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Westward plans a $30M debut fund to take Chinese indie games global
In Hefei, a Chinese city known for its relics from the Three Kingdoms period and its manufacturing industry today, Maxim Rate was thrilled to find a small studio crafting a Western role-playing game, a genre that attracts lovers of gritty aesthetics and dark storylines.
“The design and computer graphics are really good. You can’t tell they are a Chinese team,” said Rate.
Rate’s mission is to find Chinese studios like the bootstrapped Hefei team and help them woo international players. As Chinese regulators tighten rules on game publishing and make licenses hard to obtain, small studios find themselves struggling. Since last year, Apple has pulled thousands of unlicensed games from its Chinese App Store at the behest of local authorities. Small-time developers began to look beyond their home turf.
“The problem is these startups have no experience in overseas expansion,” said Rate.
An avid gamer himself, Rate quit his job at a Chinese cross-border payment firm last year and launched a part-incubator, part-investment vehicle to take Chinese games abroad. The firm, called Westward Gaming Ventures, took inspiration from Zheng He, a Chinese diplomat and explorer who embarked on state-sponsored naval expeditions to the “Western Oceans” during the Ming Dynasty.
Westward plans to raise 200 million yuan ($30 million) for its debut fund, Rate told TechCrunch in an interview. It plans to deploy the capital over the next three years with an intended check size of 2-4 million yuan per studio. It’s currently in talks with 20-30 teams that span a wide range of genres.
The Chinese fund being established is a so-called Qualified Foreign Limited Partners Fund, which, Rate said, for the first time will enable foreign investors (USD and EUR) to invest directly in Chinese gaming firms. Only a few institutions own a license for QFLP, and while Westward itself doesn’t hold one, it gained legitimacy for direct foreign investment by partnering with the private equity arm of a major Chinese financial conglomerate, which declined to be named at this stage.
To navigate such regulatory complications, Westward also seeks help from its advisors, including one that oversaw the legal and financial process of one of the largest joint ventures established between Chinese and foreign gaming firms in recent years. The partnership, which can’t be named, was also the first time a foreign entity has become the majority shareholder in a gaming joint venture in China.
China limits foreign investments in areas it considers sensitive, such as value-added services, so many companies resort to setting up elaborate offshore entities to receive overseas funding. The restriction makes it difficult for resource-strapped studios to land foreign investors, who could help them venture into global markets. They are left with the option of getting backed or bought by Chinese giants like Tencent or ByteDance.
Rise of Chinese plays
The idea of Westward is not just to lower the barriers for independent Chinese games to secure foreign capital but also to better prepare them for overseas expansion.
“Chinese gaming studios, big or small, used to rely heavily on ads for user acquisition when they went abroad,” said Rate. “Sometimes a game would take off, but the team had no idea why, so they continued to test. Those who failed may just give up.”
But taking a game abroad is not as simple as translating it, hitting the publish button and launching an ad campaign on Facebook.
Westward’s plan is to get involved in a game’s early development phase and help them position: Is it an RPG? Is the targeted user a casual or serious player? What’s the graphic style? In addition, the firm also plans to supply developers with workspace, technical assistance, marketing and localization expertise, connection to publishers and overseas operation help.
Image Credits: Westward Gaming Ventures
To provide post-investment support, Westward has partnered up with V+ Gaming Society, an incubator for games headquartered in Shenzhen, which Westward also calls home.
Chinese tech companies are facing mounting challenges in the West as geopolitical tensions rise. Many now prefer calling themselves “global firms” and even deny their Chinese roots outright.
But for Westward, the games it helps create don’t need to pretend they are non-Chinese. “Most players don’t consider where a game is from if it is a really good game,” said Rate.
“We actually hope to see elements of Chinese culture in these games that can be understood by overseas players.”
Amy Ho, a partner at Westward along with Rate and Edward He, said one of the few Chinese games that have managed to be both “Chinese” and transcend cultural boundaries is “Chinese Parents.” The simulation game became a global hit by letting users experience what it is like to raise a child in China.
The benchmark Rate gave was the generation of Japanese games that began exporting 20-30 years ago, which he described as “Japanese” in spirit but “globalized” in graphics and game design.
