China Roundup: Kai-Fu Lee’s first Europe bet, WeRide buys a truck startup

Hello and welcome back to TechCrunch’s China Roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world.

Despite the geopolitical headwinds for foreign tech firms to enter China, many companies, especially those that find a dependable partner, are still forging ahead. For this week’s roundup, I’m including a conversation I had with Prophesee, a French vision technology startup, which recently got funding from Kai-Fu Lee and Xiaomi, along with the usual news digest.

Spotting opportunities in China

Like many companies working on futuristic, cutting-edge tech in Europe, Prophesee was a spinout from university research labs. Previously, I covered two such companies from Sweden: Imint, which improves smartphone video production through deep learning, and Dirac, an expert in sound optimization.

The three companies have two things in common: They are all in niche fields, and they have all found eager customers in China.

For Prophesee, they are production lines, automakers and smartphone companies in China looking for breakthroughs in perception technology, which will in turn improve how their robots respond to the environment. So it’s unsurprising that Xiaomi and Chinese chip-focused investment firm Inno-Chip backed Prophesee in its latest funding round, which was led by Sinovation Venture.

The funding size was undisclosed but TechCrunch learned it was in the range of “tens of million USD.” It was also the first investment that Kai-Fu Lee has made through Sinovation in Europe. As Prophesee CEO Luca Verre recalled:

I met Dr. Kai-Fu Lee three years ago during the World Economic Forum … and when I pitched to him about Prophesee, he got very intrigued. And then over the past three years, actually, we kept in touch and last year, given the growing traction we were having in China, particularly in the mobile and IoT industry, he decided to jump in. He said okay, it is now the right timing Prophesee becomes big.

The Paris-based company wasn’t actively seeking funding, but it believed having Chinese strategic investors could help it gain greater access to the complex market.

Rather than sending information collected by sensors and cameras to computing platforms, Prophesee fits that process inside a chip (fabricated by Sony) that mimics the human eyes, a technology that is built upon neuromorphic engineering.

The old method snaps a collection of fixed images so when information grows in volume, a tremendous amount of computing power is needed. In contrast, Prophesee’s sensors, which it describes as “event-based,” only pick up changes in the environment just as the photoreceptors in our eyes and can process information continuously and quickly.

Europe has been pioneering neuromorphic computing, but in recent years, Verre saw a surge in research coming from Chinese universities and tech firms, which reaffirmed his confidence in the market’s appetite.

We see Chinese OEMs (original equipment manufacturers), particularly Xiaomi, Oppo and Vivo pushing the standard of quality of image quality to very, very high … They are very eager to adopt new technology to further differentiate in a way which is faster and more aggressive than Apple. Apple is a company with an attitude which to me looks more similar to Huawei. So maybe for some technology, it takes more time to see the technology mature and adopt, which is right very often but later. So I’m sure that Apple will come at certain point with some products integrating event-based technology. In fact, we see them moving. We see them filing patents in the space. I’m sure that will come, but maybe not the first.

Though China is striving for technological independence, Verre believed Prophesee’s addressable market is large enough — $20 billion by his estimate. Nonetheless, he admitted he’d be “naive to believe Prophesee will be the only one to capture” this opportunity.

WeRide bought a truck company

One of China’s most valuable robotaxi startups has just acquired an autonomous trucking company called MoonX. The size of the deal is undisclosed, but we know that MoonX raised “tens of millions RMB” 15 months ago in a Series A round.

While WeRide is focused on Level 4 self-driving technology, it is also finding new monetization avenues before its robotaxis can chauffeur people at scale. It’s done so by developing minibusses, and the MoonX acqui-hire, which brings the company’s founder and over 50 engineers to WeRide, will likely help diversify its revenue pool.

WeRide and MoonX have deep-rooted relationships. Their respective founders, Tony Han and Yang Qingxiong, worked side by side at Jingchi, which was later rebranded to WeRide. Han co-founded Jingchi and took the helm as CEO in March 2018 while Yang was assigned vice president of engineering. But Yang soon quit and started MoonX.

Han, a Baidu veteran, gave Yang a warm homecoming and put him in charge of the firm’s research institute and its new office in Shenzhen, home to MoonX. WeRide’s sprawling headquarters is just about an hour’s drive away in the adjacent city of Guangzhou.

AI surveillance giant Cloudwalk nears IPO

Cloudwalk belongs to a cohort of Chinese unicorns that flourished through the second half of the 2010s by selling computer vision technology to government agencies across China. Together, Cloudwalk and its rivals SenseTime, Megvii and Yitu were dubbed the “four AI dragons” for their fast ascending valuations and handsome funding rounds.

Of course, the term “AI dragon” is now a misnomer as AI application becomes so pervasive across industries. Investors soon realized these upstarts need to diversify revenue streams beyond smart city contracts, and they’ve been waiting anxiously for exits. Finally, here comes Cloudwalk, which will likely be the first in its cohort to go public.

Cloudwalk’s application to raise 3.75 billion yuan ($580 million) from an IPO on the Shanghai STAR board was approved this week, though it can still be months before it starts trading. The firm’s financials don’t look particularly rosy for investors, with net loss amounting to 720 million yuan in 2020.

Also in the news

  • Speaking of the torrent of news in autonomous driving, vehicle vision provider CalmCar said this week that it has raised $150 million in a Series C round. Founded by several overseas Chinese returnees in 2016, CalmCar uses deep learning to develop ADAS (Advanced Driver Assistance System) used in automotive, industrial and surveillance scenarios. German auto parts maker ZF led the round.
  • Baby clothes direct-to-consumer brand PatPat said it has raised $510 million from Series C and D rounds. The D2C ecosystem leveraging China’s robust supply chains is increasingly gaining interest from venture capitalists. Brands like Shein, PatPat, Cider and Outer have all secured fundings from established VCs. Founded by three Carnegie Mellon grads, PatPat counts IDG Capital, General Atlantic, DST Global, GGV Capital, SIG China and Sequoia China among its investors.

#apple-inc, #artificial-intelligence, #asia, #carnegie-mellon, #china, #dst-global, #europe, #funding, #fundings-exits, #general-atlantic, #ggv-capital, #idg-capital, #kai-fu-lee, #megvii, #paris, #perception, #self-driving-technology, #sensetime, #sequoia-china, #shein, #shenzhen, #sig-china, #smartphone, #smartphones, #sony, #sweden, #tc, #weride, #xiaomi

Austin-based iFly.vc closes $46M second fund from legendary tech founders

To compete with the myriad venture capital firms in Silicon Valley, iFly.vc has a unique vantage point.

Its founder Han Shen has straddled the United States and China for several decades. He was the first hire on the investment team of Formation 8, the VC firm co-founded by Palantir’s Joe Lonsdale. After iFly.vc backed Weee! in a Series A round in 2018, Shen arranged for the grocery startup to meet with China’s produce delivery leaders — two of which recently went public in the U.S. — to learn what was applicable to the American market.

Weee! has since become the go-to grocery app for America’s Asian communities and raised hundreds of millions of dollars from Lightspeed Venture Partners, DST Global, Blackstone, Tiger Global and other major institutions. IFly.vc is still Weee!’s second-largest shareholder, and its first fund recorded a 10x rate of return, Shen told TechCrunch during an interview.

On the back of its cross-continental experiences and portfolio performance, iFly.vc recently closed its second fund with over $46 million, boosting the firm’s assets under management to more than $95 million.

The limited partners in Fund II include family offices across the U.S. and Asia as well as high-profile entrepreneurs such as Zhang Tao, founder of China’s Yelp counterpart Dianping, Free Wu, a founding member of Tencent who now manages Welight Capital, Joe Lonsdale, co-founder of Palantir, and Aayush Phumbhra, co-founder of Chegg.

IFly.vc made another big move during the pandemic, relocating its office from San Francisco to Austin, joining a wave of Californians fleeing the expensive area.

When it comes to investment focus, Shen said he tries to seek out the underdogs in North America’s trillion-dollar consumer market.

“On the one hand, enterprise services are growing very quickly. But on the other hand, the rise of enterprise software is helping consumer tech to grow even more quickly and easily. The consumer market is very diverse and serves an array of minority groups, so there is always a new opportunity.”

With this premise in mind, iFly.vc recently invested in Cheese Financial‘s seed round, a digital bank that started out by serving the underbanked Asian American populations.

IFly.vc prefers backing startups early on and seeing them through by providing hands-on, post-investment support. Rather than spray and pray, iFly.vc has invested in just about a dozen companies five years after its founding.

Shen’s background of growing up in China and working in Silicon Valley, where he eventually became a partner at Formation 8, led him to appreciate entrepreneurs with a similarly international background because they can learn from mistakes and successes on both sides. They also know how to leverage the different fields of talent across the world.

Cheese Financial, for instance, is setting up an engineering force in the founder’s hometown, Shenzhen, to take advantage of the Chinese city’s large pool of engineers at costs much lower than those of Silicon Valley.

It’s not just about hiring cheaper programmers, though. As Shen puts it: “In the past, American companies were simply outsourcing technical tasks to China. Now Chinese engineers actually have valuable lessons to bring to American companies because many have worked at large, successful Chinese tech companies themselves.”

#asia, #blackstone, #chegg, #china, #digital-bank, #dst-global, #formation-8, #funding, #joe-lonsdale, #palantir, #private-equity, #shenzhen, #tc, #tencent, #venture-capital, #welight-capital

Chinese sellers on Amazon in hot demand by VCs and e-commerce roll-ups

Chinese merchants selling on Amazon are having a moment. The scruffy exporters are used to roaming about suburban factory areas and dealing with constant cash flow strain, but suddenly they find themselves having coffee with top Chinese venture capital firms and investment representatives from internet giants, who come with big checks to hunt down the next Shein or Anker. While VCs can provide the money for them to scale quickly, many lack the expertise to help on the strategic side.

This is where brand aggregators can put their retail know-how to work. Also called roll-ups, these companies go around acquiring promising e-commmerce brands for operational synergies. After taking off in the United States, Europe, and lately Southeast Asia, it has also quietly landed in China, where traditional white-label manufacturers are trying to move up the value chain and establish their own brand presence.

The latest roll-up to enter China is Berlin Brands Group (BBG), which aims to buy “dozens of” brands in the country over the next few years, its founder and CEO Peter Chaljawski told TechCrunch. This will significantly boost the German company’s existing portfolio of 14 brands.

The move came on the back of BBG’s $240 million funding raised from debt and its announcement to commit $300 million on its balance sheet to buying up companies. The firm opted for debt in part because it has been profitable since its inception. The recent funding won’t be its last round and it may use other financial instruments in the future, said the founder.

Chaljawski doesn’t see VC and corporate investors as direct competitors in the hunt for brands. “There are tens of thousands of sellers in China that generate significant revenue on Amazon. I think the VC money applies to some of them, and the roll-up model applies also to only some of them. But ‘some’ is a very, very big number.”

BBG is no stranger to China. The 15-year-old company has been relying on Chinese manufacturers to make its kitchenware, gardening tools, sports gear and other home appliances, with 90% of its products still made in the country today. For the new brand buy-out initiative, it’s hiring dozens of staff in Shenzhen, which Chalijawski dubbed the “Silicon Valley of Amazon,” referring to the southern city’s key role in global export, manufacturing, and increasingly, design.

Amazon alternative

BBG hopes to offer a new way for Chinese consumer products to scale in Europe and the U.S. beyond being an anonymous brand on Amazon. Sellers may want to break free of the American behemoth to seize more control over consumer data, but building a direct-to-consumer (D2C) brand is no small feat.

Many merchants that are good at operating Amazon third-party businesses lack the infrastructure to go beyond Amazon, like an in-house logistics system, said the founder. In Europe, BBG manages 120,000 square meters of fulfillment centers, allowing it to shed dependence on Amazon.

Chinese brands may also want to find Amazon alternatives in Europe, where the e-commerce landscape is a lot more fragmented than that in the U.S, noted Chaljawski.

“If you look at the U.S., Amazon is dominant. If you look at Europe, Amazon only has 10% of the market share of online retail. So 90% is beyond Amazon. In the Netherlands, you have platforms like Bol. In Poland, you have Allegro, and in France, you have other dominant players.”

