Miniso, the Japanese-looking variety store from China, sees shares jump in US IPO

Investors are jumping aboard a value store chain that is bringing Japanese-inspired lifestyle goods to consumers around the world. The company, Miniso, raised $608 million from an initial public offering in New York on Thursday. It debuted at $24.40, above its pricing range of $16.50 to $18.50, and finished the day up 4.4%.

Everything about the seven-year-old firm — from its name, branding, products, to its website — suggests it is Japanese, except in fact it was born and bred in China. It bears a striking similarity to Muji, Uniqlo and dollar store Daiso in many ways, and has been called a copycat of its Japanese lifestyle predecessors.

The company, backed by Tencent and Hillhouse Capital, seems to intentionally, albeit misleadingly, brand itself as Japanese. In its public messaging, such as this press release and its country-specific site, it describes itself as a firm co-founded by Chinese entrepreneur Ye Guofu and Japanese designer Miyake Junya in Tokyo in 2013. But its Japanese origin is nowhere to be seen in its IPO prospectus.

Instead, the document lists the southern Chinese metropolis Guangzhou as the firm’s first base and Ye as the sole founder and current chief executive. All key directors and executives appear to be Chinese.

Branding confusion aside, there’s no denying Miniso has successfully wooed many young, price-sensitive consumers who welcome choice overload. Over 80% of its store visitors in China are under the age of 40. As of June, more than 95% of its products in China were below 50 yuan or $7.08 — thanks to the vicinity of abundant manufacturers — and the firm prides itself on the goal to launch 100 new SKUs every seven days.

Miniso’s revenue reached $1.4 billion in 2019, compared to $17.85 billion for 71-year-old Uniqlo and $4.17 billion for 39-year-old Muji. It recorded a loss of $44 million last year. 

The firm’s retail stores, decorated by its iconic bright red color reminiscent of the Uniqlo brand, span over 80 countries today. 40% of its 4,200 stores are outside of China. Over 90% of its outlets are franchise stores, one reason why it’s able to expand rapidly, but the model also means Miniso has limited control over its large network of third-party operators.

Alibaba-affiliated marketplace to leave Taiwan, again

Separated by a strait, the internet in Taiwan and mainland China are two different worlds. Even mainland tech giants Alibaba and Tencent have had little success entering the island, often running into regulatory hurdles.

Less than a year after Taobao launched on the island through an Alibaba-backed joint venture, the marketplace announced it will cease operations by the end of this year, the platform said in a notice to customers on Thursday.

The decision came two months after the Investment Commission under Taiwan’s Ministry of Economic Affairs ruled that Taobao Taiwan is a Chinese-controlled company and required the firm to either leave or re-register under a different corporate structure. Under Taiwanese law, Chinese investors must obtain permission from the government to directly or indirectly acquire a stake of more than 30% in any Taiwanese company.

Taobao Taiwan is owned and operated by British-registered Claddagh Venture Investment, which is 28.77% owned by Alibaba. Nonetheless, the investment regulator ruled that the one with de facto control over Taobao Taiwan is Alibaba, which has “veto power” over Claddagh’s board decisions.

The app is currently the most downloaded shopping app in the Taiwanese Google Play store, according to app tracking firm App Annie. Unexpectedly, the Chinese edition of Taobao comes in sixth in the iOS shopping category, where Shopee tops.

Taobao Taiwan is separate from Alibaba’s main marketplaces, which last boast 874 million mobile monthly users. Most of Alibaba’s shoppers are in mainland China, though customers in Hong Kong and Taiwan have long been able to shop on the Chinese Taobao app and have the goods imported to them with extra fees.

Taobao Taiwan, on the other hand, established to attract local vendors in a market of around 24 million people, competing with popular alternatives like Singapore-headquartered Shopee and the indigenous PChome 24.

This isn’t the first time Taobao has been hit by local law. In 2015, the authority ordered Taobao Taiwan, at the time set up by a Hong Kong entity of Alibaba, to leave because of its Chinese association. Even Shopee wasn’t exempt and was under investigation in 2017 for Tencent owned around 40% of its parent company Sea.

“We respect the decision by Claddagh,” an Alibaba representative said in a statement to TechCrunch. “Alibaba businesses are operating as normal in the Taiwan market, and we will continue to serve local consumers with quality products through our Taobao app.”

It’s unclear how Claddagh came to decide on its retreat rather than restructuring the joint venture. The firm has not responded to TechCrunch’s request for comment.

Huawei plans to divest budget phone unit Honor: reports

Besieged by U.S. tech sanctions, Huawei may be looking to shake up its smartphone business that has taken a hit after losing core semiconductor parts and software services.

The Chinese giant is in talks with Digital China Group to sell parts of Honor, its low-end, budget phone unit for 15-25 billion yuan ($2.2-3.7 billion), Reuters reported on Wednesday. 

