4/22 TBC Insider Digest
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Insider Digest 4/22/21: Tencent Reorg, Fiture Raise, Pre-IPO BossZhipin and more …
Announcement: I’ll be taking a week off for vacation the week of May 3 to celebrate my 40th, so won’t be sending out a digest that week. I’ll do my best to queue up some interesting material — there’s a lot of activity in the private space I’ve been researching … but we’ll see!
Join our WhatsApp group if you want real time communications with the rest of the community! It’s pretty low volume and always on topic!
Open chat, any topic tomorrow for the weekly Friday Chat TOMORROW at 6-6:45AM PST / 9-945AM EST / 9-9:45PM Asia time. I will send out a reminder on WhatsApp, but please just join us on the Zoom here!
Alibaba and Ant Antitrust Remedies
Summary of Alibaba’s record fine & Ant restructuring proposal. You might also have read me on BBC or heard me on Marketplace and know what I think about all this. (Or guessed it, from what I wrote on antitrust last December!) But what’s perhaps more interesting is talking about Alibaba’s longer term prospects, which I invite you to do here in GF’s thread. It is based on his writeup of the company, Alibaba at a Crossroads. Do you agree, disagree? Jump in!
Rumored ByteDance Data
I personally thought this was the highlight of this digest, but your mileage may vary! This was briefly up on a WeChat Official Account then deleted, but not before it made its way through some chat groups and to me. I do not know if the data is accurate. The only thing I can say is that it is pretty dang detailed and it looks reasonable, because it is very much in line with my long time following the company. Ecommerce is the segment to watch, and search is very strong. Education is hit hard by policy changes sector wide, and gaming is growing (well, ByteDance just bought yet another gaming company).
Read it, or do not read it, at your own peril!
SF Express (Logistics) Announces Record Loss
On 4/9/21, SF Express, the largest logistics company by market capitalization in China and widely considered the industry leader, announced that they would experience a loss of ~$140-170mm USD, its first loss since 2009. The market cap sits at about $50Bn today, down 38% from its high on 2/18/21.
The reason why this news is interesting is because logistics in China is closely related to if not downright dependent on e-commerce. Supposedly, 80%of the kuaidi logistics business in China comes from e-commerce (in Chinese). By 2019, it was obvious that SF's growth had been below industry average because it had been slow to adapt to the "low price ecommerce" business that its competitors were fighting over.
Fun Video (PR) on China’s Domestic Beauty Industry
Thanks John Dawson for sharing this video that is mostly PR, but nonetheless reflects the true attitudes of Chinese consumers who, until recently, very much shunned local brands due to the perception of low quality. Comes with English captions.
External Links:
Our own Zak Dychtwald’s article in HBR on China’s Innovation Advantage, in which he argues that China has one thing no one else does … hundreds of millions of hyper-adaptive, hyper-adoptive consumers because they’ve lived through so much change in the last 30 years (and seen their GDP per capita go up 30X+) that they are willing to try anything!
That’s it! Please check the forums for amazing contributions from our members and join the WhatsApp group!
Open chat, any topic tomorrow for the weekly Friday Chat TOMORROW at 6-6:45AM PST / 9-945AM EST / 9-9:45PM Asia time. I will send out a reminder on WhatsApp, but please just join us on the Zoom here!
4/15 Tencent Reorganization Continues
Compared to Alibaba’s annual re-orgs, Tencent’s are few and far in between, which is why it made the news. The combination of its longform video platform and Tencent Video and short video app WeSee is interpted as a way to combat ByteDance, which I agree with. It seems that it’s merely latching onto its IP generating ecosystem (China Literature, etc.) and producing more PUGC vs relying on UGC, the latter of which will probably be relegated to WeChat Channels.
Huawei Regroups
Anton went to their Analyst day and shares his impressions of the event. “It's basically IoT everything for them now, but more on the industrial and management and operations solutions side of things and less on the consumer side. I do imagine that eventually, HarmonyOS could make it into non-Huawei consumer-facing devices, but for now what I'm seeing is digitization and automation being a priority. They were initially quiet about Made in China 2025, but now they're all over it.”
IPO-Ready Recruiting Startup Boss Zhipin
As you know, I look at pre-IPO opportunities. This one has consistently come up as an interesting company to consider. It’s mobile recruiting in the format of a messaging app. Not very big … but seems to be growing very well on the SME side of the market, and also appealing to youth.
FITURE ("AI Fitness") & What Its $300mm Series B Means
HUGE round for a Chinese clone of Mirror, $300mm Series B led by Coatue and DST, and with a retail price only about 20% less, too at $1,200. I would be very surprised if the company isn’t trying to go international with its premium branding. It would be ambitious but not that unexpected, there are actually fitness apps like Daily Yoga that are Chinese but have a ton of overseas users.
Things You Might Have Missed from the WhatsApp chat:
On the new rules revealed by CSRC on 4/16 that fintech, as well as financial investment and real estate firms would not be allowed to list on STAR. On that, Luke noted:
One thing to remember re rest of world is that a (very) large proportion of fintech unicorns are running off payment interchange fees. Even when they don't look like it. All the neobanks' models are based on interchange, the BaaS players too. Basically the 2.5% Visa tax on the economy funds them all. That's not available in China. And another big chunk of fintech is payday loans by other names (BNPL etc). Post-Huabei, also not wanted/available. Final category is crypto. So I don't think it needs this move from STAR to alter any of that. No interchange fees, no unsecured consumption loans, no crypto = no Western fintech unicorns regardless of listing option.
On the news that US will be banning more exports of semiconductor equipment to China, which may affect Samsung’s plans there, Michael H thought:
Although the ban is probably mainly aimed at choking China, micron also competes directly against Samsung and sk Hynix in dram/nand and micron is in a much better technological position to take chunks of market share from the dominant Korean companies than Intel vs tsmc/Samsung so this is like killing two birds with one stone
By the way, Morris Chang of TSMC just shared that he thought China was only 5 years behind TSMC in semiconductor fabrication and two years behind in logic fabrication.
Agree, disagree? Have some thoughts? Reply to this email, in the WhatsApp group, or on our online community!
Reading Club
Zhang Lei’s Value, check out the latest summaries from QuanNM!
External Links:
YouTube: China Economy Lecture Series Featuring Angela Zhang — Chinese Antitrust Exceptionalism (Recommended by QuanNM)
That’s it! Please check the forums for amazing contributions from our members and join the WhatsApp group!
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