Microsoft trims hardware output, India seeks new investors

Hello everyone! This is Lauly writing from Taipei.

There has been a lot going on in the tech supply chain circle recently, especially in Taiwan. Last week I attended a press conference by Terry Gou, the founder and former chair of iPhone assembler Foxconn. In case you’ve missed it, the tech billionaire, who mainly made his fortune on the rise of the iPhone, is launching his presidential bid again, aiming to be the candidate for the China-friendly Kuomintang to challenge the ruling Democratic Progressive party in the January 2024 election.

Gou remains the biggest individual shareholder in Foxconn, which has massive operations in China. At his press conference, he sang Taiwan’s national anthem, bowed to a picture of Sun Yat-sen, the founding father of the Republic of China — as Taiwan is formally called — and tried to persuade the public he is the right choice to lead the tech-focused island through US-China tensions.

Meanwhile, the tech industry’s struggle continues. I went to the annual Touch Taiwan display show, where Taiwan’s two leading display makers, AUO and Innolux, both said they are cutting domestic production capacity for notebooks and TV screens because of an ongoing supply glut. Several display equipment makers at the expo also shared pessimistic views about the outlook for the remainder of this year.

“Basically, I’ve almost given up for this year. I don’t think the markets would really recover significantly in Q3 [the July-September quarter],” said a sales executive at a US-based display and chip equipment maker.

A day later, Taiwan Semiconductor Manufacturing Co, the world’s biggest contract chipmaker, lowered its full-year revenue forecast from growth to decline due to slower-than-expected inventory digestion.

TSMC is the leading barometer for the tech industry, and for the first time, I find myself hoping its outlook is wrong.

Thank you for reading #techAsia. We are taking a short holiday next week and will be back to your inboxes on Thursday, May 11.

Peripheral adjustments

Microsoft is scaling back production of peripherals for its Surface line of computers, writes Nikkei Asia’s Lauly Li, as the industry-wide downturn in PC sales drags on.

The company behind the ubiquitous Windows operating system has spent more than a decade building up its hardware supply chain for the Surface, spending generously to do so, according to its suppliers. The line-up now includes tablets, notebook and desktop computers and even wireless devices like earphones.

But demand for PCs, which surged during the Covid years, has taken a hit from global economic woes from around the start of the war in Ukraine in February last year. Global PC demand, including desktops, has declined sharply, plunging 12.5 per cent to 453.7mn units in 2022, according to data from IDC. Microsoft itself shipped just 38,000 desktop computers last year, down 25 per cent on the year.

Microsoft’s decision to reduce production of Surface accessories reflects this prolonged slump, and suppliers say it makes sense for the US tech giant to focus resources on other, more profitable areas, such as cloud computing.

“We were told the Surface series will still be one of Microsoft’s development focuses, but just not the peripherals anymore,” an executive at one supplier said.

Making it by faking it

When videos of incredible weight loss, nodding physicians and swirling cups of “enzyme coffee” went viral on TikTok last year, even their Shenzhen-based creator was taken aback, write the Financial Times’ Ryan McMorrow, Nian Liu and Cristina Criddle.

“I have no idea why it became so popular,” said Mo Huabin, the man behind the fake enzyme coffees purporting to help anyone lose pounds fast. “It’s actually just regular coffee, nothing special,” he admitted in an interview with the FT.

TikTok’s spiralling global use and lax approach to policing content has dragged along a cottage industry of scammers in its home country who use the Chinese app to sell coffees and other dubious goods around the world.

Many of them organise and boast of their exploits on TikTok’s sister app for China, Douyin, where the FT found Mo chronicling how he cuts together stolen clips of physicians to add credibility to the videos’ weight loss claims.

“I do TikTok to rip people off,” Mo said in a January video posted to Douyin. “My main tool is ecommerce in short videos and livestreams for the Americas.” He told the FT that he was joking in the video and that he did not consider selling dubious goods as tricking people.

New backers wanted

Indian venture capital firms are turning to the Middle East and south-east Asia for funding as traditional US backers retreat, writes Nikkei Asia’s Sayan Chakraborty.

Indian VC firms flourished at the start of the decade on hopes that their country would be the “next China”, but they have hit tougher times in the second half of 2022. Sources attribute the change to tightening credit conditions and the uncertain outlook for initial public offerings.

“The bar is very high to raise from the US investors,” one Indian VC executive told Nikkei. “Raising [money] from the US now is like getting admission at Harvard.”

That reflects in part a global trend as rising central bank rates cooled enthusiasm for venture investments. The question now is how effectively Indian VCs can sell the India story to a new audience.

EU on AI

The European Union is looking to agree on blocwide rules for generative artificial intelligence — the tech behind ChatGPT — as early as this year, European Commission Executive vice-president Margrethe Vestager told Nikkei’s Takashi Tsuji and Catherine De Beaurepaire.

The sudden arrival of ChatGPT on the global stage sparked a rush of tech companies attempting to cash in on the AI boom, creating plenty of hype but also raising serious concerns over user privacy and safety.

“It would be good to pass it as fast as possible,” said Vestager, who is in charge of EU policies on competition and AI.

The commission is due to draft the new AI rules in conjunction with EU member states and the European parliament.

Vestager is the first senior EU official to give a timeframe and other details of proposals for regulating the technology. She also gave concrete examples of the types of usage that could fall under such rules.

“It will give you an obligation to label, if, for instance, a photo or a film or a song is made with AI,” she said.

One area that won’t be affected, she said, is research. “You can test, you can innovate, you can pursue your ideas,” she said. “What we are regulating is when it’s put into use.”

Suggested reads

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2. Tencent accelerates investment in overseas gaming studios (FT)

3. Huawei diversifies in Vietnam with products for data centres (Nikkei Asia)

4. Samsung semiconductor division swings to $3.4bn loss in Q1 (Nikkei Asia)

5. Japanese gaming company suffers $30mn Credit Suisse AT1 bond hit (FT)

6. Vietnam’s VinFast debuts budget EV as Chinese rivals jump in (Nikkei Asia)

7. US urges South Korea not to fill China shortfalls if Beijing bans Micron chips (FT)

8. Japan’s ispace hopes to overcome failed moon landing with 2024 trip (Nikkei Asia)

9. Chip designer Arm makes its own advanced prototype semiconductor (FT)

10. China building cyber weapons to hijack enemy satellites, says US leak (FT)

#techAsia is co-ordinated by Nikkei Asia’s Katherine Creel in Tokyo, with assistance from the FT tech desk in London.

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