Sign up to receive free Technology updates in your email inbox. Every morning, the myFT Daily Digest email will provide you with a roundup of the latest Technology news. Greetings to all! This is Akito reporting from Singapore.
Back in the 1980s, when I was just a child, my family relocated from Japan to Europe due to my father’s job. This move took place during the height of the cold war, and I distinctly recall that our Japan Airlines flight to Europe made a stopover in Anchorage, Alaska. However, when we returned to Japan a few years later, our plane traveled over the Soviet Union as tensions were easing.
Fast forward about 20 years, and I found myself in Silicon Valley as a Nikkei reporter. The era of globalization was rapidly progressing, with entrepreneurs from all corners of the globe, including China and Russia, flocking to the region. Concurrently, US venture capitalists started investing in Chinese tech companies, while American tech giants began utilizing China as a major production hub. It was truly the “good old days,” a time when market distances were shrinking at an unprecedented pace.
A few months ago, I had a conversation with a former diplomat here in Singapore who remarked, “In the extensive history of international relations, the ‘good old days’ you experienced in the Valley are quite rare.” He pointed out past instances of conflict between powerful nations, such as the second world war and the cold war. Unfortunately, he also noted that we currently have a prime example of growing tensions: the escalating US-China relationship.
These tensions pose significant challenges for US tech companies. According to Nikkei staff writers Akito Tanaka and Grace Li, many of these companies rely heavily on China for their sales. Analysis of financial data by Nikkei Asia reveals that among the top 100 global companies in China based on sales in the recent fiscal year, 17 are US tech-related firms. Apple reigns supreme on this list, while Qualcomm, a major American chip company, depends on China for over 60% of its sales. Electric vehicle manufacturer Tesla also relies on China for more than 20% of its sales.
Despite efforts to decouple the tech supply chains between the two countries, this dependence on China has changed very little. Greater China continues to be Apple’s second-largest revenue source, following its home market. For Tesla, China’s importance has skyrocketed. In 2022, China accounted for 22% of Tesla’s total sales, compared to just 8% in 2018.
Similar to the former diplomat’s view that tension is more common than harmony in global affairs, many analysts anticipate that the US-China conflict will persist. Leaders of US tech companies, whose strategies revolve around the Chinese market, will have to acknowledge and adapt to a new status quo, according to experts.
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As Beijing seeks to strike a delicate balance between promoting advancements in artificial intelligence (AI) and maintaining control over content, China plans to tighten its regulations on AI, reports Qianer Liu from the Financial Times. The Cyberspace Administration of China, a powerful internet watchdog, intends to implement measures that will require companies to obtain approval before releasing generative AI products. According to insiders, these updated regulations, slated for finalization as early as this month, contrast with the draft regulations from April, which allowed tech companies just 10 working days to register their products after their launch. The previous document also placed the responsibility on companies to train their generative AI models with veracity, accuracy, objectivity, and diversity, making them fully accountable for the content generated by their AI.
This recent move in China’s AI regulatory landscape highlights the government’s struggle to reconcile its desire to foster groundbreaking technologies with its longstanding censorship policies. Beijing aims to establish a clear regulatory framework for generative AI before its widespread adoption. Generative AI, which can quickly generate human-like text, images, and other content in response to simple prompts, holds great potential.
Despite the ongoing trade restrictions and tensions between the US and China, China’s booming artificial intelligence sector continues to attract American companies. The recent World Artificial Intelligence Conference in Shanghai saw executives from Tesla, Microsoft, and other major US firms seeking to tap into the emerging AI market in China. As reported by Tomoko Wakasugi and Shunsuke Tabeta of Nikkei, even though Google services are blocked in China, the company had a booth at the conference, and Microsoft executives took the stage. Tesla CEO Elon Musk, speaking via video message, praised the abundance of talented individuals in China.
US tech companies remain focused on China due to the sheer size of its AI market, despite the deteriorating relationship between Washington and Beijing. Market researcher IDC forecasts that China’s AI market will more than double between 2022 and 2026, reaching $26.4 billion.
Netflix co-founder Reed Hastings revealed in an interview with Nikkei that one of his preferred shows is “Midnight Diner,” based on a Japanese manga. In light of this, Netflix is investing heavily in creating new content for Asian markets such as South Korea, Japan, and India, report Rei Nakafuji and Kotaro Hosokawa from Nikkei. The company is actively seeking out partnerships and emerging talent to capture audiences in this increasingly important region. Netflix co-CEO Ted Sarandos recently visited Seoul, where he met with production company executives and creators, signifying Netflix’s commitment. The company also signed a five-year contract with Yuji Sakamoto, the winner of the Best Screenplay award at this year’s Cannes Film Festival for the film “Kaibutsu” (Monster). In India, Netflix secured a multiyear deal with director Hansal Mehta following the success of his crime drama “Scam 1992.”
Netflix’s focus on Asia comes at a time when the platform faces intense competition domestically and slower growth. In the first quarter of this year, revenue increased by approximately 4% compared to the previous year, reaching $8.16 billion, falling short of market expectations. Net profit declined by 18% to $1.31 billion.
Recommended reads:
– Nvidia in talks to become an anchor investor in Arm IPO (FT)
– Foxconn withdraws from $19.5 billion chip joint venture with India’s Vedanta (Nikkei Asia)
– Apple’s headset headache: the tiny and costly displays inside the Vision Pro (FT)
– Huawei unveils latest AI model as ChatGPT boom continues (Nikkei Asia)
– Indian ride-hailing startup BluSmart takes on Uber with electric cars (FT)
– Japan to invest $530 million in new Sumco silicon wafer plants (Nikkei Asia)
– Shenzhen, China’s “city of young migrants,” at a turning point (Nikkei Asia)
– Ant Group launches $6 billion buyback after regulatory crackdown ends (FT)
– Byju’s faces investor discontent with online learning group (FT)
– Sony dives into “extended reality” with $2 billion R&D fund (Nikkei Asia)
#techAsia is a collaborative effort between Nikkei Asia and the FT tech desk, with Katherine Creel coordinating in Tokyo. Sign up here at Nikkei Asia to receive #techAsia every week. For any inquiries, the editorial team can be reached at [email protected].
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