A Hong Kong-listed firm, Digital China is a spinoff from the Legend Group (later Lenovo) and a major distributor and close ally of Huawei.

Smartphone sales and other consumer-facing electronics today make up the bulk of revenue for Huawei, which began by selling telecommunications gear in the late 1980s.

The news came days after a Chinese tech news blogger claimed Huawei is planning to sell Honor. Respected Apple analyst Ming-Chi Kuo also noted in a report that it’s in Huawei’s benefit to divest Honor so the business could be free of trade restrictions and Huawei gets to focus on high-end phones under its namesake brand.

Sources close to Huawei denied the planned sale of Honor, Tencent News reported last week. A Huawei representative contacted by TechCrunch declined to comment.

Huawei rolled out independent brand Honor in 2011 as Xiaomi’s low-budget phones were taking China by storm. Like Xiaomi, Honor started out by focusing on online sales and young consumers. BBK Group’s Oppo, Vivo and Realme have since made significant inroads into the budget phone market.

Honor’s brand, research and development capabilities and related supply chain management business could be for sale, sources told Reuters. The tech news blogger said Honor will operate and procure independently after the sale.

Other bidders include Xiaomi and TCL, according to Reuters, as well as Gree and BYD, according to the tech news blogger.

More to come…

South Korea pushes for AI semiconductors as global demand grows

The South Korean government has made no secret of its ambition to be a key player in the global artificial intelligence industry, including making the semiconductors powering AI functionalities.

This week, the country’s information and communications technology regulator announced plans to develop up to 50 types of AI -focused system semiconductors by 2030, Yonhap News Agency reported. The government will be on the hunt for thousands of local experts to lead the new wave of innovation.

South Korean has made several promises to support next-generation chip companies in recent times. Earlier this year, for example, it announced plans to spend about 1 trillion won ($870 million) on AI chips commercialization and production before 2029. Last year, President Moon Jae-in announced his “Presidential Initiative for AI” to raise public awareness on the industry.

These efforts come amid growing demand for AI-related chips, which, by McKinsey estimates, could account for almost 20% of all semiconductor demand and generate about $67 billion in revenue by 2025.

South Korea is already home to two of the world’s largest memory chip makers — Samsung and SK hynix. While that’s a lucrative industry, it’s one relying more on “the manufacturing process rather than core technologies,” observed Seewan Toong, an independent IT industry expert.

“It’s about making the chip smaller, denser, more efficient, and putting more memory on one chip,” he added.

The country wants to make its semiconductors smarter and vow to own 20% of the global AI chip market by 2030, according to Yonhap.

Samsung dabbled in next-gen chips as it became the mass-production partner for Baidu’s AI chips late last year. In July, the conglomerate announced hiring 1,000 new staff to work on chips and AI. SK hynix has picked its own Chinese ally by backing Horizon Robotics, an AI chip designer last valued at $3 billion.

China, which has long focused on the application of AI rather than fundamental research, has similarly shelled out state funds for home-grown semiconductor companies as the country suffers from U.S. sanctions on core technologies. The question is how many startups, under state support, will survive to compete with global behemoths like Nvidia and Qualcomm.

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.

New Chinese browser offers a glimpse beyond the Great Firewall – with caveats

China now has a tool that lets users access YouTube, Facebook, Twitter, Instagram, Google, and other internet services that have otherwise long been banned in the country.

Called Tuber, the mobile browser recently debuted on China’s third-party Android stores, with an iOS launch in the pipeline. The landing page of the app features a scrolling feed of YouTube videos, with tabs at the bottom that allow users to visit other mainstream Western internet services.

While some celebrate the app as an unprecedented “opening up” of the Chinese internet, others quickly noticed the browser comes with a veil of censorship. YouTube queries for politically sensitive keywords such as “Tiananmen” and “Xi Jinping” returned no results on the app, according to tests done by TechCrunch.

Using the app also comes with liabilities. Registration requires a Chinese phone number, which is tied to a person’s real identity. The platform could suspend users’ accounts and share their data “with the relevant authorities” if they “actively watch or share” content that breaches the constitution, endangers national security and sovereignty, spreads rumors, disrupts social orders, or violates other local laws, according to the app’s terms of service.

Rather than blocking sites that are beyond the purview of Beijing and tracking individuals using VPNs to circumvent the Great Firewall, China now has an app that gives its people a glimpse into the Western internet — with the caveat that their digital footprint may be under close watch by the authorities.

Much about the app remains unclear, such as its origin and the motive behind it. The operator of the app’s official website (上海丰炫信息技术有限公司) is 70% owned by a subsidiary of Qihoo 360, a Chinese cybersecurity software giant. It remains to be seen whether the app will take off.

This is an updating story.

