July 19, 2020: TikTok Data, Huawei in UK, Google in India, SMIC IPO, Softbank ARM, Luckin Coffee

This issue covers the period between July 13 - 19, 2020 with six news stories – three from English language sources, three from Chinese language sources – hand-picked by your humble author to further our exploration of the interconnections between technology, business, investment, and geopolitics. All translated article titles are done by me, not official translations from the media outlets.

“Is it time to delete TikTok? A guide to the rumors and the real privacy risks.” (English Source: Washington Post)

My Thoughts: This is one of the few articles I’ve read that provides a technical analysis of whether TikTok is sending and storing American user data to China. The analysis shows no evidence of that so far, but comes with the boilerplate caveat that TikTok could still be compelled to share data with the Chinese government in the future. To be clear, I support a TikTok ban if it does indeed share user data with the Chinese government. But this decision should be made based on evidence, not a bunch of speculative “could’s”. Since the user data appears to be stored on AWS, according to this article, working with AWS to monitor the outflow of TikTok data is both technically feasible and a legitimate national security request. And as I argued last month in “Can ByteDance Build Trust”, there’s plenty of work TikTok needs to do to build trust with the cybersecurity community, ideally by progressively open sourcing its codebase. All the PR statements are clearly not working. Talk is cheap, show me the code.

“U.K. Bars Huawei for 5G as Tech Battle Between China and the West Escalates” (English Source: New York Times)

My Thoughts: The dynamics around Huawei and 5G continues to be volatile, as shown by this reversal of the UK government. Earlier this year, Huawei was permitted to build the “non-core” part of the UK’s 5G network, much to the Trump administration’s chagrin. Now Huawei is completely out. This change seems to be a response to new anti-China sentiments caused by the National Security Law in Hong Kong; there’s no evidence yet of additional pressure exerted by the Trump administration. As I’ve noted in “Chips, Geopolitics, Elections”, the Wassenaar Arrangement, a membership organization that coordinates how to control or restrict technology transfer to non-member countries that could be used in hostile ways, is crucial to understanding how this “Tech Cold-War” will evolve. The UK is indeed a Wassenaar member country. It’s not just “U.S. vs. China”, it’s really “Wassenaar vs China”.

“Google to invest $10 billion in India” (English Source: TechCrunch)

My Thoughts: From an investor’s perspective, the recent flood of Western tech money to India is head-spinning and breathtaking. Amazon, Facebook, Silver Lake, Intel, Sequoia India, Walmart, and now Google. This is happening as India becomes increasingly hostile towards Chinese technology companies and their products, with some Indian entrepreneurs vowing to never take any Chinese investment. However, India’s vast economic potential and demographic advantages are well-known for some time, so I’m surprised that it took a massive geopolitical shift and border conflict between India and China to catalyze Western tech money to commit to India. Building in India won’t be easy; Apple’s experience there was full of challenges, like local corruption and poor manufacturing quality.

“SMIC successfully debuts on the STAR market; Opening price soared by more than 238%! ” (Chinese Source: iponews)

My thoughts: SMIC’s IPO and eye-popping first day price surge was much celebrated in Chinese language tech media and received some coverage in English language media as well. Of course, if you are a seasoned observer of IPO’s, a big first day price increase just means you left a lot of money on the table and could’ve raised more! As China’s de facto national champion of the semiconductor industry, SMIC won’t need to worry about funding or profit-making any time soon. Its big challenge will be weathering the ongoing US-led sanctions that may expand to other countries, while advancing its core chip-making processes beyond 14nm and manufacturing capacity. As a public company once again, there will be more information to analyze SMIC, though not nearly as much as before when it was listed on the NYSE.

“Running out of money? Softbank wants to sell ARM; Will Apple "pick up the tab"?” (Chinese Source: AI Frontier)

My thoughts: The news of Softbank trying to either sell ARM or do an IPO to get some liquidity for its beleaguered Vision Fund was widely reported in English language media. But I chose to highlight this article from a Chinese language source, because of its schadenfreude tone and speculation that Apple may be a buyer. The tone revealed to me that Softbank’s rise and fall in recent years have irked just as many people in China as in Silicon Valley. The Apple speculation is reasonable given its recent shift to ARM chips for Macs, but omitting any Chinese companies as potential suitors in the discussion is surprising. One possible buyer that I have not seen pop up is Alibaba, even though an Alibaba-ARM alliance makes both strategic sense and is realistic. I laid out my rationale in this mini tweet thread:

“Ex-Luckin Coffee CTO joins Naixue Tea, Preparing for possible IPO” (Chinese Source: 36Kr)

My thoughts: The scam that is Luckin Coffee amounted to quite a national embarrassment in China and triggered much of the new scrutiny against Chinese companies in the American capital market. The fact that its CTO could land another gig at another retail-dressed-up-as-tech company also looking to IPO, just shows you how comically irresponsible the tech business world can be. Naixue Tea apparently could be going public either in the U.S. or Hong Kong later this year. Will we see another Luckin?

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