Panasonic’s gigafactory expansion and south-east Asia’s funding chill

Hello everyone, this is Cissy from Hong Kong.

In the past week, Chinese social media has been gripped by Elon Musk. The Tesla CEO’s first visit to China in three years, his private jet and his dinner menu at a Beijing restaurant were all trending on social media. Even one of his tweets — consisting of a single letter “X” that he posted after getting back to the US — triggered speculation that he was implying something about his China visit.

Musk spent about 44 hours in China, with a tight schedule and full confidentiality. Only a small amount of information was disclosed through official channels: he met China’s foreign, industry and commerce ministers; he had dinner with Robin Zeng, founder of CATL — one of Tesla’s battery suppliers — but no details were given. The foreign minister’s reception of Musk has been taken as a sign that the CEO is not only seen as a prominent foreign investor but also as a significant political figure and friend to Beijing.

But Musk is just one of several senior Western executives who have come to China since the country fully reopened to visitors in March. Jamie Dimon, the chief executive of JPMorgan Chase, visited in May, and LVMH chair Bernard Arnault is set to do so this month after the world’s largest luxury company reported a 17 per cent year-over-year increase in first quarter revenue, largely driven by a rebounding Chinese luxury market.

Against the backdrop of intensifying geopolitical tensions and the US-China tech war, it is interesting to see Western companies cannot ignore Asia’s biggest economy, both as a major market and a vital supplier. Chinese businesses, for their part, remain interested in building connections with their Western counterparts despite the political headwinds they may encounter.

More juice for Tesla

Tesla is scrambling to secure batteries in the increasingly competitive electric vehicle industry. The American EV maker recently told Panasonic that it would “buy as much” EV battery output as the Japanese electronic giant can produce at its Nevada factory, writes Nikkei Asia’s Ryohtaroh Satoh.

Panasonic Energy, an affiliate of Panasonic Holdings, is adding another production line — the 15th in total — at gigafactory Nevada, with plans for it to start operating within the next year or two. This move is expected to boost the factory’s annual production capacity by about 10 per cent, from the current capacity of between 38 and 39 gigawatt-hours. That’s enough to power around 500,000 to 700,000 Tesla Model 3s.

Tesla is Panasonic’s biggest customer, but even though the EV maker is asking for more juice, the Japanese company is cautious about expanding production capacity in Nevada. This is because the gigafactory is partially owned by Tesla, and Panasonic can’t sell batteries made there to other customers.

The electric vehicle market in the US is getting pretty crowded. Big names like General Motors and Ford Motor, as well as newer players such as Rivian, have all said they plan to ramp up their production in the US. These competing companies could potentially eat into Tesla’s huge market share.

Cloud vs. console

Sony’s chief executive has warned that cloud gaming is still technically “very tricky,” playing down the risk of the industry quickly converting to a technology on which its rival Microsoft has bet heavily, write the Financial Times’ Kana Inagaki and Leo Lewis.

In an interview, Kenichiro Yoshida said the PlayStation creator would still study “various options” for streaming games over the internet, adding it could use GT Sophy, its artificial intelligence agent, to enhance cloud gaming.

“Cloud itself is an amazing business model but, when it comes to games, the technical difficulties are high,” said Yoshida, citing latency — the fast response times demanded by gamers — as the biggest issue. “So there will be challenges to cloud gaming, but we want to take on those challenges.”

He declined to comment on the impact Sony foresees from Microsoft’s $75bn agreed purchase of game publisher Activision, the company behind the Call of Duty and World of Warcraft franchises, saying regulatory reviews were continuing.

Industry and regulatory concerns have focused on whether Microsoft would make Activision’s games exclusive to its own cloud gaming service, a move that could potentially accelerate the shift away from consoles.

A chill in the air

Funding for start-ups in south-east Asia is on track to have its worst six months since before the pandemic, as venture capitalists lower their valuations of fledgling companies, writes Nikkei Asia’s Tsubasa Suruga.

For the first five months of this year, venture capital funding in south-east Asia reached just $4bn. That’s down a whopping 65 per cent compared to the first half of 2022 and the lowest level since the second half of 2019, according to investment data firm Preqin. Indonesia and Singapore were hit especially hard, with funding plummeting by 70 per cent and 65 per cent, respectively.

The poor performance of regional rock star tech companies like Grab and GoTo has dented the willingness of VCs to fund start-ups in Asean countries. Venture capitalists also told Nikkei that given the tougher economic outlook, many of them have shifted their focus from funding new deals to portfolio management.

Investors are also keeping a sharper eye on the financial sustainability of start-ups from a much earlier stage and spending a longer time on due diligence as they become more cautious with where and how much they invest.

A boom of one’s own

The AI frenzy continues to sweep China. In the past three months, more than 30 Chinese entities, from tech giants to state-backed institutions to entrepreneurs, have announced they are developing their own large language models, the technology that underpins chatbots like ChatGPT and Google’s Bard.

Using algorithms, advanced computing power and vast amounts of data, developing large language models is not for the faint of heart — or the shallow of pocket.

But the vast commercial potential of AI in the country and the appeal of large language models as a new approach to the field is nevertheless drawing in investors large and small, writes Nikkei Asia’s Cissy Zhou.

Unlike in the US, where AI models tend to be released to the wider public early on for further training and development, Chinese firms tend to plug their generative AI models into their own tightly focused verticals, or target market, and to use their own data sets to more quickly develop applications that will create revenue.

Some are critical of the money being poured into AI, with one scholar even comparing it to Mao Zedong’s disastrous economic policy, the Great Leap Forward. Investors believe that only a few tech giants will ultimately win in the large language models war.

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4. Nvidia’s rally forces money managers to play catch-up (FT)

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