuestMobile. In other words, however much edtech outfits saved on ad costs during those three magical months, they more than made up for it with lavish expenditures in the remaining months of the half-year.

Small fry who once dreamed of continuing to soar high as Covid ebbed now found themselves outspent by industry giants, challenged (in Chinese) by brick-and-mortar training centers moving online and, alas, bleeding money again.

Only a very few early-stage companies broke out from the pack during the pandemic. Among those that managed was Palfish (banyu), founded in 2015. The company was one of the first to purchase copyrighted children’s books from western publishers, and to digitize them into multimedia formats. It then successfully morphed into an English training service that enjoyed commendable conversion. Now very possibly a billion-dollar company after raising hundreds of millions of dollars in three Series C funding tranches, Palfish’s development fits a “unicorn takes all” theory on 2020 edtech.

Unicorns take all

Ultimately, it was the billion-dollar companies who were able to consolidate gains from the disruption set off by the pandemic.

In April, Sequoia and Softbank helped Zuoyebang raise a $750 million Series E. Meanwhile, the valuation of Yuanfudao, its arch-rival of 8 years, rose to an eye-popping $15.5 billion after the company raised a total of $3.2 billion in March and October. Prominent backers like Hillhouse Capital and Tencent competed for a leading role in a round that made it the most valued edtech provider in the world.

A quick look shows both companies committed to the same primary offering: large-class livestreams, in which students enjoy quality instruction by acclaimed, metropolitan-based teachers, along with detailed after-class tutoring via Wechat. The easily scalable offering was pioneered by Genshuixue (NYSE: GSX) in late 2017, swiftly earning industry-wide envy for its profitability. A gross margin in the high seventies sent the company from Beijing to NYSE with merely an angel investment and an A round on its fundraising record.

The huge potential of the exam-oriented training market allowed GSX share prices to triple amid the pandemic. In early August, the company saw its valuation momentarily surpass that of offline conglomerate New Oriental (NYSE: EDU) to become the second largest Chinese K-12 education provider by market cap—despite multiple rounds of accusations that the company was inflating revenue figures and student counts and an ongoing investigation by the US Securities and Exchange Commission. In the latest development, GSX shares crashed more than 30% on Oct. 21 following rumors of a bleak Q3 forecast and a downgrade by Credit Suisse, which noted rising competition.

The early childhood market has also converged on a favored model, defined by the investor darling (in Chinese) Yuanfudao’s four-year-old blockbuster app Zebra AI. The app uses bright, saturated 2D cartoons, fairy-tale-style storytelling, and repetitive iteration of key bits of knowledge to hold the attention of small children. Owing to aggressive ad-buy during the pandemic peak and a high annual subscription rate, the interactive learning brand is well on track to quintuple (in Chinese) its 2019 revenue of RMB 1 billion ($149.2 million).

The industry has bestowed Zebra AI with its highest honor: extensive cloning. Success with younger children is also notable for its potential to lower acquisition costs for the company’s products for older students. (But do note that few of these companies publish academically rigorous research to support the efficacy of their approaches, as their western counterparts proudly do.)

Customers get smarter

The breakout success of a few products indicates that customers have become more discerning during Covid lockdown. Parents stuck at home sent edtech companies an overflow of leads, but it also gave the parents time to tell the great from the mediocre.

Investors didn’t miss this trend. Meta-analysis by data aggregator CVsource on edtech funding shows a clear preference (in Chinese) for companies which already have bestseller offerings. Of the 38 deals made public in the first half of 2020, the top 10 captured 90% of total funds raised. And despite a significant 57% drop in number of deals closed, deal size aggregate increased by 10.5% year-on-year, reaching RMB 89.7 billion—the highest level in five years.

There’s no denying the Matthew Effect at work here: The well-doers keep getting the better end of the deals. The unicorns, not the upstarts, won the pandemic edtech boomlet.

Bytedance is seriously competing

Big fish eat little fish—but bigger fish eat the likes of Palfish. Despite emerging triumphant from the pandemic, the unicorns had little time to gloat.

Covid times enticed Bytedance, whose previous educational offers largely failed to dominate, to elbow its way onto the edtech playing field for another try. It already offers more than 20 products catering to learners from infants to seniors.

Chen Lin, a Bytedance senior vice president, spooked edtech in July by vowing that the parent company of Douyin and Tiktok “won’t demand profits from its educational services for the next three years.” If Bytedance’s product proves competitive, rivals will need to ask their investors to fund that many more years of trench warfare ad buy.

More worrisome still is that the platform giant competes with a home team advantage, since the company grants a 20% ad buy discount (in Chinese) to its self-incubated programs, according to a LatePost source.

It’s not unjustified to fear that the internet conglomerate might limit ads for its vertical advertisers, like the way Amazon restricts ads from some of its merchant competitors. The company does have a track record here: it cleared out all Alibaba and JD links  from its livestream ecommerce earlier this August. “Should Bytedance cut off ads of one particular [edtech] brand, their user growth would be crippled by at least half—that’s the harsh reality,” commented one investor (in Chinese). These days, even frontrunners like Yuanfudao will find themselves tasked with a mission impossible: to compete with but not irritate an emerging edtech Goliath.

What now?

If the dizzying episode of the Covid-19 traffic bonanza taught us anything, it’s that building an education business is a Long March, never a quick sprint. 

For those still starting up, the post-pandemic landscape seems grimmer, but it could also serve as a prompt to pivot, avoiding head-on homogeneous competition. For example, they could switch focus to advanced individualized learning through data processing or upgrade 2D content to VR or AR formats.

For existing unicorns, while it sure felt great toasting record-setting ad-buy deals and rubbing shoulders with their Bytedance client managers, it’s time to go light on the champagne.

Laying down the law

• On Sunday, the PBOC released a draft regulatory framework that updates the central bank’s mandate for the digital age. The regulation (in Chinese) is open for public comment until Nov. 23.
• The draft legalizes the digital yuan with a simple provision: China’s official currency, the renmimbi, comes in both physical and digital form, the law says.
• According to an article released by state-owned newspaper Global Times commenting on the new regulation, the digital yuan will not be rolled out nationally for another two to three years.
• The regulation states that the central bank’s jurisdiction include “important” financial “infrastructure” and “companies,” spelling out its authority over China’s sprawling digital sector. This language was absent in the previous iteration of the PBOC law, passed in 2003.
• The law makes special reference to “non-bank” digital payment providers, which include Alipay and Wechat Pay.

READ MORE: INSIGHTS | China’s digital currency has a long way to go

Global ambitions for Ebang

• Crypto mining rig manufacturer Ebang is looking to establish a digital asset management platform in Australia. The firm established a subsidiary in the country and has applied for licenses with the local regulator, according to a company statement.
• Ebang has been spreading its wings around the world. It set up a subsidiary in Singapore in August, looking to set up a cryptocurrency exchange.
• In pursuit of a global digital asset platform, it set up another subsidiary in Canada in September, and acquired a licensed New Zealand broker and wealth management firm in October.

Tether crackdown

• Last week, the Chinese central bank announced it cracked down on illegal activity tied to the cryptocurrency Tether. According to a statement posted on the PBOC’s Wechat account, 77 people were arrested and three sites were shut down, with the help of local authorities.
• The suspects laundered RMB 120 million ($17.95 million) of illicit gambling profits, using the stablecoin for some of the illegal activity. Tether is pegged to the US dollar at a one-to-one ratio.

Okex almost back to normal

• Crypto exchange Okex resumed some of its operations following a shutdown on Oct. 16 when one of its founders became involved in a police investigation.
• Fiat-to-cryptocurrency as well as peer-to-peer transactions were working again, the exchange said on Oct. 21. Withdrawals remain on pause.

READ MORE: Major disruptions at Okex, Filecoin strike: Blockheads

Government-backed blockchain

• A spokesperson for the China Securities and Exchange Commission said that blockchain technology will be used in the future for debt and equity registration. (Sina Finance, in Chinese)
• A blockchain-based health code registration system developed by FISCO BCOS allowed 17 million tourists to travel between Macau and Guangdong since May, it said on Oct. 21. (Cointelegraph)

Filecoin update

• Digital file storage token Filecoin got off to a bumpy start after its Oct. 15 launch. Chinese miners found that the late reward system made mining too capital-intensive, and unplugged their mining machines. Filecoin decided to allow for mining rewards to be released faster than the original six-month payoff window.
• The coin’s price started rising over the weekend and it hit a high of $40 on Monday. It is now trading at $35.

Cyberx, a Hong Kong-based crypto prime brokerage, launched on Wednesday the world’s first cross-exchange portfolio margin service for spots and derivatives trading.

Why it matters: Prime brokerage for cryptocurrencies is still a nascent industry, with only a handful companies around the world offering such services. Most crypto-focused prime brokerages are headquartered in and focused on the US, away from the crypto liquidity of Chinese miners.

• The new offering promises to significantly ease much of the headache around trading crypto across hundreds of platforms.

