Hi everyone, this is Lauly, sending greetings from Taipei. We’ve been seeing dark clouds in the sky most afternoons, much like those gathering over volatile Asian stock markets in the past few trading days.
Last Friday, just minutes before stepping into an interview, two industry friends told me that the scheduled shipment of Nvidia’s new GB200 system had encountered some problems. When I finally got out of the interview two and half hours later, the news was all over the internet and the Taiwan Stock Exchange had shed more than 1,000 points. My jaw dropped.
The pessimistic atmosphere extended to Monday, as Japan’s benchmark index recorded its worst-ever daily sell-off on a points basis.
Taiwan’s Taiex also recorded its biggest-ever drop, falling more than 1,800 points, or 8.35 per cent.
The plunge came a day after Taiwan took gold in men’s double badminton at the Paris Olympics. Many people here joked that to celebrate the island’s first gold of this Games, everyone was having a sale — including the stock market.
Asian stock markets bounced back on Tuesday and Wednesday, but several factors were behind the recent volatility: disappointing results from big tech companies, including Intel’s decision to cut 15,000 jobs, fears of a US recession, a sudden strengthening of the Japanese yen and escalating tensions in the Middle East.
I recently went to the earnings conference of Delta Electronics, the world’s leading provider of power management solutions for AI data centres, consumer electronics and automobiles. The company trimmed its forecast for its electric vehicle business for a second time to “just a little bit of growth this year”, while chair and CEO Ping Cheng said it was hard to tell when EV markets would overcome their current headwinds.
“At the end of last year, all our [automotive] clients were asking us to churn out more outputs as quickly as possible, and we did. But so quickly the dynamics shifted to the other direction, and we’ve seen demand suddenly freeze since then,” the chair said.
“At the end of the day, it is a test for us to hone our agility and operational capability,” he added.
In today’s rapidly changing market environment, I think those words apply to suppliers across the tech industry.
Supply chain shake-up
HP is undertaking its biggest-ever supply chain shift to boost resilience and mitigate geopolitical risks, Nikkei Asia’s Lauly Li and Cheng Ting-Fang write.
The US PC maker, the second-largest in the world, is aiming to have at least 50 per cent of its PC production outside of China and is also setting up a “back-up” design hub in Singapore, according to multiple sources with direct knowledge of the matter. HP aims to reach the production goal in two to three years, and one source said the company has even set an internal goal of eventually making up to 70 per cent of its notebooks outside of China.
Thailand is emerging as the most important production hub for HP. At least five suppliers are building new factories or warehouse hubs for the American company, while two are increasing their capacity there.
HP’s escalation of supply chain shift is a stark contrast to its decades-long strategy of focusing its manufacturing operations on China, where it and its suppliers have built an extensive network in the inland city of Chongqing.
A charged atmosphere
Kim Beom-su, founder of South Korean tech group Kakao, was arrested last month on stock manipulation charges relating to a takeover battle for one of the country’s top K-pop labels.
Those who worked closely with Kim stressed his determination to run Kakao differently to the top-down management style preferred by South Korea’s leading conglomerates, write Christian Davies and Song Jung-a for the Financial Times.
But the tech group’s horizontal “start-ups within a start-up” model ended up spiralling out of control as it expanded to 124 affiliates.
Kakao’s businesses range from South Korea’s dominant messenger app to entertainment companies, fintech and a nascent AI affiliate.
If convicted, Kim will be forced to relinquish control of the country’s biggest internet bank. That would mean Kakao losing one of its key business pillars just as the group is seeking to move towards offering AI-powered digital services.
Even before Kim’s arrest, Kakao and fellow South Korean tech group Naver were struggling to fight off competition from US giants encroaching into the country’s market.
Infineon goes big
Top European chipmaker Infineon has begun production at its biggest power chip plant in Malaysia, marking a victory for the south-east Asian country as it attempts to move up the value chain in the global semiconductor supply chain, Nikkei Asia’s Cheng Ting-Fang reports from Kulim.
The plant will be the world’s biggest factory for silicon carbide chips once it reaches full capacity over the next five years, Infineon said.
Malaysia has seen an uptick in investment amid US-China trade tensions, driven by companies like Infineon expanding their operations. The country reported a 24 per cent growth in investment in 2023, reaching a record 329.5bn Malaysian ringgit. It is also attracting investment in data centres, one of the hottest segments of the tech industry. More than 45 per cent of the investment last year was related to electrical and electronics, information and communication sectors, according to the Malaysian Investment Development Authority.
Showdown in the Valley
Silicon Valley is splitting into two camps as US vice-president Kamala Harris and former president Donald Trump prepare to face off in the November presidential election, writes Nikkei Asia’s Yifan Yu.
Trump, the Republican candidate, has won some heavyweight supporters in the tech industry, such as Elon Musk and the founders of venture capital firm Andreessen Horowitz. His Democratic challenger, who only entered the race a few weeks ago, has garnered support from hundreds of venture capitalists.
While both candidates have adopted “aggressive anti-China” positions, their approaches could hardly be more different.
“The Trump administration made everything personal, and lashed out unpredictably. The Biden-Harris administration has been much more professional and predictable,” said Eric Rosenblum, managing partner at Foothill Ventures.
Harris is expected to continue the Biden administration’s controlled and narrow approach to China, while it is hard to predict how Trump would handle tensions with Asia’s biggest economy.
Suggested reads
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US sues TikTok over ‘widespread violations’ of child privacy law (FT)
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SoftBank restates faith in AI amid global market anxiety (Nikkei Asia)
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Asia’s ferocious sell-off has its roots in US AI boom (FT)
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Founder of SoftBank-backed app IRL accused of fraud by SEC (FT)
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China’s cyber space ID proposal triggers fear of stricter social control (Nikkei Asia)
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Indian IT outsourcer Infosys hit with $4bn tax demand (FT)
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Malaysia and China deepen chip co-operation with joint expo (Nikkei Asia)
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Understanding China’s pragmatic AI plan (FT)
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Japan space start-up Interstellar raises $21mn from NTT-led backers (Nikkei Asia)
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KKR eyes $4bn buyout to take Japan’s Fuji Soft private (Nikkei Asia)
#techAsia is co-ordinated by Nikkei Asia’s Katherine Creel in Tokyo, with assistance from the FT tech desk in London.
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