There have already been globally successful titles from Chinese makers like Tencent and rising studios Lilith and Mihoyo. In the past, many Chinese users on Steam would be asking foreign titles to rush out Chinese versions. Now, it’s not uncommon to see Western users demanding English editions of Chinese games, Rate observed.
Rather than politics, the bigger challenge, especially for small studios, is how to “collect key data for product iteration while complying with local privacy laws,” said Ho.
Westward expects 50-70% of its capital to come from Chinese institutions. The presence of Chinese investments inevitably leads to questions around censorship. Ho said while Westward provides resources and capital to studios, it will work to ensure their independence from investor influence.
If things go well, Westward could help facilitate cultural exchange between China and the rest of the world. Beijing has been trying to export the country’s soft power, and games may be a suitable conduit, suggested Rate. Amid the ongoing trade war, having foreign funding in Chinese companies may also do good to China’s “brand”, he said.
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Chinese startups rush to bring alternative protein to people’s plates
On a recent morning in downtown Shenzhen, Lingyu queued up to order her go-to McMuffin. As she waited in line with other commuters, the 50-year-old accountant noticed the new vegetarian options on the menu and decided to try the imitation spam and scrambled egg burger.
“I’ve never had fake meat,” she said of the burger — one of five new breakfast items that McDonald’s introduced last week in three major Chinese cities featuring luncheon meat substitutes produced by Green Monday.
Although some investors worry the sudden boom of meat-substitute startups could turn into a bubble, others believe the market is far from saturated.
Lingyu, who works in her family business in Shenzhen, is exactly the type of Chinese customer that imitation meat companies want to attract beyond the young, trendy, eco-conscious urbanites. Her yuan means potentially more to meat replacement companies because it advances their business and climate agendas both. Eating less meat is one of the simplest ways to reduce an individual’s carbon footprint and help fight climate change.
McDonald’s hopes that its pea- and soy-based, zero-cholesterol, luncheon meat substitutes will carve out a piece of China’s massive dining market. Longtime rival KFC, and local competitor Dicos introduced their own plant-based products last year. Partnering with fast food chains is a smart move for companies that want to promote alternative protein to the masses, because these products are often pricey and are usually aimed at wealthy urbanites.
2020 could well have been the dawn of alternative protein in China. More than 10 startups raised capital to make plant-based protein for a country with increasing meat demand. Of these, Starfield, Hey Maet, Vesta and Haofood have been around for about a year; ZhenMeat was founded three years ago; and the aforementioned Green Monday is a nine-year-old Hong Kong firm pushing into mainland China. The competition intensified further last year when American incumbents Beyond Meat and Eat Just entered China.
Although some investors worry the sudden boom of meat-substitute startups could turn into a bubble, others believe the market is far from saturated.
“Think about how much meat China consumes a year,” said an investor in a Chinese soy protein startup who requested anonymity. “Even if alternative protein replaces 0.01% of the consumption, it could be a market worth tens of billions of dollars.”
In many ways, China is the ideal testbed for alternative protein. The country has a long history of imitation meat rooted in Buddhist vegetarianism and an expanding middle class that is increasingly health-conscious and willing to experiment. The country also has a grip on the global supply chain for plant-based protein, which could give domestic startups an edge over foreign rivals.
“I believe, in five years, China will see a raft of domestic plant-based protein companies that could be on par with industry leaders from Europe and North America,” said Xie Zihan, who founded Vesta to develop soy-based meat suitable for Chinese cuisine.
Meat varieties
Hey Maet’s imitation meat dumplings. Image Credits: Hey Maet
Lily Chen, a manager at the Chinese arm of alternative protein investor Lever VC, outlines three categories of meat analog companies in China: Western giants such as Beyond Meat and Eat Just; local players; and conglomerates such as Unilever and Nestlé that are developing vegan meat product lines as a defense strategy. Lever VC invested in Beyond Meat, Impossible Foods and Memphis Meats.
“They all have their product differentiation, but the industry is still very early stage,” said Chen.
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AutoX becomes China’s first to remove safety drivers from robotaxis
Residents of Shenzhen will see truly driverless cars on the road starting Thursday. AutoX, a four-year-old startup backed by Alibaba, MediaTek and Shanghai Motors, is deploying a fleet of 25 unmanned vehicles in downtown Shenzhen, marking the first time any autonomous driving car in China tests on public roads without safety drivers or remote operators.
