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Zoom admits some calls were routed through China by mistake

Hours after security researchers at Citizen Lab reported that some Zoom calls were routed through China, the video conferencing platform has offered an apology and a partial explanation.

To recap, Zoom has faced a barrage of headlines this week over its security policies and privacy practices, as hundreds of millions forced to work from home during the coronavirus pandemic still need to communicate with each other.

The latest findings landed earlier today when Citizen Lab researchers said that some calls made in North America were routed through China — as were the encryption keys used to secure those calls. But as was noted this week, Zoom isn’t end-to-end encrypted at all, despite the company’s earlier claims, meaning that Zoom controls the encryption keys and can therefore access the contents of its customers’ calls. Zoom said in an earlier blog post that it has “implemented robust and validated internal controls to prevent unauthorized access to any content that users share during meetings.” The same can’t be said for Chinese authorities, however, which could demand Zoom turn over any encryption keys on its servers in China to facilitate decryption of the contents of encrypted calls.

Zoom now says that during its efforts to ramp up its server capacity to accommodate the massive influx of users over the past few weeks, it “mistakenly” allowed two of its Chinese data centers to accept calls as a backup in the event of network congestion.

From Zoom’s CEO Eric Yuan:

During normal operations, Zoom clients attempt to connect to a series of primary datacenters in or near a user’s region, and if those multiple connection attempts fail due to network congestion or other issues, clients will reach out to two secondary datacenters off of a list of several secondary datacenters as a potential backup bridge to the Zoom platform. In all instances, Zoom clients are provided with a list of datacenters appropriate to their region. This system is critical to Zoom’s trademark reliability, particularly during times of massive internet stress.”

In other words, North American calls are supposed to stay in North America, just as European calls are supposed to stay in Europe. This is what Zoom calls its data center “geofencing.” But when traffic spikes, the network shifts traffic to the nearest data center with the most available capacity.

China, however, is supposed to be an exception, largely due to privacy concerns among Western companies. But China’s own laws and regulations mandate that companies operating on the mainland must keep citizens’ data within its borders.

Zoom said in February that “rapidly added capacity” to its Chinese regions to handle demand was also put on an international whitelist of backup data centers, which meant non-Chinese users were in some cases connected to Chinese servers when data centers in other regions were unavailable.

Zoom said this happened in “extremely limited circumstances.” When reached, a Zoom spokesperson did not quantify the number of users affected.

Zoom said that it has now reversed that incorrect whitelisting. The company also said users on the company’s dedicated government plan were not affected by the accidental rerouting.

But some questions remain. The blog post only briefly addresses its encryption design. Citizen Lab criticized the company for “rolling its own” encryption — otherwise known as building its own encryption scheme. Experts have long rejected efforts by companies to build their own encryption, because it doesn’t undergo the same scrutiny and peer review as the decades-old encryption standards we all use today.

Zoom said in its defense that it can “do better” on its encryption scheme, which it says covers a “large range of use cases.” Zoom also said it was consulting with outside experts, but when asked, a spokesperson declined to name any.

Bill Marczak, one of the Citizen Lab researchers that authored today’s report, told TechCrunch he was “cautiously optimistic” about Zoom’s response.

“The bigger issue here is that Zoom has apparently written their own scheme for encrypting and securing calls,” he said, and that “there are Zoom servers in Beijing that have access to the meeting encryption keys.”

“If you’re a well-resourced entity, obtaining a copy of the internet traffic containing some particularly high-value encrypted Zoom call is perhaps not that hard,” said Marcak.

“The huge shift to platforms like Zoom during the COVID-19 pandemic makes platforms like Zoom attractive targets for many different types of intelligence agencies, not just China,” he said. “Fortunately, the company has (so far) hit all the right notes in responding to this new wave of scrutiny from security researchers, and have committed themselves to make improvements in their app.”

Zoom’s blog post gets points for transparency. But the company is still facing pressure from New York’s attorney general and from two class-action lawsuits. Just today, several lawmakers demanded to know what it’s doing to protect users’ privacy.

Will Zoom’s mea culpas be enough?

The Station: Bird and Lime layoffs, pivots in a COVID-19 era and a $2.2 trillion deal

Hello folks, welcome back (or hi for the first time) to The Station, a weekly newsletter dedicated to the all the ways people and packages move around this world. I’m your host, Kirsten Korosec, senior transportation reporter at TechCrunch.

I also have started to publish a shorter version of the newsletter on TechCrunch . That’s what you’re reading now. For the whole enchilada — which comes out every Saturday — you can subscribe to the newsletter by heading over here, and clicking “The Station.” It’s free!

Before I get into the thick of things, how is everyone doing? This isn’t a rhetorical question; I’m being earnest. I want to hear from you (note my email below). Maybe you’re a startup founder, a safety driver at an autonomous vehicle developer, a venture capitalist, engineer or gig economy worker. I’m interested in how you are doing, what you’re doing to cope and how you’re getting around in your respective cities.

Please reach out and email me at kirsten.korosec@techcrunch.com to share thoughts, opinions or tips or send a direct message to @kirstenkorosec.

Micromobbin’

the station scooter1a

It was a rough week for micromobility amid the COVID-19 pandemic. Bird laid off about 30% of its employees due to the uncertainty caused by the coronavirus.

In a memo obtained by TechCrunch, Bird CEO Travis VanderZanden said:

The unprecedented COVID-19 crisis has forced our leadership team and the board of directors to make many extremely difficult and painful decisions relating to some of your teammates. As you know, we’ve had to pause many markets around the world and drastically cut spending. Due to the financial and operational impact of the ongoing COVID-19 crisis, we are saying goodbye to about 30% of our team.

The fallout from COVID-19 isn’t limited to Bird. Lime is also reportedly considering laying off up to 70 people in the San Francisco Bay Area.

Meanwhile, Wheels deployed e-bikes with self-cleaning handlebars and brake levers to help reduce the risk of spreading the virus. NanoSeptic’s technology, which is powered by light, uses mineral nano-crystals to create an oxidation reaction that is stronger than bleach, according to the company’s website. NanoSeptic then implements that technology into skins and mats to turn anything from a mousepad to door handles to handlebars into self-cleaning surfaces.

The upshot to all of this: COVID-19 is turning shared mobility on its head. That means lay offs will continue. It also means companies like Wheels will try to innovate or pivot in hopes of staying alive.

While some companies pulled scooters off city streets, others changed how they marketed services. Some turned efforts to gig economy workers delivering food. Others, like shared electric moped service Revel, are focusing on healthcare workers.

Revel is now letting healthcare workers in New York rent its mopeds for free. To qualify, they just need to upload their employee ID. For now, the free rides for healthcare workers is limited to Brooklyn, Queens and a new service area from upper Manhattan down to 65th street. Revel expanded the area to include hospitals in one of the epicenters of the disease.

Revel is still renting its mopeds to the rest of us out there, although they encourage people to only use them for essential trips. As you might guess, ridership is down significantly. The company says it has stepped up efforts of disinfecting and cleaning the mopeds and helmets. Revel also operates in Austin, New York City, Oakland, and Washington. It has suspended service in Miami per local regulations.

Megan Rose Dickey (with a cameo from Kirsten Korosec)

Deal of the week

money the station

Typically, I would highlight a large funding round for a startup in the “deal of the week” section. This week, I have broadened my definition.

On Friday, the House of Representatives passed a historic stimulus package known as the Coronavirus Aid, Relief, and Economic Security or “CARES” act. President Donald Trump signed it hours later. The CARES act contains an unprecedented $2.2 trillion in total financial relief for businesses, public institutions and individuals hit hard by the COVID-19 pandemic.

TechCrunch has just started what will be a multi-day dive into the 880-page document. And in the coming weeks, I will highlight anything related or relevant to the transportation industry or startups here.

I’ll focus today on three items: airlines, public transit and small business loans.

U.S. airlines are receiving $58 billion. It breaks down to about $25 billion in loans for commercial carriers, $25 billion in payroll grants to cover the 750,000 employees who work in the industry.  Cargo carriers will receive $4 billion in loans and $4 billion in grants. These loans come with some strings attached. Airlines will have to agree not to lay off workers through the end of September. The package forbids stock buybacks and issuing dividends to shareholders for a year after paying off one of the loans.

Public transit has been allocated $24.9 billion. The CARES Act provides almost three times the FY 2020 appropriations for this category, according to the American Public Transportation Association. The funds are distributed through a formula that puts $13.79 billion to urban, $2 billion to rural, $7.51 billion towards state of good repair and $1.71 billion for high-density state transit. APTA notes that these funds are for operating expenses to prevent, prepare for, and respond to COVID-19 beginning on January 20, 2020.

Amtrak received an additional $1 billion in grants, that directs $492 million of those funds towards the northeast corridor. The remaining goes to the national network.

Small business loans are a critical piece of the bill, and an area where many startups may be focused. There is a lot to unpack here, but in basic terms the act provides $350 billion in loans that will be administered by the Small Business Administration to businesses with 500 or fewer employees. These loans are meant to cover an eligible borrower’s payroll, rent, utilities expenses and mortgage interest for up to eight weeks. If the borrower maintains its workforce, some of the loan may be forgiven.

Venture-backed startups seeking relief may run into problems qualifying. It all comes down to how employees are counted. Normally, SBA looks at a company’s affiliates to determine if they qualify. So, a startup owned by a private equity firm is considered affiliated with the other companies in that firm’s portfolio, which could push employment numbers far beyond 500. That rule also seems to apply to venture-backed startups, in which more than 50% of voting stock is held by the VC.

The guidance on this is still spotty. But Fenwick & West, a Silicon Valley law firm, said in recent explainer that the rule has the “potential to be problematic for startups because the SBA affiliation rules are highly complex and could cause lenders to group together several otherwise unaffiliated portfolio companies of a single venture capital firm in determining whether a borrower has no more than 500 employees.”

One final note: The SBA has waived these affiliation rules for borrowers in the food services and food supply chain industry. It’s unclear what that might mean for those food automation startups or companies building autonomous vehicles for food delivery.

More deal$

COVID-19 has taken over, but deals are still happening. Here’s a rundown of some of partnerships, acquisitions and fundraising round that got our attention.

  • Lilium, the Munich-based startup that is designing and building vertical take-off and landing (VTOL) aircraft and aspires to run in its own taxi fleet, has raised $240 million in a funding round led by Tencent. This is being couched as an inside round with only existing investors, a list that included participation from previous backers such as Atomico, Freigeist and LGT. The valuation is not being disclosed. But sources tell us that it’s between $750 million and $1 billion.
  • Wunder Mobility acquired Australia-based car rental technology provider KEAZ. (Financial terms weren’t disclosed, but as part of the deal KEAZ founder and CTO Tim Bos is joining Wunder Mobility) KEAZ developed a mobile app and back-end management tool that lets rental agencies, car dealerships, and corporations provide shared access to vehicles.
  • Cazoo, a startup that buys used cars and then sells them online and delivers to them your door, raised $116 million funding. The round was led by DMG Ventures with General Catalyst, CNP (Groupe Frère), Mubadala Capital, Octopus Ventures, Eight Roads Ventures and Stride.VC also participating.
  • Helm.ai came out of stealth with an announcement that it has raised $13 million in a seed round that includes investment from A.Capital Ventures, Amplo, Binnacle Partners, Sound Ventures, Fontinalis Partners and SV Angel. Helm.ai says it developed software for autonomous vehicles that can skip traditional steps of simulation, on-road testing and annotated data set — all tools that are used to train and improve the so-called “brain” of the self-driving vehicle.
  • RoadSync, a digital payment platform for the transportation industry, raised a $5.7 million in a Series A led by Base10 Partners with participation from repeat investor Hyde Park Venture Partners and Companyon Ventures. The company developed cloud-based software that lets businesses invoice and accept payments from truck drivers, carriers and brokers. Their platform is in use at over 400 locations nationwide with over 50,000 unique transactions monthly, according to RoadSync.
  • Self-driving truck startup TuSimple is partnering with automotive supplier ZF to develop and produce autonomous vehicle technology, such as sensors, on a commercial scale. The partnership, slated to begin in April, will cover China, Europe and North America.

A final word

Remember, the weekly newsletter features even more mobility news and insights. I’ll leave ya’ll with this one chart from Inrix. The company has launched a U.S. traffic synopsis that it plans to publish every Monday. The chart shows traffic from the week of March 14 to March 20. The upshot: COVID-19 reduced traffic by 30% nationwide.

inrix traffic drop from covid

Detroit Auto Show canceled in preparation for FEMA to turn venue into field hospital

The North American International Auto Show, which was scheduled for June in Detroit, has been canceled as the COVID-19 pandemic continues to spread and the city prepares to repurpose the TCF Center into a temporary field hospital.

NAIAS is held each year in the TCF Center, formerly known as the Cobo Center. Organizers said they expected the Federal Emergency Management Agency to designate the TCF Center as a field hospital.

“Although we are disappointed, there is nothing more important to us than the health, safety and well-being of the citizens of Detroit and Michigan, and we will do what we can to support our community’s fight against the coronavirus outbreak,” NAIAS Executive Director Rod Alberts said in an emailed statement.

The NAIAS is the latest in a long line of events and conventions that have been canceled as COVID-19, the disease caused by the coronavirus, has spread from China to Europe, and now the U.S. and the rest of the world.

More than 100 convention centers and facilities around the country are being considered to potentially serve as temporary hospitals. Alberts said it became clear that TCF Center would be an inevitable option to serve as a care facility.

The NAIAS, also known as the Detroit Auto Show, will be held in June 2021. Organizers are discussing plans for a fundraising activity later this year to benefit the children’s charities that were designated as beneficiaries of the 2020 Charity Preview event.

This year’s show was highly anticipated because it had moved from January to summer, following years of encouragement to schedule it during the warmer months.

All tickets purchased for the 2020 NAIAS show, including tickets for the Public Show, Industry Preview and Charity Preview will be fully refunded, organizers said. Charity Preview ticket holders will be given the option of a refund, or the opportunity to donate the proceeds of their refund to one of the nine designated Charity Preview beneficiaries. The NAIAS ticket office will be in contact with all ticket holders, according to the organizers.

Nigeria is becoming Africa’s unofficial tech capital

Africa has one of the world’s fastest growing tech markets and Nigeria is becoming its unofficial capital.

While the West African nation is commonly associated with negative cliches around corruption and terrorism — which persist as serious problems, and influenced the Trump administration’s recent restrictions on Nigerian immigration to the U.S.

Even so, there’s more to the country than Boko Haram or fictitious princes with inheritances.

Nigeria has become a magnet for VC, a hotbed for startup formation and a strategic entry point for Silicon Valley. As a frontier market, there is certainly a volatility to the country’s political and economic trajectory. The nation teeters back and forth between its stereotypical basket-case status and getting its act together to become Africa’s unrivaled superpower.

The upside of that pendulum is why — despite its problems — so much American, Chinese and African tech capital is gravitating to Nigeria.

Demographics

“Whatever you think of Africa, you can’t ignore the numbers,” Africa’s richest man Aliko Dangote told me in 2015, noting that demographics are creating an imperative for global businesses to enter the continent.

Latin America Roundup: Loft raises $175M, SoftBank invests in Mexico’s Alphacredit and Rappi pulls back

Sophia Wood
Contributor

Sophia Wood is a principal at Magma Partners, a Latin America-focused seed-stage VC firm with offices in Latin America, Asia and the U.S. Sophia is also the co-founder of LatAm List, an English-language Latin American tech news source.

Brazil’s famously tricky real estate market has long drawn international investors to the region in search of tech solutions. This time, Brazilian startup Loft brought in a $175 million Series C from first-time investor in the region, Vulcan Capital (Paul Allen’s investment arm), alongside Andreessen Horowitz. Loft is also a16z’s first and only Brazilian investment. 

Co-founded by serial entrepreneurs and investors Mate Pencz and Florian Hagenbuch in 2018, Loft uses a proprietary algorithm to process transaction data and provide more transparent pricing for both buyers and sellers. The startup uses two models to help clients sell properties; either Loft will value the apartment for listing on the site, or they will offer to purchase the property from the buyer immediately. Many real estate platforms in the U.S. are shifting toward a similar iBuyer model; however, this system may be even more apt for the Latin American market, where property sales are notoriously untransparent, bureaucratic and tedious.

Loft will use the capital to expand to Rio de Janeiro in Q1 2020 and to Mexico City in Q2, bringing on at least 100 new employees in the process. It also plans to scale its financial products to include mortgages and insurance by the end of the year. 

AlphaCredit raises $125M from SoftBank

Mexican consumer lending startup AlphaCredit became SoftBank’s new Mexico bet this month, with a $125 million Series B round. AlphaCredit uses a programmed deduction system to provide rapid, online loans to individuals and small businesses in Mexico. To date, the startup has granted more than $1 billion in loans to small business clients in Mexico and Colombia, many of whom have never previously had access to financing. 

AlphaCredit’s programmed deductions system enables the startup to lower default rates, which in turn lowers interest rates. For more than eight years, AlphaCredit has encouraged financial inclusion in Mexico and Colombia through technology; this round of investment will enable the platform to consolidate its holding as one of the top lending platforms in the region. The investment is still subject to approval by Mexico’s competition authority, COFECE, which has previously blocked startup deals such as the Cornershop acquisition in 2019. 

SoftBank’s biggest bets back off in Latin America

While SoftBank is still rapidly deploying its Latin America-focused Innovation Fund, some of its largest companies are stepping on the brakes. In particular, SoftBank’s largest LatAm investment, Rappi, recently announced that it would lay off up to 6% of its workforce in an effort to cut costs and focus on their technology. The Colombian unicorn has been expanding at a breakneck pace throughout the region using a blitzscaling technique that has helped it reach nine countries, with 5,000 employees in just two years, including Ecuador in November 2019.

Rappi has stated that it will focus on technology and UX in 2020, explaining that the job cuts do not reflect its long-term growth strategy. However, Rappi is also facing legal action for alleged intellectual property theft. Mauricio Paba, José Mendoza and Jorge Uribe are suing Rappi CEO Simon Borrero and the company for stealing the idea for the Rappi platform while providing consulting for the three founders through his firm, Imaginamos. The case is currently being processed in Colombia and the U.S. 

One of SoftBank’s biggest bets in Asia, Oyo Rooms, is facing similar challenges. Just months after announcing their expansion into Mexico, Oyo fired thousands of employees in China and India. Oyo plans to be the largest hotel chain in Mexico by the end of 2020, according to a local spokesperson.

Argentina’s Agrofy breaks regional agtech records

With a $23 million Series B from SP Ventures, Fall Line Capital and Acre Venture Partners, Argentine agricultural supply marketplace Agrofy has raised the region’s largest round for an agtech startup to date. The platform provides transparency and ease for the agricultural industry, where users can buy everything from tractors to seeds. In four years, Agrofy has established itself as the market leader in agricultural e-commerce; it was also Fall Line Capital’s first investment outside of the U.S.