Details: Cyberx’s new product, “Prime,” will unify portfolio margins across exchanges for derivatives, according to its press release.

• “We are targeting mining pools, wallets, and quant hedge funds,” the company’s CEO and founder Wang Hao told TechNode.
• The focus on quantitative strategies and derivatives is better suited to the Asian and Chinese market, the CEO said.
• Crypto investors in “the rest of the world, especially in the US, want to do buy and hold” strategies, “they are not really doing quant strategies and turnover is not that high,” Hao said.
• On the other hand, crypto investors in China, and Asia more generally, are “doing more on quant trading and market neutral trading,” for spots and derivatives. One reason why Chinese investors are more focused on derivatives trading is that they are less regulated in China, Hao said.
• China has a lot of crypto investors with a lot of liquidity and “most of the institutions are managing their own capital to trade,” mainly from miners and early crypto adopters, Hao said.
• “We are not only targeting China, but we know Chinese institutions well,” he said, adding that their expertise in traditional finance helps them gain clients’ trust.
• Hao also wants to attract hedge funds from traditional finance into crypto investing, so Cyberx is trying to make trading easier for non-crypto investors by unifying API gateways with their new product. “We have a lot of friends from the traditional finance world. They don’t really know how to gain their first bitcoin and they don’t have their own historical market data,” Hao said.
• “There are a lot of [traditional] hedge funds in Asia, in Hong Kong and Singapore, that are really interested in crypto markets,” the Cyberx CEO said.

READ MORE: Is crypto mining really moving to North America?

Context: Founded in 2016 by former Goldman Sachs executive Wang Hao, Cyberx offered trading services in traditional finance until 2018, when it switched to crypto.

• It is headquartered in Hong Kong and has offices in Beijing and San Francisco.
• Cyberx has been working with 50 institutional investors globally, its press release said. These include mining pools with a big presence in China such as F2Pool and Poolin, Chinese crypto wallets Bixin and Cobo, crypto lender Babel Finance, quantitative hedge funds with investments in traditional finance like Kronos Research, and exchanges, the CEO said.
• The crypto prime brokerage industry has been heating up in the last year, with heavyweights like Digital Currency Group and Coinbase acquiring prime brokerage startups.

Chinese online education firm Yuanfudao announced the completion of a $1.2 billion Series G2 which valued the company at $15.5 billion, according to a statement sent to TechNode.

Details: DST Global led the round, a second batch of Yuanfudao’s Series G, with participation from CITICPE, GIC, Temasek, TBP, DCP, Ocean Link, Greenwoods, and Danhe Capital.

• The statement also made official a $1 billion Series G1 received in April this year, and confirmed a report by local media on Wednesday about a second batch. Together, the two rounds boost the total raised in the Series G to $2.2 billion.
• The G2 financing round increased Yuanfudao’s valuation to $15.5 billion, almost doubling its $7.8 billion valuation from six months ago.
• The Beijing-based firm plans to use the cash for educational technology innovation, to accelerate new curriculum product development, and expand its online education service system, according to the statement.
• The company said that two of its core businesses—live tutoring platform Yuanfudao and Zebra AI Class which targets pre-school students—have amassed a combined 3.7 million users.

Context: In China’s crowded online education market, Yuanfudao is competing with rivals like Zuoyebang and Vipkid.

• Archrival Zuoyebang, also focused on K-12 sector, is reportedly closing a $700 million to $800 million round, according to a Chinese media report. Similarly, the round comes on the heels of a hefty $750 million Series E received in June this year.
• Investors are rushing to the online education sector, which has seen a boost as a result of the pandemic.

Chinese electric vehicle startup Byton could be steering itself out of deep financial trouble with the departure of its founder as part of a broader restructuring plan to begin production of its first model next year.

Why it matters: The removal of a formative leader marks a turning point for the once-hyped EV startup that has suspended operations for months after the onset of a massive cash crunch beginning last year.

Details: Daniel Kirchert, co-founder and CEO of Byton, has left the business and the company’s board of directors have approved a restructuring plan, Chinese media reported Wednesday citing persons with the knowledge of the matter.

• Byton’s chief of staff Ding Qingfen was appointed co-CEO in July, in charge of implementing the new restructuring plan. Part of the plan includes establishing a new firm to raise funds, multiple sources said.
• A Byton spokeswoman confirmed to TechNode on Friday the plan to resume operations to ramp up the production of its first model “as soon as possible.” The company declined to comment further regarding Kirchert’s departure.
• There were signs of a Byton revival early last month when its major shareholders, including Volkswagen’s manufacturing partner FAW Group and the city government of Nanjing in eastern China, formed a new company led by a Byton executive.
• The new company, Nanjing Shengteng Automobile Technology Co., Ltd. has registered capital of RMB 1.5 billion (around $223 million). Duan Lianxiang, Byton’s vice president of research and development, is listed as a general manager, according to business research platform Tianyancha.com.
• The newly formed company is working on a RMB 2 billion financing project mainly from existing shareholders to get Byton’s first model, M-Byte, on the road as early as late 2021. Both FAW and the Nanjing government indicated they would participate while other current backers declined to follow, according to a Caixin report (in Chinese).

Context: Byton is not the only cash-strapped EV maker returning from near-death in recent months. Boosted China’s new energy vehicle (NEV) sales figures and local governments scrambling to bail out homegrown young leaders, other Chinese EV firms could rejoin the race.

• Another would-be EV maker, Enovate, has reportedly (in Chinese) closed a RMB 5 billion round of funding from a group of strategic investors including state-owned banks and capital firms, with plans to list on China’s Nasdaq-like STAR Market in 2021.
• WM Motor has similar plans—the company recently secured a whopping RMB 10 billion round of funding from a group of capital funds owned by the Shanghai municipal government, among others.
• NEV sales in China have resumed growth at double-digit rates since July, according to figures from the China Association of Automobile Manufacturers, with Nio and Xpeng more than doubling their sales in the third quarter from the same period a year ago.

READ MORE: Nio, Xpeng, Li Auto: your cheat sheet to China’s listed Tesla rivals

Emerge 2019 was a great success; Emerge 2020, here we come.

Like the name says, Emerge is about emerging trends that are shaping tech.

We empower entrepreneurs, professionals, and key decision-makers to better understand the forces shaping China tech through expert analysis and insight. Our online content already makes us a leader in this space—and Emerge is when we bring it offline.

Through deep and meaningful conversations with experts and experienced professionals, Emerge delivers unbiased and clear-eyed information, insight, and analysis. Don’t miss your chance to speak with the top minds uncovering China tech.

This year’s Emerge will be held in conjunction with the Pujiang Innovation Forum–Inno Match Global Technology Transfer Fair on Oct. 29, 2020, at the Shanghai Exhibition Center. Seating is limited due to capacity, so sign up now for this limited time offer!

TOPICS:

Keynote panel: Is the world still open to China tech?

Last year on the Emerge stage, we talked about global expansion as the key to growth for China’s tech majors, hosting panels on opportunities in Southeast Asia and India. Today, most major Chinese apps are banned in India, and every week brings news about sweeping and restrictions from the US on companies like Huawei and Tiktok. Meanwhile, European countries and Australia have taken action against Huawei. Is the world open to China tech? Does it still make sense for Chinese companies to pursue global ambitions?

Electric vehicles: What’s next as the industry recovers

It’s been a dramatic year in electric vehicles. Sales plunged after the government scaled back a subsidies policy that had fueled the industry’s growth—and then took a second beating from Covid-19. But the second half of the year has seen a reversal as EV majors are creeping toward profits, and even enjoying successful stock listings. Is the worst over? Where is the industry going in the year ahead?

China: blockchain superpower?

China is pushing ahead on blockchain. In October 2019, Xi Jinping publicly endorsed blockchain, calling on China to seize the moment and become a world leader in the technology. Local governments have rushed to follow his lead, and the Blockchain Services Network has expanded China’s global reach in blockchain. Where do Chinese companies stand in terms of blockchain innovation? How is the government supporting them? Will China’s approach to technology dominate the global industry?

Foodtech: How technology is shaping our appetite

Plant-based proteins are not all new to Asians, who have been eating meat-like plant proteins for millennia. Today, as Silicon Valley investors are applying technology in a bid to disrupt the food industry, Asians, China is taking a new look at food businesses. What is the role of technology on our plates? What’s beyond Beyond Meat, and how will it shape our evolving appetites?

Healthtech after Covid

In the socially distant world, many of us are trying online medical services for the first time. But healthcare innovators have been building these services for years. What are the opportunities for investors as e-health takes off? And will it improve health care for patients?

Does live-streaming growth have a ceiling?

From low-budget, grassroots origins, live-streaming has become the biggest entertainment and marketing story of 2020, closely intertwined with e-commerce, short videos, and gaming. How has the boom changed China’s retail and supply chain networks? Are Covid windfall users turning into permanent fans? And is there brand value in live-streaming, or is it just about sales?

More information coming soon, stay tuned!

