Hello everyone. This is Kenji from Hong Kong.
The closely watched meeting between US President Joe Biden and Chinese President Xi Jinping that ended Thursday morning, East Asian time, was generally positive in the sense that the two leaders were finally able to speak face-to-face.
Although there were few concrete results, one of the main goals of the San Francisco summit, namely to normalize an emergency communication channel, appears to have been achieved. Biden said ahead of his second meeting as president with Xi that it was important to “get back on a normal course, correspond and be able to pick up the phone and talk to each other in a crisis”.
However, one major point of tension between the two nations remains: technology. It is not yet clear exactly what was discussed during their summit, but a recent five-part series in China’s state-owned news outlet Xinhua provides a clue as to how Beijing views the bilateral relationship and what the key issues are.
Titled “Pushing forward Sino-American Relations back to the right track”, the series uses the phrase “science and technology (the other one)” a total of seven times, indicating the importance Beijing places on unrestrained exchange in this area. The series also criticizes Washington for “politicizing” and “weaponizing” technology and trade issues.
However, getting back on the “right track” is easier said than done. For example, both sides have imposed various export restrictions on wood chips or on the raw materials used in their production. And at a news conference shortly after their summit, Biden again called Xi a “dictator,” a comment sure to provoke a backlash from Beijing.
This week, we have an in-depth report on how China is circumventing US restrictions to gain access to the advanced machinery needed to make cars and planes – and potentially military weapons.
More machines, please
Semiconductors are not the only advanced technology that China wants to acquire from the West. Machine tools are apparently also high on the wish list.
This equipment, known as “mother machines”, is widely used in the machining of precision parts indispensable for a wide range of industrial products such as automobiles and aircraft. But they can also be used to develop weapons of mass destruction, including nuclear weapons.
In this Nikkei film, a team of journalists led by Toru Tsunashima, Tetsuya Abe and Kazuhiro Kida examines how cutting-edge machines made by Japanese and German manufacturers end up in the hands of the China Academy of Engineering Physics, or CAEP.
CAEP describes itself as “China’s only nuclear weapons development and production unit” on its website and plays a key role in Beijing’s efforts to catch up with Washington in terms of nuclear weapons capabilities.
Through numerous interviews and analysis of open source code, the team discovered how China’s top nuclear weapons research institute was able to access embargoed machinery.
The case points to the difficulties in implementing export controls on high-tech equipment, as well as the dilemma for companies doing business with China.
The article on which the video is based is here, and the Japanese version is here.
Looking for a winner
With both startup and Big Tech company valuations reaching stratospheric levels, some global investors are scratching their heads over the best way to back the generative artificial intelligence boom, writes Mercedes Ruehl in Singapore.
Singapore’s GIC, one of the world’s largest institutional investors, has some simple advice: stick with the familiar big names over buzzy start-ups.
The chief executive of the sovereign wealth fund, Lim Chow Kiat, said listed companies such as Microsoft, Meta and Google parent Alphabet are capturing “a lot of the value already”.
“Clients are already paying for (their services). So, actually, it’s a pretty good place for investors to double down,” he told the Financial Times in an interview.
AI has boosted the market values of major tech companies, with trillions added to their collective valuations since last year. But most of them have predicted that AI will increase their revenue, with Microsoft taking an early lead in incorporating it into its products, with the help of its large stake in ChatGPT creator OpenAI.
The frenzy since the launch of the ChatGPT chatbot a year ago has led to warnings from experts that most start-ups in the sector are overvalued and, more importantly, will fail to make money.
“Our observation is that (start-up) valuations are too high. Of course, one or two of them may eventually succeed and justify this valuation,” Lim said.
Calling China suppliers
Huawei’s high-end Mate 60 Pro smartphone, released in August, is an example of how US-led export restrictions on cutting-edge technology are encouraging Chinese companies to use local components.
A teardown of Nikkei’s flagship phone Masaharu Ban and Nami Matsuura, along with Tokyo-based research firm Fomalhaut Techno Solutions, revealed that 47 percent of its components by cost come from China. This marks a big step up from the 29 percent China-made parts in its predecessor, the Mate 40 Pro, which was released three years ago.
The main reason for the jump is a switch of suppliers of the most expensive component, the organic LED display, to state-owned BOE Technology Group from South Korea’s LG Display.
Meanwhile, the share of Japanese components fell to 1 percent from 19 percent, largely due to the camera’s image sensor being switched to Samsung from the Sony Group. The total share of South Korean suppliers increased by 5 percentage points to 36 percent.
Thinking outside the box
Bento, a Japanese-style lunch box, may not be that high-tech, but the vending machines to serve them hot and the supply chain management system that makes it all possible are filled with patent-backed technology.
Jason Chen, a former Sony chip designer who has found a new calling as a food technology entrepreneur in Hong Kong, is bringing this innovation to bento’s home, writes Nikkei Asia’s Kenji Kawase. The “hot-chain” logistics are monitored and controlled by GPS and cloud-based Internet-of-Things technology to ensure that the ready-made meals are not only hot but also germ-free.
Chen’s first bento machine in Japan is scheduled to start serving hungry customers on Friday in Kitahama, a central business district in Osaka.
‘Zelda’ movie tests Nintendo’s ability to exploit intellectual property rights (IPR)
China’s chipmaking equipment imports up 93% despite curbs (Nikkei Asia)
Foxconn plans for possible China fallout from founder’s Taiwan presidential bid (FT)
Hungary’s Chinese electric car ambitions thwarted by anti-immigration grief (Nikkei Asia)
Wall Street and Beijing fight calls for ransomware attack on China’s biggest bank (FT)
Gaming start-up VNG aims to launch Vietnam’s answer to ChatGPT (Nikkei Asia)
Tech leakage to China can’t be stopped but can be delayed, says expert (Nikkei Asia)
China’s biggest chipmaker warns geopolitics is fueling global glut (FT)
Nvidia develops AI chips for China in latest big to avoid US restrictions (FT)
Apple supplier Foxconn gives conservative outlook for 2024 (Nikkei Asia)
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