The cars, meant as robotaxis, are not yet open to the public, an AutoX spokesperson told TechCrunch.
The milestone came just five months after AutoX landed a permit from California to start driverless tests, following in the footsteps of Waymo and Nuro.
It also indicates that China wants to bring its smart driving industry on par with the U.S. Cities from Shenzhen to Shanghai are competing to attract autonomous driving upstarts by clearing regulatory hurdles, touting subsidies and putting up 5G infrastructure.
As a result, each city ends up with its own poster child in the space: AutoX and Deeproute.ai in Shenzhen, Pony.ai and WeRide in Guangzhou, Momenta in Suzhou and Baidu’s Apollo fleet in Beijing, to name a few. The autonomous driving companies, in turn, work closely with traditional carmakers to make their vehicles smarter and more suitable for future transportation.
“We have obtained support from the local government. Shenzhen is making a lot of rapid progress on legislation for self-driving cars,” said the AutoX representative.
The decision to remove drivers from the front and operators from a remote center appears a bold move in one of China’s most populated cities. AutoX equips its vehicles with its proprietary vehicle control unit called XCU, which it claims has faster processing speed and more computational capability to handle the complex road scenarios in China’s cities.
“[The XCU] provides multiple layers of redundancy to handle this kind of situation,” said AutoX when asked how its vehicles will respond should the machines ever go rogue.
The company also stressed the experience it learned from “millions of miles” driven in China’s densest city centers through its 100 robotaxis in the past few years. Its rivals are also aggressively accumulating mileage to train their self-driving algorithms while banking sizable investments to fund R&D and pilot tests. AutoX itself, for instance, has raised more than $160 million to date.
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Huawei reportedly set to sell Honor budget phone division for $15B
Following weeks of rumors surrounding a potential sale, Huawei has reportedly struck a deal to divest itself of its Honor brand. A new report out today from Reuters notes that the embattled hardware maker will sell the budget unit to a consortium of buyers that includes the government of the city of Shenzhen and Digital China, a phone distributor.
The report, which cites “people familiar with the matter,” puts the price tag for the Honor unit at $15.2 billion. Honor’s new owners will reportedly keep much of the brand’s 7,000 employees (management included) in tact, with plans to take the company public in around three years. The Honor brand has largely focused on low-cost devices, with sales in China, Europe and the U.S. This deal would likely find Huawei focusing more exclusively on high-end products under its own brand.
While the deal has been rumored for some time now, its seeming conclusion comes in the wake of Joe Biden’s presidential election win. It seems clear from Huawei’s decision to press on with the all-cash deal that the company doesn’t believe its international fortunes will change immediately under a new U.S. president.
The news comes in the wake of ongoing difficulties tied to U.S. sanctions. Huawei’s inability to access technologies from companies like Google have proven to be a major hit for the world’s second largest phone maker. While the company has managed to maintain solid sales in its native China, even those have taken a hit amid its struggles.
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Africa’s top mobile phone seller Transsion lists in Chinese IPO
Chinese mobile phone and device maker Transsion has listed in an IPO on Shanghai’s STAR Market, a Transsion spokesperson confirmed to TechCrunch.
Headquartered in Shenzhen, Transsion is a top seller of smartphones in Africa under its Tecno brand. The company has also started to support venture funding of African startups.
Transsion issued 80 million A shares at an opening price of 35.15 yuan (≈ $5.00) to raise 2.8 billion yuan (or ≈ $394 million).
A shares are the common shares issued by mainland Chinese companies and are normally available for purchases only by mainland citizens.
Transsion’s IPO prospectus is downloadable (in Chinese) and its STAR Market listing application is available on the Shanghai Stock Exchange’s website.
STAR is the Shanghai Stock Exchange’s new Nasdaq-style board for tech stocks that went live in July with some 25 companies going public.
Transsion plans to spend 1.6 billion yuan (or $227 million) of its STAR Market raise on building more phone assembly hubs, and around 430 million yuan ($62 million) on research and development, including a mobile phone R&D center in Shanghai, a company spokesperson said.
To support its African sales network, Transsion maintains a manufacturing facility in Ethiopia. The company recently announced plans to build an industrial park and R&D facility in India for manufacture of phones to Africa.
