Issue 33 | April 23, 2018

An Opinion: Why Meituan-Dianping’s Expansions Make Sense
Meituan-Dianping has made a lot of headlines recently, following its acquisition of Mobike and expansion into ride-hailing. The $30 billion Chinese lifestyle services company now provides at least a dozen consumer offerings, from restaurant reviews to vacation rentals to offline grocery stores. Many commentators have called Meituan “unfocused,” saying that it is spreading itself too thinly. In this piece, we argue that Meituan in fact has strategically chosen to expand into these areas to take advantage of a unique “super app” business model.

A Big Deal: ZTE’s Ban in US Sounds Wake-Up Call in China

The US Commerce Department said it would ban ZTE, China’s second-largest maker of telecommunications equipment, from buying American components. The US government claims ZTE made false statements during an investigation into possible violations of American sanctions.

The move threatens to cut off ZTE’s supply chain. It means ZTE, which shipped 47 million smartphones last year, won’t be able to buy chips from Qualcomm, or optical components for its handsets from other US manufacturers. ZTE may also be starved of access to software updates to its Google applications. For a global smartphone manufacturer, this ban is close to a death blow.

The denial order by the US Department of Commerce has sent ZTE into a “state of shock” that will hurt the interests of employees, telecom operators, consumers, and shareholders, said ZTE chairman Yin Yimin.

The ban has also sounded a wake-up call for Chinese companies to invest in their own R&D capabilities, especially in chip design. In a comment that went viral, a Chinese professor wrote, “In China today, companies burn millions of dollars in sectors like bike-sharing and food delivery, but you rarely see organizations invest in high-tech R&D. This is why the ZTE incident is so painful.”

Some predicted this event could be the catalyst for China to move more quickly towards its long-term goal of becoming less reliant on foreign technology.

Also this week, Alibaba acquired Hangzhou-based chipmaker C-Sky Microsystems. The move was part of Alibaba’s effort to increase its chipmaking capabilities as it branches into high-tech hardware. C-Sky Microsystems is among a group of Chinese startups aiming to break into the sector for high-tech chip design, which is now mainly dominated by big global names such as Intel and Qualcomm.
Tweet this

A Product: Tencent Launches Docs
Tencent has launched its own Google Docs-like online document product, Tencent Docs (docs.qq.com), focused on multi-person collaboration.

Its functions including quick translation, real-time stock quotes, permission settings, watermarks, and document sharing among contacts on Tencent platforms such as QQ and WeChat. Tencent Docs also has a WeChat mini-program that supports text editing on mobile. Users can easily convert existing Microsoft Word and Excel documents into Tencent Docs.

The release of Tencent Docs comes shortly after Shimo (石墨), another Chinese online collaborative office software company, received $32 million in financing. Bytedance (a.k.a Toutiao) is the largest shareholder of Shimo, which launched in 2015. Bytedance is also developing a corporate instant messaging software product named Lark.

Tencent Docs, which has been incubating for a year, already has over 5 million active users, the company said.

Note: GGV Capital is a shareholder of Bytedance.
Tweet this

A Quote:
“We must curb the tendency for greed and win absolute trust from consumers. We will not, in perpetuity, exceed a certain number of percentage points in profit on our hardware. Our target is just one or two percent. We want all consumers who buy our products not to hesitate.”

– Lei Jun, founder and CEO of Xiaomi, in an interview with South China Morning Post

Note: Hans Tung, managing partner at GGV Capital, is an early investor and former board member of Xiaomi.
Tweet this

A Graph: ZTE’s Top Customers by % of Revenue

Tweet this