In the shadow of the trade war, Chinese technology companies in the United States are anxiously waiting for the boots to land. Most of the potential changes in the business environment will remain silent. Only the Chinese investment in Silicon Valley is still cautiously optimistic.
Trade war is imminent
U.S. President Trump signed a memorandum last week to propose to levy a tariff of up to 60 billion U.S. dollars per year on Chinese imports, while restricting Chinese companies from acquiring and investing in U.S. companies. In response, the Ministry of Commerce of China also announced that it imposed 30 U.S. imports on some U.S. imports. Billions of U.S. dollars in tariffs are mainly agricultural products. As the world’s two largest economies, the comprehensive trade war between the United States and China seems to have started.
This is not surprising. During the 2016 election, Trump has been slamming the Obama administration’s failed trade policy, which has caused the huge trade deficit to continue to widen; he promised to reform the U.S. trade policy after the election, especially China imposes high tariffs because two-thirds of the US global trade deficit comes from Sino-U.S. trade.
However, when the horn of the trade war was officially sounded, the global financial market was still in a panic. The US stock market fell across the board on Friday. The Dow Jones Index tumbled more than 730 points, setting the biggest drop in two years; China's stock market and Japan's stock market week. 5. There has also been a sharp decline.
A report in the Wall Street Journal has somewhat eased the worries of some markets. The article quoted sources as saying that senior trade officials from China and the United States are negotiating to discuss mutually acceptable measures to avoid a full-scale trade war. These include the reduction of China’s tariffs on U.S. cars, the increase in the purchase of U.S. semiconductor chips and the expansion of China’s financial industry to U.S. companies.
Affected by this, the US stock market rebounded on Monday. The Dow, which slumped last week, exceeded 670 points. The major stocks in the Chinese stock market, such as finance and manufacturing, continued to decline, dragging the Chinese stock market lower for the fourth consecutive trading day on Monday. The five major agricultural stocks have apparently declined.
Technology investment is coming
Although the financial market’s concerns about the trade war have been resolved, for Chinese companies expanding in the United States, the trade war has actually already begun. Since Trump came to power, they have obviously felt that American trade protectionism is more incongruous than that of Obama. During the period, there was a marked warming. This is not only reflected in the business environment, but also in the M&A investment industry.
With the rapid rise of China’s Internet economy in recent years, Chinese tech companies with a significant increase in their capabilities have gradually expanded into the US market; on the one hand, they intend to expand their revenues in the massive U.S. market. On the other hand, they also intend to increase investment through mergers and acquisitions. Raising its R&D strength and patent reserves. Last year, China invested US$46 billion in US investment, which has increased by a factor of two.
However, to invest in M&A in the United States, it must face a huge obstacle - the US Government's Foreign Investment Committee (CFIUS). In theory, Chinese companies investing more than 10% of US companies holding shares must be released through CFIUS. In the history of Chinese technology companies investing in U.S. mergers and acquisitions in the United States, although there have been successful cases of Lenovo acquiring Motorola Mobile and IBM X86 servers, it is more bitter and helpless.
The communications industry and the semiconductor industry are undoubtedly the most sensitive areas. In this regard, Huawei is undoubtedly the biggest sufferer. Over the past ten years, Huawei’s consecutive acquisitions in the Obama era have been rejected by CFIUS, regardless of minority interest. , Still a patent asset, or an overall acquisition, without exception, were forced to give up.
In the first year after Trump took office, U.S. efforts to review China’s investment have undoubtedly been further enhanced. Several rejected deals have attracted much attention. In September last year, the U.S. White House immediately halted the leader in the programmable logic chip industry. The sale of Ladis Semiconductors was based on the fact that the investment consortium included China Guoxin Holdings, an investment company with a Chinese government background.
After failing to obtain CFIUS approval, Ant Financial, after waiting for one year, reluctantly gave up its US$1.2 billion acquisition of the world's second-largest money transfer service company MoneyGram in January of this year, and switched to strategic cooperation. When Sina Technology requested to comment on Ali's future investment prospects in the United States, Ali stated that it needs some time to evaluate and respond.
Such a containment strategy against China has even spread to the first acquisition of the global semiconductor industry. Broadcom spent 103 billion US dollars to acquire Qualcomm's transaction. Although Broadcom is a company that will transfer its headquarters from Singapore to the United States, and China does not Too much relationship, but the United States is more worried Qualcomm will be affected by the Broadcom acquisition will affect its long-term R & D investment, thus in competition with China's 5G technology standards in a disadvantage.