The IPO comes after Transsion announced its intent to go public and filed its first docs with the Shanghai Stock Exchange in April.
Listing on STAR Market puts Transsion on China’s new exchange — seen as an extension of Beijing’s ambition to become a hub for tech startups to raise public capital. Chinese regulators lowered profitability requirements for the STAR Market, which means pre-profit ventures can list.
Transsion’s IPO comes when the company is actually in the black. The firm generated 22.6 billion yuan ($3.29 billion) in revenue in 2018, up from 20 billion yuan a year earlier. Net profit for the year slid to 654 million yuan, down from 677 million yuan in 2017, according to the firm’s prospectus.
Transsion sold 124 million phones globally in 2018, per company data. In Africa, Transsion holds 54% of the feature phone market — through its brands Tecno, Infinix and Itel — and in smartphone sales is second to Samsung and before Huawei, according to International Data Corporation stats.
Transsion has R&D centers in Nigeria and Kenya and its sales network in Africa includes retail shops in Nigeria, Kenya, Tanzania, Ethiopia and Egypt. The company also attracted attention for being one of the first known device makers to optimize its camera phones for African complexions.
On a 2019 research trip to Addis Ababa, TechCrunch learned the top entry-level Tecno smartphone was the W3, which lists for 3,600 Ethiopian Birr, or roughly $125.
In Africa, Transsion’s ability to build market share and find a sweet spot with consumers on price and features gives it prominence in the continent’s booming tech scene.
Africa already has strong mobile-phone penetration, but continues to undergo a conversion from basic USSD phones, to feature phones, to smartphones.
Smartphone adoption on the continent is low, at 34%, but expected to grow to 67% by 2025, according to GSMA.
This, added to an improving internet profile, is key to Africa’s tech scene. In top markets for VC and startup origination — such as Nigeria, Kenya and South Africa — thousands of ventures are building business models around mobile-based products and digital applications.
If Transsion’s IPO enables higher smartphone conversion on the continent, that could enable more startups and startup opportunities — from fintech to VOD apps.
Another interesting facet to Transsion’s IPO is its potential to create greater influence from China in African tech, in particular as the Shenzhen company moves more definitely toward venture investing.
In August, Transsion-funded Future Hub teamed up with Kenya’s Wapi Capital to source and fund early-stage African fintech startups.
China’s engagement with African startups has been light compared to China’s deal-making on infrastructure and commodities — further boosted in recent years as Beijing pushes its Belt and Road plan.
Transsion’s IPO is the second event this year — after Chinese owned Opera’s venture spending in Nigeria — to reflect greater Chinese influence and investment in the continent’s digital scene.
So in coming years, China could be less known for building roads and bridges in Africa and more for selling smartphones and providing VC for African startups.
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Huawei pushes back launch of 5G foldable, the Mate X
If you were desperately ripping days off of your calendar until you could get your hands on Huawei’s $2,600 5G foldable, the Mate X — which was originally slated to launch next month — it sounds like you’re going to have to wait a bit longer, per TechRadar which attended a press event at Huawei’s Shenzhen headquarters today.
It reports being told there is no possibility of a September launch. Instead Huawei is now aiming for November. But the company would only profess itself certain its first smartphone that folds out to a (square) tablet will launch before 2020. So it seems Mate X buyers may need to wait until circa Christmas to fondle this foldable.
It’s not clear exactly why the launch is being delayed. But — speculating wildly — we imagine it’s something to do with the fact that the screen, er, folds.
We’ve reached out to Huawei for official comment on the delay.
Huawei’s Mate X date slippage suggests Samsung will still be first to market with its (previously) delayed Galaxy Fold — which was itself delayed after a bunch of review units broke (because, well, did we tell you the screen folds?).
Last we heard, the Galaxy Fold is slated for a September release — Samsung seemingly confident it’s fixed the problem of how to make a foldable phone survive actual use.
Of course survival in the wild very much remains to be seen with any of these foldable. So expect TC’s in house hardware guru, Brian Heater, to put all of these expensively hinged touchscreens through their paces.
Returning to Huawei’s Mate X, potential buyers may not be entirely reassured to learn the company appeared to dangle rather more information about a planned sequel in front of reporters at the press event.