To bridge the gap for international brands targeting Europe, BBG operates close to 20 D2C web stores in major European countries, aside from selling on Amazon. Its sales growth in the U.S. has also been in full steam. Currently, over 60% of the firm’s revenues come from non-Amazon channels.

BBG is already in advanced negotiations with “some brands” in China but cannot disclose their names at this stage.

#amazon, #asia, #berlin-brands-group, #brand, #china, #consumer-products, #e-commerce, #e-commerce-aggregator, #ecommerce, #europe, #manufacturing, #online-retail, #online-shopping, #retailers, #roll-ups, #shenzhen, #tc

Kai-Fu Lee’s Sinovation bets on Linux tablet maker Jingling in $10M round

Kai-Fu Lee’s Sinovation Ventures has its eyes on a niche market targeting software developers. In April, the venture capital fund led a $10 million angel round in Jingling, a Chinese startup developing Linux-based tablets and laptops, TechCrunch learned. Other investors in the round included private equity firm Trustbridge Partners.

Jingling was founded only in June 2020 but has quickly assembled a team of 80 employees hailing from the likes of Aliyun OS, Alibaba’s Linux distribution, Thunder Software, a Chinese operating system solution provider, and active participants in China’s open source community.

The majority of the startup’s staff are working on its Linux-based operating system called JingOS in Beijing, with the rest developing hardware in Shenzhen, where its supply chain is located.

“Operating systems are a highly worthwhile field for investment,” Peter Fang, a partner at Sinovation Ventures, told TechCrunch. “We’ve seen the best product iteration for work and entertainment through the combination of iPad Pro and Magical Keyboard, but no tablet maker has delivered a superior user experience for the Android system so far, so we decided to back JingOS.”

“The investment is also in line with Sinovation’s recognition and prediction in ARM powering more mobile and desktop devices in the future,” the investor added.

Jingling’s first device, the JingPad A1 tablet based on the ARM architecture, has already shipped over 500 units in a pre-sale and is ramping up interest through a crowdfunding campaign. Jingling currently uses processors from Tsinghua Unigroup but is looking into Qualcomm and MediaTek chipsets for future production, according to Liu.

On the software end, JingOS, which is open sourced on GitHub, has accumulated over 50,000 installs from users around the world, most of whom are in the United States and Europe.

But how many people want a Linux tablet or laptop? Liu Chengcheng, who launched Jingling with Zhu Rui, said the demand is big enough from the developer community to sustain the startup’s early-phase growth. Liu is known for founding China’s leading startup news site 36Kr and Zhu is an operating system expert and a veteran of Motorola and Lenovo.

Targeting the Linux community is step one for Jingling, for “it’s difficult to gain a foothold by starting out in the [general] consumer market,” said Liu.

“The Linux market is too small for tech giants but too hard for small startups to tackle… Aside from Jingling, Huawei is the only other company in China building a mobile operating system, but HarmonyOS focuses more on IoTs.”

Linux laptops have been around for years, but Jingling wanted to offer something different by offering both desktop and mobile experiences on one device. That’s why Jingling made JingOS compatible with both Linux desktop software like WPS Office and Terminal as well as the usual Android apps on smartphones. The JingPad A1 tablet comes with a detachable keyboard that immediately turns itself into a laptop, a setup similar to Apple’s Magic Keyboard for iPad.

“It’s a gift to programmers, who can use it to code in the Linux system but also use Android mobile apps on the run,” said Liu.

Jingling aspires to widen its user base and seize the Chromebook market about two from now, Liu said. The success of Chromebooks, which comprised 10.8% of the PC market in 2020 and increasingly ate into Microsoft’s dominance, is indicative of the slowing demand for Windows personal computers, the founder observed.

The JingPad A1 is sold at a starting price of $549, compared to Chrome’s wide price range roughly between $200 and $550 depending on the specs and hardware providers.

#android, #asia, #beijing, #china, #funding, #gadgets, #hardware, #ipad, #kai-fu-lee, #linus-torvalds, #linux, #mediatek, #operating-system, #operating-systems, #shenzhen, #software-developers, #tc, #trustbridge-partners

Prime today, gone tomorrow: Chinese products get pulled from Amazon

If you ever bought power banks, water bottles, toys, or other daily goods on Amazon, the chances are your suppliers are from China. Analysts have estimated that the share of Chinese merchants represented 75% of Amazon’s new sellers in January, up from 47% the year before, according to Marketplace Pulse, an e-commerce research firm.

Chinese sellers are swarming not just Amazon but also eBay, Wish, Shopee and Alibaba’s AliExpress. The boom is in part a result of intense domestic competition in China’s online retail world, which forces merchants to seek new markets. Traditional exporters are turning to e-commerce, cutting out excessive distributors. Businesses are enchanted by the tale that a swathe of the priciest property in Shenzhen, the Chinese city known for its vibrant tech industry and expensive apartments, is now owned by people who made a fortune from e-commerce export.

But the get-rich-quick optimism among the cross-border community came to a halt when several top Chinese sellers disappeared from Amazon over the past few days. At least eleven accounts that originate from Greater China were suspended, according to Juozas Kaziukenas, founder of Marketplace Pulse.

Several accounts belong to the same parent firms, as it’s normal for big sellers, those with more than a million dollars in annual sales, to operate multiple brands on Amazon to optimize sales.

TechCrunch has reached out to Mpower and Aukey, whose Amazon stores are gone and were two of the most successful brands native to the American marketplace.

In total, the suspended accounts contribute over a billion dollars in gross merchandise value (GMV) to Amazon, said Kaziukenas.

Amazon didn’t comment on the status of the suspended accounts, but said in a statement for TechCrunch that it has “long-standing policies to protect the integrity of our store, including product authenticity, genuine reviews, and products meeting the expectations of our customers.”

“We take swift action against those that violate them, including suspending or removing selling privileges,” said an Amazon spokesperson.

Chinese e-commerce exporters were startled by the incident. Inside WeChat groups where hundreds of sellers normally exchange business strategies, anxiety is rife and the consensus is that the targeted sellers have “crossed the line” in conducting questionable platform practices. Amazon says it shares enforcement actions directly with selling accounts.

“This isn’t the first time Amazon has shut down accounts over fake reviews and other behavior that violate its rules, but the scale of this wave is unprecedented,” said Bill Zhang, who develops and exports smart training suits through Amazon.

It’s no doubt that Amazon needs Chinese suppliers for affordable and diverse products, of which average quality has also increased remarkably in recent years. But as competition heated up among Chinese sellers, black hat tactics that were common in Chinese e-commerce became a necessity to survive on Amazon.

“It’s an open secret that a lot of Chinese sellers are aggressive towards marketing,” Cameron Walker, who worked for an export trade show in China for over a decade before running a toy export business.

One of the common tricks employed by Chinese sellers is review manipulation because reviews affect how a product is listed on Amazon. This can be done by paying real buyers to leave a positive review or sending fake orders and leaving good reviews through zombie accounts.

The latter approach is often delegated to agents that call themselves “product review” services, which offer a suite of resources to emulate real accounts: IP proxies, virtual credit cards, overseas addresses, any pieces of identity that can help avoid suspicion from Amazon’s anti-fake algorithms, said an executive at a payments service who works closely with Chinese exporters.

Another prevalent tactic, which perhaps poses a greater existential crisis to Amazon than fake reviews, is ways to direct buyers away from Amazon onto merchants’ own web stores. Amazon restricts merchants from collecting sensitive buyer information such as emails, but Chinese exporters find a way around: sending postcards to customers asking them to leave reviews on their own websites.

These tricks have been around for years, so what caused the sudden attack at top sellers?

Exporters contacted by TechCrunch pointed to a data breach uncovered by SafetyDetectives, a cybersecurity firm, which contained a trove of direct messages between Amazon sellers soliciting fake reviews from buyers. The data, which implicates more than 200,000 individuals, was hosted on a server that appears to be in China, according to SafetyDetectives’ report.

The report didn’t mention the names of the sellers involved. TechCrunch cannot immediately verify claims in the report.

Amazon did not say whether it was aware of the data breach. It, however, claimed that it uses “machine learning tools and skilled investigators to analyze over 10 million review submissions weekly” and monitor “all existing reviews for signs of abuse and quickly take action if we find an issue.” It also works with social media sites to report “bad actors.”

But bad actors will likely come back even after the latest episodes of crackdowns, said the cross-border payments executive.

“Amazon is fighting an entire lucrative and tight-knit ecosystem of merchants and fake review services, not just a few big sellers.”

In recent years, Amazon has been trying to nudge more new sellers to join and be “good brands,” observed Walker. Merchants now need to meet strict requirements for brand registries, safety testing, and insurance liability, he said.

“It’s getting more difficult and costly to run a business on Amazon.”

These challenges have encouraged hordes of exporters to diversify sales channels beyond Amazon and invest in their own Shopify-based web stores, where they get to write the rules. They are encouraged by what Shein, an independent e-commerce store that sells made-in-China apparel to overseas markets, has achieved. In the first quarter, Shein was the world’s second most downloaded shopping app, according to data provided by app analytics firm SensorTower. Many Chinese sellers dream that one day they, too, could break free from the grip of a behemoth like Amazon.

#alibaba-group, #aliexpress, #amazon, #amazon-marketplace, #asia, #china, #cross-border-commerce, #e-commerce, #ebay, #ecommerce, #online-shopping, #retailers, #shein, #shenzhen, #shopee, #shopify, #tc

SoftBank leads $15M round for China’s industrial robot maker Youibot

SoftBank has picked its bet in China’s flourishing industrial robotics space. Youibot, a four-year-old startup that makes autonomous mobile robots for a range of scenarios, said it has notched close to 100 million yuan ($15.47 million) in its latest funding round led by SoftBank Ventures Asia, the Seoul-based early-stage arm of the global investment behemoth.

In December, SoftBank Ventures Asia led the financing round for another Chinese robotics startup called KeenOn, which focuses on delivery and service robots.

Youibot’s previous investors BlueRun Ventures and SIG also participated in the round. The startup, based in Shenzhen where it went through SOSV’s HAX hardware accelerator program, secured three financing rounds during 2020 as businesses and investors embrace industrial automation to minimize human contact. Youibot has raised over 200 million yuan to date.

Founded by a group of PhDs from China’s prestigious Xi’an Jiaotong University, Youibot develops solutions for factory automation, logistics management, as well as inspection and maintenance for various industries. For example, its robots can navigate around a yard of buses, inspect every tire of the vehicles and provide a detailed report for maintenance, a feature that helped it rack up Michelin’s contract.

Youibot’s “strongest suits” are in electronics manufacturing and electric power patrol, the company’s spokesperson told TechCrunch.

The startup is also seeing high growth in its semiconductor business, with customers coming from several prominent front-end wafer fabs, which use the firm’s robots for chip packaging, testing, and wafer production. Youibot declined to disclose their names due to confidentiality.

Chinese clients that it named include CRRC Zhuzhou, a state-owned locomotive manufacturer, Huaneng Group, a state-owned electricity generation giant, Huawei, and more. China currently comprises 80% of Youibot’s total revenues while overseas markets are rapidly catching up. The firm’s revenues tripled last year from 2020.

Youibot plans to spend the fresh proceeds on research and development in its mobile robots and propietary software, team building and market expansion.

#artificial-intelligence, #asia, #bluerun-ventures, #china, #electronics, #hardware, #huawei, #industrial-robot, #robot, #robotics, #semiconductor, #seoul, #shenzhen, #softbank-group, #softbank-ventures-asia, #tc

Westward plans a $30M debut fund to take Chinese indie games global

In Hefei, a Chinese city known for its relics from the Three Kingdoms period and its manufacturing industry today, Maxim Rate was thrilled to find a small studio crafting a Western role-playing game, a genre that attracts lovers of gritty aesthetics and dark storylines.

“The design and computer graphics are really good. You can’t tell they are a Chinese team,” said Rate.

Rate’s mission is to find Chinese studios like the bootstrapped Hefei team and help them woo international players. As Chinese regulators tighten rules on game publishing and make licenses hard to obtain in recent years, small studios find themselves struggling. Since last year, Apple has pulled thousands of unlicensed games from its Chinese App Store at the behest of local authorities. Small-time developers begin to look beyond their home turf.

