2/1/22 Tech Buzz China Insider Digest
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Insider Digest 2/1/22: Happy Year of the Tiger! Predictions for 2022, SES Battery and Abogen Biotech Profiles
Housekeeping / Announcements:
TBC Syndicate: Our first syndicate deal has an unexpected allocation of $5000 USD open. You would be investing in Hirect app, which is a Boss Zhipin clone for non-Chinese markets (primarily India and US at current), in their Series A which is being led by two well-known global funds with $150Bn AUM combined. Everything has been signed and wired, we just had one individual investor who was unable to fulfill KYC, thus the current unexpected opening. First come first serve, so please email me your interest. Do note that you must be an accredited investor to invest, and that you must be able to commit in the next 48 hours and wire funds by this weekend. (Of course you will have access to the short investment memo we have prepared.) Sorry for the accelerated timeline!
Happy Lunar New Year to those who celebrate! You’re probably sick of seeing animated cartoon tigers already, so I’m sharing instead my favorite segment from the CCTV Spring Festival Gala this year (the most watched TV event in the world, or so they claim), a modern interpretation of a famous Song Dynasty landscape painting, in the form of dance.
It’s going to be somewhat slow as China is taking off this next week for the Lunar New Year holiday. Be sure to join us on Discord for the latest news, rumors, and many informed opinions! Let’s get started —
JD.com's Ochama stores in The Netherlands [by Ed Sander]
1/31/22 Some Predictions for 2022
Near certainties, not really even predictions:
Tech regulations will continue, there’s no going back to the freewheeling days of an ultra permissive CAC. But specifically, and I’m drawing on expert opinions that I shared previously:
Antitrust will continue, but of course. But we’ll not be hit with as many cases of calamitous fines against Big Tech. There just aren’t many egregious open-and-shut cases of abuse remaining like the two-choose-one issues prosecuted in 2021. So more nuanced cases of abuse, or as was predicted in the post shared above, investigations of anticompetitive behaviors will likely be the focus. Chinese cases will look more and more like American and European ones, requiring more regulatory sophistication. Is the Chinese government up to it? I think so, based on how closely they watch what’s happening abroad and the fact that they do not have to deal with domestic political foes, but perhaps we shouldn’t have too high expectations here.
What about Pinduoduo’s flagrant violations of IP? I have been puzzled about this as well. The most common conspiracy theory is that Colin is shielded by his uncommonly good relationship with the Shanghai government. I mean, maybe. PDD is Shanghai’s largest internet company, after all, so they are always rumored to be given special consideration. But I think there’s a simpler explanation. It’s clear that with the economy in a malaise, compounded by COVID-19, the government is most worried about the many small businesses and microenterprises who are struggling. Now is simply not the right time to hit (hard) the problem of IP fraud, as long as these pirates are not, you know, poisoning, hurting, or killing people. So, hurting consumer interests by selling fake medicines, that’s never OK, but selling SAVVSVNG HDTVs at a fraction of Samsung’s prices? Probably OK ... for now.
The economy will be a bigger worry than regulations in 2022. Yes, you’ve heard the GDP growth estimates from all the experts — much closer to 4% than 5% this year. Based on conversations with Big Tech folks, they are all much more worried about consumption in general, rather than any regulatory issues. Sure, the largest layoffs might have been due to regulations (iQiyi and celebrity content, for one) but the overall malaise is not. The intermittent lockdowns are not going away any time soon, so consumption will remain wonky. There have been no real breakthroughs in e-commerce after CGB has proven itself largely to be a dud — the newest, pre-packaged food and meals (a la Freshly), seem dead in the water.
SES (previously Solid Energy Systems) Background:
Founded 2012 by Qichao Hu, who moved to the US from China at age 12.
Breakthrough: There are apparently breakthroughs in battery technology every 30 years or so, and lithium-metal may be the next one, coming right on time after Sony commercialized the current widely-used lithium-ion technology in 1991. CATL, by the way, is one of the most successful companies of the lithium-ion guard.