Agrofy is active in nine countries and receives more than five million visits per month, 60% of which come from Brazil. However, the startup faces the challenge of low connectivity in rural areas, where most of its customers live. The investment will go to improving the platform, as well as integrating new payment types directly into the site to help clients process their transactions more smoothly. 

News and Notes: Fanatiz, Pachama, Moons, Didi and IDB

The Miami-based sports-streaming platform Fanatiz raised $10 million in a Series A round from 777 Partners in January 2020 after registering 125% user growth since July 2019. Founded by Chilean Matias Rivera, Fanatiz provides legal international streaming of soccer and other sports through a personalized platform so that fans can follow their teams from anywhere in the world. The startup provided the Pope with an account so that he could follow his beloved team, San Lorenzo, from the Vatican. Fanatiz has previously received investment from Magma Partners and participated in 500 Startups’ Miami Scale program.

Conservation-tech startup Pachama raised $4.1 million from Silicon Valley investors to continue developing a carbon offset marketplace using drone and lidar data. Pachama was founded by Argentine entrepreneur Diego Saez-Gil in 2019 after he noticed the effects of deforestation in the Peruvian Amazon. After participating in Y Combinator in 2019, Pachama now has 23 sites in the U.S. and Latin America where scientists are working alongside the startup’s technology to certify forests for carbon sequestration projects. 

Mexico’s Moons, an orthodontics startup that provides low-cost invisible aligners, has raised $5 million from investors such as Jaguar Ventures, Tuesday Capital and Foundation Capital and was recently accepted into Y Combinator, bringing the startup to the U.S. Moons provides a free consultation and 3D scan to patients in Mexico to determine if they are a good fit for the program, then supplies them with a year-long invisible braces regime for around $1,200. With 18 locations in Mexico and two in Colombia, Moons is expanding rapidly across the region, with ambitions for providing low-cost healthcare across several verticals in Latin America. 

Chinese ride-hailing startup Didi Chuxing recently launched a sustainable fleet of over 700 electric and hybrid cars for its Mexico City operations. After two years operating in Mexico, Didi announced that it would establish its headquarters in the capital city to manage its new low-emissions fleet. The company will provide financing to help its drivers acquire and use the vehicles, in an effort to reduce Didi’s environmental impact.

The IDB Lab released a report on female entrepreneurs in Latin America, finding that 54% of female founders have raised capital and 80% plan to scale internationally in the next five years. The study, entitled “wX Insights 2020: The Rise of Women STEMpreneurs,” finds that female entrepreneurship is on the rise in Latin America, particularly in the areas of fintech, edtech, healthtech and biotech. Nonetheless, 59% of the 1,148 women surveyed still see access to capital as the most significant limitation for their companies. However, as women take center stage in Latin American VC, such as Antonia Rojas Eing joining ALLVP as Partner, we may see funding tilt toward female-founded firms.

This month has set 2020 on a course to continue the strong growth we saw in the Latin American ecosystem in 2019. It is always exciting to see international investors make their first bets in the region, and we expect to continue seeing new VCs entering the region over the coming year.

Impossible adds ‘ground pork’ and ‘sausages’ to its lineup of plant-based foods

Impossible Foods made huge waves in the food industry when it came up with a way of isolating and using “heme” molecules from plants to mimic the blood found in animal meat (also comprised of heme), bringing a new depth of flavor to its vegetarian burger.

This week at CES, the company is presenting the next act in its mission to get the average consumer to switch to more sustainable, plant-based proteins: it unveiled its version of pork — specifically ground pork, which will be sold as a basic building block for cooking as well as in sausage form. It’s a critical step, given that pork is the most-eaten animal product in the world.

Impossible has set up shop in CES’s outdoor area, situated near a line of food trucks, and it will be cooking food for whoever wants to come by. (I tasted a selection of items made from the new product — a steamed bun, a meatball, some noodles and a lettuce wrap — and the resemblance is uncanny, and not bad at all.) And after today, the new product will be making its way first to selected Burger King restaurants in the US before appearing elsewhere.

It may sound a little far-fetched to see a food startup exhibiting and launching new products at a consumer electronics show, attended by 200,000 visitors who will likely by outnumbered by the number of TVs, computers, phones, and other electronic devices on display. Indeed, Impossible is the only food exhibitor this year.

But if you ask Pat Brown, the CEO and founder of Impossible Foods (pictured right, at the sunny CES stand in the cold wearing a hat), the company is in precisely the right place.

“To me it’s very natural to be at CES,” he said in an interview this week at the show. “The food system is the most important technology on earth. It is absolutely a technology, and an incredibly important one, even if it doesn’t get recognised as such. The use of animals as a food technology is the most destructive on earth. And when Impossible was founded, it was to address that issue. We recognised it as a technology problem.”

That is also how Impossible has positioned itself as a startup. Its emergence (it was founded 2011) dovetailed with an interesting shift in the world of tech. The number of startups were booming, fuelled by VC money and a boom in smartphones and broadband. At the same time, we were starting to see a new kind of startup emerging built on technology but disrupting a wide range of areas not traditionally associated with technology. Technology VCs, looking for more opportunities (and needing to invest increasingly larger funds), were opening themselves up to consider more of the latter opportunities.

Impossible has seized the moment. It has raised around $777 million to date from a list of investors more commonly associated with tech companies — they include Khosla, Temasek, Horizons Ventures, GV, and a host of celebrities — and Impossible is now estimated to be valued at around $4 billion. Brown told me it is currently more than doubling revenues annually.  

With his roots in academia, the idea of Brown (who has also done groundbreaking work in HIV research) founding and running a business is perhaps as left-field a development as a food company making the leap from commodity or packaged good business to tech. Before Impossible, Brown said that he had “zero interest” in becoming an entrepreneur: the bug that has bitten so many others at Stanford (where he was working prior to founding Impossible) had not bitten him.

“I had an awesome job where I followed my curiosity, working on problems that I found interesting and important with great colleagues,” he said.

That changed when he began to realise the scale of the problem resulting from the meat industry, which has led to a well-catalogued list of health, economic and environmental impacts (including increased greenhouse gas emissions and the removal of natural ecosystems to make way for farming land. “It is the most important and consequential issue for the future of the world, and so the solution has to be market-based,” he said. “The only way we can replace themes that are this destructive is by coming up with a better technology and competing.”

Pork is a necessary step in that strategy to compete. America, it seems, is all about beef and chicken when it comes to eating animals. But pigs and pork take the cake when you consider meat consumption globally, accounting for 38% of all meat production, with 47 pigs killed on average every second of every day. Asia, and specifically China, figure strongly in that demand. Consumption of pork in China has increased 140% since 1990, Impossible notes.

Pigs’ collective footprint in the world is also huge: there are 1.44 billion of them, and their collective biomass totals 175 kg, twice as much as the biomass of all wild terrestrial vertebrates, Impossible says.

Whether Impossible’s version of pork will be enough or just an incremental step is another question. Ground meat is not the same as creating structured proteins that mimic the whole-cuts that are common (probably more common) when it comes to how pork is typically cooked (ditto for chicken and beef and other meats).

That might likely require more capital and time to develop.

For now, Impossible is focused on building out its business on its own steam: it’s not entertaining any thoughts of selling up, or even of licensing out its IP for isolating and using soy leghemoglobin — the essential “blood” that sets its veggie proteins apart from other things on the market. (I think of licensing out that IP, as the equivalent of how a tech company might white label or create APIs for third parties to integrate its cool stuff into their services.)

That means there will be inevitable questions down the line about how Impossible will capitalise to meet demand for its products. Brown said that for now there are no plans for IPOs or to raise more externally, but pointed out that it would have no problem doing either.

Indeed, the company has built up an impressive bench of executives and other talent to meet those future scenarios. Earlier this year, Impossible hired Dennis Woodside — the former Dropbox, Google and Motorola star– as its first president. And its CFO, David Lee, joined from Zynga back in 2015, with a stint also in the mass-market food industry, having been at Del Monte prior to that.

Lee told me that the company has essentially been running itself as a public company internally in preparation for a time when it might follow in the footsteps of its biggest competitor, Beyond Meat, and go public.

“From a tech standpoint I’m absolutely confident that we can outperform what we get from animals in affordability, nutrition and deliciousness,” said Brown. “This entire industry is most destructive by far and has major responsibility in terms of climate and biodiversity, but it going to be history and we are going to replace it.”

CES 2020 coverage - TechCrunch

DJI patents an off-road rover with a stabilized camera on top

DJI is easily the leading brand when it comes to camera drones, but few companies have even attempted a ground-based mobile camera platform. The company may be moving in that direction, though, if this patent for a small off-road vehicle with a stabilized camera is any indication.

The Chinese patent, first noted by DroneDJ, shows a rather serious-looking vehicle platform with chunky tires and a stabilized camera gimbal. As you can see in the image above, the camera mount is protected against shock by springs and pneumatics, which would no doubt react actively to sudden movements.

The image is no simple sketch like those you sometimes see of notional products and “just in case” patents — this looks like a fleshed-out mechanical drawing of a real device. Of course, that doesn’t mean it’s coming to market at all, let alone any time soon. But it does suggest that DJI’s engineers have dedicated real time and effort to making this thing a reality.

Why have a “drone” on the ground when there are perfectly good ones for the air? Battery life, for one. Drones can only be airborne for a short time, even less when they’re carrying decent cameras and lenses. A ground-based drone could operate for far longer — though naturally from a rather lower vantage.

Perhaps more importantly, however, a wheeled drone makes sense in places where an aerial one doesn’t. Do you really want to fly a drone through narrow hallways in security sweeps, or in your own home? And what about areas where you might encounter people? It would be better not to have to land and take off constantly for safety’s sake.

It’s likely that DJI has done its homework and knows that there are plenty of niches to which they could extend if they diversified their offerings a bit. And like so many situations where drones have become commonplace, we’ll all think of these robot-powered industries as obvious in retrospect. For instance, the winner of our Startup Battlefield at Disrupt Berlin, Scaled Robotics, which does painstaking automated inspections of construction sites.

In fact DJI already makes a ground-based robotic platform, the RoboMaster S1. This is more of an educational toy, but may have served as a test bed for technologies the company hopes to apply elsewhere.

Whether this little vehicle ever sees the light of day or not, it does make one think seriously about the possibility of a wheeled camera platform doing serious work around the home or office.

Huawei sues FCC over “unconstitutional” ban on the use of federal subsidies to buy its equipment

Huawei said today it is suing the Federal Communications Commission, asking to overturn a ban on carriers from using money from the Universal Service Fund (USF) to buy equipment from Huawei and ZTE.

The $8.5 billion USF supports the purchase of equipment to build communications infrastructure, especially in rural communities. Huawei is asking the United States Court of Appeals for the Fifth Circuit to overrule the FCC’s order, passed on Nov. 22.

Small carriers buy equipment from Huawei and ZTE because it is dependable and cheap. According to a Reuters report, some carriers are considering Nokia and Ericsson for replacements, but their equipment is priced less competitively.

During a press conference in Shenzhen today, Glen Nager, Huawei’s lead counsel for the lawsuit, claimed the ban goes beyond the FCC’s authority and violates the constitution. “The order fails to give Huawei constitutionally required due process before stigmatizing it as a national security threat, such as an opportunity to confront supposed evidence and witnesses, and a fair and neutral hearing process,” he said.

Huawei chief legal officer Song Liuping claims that FCC chairman and Ajit Pai and other commissioners did not present evidence to back its claim that Huawei is a security threat.

“This is a common trend in Washington these days. ‘Huawei is a Chinese company.’ That’s his only excuse,” Song said. He also claimed that the FCC ignored 21 rounds of “detailed comments” submitted by Huawei to explain how the order would harm businesses in rural areas, adding “This decision, just like the Entity List decision in May, is based on politics, not security.”

In March, Huawei also cited the Constitution in another lawsuit filed against the U.S. government arguing that a ban on the use of its products by federal agencies and contractors violate due process.

Huawei and ZTE were first identified as potential national security threats in 2012 by a U.S Congressional panel, but federal actions against Huawei and ZTE have intensified over the past year as the trade war between the U.S. and China escalates.

Earlier this year, it was placed on the U.S. Entity List and the Department of Justice announced it was pursuing several criminal charges against Huawei, including conspiracy to steal trade secrets. Huawei’s chief financial officer, Meng Wanzhou also faces fraud charges in New York. In response, Huawei has dramatically increased the amount it spends on lobbying in the U.S.

In China, Huawei’s announcement today about its FCC lawsuit was overshadowed by controversy about a former employee, Li Hongyuan who was arrested and detained for eight months after demanding severance pay. Li was arrested on extortion charges and released because of insufficient evidence and his treatment has triggered controversy and anger over the treatment of workers by Huawei and other tech companies.

Africa Roundup: Nigerian fintech gets $360M, mints unicorn, draws Chinese VC

November 2019 could mark when Nigeria (arguably) became Africa’s unofficial capital for fintech investment and digital finance startups.

The month saw $360 million invested in Nigerian focused payment ventures. That is equivalent to roughly one-third of all the startup VC raised for the entire continent in 2018, according to Partech stats.

A notable trend-within-the-trend is that more than half — or $170 million — of the funding to Nigerian fintech ventures in November came from Chinese investors. This marks a pivot in China’s engagement with Africa to tech. We’ll get to that.

Before the big Chinese backed rounds, one of Nigeria’s earliest fintech companies, Interswitch, confirmed its $1 billion valuation after Visa took a minority stake in the company. Interswitch would not disclose the amount to TechCrunch, but Sky News reporting pegged it at $200 million for 20%.

Founded in 2002 by Mitchell Elegbe, Interswitch pioneered the infrastructure to digitize Nigeria’s then predominantly paper-ledger and cash-based economy.

The company now provides much of the tech-wiring for Nigeria’s online banking system that serves Africa’s largest economy and population. Interswitch offers a number of personal and business finance products, including its Verve payment cards and Quickteller payment app.

The financial services firm has expanded its physical presence to Uganda, Gambia and Kenya . The Nigerian company also sells its products in 23 African countries and launched a partnership in August for Verve cardholders to make payments on Discover’s global network.

Visa and Interswitch touted the equity investment as a strategic collaboration between the two companies, without a lot of detail on what that will mean.

One point TechCrunch did lock down is Interswitch’s (long-awaited) and imminent IPO. A source close to the matter said the company will list on a major exchange by mid-2020.

For the near to medium-term, Interswitch could stand as Africa’s sole tech-unicorn, as e-commerce venture Jumia’s volatile share-price and declining market-cap — since an April IPO — have dropped the company’s valuation below $1 billion.

Circling back to China, November was the month that signaled Chinese actors are all in on African tech.

In two separate rounds, Chinese investors put $220 million into OPay and PalmPay — two fledgling startups with plans to scale in Nigeria and the broader continent.

PalmPay, a consumer oriented payments product, went live last month with a $40 million seed-round (one of the largest in Africa in 2019) led by Africa’s biggest mobile-phone seller — China’s Transsion.

The startup was upfront about its ambitions, stating its goals to become “Africa’s largest financial services platform,” in a company release.

To that end, PalmPay conveniently entered a strategic partnership with its lead investor. The startup’s payment app will come pre-installed on Transsion’s mobile device brands, such as Tecno, in Africa — for an estimated reach of 20 million phones.

PalmPay also launched in Ghana in November and its UK and Africa based CEO, Greg Reeve, confirmed plans to expand to additional African countries in 2020.

OPay’s $120 million Series B was announced several days after the PalmPay news and came only months after the mobile-based fintech venture raised $50 million.

Founded by Chinese owned consumer internet company Opera — and backed by 9 Chinese investors — OPay is the payment utility for a suite of Opera developed internet based commercial products in Nigeria. These include ride-hail apps ORide and OCar and food delivery service OFood.

With its latest Series A, OPay announced it would expand in Kenya, South Africa, and Ghana.

Though it wasn’t fintech, Chinese investors also backed a (reported) $30 million Series B for East African trucking logistics company Lori Systems in November.

With OPay, PalmPay, and Lori Systems, startups in Africa have raised a combined $240 million from 15 Chinese investors in a span of months.

There are a number of things to note and watch out for here, as TechCrunch reporting has illuminated (and will continue to do in follow-on coverage).

These moves mark a next chapter in China’s engagement in Africa and could raise some new issues. Hereto, the country’s interaction with Africa’s tech ecosystem has been relatively light compared to China’s deal-making on infrastructure and commodities.

There continues to be plenty of debate (and critique) of China’s role in Africa. This new digital-phase will certainly add a fresh component to all that. One thing to track will be data-privacy and national-security concerns that may emerge around Chinese actors investing heavily in African mobile consumer platforms.

We’ve seen lines (allegedly) blur on these matters between Chinese state and private-sector actors with companies such as Huawei.

As OPera and PalmPay expand, they may need to do some reassuring of African regulators as countries (such as Kenya) establish more formal consumer protection protocols for digital platforms.

One more thing to follow on OPay’s funding and planned expansion is the extent to which it puts Opera (and its entire suite of consumer internet products) in competition with multiple actors in Africa’s startup ecosystem. Opera’s Africa ventures could go head to head with Uber, Jumia, and M-Pesa — the mobile money-product that put Kenya out front on digital finance in Africa before Nigeria.

Shifting back to American engagement in African tech, Twitter and Square CEO Jack Dorsey was on the continent in November. No sooner than he’d finished his first trip, Dorsey announced plans to move to Africa in 2020, for 3 to 6 months, saying on Twitter “Africa will define the future (especially the bitcoin one!).”

We still don’t know much about what this last trip — or his future foray — mean in terms of concrete partnerships, investment, or market moves in Africa from Dorsey and his companies.

He visited Nigeria, Ghana, South Africa and Ethiopia and met with leaders at Nigeria’s CcHub (Bosun Tijani), Ethiopia’s Ice Addis (Markos Lemming), and did some meetings with fintech founders in Lagos (Paga’s Tayo Oviosu).

I know most of the organizations and people Dorsey talked to pretty well and nothing has shaken out yet in terms of partnership or investment news from his recent trip.

On what could come out of Dorsey’s 2020 move to Africa, per his tweet and news highlighted in this roundup, a good bet would be it will have something to with fintech and Square.

More Africa-related stories @TechCrunch

African tech around the ‘net

TikTok apologizes for removing viral video about abuses against Uighurs, blames a “human moderation error”

TikTok has issued a public apology to a teenager who had her account suspended shortly after posting a video that asked viewers to research the persecution of Uighur people and other Muslim groups in Xinjiang. TikTok included a “clarification on the timeline of events,” and said that the viral video was removed four days after it was posted on November 23 “due to a human moderation error” and did not violate the platform’s community guidelines (the account @getmefamouspartthree and video have since been reinstated).

But the user, Feroza Aziz, who describes herself in her Twitter profile as “just a Muslim trying to spread awareness,” rejected TikTok’s claims, tweeting “Do I believe they took it away because of an unrelated satirical video that was deleted on a previous deleted account of mine? Right after I finished posting a 3 part video about the Uyghurs? No.”