A sequel which may or may not have even more screens, as Huawei is apparently considering putting glass on the back. Yes, glass. (The gen-one Mate X will have a steel back.) Glass panels which it says could double as touchscreens. On the back. As well as the front. We have no idea if that means the price-tag will double too.
This theoretical quad (?) screen foldable follow-up to the still unreleased Mate X might even be released as soon as next year, according to TechRadar’s reportage. Or — again speculating wildly — it might never be released. Because, frankly, it sounds mental. But that’s the wacky world of foldables for ya.
There may be method in this madness too. Because, since smartphones turned into all-screen devices — making it almost impossible to tell one touch-sensitive slab from another — plucky Android device makers are trying to find a way to put more screen on the slab so you can see more.
If they can pull that off it might be great. However sticking a hinge right through the middle of a smartphone’s primary feature and function without that simultaneously causing problems is certainly a major engineering challenge.
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London edtech startup pi-top sees layoffs after major contract loss
London-based edtech startup pi-top has cut a number of staff, TechCrunch has learned.
According to our sources, the company has reduced its headcount in recent weeks, with staff being told cuts are a result of restructuring as it seeks to implement a new strategy.
One source told us pi-top recently lost out on a large education contract.
Another source said sales at pi-top have been much lower than predicted — with all major bids being lost.
Pi-top confirmed to TechCrunch that it has let staff go, saying it has reduced headcount from 72 to 60 people across its offices in London, Austin and Shenzhen.
Our sources suggest the total number of layoffs could be up to a third.
In a statement, pi-top told us:
pi-top has become one of the fastest growing ed-tech companies in the market in 4.5 years. We have a unique vision to increase access to coding and technical education through project based learning to inspire a new generation of makers.
As part of this vision we built up our global team with a view to winning a particularly exciting national project in a developing nation, where we had a previous large scale successful implementation. We were disappointed this tender ultimately fell through due to economic factors in the region and have subsequently made the unfortunate but unavoidable decision to reduce our team size from 72 to 60 people across our offices in London, Austin and Shenzhen.
Moving forward we are focusing on our growth within the USA where we continue to enjoy widespread success. We are rolling out our new learning platform pi-top Further which will enable schools everywhere to access a world of content enhanced by practical hands-on project based learning outcomes. We have recently completed a successful Kickstarter campaign and we look forward to releasing our newest product pi-top [4].
We are also proud to have appointed Stanley Buchesky as our new Executive Chairman. Stanley brings a wealth of experience in the ed-tech sector and will be a great asset to our strategy going forward.
Pi-top sells hardware and software designed for educational use in schools. It’s one of a large number of edtech startups that have sought to tap into the popularity of the “learn to code” movement by piggybacking atop the (also British) low-cost Raspberry Pi microprocessor — which provides the computing power for all pi-top’s products.
Pi-top adds its own OS and additional education-focused software to the Pi, as well as proprietary cases — including a bright green laptop housing with a built-in rail for breadboarding electronics.
Its most recent product, the pi-top 4, which was announced back in January, looks intended to move the company away from its first focus on educational desktop computing to more modular and embeddable hardware hacking that could be used by schools to power a wider variety of robotics and electronics projects.
Despite raising $16M in VC funding just over a year ago, pi-top opted to run a crowdfunding campaign for the pi-top 4 — going on to raise almost $200,000 on Kickstarter from 521 backers.
Pi-top 4 backers have been told to expect the device to ship in November.
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Africa’s top mobile phone seller Transsion to list in Chinese IPO
Chinese mobile-phone and device maker Transsion will list in an IPO on Shanghai’s STAR Market, Transsion confirmed to TechCrunch.
The company — which has a robust Africa sales network — could raise up to 3 billion yuan (or $426 million).
“The company’s listing-related work is running smoothly. The registration application and issuance process is still underway, with the specific timetable yet to be confirmed by the CSRC and Shanghai Stock Exchange,” a spokesperson for Transsion’s Office of the Secretary to the Chairman told TechCrunch via email.
Transsion’s IPO prospectus is downloadable (in Chinese) and its STAR Market listing application available on the Shanghai Stock Exchange’s website.
STAR is the Shanghai Stock Exchange’s new Nasdaq-style board for tech stocks that also went live in July with some 25 companies going public.