Hong Kong logistics unicorn Lalamove makes foray into the US

Lalamove, an on-demand logistics service active in China, Southeast Asia, and Latin America, has officially entered the U.S. seven years after launch.

As the COVID-19 pandemic keeps millions of Americans home, Hong Kong-based Lalamove believes it can seize the growing demand for delivery services in the country. It makes its debut in the Dallas Fort-Worth area, a major hub for distribution and logistics in the U.S. In days the service will launch in Chicago and Houston.

The startup was one of the first in Hong Kong to hit the $1 billion unicorn valuation mark alongside its archrival GoGoVan. Its business is multifold and highly localized, but essentially it works as an Uber for businesses and individuals that need to move goods within the city.

In China, where it’s known as Huolala (货拉拉), it primarily serves as a broker between shippers who need to send cargo and a network of truck drivers. In Southeast Asia, the business functions similarly with the addition of food delivery for restaurants, a crowded and cash-burning space. In the U.S., its fleet of sedans, SUVs and pickup trucks are available 24/7, allowing it to target customers spanning catering, retail, e-commerce, manufacturing and construction, with fees starting at $8.90.

“Delivery is essential, especially during the pandemic. But many local businesses don’t have or cannot afford in-house fleets, so we’re excited to work with businesses in the Dallas Fort-Worth area to provide same-day, on-demand delivery services to their customers,” said Blake Larson, international managing director at Lalamove and formerly co-founder of Rocket Internet’s Asia-focused e-hailing startup Easy Taxi.

Like GoGoVan, Lalamove was founded by a Hong Kong entrepreneur who was educated in the U.S. Both companies have scored fundings from heavyweight institutions from China and elsewhere.

Lalamove’s investors included Hillhouse Capital, Sequoia Capital China and Xiaomi founder’s Shunwei Capital. Through a merger with China’s 58 Suyun, GoGoVan counts Tencent, Alibaba, KKR and New Horizon Capital amongst its backers.

The Hong Kong startup’s global expansion comes at a time when TikTok stumbles in the U.S. due to its links to China. In the logistics startup’s case, a Chinese team operates the Chinese division Huolala, while separate international teams manage the overseas segments of Lalamove, TechCrunch understands. The core of TikTok’s challenge in the U.S. is the video app’s dependence on its Chinese parent ByteDance’s technological capabilities.

To date, Lalamove has verified and onboarded more than 500 partner drivers in Dallas Fort-Worth, with plans to add another 500 in the area by the end of this year. It’s also hiring for its regional operational office at a time when the U.S. is struck by widespread virus-induced layoffs, furloughs and slowdown in hiring.

Lalamove claims it has to date matched more than 7 million users with a pool of over 700,000 delivery partners in 22 markets around the world.

Apple removes two RSS feed readers from China App Store

It looks like Apple is scouring its Chinese App Store for any remaining services that may not sit well with Chinese censors. Two RSS reader apps, Reeder and Fiery Feeds, said this week that their iOS apps have been removed in China over content that is considered “illegal” in the country.

Apps get banned in China for all sorts of reasons. Feed readers of RSS, or Real Simple Syndication, are particularly troubling to the authority because they fetch content from third-party websites, allowing users to bypass China’s Great Firewall and reach otherwise forbidden information.

Those who use RSS readers in China are scarce, as the majority of China’s internet users — 940 million as of late — receive their dose of news through domestic services, from algorithmic news aggregators such as ByteDance’s Toutiao, WeChat’s built-in content subscription feature, to apps of mainstream local outlets.

Major political events and regulatory changes can trigger new waves of app removals, but it’s unclear why the two RSS feed readers were pulled this week. Inoreader, a similar service, was banned from Apple’s Chinese App Store back in 2017. Feedly is also unavailable through the local App Store.

The latest incidents could well be part of Apple’s business-as-usual in China: cleaning up foreign information services operating outside Beijing’s purview. The history of China’s crackdown on RSS dates back to 2007 when the authority launched a blanked ban on web-based RSS feed aggregators.

Before its ban, the Fiery Feeds iOS app was available in China without the use of a VPN, though some of the synced services it supported were blocked, the app told TechCrunch. Reeder and Apple cannot be immediately reached for comment.

“It seems [the ban] comes from the Chinese government, so I do see any use in appealing to Apple,” said a spokesperson at Fiery Feeds.

Baidu’s smart voice unit to raise independent round on $2.9B valuation

Baidu, China’s dominant search service and a leader in artificial intelligence research, is further diversifying into the smart voice space as its smart living group is poised to raise an independent round on a 20 billion yuan ($2.94 billion) post-money valuation.

The fundraising move signals a potential spinoff of the smart living group down the road. The unit is best known for its voice assistant DuerOS, the search giant’s Alexa equivalent, which was active on 200 million devices including both Baidu’s own branded speaker and a variety of third-party gadgets as of early 2019.