In the video removed by TikTok, Aziz begins by telling viewers to use an eyelash curler, before telling them to put it down and “use your phone, that you’re using right now, to search up what’s happening in China, how they’re getting concentration camps, throwing innocent Muslims in there, separating families from each other, kidnapping them, murdering them, raping them, forcing them to eat pork, forcing them to drink, forcing them to convert. This is another Holocaust, yet no one is talking about it. Please be aware, please spread awareness in Xinjiang right now.”

TikTok is owned by ByteDance and the video’s removal led to claims that the Beijing-based company capitulated to pressure from the Chinese Communist Party (Douyin, ByteDance’s version of TikTok for China, is subject to the same censorship laws as other online platforms in China).

Though the government-directed persecution of Muslim minority groups in China began several years ago and about a million people are believed to be detained in internment camps, awareness of the crisis was heightened this month after two significant leaks of classified Chinese government documents were published by the New York Times and the International Consortium of Investigative Journalists, confirming reports by former inmates, eyewitnesses and researchers.

Aziz told BuzzFeed News she has been talking about the persecution of minority groups in China since 2018 because “as a Muslim girl, I’ve always been oppressed and seen my people be oppressed, and I’ve always been into human rights.”

In the BuzzFeed News article, published before TikTok’s apology post, the company claimed Aziz’s account suspension was related to another video she made that contained an image of Osama Bin Laden. The video was created as a satirical response to a meme about celebrity crushes and Aziz told BuzzFeed News that “it was a dark humor joke that he was at the end, because obviously no one in their right mind would think or say that.” A TikTok spokesperson said it nonetheless “violated its policies on terrorism-related content.”

“While we recognize that this video may have been intended as satire, our policies on this front are currently strict. Any such content, when identified, is deemed a violation of our Community Guidelines and Terms of Service, resulting in a permanent ban of the account and associated devices,” a TikTok spokesperson told BuzzFeed, adding that the suspension of Aziz’s second account, which the makeup tutorial video was posted on, was part of the platform’s blocking of 2,406 devices linked to previously suspended accounts.

In TikTok’s apology post today, TikTok US head of safety Eric Tan wrote that the platform relies on technology to uphold community guidelines and human moderators as a “second line of defense.”

“We acknowledge that at times, this process will not be perfect. Humans will sometimes make mistakes, such as the one made today in the case of @getmefamouspartthree’s video,” he added. “When those mistakes happen, however, our commitment is to quickly address and fix them, undertake trainings or make changes to reduce the risk of the same mistakes being repeated, and fully own the responsibility for our errors.”

Aziz told the Washington Post, however, that “TikTok is trying to cover up this whole mess. I won’t let them get away with this.”

The controversy comes as TikTok faces an inquiry by the U.S. government into how it secures the personal data of users. Reuters reported yesterday that TikTok plans to separate its product and business development, and marketing and legal teams from Douyin in the third quarter of this year.

 

Opera’s Africa fintech startup OPay gains $120M from Chinese investors

Africa focused fintech startup OPay has raised a $120 million Series B round backed by Chinese investors.

Located in Lagos and founded by consumer internet company Opera, OPay will use the funds to scale in Nigeria and expand its payments product to Kenya, Ghana and South Africa — Opera’s CFO Frode Jacobsen confirmed to TechCrunch.

Series B investors included Meituan-Dianping, GaoRong, Source Code Capital, Softbank Asia, BAI, Redpoint, IDG Capital, Sequoia China and GSR Ventures.

OPay’s $120 million round comes after the startup raised $50 million in June.

It also follows Visa’s $200 million investment in Nigerian fintech company Interswitch and a $40 million raise by Lagos based payments startup PalmPay — led by China’s Transsion.

There are a couple quick takeaways. Nigeria has become the epicenter for fintech VC and expansion in Africa. And Chinese investors have made an unmistakable pivot to African tech.

Opera’s activity on the continent represents both trends. The Norway based, Chinese (majority) owned company founded OPay in 2018 on the popularity of its internet search engine.

Opera’s web-browser has ranked No. 2 in usage in Africa, after Chrome, the last four years.

The company has built a hefty suite of internet-based commercial products in Nigeria around OPay’s financial utility. These include motorcycle ride-hail app ORide, OFood delivery service, and OLeads SME marketing and advertising vertical.

“Opay will facilitate the people in Nigeria, Ghana, South Africa, Kenya and other African countries with the best fintech ecosystem. We see ourselves as a key contributor to…helping local businesses…thrive from…digital business models,” Opera CEO and OPay Chairman Yahui Zhou, said in a statement.

Opera CFO Frode Jacobsen shed additional light on how OPay will deploy the $120 million across Opera’s Africa network. OPay looks to capture volume around bill payments and airtime purchases, but not necessarily as priority.  “That’s not something you do ever day. We want to focus our services on things that have high-frequency usage,” said Jacobsen.

Those include transportation services, food services, and other types of daily activities, he explained. Jacobsen also noted OPay will use the $120 million to enter more countries in Africa than those disclosed.

Since its Series A raise, OPay in Nigeria has scaled to 140,000 active agents and $10 million in daily transaction volume, according to company stats.

Beyond standing out as another huge funding round, OPay’s $120 million VC raise has significance for Africa’s tech ecosystem on multiple levels.

It marks 2019 as the year Chinese investors went all in on the continent’s startup scene. OPay, PalmPay, and East African trucking logistics company Lori Systems have raised a combined $240 million from 15 different Chinese actors in a span of months.

OPay’s funding and expansion plans are also harbinger for fierce, cross-border fintech competition in Africa’s digital finance space. Parallel events to watch for include Interswitch’s imminent IPO, e-commerce venture Jumia’s shift to digital finance, and WhatsApp’s likely entry in African payments.

The continent’s 1.2 billion people represent the largest share of the world’s unbanked and underbanked population — which makes fintech Africa’s most promising digital sector. But it’s becoming a notably crowded sector where startup attrition and failure will certainly come into play.

And not to be overlooked is how OPay’s capital raise moves Opera toward becoming a multi-service commercial internet platform in Africa.

This places OPay and its Opera-supported suite of products on a competitive footing with other ride-hail, food delivery and payments startups across the continent. That means inevitable competition between Opera and Africa’s largest multi-service internet company, Jumia.

 

 

 

 

 

Chinese EV startup Xpeng Motors raises $400 million, takes on Xiaomi as strategic investor

Xpeng Motors, the Chinese electric vehicle startup backed by Alibaba and Foxconn, has raised a fresh injection of $400 million in capital and has taken on Xiaomi as a strategic investor, the company announced.

The Series C includes an unidentified group of strategic and institutional investors. XPeng Motors Chairman and CEO He Xiaopeng, who also participated in the Series C, said the received strong support from many of its current shareholders. Xiaomi founder and CEO Lei Jun previously invested in the company.

“Xiaomi Corporation and Xpeng Motors have achieved significant progress through in-depth collaboration in developing technologies connecting smart phones and smart cars,” Xiaomi’s Jun said in a statement. “We believe that this strategic investment will further deepen our partnership with Xpeng in advancing innovation for intelligent hardware and the Internet of Things.”

The company didn’t disclose what its post-money valuation is now. However, a source familiar with the deal said it is “better” than the 25 billion yuan valuation it had in its last round in August 2018.

The announcement confirms an earlier report from Reuters that cited anonymous sources.

XPeng also said it has garnered “several billions” in Chinese yuan of unsecured credit lines from institutions such as China Merchants Bank, China CITIC Bank and HSBC. XPeng didn’t elaborate when asked what “several billions” means.

Brian Gu, Xpeng Motors Vice Chairman and President added that the company has been able to hit most of its business and financing targets despite economic headwinds, uncertainties in the global markets and government policy changes that have had direct impact on overall auto sales in China.

The round comes as XPeng prepares to launch its electric P7 sedan in spring 2020. Deliveries of the P7 are expected to begin in the second quarter of 2020.

Xpeng began deliveries of its first production model the G3 2019 SUV in December and shipped 10,000 models by mid-June. The company has since released an enhanced version of the G3 with a 520 km NEDC driving range.

The company plans to launch the P7 sedan in the spring 2020 and will start delivery in 2Q 2020.

XPeng has said it wants to IPO, but it’s unclear when the company might file to become a public company. No specific IPO timetable has been set and a spokesperson said the company is monitoring market conditions closely, but its current focus is on building core businesses.

Apple’s China stance makes for strange political alliances, as AOC and Ted Cruz slam the company

In a rare instance of bipartisanship overcoming the rancorous discord that’s been the hallmark of the U.S. Congress, senators and sepresentatives issued a scathing rebuke to Apple for its decision to take down an app at the request of the Chinese government.

Signed by Senators Ron Wyden, Tom Cotton, Marco Rubio, Ted Cruz, and Congressional Representatives Alexandria Ocasio-Cortez, Mike Gallagher and Tom Malinowski, the letter was written to “express… strong concern about Apple’s censorship of apps, including a prominent app used by protestors in Hong Kong, at the request of the Chinese government.”

Tim Cook gets a letter from @RonWyden @SenTomCotton @marcorubio @AOC @tedcruz @RepGallagher & @Malinowski re: China censorship. pic.twitter.com/dJlEAlheMX

— Jessica Smith (@JessicaASmith8) October 18, 2019

In 2019, it seems the only things that can unite America’s clashing political factions are the decisions made by companies in one of its most powerful industries.

At the heart of the dispute is Apple’s decision to take down an app called HKMaps that was being used by citizens of the island territory to track police activity.

For several months protestors have been clashing with police in the tiny territory over what they see as the undue influence being exerted by China’s government in Beijing over the governance of Hong Kong. Citizens of the former British protectorate have enjoyed special privileges and rights not afforded to mainland Chinese citizens since the United Kingdom returned sovereignty over the region to China on July 1, 1997.

“Apple’s decision last week to accommodate the Chinese government by taking down HKMaps is deeply concerning,” the authors of the letter wrote. “We urge you in the strongest terms to reverse course, to demonstrate that Apple puts values above market access, and to stand with the brave men and women fighting for basic rights and dignity in Hong Kong.”

Apple has long positioned itself as a defender of human rights (including privacy and free speech)… in the United States. Abroad, the company’s record is not quite as spotless, especially when it comes to pressure from China, which is one of the company’s largest markets outside of the U.S.

Back in 2017, Apple capitulated to a request from the Chinese government that it remove all virtual private networking apps from the App Store. Those applications allowed Chinese users to circumvent the “Great Firewall” of China, which limits access to information to only that which is approved by the Chinese government and its censors.

Over 1,100 applications have been taken down by Apple at the request of the Chinese government, according to the organization GreatFire (whose data was cited in the Congressional letter). They include VPNs, and applications made for oppressed communities inside China’s borders (like Uighurs and Tibetans).

Apple isn’t the only company that’s come under fire from the Chinese government as part of their overall response to the unrest in Hong Kong. The National Basketball Association and the gaming company Blizzard have had their own run-ins resulting in self-censorship as a result of various public positions from employees or individuals affiliated with the sports franchises or gaming communities these companies represent.

However, Apple is the largest of these companies, and therefore the biggest target. The company’s stance indicates a willingness to accede to pressure in markets that it considers strategically important no matter how it positions itself at home.

The question is what will happen should regulators in the U.S. stop writing letters and start making legislative demands of their own.

Alibaba acquires NetEase Kaola in deal worth $2 billion

Alibaba Group has acquired NetEase Kaola for $2 billion, the two companies said today, and will integrate it into Tmall, creating the largest cross-border e-commerce platform in China. The announcement follows weeks of media reports about a potential deal, which was said to have stalled in the middle of August after the companies reportedly disagreed on transaction details.

Tmall Import and Export general manager Alvin Liu has been named as Kaola’s new CEO, replacing Zhang Lei, but Kaola will continue to operate independently under its own brand.

Tmall Global and Kaola are China’s largest and second-largest cross-border e-commerce platforms, respectively, holding 31.7% and 24.5% of the market, and their union means they will create a business that will far outstrip in size rivals like JD Worldwide, VIP International and Amazon China. (Earlier this year, NetEase was reportedly in talks to merge Kaola with Amazon China).

Alibaba and Yunfeng, the investment firm launched by Alibaba founder Jack Ma, also agreed to invest $700 million into NetEase Cloud Music’s latest funding round. This will give Alibaba a minority stake in the streaming music service, with NetEase remaining its controlling shareholder.

In a press release, NetEase CEO William Ding said “We are pleased to have found a strategic fit for Kaola within Alibaba’s extensive ecosystem, where Kaola will continue to provide Chinese consumers with high-quality import products and services. At the same time, the completion of this strategic transaction will allow NetEase to focus on its growth strategy, investing in markets that allow us to best leverage our competitive advantages.”

Daniel Zhang, Alibaba Group’s CEO, said “Alibaba is confidence about the future of China’s import e-commerce market, which we believe remains in its infancy with great growth potential.”

WeChat restricts controversial video face-swapping app Zao, citing “security risks”

Zao went viral in China this weekend for its realistic face-swapping videos, but after controversy about its policies, WeChat restricted access to the app on its messaging platform.

Developed by a unit of Momo, one of China’s most popular dating apps, Zao creates videos that replace the faces of celebrities in scenes from popular movies, shows and music videos with a selfie uploaded by the user.

The app, currently available only in China, went viral as users shared their videos through WeChat and other social media platforms in China. But concerns about the potential misuse of deepfake technology coupled with a clause (now deleted) in Zao’s terms of use that gave it full ownership and copyright to content uploaded or created on it, in addition to “completely free, irrevocable, perpetual, transferrable, and re-licensable rights,” caused controversy.

In case you haven’t heard, #ZAO is a Chinese app which completely blew up since Friday. Best application of ‘Deepfake’-style AI facial replacement I’ve ever seen.

Here’s an example of me as DiCaprio (generated in under 8 secs from that one photo in the thumbnail) 🤯pic.twitter.com/1RpnJJ3wgT

— Allan Xia (@AllanXia) September 1, 2019

By going viral quickly and being very easy to use (Zao’s videos can be generated from a single selfie, though it suggests that users upload photos from several angles for better results), the app has also focused more attention on deepfake technology and how it can potentially be used to spread misinformation or harass people.

Users can still upload videos they created with Zao to WeChat, but if they try to download the app or send an invite link to another WeChat user, a message is displayed that says “this web page has been reported multiple times and contains security risks. To maintain a safe online environment, access to this page has been blocked.”23011567479434 .pic

Zao was released last Friday and quickly became the top free iOS app in China, according to App Annie. A statement posted on Sept. 1 to Zao’s Weibo account says “we completely understand everybody’s concerns about the privacy issue. We are aware of the issue and we are thinking about how to fix the problems, we need a little time.” Its terms and conditions now say user-generated content will only be used by the company to improve the app and that all deleted content will be removed from its servers.

TechCrunch has contacted Zao for comment.

The Hong Kong Internet Service Providers Association warns that restricting online access would be ruinous for the region

After Hong Kong’s leader suggested she may invoke emergency powers that could potentially include limiting Internet access, one of city’s biggest industry groups warned that “any such restrictions, however slight originally, would start the end of the open Internet of Hong Kong.”

While talking to reporters on Tuesday, Hong Kong Chief Executive Carrie Lam suggested the government may use the Emergency Regulations Ordinance in response to ongoing anti-government demonstrations. The law, which has not been used in more than half a century, would give the government a sweeping array of powers, including the ability to restrict or censor publications and communications. In contrast to China’s “Great Firewall” and routine government censorship of internet services, Hong Kong’s internet is currently open and mostly unrestricted, with the exception of laws to prevent online crime, copyright infringements and the spread of obscene material like child pornography.

In an “urgent statement” addressed to Hong Kong’s Executive Council, the Hong Kong Internet Service Providers Association (HKISPA) said that because of technology like VPNs, the cloud and cryptographies, the only way to “effectively and meaningfully block any services” would entail putting all of Hong Kong’s internet behind a large-scale surveillance firewall. The association added that this would have huge economic and social consequences and deter international organizations from doing business in Hong Kong.

Furthermore, restricting the internet in Hong Kong would also have implications in the rest of the region, including in mainland China, the HKISPA added. There are currently 18 international cable systems that land, or will land, in Hong Kong, making it a major telecommunications hub. Blocking one application means users will move onto another application, creating a cascading effect that will continue until all of Hong Kong is behind a firewall, the association warned.

In its statement, the HKISPA wrote that “the lifeline of Hong Kong’s Internet industry relies in large part on the open network,” adding “Hong Kong is the largest core node of Asia’s optical fiber network and hosts the biggest Internet exchange in the region, and it is now home to 100+ data centers operated by local and international companies, and it transits 80%+ of traffic for mainland China.”

“All these successes rely on the openness of Hong Kong’s network,” the HKISPA continued. “Such restrictions imposed by executive orders would completely ruin the uniqueness and value of Hong Kong as a telecommunications hub, a pillar of success as an international financial centre.”

The HKISPA urged the government to consult the industry and “society at large” before placing any restrictions in place. “The HKISPA strongly opposes selective blocking of Internet Services without consensus of the community,” it said.

More than 130 U.S. companies have reportedly applied to sell to Huawei, but the Commerce Department has approved none of them

Trump said in July that some U.S. suppliers would be allowed to sell to Huawei while it remains blacklisted, but so far no vendors have been allowed to do so. Reuters reports that more than 130 applications have been submitted by companies that want to do business with Huawei, but the U.S. Commerce Department has not approved any of them yet.

Huawei has served as a bargaining chip in the U.S.-China trade war, which escalated again last week when Trump said he would adds tariffs to $550 billion worth of Chinese imports, after China said it would impose duties of $75 billions on U.S. goods. Trump’s mixed signals during this weekend’s G7 summit also created confusion on Wall Street.

When both presidents met at the G20 Summit in June, Donald Trump told Chinese leader Xi Jinping that he would allow some American companies to sell to Huawei, even though it remains on the Commerce Department’s Entity List. Secretary of Commerce Wilbur Ross said the Commerce Department would begin accepting applications again, requiring companies to prove that the tech they sell to Huawei would not pose a national security risk.

But one of the reasons no licenses have been granted yet is because the Commerce Department is unclear about what it is supposed to do. Former Commerce department official William Reinsch told Reuters that “nobody in the executive branch knows what [Trump] wants and they’re all afraid to make a decision without knowing that.”

In addition to providing telecom equipment, Huawei is an important customer for many U.S. tech firms, including Qualcomm, Intel and Micron. Out of the $70 billion in parts it bought last year, $11 billion of that went to U.S. suppliers. The U.S. claims Huawei is a national security risk, a charge the company has repeatedly denied.

China’s Transsion and Kenya’s Wapi Capital partner on Africa fund

Chinese mobile-phone and device maker Transsion is teaming up with Kenya’s Wapi Capital to source and fund early-stage African fintech startups.

Headquartered in Shenzhen, Transsion is a top-seller of smartphones in Africa that recently confirmed its imminent IPO.