WORKSHOPS:

Workshop A: DEFI Crash Course | Instructor: Matthew Graham from Sino Global Capital

Decentralized finance is the latest craze. Its promises of an alternative to financial institutions have attracted major attention from Chinese investors. But Ponzi schemes and sudden token crashes have thrown the industry into turmoil, reminiscent of the early days of crypto. This workshop will cover the basics and history of Defi, and discuss its future and how investors can avoid traps.

More workshops coming soon, stay tuned!

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Xpeng Motors said it has reached an agreement securing a $586 million round of financing from a state-owned investment company, as the Chinese electric vehicle maker pursues further expansion with plans to build its second plant.

Guangzhou GET Investment Holdings Co., Ltd, a subsidiary owned by the Guangzhou Economic and Technological Development Zone, part of the city’s municipal government, will inject RMB 4 billion (around $586 million) into Xpeng to fuel its growth, the company said Monday.

As part of the agreement, around RMB 1.3 billion from the financing will be spent on the construction of a manufacturing base, scheduled to kick off production by late 2022, within the development zone.

Xpeng has been mass-producing cars since the second quarter of this year in its first wholly-owned facility located in in Zhaoqing, a city neighboring Guangzhou, according to the SCMP. Previously, the company contracted production to Chinese OEM, Haima.

“With the strong support from the Guangzhou government, we are confident we will execute on our strategic growth initiatives and deliver the highest quality products and services to meet our customers’ needs,” Xpeng CEO He Xiaopeng said in an announcement.

Headquartered in Guangzhou, capital city of southern Guangdong province, Xpeng is accelerating expansion domestically as well as overseas. The company recently kicked off its global sales initiative with a shipment of 100 G3 crossovers destined for Norway. The vehicles will sell at a starting price of 358,000 Norwegian Krone ($37,590). Sales are expected to begin in November, with help from a local dealer.

The EV maker is also attempting to boost domestic sales by offering lifelong free charging, an offer which started Saturday, to individual buyers from 24 major cities, including Beijing, Shanghai, Guangzhou, and Shenzhen.

READ MORE: Xpeng, next up in wave of US IPOs, attracts big-name investors

The company plans to expand its free charging offer more than 60 cities by year-end and the number will more than triple to 200 by the first half of 2021. Xpeng is the first Chinese EV maker to offer free lifetime charging, limited to 3,000 kilowatt-hours (kWh) of charging credits annually, for first-time buyers.

Rival Chinese EV maker Nio has offered a free battery swap service for customers with their first cars, but recently capped the service at six free swaps per month to new owners.

Currently a top seller in the Chinese EV market, Tesla has been capricious with its free supercharging policy. The US EV maker reportedly offered two years of Supercharging for free a year ago in an aim to boost Model 3 deliveries, after it put an end to free unlimited supercharging in 2018, according to a TechCrunch report.

Xpeng has lagged other major EV players in the Chinese market, delivering a total of 4,099 vehicles for the first seven months of this year. Nio handed over 17,702 vehicles to customers during the same period, followed by Li Auto at 12,181 units. Tesla currently dominates the Chinese EV market with 56,762 Model 3 sold during the same period, according to figures from China Passenger Car Association.

Chinese electric vehicle maker Li Auto on Tuesday said it will partner with Nvidia Corp to provide its next-generation SUV with a chipset and software platform that can be used for self-driving functions.

Why it matters: The partnership is the latest in a series of Li Auto’s efforts to develop its own autonomous driving capabilities to catch up in a race led by Tesla.

• The collaboration also means that Li Auto, currently a partner of Intel’s automotive sensor company Mobileye, is switching to Nvidia for a custom-designed chip and to retain control over the development schedule.

Details: Li Auto is teaming up with Nvidia and its Chinese partner Desay SV Automotive to develop a self-driving platform based on the Orin chipset and software stack for its next large-sized premium SUV which will launch in 2022, the companies announced Tuesday.

• Li Auto will be the first automaker to use Nvidia’s newest processor to facilitate upgradeable autonomous driving functions for its EVs, ranging from assisted driving functions and eventually, vehicle autonomy, according to an announcement.
• Nvidia in 2019 unveiled Orin, its next-generation system-on-a-chip (SOC) for automobiles, capable of performing 200 trillion operations per second (TOPS) using just 45 watts. The SOC is scheduled for production in late 2022.
• Its previous generation chip, Xavier, delivers 30 TOPS and consumes 30 watts of power, was first included in Xpeng’s latest P7 sedan which it began delivering in June. The two companies formed a partnership in late 2018.
• Li Auto currently offers assisted driving functions on its first Li One model based on the Mobileye Eye Q4 vision processor, which is also deployed on Nio’s crossovers.
• Li Auto’s new technology chief Wang Kai said to Chinese media in Beijing on Tuesday that Mobileye’s data center offerings, including algorithms for vehicle perception, was “sophisticated but not open enough” (our translation), leaving limited room for self-improvement.
• The Meituan-backed EV maker recently kicked off Level 4 autonomous driving development a year ahead of schedule. It is also ramping up plans to offer a hands-off Level 3 automated navigation driving function, similar to Tesla’s Navigation on Autopilot, as early as 2021.

Context: After big cash injections from US stock markets, young Chinese EV makers are speeding up efforts to close the gap with Tesla.

• Nio raised $1.7 billion earlier this month with a follow-on share offering. The Tencent-backed EV maker plans to use part of the proceeds to enhance self-driving technologies, following the hiring of a Chinese computer vision expert to lead its AV team of 200 employees.
• Li Auto currently has 60 self-driving scientists and engineers, and is planning to triple the size to 200 by early next year, according to Chinese media reports. It appointed Wang Kai, a former global chief architect at American Tier 1 supplier Visteon, last week as CTO to lead AV development.
• Li Auto’s collaboration with Mobileye will continue—the Israeli self-driving firm makes chipsets for the automaker’s first production model, the Li One.

Alibaba’s digital factory

• Alibaba Group unveiled on Sept. 16 the Xunxi Digital Factory featuring its cloud computing infrastructure and internet of things technologies. The Hangzhou-based factory offers small- and medium-sized companies a digitalized manufacturing supply chain that allows for customizable, more responsive production. Under the company’s new manufacturing model, a program Jack Ma introduced in 2016, Xunxi is primarily focused on apparel manufacturing in its early stages. The company said that the factory has nearly doubled manufacturing efficiency by leveraging new technologies such as real-time resourcing, as well as process and cost planning. (36kr, in Chinese)

Logistics: backbone for e-commerce

• E-commerce platform Pinduoduo has entered a strategic agreement with China Post, the state-backed postal service, to offer farmers support for their sales, logistics, and finances. China Post also pledged to build 150 agricultural production centers over the next three years. The cooperation highlights Pinduoduo’s efforts to deepen its agricultural product strategy. (Donews, in Chinese)
• Cainiao Guoguo, Alibaba-backed parcel delivery service plans to double its user base to 400 billion in the coming year, CEO Li Jianghua said on Sunday. Additionally, the company is going to support scheduled deliveries in 100 cities, build 200,000 delivery stations across the country, and use recyclable packaging materials in 30 cities, Li said. (Tencent News, in Chinese)

 Pet e-commerce on the rise

• JD Daojia, JD.com’s on-demand retail joint venture, launched a pet supplies shopping promotion with New Ruipeng Group, a leading pet service in China. As part of a partnership inked in July, orders for pet products placed on JD Daojia will be delivered directly from nearly 1,000 physical stores run by New Ruipeng. The orders will arrive within an hour in first-and second-tier cities like Shanghai, Beijing, Chengdu, and Shenzhen. New Ruipeng inked a similar deal (in Chinese) with Meituan’s on-demand delivery arm to capitalize on the popularity of grocery delivery. (JD Daojia, in Chinese)
• Petkit, pet specialty retailer and smart service provider, announced on Friday the completion of its Series C Plus led by current investor Qiming Venture Partners, joined by GGV and Ince Capital. The company said the funding reached eight digits in dollar value. The company’s most recent $20 million C round was received in 2019 from Qiming Venture Partners. (Petkit, in Chinese)
• Boqii Holdings, China’s top pet-focused online retailer, filed on Sept. 8 with the US Securities and Exchange Commission for a listing with a fundraise goal of $115 million. The pet e-commerce platform is extending its offline reach to connect brand partners, pet product manufacturers, pet stores and pet hospitals. The market size of China’s pet industry nearly tripled to RMB 204.9 billion ($30.2 billion) in 2019 from 2014, and is expected to reach RMB 449.5 billion in 2024, according to Boqii’s prospectus citing data from Frost & Sullivan.(SEC)

Healthcare boom

• JD plans to spin off its health care unit JD Health in a Hong Kong listing. The timing for the debut will depend on market conditions, according to a filing from the online retailer on Monday. JD Health is the latest JD.com affiliate preparing to go public in a recent spree. Mergers and acquisition deals as well as IPOs in China’s healthcare and biotech sector have surged amid the Covid-19 epidemic. (JD)
• A Hangzhou-based Pinduoduo affiliate set up a heath care subsidiary in Shanghai on Sept. 17, according to corporate intelligence service Tianyancha. Headed by Pinduoduo’s general counsel and VP of finance Zhu Jianchong, the subsidiary’s business scope includes telemedicine, medical services, health food sales, and medicine sales.  (Tianyancha, in Chinese)
• AliHealth, which rebranded as Yilu Fukang in early September, celebrated its fourth anniversary on Sept. 16. (Tencent News, in Chinese)

Electric vehicle maker WM Motor said it has completed a Series D worth RMB 10 billion (around $1.5 billion), the biggest round of funding closed by a Chinese EV startup.