“The problem is these startups have no experience in overseas expansion,” said Rate.

An avid gamer himself, Rate quit his job at a Chinese cross-border payment firm last year and launched a part-incubator, part-investment vehicle to take Chinese games abroad. The firm, called Westward Gaming Ventures, took inspiration from Zheng He, a Chinese diplomat and explorer who embarked on state-sponsored naval expeditions to the “Western Oceans” during the Ming Dynasty.

Westward plans to raise 200 million yuan ($30 million) for its debut fund, Rate told TechCrunch in an interview. It plans to deploy the capital over the next three years with an intended check size of 2-4 million yuan per studio. It’s currently in talks with 20-30 teams that span a wide range of genres.

The Chinese fund being established is a so-called Qualified Foreign Limited Partners Fund, which, for the first time, will enable foreign investors (USD and EUR) to invest directly in Chinese gaming firms. Only a few institutions own a license for QFLP, and while Westward itself doesn’t hold one, it gains legitimacy for direct foreign investment by partnering with the private equity arm of a major Chinese financial conglomerate, which declined to be named at this stage.

To navigate such regulatory complications, Westward also seeks help from its advisors, including one that oversaw the legal and financial process of one of the largest joint ventures established between Chinese and foreign gaming firms in recent years. The partnership, which can’t be named, was also the first time a foreign entity has become the majority shareholder in a gaming joint venture in China.

China limits foreign investments in areas it considers sensitive, such as value-added services, so many companies resort to setting up elaborate offshore entities to receive overseas funding. The restriction makes it difficult for resource-strapped studios to land foreign investors, who could help them venture into global markets. They are left with the option of getting backed or bought by Chinese giants like Tencent or ByteDance.

Rise of Chinese plays

The idea of Westward is not just to lower the barriers for independent Chinese games to secure foreign capital but also better prepare them for overseas expansion.

“Chinese gaming studios, big or small, used to rely heavily on ads for user acquisition when they went abroad,” said Rate. “Sometimes a game would take off, but the team had no idea why, so they continued to test. Those who failed may just give up.”

But taking a game abroad is not as simple as translating it, hitting the publish button and launching an ad campaign on Facebook.

Westward’s plan is to get involved in a game’s early development phase and help them position: Is it an RPG? Is the targeted user a casual or serious player? What’s the graphic style? In addition, the firm also plans to supply developers with workspace, technical assistance, marketing and localization expertise, connection to publishers, and overseas operation help.

Image Credits: Westward Gaming Ventures

To provide post-investment support, Westward has partnered up with V+ Gaming Society, an incubator for games headquartered Shenzhen, which Westward also calls home.

Chinese tech companies are facing mounting challenges in the West as geopolitical tensions rise. Many now prefer calling themselves “global firms” and even deny their Chinese roots outright.

But for Westward, the games it helps doesn’t need to pretend they are non-Chinese. “Most players don’t consider where a game is from if it is a really good game,” said Rate.

“We actually hope to see elements of Chinese culture in these games that can be understood by overseas players.”

Amy Ho, a partner at Westward along with Rate and Edward He, said one of the few Chinese games that have managed to be both “Chinese” and transcend cultural boundaries is Chinese Parents. The simulation game became a global hit by letting users experience what it is like to raise a child in China.

The benchmark Rate gave was the generation of Japanese games that began exporting 20-30 years ago, which he described as “Japanese” in spirit but “globalized” in graphics and game design.

There have already been globally successful titles from Chinese makers like Tencent and rising studios Lilith and Mihoyo. In the past, many Chinese users on Steam would be asking foreign titles to rush out Chinese versions. Now, it’s not uncommon to see Western users demanding English editions of Chinese games, Rate observed.

Rather than politics, the bigger challenge, especially for small studios, is how to “collect key data for product iteration while complying with local privacy laws,” said Ho.

50-70% of Westward’s capital will come from Chinese institutions. The presence of Chinese investments inevitably leads to questions around censorship. Ho said while Westward provides resources and capital to studios, it will work to ensure their independence from investor influence.

If things go well, Westward could help facilitate cultural exchange between China and the rest of the world. Beijing has been trying to export the country’s soft power, and games may be a suitable conduit, suggested Rate. Amid the ongoing trade war, having foreign fundings in Chinese companies may also do good to China’s “brand”, he said.

#asia, #china, #entertainment, #funding, #games, #gaming, #rpg, #shenzhen, #tc, #tencent

Huawei is not a carmaker. It wants to be the Bosch of China

One after another, Chinese tech giants have announced their plans for the auto space over the last few months. Some internet companies, like search engine provider Baidu, decided to recruit help from a traditional carmaker to produce cars. Xiaomi, which makes its own smartphones but has stressed for years it’s a light-asset firm making money from software services, also jumped on the automaking bandwagon. Industry observers are now speculating who will be the next. Huawei naturally comes to their minds.

Huawei seems well-suited for building cars — at least more qualified than some of the pure internet firms — thanks to its history in manufacturing and supply chain management, brand recognition, and vast retail network. But the telecom equipment and smartphone maker repeatedly denied reports claiming it was launching a car brand. Instead, it says its role is to be a Tier 1 supplier for automakers or OEMs (original equipment manufacturers).

Huawei is not a carmaker, the company’s rotating chairman Eric Xu reiterated recently at the firm’s annual analyst conference in Shenzhen.

“Since 2012, I have personally engaged with the chairmen and CEOs of all major car OEMs in China as well as executives of German and Japanese automakers. During this process, I found that the automotive industry needs Huawei. It doesn’t need the Huawei brand, but instead, it needs our ICT [information and communication technology] expertise to help build future-oriented vehicles,” said Xu, who said the strategy has not changed since it was incepted in 2018.

There are three major roles in auto production: branded vehicle manufacturers like Audi, Honda, Tesla, and soon Apple; Tier 1 companies that supply car parts and systems directly to carmakers, including established ones like Bosch and Continental, and now Huawei; and lastly, chip suppliers including Nvidia, Intel and NXP, whose role is increasingly crucial as industry players make strides toward highly automated vehicles. Huawei also makes in-house car chips.

“Huawei wants to be the next-generation Bosch,” an executive from a Chinese robotaxi startup told TechCrunch, asking not to be named.

Huawei makes its position as a Tier 1 supplier unequivocal. So far it has secured three major customers: BAIC, Chang’an Automobile, and Guangzhou Automobile Group.

“We won’t have too many of these types of in-depth collaboration,” Xu assured.

L4 autonomy?

Arcfox, a new electric passenger car brand under state-owned carmaker BAIC, debuted its Alpha S model quipped with Huawei’s “HI” systems, short for Huawei Inside (not unlike “Powered by Intel”), during the annual Shanghai auto show on Saturday. The electric sedan, priced between 388,900 yuan and 429,900 yuan (about $60,000 and $66,000), comes with Huawei functions including an operating system driven by Huawei’s Kirin chip, a range of apps that run on HarmonyOS, automated driving, fast charging, and cloud computing.

Perhaps most eye-catching is that Alpha S has achieved Level 4 capabilities, which Huawei confirmed with TechCrunch.

That’s a bold statement, for it means that the car will not require human intervention in most scenarios, that is, drivers can take their hands off the wheels and nap.

There are some nuances to this claim, though. In a recent interview, Su Qing, general manager for autonomous driving at Huawei, said Alpha S is L4 in terms of “experience” but L2 according to “legal” responsibilities. China has only permitted a small number of companies to test autonomous vehicles without safety drivers in restricted areas and is far from letting consumer-grade driverless cars roam urban roads.

As it turned out, Huawei’s “L4” functions were shown during a demo, during which the Arcfox car traveled for 1,000 kilometers in a busy Chinese city without human intervention, though a safety driver was present in the driving seat. Automating the car is a stack of sensors, including three lidars, six millimeter-wave radars, 13 ultrasonic radars and 12 cameras, as well as Huawei’s own chipset for automated driving.

“This would be much better than Tesla,” Xu said of the car’s capabilities.

But some argue the Huawei-powered vehicle isn’t L4 by strict definition. The debate seems to be a matter of semantics.

“Our cars you see today are already L4, but I can assure you, I dare not let the driver leave the car,” Su said. “Before you achieve really big MPI [miles per intervention] numbers, don’t even mention L4. It’s all just demos.”

“It’s not L4 if you can’t remove the safety driver,” the executive from the robotaxi company argued. “A demo can be done easily, but removing the driver is very difficult.”

“This technology that Huawei claims is different from L4 autonomous driving,” said a director working for another Chinese autonomous vehicle startup. “The current challenge for L4 is not whether it can be driverless but how to be driverless at all times.”

L4 or not, Huawei is certainly willing to splurge on the future of driving. This year, the firm is on track to spend $1 billion on smart vehicle components and tech, Xu said at the analyst event.

A 5G future

Many believe 5G will play a key role in accelerating the development of driverless vehicles. Huawei, the world’s biggest telecom equipment maker, would have a lot to reap from 5G rollouts across the globe, but Xu argued the next-gen wireless technology isn’t a necessity for self-driving vehicles.

“To make autonomous driving a reality, the vehicles themselves have to be autonomous. That means a vehicle can drive autonomously without external support,” said the executive.

“Completely relying on 5G or 5.5G for autonomous driving will inevitably cause problems. What if a 5G site goes wrong? That would raise a very high bar for mobile network operators. They would have to ensure their networks cover every corner, don’t go wrong in any circumstances and have high levels of resilience. I think that’s simply an unrealistic expectation.”

Huawei may be happy enough as a Tier 1 supplier if it ends up taking over Bosch’s market. Many Chinese companies are shifting away from Western tech suppliers towards homegrown options in anticipation of future sanctions or simply to seek cheaper alternatives that are just as robust. Arcfox is just the beginning of Huawei’s car ambitions.

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China’s Xpeng in the race to automate EVs with lidar

Elon Musk famously said any company relying on lidar is “doomed.” Tesla instead believes automated driving functions are built on visual recognition and is even working to remove the radar. China’s Xpeng begs to differ.

Founded in 2014, Xpeng is one of China’s most celebrated electric vehicle startups and went public when it was just six years old. Like Tesla, Xpeng sees automation as an integral part of its strategy; unlike the American giant, Xpeng uses a combination of radar, cameras, high-precision maps powered by Alibaba, localization systems developed in-house, and most recently, lidar to detect and predict road conditions.

“Lidar will provide the 3D drivable space and precise depth estimation to small moving obstacles even like kids and pets, and obviously, other pedestrians and the motorbikes which are a nightmare for anybody who’s working on driving,” Xinzhou Wu, who oversees Xpeng’s autonomous driving R&D center, said in an interview with TechCrunch.

“On top of that, we have the usual radar which gives you location and speed. Then you have the camera which has very rich, basic semantic information.”

Xpeng is adding lidar to its mass-produced EV model P5, which will begin delivering in the second half of this year. The car, a family sedan, will later be able to drive from point A to B based on a navigation route set by the driver on highways and certain urban roads in China that are covered by Alibaba’s maps. An older model without lidar already enables assisted driving on highways.

The system, called Navigation Guided Pilot, is benchmarked against Tesla’s Navigate On Autopilot, said Wu. It can, for example, automatically change lanes, enter or exit ramps, overtake other vehicles, and maneuver another car’s sudden cut-in, a common sight in China’s complex road conditions.

“The city is super hard compared to the highway but with lidar and precise perception capability, we will have essentially three layers of redundancy for sensing,” said Wu.

By definition, NGP is an advanced driver-assistance system (ADAS) as drivers still need to keep their hands on the wheel and take control at any time (Chinese laws don’t allow drivers to be hands-off on the road). The carmaker’s ambition is to remove the driver, that is, reach Level 4 autonomy two to four years from now, but real-life implementation will hinge on regulations, said Wu.

“But I’m not worried about that too much. I understand the Chinese government is actually the most flexible in terms of technology regulation.”

The lidar camp

Musk’s disdain for lidar stems from the high costs of the remote sensing method that uses lasers. In the early days, a lidar unit spinning on top of a robotaxi could cost as much as $100,000, said Wu.