Wapi Capital is the venture fund of Kenyan fintech startup Wapi Pay—a Nairobi based company that facilitates digital payments between African and Asia via mobile money or bank accounts.

Investments for the new partnership will come from Transsion’s Future Hub, an incubator and seed fund for African startups opened by Transsion in 2019.

Starting September 2019, Transsion will work with Wapi Capital to select early-stage African fintech companies for equity-based investments of up to $100,000, Transsion Future Hub Senior Investor Laura Li told TechCrunch via email.

Wapi Capital won’t contribute funds to Transsion’s Africa investments, but will help determine the viability and scale of the startups, including due diligence and deal flow, according to Wapi Pay co-founder Eddie Ndichu.

Wapi Pay and Transsion Future Hub will consider ventures from all 54 African countries and interested startups can reach out directly to either organization, Ndichu and Li confirmed.

The Wapi Capital fintech partnership is not Transsion’s sole VC focus in Africa. Though an exact fund size hasn’t been disclosed, the Transsion Future Hub will also make startup investments on the continent in adtech, fintech, e-commerce, logistics, and media and entertainment, according to Li.

Transsion Future Hub’s existing portfolio includes Africa focused browser company Phoenix, content aggregator Scoop, and music service Boomplay.

Wapi Capital adds to the list of African located and run venture funds—which have been growing in recent years—according to a 2018 study by TechCrunch and Crunchbase. Wapi Capital will also start making its own investments and is looking to raise $1 million this year and $10 million over the next three years, according to Ndichu, who co-founded the fund and Wapi Pay with his twin brother Paul.

Transsion’s commitment to African startup investments comes as the company is on the verge of listing on China’s new Nasdaq-style STAR Market tech exchange. Transsion confirmed to TechCrunch this month the IPO is in process and that it could raise up to 3 billion yuan (or $426 million).

Transsion sold 124 million phones globally in 2018, per company data. In Africa, Transsion holds 54% of the feature phone market — through its brands Tecno, Infinix and Itel — and in smartphone sales is second to Samsung and before Huawei, according to International Data Corporation stats.

Transsion has R&D centers in Nigeria and Kenya and its sales network in Africa includes retail shops in Nigeria, Kenya, Tanzania, Ethiopia and Egypt. The company also has a manufacturing facility in Ethiopia.

Transsion’s move into venture investing tracks greater influence from China in African tech.

China’s engagement with African startups has been light compared to China’s deal-making on infrastructure and commodities.

Transsion’s Wapi Pay partnership is the second recent event — after Chinese owned Opera’s big venture spending in Nigeria — to reflect greater Chinese influence and investment in the continent’s digital scene.

 

 

 

 

 

 

 

Through a new partnership and $72 million in funding, LanzaTech expands its carbon capture tech

For nearly fifteen years LanzaTech has been developing a carbon capture technology that can turn waste streams into ethanol that can be used for chemicals and fuel.

Now, with $72 million in fresh funding at a nearly $1 billion valuation and a newly inked partnership with biotechnology giant, Novo Holdings, the company is looking to expand its suite of products beyond ethanol manufacturing, thanks, in part, to the intellectual property held by Novozymes (a Novo Holdings subsidiary).

“We are learning how to modify our organisms so they can make things other than ethanol directly,” said LanzaTech chief executive officer, Jennifer Holmgren.

From its headquarters in Skokie, Ill., where LanzaTech relocated in 2014 from New Zealand, the biotechnology company has been plotting ways to reduce carbon emissions and create a more circular manufacturing system. That’s one where waste gases and solid waste sources that were previously considered to be un-recyclable are converted into chemicals by LanzaTech’s genetically modified microbes.

The company already has a commercial manufacturing facility in China, attached to a steel plant operated by the Shougang Group, which produces 16 million gallons of ethanol per-year. LanzaTech’s technology pipes the waste gas into a fermenter, which is filled with genetically modified yeast that uses the carbon dioxide to produce ethanol. Another plant, using a similar technology is under construction in Europe.

Through a partnership with Indian Oil, LanzaTech is working on a third waste gas to ethanol using a different waste gas taken from a Hydrogen plant.

The company has also inked early deals with airlines like Virgin in the UK and ANA in Japan to make an ethanol-based jet fuel for commercial flight. And a third application of the technology is being explored in Japan which takes previously un-recyclable waste streams from consumer products and converts that into ethanol and polyethylene that can be used to make bio-plastics or bio-based nylon fabrics.

Through the partnership with Novo Holdings, LanzaTech will be able to use the company’s technology to expand its work into other chemicals, according to chief executive Jennifer Holmgren. “We are making product to sell into that [chemicals market] right now. We are taking ethanol and making products out of it. Taking ethylene and we will make polyethylene and we will make PET to substitute for fiber.”

Holmgren said that LanzaTech’s operations were currently reducing carbon dioxide emissions by the equivalent of taking 70,000 cars off the road.

“LanzaTech is addressing our collective need for sustainable fuels and materials, enabling industrial players to be part of building a truly circular economy,” said Anders Bendsen Spohr, Senior Director at Novo Holdings, in a statement. “Novo Holdings’ investment underlines our commitment to supporting the bio-industrials sector and, in particular, companies that are developing cutting-edge technology platforms. We are excited to work with the LanzaTech team and look forward to supporting the company in its next phase of growth.”

Holmgren said that the push into new chemicals by LanzaTech is symbolic of a resurgence of industrial biotechnology as one of the critical pathways to reducing carbon emissions and setting industry on a more sustainable production pathway.

“Industrial biotechnology ca unlock the utility of a lot of waste carbon emissions. ” said Holmgren. “[Municipal solid waste] is an urban oil field. And we are working to find new sources of sustainable carbon.”

LanzaTech isn’t alone in its quest to create sustainable pathways for chemical manufacturing. Solugen, an upstart biotechnology company out of Houston, is looking to commercialize the bio-production of hydrogen peroxide. It’s another chemical that’s at the heart of modern industrial processes — and is incredibly hazardous to make using traditional methods.

As the world warms, and carbon emissions continue to rise, it’s important that both companies find pathways to commercial success, according to Holmgren.

“It’s going to get much much worse if we don’t do anything,” she said.

Didi Chuxing and oil giant BP team up to build electric vehicle charging infrastructure in China

Ride-sharing and transportation platform Didi Chuxing announced today that it has formed a joint venture with BP, the British gas, oil and energy supermajor. to build electric vehicle charging infrastructure in China. The charging stations will be available to Didi and non-Didi drivers.

The news of Didi and BP’s joint venture comes one week after Didi announced that it had received funding totaling $600 million from Toyota Motor Corporation. As part of that deal, Didi and Toyota Motor set up a joint venture with GAC Toyota Motor to provide vehicle-related services to Didi drivers.

BP’s first charging site in Guangzhou has already been connected to XAS (Xiaoju Automobile Solutions), which Didi spun out in April 2018 to put all its vehicle-related services into one platform.

XAS is part of Didi Chuxing’s evolution from a ride-sharing company to a mobility services platform, with its services available to other car, transportation and logistics companies. In June, Didi also opened its ride-sharing platform to other companies, enabling its users to request rides from third-party providers in a bid to better compete with apps like Meituan Dianping and AutoNavi, which aggregate several ride-hailing services on their platforms.

Didi says it now offers ride-sharing, vehicle rental and delivery services to 550 million users and covers 1,000 cities through partnerships with Grab, Lyft, Ola, 99 and Bolt (Taxify). The company also claims to be the world’s largest electric vehicle operator with more than 600,000 EVs on its platform.

It also has partnerships with automakers and other car-related companies like Toyota, FAW, Dongfeng, GAC, Volkswagen and Renault-Nissan-Mitsubishi to collaborate on a platform that uses new energy, AI-based and mobility technologies.

In a press statement, Tufan Erginbilgic, the CEO of BP’s Downstream business, said “As the world’s largest EV market, China offers extraordinary opportunities to develop innovative new businesses at scale and we see this as the perfect partnership for such a fast-evolving environment. The lessons we learn here will help us further expand BP’s advanced mobility business worldwide, helping drive the energy transition and develop solutions for a low carbon world.”

Joy Capital closes $700M for early-stage investments in China

Joy Capital, the venture capital firm that’s backed Luckin, NIO, Mobike and other investor darlings in China, just raised $700 million for a new fund focusing on early-to-growth stage startups.

Launched in 2015 by a team of former investors at Legend Capital, the investment arm of PC maker Lenovo’s parent company, Joy Capital made the news official (in Chinese) on Monday. It didn’t identify the limited partners in this new corpus of funding but said they include “top” public pension funds and insurance companies. Its existing pool of investors counts those from sovereign wealth funds, education-focused endowment funds, family funds and parent funds.

The fresh money boosted Joy’s total tally to over 10 billion yuan ($1.45 billion) under management, with a focus on backing cutting edge technologies and companies involved in the digital upgrade of China’s traditional sectors, or what Joy’s founding partner Liu Erhai (pictured above) dubbed the “new infrastructure” in an op-ed for the China Securities Journal. Targets can include the likes of logistics companies, online car rental platforms or bike-sharing apps.

As a relatively young fund, Joy Capital has so far achieved a few large outcomes. One of its portfolio companies NIO became China’s first electric vehicle startup to go public in the U.S. as a rival to Tesla. It’s also funded Luckin, the Starbucks nemesis from China that floated in the U.S. only 18 months after inception. The fund’s other big wins include Mobike, the bike-sharing pioneer that was sold to Meituan Dianping for $2.7 billion and fast-growing house-sharing unicorn Danke Apartment.

Joy Capital’s new raise arrived at a time when Chinese venture investors are coping with a cash crunch amid a cooling economy exacerbated by the expansion of U.S. tariffs. We reported that private equity and venture capital firms in the country raised 30% less in the first six months of 2019 compared to a year earlier, and the number of investors that managed to attract fundings was down 52% in the same period.

Alibaba to help Salesforce localize and sell in China

Salesforce, the 20-year-old leader in customer relationship management (CRM) tools, is making a foray into Asia by working with one of the country’s largest tech firms, Alibaba.

Alibaba will be the exclusive provider of Salesforce to enterprise customers in mainland China, Hong Kong, Macau, and Taiwan, and Salesforce will become the exclusive enterprise CRM software suite sold by Alibaba, the companies announced on Thursday.

The Chinese internet has for years been dominated by consumer-facing services such as Tencent’s WeChat messenger and Alibaba’s Taobao marketplace, but enterprise software is starting to garner strong interest from businesses and investors. Workflow automation startup Laiye, for example, recently closed a $35 million funding round led by Cathay Innovation, a growth-stage fund that believes “enterprise software is about to grow rapidly” in China.

The partners have something to gain from each other. Alibaba does not have a Salesforce equivalent serving the raft of small-and-medium businesses selling through its e-commerce marketplaces or using its cloud computing services, so the alliance with the American cloud behemoth will fill that gap.

On the other hand, Salesforce will gain sales avenues in China through Alibaba, whose cloud infrastructure and data platform will help the American firm “offer localized solutions and better serve its multinational customers,” said Ken Shen, vice president of Alibaba Cloud Intelligence, in a statement.

“More and more of our multinational customers are asking us to support them wherever they do business around the world. That’s why today Salesforce announced a strategic partnership with Alibaba,” said Salesforce in a statement.

Overall, only about 10% of Salesforce revenues in the three months ended April 30 originated from Asia, compared to 20% from Europe and 70% from the Americas.

Besides gaining client acquisition channels, the tie-up also enables Salesforce to store its China-based data at Alibaba Cloud. China requires all overseas companies to work with a domestic firm in processing and storing data sourced from Chinese users.

“The partnership ensures that customers of Salesforce that have operations in the Greater China area will have exclusive access to a locally-hosted version of Salesforce from Alibaba Cloud, who understands local business, culture and regulations,” an Alibaba spokesperson told TechCrunch.

Cloud has been an important growth vertical at Alibaba and nabbing a heavyweight ally will only strengthen its foothold as China’s biggest cloud service provider. Salesforce made some headway in Asia last December when it set up a $100 million fund to invest in Japanese enterprise startups and the latest partnership with Alibaba will see the San Francisco-based firm actually go after customers in Asia.

China plans e-cigarette regulation as industry booms

China is taking steps to regulate its blossoming vaping market as health concerns over electronic cigarettes increase in recent times.

China’s National Health Commission has begun research into e-cigarettes and plans to issue legislation for the industry, said the head of the health authority Mao Qunan at a press conference this week. The attempt came as Chinese e-cigarette startups raised loads of venture capital over the past year in their fight to vie for attention in the world’s largest market of smokers.

Vaping suppliers in China range from little-known workshops that have come under legal attack from industry giant Juul, which is reportedly mulling a China entry itself, to venture-backed startups operating out of manufacturing hub Shenzhen. At least 20 e-cigarette companies in China have raised fundings since the beginning of 2019, according to data collected by Crunchbase.

These players are in effect up against state monopoly China Tobacco, which is the world’s biggest cigarette maker and provides the government with colossal tax revenues.

Some researchers support the use of vaping to help adults quit smoking while others have shown that e-cigarettes are just as addictive as traditional ones. The other major controversy is the growing use of e-cigarettes among teenagers, which has led to California’s plan to ban vaping product sales.

China is also applying more scrutiny to the new smoking technology. Research shows that the aerosol produced by heating up e-cigarettes can contain “a lot of harmful substances” and additives in e-cigarettes can “pose health risks,” said Mao. He also noted that equivocal labeling of nicotine level can misguide smokers and sloppy device standards can result in battery explosion and other safety incidents.

Like the U.S., China has seen a worryingly high vaping rate among young people, which is another reason that urges Beijing to hold the industry in check. The use of e-cigarettes by kids, teens and young adults has been proven unsafe because nicotine, which is highly addictive, can harm brain development.

In May, China drew up a set of standards (in Chinese) for e-cigarettes that specify the level of nicotine, the type of additives and other components and designs allowed in battery-powered cigarette devices.

China’s new Nasdaq-style board for tech shares starts trading with 25 companies listed

Trading on China’s new Nasdaq-style stock market began today, with 25 tech companies listed on the Science and Technology Innovation Board, operated by the Shanghai Stock Market. Called the STAR Market, the board is an initiative by the government to encourage more Chinese tech companies to list domestically by addressing concerns about governance.

Traders cautioned that initial trading may be volatile as investors buy and trade stocks, however, and that warning was borne out today with trading by several companies paused after a surge of buying triggered their circuit breakers, or measures put into place that temporarily halt buying and selling to prevent stock crashes.

Plans for the STAR Market were announced in November as part of the Chinese government’s efforts to launch capital market reforms and make listing in mainland China more appealing to tech companies by easing profitability requirements. Some of the highest-profile Chinese tech IPOs, including Alibaba, Tencent, Xiaomi, JD.com and Pinduoduo, have taken place in New York City or Hong Kong, and the STAR Market may encourage more local stock debuts and investment—a goal that holds especially high stakes as China’s trade war with the U.S. continues.

But CNBC notes that the success of the STAR Market is far from a sure thing, since China has launched two other equity markets (the ChiNext in 009 and the New Third Board in 2013) that still receive far less attention than its two primary stock exchanges in Shanghai and Shenzhen.

Hellobike, survivor of China’s bike-sharing craze, goes electric

Just two years ago, investors were heavily pouring money into China’s dockless bike-sharing startups. Now that boom has busted with derelict bikes littering the streets of cities.

Meanwhile, a new race has started for two-wheelers with motors — and one of the main players is a survivor from the bike-sharing craze. Blessed with fundings from the world’s most valuable fintech company Ant Financial through its Series D to F funding rounds, Hellobike provides a range of mobility services such as shared e-bikes and rented electric scooters to its 230 million registered users.

Electric push

Hellobike first launched in 2016 by deploying shared bikes in smaller cities and towns — where Ofo and Mobike were largely absent early on — rather than large urban centers like Beijing and Shanghai. This allowed Hellobike to largely avoid the cash splurging competition against Ofo and Mobike.

Ofo is now battling a major financial crisis as it struggles to repay user deposits. Its archrival Mobike has slowed down expansion since it was sold to Hong Kong-listed local services giant Meituan. And Hellobike, which boasts about its operational efficiency, has begun an electric push.

“When the two major powers were at war, neither of them went after electric bikes. They were fighting over bicycles,” Hellobike’s chief financial officer Fischer Chen (pictured above) recently told TechCrunch at Rise conference in Hong Kong, referring to the feud between Mobike and Ofo. “As such, there was no price war for e-bikes from the outset. The competition is rational.”

Electric two-wheeled vehicles are in high demand in the country where nearly 1.4 billion people live. According to data collected by Hellobike, nearly 300 million rides are completed on analog bikes every day in China. What many don’t realize is that pedal-assist electric bikes and pedal-free scooters together more than double that number, generating 700 million rides per day.

As with bicycles, there are benefits to rent rather than buy an electric bike in China. For one, users don’t need to worry about getting their assets stolen. Second — and, this is specific to electric vehicles — finding a safe, convenient charging spot can be a challenge in China.

That’s why Hellobike put up charging stations as it went about offering shared ebikes in 2017. At these kiosks, riders swap their battery out for a new one without having to plug in and wait. They then have the option to pay with Alipay, Ant’s mobile wallet with a one-billion user base.

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Hellobike’s bike (left and middle) and e-bike (right) models / Photo: Hellobike via Weibo

Of all the monthly two-wheeler electric bikes activity in China, Hellobike has captured 80% of the market share, Chen claims. For bike-sharing, it accounts for 60-70%. It’s hard to verify the share by looking at data compiled by third-party app trackers, for they don’t usually break out the user number for individual features. The Hellobike app is a one-stop-shop for bicycles, e-bikes, e-scooters as well as carpooling, a service complementary to its main two-wheeler business intended to “capture price-sensitive small-town consumers” according to Chen.

Similarly, Mobike has been folded into Meituan’s all-in-one service app. What further complicates the inquiry is some of Hellobike’s rides are accessed directly on Alipay rather than its own app.

When it comes to competition in electric two-wheelers, Chen maintained that other challengers are “relatively small” and that acquiring online users has become “very difficult.” For Hellobike, getting existing customers to try out new features takes as much effort as “adding a new tab to its app,” Chen suggested.

But other internet giants have also set their sight on plugged-in micromobility. Both Mobike and ride-sharing leader Didi Chuxing have their own e-bike sharing programs. It won’t be an easy game, as all contenders need to cope with China’s increasingly strict rules for electric bicycles.

Scooter rental is next

What’s for certain is that Hellobike has big ambitions for electric micromobility. While shared bikes and e-bikes are meant for one-off uses, Hellobike plans to rent out e-scooters for longer swathes of time as many people might want the powered-up vehicles for their daily commute.

