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We update you on the most essential news from Asia in tech, media, and business—the things you need to know that you probably haven’t heard in Western media.
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Covid’s Effect on Chinese Smartphones 📱
Three of the world’s top five smartphone companies are Chinese, making up one-third of global sales. This KrAsia article summarises how these major brands are dealing with the coronavirus. As an overall global industry, smartphones are struggling and Q1 saw an 11% year-on-year decline in shipments, which is the largest decline ever recorded.
The biggest Chinese smartphone companies are Huawei, Xiaomi, and Vivo. Over the last couple of years, their growth has mainly come from emerging markets in places like India, South East Asia, and Africa. Their current challenges don’t just come from the coronavirus, but are compounded by government regulation. Huawei has been the subject of bans by the US government, and this week the Indian government banned 59 Chinese mobile apps.
Huawei is the second biggest smartphone maker by number of shipments, and 50% of their sales come from the Chinese domestic market. They recently opened a huge new flagship store in Shanghai right next to the Apple store. Xiaomi is a weaker player in China, with most of their growth coming from India, Europe, and South America. This leaves them in a more vulnerable position given both public health and policy challenges in each of those regions. Vivo has even more reliance on the Indian market for growth—earlier this year before Covid, they announced an aggressive marketing plan to launch hundreds of new stores around India, which is likely no longer possible to pull off. It’s not an easy time to be a Chinese smartphone maker.
Taobao - From E-Commerce to Online Education 🎓
Taobao, one of China’s largest e-commerce platforms, is owned by Alibaba and has over 800 million users. Last week, they announced a new initiative called a “One Million New Students Plan” to “help more than 1,000 education organisations to gain at least 100,000 new students each in the next three years.” So that’s a goal to get 100 million new students in total within three years. This includes new product features, marketing, content, and partnerships.
In 2013, Taobao had launched their first version of an online education spinoff called Tongxue, which means ‘classmates’ in English. It’s always been available on Taobao, but this latest announcement is more topical and takes advantage of recent trends. Since the beginning of this year, edtech and online classes have grown rapidly in China. Given the size of China’s population, the stakes are even higher for education. With 230 million Chinese students currently in K-12 education, it’s more than any other country in the world.
The Financial Times reported on this education boom earlier in the year, which is happening not only in China, but throughout Asia. Online education apps like Ding Talk became widely used teaching tools for almost all students thanks to the coronavirus. Ding Talk specifically got so big that Chinese students from around the country kept giving the app a one-star rating, with the hopes that the app would get kicked off the App Store and they wouldn’t have to do their homework. And now it’s Taobao’s turn to try to win over students and get a slice of the growing education pie.
KKR Raises New Asia Fund, Their Biggest Ever 💴
KKR (Kohlberg, Kravis, Roberts) is in the process of closing a $12.5 Billion buyout fund this month, focused specifically on investments in Asia. This is said to be the biggest ever Asia-focused fund raised by a U.S. company. KKR is one of the oldest and most respected companies in private equity. And given the financial toll the coronavirus has taken on the world economy, this provides KKR with more potential companies as investment targets.
Just this year, KKR has already spent $3.3 Billion acquiring companies in Asia-Pacific, including $1.1 Billion in the Indian-based Reliance Industries and $650 Million in Vietnam’s largest real estate developer. Clearly KKR sees major opportunity in Asia, but it’s not the case for all investors. The PR fallout from Luckin Coffee’s scandal has still cast doubt on investing in Asia and a recent study by Bain indicates that Asia-Pacific private equity activity has declined over the last year. There’s room for many different opinions on the future of Asia.
Update #17 - Smartphones, Online Classes, and KKR