“Right now, [the cost] is at least two orders low,” said Wu. After 13 years with Qualcomm in the U.S., Wu joined Xpeng in late 2018 to work on automating the company’s electric cars. He currently leads a core autonomous driving R&D team of 500 staff and said the force will double in headcount by the end of this year.

“Our next vehicle is targeting the economy class. I would say it’s mid-range in terms of price,” he said, referring to the firm’s new lidar-powered sedan.

The lidar sensors powering Xpeng come from Livox, a firm touting more affordable lidar and an affiliate of DJI, the Shenzhen-based drone giant. Xpeng’s headquarters is in the adjacent city of Guangzhou about 1.5 hours’ drive away.

Xpeng isn’t the only one embracing lidar. Nio, a Chinese rival to Xpeng targeting a more premium market, unveiled a lidar-powered car in January but the model won’t start production until 2022. Arcfox, a new EV brand of Chinese state-owned carmaker BAIC, recently said it would be launching an electric car equipped with Huawei’s lidar.

Musk recently hinted that Tesla may remove radar from production outright as it inches closer to pure vision based on camera and machine learning. The billionaire founder isn’t particularly a fan of Xpeng, which he alleged owned a copy of Tesla’s old source code.

In 2019, Tesla filed a lawsuit against Cao Guangzhi alleging that the former Tesla engineer stole trade secrets and brought them to Xpeng. XPeng has repeatedly denied any wrongdoing. Cao no longer works at Xpeng.

Supply challenges

While Livox claims to be an independent entity “incubated” by DJI, a source told TechCrunch previously that it is just a “team within DJI” positioned as a separate company. The intention to distance from DJI comes as no one’s surprise as the drone maker is on the U.S. government’s Entity List, which has cut key suppliers off from a multitude of Chinese tech firms including Huawei.

Other critical parts that Xpeng uses include NVIDIA’s Xavier system-on-the-chip computing platform and Bosch’s iBooster brake system. Globally, the ongoing semiconductor shortage is pushing auto executives to ponder over future scenarios where self-driving cars become even more dependent on chips.

Xpeng is well aware of supply chain risks. “Basically, safety is very important,” said Wu. “It’s more than the tension between countries around the world right now. Covid-19 is also creating a lot of issues for some of the suppliers, so having redundancy in the suppliers is some strategy we are looking very closely at.”

Taking on robotaxis

Xpeng could have easily tapped the flurry of autonomous driving solution providers in China, including Pony.ai and WeRide in its backyard Guangzhou. Instead, Xpeng becomes their competitor, working on automation in-house and pledges to outrival the artificial intelligence startups.

“The availability of massive computing for cars at affordable costs and the fast dropping price of lidar is making the two camps really the same,” Wu said of the dynamics between EV makers and robotaxi startups.

“[The robotaxi companies] have to work very hard to find a path to a mass-production vehicle. If they don’t do that, two years from now, they will find the technology is already available in mass production and their value become will become much less than today’s,” he added.

“We know how to mass-produce a technology up to the safety requirement and the quarantine required of the auto industry. This is a super high bar for anybody wanting to survive.”

Xpeng has no plans of going visual-only. Options of automotive technologies like lidar are becoming cheaper and more abundant, so “why do we have to bind our hands right now and say camera only?” Wu asked.

“We have a lot of respect for Elon and his company. We wish them all the best. But we will, as Xiaopeng [founder of Xpeng] said in one of his famous speeches, compete in China and hopefully in the rest of the world as well with different technologies.”

5G, coupled with cloud computing and cabin intelligence, will accelerate Xpeng’s path to achieve full automation, though Wu couldn’t share much detail on how 5G is used. When unmanned driving is viable, Xpeng will explore “a lot of exciting features” that go into a car when the driver’s hands are freed. Xpeng’s electric SUV is already available in Norway, and the company is looking to further expand globally.

#alibaba, #artificial-intelligence, #asia, #automation, #automotive, #baic, #bosch, #cars, #china, #cloud-computing, #driver, #electric-car, #elon-musk, #emerging-technologies, #engineer, #founder, #huawei, #lasers, #li-auto, #lidar, #livox, #machine-learning, #nio, #norway, #nvidia, #qualcomm, #robotaxi, #robotics, #self-driving-cars, #semiconductor, #shenzhen, #tc, #tesla, #transport, #transportation, #u-s-government, #united-states, #wu, #xavier, #xiaopeng, #xpeng

ConsenSys raises $65M from JP Morgan, Mastercard, UBS to build infrastructure for DeFi

ConsenSys, a key player in crypto and a major proponent of the Ethereum blockchain, has raised a $65 million funding round from J.P. Morgan, Mastercard, and UBS AG, as well as major blockchain companies Protocol Labs, the Maker Foundation, Fenbushi, The LAO and Alameda Research. Additional investors include CMT Digital and the Greater Bay Area Homeland Development Fund. As well as fiat, several funds invested with Ethereum-based stablecoins, DAI and USDC, as consideration.

Sources told TechCrunch that this is an unpriced round because of the valuation risk, and the funding instrument is “full”, so the round is being closed now.

The fundraise looks like a highly strategic one, based around the idea that traditional institutions will need visibility into the increasingly influential world of ‘decentralized finance’ (DeFi) and the Web3 applications being developed on the Ethereum blockchain.

In a statement on the fundraise, ConsenSys said it has been through a “period of strategic evolution and growth”, but most outside observers would agree that this is that’s something of an understatement.

After a period of quite a lot of ‘creative disruption’ to put it mildly (at one point a couple of years ago, ConsenSys seemed to have everything from a VC fund, to an accelerator, to multiple startups under its wing), the company has restructured to form two main arms: ConsenSys, the core software business; and ConsenSys Mesh, the investment arm, incubator, and portfolio. It also acquired the Quorum product from J.P. Morgan which has given it a deeper bench into the enterprise blockchain ecosystem. This means it now has a very key product suite for the Etherum platform, including products such as Codefi, Diligence, Infura, MetaMask, Truffle, and Quorum.

This suite allows it to serve both public and private permissioned blockchain networks. It can also support Layer 2 Ethereum networks, as well as facilitate access to adjacent protocols like IPFS, Filecoin, and others. ConsenSys is also a major contributor to the Ethereum 2.0 project, for obvious reasons.

Commenting on the fundraise, Joseph Lubin, founder of ConsenSys and co-founder, Ethreum said in a statement: “When we set out to raise a round, it was important to us to patiently construct a diverse cap table, consistent with our belief that similar to how the web developed, the whole economy would join the revolutionaries on a next-generation protocol. ConsenSys’ software stack represents access to a new automated objective trust foundation enabled by decentralized protocols like Ethereum. We are proud to partner with preeminent financial firms alongside leading crypto companies to further converge the centralized and decentralized financial domains at this particularly exciting time of growth for ConsenSys and the entire industry.”

With financial institutions able to see, ‘in public’ DeFi happening on Ethereuem, because of the public chain, they can see how much of the financial system is gradually starting to merge with the blockchain world. So it’s becoming clearer what attracts these major institutions.

Mike Dargan, Head of Group Technology at UBS said: “Our investment in ConsenSys adds proven expertise in distributed ledger technology to our UBS Next portfolio.”

For MasterCard this appears to be not just a pure investment – Consensys has been working with it on a private permissioned network.

Raj Dhamodharan, executive vice president of digital asset and blockchain products and partnerships at Mastercard said: “Enterprise Ethereum is a key infrastructure on which we and our partners are building payment and non-payment applications to power the future of commerce… Our investment and partnership with ConsenSys helps us bring secure and performant Enterprise Ethereum capabilities to our customers.”

Colleen Sullivan, Co-Founder and CEO of CMT Digital said: “ConsenSys is the pioneer in bridging the gaps across traditional finance, centralized crypto, and DeFi, and more broadly, between Web 2.0 and Web 3.0. We are proud to participate in this funding round as the ConsenSys team continues to pave the way for global users  — retail and institutional — to easily access the crypto ecosystem.”

TechCrunch understands that the fundraise was started around the time of the Quorum acquisition, last June. The $65 million round is in majority fiat currency as opposed to cryptocurrency and is an adjunct to the round done with JP Morgan last summer.

The presence of significant crypto players such as Maker Protocol Labs shows the significance of the fund-raise, beyond the simple transaction. The announcement also comes just ahead of the Coinbase IPO, which makes for interesting timing.

ConsenSys’ products have become highly significant in the world where developers, enterprises, and consumers meet blockchain and crypto. In its statement, the company claims MetaMask now has over three million monthly active users across mobile and desktop, a 3x increase in the last five or six months, it says. This is roughly the same amount of monthly active customers as Coinbase.

The ConsenSys announcement comes just ahead of the Coinbase IPO. While Coinbase is acting as an exchange to turn fiat into crypto and vice versa, it has also been getting into DeFi of late. Where there are also resemblances with ConsenSys, is that Coinbase, with 3 million users, is used as a wallet, and MetMask, which also has 3 million users, can also be used as a wallet. The comparison ends there, but it’s certainly interesting, given Coinbase’s $100 billion valuation.

As Jeremy Millar, Chief Development Officer, told me: “Coinbase has pioneered an exchange, in one of the world’s most regulated financial markets, the US. And it has helped drive significant interest in the space. We enjoy a very positive relationship with Coinbase, trying to further enable the ecosystem and adoption of the technology.”

The background to this raise is that a lot of early-stage blockchain and crypto companies have been raising a lot of money recently, but much of this has been through crypto investment firms. Only a handful of Silicon Valley VCs are backing blockchain, such as Andreessen Horowitz.

What’s interesting about this announcement is that these incumbent financial giants are not only taking an interest, but working alongside ConsenSys to both invest and build products on Ethereum.

It’s ConsenSys’ view that every payment service provider, banks will need this financial infrastructure in the future, especially for DeFI.

Given there is roughly $43 billion collateralized in DeFi, it’s increasingly the case that major investors are involved, and there are increasingly higher returns than traditional yield and bond or bond yields.

The moves by Central Banks into digital currencies is also forcing companies and governments to realize digital currency, and the ‘blockchain rails’ on which it runs, is here to stay. This is what is suggested by the Greater Bay Area Homeland Development Fund’s (a Shenzhen / Hong Kong joint partnership) decision to get involved.

Another aspect of this story is that ConsenSys is sitting on some extremely powerful products. Consensys has six products that serve three different types of people.

Service developers who are building on Ethereum are using Truffle to develop smart contracts. Users joining the NFT hype are using MetaMask underneath it all.

The MetaMask wallet allows users to swap one token for another. This has proved quite lucrative for ConsenSys, which says it has resulted in $1.8 billion in volume in decentralized exchange use. ConsenSys takes a 0.875 percent cut on every swap that it serves.

And institutions are using Consensys’ products. The company says more than 150,000 developers use Infura’s APIs, and 4.5 million developers create and deploy smart contracts using Truffle, while its Protocols group — developer of Hyperledger Besu and ConsenSys Quorum — are building Central Bank Digital Currencies (CBDCs) for six central banks, says Consensys.

Consensys is also making hay with the NFT boom. Developers are using Consensys products for the nodes and infrastructure on Ethereum which stores the NFT files.

Consensys is also riding two waves. One is the developer eave and the other is the financial system wave.

As a spokesperson said: “Where the interest in money and invention started happening was on public networks like Ethereum. So we really believe that these are converging and they will continue to, and every one of our products offers public main net compatibility because we think this is the future.”

Millar added: “If we want to help the world adopt the technology we need to meet it at its adoption point, which for many large enterprises means inside the firewall first. But similarly, we think, just like the public Internet, the real value – the disruptive value – changes the ability to do this on a broader permissionless basis, especially when you have sufficient privacy and authentication available.”

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Chinese hardware makers turn to crowdfunding as they look to go global

China’s tech giants have had a rough time in Western markets over the last few years. Huawei and DJI have been hit by trade restrictions, while TikTok and WeChat are threatened with their apps being banned in the U.S. Overall, Chinese companies with an overseas footprint are increasingly wary of rising geopolitical tensions.

But at an event hosted by California-based crowdfunding platform Indiegogo for Chinese consumer product makers in Shenzhen, businesses from sizes ranging from a startup making portable power stations to 53-year-old home appliances behemoth Midea, listened attentively as Indiegogo’s China managers shed light on how to court Western consumers.