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Hellobike’s electric scooter. Caption: “App-enabled lock. Smart anti-theft. Real-time location tracking for checking the vehicle’s status.” / Photo: Hellobike homepage  

Hellobike founded a new joint venture last month to fulfill that demand. Joining forces with Ant — which is controlled by Alibaba founder Jack Ma — and China’s top battery manufacturer CATL, Hellobike is launching a rental marketplace for its 25 km/h e-scooters targeted at millions of migrant workers in Chinese cities.

“People might be able to afford an e-scooter that costs several thousand yuan [$1 = 6.88yuan], but they might be leaving the city after a year, so why would they buy it? So we come in as a third-party partner with a new rental model through which people pay about 200 yuan a month to use the scooter,” explained Chen. “By doing so, we convert people from buying vehicles to paying for services, renting the vehicles.”

The three shareholders will also work to install more battery-swapping stations nationwide that not only recharge Hellobike’s shared e-bikes but also its e-scooters, that will be made by manufacturing partners.

“We function as a platform and won’t compete with traditional scooter manufacturers,” suggested Chen. “They still get to use their own designs and SKUs [stock keeping units], but we will put smart hardware into their models… so users know where their vehicles are… and they can unlock the scooters with a QR code just like they do with a shared bike or e-bike.”

Hellboke has raised at least $1.8 billion to date, according to public data compiled by Crunchbase. Bloomberg reported in April that it was seeking to raise at least $500 million in a new funding round. The company declined to comment on its fundraising progress.

When it comes to financial metrics, Chen, a veteran investment banker, declined to disclose whether Hellobike overall is profitable but said the company “performs much better than its competitors” financially. The most profitable segment, according to the executive, is the electric bike business.

As for bicycles, Chen noted that China’s main bike-sharing companies are “no longer burning money” since they’ve raised prices in recent times. Hellobike’s bike unit has achieved cash-flow positive during the warmer, peak seasons, Chen added.

The Commerce Department will accept applications from companies that want to supply Huawei, but it remains blacklisted

About two months after Huawei was placed on the Commerce Department’s Entity List, the Chinese telecom equipment and smartphone giant will be able to do business with American suppliers again–but only if they get a license from the U.S. government. Commerce Secretary Wilbur Ross made the announcement during a department conference, adding that companies must first demonstrate that the technology they sell to Huawei will not put national security at risk.

Huawei will remain on the entity list, however, and license applications will be reviewed under a “presumption of denial,” making it likely that most will not be approved.

Last month while both presidents were in Japan for the G20 Summit, Donald Trump told Chinese leader Xi Jinping that he would allow U.S. companies to sell equipment to Huawei again, but the promise created confusion about how it would be carried out, with the Commerce Department instructing staff to continue acting as if the blacklist is still in place. Huawei, the world’s largest telecom equipment maker and second-largest smartphone vendor, is a major bargaining chip in the ongoing trade war between the U.S. and China.

The blacklist has had a major impact on Huawei, with important suppliers like Qualcomm, Intel and Google severing ties after it was placed on the entity list. Huawei, which has repeatedly denied being a threat to U.S. national security, said that being blacklisted would cost the company about $30 billion in revenue, though founder and CEO Ren Zhengfei later downplayed the impact in an interview with CNBC. It also means U.S. companies have lost an important customer. Out of the $70 billion Huawei spent buying components last year, $11 billion went to American companies like Qualcomm, Intel and Micron.

Despite Trump’s promised reprieve, Commerce Department tells staff to continue treating Huawei as blacklisted

President Donald Trump recently promised to ease the ban on American companies doing business with Huawei, but the Commerce Department is requiring its staff to treat Huawei as if the blacklist is still in place, reports Reuters.

Enforcement staff were sent an internal letter this week by John Sonderman, the Deputy Director of the Office of Export Enforcement, to continue treating Huawei as blacklisted. The letter, viewed by Reuters, said applications from companies that want to sell to Huawei should be considered on merit and flagged with language that notes Huawei is on the entity list. The applications should also still be viewed under a “presumption of denial” policy that applies to companies on the blacklist. This means license applications are scrutinized more closely and most of them are rejected.

Along with 70 other companies, Huawei was added in May to an “entity list” of companies that U.S. companies are forbidden to do business with. As a result, many of Huawei’s most important component suppliers, including Qualcomm and Intel, severed ties with Huawei, while Google cut off its access to Android--a major headache for Huawei, which is the third-largest smartphone maker in the world. Huawei founder and CEO Ren Zhengfei said the ban would result in $30 billion in lost revenue.

According to Reuters, this is the only guidance enforcement officials have received since Trump’s surprise announcement, made after he met with Chinese premier Xi Jinping at the G20 summit. In an apparent concession to China, which sees Huawei as major sticking point in the U.S.-China trade war, Trump suggested that the U.S. will allow American companies to resume selling hardware to Huawei as long as it doesn’t pose a “great national emergency problem,” and would hold meetings about Huawei’s trade status.

After Trump’s announcement, Ren downplayed the effect of the promised partial reprieve, telling the Financial Times that the ban has helped the company “become more united than ever.” He added “if we aren’t allowed to use U.S. components, we are very confident in our ability to use components made in China and other countries.”

India reportedly wants to build its own WhatsApp for government communications

India may have plans to follow France’s footsteps in building a chat app and requiring government employees to use it for official communications.

The New Delhi government is said to be pondering about the need to have homegrown email and chat apps, local news outlet Economic Times reported on Thursday.

The rationale behind the move is to cut reliance on foreign entities, the report said, a concern that has somehow manifested amid U.S.’s ongoing tussle with Huawei and China.

“We need to make our communication insular,” an unnamed top government official was quoted as saying by the paper. The person suggested that by putting Chinese giant Huawei on the entity list, the U.S. has “set alarm bells ringing in New Delhi.”

India has its own ongoing trade tension with the U.S. Donald Trump earlier this month removed the South Asian nation from a special trade program after India did not assure him that it will “provide equitable and reasonable access to its markets.” India called the move “unfortunate”, and weeks later, increased tariffs on some U.S. exports.

The move to step away from foreign communication apps, if it comes to fruition, won’t be the first time a nation has attempted to cautiously restrict usage of popular messaging apps run by foreign players in government offices.

France launched an encrypted chat app — called Tchap — for use in government offices earlier this year. Only those employed by the French government offices can sign up to use the service, though the nation has open sourced the app’s code for the world to see and audit.

Of course, a security flaw in Tchap came into light within the first 24 hours of its release. Security is a real challenge that the government would have to tackle and it might not have the best resources — talent, budget, and expertise — to deal with it.

China, which has restricted many foreign companies from operating in the nation, also maintains customized versions of popular operating systems for use in government offices. So does North Korea.

It won’t be an unprecedented step for India, either. The nation has been trying to build and scale its own Linux-based desktop operating system called BOSS for several years with little success as most government agencies continue to use Microsoft’s Windows operating system.

Even as India has emerged as the third-largest startup hub in the world, the country has failed to build local alternatives for many popular services. Facebook’s WhatsApp has become ubiquitous for communication in India, while Google’s Android and Microsoft’s Windows power most smartphones and computers in the nation.

Semiconductor startup CNEX Labs alleged Huawei’s deputy chairman conspired to steal its intellectual property

A San Jose-based semiconductor startup being sued by Huawei for stealing trade secrets has hit back in court documents, accusing the Chinese firm’s deputy chairman of conspiring to steal its intellectual property, reports the Wall Street Journal. In court filings, CNEX Labs, which is backed by the investment arms of Dell and Microsoft, alleges that Eric Xu, who is also one of Huawei’s rotating CEOs, worked with other Huawei employees to steal its proprietary technology.

The lawsuit, set for trial on June 3 in federal court in the Eastern District of Texas, started in 2017 when Huawei sued CNEX and one of its founders, Yiren “Ronnie” Huang, a former employee at Huawei’s Santa Clara office, for stealing its technology and using unlawful means to poach 14 other Huawei employees. CNEX filed a countersuit the following year. Huawei has denied the startup’s allegations in court filings.

The lawsuit is happening at a fraught time for Huawei. Last week, the Chinese telecom equipment maker (and the world’s second-largest smartphone brand), was placed on a trade blacklist by the Trump administration, which also signed an executive order that would make it possible to block American companies from doing business with Huawei and other companies it deems a national security threat. As a result, several companies have suspended business with Huawei, including Google, Qualcomm, Intel and ARM.

Court filings said that after being directed by Xu to analyze CNEX’s technical information, a Huawei engineer met with the startup’s officials in June 2016, pretending to be a potential customer. But then the engineer produced a report about CNEX’s tech and put it into a database of information about competitors run by Huawei’s chip development unit.

CNEX’s lawyers also say that Xu knew about a partnership between Huawei and Xiamen University that was allegedly part of plan to steal the startup’s trade secrets. They claim Xiamen obtained a memory board from CNEX in 2017 under a licensing agreement, saying it would be used for academic research. But CNEX lawyer Eugene Mar said that “what was hidden from CNEX was that Xiamen was working with Huawei and had entered into an agreement separately with Huawei to provide them with all of their research test reports,” according to court transcripts viewed by the Wall Street Journal.

Information from the university’s study was then allegedly used for Huawei chip projects, including one that is expected to be released this year. Huawei’s lawyers refuted CNEX’s charges, claiming that the partnership between Huawei and the university did not involve reverse engineering or CNEX’s trade secrets and was meant to design database software instead of developing chips. A Huawei lawyer said that Xu was part of “the chain of command that had requested” information about CNEX and that a CNEX document had been placed into its chip development unit’s database, but denied allegations that anything was stolen.

CNEX co-founder Huang claimed in court filings that he offered to sell his intellectual property to Huawei when he started working at Futurewei, its research and development unit. Huawei refused his offer, but then later tried to get Huang to give them his IP under an employee agreement, which Huang refused to sign, he claims. Huang left Futurewei in 2013 and founded CNEX Labs soon after.

TikTok owner ByteDance’s long-awaited chat app is here

In WeChat -dominated China, there’s no shortage of challengers out there claiming to create an alternative social experience. The latest creation comes from ByteDance, the world’s most valuable startup and the operator behind TikTok, the video app that has consistently topped the iOS App Store over the last few quarters.

The new offer is called Feiliao (飞聊), or Flipchat in English, a hybrid of an instant messenger plus interest-based forums, and it’s currently available for both iOS and Android. It arrived only four months after Bytedance unveiled its video-focused chatting app Duoshan at a buzzy press event.

Screenshots of Feiliao / Image source: Feiliao

Some are already calling Feiliao a WeChat challenger, but a closer look shows it’s targeting a more niche need. WeChat, in its own right, is the go-to place for daily communication in addition to facilitating payments, car-hailing, food delivery and other forms of convenience.

Feiliao, which literally translates to ‘fly chat’, encourages users to create forums and chat groups centered around their penchants and hobbies. As its app description writes:

Feiliao is an interest-based social app. Here you will find the familiar [features of] chats and video calls. In addition, you will discover new friends and share what’s fun; as well as share your daily life on your feed and interact with close friends.

Feiliao “is an open social product,” said ByteDance in a statement provided to TechCrunch. “We hope Feiliao will connect people of the same interests, making people’s life more diverse and interesting.”

It’s unclear what Feiliao means by claiming to be ‘open’, but one door is already shut. As expected, there’s no direct way to transfer people’s WeChat profiles and friend connections to Feiliao, and there’s no option to log in via the Tencent app. As of Monday morning, links to Feiliao can’t be opened on WeChat, which recently crossed 1.1 billion monthly active users.

On the other side, Alibaba, Tencent’s long-time nemesis, is enabling Feiliao’s payments function through the Alipay digital wallet. Alibaba has also partnered with Bytedance elsewhere, most notably on TikTok’s Chinese version Douyin where certain users can sell goods via Taobao stores.

In all, Flipchat is more reminiscent of another blossoming social app — Tencent-backed Jike — than WeChat. Jike (pronounced ‘gee-keh’) lets people discover content and connect with each other based on various topics, making it one of the closest counterparts to Reddit in China.

Jike’s CEO Wa Nen has taken noticed of Feiliao, commenting with the 👌 emoji on his Jike feed, saying no more.

Screenshot of Jike CEO Wa Ren commenting on Feiliao

“I think [Feiliao] is a product anchored in ‘communities’, such as groups for hobbies, key opinion leaders/celebrities, people from the same city, and alumni,” a product manager for a Chinese enterprise software startup told TechCrunch after trying out the app.

Though Feiliao isn’t a direct take on WeChat, there’s little doubt that the fight between Bytedance and Tencent has heated up tremendously as the former’s army of apps captures more user attention.

According to a new report published by research firm Questmobile, ByteDance accounted for 11.3 percent of Chinese users’ total time spent on ‘giant apps’ — those that surpassed 100 million MAUs — in March, compared to 8.2 percent a year earlier. The percentage controlled by Tencent was 43.8 percent in March, down from 47.5 percent, while the remaining share, divided between Alibaba, Baidu and others, grew only slightly from 44.3 percent to 44.9 percent over the past year.

Tech stocks slide on US decision to blacklist Huawei and 70 affiliates

The United States has been lobbying for months to prevent its western allies from using Huawei equipment in their 5G deployment, and on Wednesday, Washington made it more difficult for the Chinese telecom titan to churn out those next-gen products.

The U.S. Department of Commerce announced that it will add Huawei and its 70 affiliates to the so-called ‘Entity List,’ a move that will prevent the telecom giant from buying parts and components from U.S. companies without approval from Washington. That confirms reports of the potential ban a day before.

Despite being the largest telecom equipment maker around the world, Huawei relies heavily on its American suppliers, giving the U.S. much leeway to hobble the Chinese firm’s production.

Following the dramatic move, shares of a gauge of Huawei affiliates slumped on Wednesday. Tatfook Technology, which sells to Huawei as well as Ericsson and Bosch, dropped 2.84 percent in Shenzhen in morning trading. New Sea Union Telecom, a supplier to China’s ‘big three’ telecom network operators and Huawei, slid 4.88 percent. Another Huawei key partner Chunxing Precision Mechanical dropped as much as 5.37 percent.

Huawei did not comment directly on the Commerce Department’s blacklist when reached out by TechCrunch, but said it’s “ready and willing to engage with the U.S. government and come up with effective measures to ensure product security.”

“Restricting Huawei from doing business in the U.S. will not make the U.S. more secure or stronger; instead, this will only serve to limit the U.S. to inferior yet more expensive alternatives, leaving the U.S. lagging behind in 5G deployment, and eventually harming the interests of U.S. companies and consumers,” Huawei hit back in the statement.

This view is congruent with some of the harshest criticisms of Washington’s backlash against Huawei. Scholars and industry observers warn that Chinese tech firms have become such an integral part to the global economy that severing ties with Huawei will do ham to 5G advancement worldwide.

In addition, the Chinese company said the U.S.’s “unreasonable restrictions will infringe upon Huawei’s rights and raise other serious legal issues,” though it did not spell out what those rights and legal concerns are.

The announcement dropped on the same day U.S. President Donald Trump declared “a national emergency” over technology supply chain threats from the country’s “foreign adversaries”.

The Commerce Department said it has a reasonable basis to conclude that “Huawei is engaged in activities that are contrary to U.S. national security or foreign policy interest.”

Some of the U.S’s allies including the U.K. are still investigating Huawei’s possible security threat and deciding how close a link they should keep with Huawei, but the Shenzhen-based company has already taken a bold step to give its potential clients some assurance.

Just this Tuesday, Huawei told reporters in London that it’s “willing to sign no-spy agreements with governments, including the U.K. government,” and commit itself to making its equipment “meet the no-spy, no-backdoors standard.”

The U.S.’s tit-for-tat with Huawei also includes the push to arrest the company’s CFO Meng Wanzhou on charges that Huawei did business in Iran in breach of U.S. sanctions.

Huawei launches AI-backed database to target enterprise customers

China’s Huawei is making a serious foray into the enterprise business market after it unveiled a new database management product on Wednesday, putting it in direct competition with entrenched vendors like IBM, Oracle and Microsoft.

The Shenzhen-based company, best known for making smartphones and telecom equipment, claims its newly minted database uses artificial intelligence capabilities to improve tuning performance, a process that traditionally involves human administrators, by over 60 percent.

Called the GaussDB, the database works both locally as well as on public and private clouds. When running on Huawei’s own cloud, GaussDB provides data warehouse services for customers across the board, from the financial, logistics, education to automotive industries.

The database launch was first reported by The Information on Tuesday citing sources saying it is designed by the company’s secretive database research group called Gauss and will initially focus on the Chinese market.

The announcement comes at a time when Huawei’s core telecom business is drawing scrutiny in the West over the company’s alleged ties to the Chinese government. That segment accounted for 40.8 percent of Huawei’s total revenues in 2018, according to financial details released by the privately-held firm.

Huawei’s consumer unit, which is driven by its fast-growing smartphone and device sales, made up almost a half of the company’s annual revenues. Enterprise businesses made up less than a quarter of earnings, but Huawei’s new push into database management is set to add new fuel to the segment.

Meanwhile, at Oracle, more than 900 employees, most of whom worked for its 1,600-staff research and development center in China, were recently let go amid a major company restructuring, multiple media outlets reported earlier this month.

Data provided to TechCrunch by Boss Zhipin offers clues to the layoff: The Chinese recruiting platform has recently seen a surge in newly registered users who work at Oracle China. But the door is still open for new candidates as the American giant is currently recruiting for more than 100 positions through Boss, including many related to cloud computing.

U.S. slams Alibaba and its challenger Pinduoduo for selling fakes

China’s biggest ecommerce company Alibaba was again on the U.S. Trade Representative’s blacklist over suspected counterfeits sold on its popular Taobao marketplace that connects small merchants to consumers.

Nestling with Alibaba on the U.S.’s annual “notorious” list that reviews trading partners’ intellectual property practice is its fast-rising competitor Pinduoduo . Just this week, Pinduoduo founder Colin Huang, a former Google engineer, wrote in his first shareholder letter since listing the company that his startup is now China’s second-biggest ecommerce player by the number of “e-way bills”, or electronic records tracking the movement of goods. That officially unseats JD.com as the runner-up to Alibaba.

This is the third year in a row that Taobao has been called out by the U.S. government over IP theft, despite measures the company claims it has taken to root out fakes, including the arrest of 1,752 suspects and closure of 1,282 manufacturing and distribution centers.

“Although Alibaba has taken some steps to curb the offer and sale of infringing products, right holders, particularly SMEs, continue to report high volumes of infringing products and problems with using takedown procedures,” noted the USTR in its report.

In a statement provided to TechCrunch, Alibaba said it does “not agree with” the USTR’s decision. “Our results and practices have been acknowledged as best-in-class by leading industry associations, brands and SMEs in the United States and around the world. In fact, zero industry associations called for our inclusion in the report this year.”

Pinduoduo is a new addition to the annual blacklist. The Shanghai-based startup has over the course of three years rose to fame among China’s emerging online shoppers in smaller cities and rural regions, thanks to the flurry of super-cheap goods on its platform. While affluent consumers may disdain Pinduodou products’ low quality, price-sensitive users are hooked to bargains even when items are subpar.