If in the previous Obama era, the blockade of China’s investment in M&A transactions was rejected by CFIUS, then in the Trump era, restricting China’s M&A in the United States has become an open policy, especially in the field of technology. Any plan in the United States Chinese companies that invest in mergers and acquisitions may think twice in the future to avoid unnecessary waste of resources and energy. The U.S. Department of the Treasury will formulate plans within two months to specifically restrict Chinese companies from investing in and acquiring American companies.
Chinese VC cautiously optimistic
However, China’s technology giant’s M&A in the United States is one thing. China’s capital VC VC may be another matter. At least, as the most successful representative of Chinese capital in Silicon Valley, Huashan Capital’s founding partner and managing director. Yang Lei thinks so.
In Yang’s opinion, whether Sino-US trade war can be fought in the end, how big the scale will be, how big the impact will be, and it’s still unclear. “Now it's a stage of bright muscles between the two sides. I believe that the two governments will use a kind of It's a sensible way to solve or resolve. Again, a fund needs at least 7 to 10 years, and I don't think trade war will last so long.'
In Yang's view, Trump's M&A restrictions are mainly directed at the direct investment of Chinese companies. In the venture capital field of commercial operations, Chinese capital will not be affected significantly. 'Because many funds in the United States, There is China's capital in itself. And the purpose of the fund's investment is not to hold a company for a long time, but to help the company to develop. Finally, the profit is withdrawn. This is also a good thing for American companies.'
Huashan Capital is a high-tech growth fund co-founded by Yang Lei and Chen Datong in 2009. It is jointly invested by sovereign wealth funds from China, North America, and Europe. It is considered the first brand of China’s high-tech investment fund in Silicon Valley and is also Silicon Valley startups have entered China's best fund platform. Huashan Capital has three funds with a total capital of more than 600 million U.S. dollars. It has invested in more than 30 companies, of which Silicon Valley's successful projects include the well-known game development engine Unity, which is 1.1 billion U.S. Amazon. Dollar acquisition game video platform Twitch et al.
Yang Lei, who has lived and worked in Silicon Valley and China for more than 20 years, has an in-depth understanding of the venture capital culture in Silicon Valley. He does not think that the investment and financing environment for Chinese capital in Silicon Valley will change. 'Silicon Valley is a Where governments and politicians are affected, entrepreneurs and investors are more diversified. Three-quarters of entrepreneurs are immigrants and will not support Trump's policies. For so many years, we have started businesses, invested, Life rarely communicates with any government officials and politicians, and it uses its own methods, market-oriented investment within the law, entrepreneurship, and various international collaborations. I don't think this environment will change fundamentally.
However, besides the issue of the US investment and financing environment, Silicon Valley’s Chinese capital may have another concern: How to transfer RMB funds from domestic to US dollar funds for overseas investment under the restriction of domestic regulatory policies. The person in charge of China Capital VC told Sina Technology that 'Chinese VCs like Huashan Capital with strong capital and international capital background do not need to worry about financing issues, nor are they worried about investment acceptance. But for some of them originally relying on domestic financing, In the case of a Chinese fund with no government background, the shuffling has already begun. On the one hand, it is worried that money will not come out and the remaining funds will be carefully planned. On the other hand, good projects will not accept your investment.
Hisense prepares its production capacity in advance
Perhaps the biggest impact of the trade war is on Chinese technology companies operating in the U.S. market, and they are patiently waiting for the final boots to land. Trump asked the U.S. Trade Representative’s Office to formulate a specific plan to impose tariffs on Chinese goods within 15 days. It will impose a 25% tariff on products such as aerospace, information and communications, and machinery.
As a prelude to the trade war, the Trump administration announced in January this year that it imposes punitive tariffs on washing machines and solar panels. In March, it announced the imposition of special tariffs on imported steel and aluminum (Canada and Mexico subsequently received special exemptions). Article 201 of all imported products, China's trade war is based on the United States "Trade Law" 301 clauses targeted precision blow.
At present, in the consumer electronics industry in the US market, there are no shortage of Chinese companies, and their market share continues to rise. In the smart phone field, there are ZTE, TCL (Alcatel), Coolpad, and Huawei OnePlus; in the television field, there are Hisense, Changhong and TCL, etc.
Although there are also mid- to high-end products such as Huawei Mate 10 Pro, One Plus 5T and Hisense ULED, most Chinese consumer electronics products are concentrated in low-end and mid-to-high-end markets to get market shipments at a reasonable price. Once Sino-US trade war The tariffs fell sharply on these product areas, and the above-mentioned Chinese manufacturers became the biggest victims.
