This Week in China (12/2–12/8)
Huawei Under Fire
The “251 incident” of Huawei. Li Hongyuan, an ex-Huawei employee who worked at the company for 13 years, was jailed for 251 days over “suspicious criminal activity” that lacked evidence and proof. It was reported that the incident happened after. disagreement over resignation compensation between Li and Huawei. Li demanded a 2N compensation (equivalent 26 months of salary), while Huawei only gave him a N+1 compensation (equivalent 14 months of salary). Huawei claimed no direct correlation between this detention and the company itself. This incident blew up in China and caused a further sense of insecurity in the workplace. Now there’s a saying in China goes like “leave the company like 251, work at a company like 996.”
Read our source (in Chinese) »
New Launch from XiaoMi
XiaoMi debuts Mi Credit in India. XiaoMi debuted the Mi Credit in India as an alternative solution for online loans. This is the second fintech product XiaoMi has presented to India after Mi Pay. Mi Credit offers users credit between 5000 Rs to 100,000 Rs (70$ — 1400$) at low interest rates. “We have over 300 million Mi Fans, and we understand their consumption behaviors. This is one of our strength to build a global Mi Finance service.”
Read our source (in Chinese) »
EV Shakeout
Electric vehicles face diminishing market. Jack Ma, Pony Ma and other well known Chinese entrepreneurs have invested heavily into Chinese electric vehicle companies in hopes to integrate the vehicle with other industries. However, electric vehicle sales in China are experiencing gradual decline, forcing electric vehicle manufactures to lower expectations for profits. The new companies that have recently joined the industry will have a very steep slope to climb.
- XiaoPeng (XPeng Motors), backed by Alibaba, faces allegations for stealing from Tesla. Xiaopeng He, the CEO and founder of XPeng used to hold high-level at Alibaba.
- WeiLai, backed by Tencent, faces 2.8 billion of losses over a 12-month period by June this year, and has fired 20% of its total employees. WeiLai sponsored Bruno Mars’ concerts, and opened 19 WeiLai offline centers, which took up 6.3% of its 12-month overall revenue by March of 2019.
- WeiMa, backed by Baidu, was sued for 2.1 billion USD in compensation for intellectual property infringement by Volvo’s parent company, Geely. WeiMa has denied such wrongdoings.
Short-form Video’s Impact
Short videos have impacted largely on once popular consumers apps in China. Live-streaming companies like Yingke and YY are facing the questions of whether they should pivot to short videos.
- YingKe decides to stick to live streaming. Yingke used to be a star company in China in live streaming, but luck has turned its back onto the company. Its stock price dropped from 3.85 HKD in 2018 to 1.14 HKD according to recent data. In 2018, YingKe’s live streaming revenue dropped by 4.9%, overall company revenue dropped by 2.1%, and net profit dropped by 24.7%. In competition with Douyin and Kuaishou, YingKe’s business model is not diversified and only relies on its live-streaming services. YingKe depends on a few content creators on its platforms to keep up its user retention rate, but their content is just not differentiating enough. Panda and Quanmin, two once trendy live streaming apps have already died out because of similar problems.
- YY focuses on short-form video segment. According to YY’s Q3 report this year, its revenue increased 67.8% year over year, net profit decreased 27%, which has falled for four consecutive quarters. Earlier in March YY acquired BIGO, which has products such as BIGO Live in live streaming and Likee in short-form video editing. This represents that YY has grown from a live streaming platform to a diversified video platform and has started its global layout.
YinYueTai, once China’s Biggest Video Platform, was heard to be shut down this week.
Multiple evidence showed that YinYueTai was malfunctioning. YinYueTai used to be a popular platform in China to share music videos and get the most recent updates from celebrities. YinYueTai’s decline in business can largely be attributed to competition in content platforms, and decline in music video sharing industry in China, due to the rise of short video platforms like Douyin (China’s Tik-Tok under Bytedance) and Kuaishou.
Read our source (in Chinese) »
Fundraising Winter
The polarity behind fundraising environment for VCs in China. This year is a tough year for VCs in China. Successful funds raised huge amount of funding while smaller funds could not raise any at all.
Sequoia China raised 2.35 billion USD in total for its early stage and growth investment funds. HuaPing (Warburg Pincus China) raised 4.5 billion USD for its 2nd China’s fund, while TPG Asia raised 4.6 billion USD for its seventh fund. Neil Shen, founding partner of Sequoia China accepted an interview from Financial Times, and stated, “As company grows and its scale increases along with it, in order to become the main investor of a successful company, 100 million USD is not enough. To build a company valued at billions of dollars, you must put in at least 400 to 500 million dollars”.