“Many of these price-conscious shoppers are reportedly aware of the proliferation of counterfeit products on pinduoduo.com but are nevertheless attracted to the low-priced goods on the platform,” the USTR pointed out, adding that Pinduoduo’s measures to up the ante in anti-piracy technologies failed to fully address the issue.

Pinduoduo, too, rebutted the USTR’s decision. “We do not fully understand why we are listed on the USTR report, and we disagree with the report,” a Pinduoduo spokesperson told TechCrunch. “We will focus our energy to upgrade the e-shopping experience for our users. We have introduced strict penalties for counterfeit merchants, collaborated closely with law enforcement and employed technologies to proactively take down suspicious products.”

The attacks on two of China’s most promising ecommerce businesses came as China and the U.S. are embroiled in on-going trade negotiations, which have seen the Trump administration repeatedly accused China of IP theft. Tmall, which is Alibaba’s online retailer that brings branded goods to shoppers, was immune from the blacklist, and so was Tmall’s direct rival JD.com.

Taobao has spent over a decade trying to revive its old image of an online bazaar teeming with fakes and “shanzhai” items, which are not outright pirated goods but whose names or designs intimate those of legitimate brands. Pinduoduo is now asked to do the same after a few years of growth frenzy. On the one hand, listing publicly in the U.S. subjects the Chinese startup to more scrutiny. On the other, small-town users may soon demand higher quality as their purchasing power improves. And when the countryside market becomes saturated, Pinduoduo will need to more aggressively upgrade its product selection to court the more sophisticated consumers from Chinese megacities.

Douyu, China’s Twitch backed by Tencent, files for a $500M U.S. IPO

Douyu, a Chinese live streaming service focused on video games, has filed with the U.S. Securities and Exchange Commission as it prepares to raise up to $500 million on the NYSE less than a year after its archrival floated on the same stock market.

Wuhan-based Douyu, whose name translates as “fighting fish”, is the second Twitch -like service backed by Tencent to go public in the United States. Its direct competitor Huya, who has a similarly fierce name “tiger’s teeth” and also counts Tencent as a major investor, raised $180 million from its NYSE listing last May.

It’s not surprising for Tencent to hedge its bets in esports streaming, given the giant relies heavily on video games to make money. For example, Tencent can use some of its portfolio companies’ ad slots to get the word out about its new releases. Indeed, Douyu’s filing shows it received a hefty 27.48 million yuan ($4.09 million) in advertising fees from Tencent last year.

As Douyu warns in its prospectus, its alliance with Tencent can be tenuous.

“Tencent may devote resources or attention to the other companies it has an interest in, including our direct or indirect competitors. As a result, we may not fully realize the benefits we expect from the strategic cooperation with Tencent. Failure to realize the intended benefits from the strategic cooperation with Tencent, or potential restrictions on our collaboration with other parties, could materially and adversely affect our business and results of operations.”

But there are nuances in the giant’s ties to China’s top two live streaming services that could mean more affinity between Tencent and Douyu. The social media and gaming behemoth is currently Douyu’s largest shareholder with a 40.1 percent stake owned through its wholly-owned subsidiary Nectarine. Over at Huya, Tencent is the second-largest stakeholder behind YY, the pioneer in China’s live streaming sector that had spun off Huya.

When it comes to the financial terms, the rivaling pair is in a head-on race. In 2018, Douyu doubled its net revenues to $531.5 million. Huya held an edge as it earned $678.3 million in the same period, also doubling the amount from a year ago.

Huya may have learned a few things about monetizing live streaming from 14-year-old YY as it managed to pull in more revenues despite owning a smaller user base. While Douyu claimed 153.5 million monthly active users in the fourth quarter, Huya had 116.6 million.

How the two make money also diverge slightly. In the fourth quarter, 86 percent of Douyu’s revenues originated from virtual items that users tipped to their favorite streaming hosts, with the remaining earnings derived from advertising and more. By contrast, Huya relied almost exclusively on live streaming gifts, which made up 95.3 percent of total revenues.

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Screenshot of a Douyu live streaming session 

As Douyu grows its coffers to spend on content as well as technologies following the impending IPO, competition in China’s live streaming landscape is set to heat up. Just earlier this month, Huya raised $327 million in a secondary offering to invest in content and R&D. Like many other businesses anchored in content, Huya and Douyu depend tremendously on quality creators to keep users loyal. Both have offered sizable checks to live streaming hosts, promising to grow the internet celebrities into bigger stars.

And they’ve extended the battlefield outside China as emerging media forms, most exemplified by short video services Douyin (TikTok’s China version) and Kuaishou, threaten to steal people’s eyeball time away. Both bite-size video apps now enjoy a much bigger user base than their live streaming counterparts.

“We intend to further explore overseas markets to expand our user base through both organic expansion and selective investments,” noted Douyu in its IPO filing.

In a similar move, Huya’s overseas expansion is also well underway. “In addition to our vigorous domestic growth, we have successfully leveraged our unique business model to enter new overseas markets. We believe we are delivering long-term value through strategic investments in overseas markets in 2019 and beyond,” said Huya chief executive Rongjie Dong in the company’s Q4 earnings report.

Hong Kong-based fintech startup Qupital raises $15M Series A to expand in mainland China

Qupital, a fintech startup that bills itself as Hong Kong’s largest trade financing platform for SMEs, has closed a $15 million Series A led by CreditEase FinTech Investment Fund (CEFIF), with participation from returning investors Alibaba Hong Kong Entrepreneurs Fund and MindWorks Ventures, both participants in its seed round. To date, Qupital has raised $17 million, including a seed round two years ago, and will use its latest funding to expand its supply chain financing products, launch in mainland Chinese cities and hire more people for its tech development and risk management teams.

CreditEase, which provides loans and other financial services for SMEs in China, will act as a strategic investor, aiding with Qupital’s geographic expansion. Existing investor Alibaba has already helped Qupital reach small businesses on its platform. Qupital will open branches in Chinese cities including Shanghai, Hangzhou, Guangzhou and Shenzhen, along with setting up a new technology center in the Guangdong-Hong Kong-Macau Greater Bay Area for talent and tech development. In total, it will hire about 100 people for its Hong Kong office this year.

Founded in 2016, Qupital offers lending for SMEs that frequently have cash flow issues because they are in a cycle of waiting for invoices to be paid. Qupital’s loans cover most of the value of an invoice, then matches that with investors and funders who cover the cash with the expectation of a return. The company makes money by charging SMEs a service fee that is a fixed percentage of the total invoice value and then a discount fee, and taking a percentage of net gains made by investors.

Qupital has now processed 8,000 trades, totaling HKD $2 billion in value. It won’t disclose how many SMEs it has worked with, but co-founder and chairman Andy Chan says that number is in the hundreds.

Chan tells TechCrunch that in China, Qupital will not compete directly against traditional financial institutions, because it focuses on financing the Hong Kong business entities of Chinese companies in U.S. and Hong Kong currency, instead of onshore renminbi. It will also target SMEs underserved by traditional lenders, by using alternative data sources to determine their creditworthiness.

In a prepared statement, CEFIF managing director Dennis Cong said “The growing volume of SME and cross-border trading drives a huge demand for alternative financing for SME’s who are underserved in the market and opportunities for investors to earn a decent risk-adjusted return. We look forward to working with Qupital to broaden its source of capital base and create unparalleled investment opportunities for CreditEase.”

Alibaba acquires Israeli VR startup Infinity Augmented Reality

Infinity Augmented Reality, an Israeli virtual reality startup, has been acquired by Alibaba, the companies announced this weekend. The deal’s terms were not disclosed. Alibaba and InfinityAR have had a strategic partnership since 2016, when Alibaba Group led InfinityAR’s Series C. Since then, the two have collaborated on augmented reality, computer vision and artificial intelligence projects.

Founded in 2013, the startup’s augmented glasses platform enables developers in a wide range of industries (retail, gaming, medical, etc.) to integrate AR into their apps. InfinityAR’s products include software for ODMs and OEMs and a SDK plug-in for 3D engines.

Alibaba’s foray into virtual reality started three years ago, when it invested in Magic Leap and then announced a new research lab in China to develop ways of incorporating virtual reality into its e-commerce platform.

InfinityAR’s research and development team will begin working out of Alibaba’s Israel Machine Laboratory, part of Alibaba DAMO Academy, the R&D initiative it is pouring $15 billion into with the goal of eventually serving two billion customers and creating 100 million jobs by 2036. DAMO Academy collaborates with universities around the world and Alibaba’s Israel Machine Laboratory has a partnership with Tel Aviv University focused on video analysis and machine learning.

In a press statement, the laboratory’s head, Lihi Zelnik-Manor, said “Alibaba is delighted to be working with InfinityAR as one team after three years of partnership. The talented team brings unique knowhow in sensor fusion, computer vision and navigation technologies. We look forward to exploring these leading technologies and offering additional benefits to customers, partners and developers.”

PicsArt hits 130 million MAUs as Chinese flock to its photo editing app

If you’re like me, who isn’t big on social media, you’d think that the image filters that come inside most apps will do the job. But for many others, especially the younger crowd, making their photos stand out is a huge deal.

The demand is big enough that PicsArt, a rival to filtering companies VSCO and Snapseed, recently hit 130 million monthly active users worldwide, roughly a year after it amassed 100 million MAUs. Like VSCO, PicsArt now offers video overlays though images are still its focus.

Nearly 80 percent of PicsArt’s users are under the age of 35 and those under 18 are driving most of its growth. The “Gen Z” (the generation after millennials) users aren’t obsessed with the next big, big thing. Rather, they pride themselves on having niche interests, be it K-pop, celebrities, anime, sci-fi or space science, topics that come in the form of filters, effects, stickers and GIFs in PicsArt’s content library.

“PicsArt is helping to drive a trend I call visual storytelling. There’s a generation of young people who communicate through memes, short-form videos, images and stickers, and they rarely use words,” Tammy Nam, who joined PicsArt as its chief operating officer in July, told TechCrunch in an interview.

PicsArt has so far raised $45 million, according to data collected by Crunchbase. It picked up $20 million from a Series B round in 2016 to grow its Asia focus and told TechCrunch that it’s “actively considering fundraising to fuel [its] rapid growth even more.”

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PicsArt wants to help users stand out on social media, for instance, by virtually applying this rainbow makeup look on them. / Image: PicsArt via Weibo

The app doubles as a social platform, although the use case is much smaller compared to the size of Instagram, Facebook and other mainstream social media products. About 40 percent of PicsArt’s users post on the app, putting it in a unique position where it competes with the social media juggernauts on one hand, and serving as a platform-agnostic app to facilitate content creation for its rivals on the other.

What separates PicsArt from the giants, according to Nam, is that people who do share there tend to be content creators rather than passive consumers.

“On TikTok and Instagram, the majority of the people there are consumers. Almost 100 percent of the people on PicsArt are creating or editing something. For many users, coming on PicsArt is a built-in habit. They come in every week, and find the editing process Zen-like and peaceful.”

Trending in China

Most of PicsArt’s users live in the United States, but the app owes much of its recent success to China, its fastest growing market with more than 15 million MAUs. The regional growth, which has been 10-30 percent month-over-month recently, appears more remarkable when factoring in PicsArt’s zero user acquisition expense in a crowded market where pay-to-play is a norm for emerging startups.

“Many larger companies [in China] are spending a lot of money on advertising to gain market share. PicsArt has done zero paid marketing in China,” noted Nam.

Screenshot: TikTok-related stickers from PicsArt’s library

When people catch sight of an impressive image filtering effect online, many will inquire about the toolset behind it. Chinese users find out about the Armenian startup from photos and videos hashtagged #PicsArt, not different from how VSCO gets discovered from #vscocam on Instagram. It’s through such word of mouth that PicsArt broke into China, where users flocked to its Avengers-inspired disappearing superhero effect last May when the film was screening. China is now the company’s second largest market by revenue after the U.S.

Screenshot: PicsArts lets users easily apply the Avengers dispersion effect to their own photos

A hurdle that all media apps see in China is the country’s opaque guidelines on digital content. Companies in the business of disseminating information, from WeChat to TikTok, hire armies of content moderators to root out what the government deems inappropriate or illegal. PicsArt says it uses artificial intelligence to sterilize content and keeps a global moderator team that also keeps an eye on its China content.

Despite being headquartered in Silicon Valley, PicsArt has placed its research and development center in Armenia, home to founder Hovhannes Avoyan. This gives the startup access to much cheaper engineering talents in the country and neighboring Russia compared to what it can hire in the U.S. To date, 70 percent of the company’s 360 employees are working in engineering and product development (50 percent of whom are female), an investment it believes helps keep its creative tools up to date.

Most of PicsArt’s features are free to use, but the firm has also looked into getting paid. It rolled out a premium program last March that gives users more sophisticated functions and exclusive content. This segment has already leapfrogged advertising to be PicsArt’s largest revenue source, although in China, its budding market, paid subscriptions have been slow to come.

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PicsArt lets users do all sorts of creative work, including virtually posing with their idol. / Image: PicsArt via Weibo

“In China, people don’t want to pay because they don’t believe in the products. But if they understand your value, they are willing to pay, for example, they pay a lot for mobile games,” said Jennifer Liu, PicsArt China’s country manager.

And Nam is positive that Chinese users will come to appreciate the app’s value. “In order for this new generation to create really differentiated content, become influencers, or be more relevant on social media, they have to do edit their content. It’s just a natural way for them to do that.”

Grab launches SME loans and micro-insurance in Southeast Asia

In its latest move beyond ride-hailing, Southeast Asia’s Grab has started to offer financing to SMEs and micro-insurance to its drivers.

The launch comes just weeks after Grab raised $1.5 billion from the Vision Fund as part of a larger $5 billion Series H funding round that’ll be used to battle rival Go-Jek, which is vying with Grab to become the top on-demand app for Southeast Asia’s 600 million-plus consumers.

Grab acquired Uber’s Southeast Asia business in 2018 and it has spent the past year or so pushing a ‘super app’ strategy. That’s essentially an effort to become a daily app for Southeast Asia and, beyond rides, it entails food delivery, payments and other services on demand. Financial services are also a significant chunk of that focus, and now Grab is switching on loans and micro-insurance for the first time.

Initially, the first market is Singapore, but the plan is to expand to Southeast Asia’s five other major markets, Reuben Lai,  who is senior managing director and co-head of Grab Financial, told TechCrunch on the sidelines of the Money20/20 conference in Singapore. Lai declined to provide a timeframe for the expansion.

The company announced its launch into financial services last year and that, Lai confirmed, was a purely offline effort. Now the new financial products announced today will be available from within the Grab app itself.

Grab is also planning to develop a ‘marketplace’ of financial products that will allow other financial organizations to promote services to its 130 million registered users. Grab doesn’t provide figures for its active user base.

Grab announced a platform play last summer that allows selected partners to develop services that sit within its app. Some services have included grocery delivers from Happy Fresh, video streaming service Hooq, and health services from China’s Ping An.

The Khashoggi murder isn’t stopping SoftBank’s Vision Fund

Money talks in the startup community, especially when SoftBank comes knocking with the megabucks of its Vision Fund.

Despite the public outcry around the firm’s dependence on money from Saudi Arabia in the wake of that country’s assassination of Washington Post journalist Jamal Khashoggi, deal flow for Softbank’s Vision Fund appears to be back to normal.

The $100 billion megafund has done 21 deals over the last two quarters, that’s as more than in the other quarters of the previous year combined, according to data from Crunchbase, thanks to an uptick from Asia. Since the October 2 murder, there have been 11 investments in U.S. companies, seven in Asia, two in Europe and one in Latin America. Just this week, the fund completed a near $1.5 billion investment in Southeast Asia-based ride-hailing company Grab.

While U.S. and European firms have more options, and therefore, perhaps deserve more scrutiny, Softbank’s cash is increasingly the only game in town for startups in Asia, where there are fewer alternatives for later stage capital outside of large Chinese private equity firms or tech giants — which come with their own risks.

The Vision Fund is seen by some critics as tainted money for its links to the Saudi Royal family. Saudi Arabia’s Public Investment Fund (PIF) is the fund’s anchor investor and it is controlled by Crown Prince Mohammed bin Salman, who has been strongly linked with the murder of Saudi journalist Jamal Khashoggi, an outspoken critic of the regime.

Khashoggi, a Washington Post columnist, was murdered on October 2 after he entered the Saudi consulate in Istanbul. His visit was part of an effort to obtain divorce documents in order to marry his fiancée, but it ended with his apparently gruesome death. Audio clips suggest he was beheaded, dismembered, and had his fingers severed before his body was dissolved in acid, although new reports suggest it may have been burned.

Jamal Khashoggi — pictured in 2014 — was murdered in the Saudi consulate in Istanbul last year [Photographer: Ohammed Al-Shaikh/AFP/Getty Images]

The Vision Fund is designed to finance ‘global winners’ which, like all investment funds, is set up to provide ‘unfair advantages’ to help its companies grow into hugely important businesses. On the financial end, as is the norm, it is built to provide handsome returns to the LPs, thus directly boosting the coffers of the PIF, the Saudi kingdom, and by extension the Saudi prince himself.

An investigation is going, but there’s already plenty of evidence to suggest that the murder happened at the request of the prince.

Sources within the U.S. State Department have reportedly said it is “blindingly obvious” that the Crown Prince ordered the killing — he reportedly threatened to shoot Khashoggi one year before. But, now that the apparent period of outrage is over, SoftBank has reverted back to writing checks and companies are taking them in spite of the links to Saudi Arabia.

For startups, the money flow means that a major source of capital for growth or subsidies for customers comes from the Saudi royal family’s pockets — a regime that would reportedly not hesitate to murder a critical voice.

SoftBank’s Vision Fund has ramped up its deals over the past six months, according to data from Crunchbase

What are the companies saying?

SoftBank itself said it has a commitment to “the people” of Saudi Arabia that will see it deploy its capital unchanged, although Chairman Masayoshi Son did concede that he will wait on the findings of the investigation into the murder before deciding on whether PIF will be involved in a second Vision Fund.

The founders taking the capital have been more cautious. When questioned, executives talk about the specifics of their deal and their growth plans, most defer issues on the management of LPs, like PIF, to SoftBank. While offering words in support of the ongoing murder investigation, they manage to say little about the ethics of taking money from the Saudi regime.

Bom Kim, CEO of Korean e-commerce company Coupang — which raised $2 billion from the Vision Fund — told TechCrunch in November that the allegations around the murder “don’t represent us and don’t represent [Vision Fund] companies.”

“We are deeply concerned by the reported events and alongside SoftBank are monitoring the situation closely until the full facts are known,” Tokopedia CEO William Tanuwijaya told TechCrunch in December after the Vision Fund co-led a $1.1 billion round.

William Tanuwijaya is the co-founder and CEO of Tokopedia [Photographer: Jason Alden/Bloomberg]

OYO, the budget hotel network based out of India, did not respond to a request comment sent the day before this story was published. The startup raised $1 billion led by the Vision Fund in September.