“The first stage is to let ourselves be heard by the world. We have done that,” Li Yongqin, general manager of Indiegogo China, exhorted a room of entrepreneurs. “Next, we will bravely ride the tide and accept the challenge of coming the brands loved by users around the world.”

For Midea, “crowdfunding gives us a very direct way to understand consumers,” said Chen Zhenrui, who oversees the group’s overseas e-commerce initiative. Platforms like Indiegogo and Kickstarter are ways for individuals and organizations to raise capital from a large number of people to fund a project. In most cases, backers get perks or rewards from the project they fund.

Midea raised $1.5 million last year for a new air conditioner unit launched on Indiegogo, an almost negligible amount compared to the 280 billion yuan ($42 billion) annual revenue it generated in 2019. But the support from its 3,600 backers on Indiegogo was more a proof of concept.

Within a few weeks, Midea learned that a compact air conditioner that saddles snugly on the window sill, blocks out noise and saves energy could entice many American consumers. Like other established Chinese home appliances makers, Midea had been exporting for several decades.

But “in the past, much of our overseas business was in the traditional, B2B export realm. I think we are still far from being a world-class brand,” said Chen.

When Midea first launched on Indiegogo, a user left comments on its campaign page calling the project a scam: How could a Fortune Global 500 company be on Indiegogo?

“Through rounds of communication, we got to know each other. That user gave us a big push,” Chen recalled, adding that Midea used a dozen of suggestions from Indiegogo backers to improve its product.

Li Yongqin, general manager of Indiegogo China, exhorted a room of entrepreneurs to develop brands loved by global users. Photo: TechCrunch

More and more traditional manufacturers from China are giving crowdfunding a shot. Padmate, based in the southern coastal city of Xiamen, built a new earbud brand called Pamu from its foundation as a white-label maker of sound systems.

Edison Shen, a director at Padmate, said that traditional export was getting harder as old-school distributors became squeezed by new retail channels like e-commerce. By creating their own brands and reaching consumers directly, factories could also improve profit margins. Padmate went on Indiegogo in 2018 and raised over $6.6 million in one of its wireless headphone campaigns.

Most of the projects on Indiegogo will go beyond the 9-million-backer crowdfunding site onto mainstream platforms, listing on Amazon as well as advertising on Google and Facebook. Though the core services of these American Big Tech firms aren’t available in China, they have all set up some form of operational presence in China, whether it’s stationing staff in the country like Amazon or working through local ad resellers like Facebook.

Indiegogo itself opened its China office in Shenzhen five years ago and has since seen China-based projects raise over $300 million through its platform, according to Lu Li, general manager for Indiegogo’s global strategy. China is now the company’s fastest-growing market and accounted for over 40% of the campaigns that raised over $1 million in 2020.

Kickstarter, a rival to Indiegogo, also saw a surge in projects from China, which reached a record $60.5 million in funding in 2020. The Brooklyn-based company recently began looking for a contractor in Shenzhen or the adjacent city Hong Kong to help it research the Chinese market.

“In recent years, more Chinese companies are getting the hang of crowdfunding and taking their brand global, so ‘blockbuster’ campaigns [from China] are also on the rise,” observed Li.

#amazon, #asia, #brooklyn, #california, #china, #crowdfunding, #funding, #gadgets, #hardware, #indiegogo, #kickstarter, #philanthropy, #shenzhen, #tc

Chinese startups rush to bring alternative protein to people’s plates

On a recent morning in downtown Shenzhen, Lingyu queued up to order her go-to McMuffin. As she waited in line with other commuters, the 50-year-old accountant noticed the new vegetarian options on the menu and decided to try the imitation spam and scrambled egg burger.

“I’ve never had fake meat,” she said of the burger — one of five new breakfast items that McDonald’s introduced last week in three major Chinese cities featuring luncheon meat substitutes produced by Green Monday.

Lingyu, who works in her family business in Shenzhen, is exactly the type of Chinese customer that imitation meat companies want to attract beyond the young, trendy, eco-conscious urbanites. Her yuan means potentially more to meat replacement companies because it advances their business and climate agendas both. Eating less meat is one of the simplest ways to reduce an individual’s carbon footprint and help fight climate change.

McDonald’s hopes that its pea- and soy-based, zero-cholesterol, luncheon meat substitutes will carve out a piece of China’s massive dining market. Long-time rival KFC, and local competitor Dicos introduced their own plant-based products last year. Partnering with fast food chains is a smart move for companies that want to promote alternative protein to the masses, because these products are often pricey and are usually aimed at wealthy urbanites.

2020 could well have been the dawn of alternative protein in China. More than 10 startups raised capital to make plant-based protein for a country with increasing meat demand. Of these, Starfield, Hey Maet, Vesta and Haofood have been around for about a year; ZhenMeat was founded three years ago; and the aforementioned Green Monday is a nine-year-old Hong Kong firm pushing into mainland China. The competition intensified further last year when American incumbents Beyond Meat and Eat Just entered China.

Although some investors worry the sudden boom of meat substitute startups could turn into a bubble, others believe the market is far from saturated.

“Think about how much meat China consumes a year,” said an investor in a Chinese soy protein startup who requested anonymity. “Even if alternative protein replaces 0.01% of the consumption, it could be a market worth tens of billions of dollars.”

In many ways, China is the ideal testbed for alternative protein. The country has a long history of imitation meat rooted in Buddhist vegetarianism and an expanding middle class that is increasingly health-conscious and willing to experiment. The country also has a grip on the global supply chain for plant-based protein, which could give domestic startups an edge over foreign rivals.

“I believe, in five years, China will see a raft of domestic plant-based protein companies that could be on par with industry leaders from Europe and North America,” said Xie Zihan, who founded Vesta to develop soy-based meat suitable for Chinese cuisine.

Meat varieties

Hey Maet’s imitation meat dumplings / Photo: Hey Maet 

Lily Chen, a manager at the Chinese arm of alternative protein investor Lever VC, outlines three categories of meat analog companies in China: Western giants such as Beyond Meat and Eat Just; local players; and conglomerates such as Unilever and Nestlé that are developing vegan meat product lines as a defense strategy. Lever VC invested in Beyond Meat, Impossible Foods and Memphis Meats.

“They all have their product differentiation, but the industry is still very early stage,” said Chen.

#alternative-protein, #asia, #beyond-meat, #china, #ec-food-climate-and-sustainability, #food, #food-tech-investor, #greentech, #impossible-foods, #meat-substitutes, #memphis-meats, #shenzhen, #tc

Nordetect’s system to monitor soil and water for indoor agriculture raises seed funding

As indoor farming expands, a number of new companies are cropping up to provide better data and monitoring tools for the businesses aimed at improving efficiencies and quality of indoor crops. 

One of these companies, the Copenhagen-based Nordetect, is entering the U.S. market with around $1.5 million in funding from government investment firms and traditional accelerators like SOS V, with a tech that the company claims can give vertical farms a better way to monitor and manage nutrients and water quality.

Controlled agriculture, whether in greenhouses or warehouses, benefits from its ability to administer every aspect of the inputs to ensure that plants have the optimal growing conditions. It is, however, far more expensive than just seeding the ground.

Proponents say that these farms can overcome the additional expense by improving efficiency around water use, reducing the application of pesticides and fertilizer, and cultivating for better, tastier produce.

That’s where Keenan Pinto and Palak Sehgal’s Nordetect comes in. The two co-founders have known each other since they were undergraduates in India eight years ago. They went on to do their masters work together and after working in bioengineering plants — Sehgal focused on flowering systems in plants and Pinto focused on roots — they both went into more digital fields — but maintained their fascination with plants and kept in touch with each other.

Professional work in medical diagnostics for Sehgal and lab instrumentation for Pinto kept both busy, but they continued their discussions around plant science and soil health.

Roughly three years ago, the two hit on the idea for a combined toolkit for water quality monitoring and soil health. Sehgal left the India Institutes of Technology, where she had been working, and joined Pinto in Copenhagen to begin developing the tech that would form the core of Nordetect’s business proposition full time.

The company’s technology consists of an analyzer and a cartridge, a microfluidic chip that users can insert into their water tank to take a sample. From the data that the device collects, farmers can control the nutrients they put into the water to optimize for traits like color and flavor, Pinto said.

Image Credit: Shutterstock/Francesco83

The company was accepted into SOSV’s Hax accelerator in 2017 and the two first time founders moved from Denmark to Shenzhen to begin developing the business. In late 2018 the company moved back to Denmark and raised a small amount of additional capital from SOSV and Rockstart.

By 2020, watching the expansion of vertical farming, the company took what had initially been a soil monitoring tool and added water quality monitoring features to support indoor farming. That’s when the business started taking off, according to Pinto.

“One of the interesting things is when i consider the outdoor vs. the indoor markets. The outdoor felt a bit conservative… the indoor seems much more forthcoming… and that traction allowed us to pull together this funding round $1.5 million,” Pinto said. 

The new round came from Rockstart, Preseed Ventures, SOSV, the government of Denmark’s growth fund, and Luminate, a Rochester, NY-based accelerator that focuses on optical electronics technology.

Luminate’s participation is one reason why Nordetect is coming to the U.S., but it’s hardly the only reason. There’s also the capital that has come in to finance indoor ag companies. The two largest vertical farming companies in the U.S., Plenty and Bowery Farming have raised $541 million and $167 million between them.

“The vertical movement has put people into the position where they are what I call data farmers,” said Pinto. “Each batch of produce is being used to learn and the data is more important than the output. We used this market as a beachhead.”

#agriculture, #articles, #copenhagen, #denmark, #electronics, #india, #new-york, #shenzhen, #shutterstock, #soil, #sosv, #tc, #united-states, #urban-agriculture, #vertical-farming

How China’s synthetic media startup Surreal nabs funding in 3 months

What if we no longer needed cameras to make videos and can instead generate them through a few lines of coding?

Advances in machine learning are turning the idea into a reality. We’ve seen how deepfakes swap faces in family photos and turn one’s selfies into famous video clips. Now entrepreneurs with AI research background are devising tools to let people generate highly realistic photos, voices, and videos using algorithms.

One of the startups building this technology is China-based Surreal. The company is merely three months old but has already secured a seed round of $2-3 million from two prominent investors, Sequoia China and ZhenFund. Surreal received nearly ten investment offers in this round, founder and CEO Xu Zhuo told TechCrunch, as investors jostled to bet on a future shaped by AI-generated content.

Prior to founding Surreal, Xu spent six years at Snap, building its ad recommendation system, machine learning platform, and AI camera technology. The experience convinced Xu that synthetic media would become mainstream because the tool could significantly “lower the cost of content production,” Xu said in an interview from Surreal’s a-dozen-person office in Shenzhen.

Surreal has no intention, however, to replace human creators or artists. In fact, Xu doesn’t think machines can surpass human creativity in the next few decades. This belief is embodied in the company’s Chinese name, Shi Yun, or The Poetry Cloud. It is taken from the title of a novel by science fiction writer Liu Cixin, who tells the story of how technology fails to outdo the ancient Chinese poet Li Bai.

“We have an internal formula: visual storytelling equals creativity plus making,” Xu said, his eyes lit up. “We focus on the making part.”

In a way, machine video generation is like a souped-up video tool, a step up from the video filters we see today and make Douyin (TikTok’s Chinese version) and Kuaishou popular. Short video apps significantly lower the barrier to making a professional-looking video, but they still require a camera.

“The heart of short videos is definitely not the short video form itself. It lies in having better camera technology, which lowers the cost of video creation,” said Xu, who founded Surreal with Wang Liang, a veteran of TikTok parent ByteDance.

Commercializing deepfakery

Some of the world’s biggest tech firms, such as Google, Facebook, Tencent and ByteDance, also have research teams working on GAN. Xu’s strategy is not to directly confront the heavyweights, which are drawn to big-sized contracts. Rather, Surreal is going after small and medium-sized customers.

Surreal’s face swapping software for e-commerce sellers

Surreal’s software is currently only for enterprise customers, who can use it to either change faces in uploaded content or generate an entirely new image or video. Xu calls Surreal a “Google Translate for videos,” for the software can not only swap people’s faces but also translate the languages they speak accordingly and match their lips with voices.