Why it matters: The investment is co-led by a group of capital funds owned by the Shanghai municipal government including China’s biggest automaker, SAIC. It brings WM Motor’s total funding to more than RMB 33 billion.

• The investment exceeds those raised by its peers Nio, Xpeng Motors, and Li Auto which raised between RMB 15 billion and RMB 20 billion before going public on US stock markets.
• WM Motor is also the only carmaker of the “fab four“—promising Chinese EV makers poised to take on Tesla according to a Deutsche Bank analyst—which hasn’t listed publicly.

Details: Apart from the Shanghai government funds and state-owned SAIC, other investors include Chinese internet giant Baidu, SIG Asia Investments, and a number of equity firms owned by regional governments, including those of central Hubei province as well as eastern Jiangsu and Anhui provinces, WM Motor said Tuesday.

• The company did not disclose an updated valuation. WM Motor closed in March 2019 a RMB 3 billion Series C led by Baidu at a valuation of $5 billion.
• The Covid-19 outbreak had delayed the financing round. WM Motor chief strategy officer Rupert Mitchell in November revealed the company’s plan to secure funding of up to $1 billion in six months.
• The Shanghai-based EV maker said the capital will be used to speed up the development of vehicle intelligence technologies, expansion in sales channels, and brand enhancement.
• This was also the first time that SAIC, Volkswagen’s manufacturing partner in China, has invested in an EV startup. The legacy automaker was said to have spent RMB 500 million in the round, according to a Chinese media report earlier this month.  

Context: Founded in 2015 by Volvo China’s former chairman Freeman Shen, WM Motor in 2019 delivered 16,876 units of its first production model, the EX5. The entry-level crossover has a starting price of RMB 146,800. Nio delivered 20,565 units in 2019.

• WM Motor is reportedly (in Chinese) planning to file for a listing on Shanghai’s Nasdaq-style STAR Market in early 2021, with investment bank China Securities Co., Ltd (CSC) as its underwriter.
• The five-year-old EV maker revealed plans in September to launch a new model in 2021 with Level 4 parking capabilities, meaning the car is capable of parking with limited human oversight, according to the Society of Automotive Engineers.
• The vehicle features Qualcomm’s cockpit chipset and incorporates Baidu’s self-driving algorithms, according to the plan.

Artificial Intelligence is set to drive the future. We are now moving into the so called fourth industrial revolution, led by cutting-edge technologies, and AI is the core driver in this equation.

Back in June, we announced that TechNode Global is joining hands with iFlyek to boost the community of thriving startups and AI technology applications across Asia. Since then, TechNode Global and iFlytek have been organizing an AI-focused series of free webinars and will be hosting a Global AI Challenge in the Asia region. 

In partnership with iFlytek, TechNode will host the semifinals of the 2020 iFlytek AI Developer Competition on September 25 at 2 p.m. (GMT+8). Eight startups will pitch and share how they leverage AI to make the world a better place. RSVP below to reserve a place in the audience. Alternatively, we will live-stream the event on TechNode Global’s Facebook page. Stay tuned!

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If you are looking to build your solution using iFlytek’s speech synthesis, speech recognition, and natural language processing technology, feel free to sign up for iFlytek Activate credits today and take advantage of this exclusive offer.

TechNode’s community members are eligible for the following iFlytek offerings as part of the Activate Program: 
• One year of iFlytek Promotional Credits (up to $1,000) 
• TechNode Global Exclusive Offer (up to $3,000) 

Instructions 

1) Sign up for an iFlytek account
2) Check your user console and click the “Apply for more” button under the “Remaining Service Volume” field 
3) Fill in the Redeem Code (TechNodeGlobal2020) and submit a request 

For further inquiries, email us with the subject line “Inquiry about the iFlytek Activate Program”. 

Beijing will pilot an intelligent system to assess and manage cross-border data flows as part of the city’s new free trade zone, the State Council said on Monday.

Why it matters: China’s data localization laws has been in place since 2017, but enforcement has been lagging. The law requires that overseas transfers of “important data” are cleared by public security authorities.

• The local government of Beijing has been pushing policy to boost technology adoption in the city.

READ MORE: Dust has yet to settle two years after China’s landmark cybersecurity law

Details: The cross-border data flow management pilot is part of a wider system aimed at monitoring and controlling risks related to the free trade zone. It will make use of big data, AI, blockchain, and 5G to assess the security of potential cross-border data flows, in line with China’s data localization laws.

• The pilot aims to explore whether the automated management system can correctly assess the risks related with transferring important data overseas, including the firms’ data security credentials and data backups.
• The “comprehensive platform” will also be used to warn exporting firms of potential trade risks stemming from their exposure to overseas markets and regulations.
• The FTZ plan also reiterates Beijing’s commitment to blockchain and fintech.
• The city will create a designated “testing pilot zone” for China’s central bank digital currency. It will also use the central bank’s blockchain platform to build a standards system for trade-related financial transactions.

READ MORE: Beijing unveils plan for blockchain-based government

Context: Chinese law requires that important data, distinguished either by the size of the dataset or the nature of the data, are stored within Chinese borders.

• Beijing unveiled its ambitious plan to integrate blockchain in several key aspects of the city’s governance in July, including customs clearance, real estate, finance, and more. The city wants to be a global hub for blockchain technology by 2022.

JD Health, the healthcare arm of e-commerce firm JD.com, is reported to be on the verge of filing a Hong Kong IPO that could be worth $1 billion. Tencent-backed Wedoctor is rumored to be coming next year. There’s no question that telemedicine is hot.

A pandemic that kept people at home for months is, of course, one big reason. The convenience and safety of remotely ordering medicine or texting a doctor appealed to many patients. Boosted by a Covid-driven influx of users, the user volume for online healthcare is expected to surpass 60 million this year, with a market volume exceeding RMB 700 billion (about $103 billion). But will this unique year prove to be a high water mark for the industry, or are doctor apps here to stay?

Bottom line: China’s telehealth industry got a big boost this year, offering vital medical services that would have otherwise been unreachable to many patients. But it’s too soon to say whether the surge in patients caused by lockdowns has lasted, or whether healthtech apps will be able to turn a profit. Achieving broader change in China’s healthcare system will require new regulations and industry standards, not just consultation apps. 

The Covid rush

The shock: The coronavirus exposed shortages in resources and inequalities between urban and rural hospitals, but it also revealed the potential of tech in solving some of China’s healthcare woes. 

• Health insurance covers 95% of China’s population, but qualified doctors and specialized facilities are concentrated in urban areas. 
• Covid shut down some facilities and overwhelmed others, leading many patients to try mobile healthcare platforms for the first time. 
• “Covid has crushed confidence in institution-based medicine,” Wei Siang Yu, Chairman of Borderless Healthcare Group, told TechNode. “This is a very good transition from institution-centric to consumer-centric healthcare.”

The surge: As you’d expect, doctor apps saw surging use during the Covid period.

• Telemedicine platform Ping An Good Doctor reported 831,000 average daily online consultations in the first half of 2020; JD Health saw 150,000 patients per day use their consultation services. Online consultation orders increased nearly fourfold on Tencent-backed Wedoctor.  
• During the Covid-19 outbreak, 78% of doctors from tier 1 to tier 4 cities accessed digital channels, the most popular of which were mini programs and apps like Wedoctor, according to data from the China Pharmaceutical Market Research Association. After the experience, 73% of doctors surveyed said they would use telehealth services in the future. 

And then? So far, we don’t know how much of the Covid surge lasted after re-opening.

• No user numbers are available after April.
• The online penetration rate of the internet medicine industry is expected (in Chinese) to rise to 8.2% this year from 6.6% in 2019, according to Qianzhan Industry Research Institute. 
• JD Health’s IPO plans mean more data will be available soon—and probably suggest that they’re confident in what the data will show.
• But Koh Hau-Tek, Deputy Chief Medical Officer at Jiahui Health, did not see a permanent shift to remote consultations at the Shanghai-based private healthcare network. While many patients used the network’s private platform during lockdown, he told TechNode that demand fell off quickly as patients returned to face to face doctor visits as soon as they could. 

Who are the healthcare players? 

Covid-19 made existing online healthcare services more popular and pushed traditional medical companies to move online. As of Mar. 6, 2020, China had a total of 2,330 internet medical projects, according to data from 36kr. Existing startups and tech firms expanded their markets and services, offering products from virtual consultations to medical encyclopedias. 