TechCrunch was also unable to get a response to questions sent to Chehaoduo, the Vision Fund’s first China-based startup which raised $1.5 billion in February. The company is notable for being the only one of this group that didn’t count SoftBank as an existing investor prior to its Vision Fund deal.

The latest addition to the collection is Grab, the ride-hailing company in Southeast Asia that’s led by CEO Anthony Tan, who is very publicly a devout Christian. In a statement sent to TechCrunch this week, Grab defended its relationship with SoftBank, which first invested in Grab back in 2014:

What happened to Jamal Khashoggi was obviously horrible. We hope whoever is responsible is held accountable. We are not in a position to comment on behalf of SoftBank but from our perspective Son-san and the entire SoftBank team have brought so much value to the table for Grab – beyond just financing. They have brought advice, mentorship and potential business opportunities. The Vision Fund is about investing for the next 100 or 200 years and investing in trends that will move the needle for humanity in positive ways. This is a lofty and ultimately positive goal.

Anthony Tan is the co-founder and chief executive officer of Grab [Photographer: Ore Huiying/Bloomberg/Getty Images]

The Vision Fund is just getting started in Asia, however, with rumors suggesting it is planning to open offices in China and India. Singapore is presumably on that list, too, while the fund has been busy hiring a general team that will operate globally out of the U.S.

To date, the fund’s focus in Asia has been on some of the region’s largest (highest-valued) companies, but as it develops a local presence it is likely to seek out less obvious deals to grow its portfolio. That’s going to mean this question of ethics and conscience around the Vision Fund’s capital will present itself to more founders in Asia. Going on what we’ve seen so far, most will have no problem taking the money and issuing platitudinous statements.

Privately, VCs in the region who I have canvassed have told me that founders have little choice but to take the Vision Fund’s money. They explain that nobody else can offer billion-dollar-sized checks, while SoftBank is an existing investor in many of them already which gives it additional leverage. The fund also takes the aggressive approach of threatening to back rival companies if it doesn’t get the deals it wants, as we saw when Son said he’d consider a deal with Lyft when its Uber investment was uncertain.

That reality may be true — finding an alternative to a hypothetical $1 billion Vision Fund check is a daunting challenge — but we’ve reached a very sad time and place when the sheer size of an investment overrides important concerns about where that money came from.

5G phones are here but there’s no rush to upgrade

This year’s Mobile World Congress — the CES for Android device makers — was awash with 5G handsets.

The world’s No.1 smartphone seller by marketshare, Samsung, got out ahead with a standalone launch event in San Francisco, showing off two 5G devices, just before fast-following Android rivals popped out their own 5G phones at launch events across Barcelona this week.

We’ve rounded up all these 5G handset launches here. Prices range from an eye-popping $2,600 for Huawei’s foldable phabet-to-tablet Mate X — and an equally eye-watering $1,980 for Samsung’s Galaxy Fold; another 5G handset that bends — to a rather more reasonable $680 for Xiaomi’s Mi Mix 3 5G, albeit the device is otherwise mid-tier. Other prices for 5G phones announced this week remain tbc.

Android OEMs are clearly hoping the hype around next-gen mobile networks can work a little marketing magic and kick-start stalled smartphone growth. Especially with reports suggesting Apple won’t launch a 5G iPhone until at least next year. So 5G is a space Android OEMs alone get to own for a while.

Chipmaker Qualcomm, which is embroiled in a bitter patent battle with Apple, was also on stage in Barcelona to support Xiaomi’s 5G phone launch — loudly claiming the next-gen tech is coming fast and will enhance “everything”.

“We like to work with companies like Xiaomi to take risks,” lavished Qualcomm’s president Cristiano Amon upon his hosts, using 5G uptake to jibe at Apple by implication. “When we look at the opportunity ahead of us for 5G we see an opportunity to create winners.”

Despite the heavy hype, Xiaomi’s on stage demo — which it claimed was the first live 5G video call outside China — seemed oddly staged and was not exactly lacking in latency.

“Real 5G — not fake 5G!” finished Donovan Sung, the Chinese OEM’s director of product management. As a 5G sales pitch it was all very underwhelming. Much more ‘so what’ than ‘must have’.

Whether 5G marketing hype alone will convince consumers it’s past time to upgrade seems highly unlikely.

Phones sell on features rather than connectivity per se, and — whatever Qualcomm claims — 5G is being soft-launched into the market by cash-constrained carriers whose boom times lie behind them, i.e. before over-the-top players had gobbled their messaging revenues and monopolized consumer eyeballs.

All of which makes 5G an incremental consumer upgrade proposition in the near to medium term.

Use-cases for the next-gen network tech, which is touted as able to support speeds up to 100x faster than LTE and deliver latency of just a few milliseconds (as well as connecting many more devices per cell site), are also still being formulated, let alone apps and services created to leverage 5G.

But selling a network upgrade to consumers by claiming the killer apps are going to be amazing but you just can’t show them any yet is as tough as trying to make theatre out of a marginally less janky video call.

“5G could potentially help [spark smartphone growth] in a couple of years as price points lower, and availability expands, but even that might not see growth rates similar to the transition to 3G and 4G,” suggests Carolina Milanesi, principal analyst at Creative Strategies, writing in a blog post discussing Samsung’s strategy with its latest device launches.

“This is not because 5G is not important, but because it is incremental when it comes to phones and it will be other devices that will deliver on experiences, we did not even think were possible. Consumers might end up, therefore, sharing their budget more than they did during the rise of smartphones.”

The ‘problem’ for 5G — if we can call it that — is that 4G/LTE networks are capably delivering all the stuff consumers love right now: Games, apps and video. Which means that for the vast majority of consumers there’s simply no reason to rush to shell out for a ‘5G-ready’ handset. Not if 5G is all the innovation it’s got going for it.

LG V50 ThinQ 5G with a dual screen accessory for gaming

Use cases such as better AR/VR are also a tough sell given how weak consumer demand has generally been on those fronts (with the odd branded exception).

The barebones reality is that commercial 5G networks are as rare as hen’s teeth right now, outside a few limited geographical locations in the U.S. and Asia. And 5G will remain a very patchy patchwork for the foreseeable future.

Indeed, it may take a very long time indeed to achieve nationwide coverage in many countries, if 5G even ends up stretching right to all those edges. (Alternative technologies do also exist which could help fill in gaps where the ROI just isn’t there for 5G.)

So again consumers buying phones with the puffed up idea of being able to tap into 5G right here, right now (Qualcomm claimed 2019 is going to be “the year of 5G!”) will find themselves limited to just a handful of urban locations around the world.

Analysts are clear that 5G rollouts, while coming, are going to be measured and targeted as carriers approach what’s touted as a multi-industry-transforming wireless technology cautiously, with an eye on their capex and while simultaneously trying to figure out how best to restructure their businesses to engage with all the partners they’ll need to forge business relations with, across industries, in order to successfully sell 5G’s transformative potential to all sorts of enterprises — and lock onto “the sweep spot where 5G makes sense”.

Enterprise rollouts therefore look likely to be prioritized over consumer 5G — as was the case for 5G launches in South Korea at the back end of last year.

“4G was a lot more driven by the consumer side and there was an understanding that you were going for national coverage that was never really a question and you were delivering on the data promise that 3G never really delivered… so there was a gap of technology that needed to be filled. With 5G it’s much less clear,” says Gartner’s Sylvain Fabre, discussing the tech’s hype and the reality with TechCrunch ahead of MWC.

“4G’s very good, you have multiple networks that are Gbps or more and that’s continuing to increase on the downlink with multiple carrier aggregation… and other densification schemes. So 5G doesn’t… have as gap as big to fill. It’s great but again it’s applicability of where it’s uniquely positioned is kind of like a very narrow niche at the moment.”

“It’s such a step change that the real power of 5G is actually in creating new business models using network slicing — allocation of particular aspects of the network to a particular use-case,” Forrester analyst Dan Bieler also tells us. “All of this requires some rethinking of what connectivity means for an enterprise customer or for the consumer.

“And telco sales people, the telco go-to-market approach is not based on selling use-cases, mostly — it’s selling technologies. So this is a significant shift for the average telco distribution channel to go through. And I would believe this will hold back a lot of the 5G ambitions for the medium term.”

To be clear, carriers are now actively kicking the tyres of 5G, after years of lead-in hype, and grappling with technical challenges around how best to upgrade their existing networks to add in and build out 5G.

Many are running pilots and testing what works and what doesn’t, such as where to place antennas to get the most reliable signal and so on. And a few have put a toe in the water with commercial launches (globally there are 23 networks with “some form of live 5G in their commercial networks” at this point, according to Fabre.)

But at the same time 5G network standards are yet to be fully finalized so the core technology is not 100% fully baked. And with it being early days “there’s still a long way to go before we have a real significant impact of 5G type of services”, as Bieler puts it. 

There’s also spectrum availability to factor in and the cost of acquiring the necessary spectrum. As well as the time required to clear and prepare it for commercial use. (On spectrum, government policy is critical to making things happen quickly (or not). So that’s yet another factor moderating how quickly 5G networks can be built out.)

And despite some wishful thinking industry noises at MWC this week — calling for governments to ‘support digitization at scale’ by handing out spectrum for free (uhhhh, yeah right) — that’s really just whistling into the wind.

Rolling out 5G networks is undoubtedly going to be very expensive, at a time when carriers’ businesses are already faced with rising costs (from increasing data consumption) and subdued revenue growth forecasts.

“The world now works on data” and telcos are “at core of this change”, as one carrier CEO — Singtel’s Chua Sock Koong — put it in an MWC keynote in which she delved into the opportunities and challenges for operators “as we go from traditional connectivity to a new age of intelligent connectivity”.

Chua argued it will be difficult for carriers to compete “on the basis of connectivity alone” — suggesting operators will have to pivot their businesses to build out standalone business offerings selling all sorts of b2b services to support the digital transformations of other industries as part of the 5G promise — and that’s clearly going to suck up a lot of their time and mind for the foreseeable future.

In Europe alone estimates for the cost of rolling out 5G range between €300BN and €500BN (~$340BN-$570BN), according to Bieler. Figures that underline why 5G is going to grow slowly, and networks be built out thoughtfully; in the b2b space this means essentially on a case-by-case basis.

Simply put carriers must make the economics stack up. Which means no “huge enormous gambles with 5G”. And omnipresent ROI pressure pushing them to try to eke out a premium.

“A lot of the network equipment vendors have turned down the hype quite a bit,” Bieler continues. “If you compare this to the hype around 3G many years ago or 4G a couple of years ago 5G definitely comes across as a soft launch. Sort of an evolutionary type of technology. I have not come across a network equipment vendors these days who will say there will be a complete change in everything by 2020.”

On the consumer pricing front, carriers have also only just started to grapple with 5G business models. One early example is TC parent Verizon’s 5G home service — which positions the next-gen wireless tech as an alternative to fixed line broadband with discounts if you opt for a wireless smartphone data plan as well as 5G broadband.

From the consumer point of view, the carrier 5G business model conundrum boils down to: What is my carrier going to charge me for 5G? And early adopters of any technology tend to get stung on that front.

Although, in mobile, price premiums rarely stick around for long as carriers inexorably find they must ditch premiums to unlock scale — via consumer-friendly ‘all you can eat’ price plans.

Still, in the short term, carriers look likely to experiment with 5G pricing and bundles — basically seeing what they can make early adopters pay. But it’s still far from clear that people will pay a premium for better connectivity alone. And that again necessitates caution. 

5G bundled with exclusive content might be one way carriers try to extract a premium from consumers. But without huge and/or compelling branded content inventory that risks being a too niche proposition too. And the more carriers split their 5G offers the more consumers might feel they don’t need to bother, and end up sticking with 4G for longer.

It’ll also clearly take time for a 5G ‘killer app’ to emerge in the consumer space. And such an app would likely need to still be able to fallback on 4G, again to ensure scale. So the 5G experience will really need to be compellingly different in order for the tech to sell itself.

On the handset side, 5G chipset hardware is also still in its first wave. At MWC this week Qualcomm announced a next-gen 5G modem, stepping up from last year’s Snapdragon 855 chipset — which it heavily touted as architected for 5G (though it doesn’t natively support 5G).

If you’re intending to buy and hold on to a 5G handset for a few years there’s thus a risk of early adopter burn at the chipset level — i.e. if you end up with a device with a suckier battery life vs later iterations of 5G hardware where more performance kinks have been ironed out.

Intel has warned its 5G modems won’t be in phones until next year — so, again, that suggests no 5G iPhones before 2020. And Apple is of course a great bellwether for mainstream consumer tech; the company only jumps in when it believes a technology is ready for prime time, rarely sooner. And if Cupertino feels 5G can wait, that’s going to be equally true for most consumers.

Zooming out, the specter of network security (and potential regulation) now looms very large indeed where 5G is concerned, thanks to East-West trade tensions injecting a strange new world of geopolitical uncertainty into an industry that’s never really had to grapple with this kind of business risk before.

Chinese kit maker Huawei’s rotating chairman, Guo Ping, used the opportunity of an MWC keynote to defend the company and its 5G solutions against U.S. claims its network tech could be repurposed by the Chinese state as a high tech conduit to spy on the West — literally telling delegates: “We don’t do bad things” and appealing to them to plainly to: “Please choose Huawei!”

Huawei rotating resident, Guo Ping, defends the security of its network kit on stage at MWC 2019

When established technology vendors are having to use a high profile industry conference to plead for trust it’s strange and uncertain times indeed.

In Europe it’s possible carriers’ 5G network kit choices could soon be regulated as a result of security concerns attached to Chinese suppliers. The European Commission suggested as much this week, saying in another MWC keynote that it’s preparing to step in try to prevent security concerns at the EU Member State level from fragmenting 5G rollouts across the bloc.

In an on stage Q&A Orange’s chairman and CEO, Stéphane Richard, couched the risk of destabilization of the 5G global supply chain as a “big concern”, adding: “It’s the first time we have such an important risk in our industry.”

Geopolitical security is thus another issue carriers are having to factor in as they make decisions about how quickly to make the leap to 5G. And holding off on upgrades, while regulators and other standards bodies try to figure out a trusted way forward, might seem the more sensible thing to do — potentially stalling 5G upgrades in the meanwhile.

Given all the uncertainties there’s certainly no reason for consumers to rush in.

Smartphone upgrade cycles have slowed globally for a reason. Mobile hardware is mature because it’s serving consumers very well. Handsets are both powerful and capable enough to last for years.

And while there’s no doubt 5G will change things radically in future, including for consumers — enabling many more devices to be connected and feeding back data, with the potential to deliver on the (much hyped but also still pretty nascent) ‘smart home’ concept — the early 5G sales pitch for consumers essentially boils down to more of the same.

“Over the next ten years 4G will phase out. The question is how fast that happens in the meantime and again I think that will happen slower than in early times because [with 5G] you don’t come into a vacuum, you don’t fill a big gap,” suggests Gartner’s Fabre. “4G’s great, it’s getting better, wi’fi’s getting better… The story of let’s build a big national network to do 5G at scale [for all] that’s just not happening.”

“I think we’ll start very, very simple,” he adds of the 5G consumer proposition. “Things like caching data or simply doing more broadband faster. So more of the same.

“It’ll be great though. But you’ll still be watching Netflix and maybe there’ll be a couple of apps that come up… Maybe some more interactive collaboration or what have you. But we know these things are being used today by enterprises and consumers and they’ll continue to be used.”

So — in sum — the 5G mantra for the sensible consumer is really ‘wait and see’.

Korean conglomerate SK leads $600M round for Chinese chipmaker Horizon Robotics

Horizon Robotics, a three-year-old Chinese startup backed by Intel Capital, just raised a mega-round of fundings from domestic and overseas backers as it competes for global supremacy in developing AI solutions and chips aimed at autonomous vehicles, smart retail stores, surveillance equipment and other devices for everyday scenarios.

The Beijing-based company announced Wednesday in a statement that it’s hauled in $600 million in a Series B funding round led by SK China, the China subsidiary of South Korean conglomerate SK Group; SK Hynix, SK’s semiconductor unit; and a number of undisclosed Chinese automakers along with their funds.

The fresh capital drove Horizon’s valuation to at least $3 billion, the company claims. The Financial Times previously reported that the chipmaker was raising up to $1 billion in a funding round that could value it at as much as $4 billion. Such a price tag could perhaps be justified by the vast amount of resources China has poured into the red-hot sector as part of a national push to shed dependency on imported chips and work towards what analysts call “semiconductor sovereignty.”

Horizon did not specify how the proceeds will be used. The company could not be immediately reached for comments.

In 2015, Yu Kai left Baidu as the Chinese search engine giant’s deep learning executive and founded Horizon to make the “brains” for a broad spectrum of connected devices. In doing so Yu essentially set himself up for a race against industry veterans like Intel and Nvidia. To date, the startup has managed to make a dent by securing government contracts, which provide a stable source of income for China’s AI upstarts including SenseTime, and several big-name clients like SK’s telecommunication unit, which is already leveraging Horizon’s algorithms to develop smart retail solutions. Like many of its peers who are at the forefront of the AI race, Horizon has set up an office in Silicon Valley and hiring local talents for its lab.

Other investors who joined the round included several of Horizon’s returning investors such as Hillhouse Capital and Morningside Venture Capital . There were also some heavyweight new backers, such as a fund run by conglomerate China Oceanwide Holdings as well as the CSOBOR Fund, a private equity entity set up by China’s state-owned CITIC to back projects pertaining to China’s ambitious “One Belt, One Road” modern Silk Road initiative.

Xiaomi-backed electric toothbrush Soocas raises $30 million Series C

China’s Soocas continues to jostle with global toothbrush giants as it raises 200 million yuan ($30 million) in a series C funding round. The Shenzhen-based oral care manufacturer has secured the new capital from lead investor Vision Knight Capital, with Kinzon Capital, Greenwoods Investment, Yunmu Capital and Cathay Capital also participating in the round.

The new proceeds arrived less than a year after Soocas, one of Xiaomi’s home appliance portfolio startups, snapped up close to 100 million yuan in a Series B round last March. Best known for its budget smartphones, Xiaomi has a grand plan to construct an Internet of Things empire that encompasses smart TVs to electric toothbrushes, and it has been gearing up by shelling out strategic investments for consumer goods makers such as Soocas.

Founded in 2015, Soocas’s rise reflects a growing demand for personal care accessories as people’s disposable income increases. Electric toothbrushes are a relatively new concept to most Chinese consumers but the category is picking up steam fast. According to data compiled by Alibaba’s advertising service Alimama, gross merchandise volume sales of electric toothbrushes grew 97 percent between 2015 and 2017. Multinational brands still dominate the oral care space in China, with Procter & Gamble, Colgate and Hawley & Hazel Chemical occupying the top three spots as of 2017, a report from Euromonitor International shows, but local players are rapidly catching up.