Pros vs. Cons: Lithium metal is more dense, potentially giving EVs double the capacity, but are also highly reactive and can easily lead to fires and explosions and the like. SES claims to have solved this. In addition, it has shown in third party tests that it can charge quicky (10 to 80% in about 10 minutes). And of course, it helps that the company claims the battery can be 30% lighter and 18% cheaper. Although since it's not commercialized yet, those are obviously just optimistic estimates.
Note that SES is at its core, an MIT (and therefore Boston) spinoff. However, Dr. Hu says that both Korea and China have more complete battery supply chains (than the US). Thus, materials science R&D continues to be located in Boston, but the actual battery cell R&D will be in Shanghai and Korea. Separate R&D centers will also be established in Boston and Shanghai to develop products for different countries. It makes sense that there are different needs for each region.
Shanghai has also really started to distinguish itself as a place for manufacturing for the new economy, especially NEVs and semis. You’ll probably remember that the city actually exceeded Beijing for the number of unicorns birthed last year (26 vs. Beijing’s 24). Most people agree that Shanghai missed the boat entirely for internet ... sure a few standouts exist, like Bilibili, Ctrip, Pinduoduo and Xiaohongshu, but Beijing greatly outnumbers Shanghai for internet unicorns and talent. But the city has been working on other forms of tech! Its progress in semis is the result of a plan that started two decades ago, and it is also all-in on NEVs.
Abogen: China's Leading mRNA Vaccine Company
Claim to Fame: Abogen's mRNA-based COVID-19 vaccine (ARCoV, also known as Walvax) was approved for clinical trials in June 2020. It is the first to do so in China and the only one approved for Phase III trials. It received a production license for Jiangsu in Nov 2021 and capacity is expected to be 40mm doses per year. Separately, co-developer Walvax is building a production facility in Yunnan that will be at 120mm doses per year.
Obviously, mRNA technology isn't just for COVID-19, and Abogen wants to use its proprietary platform and delivery system to treat cancer and other infectious diseases.
China has been primarily focused on inactivated virus-based vaccines, leaving mRNA players such as Abogen time to develop their solution.
It was founded in 2019 in Suzhou, Jiangsu, which is China’s answer to Boston for biotech startups.
I think I've mentioned this before, but I recently mentored some deeptech startups for the city of Hangzhou and had the opportunity to talk to a biotech partner at IDG, a PhD who has been working in this space for the past decade in China. He'd been actively recruiting returnees from abroad to start companies in China (where he will then provide the seed funding of course) for at least 5 years, and he's of the opinion that they've drained the available talent pool from overseas, and that the talent located domestically is on par with the best abroad. Of course, a lot of them may be working on both continents, such as in the case of SES, the battery company, but he doesn't think he will be spending the bulk of his time in the US and UK, like he has in the past. So it's important to remember that not all "deeptech" is alike, and biotech, much more so than semis, may be an area where China isn't nearly as far behind as some of us might have thought.
JD.com's Ochama stores in The Netherlands
As you might have read in the retail business press or the SMCP article last week, JD.com launched a new retail initiative called Ochama in my home country of The Netherlands last week. Ochama promises home delivery and pick-up for both food and non-food products.
In a series of articles I have analysed their e-mail launch campaign, the experience of ordering home-delivery and pickup orders, their website, app & store and how well their proposition holds up to reality (spoiler: not very well).
All four longread articles can be found here: https://www.chinatalk.nl/tag/ochama/
Finally … if you made it this far, ffr07 shared news about an interesting video game that’s being made by a Chinese studio in Discord. Well, it takes place in a world where Japan has colonized the US and there are, uh, zombies everywhere. It also seems to have been partly incubated by Sony. So yeah, a Japanese company funded a Chinese studio to make a game about zombies ravaging a Japan-occupied America. Interesting right? Trailer below:
But yeah, Chinese developers are going to explore international markets in a big way. As this article explains: In 2021, the sales revenue of Chinese self-developed games in overseas markets reached US$18.013 billion, a 16.59% increase from the previous year.
Have any comments or questions? See you on the Discord server!
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