Consultations and telemedicine:  A key service offered by many platforms is online consultations with doctors straight from your phone—often for free. Another common offering is medicine delivery. 

• Miaoshou Doctor offers pharmaceutical and consultation services, with some consultations as expensive as 399 RMB. It reached unicorn status after an $85 million Series C funding round in June 2020.
• Chunyu Doctor, founded in 2011, facilitates communication between doctors and patients by allowing customers to schedule appointments and send their medical history to doctors. It expanded its service overseas in March. 
• Alibaba entered health care true to its e-commerce roots by selling pharmaceuticals, a business it’s run since 2011. In response to the pandemic, the flagship Ali Health app started offering free medical consultation to users from mainland China in January, and to overseas Chinese nationals in March. Ali Health raised $1.3 billion in an August secondary sale in Hong Kong.
• Ping An Insurance’s offerings range beyond online consultation. Its popular “Good Doctor” healthcare platform, the largest in China, also offers digital prescriptions and medicine delivery. In 2019, it partnered with 94,000 pharmacies to deliver prescription drugs to patients. Backed by China’s most prominent insurance provider, Good Doctor helps users navigate healthcare insurance. 
• JD.com entered the fray in February with the launch of its JD Health app, which will reportedly soon IPO in Hong Kong. The platform facilitates both online consultations and offline appointments. Its “Family Doctor” service allows up to eight family members to save their records to the platform if only one member registers. 
• Tencent launched the Tencent Health mini program on Wechat in March 2019. Users can search a database of doctors across China and pay for text or video consultations, as well as digitally schedule appointments in-person at hospitals.
• Dingxiang Doctor began as a health information app, and won praise for helping bust rumors during the Covid-19 outbreak. It also provides consultation services: one million as of Feb. 20. 
• Therapists and mental health services are going mobile with popular startups like My Therapist, a platform that allows users to book and pay for consultations with mental health professionals from around the world.

Everything else: Outside of virtual consultations and prescription management, big tech companies are diversifying their focus to include health education or investment in new technologies. 

• Baidu drew from its position as top search engine in China to develop a medical information platform. It launched Baidu Health in March as a mini-program combining its encyclopedia of medical terms with an “ask a doctor” function. The platform hosted doctors from third-party platforms like Chunyu Doctor and Ping An Good Doctor. Baidu is also promoting medical innovation: Its AI solutions for healthcare and diagnosis have been adopted by nearly 2,000 hospitals as of Q2 2020. 
• Tencent has a broad presence in health. A “medipedia” provides health information through a partnership with WebMD, and a number of innovations such as a digital “health ID card” that records medical records from different hospitals and its own health code are grouped under the so-called “Smart Hospital” initiative. The tech giant also has three research labs focusing on medical applications of AI, and has invested in multiple healthtech startups like Wedoctor and Haodafu Online.

Telehealth’s longevity 

Is it profitable? The general consensus among observers is that telehealth apps have yet to demonstrate a viable business model. The healthtech market is big, but there has been “no proof of sustainable revenue,” Wei said. Different platforms are experimenting with different pricing models, seeking a balance between offering affordable services, paying doctors, and earning a profit. Even Ping An Good Doctor has difficulty breaking even. 

• Good Doctor’s “Private Doctor” service offers both free services and family packages for an annual fee of RMB 1,099 to RMB 7,999 for unlimited access to their services and discounts. 
• But the proportion of paying users is low: 3 million monthly paying users out of 67.3 million total monthly active users. 
• The company reported a net loss of $30.8 million in the first half of 2020, despite a ten-fold increase in customer traffic.
• Other firms also struggle to turn a profit and demonstrate the viability of their business models. Even as Wedoctor plans a Hong Kong IPO, doubts remain about the stability of the money-losing company.
• TechNode saw widely varying prices for consultations on Tencent Health’s Wechat mini program, ranging from RMB 1 to RMB 200. There seemed to be no fees besides these consultation fees, which themselves appear too low to be profitable.
• Medicine delivery seems a far more profitable angle. 2018 regulations allowed drug companies to go from selling to hospitals to selling directly on e-commerce platforms, boosting tech firms like Alibaba that were already in the game. Drug delivery also accounts for more than half the revenue of Ping An Good Doctor.

Shot in the arm from regulations: A favorable policy environment is another major factor driving growth. Chinese regulators loosened restrictions on healthcare provision in response to Covid-19. The national health insurance system has allowed online medical services to be covered by healthcare payment plans since late 2019. 

• During 2020’s “Two Sessions” meetings of the National People’s Congress and Chinese People’s Political Consultative Conference, 54 total proposals about healthcare were received. VC investors, CEOs, and other business leaders emphasized big data solutions to medical problems and integrated healthcare platforms.
• If you have any doubt about how policy-driven this sector is, check out the Chairman’s letter at the head of Ping An Good Doctor’s last annual report—he names five policy documents before his own company.

Privacy issues: The privacy of sensitive medical data will be a major concern for both companies and regulators. A data leak in October led to the exposure of 24 million patient records from Sichuan Lianhao Technologies and the medical department of Beijing’s Tsinghua University. 

• Data security in China is managed by several different laws and policies. Medical data is regulated under several different guidelines and rules, like the 2017 Cybersecurity Law and guidelines from the China Food and Drug Administration.

Healthcare beyond apps 

The coronavirus gave telehealth firms a publicity boost and added government goodwill, but mobile apps alone are just one part of the equation. Patients still need face-to-face consultations to avoid missed diagnoses. 

Lack of doctors: China struggles with a shortage of trained and qualified doctors, and apps have struggled to ensure quality. 

• “Whatever you see at the back of these mobile apps, the level of qualifications will be very different than the rest of the world,” Wei said.

The limits: Despite user numbers spiking during the pandemic, Wei argues that the mobile telehealth model has limits: “They’re good for someone in fifth or sixth tier cities that doesn’t have the resources or connections and wants to talk to somebody with a bit of medical background, but is he or she able to go into the clinic?”

• Virtual consultations are only so effective. Koh told TechNode that they work best for screening and triage, but most patients who need medical care will still need to go in person. There’s no way to virtualize many diagnoses, procedures, or care for complex health issues, which requires the physical presence of hospitals and qualified doctors. 
• Mobile apps haven’t evolved beyond thinking about healthcare “as a digital business rather than an experiential business,” Wei said. With the right moves, telehealth might end up becoming an integral part of medical care, he said, but “at the moment it’s not very sticky.” 

Big (medical) data: “Something good that will come out of this thing will be a certain level of big data,” Wei said. 

• Chinese Premier Li Keqiang stressed the importance of developing healthcare and medicine alongside technology as “drivers of growth” during an April speech. 
• Healthcare apps and existing “smart hospital” ideas have laid a foundation of tech in healthcare and are poised to further develop and standardize.
• But monetization of medical data will take some time, Wei said. “We need to watch the space of some of these mobile app players, how they go into other Southeast Asian countries.”

Now that China has lifted most Covid restrictions, telehealth companies are at an important junction. The first half of 2020 brought them new users and tacit government support, but the rest of the year will challenge firms working to maintain growth and make a profit. 

The upcoming IPOs will provide insight into the profitability of these firms and the prospects of the industry. 

Read more

• China’s healthcare industry overview 2020
• Investment opportunities in China’s healthcare sector after COVID-19
• COVID-19 makes digital care the norm in China

Work hazards for delivery drivers

• In response to public condemnation revived by a viral post about food delivery driver hardships, Eleme and Meituan rolled out an option for users to grant couriers five- or 10-minute buffers on delivery times. However, the option elicited criticism of the platforms from state media and industry experts. They believe the companies, rather than the consumers, should shoulder the burden for pushing couriers to take dangerous risks to meet stringent deadlines set by platform algorithms. (TechNode)

Online winners and losers

• Meituan Dianping, the Chinese local lifestyle service giant created through a 2015 merger between two arch rivals, will simplify its name to Meituan, according to a filing on Sept. 11. Merged as equals five years ago, the Dianping review app still widely used, but is minimized in strategic decisions. As market consolidation continues, China has witnessed many mergers between leading verticals. Similarly, Baidu Waimai, once China’s third-largest food delivery business, lost its brand after merging with Alibaba-backed Eleme, and later rebranded as Star Ele. (HKSE)
• Tencent Weibo, once a close competitor of Sina Weibo, is going to suspend its services and operations starting Sept. 28. The platform is one of the Wechat and QQ parent company Tencent’s few stumbles in social networking. (Tencent News, in Chinese)

Investors overlooking e-commerce

• In August, China’s e-commerce sector drew a total of RMB 11.7 billion ($1.72 billion) in funding, down 45.3% from RMB 21.38 billion in the same period last year, according to data from E-commerce Research Center. The funds went to 33 companies, including JD Health and fresh grocery sites Yipin Shengxian and Xiaotu Maicai. Local lifestyle e-commerce was the most popular sub-category, accounting for RMB 8.58 billion in investment during the month. The drop in China’s e-commerce venture capital aligns with the global market, where e-commerce investment in 2020 is also languishing. (Jiemian, in Chinese)