Users are charged per video or picture. In the future, Surreal aims to not just animate faces but also people’s clothes and motions. While Surreal declined to disclose its financial performance, Xu said the company has accumulated around 10 million photo and video orders.

Much of the demand now is from Chinese e-commerce exporters who use Surreal to create Western models for their marketing material. Hiring real foreign models can be costly, and employing Asian models doesn’t prove as effective. By using Surreal “models”, some customers have been able to achieve 100% return on investment (ROI), Xu said. With the multi-million seed financing in its pocket, Surreal plans to find more use cases like online education so it can collect large volumes of data to improve its algorithm.

Uncharted territory

The technology powering Surreal, called generative adversarial networks, is relatively new. Introduced by machine learning researcher Ian Goodfellow in 2014, GANs consist of a “generator” that produces images and a “discriminator” that detects whether the image is fake or real. The pair enters a period of training with adversarial roles, hence the nomenclature, until the generator delivers a satisfactory result.

In the wrong hands, GANs can be exploited for fraud, pornography and other illegal purposes. That’s in part why Surreal starts with enterprise use rather than making it available to individual users.

Companies like Surreal are also posing new legal challenges. Who owns the machine-generated images and videos? To avoid violating copyright, Surreal requires that the client has the right to the content they upload for moderation. To track and prevent misuse, Surreal adds an encrypted and invisible watermark to each piece of the content it generates, to which it claims ownership. There’s an odd chance that the “person” Surreal produces would match someone in real life, so the company runs an algorithm that crosschecks all the faces it creates with photos it finds online.

“I don’t think ethics is something that Surreal itself can address, but we are willing to explore the issue,” said Xu. “Fundamentally, I think [synthetic media] provides a disruptive infrastructure. It increases productivity, and on a macro level, it’s inexorable, because productivity is the key determinant of issues like this.”

#artificial-intelligence, #asia, #bytedance, #camera-technology, #computer-graphics, #funding, #idg-capital, #machine-learning, #sequoia-china, #shenzhen, #snap, #surreal, #synthetic-media, #tc, #tiktok

China launched its national carbon trading market yesterday

Yesterday, China flipped the switch on a nationwide carbon trading market, in what could be one of the most significant steps taken to reduce greenhouse gas emissions in 2021 — if the markets can work effectively.

China is the world’s largest emitter of greenhouse gases and its share of the world’s emissions output continues to climb.

As the Chinese government works to curb its environmental impact, policies like a carbon trading system could spur the adoption of new technologies, increasing demand for goods and services from domestic startups and tech companies around the world.

Carbon markets, implemented in some parts of the U.S. and widely across Europe, put a price on industrial emissions and force companies to offset those emissions by investing in projects that would remove an equivalent portion of greenhouse gases from the atmosphere.

They’re a key component of the 2015 Paris Agreement, but they’re also a controversial one. That’s because if they’re not implemented properly and managed effectively they can be a “massive loophole” for emitters, as Gilles Dufrasne, policy officer at Carbon Markets Watch, told Time last year.

This is especially true of China. Corruption in China is endemic and the country has long sacrificed environmental policy and stewardship at the altar of economic growth. China’s not alone in making that calculus, but the decisions have happened at a scale orders of magnitude larger than almost any other nation (with the exception of the U.S.)

The efficacy of the policy is also effected by the hierarchies that exist within the bureaucracy of the Chinese Communist Party. As ChinaDialogue noted, the measures were issued by the Ministry of Ecology and Environment, which carry lower legal authority than if they came from the NDRC, the leading governing body for macroeconomic policy across China and the overseer of the nation’s major economic initiatives.

That said, no country as large as China, which accounts for 28% of the world’s greenhouse gas emissions, has ever implemented a national carbon emissions trading market.

BEIJING, CHINA – MARCH 20: Chinese President Xi Jinping delivers a speech during the closing session of the National People’s Congress (NPC) at the Great Hall of the People on March 20, 2018 in Beijing, China. (Photo by Lintao Zhang/Getty Images)

China first started testing regional emissions trading systems back in 2011 in Shenzhen, Shanghai, Beijing, Guangdong, Tianjin, Hubei, Chongqing and Fujian. Using a system that instituted caps on emissions based on carbon intensity (emissions per unit of GDP) rather than an absolute emissions cap, the Chinese government began rolling out these pilots across its power sector and to other industries.

After a restructuring in 2018, the plan, which was initially drafted under the auspices of the National Development and Reform Commission was kicked down to the Ministry of Ecology and the Environment. The devolution of China’s cap and trade emissions program came as the United States was withdrawing from the Paris Agreement amid an abdication of climate regulation or initiatives under the Presidency of Donald Trump.

Initially intended to begin with trading simulations in 2020, China’s emissions schemes were derailed by the COVID-19 pandemic and pushed back to the back half of the year with an implementation of actual trading starting yesterday.

For now, the emissions trading system covers China’s power industry and roughly 2,000 energy generation facilities. That alone represents 30% of the nation’s total emissions and over time the trading system will encompass heavy industry like cement, steel, aluminum, chemicals and oil and gas, according to ChinaDialogue.

Initially, the government is allocating emissions allowances for free and will begin auctioning allowances “at the appropriate time according to the situation.”

That kind of language, and concerns raised by state-owned enterprises and financial services firms flagging the effect carbon pricing could have on profitability and lending risk shows that the government in Beijing is still putting more weight on the economic benefits rather than environmental costs of much of its industrial growth.

That said, a survey of market participants cited by ChinaDialogue indicated that prices are expected to start at 41 yuan (US$6.3) per ton of CO2 and rise to 66 yuan per ton in 2025. The price of carbon in China is expected to hit 77 yuan by 2030.

Meanwhile, a commission on carbon prices formed in 2017 and helmed by the economists Joseph Stiglitz and Nicholas Stern indicated that carbon needed to be priced at somewhere between $40 and $80 by 2020 and somewhere in the $50 to $100 range by 2030 if the markets and prices were to have any impact on behavior.

No nation has actually hit those price targets, although the European Union has come the closest — and seen the most reduction in greenhouse gas emissions as a result.

Still, the plan from the Chinese government does include public reporting requirements for verified company-level emissions. And the existence of a market, if the government decides to put real prices in place and consequences for flouting the system, could be a huge boon for the monitoring and management equipment startups that are developing tech to track emissions.

As the analysts at ChinaDialogue note:

“The hardest part of carbon pricing is often getting it started. The moment that the Chinese government decides to increase ambition with the national ETS, it can. The mechanism is now in place, and it can be ramped up if the momentum and political will provided by President Xi’s climate ambition continues. In the coming years, this could see an absolute and decreasing cap, more sectors covered, more transparent data provision and more effective cross-government coordination. This is especially so with energy and industrial regulators who will need to see the ETS not as a threat to their turf, but as a measure with significant co-benefits for their own policy objectives.”

#articles, #beijing, #chemicals, #china, #chinese-communist-party, #donald-trump, #energy, #europe, #european-union, #greenhouse-gas-emissions, #oil-and-gas, #president, #shanghai, #shenzhen, #steel, #tc, #united-states, #xi

Wikifactory has raised $4.5m for its ‘Github for hardware’ to make almost anything remotely

Karl Marx famously argued in ‘Das Kapital’ that to achieve freedom from the slavery of capitalism, the worker must own the means of production. Perhaps that day is edging closer. Today Wikifactory, billing itself as a ‘Github for hardware’, announces it has closed a $3 million funding round taking it to a total of $4.5m, pre-series A. The investors are unnamed, but characterized as “impact investors”. The collaboration platform claims it allows someone to make almost anything remotely.

The ‘impact’ aspect of Wikifactory’s playbook is that it involves less shipping and less costly inventories being required.

With the investment, the company will build a ‘quality-assured’ manufacturing marketplace, as well as mirrored servers in China to open up access to its hardware capital, Shenzhen . Wikifactory is available in four languages right now and is set to expand to 20 after it raised a Series A funding round next year.

In addition, its new Collaborative CAD Tool with in-built chat means designers, engineers, manufacturers and enterprises can collaborate remotely on virtually any CAD model, from concept through to finished prototype.

This allows product developers to review and discuss 3D models in over thirty file formats in real-time. The idea is to democratize access to normally expensive product lifecycle management (PLM) software.

The startup says that since May 2019 some 70,000 product developers in 190 countries have been using Wikifactory build robotics, electric vehicles and drones, agri-tech and sustainable energy appliances, lab equipment and 3D printers, smart furniture and biotech fashion materials as well as medical supplies including vital PPE and ventilators when there were global supply shortages.

Nicolai Peitersen, co-founder and executive chairman of Wikifactory said: “Wide-scale global collaboration to make physical things is happening both for open-source and for proprietary product development. The global manufacturing industry output, worth USD 35 trillion, is finally having its web moment. Online collaboration and distributed production is becoming mainstream. We’re calling it the internet of production.”

He added that with global supply chains stretched because of the pandemic, the need for a viable, alternative online infrastructure to prototype and produce products locally, to a high standard, and sustainably “has never been more relevant and necessary.”

#3d-printing, #articles, #brand-management, #cad, #china, #europe, #github, #online-collaboration, #open-source, #product-lifecycle-management, #shenzhen, #tc

Alibaba and Ethiopian Airlines to launch cold chain exporting China’s COVID vaccines

China has pledged that it would be sharing its COVID-19 vaccines with other countries, especially those with which it has close ties. While the country is not ready to deploy its vaccines internationally, it is gearing up the infrastructure for mass distribution.

This week, Alibaba announced that it has struck a partnership with Ethiopian Airlines to introduce a cold chain capable of transporting temperature-sensitive medicines from China to the rest of the world. The air freight will depart from Shenzhen Airport, which Alibaba says houses China’s first cross-border medical cold chain facility, twice a week to countries via Dubai and Addis Ababa.

“As soon as the vaccines are ready, we will have the capabilities to transport them,” a Cainiao spokesperson told TechCrunch.

Shenzhen is the home base of SF Express, another major logistics operator in China that has also been working on storing and shipping vaccines.

The Alibaba route is carried out by the firm’s logistics arm Cainiao, which operates in over 200 countries and regions. It’s certified by the International Air Transport Association to fly Covid-19 vaccines, which normally need to be stored at low temperatures. Cabins will contain temperature-controlled monitors, for instance, and Ethiopia’s cargo terminal comes with facilities that can be adjusted between -23°C and 25°C, or -9.4°F and 77°F.

“The launch of the cold chain air freight has further bolstered our global logistics capabilities and allow us to offer a one-stop solution for the global distribution of medical products such as the COVID-19 vaccines,” said James Zhao, general manager of Cainiao’s international supply chain unit.

China is a major exporter of personal protective equipment (PPE) during the COVID-19 pandemic and the country’s logistics giants, from Cainiao to SF Express, all promptly introduced programs specifically for shipping medical relief items.

#alibaba-group, #cainiao, #china, #cold-chain, #ethiopia, #health, #jack-ma, #logistics, #shenzhen, #supply-chain, #supply-chain-management, #transportation, #vaccination, #vaccine

AutoX becomes China’s first to remove safety drivers from robotaxis

Residents of Shenzhen will see truly driverless cars on the road starting Thursday. AutoX, a four-year-old startup backed by Alibaba, MediaTek and Shanghai Motors, is deploying a fleet of 25 unmanned vehicles in downtown Shenzhen, marking the first time any autonomous driving car in China tests without safety drivers or remote operators on public roads.

The cars, meant as robotaxis, are not yet open to the public, an AutoX spokesperson told TechCrunch.

The milestone came just five months after AutoX landed a permit from California to start driverless tests, following in the footsteps of Waymo and Nuro.

It also indicates that China wants to bring its smart driving industry on par with the U.S. Cities from Shenzhen to Shanghai are competing to attract autonomous driving upstarts by clearing regulatory hurdles, touting subsidies and putting up 5G infrastructure.

As a result, each city ends up with its own poster child in the space: AutoX and Deeproute.ai in Shenzhen, Pony.ai and WeRide in Guangzhou, Momenta in Suzhou, Baidu’s Apollo fleet in Beijing, to name a few. The autonomous driving companies, in turn, work closely with traditional carmakers to make their vehicles smarter and more suitable for future transportation.