Headquartered in Shenzhen — where African e-commerce unicorn Jumia also has a logistics supply-chain facility — Transsion is a top-seller of smartphones in Africa under its Tecno brand.
The company has a manufacturing facility in Ethiopia and recently expanded its presence in India.
Transsion plans to spend the bulk of its STAR Market raise (1.6 billion yuan or $227 million) on building more phone assembly hubs and around 430 million yuan ($62 million) on research and development, including a mobile phone R&D center in Shanghai, a company spokesperson said.
Transsion recently announced a larger commitment to capturing market share in India, including building an industrial park in the country for manufacture of phones to Africa.
The IPO comes after Transsion announced its intent to go public and filed its first docs with the Shanghai Stock Exchange in April.
Listing on the STAR Market will put Transsion on the freshly minted exchange seen as an extension of Beijing’s ambition to become a hub for high-potential tech startups to raise public capital. Chinese regulators lowered profitability requirements for the exchange, which means pre-profit ventures can list.
Transsion’s IPO process comes when the company is actually in the black. The firm generated 22.6 billion yuan ($3.29 billion) in revenue in 2018, up from 20 billion yuan a year earlier. Net profit for the year slid to 654 million yuan, down from 677 million yuan in 2017, according to the firm’s prospectus.
Transsion sold 124 million phones globally in 2018, per company data. In Africa, Transsion holds 54% of the feature phone market — through its brands Tecno, Infinix and Itel — and in smartphone sales is second to Samsung and before Huawei, according to International Data Corporation stats.
Transsion has R&D centers in Nigeria and Kenya and its sales network in Africa includes retail shops in Nigeria, Kenya, Tanzania, Ethiopia and Egypt. The company also attracted attention for being one of the first known device makers to optimize its camera phones for African complexions.
On a recent research trip to Addis Ababa, TechCrunch learned the top entry-level Tecno smartphone was the W3, which lists for 3,600 Ethiopian Birr, or roughly $125.
In Africa, Transsion’s ability to build market share and find a sweet spot with consumers on price and features gives it prominence in the continent’s booming tech scene.
Africa already has strong mobile-phone penetration, but continues to undergo a conversion from basic USSD phones, to feature phones, to smartphones.
Smartphone adoption on the continent is low, at 34%, but expected to grow to 67% by 2025, according to GSMA.
This, added to an improving internet profile, is key to Africa’s tech scene. In top markets for VC and startup origination — such as Nigeria, Kenya, and South Africa — thousands of ventures are building business models around mobile-based products and digital applications.
If Transsion’s IPO enables higher smartphone conversion on the continent, that could enable more startups and startup opportunities — from fintech to VOD apps.
Another interesting facet to Transsion’s IPO is its potential to create greater influence from China in African tech, in particular if the Shenzhen company moves strongly toward venture investing.
China’s engagement with African startups has been light compared to China’s deal-making on infrastructure and commodities — further boosted in recent years as Beijing pushes its Belt and Road plan.
Transsion’s IPO move is the second recent event — after Chinese owned Opera’s big venture spending in Nigeria — to reflect greater Chinese influence and investment in the continent’s digital scene.
So in coming years, China could be less known for building roads and bridges in Africa and more for selling smartphones and providing VC for African startups.
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What Huawei didn’t say in its ‘robust’ half-year results
The media has largely bought into Huawei’s “strong” half-year results today, but there’s a major catch in the report: the company’s quarter-by-quarter smartphone growth was zero.
The telecom equipment and smartphone giant announced on Tuesday that its revenue grew 23.2% to reach 401.3 billion yuan ($58.31 million) in the first half of 2019 despite all the trade restrictions the U.S. slapped on it. Huawei’s smartphone shipments recorded 118 million units in H1, up 24% year-over-year.
What about quarterly growth? Huawei didn’t say, but some quick math can uncover what it’s hiding. The company clocked a strong 39% in revenue growth in the first quarter, implying that its overall H1 momentum was dragged down by Q2 performance.
Huawei said its H1 revenue is up 23.2% year-on-year — but when you consider that Q1 revenue rose by 39%, Q2 must have been a real struggle…https://t.co/dFQo4gxEVbhttps://t.co/HABAQ6fmfK
— Jon Russell (@jonrussell) July 30, 2019
The firm shipped 59 million smartphones in the first quarter, which means the figure was also 59 million units in the second quarter. As tech journalist Alex Barredo pointed out in a tweet, Huawei’s Q2 smartphone shipments were historically stronger than Q1.
