Hello, Mercedes here from Singapore. Welcome back. This week, our Big Story scoop confirms that in tech, size matters. Apple, which relies on a vast Asian supply chain, is cutting its production of iPhones, in particular its cheapest 5G-enabled phone, the iPhone 12 mini. There was an overestimation of consumers’ appetite for 5G and an underestimation of their desire for larger screens. Elsewhere, check out what Myanmar’s crisis means for the prices of rare earths in China and, for some escapism, could holograms soon replace Zoom meetings? Happy reading.
The Big Story — Exclusive
Apple, which relies on a vast Asian supply chain, is slashing iPhone production plans for the first half of this year, according to this exclusive by Nikkei Asia.
The cuts are falling heaviest on the iPhone 12 mini, Apple’s cheapest 5G-enabled phone. One veteran analyst said that consumers “don’t yet expect much from 5G”. Another analyst blamed the iPhone 12 mini’s relatively small battery.
Key implications: Apple is cutting orders for all iPhones by about 20 per cent, compared with its plans in December, according to sources. It had told suppliers to secure components and parts to make 96m handsets in the first half of this year, but is now aiming for about 75m units.
The mildest estimate predicted production cuts for the 5.4-inch iPhone 12 mini of at least 70 per cent in the first half of this year. The adjustment of production levels for the iPhone 12, iPhone 12 Pro and Pro Max was comparatively benign and demand for those models remained relatively healthy, several people said.
Upshot: This is a big shift from Apple that looks set to affect the competitive landscape for smartphones in Asia and worldwide. However, the problem appears largely confined to the iPhone 12 mini. Apple declined to comment.
Mercedes’ top 10
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Scoop: Facebook’s strategy in south-east Asia has been hit by delays, hampering the US giant’s expansion into one of the world’s biggest social media markets.
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A blockbuster IPO in New York by Coupang, South Korea’s answer to Amazon, will be clouded by worker injuries and deaths.
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This breakdown of India’s new internet rules — which have been decried by Big Tech companies as allowing the government to “dictate content” — is worth reading.
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A leading Chinese cryptocurrency mining chip developer has been accused of using dodgy tactics to poach high-level Taiwanese chip engineers.
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Chinese tech giants Meituan and Pinduoduo have been penalised by the country’s antitrust regulator for offering vegetables that were too cheap.
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Here’s evidence that Europe is starting to take more notice of Asia tech: Germany’s Allianz has invested in Hong Kong fintech unicorn WeLab.
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James Crabtree elegantly explains why Joe Biden is likely to follow Donald Trump and double down on China — especially when it comes to semiconductors.
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Can Japan rekindle its innovation mojo? Leo Lewis investigates.
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This Tech Tonic podcast on how healthcare is being disrupted by technology is not specific to Asia, but is relevant for everyone.
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If you are in search of something lighter, check out how hologram technology is coming sooner than people realise.
When sages speak
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The Hurun report has an interesting item on the top-10 wealthiest businesspeople attending China’s National People’s Congress this month. What is striking is that seven out of 10 are tech entrepreneurs.
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China’s fragmented social credit system is becoming integrated. Here is a really good insight into the trends under way and the politics behind them by Katja Drinhausen and Vincent Brussee at Merics, a Berlin-based think-tank.
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Jonathan Hillman at CSIS, a Washington-based think-tank, breaks ground with this in-depth report on China’s growing subsea cable network that girdles the world.
Our take
More than a month on from Myanmar’s coup, the rule of the junta is turning more bloody. Concerns are also high that the coup — which China’s official Xinhua news agency has termed a “major cabinet reshuffle” — could disrupt crucial imports of rare earths.
China is the largest producer of these strategic elements, which are indispensable to producing everything from smartphones to missile defence systems. But as well as being a producer, China also depends heavily on rare earth imports, mainly from the US and Myanmar.
No big production disruptions have yet been reported from Myanmar. But the coup has brought back memories of the 2018 “Myanmar incident”, when the country banned exports of rare earths to China. “The political instability in Myanmar could bring about uncertainty in rare earths supplies,” wrote Ma Jinlong, an analyst at Zheshang Securities.
Ryan Castilloux, managing director of Adamas Intelligence, told Nikkei Asia: “Myanmar has become an essential supplier of heavy rare-earth concentrate to China in recent years, and the prospect that those supplies could be disrupted is helping fuel a surge in prices of certain rare earths in China.”
— Kenji
Spotlight
Why does SoftBank keep losing potential successors to Masayoshi Son, its founder? Katsunori Sago, the Japanese group’s chief strategy officer, is resigning after less than three years at the technology conglomerate.
Sago, who was once tipped as a possible president of Goldman Sachs Japan, is the second high-profile executive to quit after being recruited as a possible heir to Son following the 2016 departure of former Google executive Nikesh Arora. The reasons for his exit are unclear. But Son, who is 63, recently said that he plans to remain leader of the group beyond the age of 70.
Sago’s exit adds to a string of high-level management departures over the past 12 months, including the company’s chief compliance officer, chief legal officer and chief communications officer. The executive positions were meant to act as guardrails within SoftBank to Son’s unruly style of managing the company. We predict more turbulence ahead.
Art of the deal
A scoop from Nikkei: Panasonic is set to acquire US software company Blue Yonder in a blockbuster $6.5bn deal. The acquisition would be the Japanese group’s largest since 2011.
Blue Yonder uses artificial intelligence to predict product demand and delivery dates while reviewing supply chains to improve profitability. The company was founded in 1985 and has about 3,300 clients worldwide, including Unilever in the UK and Walmart in the US.
Panasonic, which has been increasingly focused on building parts and supplying services to other businesses, wants to leverage its extensive hardware operations by combining them with software. The global supply chain software market was estimated at $15bn in 2019, and it is expected to increase by about 10 per cent annually.
Multiple sources familiar with the matter confirmed that negotiations were in the final stage, but added that there was still a chance the two sides would not reach an agreement. Panasonic shares slid following the Nikkei report. More details here.
Smart data
Netflix’s share of India’s giant, film-loving population of 1.4bn is under pressure. The US group’s primary international competitors, Disney and Amazon, have raced ahead in terms of subscribers. While Disney had more than 25m subscribers in December 2020, consultancy Media Partners Asia put Netflix’s India base at 5m.
For Netflix, which is valued at more than $200bn, India is too lucrative a market to not fight back. The company has introduced a mobile-only plan and a tie-up with budget telecom operator Reliance Jio. It will also roll out its biggest roster yet of Indian films and shows as it battles for an edge.
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