Soocas faces some serious competition from its Chinese peers Usmile and Roaman. Like Soocas, the two rivals have also placed their offices in southern China for proximity to the region’s robust supply chain resources. Part of Soocas’s strength comes from its tie-up with Xiaomi, which gives its portfolio companies access to a massive online and offline distribution network worldwide. That comes at a cost, however, as Xiaomi is known to impose razor-thin margins on the companies it backs and controls.

According to a statement from Soocas’s founder Meng Fandi, the company has achieved profitability since its launch and has seen its margin increase over the years. It plans to spend its fresh proceeds on marketing in a race to lure China’s increasingly sophisticated young consumers with toothbrushes and its new lines of hair dryers, nasal trimmers and other tools that make you squeaky-clean.

Tesla to recall 14,000 Model S cars in China over faulty Takata airbags

China’s top market regulator said on Friday that Tesla will recall a total of 14,123 imported Model S vehicles in the country over potentially deadly airbags.

The recall is part of an industry-wide crackdown on Takata-made front passenger airbags, which involves roughly 37 million vehicles including more mainstream brands such as Toyota and Ford, as noted by the United States Department of Transportation. These defective airbags use a propellant that might rupture the airbag and cause serious injuries, or even deaths.

Tesla has begun a worldwide recall of its sedans that use Takata airbags, the firm said on its Support blog. It noted that the airbags only become defective based on certain factors, such as age. The recall does not affect later Model S vehicles, Roadster, Model X, or its more affordable Model 3.

The China recall involves Model S cars manufactured between February 2014 to December 2016, shows a notice posted on the website of China’s State Administration for Market Regulation. TechCrunch has reached out to Tesla for comments and will update the article once more information is available.

The setback comes as Tesla is making a big push into the world’s largest auto market and tapping on Beijing’s effort to phase out fossil-fuel cars for China. The company recently reached an agreement with the Shanghai government to build its first Gigafactory outside the US, which will focus on making Model 3 cars for Chinese consumers. There is no target date for the factory to become fully operational yet.

Despite being an alluring market, China has been a major source of Tesla’s concerns over the past months due to escalating trade tensions and the rollback of government subsidies for green vehicles. Tesla responded by slashing its Model 3 price by 7.6 percent for China to neutralize heavy tariffs on imported cars.

The Palo Alto-based company previously recalled 8,898 Model S vehicles in China over corroding bolts, which it claimed at the time had not led to any accidents or injuries.

Grab moves to offer digital insurance services in Southeast Asia

Grab is Southeast Asia’s top ride-hailing firm, thanks in no small part to its acquisition of Uber’s local business last year, but the company also houses an ambitious fintech arm, too. That just added another vertical to its business after Grab announced it is teaming up with China’s ZhongAn to introduce insurance.

Grab and ZhongAn International, the international arm of the Chinese insurance giant, said today they will create a joint venture that will provide digital insurance services across Southeast Asia. Grab said the new business will partner with insurance companies to offer the services via its mobile app. Chubb — a company that already works with Grab to offer micro-loans to its drivers — is the first partner to commit, it’ll offer insurance for Grab drivers starting in Singapore.

ZhongAn is widely-lauded for being China’s first digital-only insurance platform. It’s backed by traditional insurance giant PingAn and Chinese internet giants Tencent and Alibaba.

Grab’s move into digital insurance comes a day after Singapore Life, an online insurer in Singapore, closed the second part of a $33 million funding round aimed at expanding its business in Southeast Asia.

This ZhongAn partnership adds another layer to Grab’s services and fintech business, which already includes payments — both offline and online — and is scheduled to move into cross-border remittance and online healthcare, the latter being a deal with ZhongAn sibling PingAn Good Doctor.

The push is also part of a wider strategy from Grab, which was last valued at over $11 billion and is aiming to turn its app from merely ride-hailing to an everyday needs app, in the style of Chinese ‘super apps’ like Meituan and WeChat.

Indeed, Grab President Ming Ma referenced that very ambitious calling the insurance products “part of our commitment to becoming the leading everyday super app in the region.”

Last summer, Grab opened its platform to third-parties which can lean on its considerable userbase — currently at 130 million downloads — to reach consumers in Southeast Asia, where the fast-growing ‘digital economy’ is tipped to triple to reach $240 billion by 2025. Grab’s platform has welcomed services like e-grocer HappyFresh, deals from travel giant Booking and more.

Grab has also made efforts to develop the local ecosystem with its own accelerator program — called ‘Velocity’ — which, rather than providing equity, helps young companies to leverage its platform. It has also made investments, including a deal with budget hotel brand OYO in India, a fellow SoftBank portfolio company that has designs on expansion in Southeast Asia.

Grab itself operates across eight markets in Southeast Asia, where it claims to have completed more than two billion rides to date. The company is currently raising a massive Series H fund which has already passed $3 billion in capital raised but has a loftier goal of reaching $5 billion, as we reported recently.

Go-Jek, Grab’s chief rival, is expanding its business outside of Indonesia after launching in Vietnam, Thailand and Vietnam. Like Grab, it, too, offers services beyond ride-hailing and the company — which is backed by the likes of Meituan, Google and Tencent — is close to finalizing a new $2 billion funding round for its battle with Grab.

China’s lunar probe makes history by successfully soft-landing on the far side of the moon

It’s not Lunar New Year yet, but there is something new on the moon. In a major milestone for space exploration, China announced that its lunar program has successfully soft-landed a probe on the far side of the moon, making it the first one to do so. The historic landing was reported by Xinhua, China’s official news agency, earlier today.

According to the China National Space Administration, the probe, consisting of a lander and rover, touched down at about 10:26AM Beijing time. This is the first ever soft-landing (meaning a landing without damage or destruction to the space vehicle) on the far side of the moon, which is never visible from Earth. Named after the Chinese moon goddess, Chang’e-4 launched on Dec. 8 from the Xichang Satellite Launch Center in Sichuan province.

China’s Chang’e-4 probe softlands on Moon’s far side pic.twitter.com/Z1R6tbpBMI

— China Xinhua News (@XHNews) January 3, 2019

The South China Morning Post reported earlier this week that the Chang’e-4 will be used for “astronomical observation using low-frequency radio, surveying the terrain and landforms, detecting the mineral composition and shallow lunar surface structure, and measuring neutron radiation and neutral atoms.” The successful soft-landing is important for space exploration because there is relatively little information about the far side of the moon compared to the side visible from Earth, which has been explored and surveyed by previous missions.

Photographs taken by earlier spacecraft, including the Soviet Union’s Luna 3 and Zond 3 (launched in 1959 and 1965, respectively) and NASA’s Lunar Orbiter program (launched in 1966), found significant differences between the far side’s terrain and the surface of the moon visible from Earth. In 1962, NASA’s Ranger 4 probe became the first spacecraft to impact on the moon, but was unable to send back data after landing.

Since direct communication between Chang’e-4 and Earth is blocked because of the probe’s position, China also launched a relay satellite called Queqiao, or Magpie Bridge, that is currently 400,000 km above Earth, positioned between it and the moon.

Chang’e-4’s successful landing concludes the second phase of the Chinese Lunar Exploration Program (CLEP). The first phase was the launch of Yutu, the lunar rover of Chang’e-3, which landed on the moon in December 2013, but stopped moving after 40 days due to a mechanical problem (it is still able to transmit data and photos, including true color high-definition photos). The successful landing of Chang’e-3 was another a significant milestone for China’s space program, making it only the third country after the U.S. and Soviet Union to soft-land on the moon. After Chang’e-4, the third and final phase of CLEP will be a returnable spacecraft called Chang’e-5. Set to launch by 2020, Chang’e-5 will be used to collect samples.

Tencent left out as China approves the release of 80 new video games

Chinese internet giant Tencent has been excluded from the first batch of video game license approvals issued by the state-run government since March.

China regulators approved Saturday the released of 80 online video games after a months-long freeze, Reuters first reported. None of the approved titles listed on the approval list were from Tencent Holdings, the world’s largest gaming company.

Licenses are usually granted on a first come, first serve basis in order of when studios file their applications, several game developers told TechCrunch. There are at least 7,000 titles in the waiting list, among which only 3,000 may receive the official licenses in 2019, China’s 21st Century Business Herald reported citing experts. Given the small chance of making it to the first batch, it’s unsurprising the country’s two largest game publishers Tencent and NetEase were absent.

The controlled and gradual unfreezing process is in line with a senior official’s announcement on December 21. While the Chinese gaming regulator is trying its best to greenlight titles as soon as possible, there is a huge number of applications in the pipeline, the official said. Without licenses, studios cannot legally monetize their titles in China. The hiatus in approval has slashed earnings in the world’s largest gaming market, which posted a 5.4 percent year-over-year growth in the first half of 2018, the slowest rate in the last ten years according to a report by Beijing-based research firm GPC and China’s official gaming association CNG.

Tencent is best known as the company behind WeChat, a popular messaging platform in China. But much of its revenue comes from gaming. Even with a recent decline in gaming revenue, the company has a thriving business that is majority owner of several companies including Activision, Grinding Gears Games, Riot and Supercell. In 2012, the company took a 40 percent stake in Epic Games, maker of Fortnite. Tencent also has alliances or publishing deals with other video gaming companies such as Square Enix, makers of Tomb Raider. 

The ban on new video game titles in China has affected Tencent’s bottom line. The company reported revenue from gaming fell 4 percent in the third quarter due to the prolonged freeze on licenses. At the time, Tencent claimed it had 15 games with monetization approval in its pipeline. To combat pressure in its consumer-facing gaming business, the Chinese giant launched a major reorganization in October to focus more on enterprise-related initiatives such as cloud services and maps. Founder and CEO Pony Ma said at the time the strategic repositioning would prepare Tencent for the next 20 years of operation.

“In the second stage, we aspire to enable our partners in different industries to better connect with consumers via an expanding, open and connected ecosystem,” stated Ma.

China tightened restrictions in 2018 to combat games that are deemed illegal, immoral, low-quality or have a negative social impact such as those that make children addicted or near-sighted. This means studios, regardless of size, need to weigh new guidelines in their production and user interaction. Tencent placed its own restrictions on gaming in what appeared to be an attempt to assuage regulators. The company has expanded its age verification system, an effort aimed at curbing use of young players, and placed limits on daily play.

Update (December 30, 10:00 am, GMT+8): Adds context on China’s gaming industry and Tencent.

Alibaba-backed Hellobike bags new funds as it marches into ride-hailing

2018 has been a rough year for China’s bike-sharing giants. Alibaba-backed Ofo pulled out of dozens of international cities as it fought with a severe cash crunch. Tencent-backed Mobike puts a brake on expansion after it was sold to neighborhood services provider Meituan Dianping. But one newcomer is pedaling against the wind.

Hellobike, currently the country’s third-largest bike-sharing app according to Analysys data, announced this week that it raised “billions of yuan” ($1 = 6.88 yuan) in a new round. The company declined to reveal details on the funding amount and use of the proceeds when inquired by TechCrunch.

Leading the round were Ant Financial, the financial affiliate of Alibaba and maker behind digital wallet Alipay, and Primavera Capital, a Chinese investment firm that’s backed other mobility startups including electric automaker Xpeng and car trading platform Souche. The fledgling startup also got SoftBank interested in shelling out an investment, The Information reported in November. The fresh capital arrived about a year after it secured $350 million from investors including Ant Financial.

As China’s bicycle giants burn through billions of dollars to tout subsidized rides, they’ve gotten caught up in financial troubles. Ten months after Ofo raised $866 million, the startup is reportedly mulling bankruptcy. Meanwhile, Mobike is downsizing its fleet to “avoid an oversupply,” a Meituan executive recently said.

It’s interesting to note that while both Ofo and Hellobike fall under the Alibaba camp, they began with different geographic targets. By May, only 5 percent of Hellobike’s users were in China’s Tier 1 cities, while that ratio was over 30 percent for both Mobike and Ofo, a report by Trustdata shows.

This small-town strategy gives Hellobike an edge. As the bike-sharing markets in China’s major cities become crowded, operators began turning to lower-tier cities in 2017, a report from the China Academy of Information and Communications Technology points out.

The new contender is still dwarfed by its larger competitors in terms of user number. Ofo and Mobike command 43 million and 38 million unique monthly mobile installs, respectively, while Hellobike stands at 8 million, accroding to iResearch.

Hellobike’s ambition doesn’t stop at two-wheelers. In September, it rebranded its Chinese name to HelloTransTech to signify an extension into other transportation means. Aside from bikes, the startup also offers shared electric bikes, ride-hailing and carpooling, a category that became much contested following high-profile passenger murders on Didi Chuxing .

In May and August, two female customers were killed separately when they used the Hitch service on Didi, China’s biggest ride-hailing platform that took over Uber’s China business. The incidents sparked a huge public and regulatory backlash, forcing Didi to suspend its carpooling service up to this day. But this week, its newly minted rival Hellobike decides to forge ahead with a campaign to recruit carpooling drivers. Time will tell whether the latecomer can grapple with heightened security measures and fading customer confidence in riding with strangers.

Tesla shares fall 7.6% following price cuts in China and Elon Musk’s promise to reimburse missed tax credits

Monday was a tough day for the U.S. stock market, but Tesla shares were hit especially hard. The stock fell by 7.6 percent after Tesla cut the Model 3’s price in China and CEO Elon Musk promised to reimburse U.S. customers if they miss a tax credit deadline due to Model 3 shipment delays.

Reuters reported this weekend that the Model 3’s prices on Tesla’s China website had been reduced by up to 7.6 percent, with the starting price now at 499,000 RMB (about $72,000). This is the third time since November that Tesla has lowered the price of its vehicles in China.

The first was in November, when it slashed the price of Model X and Model S vehicles by 12 to 26 percent, stating that it was “absorbing a significant part of the tariff to help make cars more affordable for customers in China.” Then this month, Tesla cut Model X and Model S prices again, citing China’s decision to temporarily suspend a new 25 percent tariff on American-produced vehicles and auto parts as the two countries reached a ceasefire in the trade war.

In October, Tesla announced on its site that if U.S. customers needed to order a Model S, Model X, or Model 3 before October 15 if they wanted the full $7,500 federal tax credit, which begins to phase out once a manufacturer sells 200,000 qualifying vehicles in the U.S. (Tesla hit that milestone earlier this year). As a result, the federal tax vehicle will be cut 50 percent to $3,750 for vehicles delivered January 1 to June 30, 2019, before behing halved again on July 1.

On Sunday, Musk tweeted in response to a question that if a customer’s pre-December order isn’t delivered before the end of the year, Tesla will reimburse the tax credits they missed out on.

If Tesla committed delivery & customer made good faith efforts to receive before year end, Tesla will cover the tax credit difference

Elon Musk (@elonmusk) December 22, 2018

After months of production and delivery delays, Tesla ramped up fulfillment of Model 3 orders in the third quarter of this year, when it delivered a total of 83,500 vehicles, including 55,840 Model 3 units.

China’s Tencent Music raises $1.1 billion in downsized US IPO

Tencent Music, China’s largest streaming company, has raised $1.1 billion in a U.S. IPO after it priced its shares at $13 a piece ahead of a listing on the Nasdaq.

That makes it one of the largest tech listings of the year, but the pricing is at the bottom end of its $13-$15 range indicating that the much-anticipated IPO has felt the effects of an uncertain market. Indeed, the company is said to have paused the listing process, which it started in early October, for a time so choppy are the waters right now — and that’s not even mentioning a shareholder-led lawsuit that was filed last week.

Still, this listing gives TME — Tencent Music Entertainment, a spin-out of Tencent — an impressive $21.3 billion valuation which is just below the $30 billion that Spotify commanded when it went public earlier this year via an unconventional direct listing. TME was valued at $12 billion at the time of Spotify’s listing in Q1 of this year so this is also a big jump. (Meanwhile, Spotify’s present market cap is around $24 billion.)

The company operates a constellation of music streaming services in China which span orthodox Spotify-style streaming as well as karaoke and live-streaming services. Altogether, TME claims 800 million registered users — although there’s likely a little creative accounting or double counting across apps involved since the Chinese government itself says there are 800 million internet users in the entire country.

Notably, though, TME is profitable. The same can’t be said for Spotify and likely Apple Music — although we don’t have financials for the latter. That’s down to the unique business model that the Chinese firm operates, with subscription and virtual goods a major driver for its businesses, while Tencent’s ubiquitous WeChat messaging app helps it reach users and gain virality.

Tidy though the numbers are, its revenues are dwarfed by those of Spotify, which grossed €1.4 billion ($1.59 billion) in sales in its last quarter. For comparison, TME did RMB 8.6 billion ($1.3 billion) in revenue for the first six months of this year.

TME executives are taking that as a sign that there’s ample scope to grow their business, although it seems unlikely that will ever be as global as Spotify. The two companies might yet collaborate in the future though, since they are both mutual shareholders via a share swap deal that concluded one year ago.

You can read more about TME in our deep dive below.

We also wrote about the lessons Western services like Spotify and Apple Music can learn from TME.

Apple says iPhones remain on sale in China following court injunction

Apple has filed an appeal to overturn a court decision that could ban iPhone sales in China, the company said on Monday, adding that all of its models remain available in its third-largest market.

The American giant is locked in a legal battle in the world’s biggest smartphone market. On Monday, Qualcomm announced that a court in Fujian Province has granted a preliminary injunction banning the import and sales of old iPhone models in China because they violated two patents owned by the American chipmaker.

The patents in question relate to features enabling consumers to edit photos and manage apps on smartphone touchscreens, according to Qualcomm.

“Apple continues to benefit from our intellectual property while refusing to compensate us. These Court orders are further confirmation of the strength of Qualcomm’s vast patent portfolio,” said Don Rosenberg, executive vice president and general counsel of Qualcomm, in a statement.

Apple fought back in a statement calling Qualcomm’s effort to ban its products “another desperate move by a company whose illegal practices are under investigation by regulators around the world.” It also claimed that Qualcomm is asserting three patents they had never raised before, including one which has already been invalidated.

It is unclear at this point what final effects the court injunction will have on Apple’s sales in China.

The case is part of an ongoing global patent dispute between Qualcomm and Apple, which saw the former seek to block the manufacturing and sale of iPhones in China over patent issues pertaining to payments last year.

Qualcomm shares were up 3 percent on Monday. Apple opened down more than 2 percent before closing up 0.7 percent. Citi lowered its Apple price target to $200 a share from $240 a share, saying in a note to investors that while it does not expect China to ban or impose additional tariffs on Apple, “should this occur Apple has material exposure to China.”

The Apple case comes as the tech giant faces intensifying competition in China, which represented 18 percent of its total sales from the third quarter. The American company’s market share in China shrunk from 7.2 percent to 6.7 percent year-over-year in the second quarter as local competitors Huawei and Oppo gained more ground, according to market research firm IDC.

The annual drop is due to Apple’s high prices, IDC suggests, but its name “is still very strong in China” and “the company will fare well should it release slightly cheaper options later in the year.”