Huawei smartphones Q2 sales were traditionally much more stronger than on Q1 (32.5% more on average).
This year after Trump’s veto it is 0%. That’s quite the effect pic.twitter.com/x3dQlOePDA
— Alex B
(@somospostpc) July 30, 2019
And although Huawei sold more handset units in China during Q2 (37.3 million) than Q1 (29.9 million) according to data from market research firm Canalys, the domestic increase was apparently not large enough to offset the decline in international markets. Indeed, Huawei’s founder and chief executive Ren Zhengfei himself predicted in June that the company’s overseas smartphone shipments would drop as much as 40%.
The causes are multi-layered, as the Chinese tech firm has been forced to extract a raft of core technologies developed by its American partners. Google stopped providing to Huawei certain portions of Android services, such as software updates, in compliance with U.S. trade rules. Chip designer ARM also severed business ties with Huawei. To mitigate the effect of trade bans, Huawei said it’s developing its own operating system (although it later claimed the OS is primarily for industrial use) and core chips, but these backup promises may take some time to materialize.
Consumer products are just one slice of the behemoth’s business. Huawei’s enterprise segment is under attack, too, as small-town U.S. carriers look to cut ties with Huawei. The Trump administration has also been lobbying its western allies to stop purchasing Huawei’s 5G networking equipment.
In other words, being on the U.S.’s entity list — a ban that prevents American companies from doing business with Huawei — is putting a real squeeze on the Chinese firm. Washington has given Huawei a reprieve that allows American entities to resume buying from and selling to Huawei, but the damage has been done. Ren said last month that all told, the U.S. ban would cost his company a staggering $30 billion loss in revenue.
Huawei chairman Liang Hua (pictured above) acknowledged the firm faces “difficulties ahead” but said the company is “fully confident in what the future holds,” he said today in a statement. “We will continue investing as planned – including a total of CNY120 billion in R&D this year. We’ll get through these challenges, and we’re confident that Huawei will enter a new stage of growth after the worst of this is behind us.”
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China’s Vivo is eyeing smartphone users in Africa and the Middle East
Africa’s mobile phone industry has in recent times been dominated by Transsion, a Shenzhen-based company that is little known outside the African continent and is gearing up for an initial public offering in China. Now, its Chinese peer Vivo is following its shadow to this burgeoning part of the world with low-cost offerings.
Vivo, the world’s fifth-largest smartphone maker, announced this week that it’s bringing its budget-friendly Y series smartphones into Nigeria, Kenya and Egypt; the line of products is already available in Morocco.
It’s obvious that Vivo wants in on an expanding market as its home country China experiences softening smartphone sales. Despite a global slowdown, Africa posted annual growth in smartphone shipments last year for the first time since 2015 thanks in part to the abundance of entry-level products, according to market research firm IDC.
Affordability is the key driver for any smartphone brands that want to grab a slice of the African market. That’s what vaulted Transsion into a top dog on the continent where it sells feature phones for less than $20. Vivo’s Y series smartphones, which are priced as little as $170, are vying for a place with Transsion, Samsung and Huawei that have respective unit shares of 34.3%, 22.6% and 9.9% in Africa last year.
The Middle East is also part of Vivo’s latest expansion plan despite the region’s recent slump in smartphone volumes. The Y series, which comes in several models sporting features like the 89% screen-to-body ratio or the artificial intelligence-powered triple camera, is currently for sale in the United Arab Emirates and will launch in Saudi Arabia and Bahrain in the coming months.
Vivo’s new international push came months after its sister company, Oppo, also owned by BBK, made a similar move into the Middle East and Africa by opening a new regional hub in Dubai.
“Since our first entry into international markets in 2014, we have been dedicated to understanding the needs of consumers through in-depth research in an effort to bring innovative products and services to meet changing lifestyle needs,” said Vivo’s senior vice president Spark Ni in a statement.
“The Middle East and Africa markets are important to us, and we will tailor our approach with consumers’ needs in mind. The launch of Y series is just the beginning. We look forward to bringing our other widely popular products beyond Y series to consumers in the Middle East and Africa very soon,” the executive added.
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