Coolpad is the second-ranked Chinese smart phone manufacturer in the US market. Last year, shipments exceeded 4 million, an increase of 60% year-on-year. Cool American leader Kang Yongqing believes that if the United States imposes tariffs on Chinese-made smart phones, then all Manufacturers will be affected. Apple is, of course, Cool is no exception. This is also an important reason for his cautious attitude. 'I am more concerned about Apple's response to this matter, and the American people's reaction to the iPhone price increase, Apple's huge impact. Force may prompt the Trump administration to exempt smartphone products from trade wars.
In the long run, smart phone manufacturers in the United States are gradually considering the option of shifting production capacity to third countries, especially developing markets. Currently, smart phone manufacturers such as Apple have set up factories in India and Southeast Asia, perhaps in the shadow of the trade war. In the future, smart phones sold in the US market will no longer be assembled in China, thus avoiding Trump’s tariffs.
In addition, there are some Chinese technology product manufacturers that have already laid out their production in advance and do a good job of transferring production capacity to avoid possible tariff impacts of this trade war. Hisense acquired Sharp's television factory in Mexico in the acquisition of Sharp's US business in 2015. , Which will gradually transfer its own TV production capacity to the Mexican factory. Hisense US spokesman told Sina Technology that most of Hisense’s TVs sold in the United States are produced in Mexico. This means that even Trump has imposed on China’s color TVs. High tariffs will not have a significant impact on Hisense TV.
Business environment is still uncertain
Although the tariff is on the one hand, the deterioration of the competitive environment is another aspect. Huawei clearly feels deeply about this. In the Obama era, Huawei lost the tens of billions of dollars of telecommunications of the then third largest US operator Sprint under direct political interference. Equipment orders; In the era of Trump, Huawei again lost the agreement with the US's second-largest operator, AT&T, to sell smart phones under continuous pressure from the political sector.
Of course, Huawei has always been a negative target of the Chinese threat established by the U.S. government in the technology industry. Whether it is U.S. government officials or members of the National Assembly, it has attacked and rendered in various scenarios. 'Huawei with a Chinese government background may steal US user data. This negative speech has greatly affected Huawei's channel and image in the United States. Even if Huawei had voluntarily invited the US Congress to Shenzhen to carry out an official investigation of its so-called 'Chinese government background', it could not resolve this hostile atmosphere.
But this is not over yet. According to the latest media reports, Best Buy, the largest offline consumer electronics retailer in the United States, has suspended its cooperation with Huawei and will no longer sell Huawei smartphones in the future. Even if there is no official ban, there is no penalty for punishing. Huawei is also The United States is struggling. With regard to future business prospects, the United States spokesman for the Huawei terminal declined to comment on Sina Technology's request. 'Currently speaking, we can only say that we walk and watch and do our best.'
If Huashan Capital's Silicon Valley is mainly faced with startups in investment and financing environment, then Chinese technology vendors are facing the consumer market of ordinary Americans. In the shadow of trade war, will other Chinese technology manufacturers also encounter? Similar to Huawei's non-trade barriers, most of the several Chinese companies interviewed by Sina Technology are reluctant to answer this question.
At the U.S. congressional hearing in January this year, the heads of the six US intelligence agencies attacked Huawei and also named another Chinese mobile phone manufacturer ZTE. ZTE, which has entered the US market for many years, has established relationships with major mobile operators. Cooperation, currently the fourth largest manufacturer in the US smart phone market, with more than 10 million shipments in a year, second only to Apple, Samsung and LG, more than the traditional manufacturers Motorola and HTC. However, like Huawei, ZTE’s US spokesperson It also declined to comment on Sina Technology's comment, saying that it is still concerned.
Kang Yongqing of Coolpad is optimistic about it. 'Cool is a Hong Kong-listed company. It is not very big in the United States. The business environment should not change significantly. The needs of operators and consumers are always real. Problems will be circumvented through adjustments. ' The Cool Americans that have achieved profitability in the United States for two consecutive years stated that they are still optimistic about the performance growth target in the United States in the next three years, which is to maintain a 50% annual growth rate, and strive to achieve 6 million shipments this year. Ministry, to reach 10 million by 2020.
However, a U.S. spokesperson for a Chinese technology company that did not wish to be named and would not like to announce the company’s name used this to describe the uncertainties in the future. “Under the nest, there is an egg. If the trade war leads to the overall business environment, Deterioration, then all Chinese manufacturers will suffer a certain impact.