Baidu shipped around 15 million units of its Xiaodu speakers in 2019, making it the second-largest player in China following Alibaba and ahead of Xiaomi, according to market research firm IDC.

Investors including Citic Private Equity Funds Management (CPE), state conglomerate Citic’s asset management firm, as well as Baidu’s venture arm Baidu Capital and IDG Capital, have entered definitive agreements to invest an undisclosed amount into the smart living group’s Series A round.

China has in recent years seen increasing cooperation between its internet firms and industrial incumbents from sectors spanning real estate, healthcare, education to finance, which are eager to embrace digital solutions.

The transaction is expected to close in the fourth quarter of 2020, according to Baidu. Upon completion of the deal, Baidu will be the majority shareholder with super-voting rights in the smart living group and continue to consolidate the unit’s financial results.

The competition in voice intelligence is a race to secure partnerships with hardware makers, which could in turn contribute consumer usage and data. Besides selling speakers, Baidu has a leg up in putting its voice assistant in connected cars, thanks to its ecosystem of automakers using its open-source autonomous driving platform Apollo. Alibaba, needless to say, can leverage its dominance in retail to market its smart voice system and speakers. Xiaomi, on the other hand, commands an portolio of Internet of Things allies that may benefit from gaining voice capabilities.

Baidu’s endeavor in AI is marked by the lineup of famed scientists it has attracted (and lost) in recent years, including Andrew Ng and Lu Qi. The company vowed to stake its future on AI early on, though its nascent AI-related businesses have yet to deliver significant revenue. The 20-year-old firm continues to rely on search to drive ad revenue as it faces growing competition from advertisers’ new darling, TikTok parent ByteDance.

Russian surveillance tech startup NtechLab nets $13M from sovereign wealth funds

NtechLab, a startup that helps analyze footage captured by Moscow’s 100,000 surveillance cameras, just closed an investment of more than 1RUB billion ($13 million) to further global expansion.

The five-year-old company sells software that recognizes faces, silhouettes and actions on videos. It’s able to do so on a vast scale in real time, allowing clients to react promptly to situations It’s a key “differentiator” of the company, co-founder Artem Kukharenko told TechCrunch.

“There could be systems which can process, for example, 100 cameras. When there are a lot of cameras in a city, [these systems] connect 100 cameras from one part of the city, then disconnect them and connect another hundred cameras in another part of the city, so it’s not so interesting,” he suggested.

The latest round, financed by Russia’s sovereign wealth fund, the Russian Direct Investment Fund, and an undisclosed sovereign wealth fund from the Middle East, certainly carries more strategic than financial importance. The company broke even last year with revenue reaching $8 million, three times the number from the previous year, ane expects to finish 2020 at a similar growth pace.

Nonetheless, the new round will enable the startup to develop new capabilities such as automatic detection of aggressive behavior and vehicle recognition as it seeks new customers in its key markets of the Middle East, Southeast Asia and Latin America. City contracts have a major revenue driver for the firm, but it has plans to woo non-government clients, such as those in the entertainment industry, finance, trade and hospitality.

The company currently boasts clients in 30 cities across 15 countries in the Commonwealth of Independent States (CIS) bloc, Middle East, Latin America, Southeast Asia and Europe.

These customers may procure from a variety of hardware vendors featuring different graphic processing units (GPUs) to carry out computer vision tasks. As such, NtechLab needs to ensure it’s constantly in tune with different GPU suppliers. Ten years ago, Nvidia was the go-to solution, recalled Kukharenko, but rivals such as Intel and Huawei have cropped up in recent times.

The Moscow-based startup began life as a consumer software that allowed users to find someone’s online profile by uploading a photo of the person. It later pivoted to video and has since attracted government clients keen to deploy facial recognition in law enforcement. For instance, during the COVID-19 pandemic, the Russian government uses NtechLab’s system to monitor large gatherings and implement access control.

Around the world, authorities have rushed to implement similar forms of public health monitoring and tracking for virus control. While these projects are usually well-meaning, they inspire a much-needed debate around privacy, discrimination, and other consequences brought by the scramble for large-scale data solutions. NtechLab’s view is that when used properly, video surveillance generally does more good than harm.

“If you can monitor people quite [effectively], you don’t need to close all people in the city… The problem is people who don’t respect the laws. When you can monitor these people and [impose] a penalty on them, you can control the situation better,” argued Alexander Kabakov, the other co-founder of the company.

As it expands globally, NtechLab inevitably comes across customers who misuse or abuse its algorithms. While it claimed to keep all customer data private and have no control over how its software is used, the company strives to “create a process that can be in compliance with local laws,” said Kukharenko.

“We vet our partners so we can trust them, and we know that they will not use our technology for bad purposes.”