AI in Big Data
Graviti raised $10M in Pre-A funding. Graviti, a Shanghai-based AI data service provider, announced that it has raised ~ $10 million USD in pre-A funding. Investors of this round include Sequoia Capital China, Yunqi Capital, Zhen Fund and FengHe Fund Management. Founded in earlier 2019, Graviti has established high-efficiency and low-cost data annotation platform service to help enterprises develop, and it plans to build up a dataset management system for AI companies.
AI in Retail
AI solution developer Aibee raised $74M. Aibee, a Beijing-based artificial intelligence solution developer, announced that it has raised $74 million USD in Series A1 funding led by ClearVue Partners and Singularity Power Capital (SPC). GSR Ventures, Chow Tai Fook with participation from existing investor Sequoia Capital China.
Launched by former head of Baidu Research, Lin Yuanqing in Nov 2017, Aibee is committed to providing integrated AI solutions to offline retail industry. Up to now, Aibee has been developing facial recognition, human detection tracking, product identification for retail stores, and will also provide other technologies, such as AR and voice recognition to shopping malls.
Child Autism Care
Dami & Xiaomi raised RMB 100M in series B funding. Dami & Xiaomi, a Shenzhen-based autism intervention technology agency, has raised ￥100M (USD 14.14M) in series B funding led by BioVenture. Committed to child autism intervention, Dami & Xiaomi provides integrated services including rehabilitation services, integrated education support, online counseling courses for parents, and science popularization. The company also established a joint research lab with Duke Kunshan University, which will use AI to improve screening and early intervention of this disorder.
Executive Departure
High executives of BaoFeng group leaving the company. Besides its CEO Xin Feng, all executives of BaoFeng group have left the company. BaoFeng group, founded in 2007, is a company that offers online audio and video entertainment services. Its video player and video download converters used to be among the most popular tools in China. In 2008, BaoFeng’s DAU was 25 million, and total number of users exceeded 280 million people, which was 73% of the total population of Chinese netizens. In 2015, BaoFeng went IPO on ChiNext, and its price went more than 46x of its original offering price in 40 days.
Home-Sharing Expansion
Sweetome acquired Youjia, Chengsu, and received strategical funding from Airbnb and 58.com. By acquiring these two companies, Sweetome gains more integrated control over the share-living market in China. YouJia, funded mainly by Ctrip, is a platform founded in 2018 by ZhiQiang Shen, built to provide city homestays and other types of residences including hotels, resort condos, vacation houses and etc. Sweetome’s other acquisitions, promise high-quality to its customers who seek property management, construction, design, and renovation to their homes. ChengSu was founded in 2017, and Airbnb invested 5 million USD in its series A funding. Interesting and strategic enough, upon the completion of this acquisition, Airbnb will be a shareholder in Sweethome via Chengsu.
Driver-less
Alibaba-backed startup AutoX applies for driver-less test permit in California. AutoX, a Chinese AI autonomous driving company founded by ex-Princeton professor JianXiong Xiao, is applying for permission from the California DMV to conduct an all automatic driving test without any human drivers. Despite its small scale, it will be the second company to conduct such test after Alphabet’s Waymo. The Alibaba backed company has received 143 million USD in funding and has conducted test drives of its RoboTaxi in different major cities such as Shanghai, Shenzhen, San Jose, and etc. Other self-driving companies that have conducted the drive test include Tesla, Lyft, Cruise and etc., but they were all required to have humans in the car during tests. AutoX claims that after 3 years of hard work, the company has developed an innovative self-driving technology that is safe for the general public.
Read the original (CHI) »
A New Lineup
Huawei released Nova 6 5G equipped with the Kirin 990 chip. Huawei plans to use its low priced new phone models equipped with Kirin 990 chip and 5G functionality to take over the 5G mobile phone market. From the revealed photos of Nova 6, the camera has three lenses and the flash is arranged vertically in the upper left corner of the back. Fingerprint recognition is placed on the side, and two front selfie cameras in the upper left corner of the front. The screen is 6.4 inches. The memory is 8GB, and the battery capacity exceeds 4000mAh. The phone is priced at merely 3500 RMB (~500 USD) per unit.