Leadership departures at Alibaba affiliates

• Chen Lei, manager of Alibaba’s second-hand shopping app Idle Fish, or Xianyu, has left Alibaba, the company confirmed to local media on Sept. 10. No details about the reason for departure were provided, but it was reportedly due to an extramarital affair. Formerly a central figure in the development of Taobao’s virtual coin system and Taobao Live, Chen was appointed as head of Idle Fish in July 2019, reporting directly to Tmall president Jiang Fan. Jiang himself was demoted in April due to alleged affair with a Chinese social media influencer. Second-hand goods selling has been picking up momentum in China. (Hupu, in Chinese)
• Eleme chief technology officer Zhang Xuefeng stepped down from his position after five years with the food delivery platform. Zhang, who told local media he would be spending more time with his family and on hobbies, is one of the executives from Eleme’s founding team before it was fully acquired by Alibaba in 2018. Zhang’s leave comes as Alibaba is drumming up its push in local lifestyle services against Meituan. (Sina News, in Chinese)

E-commerce downstreams

• Alibaba further increased its stake in Chinese logistics giant YTO Express by 12% to 22.5%. Alibaba rival JD.com had reportedly suspended its support for YTO Express in September. Alibaba has been deepening its relationships with logistic firms through cross-shareholding. It holds stakes in major delivery companies like ZTO Express, STO Express, Yunda, and Best. Alibaba also holds a 63% stake in its affiliate Cainiao Smart logistics, which these major couriers also hold shares of. (SSE filing, in Chinese)

Buzz from China’s beverage industry

• The Luckin power struggle continues as founder Charles Lu loses control of the troubled coffee chain. Sean Shao, chairman of the special committee responsible for Luckin’s internal investigation and a major opponent to Lu, was named an independent director in a board meeting held on Sept. 2, two months after he was removed from the same position. (Sina Tech, in Chinese)
• Coca-Cola-backed coffee chain Costa is closing around 10% of its stores in mainland China across cities like Qingdao and Shenzhen. The Starbucks rival will operate nearly 400 offline stores after the downsizing, far fewer than Starbucks’ 4,400 stores. A Costa representative told local media that the company is still confident about growth potential in the China market, where it is still looking to open new stores. (National Business Daily, in Chinese)
• Coffee Box, the struggling Chinese coffee chain the subject of shutdown rumors during the coronavirus outbreak, made a major comeback last week. In a Sept. 3 statement, the company, which began reducing its store count last year, said it would be expanding to more cities as well as improving delivery times for customers on various online and offline platforms including Tmall, convenience stores, and gas stations. Local media suggested new funding was fueling the move. The company did not mention a capital injection in its statement. (Coffee Box WeChat Official Account, in Chinese)
• Heytea and Naixue’s Tea, two top bubble tea chains in China, are reportedly planning for Hong Kong listings in 2021. Naixue’s Tea was reportedly aiming to float shares in the US earlier this year. As beverage categories blur in China, bubble tea chains are competing head-on with coffee chains. (iFeng, in Chinese)

Short video apps shift into e-commerce

• Tiktok owner Bytedance obtained a license for running third-party payment services by acquiring a Wuhan-based fintech company, local media reported on Sept. 3. The move would smooth its path to expanding into e-commerce, where payment is a crucial link. This is the Chinese tech giant’s fourth fintech license. It already holds licenses to operate online insurance, online brokerage, and online microcredit businesses. The company applied for five financial licenses in Hong Kong in August. (Yicai, in Chinese)
• Short video app Kuaishou will launch an “incubation project” which aims to help more than 100,000 new businesses reach annual sales of RMB 1 million ($146,000) on its platform. The Tiktok rival pledged to build more than 100 industrial bases across China and train upwards of 10,000 livestreamers during the period. (Caixin Global)

The new standards

• The International Telecommunications Union, the body that regulates related systems and telecommunications globally, approved new basic standards on financial applications for blockchain, developed by the People’s Bank of China, the China Academy of Information and Communications Technology, and Huawei. This is the first Chinese-developed international standard on blockchain for finance approved globally. It will serve as the basis for further specific standards that can grow China’s role in the world stage of blockchain, according to Chinese media reports. (Sina Finance, in Chinese)
• Alibaba launched at an event in Beijing a new standard for blockchain used for online charities. The e-commerce giant set forth standards in 10 specific areas, including deposit protection and privacy. (CNR, in Chinese)

Canaan is alive!

Cryptocurrency rig maker Canaan Creative has endured two short reports, several investor lawsuits, and an 85% decrease in share price since its listing on the Nasdaq in November. Its unaudited financial results for the second quarter indicate that the company is getting back on its feet and cleaning up its act.

Canaan cut its net losses by more than half in Q2 to RMB 16.8 million from RMB 39.9 million ($5.84 million) in the three months ended March. Its gross profit rocketed 1,711% in the same time period, and 302% year on year.

However, Canaan is not out of the woods quite yet. Concerns set out in two short reports over the company’s business model have not yet seen improvement: cash burning and research and development (R & D) investment.

Canaan’s cash and cash equivalents have decreased by 69% compared with Q4 2019, which the company attributed to a splurge on short-term investments. In the same time period, the rig maker’s short-term investments increased by a factor of 30.

Authors of the short reports accused the company of underspending on R & D, resulting in machines inferior to those of its competitors. The company has decreased its R & D spending by 38% sequentially and 28% year on year. (Canaan Creative)

• Throwback to Canaan’s troubles: a story of fraud accusations, disappearing distributors, and bitcoin volatility. (Financial Times)

China’s investment market is going online, as digital brokers and other investment companies see new opportunities to help mainland investors send their money abroad. China’s huge economy and high savings rate means its investment services market could become one of the world’s largest, but options are limited for savers. One way to diversify is making investments in overseas markets like the US and Hong Kong.

Players old and new are dazzled by a potential user base of millions, but regulators remain tepid. While new regulations last fall encouraged tech and financial firms to go into mutual funds, most of the investment action is happening through brokerage services beyond mainland regulation in Hong Kong.

Bottom line: Digital asset management is a hot field, with a number of already-listed players offering financial services. But these players face real uncertainty about both US and Chinese regulation—most are domiciled overseas in an effort to avoid capital controls and limits on trading. As long as China keeps its capital markets mostly closed, the industry is likely to remain in a pretty uncertain position.

Room to grow: Mainland investors have traditionally had few places to put their money. But as China liberalizes its financial system, more people are seeking opportunities to diversify their assets through investments on global markets. Digital brokerage services are following the customers.

Executives at internationally-focused brokerage Futu estimate that there are 20 million Chinese nationals with overseas assets. By comparison, financial information outlet Shujubao reports (in Chinese) there are 158 million trading accounts in China.

• Consulting firm Oliver Wyman forecasts Chinese offshore financial assets will reach $2.1 trillion by 2022. 
• In domestic markets, Chinese stocks added over $1 trillion in value in just the first eight days of July, reflecting surging public interest in buying shares. Bloomberg dubbed investors’ strong appetite for investment vehicles a “budding equity mania.” 

The players

Brokerage startups with a global outlook are luring new customers and challenging established mainland Chinese trading firms and tech firms to expand their services, while big firms like Tencent and Ant Group are involved in advisory services such as personalized investment advice. Smaller firms lead in brokerage services, where investors can directly open accounts to buy stocks and bonds. 

Snowball Finance (Xueqiu): The New Zealand-registered service, founded in 2010, originally served as a financial news and advice platform for Chinese investors. It now offers brokerage services for US, HK, and China-A shares, discussion with other members, and more, all geared towards mainland users. 

• Snowball has over 12 million monthly active users. 
• Alibaba’s Ant Group invested $120 million into the app in 2018, and other investors include Sequoia China and Morningside Capital.

Futu: Founded in 2011 by former Tencent employee Leaf Hua Li and headquartered in Hong Kong, Futu aims to provide a “one-stop shop” for data and trading services in Hong Kong, mainland China, and US stock exchanges, boosted by investment from Tencent. It went public on the Nasdaq in March 2019, raising $90 million. According to the company’s most recent financial report, 66.7% of its trading volume is US stocks.

• Futu reported a strong second quarter with its highest ever total trading volume of HK$ 643.9 billion ($83 billion) and 303,102 total paying clients, an increase of 84% year on year.
• Futu credits its popularity to its interactive investor community: inexperienced traders can attend lessons and share ideas within the app.

Tiger Brokers: Launched in 2014, Tiger Brokers targets Chinese investors wanting in on the action in US and Hong Kong markets. Yet despite its similarity to Futu, it’s far less profitable. The company’s IPO on the Nasdaq in March 2019 raised $104 million.

• Tiger reported an additional 33,800 accounts with deposits opened in the second quarter of 2020, and holds nearly 60% of the market share for global Chinese investors in terms of US securities trading volume.
• Mainland Chinese users still make up the bulk of Tiger’s users, but international users made up 10% of the quarterly user growth, according to their Q2 earnings call.

