The Vision Fund shrinks, and AirPods head to India

Hello everyone. This is Akito from Singapore.

Last week, I had the opportunity to moderate a session at a private equity and venture capital conference hosted by DealStreetAsia, Nikkei Asia’s media partner, here in Singapore. The event brought together investors and entrepreneurs from south-east Asia and was focused on how the global “funding winter” will affect the region’s start-up scene. The consensus of the participants was that despite a slowdown in funding, south-east Asia still has more promising opportunities than anywhere else in the world.

History, moreover, tells us that downturns like these are not necessarily all bad for innovation and investment. In 2000, amid the collapse of the dotcom bubble, Google developed a search-based advertising system that remains the tech company’s cash cow. In 2010, Tesla laid the foundations for mass-producing EVs by acquiring a factory once owned by Toyota Motors and General Motors that had been shuttered due to the financial crisis.

During challenging times, entrepreneurs become laser-focused on generating cash flow, while for investors, a correction of sky-high valuations can open up attractive investment opportunities. I’m hoping that south-east Asia’s start-up ecosystem can emerge from the current headwinds even stronger.

Vision Fund cuts staff

One of the biggest players in the global start-up scene, SoftBank Group’s Vision Fund has also been among the hardest hit by the downturn in tech stock valuations. The most recent sign is its decision to cut about a third of its workforce, Nikkei staff writers Minoru Satake and Wataru Suzuki write.

Masayoshi Son, SoftBank’s founding chairman, once boasted that he would “become the conductor of the AI revolution,” and he made aggressive bets on the world’s unicorns — private companies valued at a $1bn or more — to turn that ambition into reality.

But the Vision Fund’s performance deteriorated sharply as global tech stocks plunged. SoftBank reported a record consolidated net loss of ¥3.16tn ($21.8bn) in the April-June quarter. According to sources, the London-based Vision Fund notified some employees about the cuts on Sept. 29. The fund has about 500 employees, and it is estimated that about 150 will be affected.

The staff cuts are just the latest shake-up for SoftBank’s flagship investment vehicle. In August, Rajeev Misra, the head of the first Vision Fund, resigned as a corporate officer and executive vice-president of SoftBank. The previous month, Son said he would take on a “more direct leadership role” in managing the second Vision Fund.

Huawei’s 5G revival plan

Huawei, the Chinese telecommunication giant and erstwhile leading smartphone vendor, plans to bring back 5G phones as soon as next year in a bid to mitigate the fallout from US sanctions and regain its lost mobile market share, reports Financial Times’ Qianer Liu.

The company, caught in the tensions between Washington and Beijing, has not yet acquired licensed components for 5G smartphones and has been working on how it might bypass US sanctions to relaunch its 5G handsets.

One approach would be to redesign the phone so that less advanced chips are able to support a 5G connection, though that could affect the user experience. The company has also partnered with Chinese chipmakers to set up manufacturing lines without US technology.

Another route for Huawei to revive its 5G phone offerings would be to collaborate with a local company on phone cases with built-in modules that enable 5G connectivity. Such cases are already on the market.

The need to do something is clear. Since 2019, Huawei has been haunted by the lack of cutting-edged components for its premium phone brands, and the revenue from its smartphone-led consumer business plunged 50% year-on-year in 2021.

Unicorns on the run

The world is becoming a less friendly place for unicorns. Global inflation and rate hikes by most of the world’s central banks has changed the investment landscape, write Nikkei’s Kazuyuki Okudaira and Yoshikazu Imahori. The number of private companies reaching a valuation of $1bn or more has dropped in recent months as the traditional unicorn model of “growth at all costs” comes under pressure. There has also been less money flowing in from investors like the SoftBank Vision Fund and Tiger Global Management, which began ramping up their investments in startups around 2017, when interest rates were historically low.

Sebastian Siemiatkowski, CEO of the SoftBank-backed buy now, pay later start-up Klarna, summed up the new mood: “We’ve had a few years now where growth has been really heavily prioritized by investors. Now, understandably, they want to see profitability.”

AirPods head to India

As China’s supply chain risks rise, Apple is asking its suppliers to move some AirPods and Beats headphone production to India for the first time, writes Nikkei Asia’s Cheng Ting-Fang.

The move is aimed at lowering the risk of disruptions stemming from China’s strict zero-Covid policy and tensions with Washington. Apple already makes its latest iPhone in India, and adding its popular audio accessories to the mix would further diversify the US company’s China-heavy production footprint.

Apple’s most important supplier in this westward shift is Foxconn, the world’s biggest electronics contract manufacturer. The Taiwanese company is preparing to make Beats headphones in India and hopes to produce AirPods there eventually, too. China’s Luxshare Precision Industry and its affiliates, which already turn out AirPods in Vietnam and China, also plan to help Apple make the popular wireless earphones in India.

These plans will be music to New Delhi’s ears. The government is pouring billions into attracting electronics manufacturers and beefing up its tech supply chain. According to one analyst, “India is learning from China’s success over the years, and it has a similar potential to become a very meaningful player in the global supply chain.”

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