“We have obtained support from the local government. Shenzhen is making a lot of rapid progress on legislation for self-driving cars,” said the AutoX representative.

The decision to remove drivers from the front and operators from a remote center appears a bold move in one of China’s most populated cities. AutoX equips its vehicles with its proprietary vehicle control unit called XCU, which it claims has faster processing speed and more computational capability to handle the complex road scenarios in China’s cities.

“[The XCU] provides multiple layers of redundancy to handle this kind of situation,” said AutoX when asked how its vehicles will respond should the machines ever go rogue.

The company also stressed the experience it learned from “millions of miles” driven in China’s densest city centers through its 100 robotaxis in the past few years. Its rivals are also aggressively accumulating mileage to train their self-driving algorithms while banking sizable investments to fund R&D and pilot tests. AutoX itself, for instance, has raised more than $160 million to date.

#alibaba, #artificial-intelligence, #asia, #automation, #autox, #beijing, #china, #mediatek, #momenta, #robotaxi, #robotics, #self-driving-cars, #shanghai, #shenzhen, #transportation, #waymo

Huawei reportedly set to sell Honor budget phone division for $15B

Following weeks of rumors surrounding a potential sale, Huawei has reportedly struck a deal to divest itself of its Honor brand. A new report out today from Reuters notes that the embattled hardware maker will sell the budget unit to a consortium of buyers that includes the government of the city of Shenzhen and Digital China, a phone distributor.

The report, which cites “people familiar with the matter,” puts the price tag for the Honor unit at $15.2 billion. Honor’s new owners will reportedly keep much of the brand’s 7,000 employees (management included) in tact, with plans to take the company public in around three years. The Honor brand has largely focused on low-cost devices, with sales in China, Europe and the U.S. This deal would likely find Huawei focusing more exclusively on high-end products under its own brand.

While the deal has been rumored for some time now, its seeming conclusion comes in the wake of Joe Biden’s presidential election win. It seems clear from Huawei’s decision to press on with the all-cash deal that the company doesn’t believe its international fortunes will change immediately under a new U.S. president.

The news comes in the wake of ongoing difficulties tied to U.S. sanctions. Huawei’s inability to access technologies from companies like Google have proven to be a major hit for the world’s second largest phone maker. While the company has managed to maintain solid sales in its native China, even those have taken a hit amid its struggles.

#google, #hardware, #huawei, #mobile, #shenzhen

Despite global headwinds, Chinese hardware startups remain to take on the world

Bill Zhang lowered himself into lunges on a squishy mat as he explained to me the benefits of the full-body training suit he was wearing. We were in his small, modest office in Xili, a university area in Shenzhen that’s also home to many hardware makers. The connected muscle stimulator attached to the suit, called Balanx, is designed to bring so-called electronic muscle stimulation, which is said to help improve metabolism and burn fat.

“We are not really aiming at Chinese consumers at this point,” said Zhang, who started Balanx in 2014. “The suit is for the more savvy consumers in the West.”

Prospects for hardware makers were looking bright until two years ago when the Trump administration began setting trade barriers on China. Relations between the two countries have been deteriorating over a series of flashpoint events, from Beijing’s policy on Hong Kong to the coronavirus pandemic.

Chinese entrepreneurs don’t expect relationships between the countries to warm up anytime soon, but many do believe the new office will make “less erratic” and “more rational” policy decisions, according to conversations TechCrunch had with seven Chinese hardware startups. Chinese tech businesses, big or small, are adapting swiftly in the new era of U.S.-China competition as they continue to woo overseas customers.

Designed in China

Zhang is just one of the many entrepreneurs looking to bring state-of-the-art Chinese hardware to the world. This generation of founders no longer hawk cheap electronic copycats, the image attached to the old “Made in China” regime. Decades of knowledge transfer, product development, manufacturing, export practice and policy support have made China a powerhouse for producing new technologies that are both edgy and still widely affordable.

The Balanx smart training suit / Source: Balanx

Anker’s power banks, Roborock’s vacuums and Huami’s fitness trackers are just a few items that have gained loyal followings in several overseas markets, not to mention global household names like Huawei, Xiaomi, Oppo and DJI.

Consumer sentiment is also changing. Europeans’ perception of “Made in China” quality and innovation has “improved significantly” over the last 10 to 15 years, said Frank Wang who oversees marketing at Xiaomi -backed Dreame which makes premium home appliances including cheaper alternatives to Dyson hairdryers and vacuums.

The new players are eager to replicate the success of their predecessors. They seek media attention and retail partners at international trade fairs like CES, teach themselves Facebook and Google campaigns, and court gadget lovers on crowdfunding platforms. Investors ranging from GGV Capital to Xiaomi rush to back scrappy startups that are already shipping millions of units around the globe.

For Donny Zhang, a Shenzhen-based electronics parts supplier to hardware companies, businesses have been shrinking as soon as the trade war began. “My clients are taking the brunt because the costs of procurement have increased,” he said of those who directly or indirectly deal with American firms.

While many export-led hardware businesses loathe decreasing profitability, some learn to adapt and look for a silver lining. That has unexpectedly spurred new directions for factory owners in China. Indiegogo, one of the world’s largest crowd-funding platforms, saw the changes first hand.

“Once tariffs increase, there’s not much profit margin left for manufacturers because the middlemen already eat up the bulk of their profit,” Lu Li, general manager for Indiegogo’s global strategy, told TechCrunch.

“A good solution is for factories to skip the middlemen and sell directly to consumers with their own brands. Once the goal of brand building is clear, they often come to us because they need marketing help as a first step to establish themselves as a global consumer brand.”

The trend, dubbed “direct-to-consumers” or D2C, also plays into China’s national plan to encourage manufacturing upgrade and homegrown innovations to compete globally, an initiative that began to take shape around 2015. The development naturally makes China Indiegogo’s fastest-growing region in the last two years: in the first three quarters of 2020, businesses coming from China jumped 50% year-over-year, according to Li.

Localize

Having an appealing product and brand is just the prerequisite. Ever-changing trade policies and geopolitics have forced many Chinese businesses to localize seriously, whether that means setting up a foreign entity or building a local team.

Dreame’s wireless vacuum / Source: Dreame

For Tuya, which provides IoT solutions to device makers around the world, the trade war’s effect has been “minimal” since it has operated a U.S. entity since 2015, which employs its local sales and technical support staff. Most of its research and development, however, still lies in the hands of its engineers in India and China, the latter of which can be a potential contention point, as shown by TikTok’s recent backlash in the U.S.

“The key is compliance. We have a dedicated team of security experts to work on compliance issues. For instance, we were one of the first to get GDPR certified in Europe,” said the company’s chief marketing office Eva Na.

The company’s readiness is prompted by practical needs though. Many of its clients are large Western corporations that demand strict legal compliance in vendors, so Tuya began collecting the needed certificates early on. Connecting 200,000 SKUs today, Tuya’s footprint is found in over 190 overseas countries, which account for over 60% of its business.

Well-funded Tuya may have the financial and operational capacity to sustain an overseas team; but for smaller startups, localization can be a costly and tedious learning curve. Many opted to set up a Hong Kong entity to tap the city’s status as a global financial hub and evade trade restrictions on China, an advantage of the territory that began to crumble following Beijing’s implementation of the national security law.

Balanx, the smart training suit maker, has a Hong Kong entity like many of its export-facing hardware peers. To cope with new global headwinds, it registered a virtual company in Nevada but quickly realized the entity is of little use unless it has an on-the-ground operation in the U.S.

“Many local banks would ask for utility bills and etc. if I want to open an account, which we don’t have. We realized we must have a local team,” asserted the founder.

Hope

Zhang is positive that small companies like his own will remain under the radar in spite of U.S. sanctions. “Just avoid having any government connection,” he said.

Populele, PopuMusic’s smart ukulele / Source: PopuMusic

Indeed, some of the more “benign” and niche products are continuing to thrive in their global push. PopuMusic, a Xiaomi-backed startup making smart instruments like ukulele and guitar to teach beginners, is one. “We aren’t affected by the trade war. We are in a business that’s neither threatening nor aggressive,” said Zhang Bohan, founder of PopuMusic, which counts the U.S. as one of its biggest overseas markets.

Chinese brands are also seeing their edge as the coronavirus sweeps across the globe and confines millions at home. Hardware makers like Balanx, Dreame and PopuMusic have long learned to master e-commerce and logistics in a country where online shopping is ubiquitous.

“Consumers in Europe and the U.S. are growing more accustomed to e-commerce, a bit like those in China five to eight years ago,” said Wang of Dreame.

Rather than rethinking the U.S., PopuMusic is forging further ahead by launching a new connected guitar via an Indiegogo campaign. Global expansion is at the core of the startup’s vision, the founder said. “We are global from day one. We had an English name before even coming up with a Chinese one.”

In the process of making big bucks, hardware makers may have to downplay their “Made in China” or “Designed in China” brand, said Li of Indiegogo. This could help them avoid unnecessary geopolitical complications and attention in their international push. But one has to wonder how this new generation of entrepreneurs is reckoning with their national pride. How do they deal with the mission passed down by Beijing to promote Chinese innovation in the global marketplace? It’s a line that Chinese entrepreneurs have to tread carefully in their global journey in the years to come.

#asia, #beijing, #china, #dreame, #gadgets, #government, #hardware, #indiegogo, #manufacturing, #shenzhen, #trade-war, #xiaomi

China’s digital yuan tests leap forward in Shenzhen

Shenzhen, known for its maker community and manufacturing resources, is taking the lead in trialing China’s digital yuan.

Last week, the city issued 10 million yuan worth of digital currency to 50,000 randomly selected residents. The government doled out the money through mobile “red envelopes,” a tool designed to digitize the custom of gifting money in red packets and first popularized by WeChat’s e-wallet.

The digital yuan is not to be mistaken as a form of cryptocurrency. Rather, it is issued and managed by the central bank, serving as the statutory, digital version of China’s physical currency and giving Beijing a better grasp of its currency circulation. It’s meant to supplement, not replace, third-party payments apps like WeChat Pay and Alipay in a country where cash is dying out.

For example, the central government may in the future issue subsidies to local offices by sending digital yuan, which can help tackle issues like corruption.

Shenzhen is one of the four Chinese cities to begin internal testing of the digital yuan, announced a government notice in August without going into the specifics. The latest distribution to consumers is seen as the country’s first large-scale, public test of the centrally issued virtual currency.

Nearly 2 million individuals in Shenzhen signed up for the lottery, according to a post from the local government. Winners could redeem the 200 yuan red envelope within the official digital yuan app and spend the virtual money at over 3,000 retail outlets in the city.

As its next step, Shenzhen will launch a (vaguely defined) “fintech innovation platform” through its official digital currency institute, said a new central government document detailing the city’s five-year development measures, including attracting more foreign investment in cutting-edge technologies. The city will also play a key role in furthering the digital yuan’s research and development, application and international collaboration.

In April, the city’s digital currency vehicle launched a wave of recruiting for technical positions like mobile app architects and Android developers.

Shenzhen was established in 1980 as China’s first special economic zones and is now home to tech behemoths like Tencent, Huawei and DJI and innovation hubs like HAX and Trouble Maker. President Xi Jinping is scheduled to visit the city this week to commemorate the city’s 40th anniversary.

While the central bank provides logic and infrastructure undergirding the digital yuan, there’s much room for commercial banks and private firms to innovate on the application level. Both ride-hailing platform Didi and JD’s fintech arm have recently unveiled steps to help accelerate the digital yuan’s real-life implementation.

#asia, #china, #digital-currency, #digital-yuan, #finance, #mobile-payments, #shenzhen, #virtual-currency

Interswitch CEO Mitchell Elegbe to discuss African fintech at TechCrunch Disrupt

The CEO of Pan-African fintech unicorn, Mitchell Elegbe, is set to speak at TechCrunch Disrupt 2020 on September 16. He founded the company in Lagos in 2002 to connect Nigeria’s — then — largely disconnected banking system.

Over the next decade plus, Interswitch accelerated the adoption of digital payments across Africa and now stands as one of the continent’s rare fintech unicorns. The company is poised to list on a global exchange, which would also create Africa’s next big tech IPO.