Huatai and Zhangle Global: Huatai Securities launched a global stock trading app called Zhangle Global from Hong Kong in July, and plans to leverage its success in the mainland trading market to move overseas. 

• Zhangle Global is specifically aimed at Chinese investors living outside the mainland, according to a Reuters report. Huatai’s service for mainland users, Zhangle Fortune Path, had 9.11 million monthly active users (in Chinese) as of June 2020. 

Major tech firms aren’t directly competing as brokers. Instead, they target people already in their user base with simpler solutions like personalized investment advice and recommendations for mutual funds, a professionally managed portfolio containing the assets of multiple investors. 

Tencent tests the waters: Tencent is leveraging its ubiquitous messaging app Wechat to attract users for its new fund advisory service Yi Qi Tou, it announced last week. Yi Qi Tou isn’t a brokerage service, providing mutual fund recommendations instead. 

• Teng An Fund, Tencent’s fund distribution unit, said the service will be launched on Wechat after a trial period.  
• Tencent has also been strategically cooperating with Futu since 2018 through traffic, content, and cloud services.

What about Alibaba? So far, Alibaba’s Ant Group has invested in Snowball but not made any forays into brokerage services itself. They have launched other financial services, notably money market fund Yu’ebao in 2013 and a new advisory fund venture called Bang Ni Tou through a 2019 partnership with Vanguard. Both services are accessed through payments app Alipay, and Bang Ni Tou acquired 200,000 clients in its first 100 days. 

Enter Bytedance? Bytedance also appears to be exploring the offshore investments market with a new subsidiary called Squirrel Securities. But with a reported one epmployee, this company is clearly in early days.

Why go abroad? Exchanges in China have a much shorter history than in other countries, and are dominated by small-time retail investors. The Shanghai and Shenzhen stock exchanges opened in 1990, and Hong Kong’s many small exchanges didn’t merge into the Stock Exchange of Hong Kong until 1986. In comparison, foreign markets like those in the US have a reputation for stability and rationality. 

• More than 80% of A-share stakeholders are under age 40, according to a study by Shujubao (in Chinese). About half of all investors have little investment experience, and nearly 90% of all Chinese investors are primarily pursuing short-term gains over long-term financial planning.
• Shujubao also reports that out of the 158 million A-share accounts opened at the end of November 2019, 99% of them are retail investors that bring home less than $700 a month.
• Individual, inexperienced traders are the bulk of Chinese investors, making “share prices vulnerable to extreme swings in popular sentiment,” according to a Bloomberg article. 
• “There’s always been a tremendous demand for people in China to hold foreign assets,” Adam Lysenko, Associate Director at Rhodium Group, told TechNode. “There’s definitely an attraction to being in a market comparatively as stable, deep, and anchored by specific institutional investors as the US is.”

Regulatory hurdles for firms and investors

Cross-border brokerage: China’s brokerage industry is intensely regulated, and it’s not entirely clear if trading foreign securities is actually legal. Brokerages have avoided the issue by domiciling overseas, and Chinese regulators have let these platforms carry on so far. But with a clear focus on users in the mainland, these companies may face demands to register there.

• Neither Futu nor Tiger are licensed as a securities brokerage in China. But given the amount of mainland users on their apps, regulators might decide to consider them brokerage businesses in the future, forcing them to apply for licenses.
• Tiger’s IPO prospectus outlined their efforts to comply with their understanding of mainland Chinese law while acknowledging future risks: “We cannot assure you that the rectifications we have made will fully satisfy the relevant regulatory authorities’ requirements.”
• Meanwhile, regulators are encouraging experiments with digital mutual funds: China began issuing fund advisory licenses last October, but only a “handful of firms” will be able to raise enough money for their products, prioritizing established firms with existing funds.

Getting dollars: In order to trade foreign stock, users also have to get ahold of foreign currency. Beijing limits how much money Chinese investors can transfer out of China. If regulations tighten, they could be cut off from maintaining their foreign assets.

• China’s State Administration of Foreign Exchange (SAFE) limits conversions of RMB to foreign currencies to $50,000 per year in an effort to keep wealth within the country, and even this limited exchange needs approval. 
• Futu and Tiger Brokers don’t provide conversion services, and Futu doesn’t ask questions about whether money exchanges have been government-approved. Tiger emphasizes compliance with regulations but admits they can’t guarantee it.
• Futu’s IPO prospectus acknowledges that further currency exchange restrictions would slash their trading volume, leaving their future business with Chinese customers in the hands of the state.

Don’t worry about the trade war: Despite White House recommendations to delist unaudited Chinese firms, brokerage services and the investors they cater to aren’t discouraged about overseas exchanges yet. Unclear Chinese regulation presents far more of a risk, experts told TechNode. 

• Integration between Chinese and US markets is still on the upswing. Twenty Chinese firms went public in the US in the first half of 2020, up 17.6% from the same period last year, according to data from Snowball. 
• “Even with the heightened risk, the fact that Chinese firms continue to come and list in the US in record numbers is indicative of how attractive they consider the US,” said Lysenko. “Whether this continues is anyone’s guess.”

The Hong Kong connection: Hong Kong is still an enticing location for both firms and investors: listing there allows them access to an internationally convertible currency while avoiding both US regulation and mainland capital controls.

• “The increase in US-listed Chinese companies seeking secondary listing in Hong Kong and the surge of high-profile Hong Kong IPOs act as major tailwinds for us to further grow and engage our paying clients,” said Futu CEO Leaf during their Q2 earnings call. 

The biggest risk comes from unclear Chinese laws surrounding brokerage services. If lawmakers perceive outward flows of Chinese money as destabilizing the domestic economy, they could tighten capital controls.

Trade war pressure and a slowing domestic economy could put indirect pressure on regulators to stall any further liberalization for securities brokers. China “is not really in a strong position to feel it can safely lower those capital controls,” Lysenko said.

Shares for Chinese electric vehicle maker Xpeng Motors climbed more than 40% in its $1.5 billion debut on the New York Stock Exchange on Thursday.

Why it matters: Xpeng’s wild first day of trading reflects a growing demand for EV stocks, as investors become increasingly bullish on Chinese new energy vehicles. However, some analysts warned about the potential for an EV bubble.

• Xpeng’s first sedan, the P7, will be facing tougher competition from Tesla’s China-made Model 3, Bernstein analysts wrote earlier this week in a report. The US EV giant will reportedly release a cheaper version with LFP batteries this year.
• Meanwhile, JL Warren Capital questioned the competitiveness of the P7 compared with the Model 3, given their similar price ranges and the effects of their ongoing legal dispute over intellectual property theft.

Details: The six-year-old EV maker now has a market capitalization of nearly $15 billion, nearing the size of a number of giant Chinese automakers, including Toyota’s Chinese partner GAC Group and BMW’s partner, Great Wall Motor.

• The offering of 99.7 million American depositary shares was priced at $15 per share, higher than the target price range of $11 to $13. The stock opened at $23.1 and rose as high as $25. It closed up 41.5% at $21.22 on Thursday.
• There has been strong appetite for Chinese electric vehicle businesses in the US stock market, helped by Tesla’s strong performance, (our translation) said Wu Tianhua, founder and CEO of Chinese online brokerage firm Tiger Brokers, an underwriter for Xpeng’s IPO.
• Xpeng, backed by Chinese tech giants Alibaba and Xiaomi, followed domestic peers Nio and Li Auto in listing in the US. The three companies now enjoy a market cap range between $15 billion and $23 billion.
• Nio has so far delivered a cumulative 49,615 vehicles as of July over a two-year period. Xpeng began mass deliveries in February 2019 and has delivered a total of 20,707 units, and Li Auto has cumulative deliveries of 12,989 since December. All three are still operating at a loss.

Context: Unlike its counterparts, Xpeng lays claim to a strong capability in developing self-driving technology, positioning its automated driving system Xpilot head-to-head with Tesla’s Autopilot.

• In the latest IPO filing, the company said it is planning to roll out early next year the Xpilot 3.0 version with functions for autonomous lane changing on highways. However, small-scale testing will begin among customers as early as October, according to multiple people familiar with the matter.
• P7 currently has a post-subsidy price range of between RMB 229,900 and RMB 349,900 ($33,470 to $50,945). The standard-range China-made Model 3 is priced at RMB 271,550 after purchase subsidies.
• Tesla in March 2019 filed a lawsuit against a Xpeng employee for allegedly stealing trade secrets related to its automated driver assistance software Autopilot. Xpeng Motors is a third party in the suit.

Xpeng Motors is priming for a public listing in New York where it could raise up to $1.1 billion from a number of high-profile backers, including Chinese technology giants Alibaba and Xiaomi.

Why it matters: Xpeng’s listing is timed to benefit from strong investor appetite for electric vehicle stocks, a spillover effect from Tesla’s massive run this year as it ramped up production of China-made Model 3 sedans.

• The initial public offering (IPO) would also be a test of US investor demand for Chinese stocks amid harsher financial scrutiny and rising tensions between Beijing and Washington.
• Xpeng would be the third Chinese EV maker to list in the US after Nio and Li Auto—currently the most potent local Tesla challengers, backed by Chinese tech giants Alibaba, Tencent, and Meituan, respectively.

Details: Xpeng Motors is offering 85 million American depositary shares (ADS) at $11 to $13 each, according to a Friday filing to the US Securities and Exchange Commission. The company said each share will represent two Class A ordinary shares.

• The high end of the range gives the EV maker a valuation of $9.17 billion. After the closing bell on Friday, Nio closed with a market cap of $16.7 billion and Li Auto with $12.5 billion.
• Chinese e-commerce giant Alibaba, its biggest external shareholder with a 14.4% stake, will purchase up to $200 million in the share sale, followed by US hedge fund Coatue with an expected subscription worth $100 million.
• In the meanwhile, Primecap Management Company, a US investment firm that has held Tesla stocks since 2011, also indicated interest in purchasing $100 million worth of shares in the offering.
• California-based Primecap is currently a Tesla shareholder with a 0.7% stake reduced from 1.8% in 2012, which accounts for 1.22% of its total portfolio, according to online research platform GuruFocus.
• Sovereign wealth fund Qatar Investment Authority will subscribe for $50 million worth of shares, after joining in its $800 million Series C+. Xiaomi, Hong Kong-listed smartphone maker and a long-time backer, will also buy up to $50 million worth of shares.
• He Xiaopeng, CEO of the company and a former executive at Alibaba, will retain 31.6% of the business and 58.9% of the voting power, according to the amended registration statement.

Context: Guangzhou-based Xpeng Motors is currently the only new EV maker that has delivered both electric sedan and SUV models to customers in China.

• Xpeng has delivered a total of 20,707 EVs as of July starting in late 2018, mostly its first production model, the G3, compared to Nio’s 49,615 units which began delivery four months earlier.
• It has sold 1,966 units of its second EV model, the P7, an electric sedan boasting a driving range of 706 kilometers (439 miles) and a proprietary assisted automated driving system XPilot, in the three months ended July 31.
• The company plans to launch its third and fourth models, one sedan and one crossover, based on its existing EV platforms by the end of 2022, according to the prospectus.

The 13-minute gameplay video of “Black Myth Wu Kong,” an upcoming role-playing PC and console game by a relatively unknown Chinese indie studio, is taking the internet by storm.

Why it matters: While China’s mobile game developers have found global success with mass-market hits like Tencent’s “Honor of Kings,” its studios haven’t produced critically acclaimed premium games.

• It could be the first China-made premium game to make it big globally, ushering in a new era for Chinese studios.
• The global gaming industry has faced significant disruption from Covid-19, with major studios announcing production delays and cancelling the industry’s biggest events.

“I feel if this game got properly released, it would become the first genuine Chinese next gen game. It looks very good!”

—Top-voted comment from “dream208” on gamers’ subreddit

Details: Game Science, the studio behind Black Myth, released the gameplay video on Youtube on Thursday morning. A day later, the video has gained 426,000 views. Including reposts by other Youtube channels, it has reached almost 3 million views. On Chinese streaming platform Bilibili, the video has been viewed more than 11 million times.

• The response has been overwhelmingly positive, with commenters and major gaming outlets exclaiming, “It came out of nowhere” and describing it as “impressive” and “gorgeous.”
• Black Myth is an action-RPG with martial arts and mystical elements that runs on Unreal Engine 4.
• Black Myth Wu Kong is deeply rooted in Chinese culture, inspired by one of the four Chinese classics, “Journey to the West.”
• It borrows the popular “Dark Souls” art style and format. It will be released on PC and consoles, the studio said.
• The developers will need a lot of time to implement what they showed in the gameplay video on a full-length game. Game Science said on its site it will “not take 500 years” for the game to be released, referencing a story in Journey to the West.
• It will be at least two years before it is released, Daniel Ahmad, senior analyst at research firm Niko Partners, wrote on Twitter. He said the game has been in the works for at least two years.
• The Game Science team is looking to hire another 19 developers to ramp up development, according to its site.

Context: Game Science has previously released three other PC and mobile titles, the most acclaimed being 2016 multiplayer strategy game, “Art of War: Red Tides.” This is its first title to be released on consoles.

• The studio was set up in 2014 by former Tencent developers, according to Ahmad. Some had worked on “Asura,” another Journey to the West-inspired game that was expected to be a big hit for Tencent but flopped.

READ MORE: INSIDER | The sun never sets on Tencent’s gaming empire

Tusimple, a Chinese self-driving startup backed by delivery giant UPS, is reportedly seeking a US listing as early as the beginning of 2021.

Why it matters: If Tusimple does successfully go public in the US, it would be the first self-driving company in the world to do so on a major financial market. The initial public offering (IPO) could also blaze a trail for peers in need of capital.

• The IPO would test investor appetite for risk as the development of robocar technology has been slower than expected.

Details: Based on both Beijing and San Diego, Tusimple is planning to file IPO paperwork for a US IPO in the first quarter of 2021 at a valuation between $3.5 billion and $7 billion, Chinese media reported citing persons familiar with the matter.

• Meanwhile, the autonomous vehicle company is about to close a last-minute pre-IPO financing next month from a number of strategic investors, with commitments for a $300 million Series E at a target valuation of $2.9 billion, the report said.
• Volkswagen’s truck unit Traton is expected to pour $140 million into the startup, with Chinese media giant Sina Corp following with a $100 million investment. Sina Corp has been a longtime backer since its RMB 50 million ($7.2 million) Series A in 2016.
• The pre-IPO funding would take the unicorn’s total funding to more than $600 million. Still, that figure is nowhere near enough to sustain the company until it can lift its profitability, which CEO Chen Mo recently estimated to cost $1 billion, according to Chinese media.
• The company expects to achieve profit with an unmanned fleet of 5,000 trucks with revenue of $300 million annually, according to Chen. It currently pilots autonomous trucking services with 70 roborigs on the highways of several cities in Arizona and Texas.
• Tusimple declined to comment when contacted by TechNode on Monday.

Context: Chinese automakers and AV startups have also been experimenting with autonomous trucks in a number of domestic cities in bid to cut labor and fuel costs, but have made slow progress because of testing restrictions.

• China’s biggest carmaker SAIC in May proposed in May at China’s annual political event allowing the testing of Level 3 autonomous vehicles, which enable hands-off driving under limited conditions, for passenger transport and freight delivery services on Chinese highways.
• Tusimple’s self-driving truck fleet in China has been limited to testing in a geo-fenced suburban area in Shanghai where the city’s Yangshan Port is located. Tusimple CTO Hou Xiaodi in May said its robotrucks have traveled a total of around 45,000 kilometers (28,000 miles), without offering further details.

Vehicle fires involving electric cars from Xpeng and Li Auto are sparking quality concerns a year after a series of blazes involving Tesla and Nio cars drew widespread media attention.

Why it matters: The incidents come just as Xpeng Motors and Li Auto debut on US stock markets, highlighting issues around EV quality control.

Details: An Xpeng G3 crossover caught fire in the southern Chinese city of Guangzhou on Tuesday, Xpeng Motors reported on microblogging platform Weibo. Local firefighters extinguished the blaze and there were no injuries.

• An initial investigation showed that the vehicle battery pack was severely damaged from bottom impact, which Xpeng said may have caused the fire.
• The brand name of the battery was not disclosed. Xpeng started equipping its cars with the NCM 811 batteries from battery giant CATL in 2019, and had earlier sourced batteries from two smaller domestic battery makers.
• The so-called NCM 811 battery, also used in Tesla and Nio EVs, contains 80% nickel, 10% cobalt, and 10% manganese. It is capable of a longer driving range compared to a lithium iron phospate (LFP) battery, but carries a higher thermal runaway risk.
• The incident was the first combustion report for Xpeng. A company spokeswoman declined to comment.
• A week ago, Li Auto said one of its Li One plug-in hybrid vehicles caught fire on an expressway in the southern Chinese city of Zhaoqing. Two passengers were hospitalized and under observation, according to a company announcement (in Chinese).
• The Nasdaq-listed EV maker blamed the accident on what appeared to be iron bands snagged by the speeding SUV that smashed through the fuel pipe, sparking the fire. The final results from the investigation have not been revealed.
• This was the second report from Li Auto about a fire involving one of its vehicles. There have been a series of quality complaints ranging from brakes to suspension problems over the past few months. Multiple car owners have requested additional plates to protect the vehicle chassis on the company’s online community forum.

Context: Xpeng is the latest in a number of Chinese EV makers which have filed for a US initial public offering, following rivals Nio and Li Auto. The Alibaba-backed company is looking to build up its war chest amid a stiffer competition in its home market thanks to Tesla.  

• Li Auto delivered 2,516 units in July and Xpeng delivered 1,641 EVs to customers during the same time period. Together, the two EV makers have produced less than half the number of China-made sedans that Tesla has delivered, according to figures from China Passenger Car Association.