At Disrupt 2020, TechCrunch will seek Elegbe’s perspective on the continent’s fintech scene, Interswitch’s venture plans, and the economic impact of Covid-19 on African startups. This year’s event is 100% virtual, making it possible for anyone with an internet connection to sign in and learn more about Elegbe’s company and digital innovation in Africa.

If you’re a VC or founder in London, Bangalore or San Francisco, you’ll likely interact with some part of Africa’s tech landscape for the first time — or more — in the near future. When measured by monetary values, the continent’s tech ecosystem is small by Shenzhen or Silicon Valley standards.

But when you look at year-over-year expansion in venture capital, startup formation and tech hubs, it’s one of the fastest-growing tech markets in the world.

Bringing the continent’s large unbanked population and underbanked consumers and SMEs online has factored prominently. Roughly 66% of Sub-Saharan Africa’s 1 billion people don’t have a bank account, according to World Bank data.

As such, fintech has become Africa’s highest funded tech sector, receiving the bulk of an estimated $2 billion in VC that went to startups in 2019.

Africa Top VC Markets 2019

Image Credits: TechCrunch

Interswitch became a pioneer of building the infrastructure to digitize finance on the continent. The company pre-dates the rise of mobile money in Kenya through Safaricom’s M-Pesa product, which is one of Africa’s most recognized fintech use-cases. 

Interswitch’s path from startup to unicorn traces back to the vision of CEO Mitchell Elegbe, who was a Nigerian electrical engineering graduate before founding the firm in 2002. The company has since produced a run of product innovation and expansion, starting in Nigeria. Interswitch created the first electronic switch whereby Nigerian financial institutions could communicate and operate ATMs and point of sales operations. The company now provides much of the rails for Nigeria’s online banking system.

Interswitch has since moved into high-volume personal and business finance, with its Verve payment cards and Quickteller payment app. The fintech firm (now well beyond startup phase) has also shaped a Pan-African and global reach — selling its products in 23 African countries with a physical presence in Uganda, Gambia and Kenya . In August 2019, Interswitch launched a partnership that allows its Verve cardholders to make payments on Discover’s global network.

Interswitch Quickteller

Image Credits: Interswitch

Interswitch also launched a venture arm in 2015 called its global ePayment Growth Fund. Another milestone came in November 2019 when Interswitch achieved a $1 billion unicorn valuation after Visa took a reported $200 million minority stake in the company. Other Interswitch backers include IFC and Helios Investment Partners.

The company’s Nigerian origins and operations have become more significant as Nigeria is now Africa’s most populous nation and largest economy. The West African country has become the continent’s unofficial tech hub and fintech capital. Nigerian startups now raise the majority of Africa’s annual VC haul, according to a study by Partech.

Heading into 2020, the momentum was there and the pieces were falling in place for Interswitch to mark that next big achievement — an IPO. Where that listing stands for the firm, particularly in the wake of the Covid-19 crisis, is one of many topics TechCrunch is excited to discuss with CEO Mitchell Elegbe at Disrupt 2020.

The event runs from September 14 through September 18 and (as mentioned) is 100% virtual this year, making it possible for anyone from London to Lagos to sign in. Get your front row seat to see Mitchell Elegbe live with a Disrupt Digital Pro Pass or a Digital Startup Alley Exhibitor Package. We’re excited to see you there.

#africa, #african-business, #african-tech, #bangalore, #banking, #ceo, #disrupt-2020, #economy, #entrepreneurship, #finance, #financial-technology, #helios-investment-partners, #interswitch, #kenya, #lagos, #london, #mitchell-elegbe, #money, #nigeria, #private-equity, #safaricom, #san-francisco, #shenzhen, #startup-company, #tc, #tech-in-africa, #uganda, #venture-capital, #world-bank

China’s BYD nabs $113M to produce IGBTs, the ‘CPU of electric cars’

BYD Co., the Chinese auto giant backed by Warren Buffett, is rushing to make China self-sufficient in the production of electric vehicles. On Monday, the firm said in a filing it has secured 800 million yuan ($113 million) in a Series A+ round for its chipmaking arm, BYD Semiconductor.

At stake is the race to make so-called insulated gate bipolar transistors (IGBT), an integral silicon component in EVs’ power management system that’s at the core of BYD Semiconductor. The electronic switch is dubbed by industry experts the “CPU of an EV” for it reduces power loss and improves reliability. It’s the second-most expensive part of an EV after batteries, accounting for around 7-10% of the total cost according to market research.

BYD is fighting a fierce competition against Germany’s semiconductor giant Infineon Technologies AG, which produced 58% of the IGBTs used in China’s electric cars in 2019. BYD finished with an 18% share that year, noted a report from Citic Securities.

The prospects of IGBT production are bright, as the technology not only powers a booming EV industry worldwide but is also used in other high-energy applications such as air conditioners, refrigerators, and high-speed trains. The global market for IGBTs is estimated to near 10 billion yuan ($1.41 billion) in 2020 and quadruple to almost 40 billion yuan by 2025, according to the Citic report.

The outsize funding arrived just two months after Shenzhen-traded BYD hived its chip unit off into an independent company ahead of a separate public listing. Due to oversubscription from investors, the subsidiary raised the new round on the heel of its 1.9 billion yuan ($270 million) Series A closed in late May.

Parent company BYD holds a 72.3% stake in the chip arm following the two funding rounds, which have lifted the valuation of the subsidiary to 10.2 billion yuan ($1.44 billion).

As the only Chinese company that can produce IGBTs independently, the semiconductor maker has drawn heavyweight backers across the board. Its investors range from Sequoia China and state-backed CICC Capital from the Series A round, to Korean conglomerate SK Group, smartphone maker Xiaomi, Lenovo Group, ARM, China’s largest semiconductor foundry SMIC, and investment affiliates of Chinese carmakers SAIC and BAIC in the latest A+ round.

BYD started out as a manufacturer of electronics components in 1995 and has since expanded into automobiles and renewable energy. Headquartered in Shenzhen, it powers all of the city’s electric buses and taxis. It’s also ramped up expansion into overseas markets as China scales back state subsidies on electric cars.

#asia, #automotive, #baic, #berkshire-hathaway, #byd, #cars, #china, #electric-vehicles, #saic, #semiconductor, #sequoia-china, #shenzhen, #warren-buffet, #xiaomi

Huawei admits uncertainty following new US chip curbs

Following the U.S. government’s announcement that would further thwart Huawei’s chip-making capability, the Chinese telecoms equipment giant condemned the new ruling for being “arbitrary and pernicious.”

“Huawei categorically opposes the amendments made by the U.S. Department of Commerce to its foreign direct product rule that target Huawei specifically,” said Huawei Monday at its annual analyst summit in Shenzhen.

The new curbs, which dropped on Friday, would ban Huawei from using U.S. software and hardware in certain strategic semiconductor processes. This will affect all foundries using U.S. technologies, including those located abroad, some of which are Huawei’s key suppliers.

Earlier on Monday, the Nikkei Asian Review reported citing sources that Taiwanese Semiconductor Manufacturing Co., the world’s largest contract semiconductor that powers many of Huawei’s high-end phones, has stopped taking new orders from Huawei, one of its largest clients. Huawei declined to comment while TSMC said the report was “purely market rumor”.

Decisions from TSMC point to its attempt to strengthen bonds with the U.S. though, as it’s planning a new $12 billion advanced chip factory in Arizona with support from the state and the U.S. federal government.

At the Monday conference, Huawei’s rotating chairman Guo Ping admitted that while the firm is able to design some semiconductor parts such as integrated circuits (IC), it remains “incapable of doing a lot of other things.”

“Survival is the keyword for us at present,” he said.

Huawei stated the latest U.S. ban would not only affect its own business in over 170 countries, where it has spent “hundreds of billions of dollars,” but also the wider ecosystem around the world.

“In the long run, [the U.S. ban] will damage the trust and collaboration within the global semiconductor industry which many industries depend on, increasing conflict and loss within these industries.”

Huawei has announced a raft of contingency measures ever since the Trump administration began slapping technology sanctions on it, including one that had cut it off certain Android services from Google.

Huawei said at the summit that it had doubled down on investment in overseas developers in an effort to lure them to its operating system. Some 1.4 million developers have signed up for Huawei Mobile Services or HMS, a 150% jump from 2019. For comparison, iOS in 2018 counted 20 million registered developers, who collectively made about $100 billion in revenues. The question for Huawei is how much money app makers can generate from its ecosystem.

In its search to identify alternatives to Google’s app suite in Europe, it has partnered up with navigation services TomTom and Here, search engine Qwant and news app News UK. 

#android, #asia, #huawei, #integrated-circuits, #operating-system, #qwant, #semiconductor, #shenzhen, #smartphones, #telecommunications, #tomtom, #tsmc, #u-s-department-of-commerce, #u-s-government

Fitbit’s Chinese rival Amazfit mulls a transparent, self-disinfecting mask

The COVID-19 pandemic has ushered in a wave of Chinese companies with manufacturing operations to produce virus-fighting equipment: Shenzhen-based electric vehicle giant BYD quickly moved to launch what it claims to be the world’s largest mask plant; Hangzhou-based voice intelligence startup Rokid is making thermal imaging glasses targeted at the US market; and many more.

The latest of such efforts comes from Huami, the NASDAQ-listed wearables startup that makes Xiaomi’s Mi Bands and sells its own fitness tracking watches under the Amazfit brand in more than 70 countries. In a phone interview with TechCrunch, the firm said it is developing a see-through plastic mask with built-in ultraviolet lights that can disinfect filters within 10 minutes when connected to a power supply through a USB port.

The Aeri concept comes with built-in ultraviolet lights that can disinfect filters within 10 minutes when connected to a power supply through a USB port. 

Called Aeri, the mask uses removable filters that are on par with N95 filtration capacity. If the concept materializes, each filter could last up to a month and a half, significantly longer than the average life of surgical masks and N95 respirators. The modular design allows for customized accessories such as a fan for breathable comfort, hence the mask’s name Aeri, a homophone of “airy”.

Aeri started from the premise that wearing masks could thwart the increasingly common adoption of facial recognition. That said, imaging companies have been working on biometric upgrades to allow analyses of other facial features such as irises or the tip of noses.

Aeri might still have a market appeal though, argued Pengtao Yu, vice president of industrial design at Huami. “Whether people need to unlock their phones or not, they want to see each other’s faces at social occasions,” said Yu, the California-based Chinese designer who had served clients including Nest Labs, Roku, GoPro and Huawei prior to joining Huami.

Huami’s U.S. operation, which focuses on research and development, opened in 2014 and now counts a dozen of employees.

Many companies turning to pandemic-fighting manufacturing have taken a hit from their core business, but Huami has managed to stay afloat. Its Q1 revenue was up 36% year-over-year to hit $154 million, although net income decreased to $2.7 million from $10.6 million. Its stocks have been declining, however, sliding from a high point of $16 in January to around $10 in mid-May.

Huami is in the process of prototyping the Aeri masks. In Shenzhen, which houses the wearables company’s headquarters, the development cycle for hardware products — from ideation to market rollout — takes as short as 6-12 months thanks to the city’s rich supply chain resources, said Yu.

Huami hasn’t priced Aeri at this early stage, but Yu admitted that the masks are targeting the “mass consumer market” around the world, not only for protection against viruses but also everyday air pollution, rather than appealing to medical workers. Given Huami’s history of making wearables at thin margins, it won’t be surprising that Aeri will be competitively priced.

The Aeri project is part of Huami’s pivot to enter the general health sector beyond pure fitness monitoring. The company has recently teamed up with a laboratory led by Dr. Zhong Nanshan, the public face of China’s fight against COVID-19, to track respiratory diseases using wearables. It’s also in talks with the German public health authority to collaborate on a smartwatch-powered virus monitoring app, the company told TechCrunch.

#asia, #biotech, #china, #gadgets, #gopro, #huami, #huawei, #shenzhen, #smartwatch, #tc, #wearable-devices, #xiaomi

The Station: Starship expands, AutoX opens up shop, and a big moment for ebikes

Hi and welcome back to The Station, a weekly newsletter dedicated to the future (and present) of transportation. I’m your host Kirsten Korosec, senior transportation reporter at TechCrun