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A Chinese flag hangs from a pole near the Semiconductor Manufacturing International Corp. headquarters in Shanghai, China, on Saturday, Dec. 19, 2020. Photo: Bloomberg

Tech Big Tech

2020 was a tumultuous year for China’s tech sector as US tensions loomed large for Huawei, TikTok and WeChat

Under pressure from Washington, Beijing fast-tracked domestic semiconductor development
Beijing pushed ahead with 5G network roll-outs, determined to take a lead in the next generation mobile technology

US-China tech war

SCMP Reporters

Published: 6:00am, 25 Dec 2020

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It was a tumultuous year for the Chinese technology sector amid rising tensions with the US and as Beijing doubled down on its goal of achieving self-reliance in strategic areas such as semiconductor development. And as 2020 drew to a close, the central government indicated there will be more regulation in 2021 as it seeks to rein in Big Tech and maintain overall economic stability.

Semiconductor shuffle

Under pressure from Washington, Beijing fast-tracked domestic semiconductor development to increase self-reliance amid a widening tech and trade war. But the year ended with China’s most advanced semiconductor foundry, Semiconductor Manufacturing International Corporation (SMIC), being added to the US blacklist.

In May, the US Commerce Department intensified its restrictions on Huawei Technologies’ access to custom-made chip items produced with US-origin technologies. SMIC, which relies on US suppliers such as Applied Materials and Lam Research for equipment used in its production, said that it has always complied with US regulations and would not produce chips for Huawei.

The US government has said SMIC’s chips might be used by the Chinese military, an accusation the Shanghai-based firm has repeatedly denied. Many analysts believe Washington’s stepped up action against SMIC will further complicate its efforts to catch up with the cutting edge of leaders such as Taiwan Semiconductor Manufacturing Company (TSMC).

Moreover, many analysts have questioned the feasibility of China’s aim to develop semiconductors domestically – an area of technology that takes decades of investment and expertise to build up. Nevertheless, the push has led to a surge in investment from both state-backed funds and private capital – albeit with some misadventures, such as the Wuhan municipal government having to take back control of a troubled US$20 billion state-of-the-art semiconductor manufacturing plant there.

Pan Che

Huawei hit hard

Under pressure from US sanctions that have cut off its access to US-origin technology – including chips – Huawei said in November it was selling its budget smartphone brand Honor to a consortium of over 30 agents and dealers.

Huawei, which became the world’s biggest smartphone maker in the second quarter before US restrictions hit home, said the sale to Shenzhen Zhixin New Information Technology would help ensure the “survival” of Honor’s industry chain.

Elsewhere, consumer head Richard Yu warned that Huawei may not be able to ship handsets with its high-end Kirin chips after this year owing to US trade sanctions, casting a cloud over the future appeal of the tech giant’s offerings.

The logo of Chinese company Huawei on the screen of a Huawei mobile phone in London. Photo: AFP

The world’s biggest network gear maker was also blocked from 5G network roll-outs in a range of global markets, including the UK, under pressure from Washington’s accusation that it is a national security threat – something the Shenzhen-based firm has repeatedly denied.

Celia Chen

China lights a 5G fire

Nevertheless, monthly sales of 5G phones in China passed the 20 million mark in October, as domestic smartphone vendors – including Xiaomi and Oppo – promoted their latest models to tap demand created by Beijing’s aggressive roll-out timetable for the next generation mobile network.

In the third quarter, 5G handsets accounted for about 18 per cent of a total 353.6 million smartphones shipped worldwide, according to data tracking firm IDC. Within the 5G smartphone total, China accounted for 77 per cent of all shipments, followed by the US with 7 per cent and South Korea in third place with 4 per cent, IDC said.

China’s top three carriers China Mobile, China Unicom and China Telecom ramped up their roll-out of 5G base stations in 2020, bringing the total number to around 700,000.

Beijing is determined to take a lead in the global development of 5G networks, hailed as the connective tissue for everything from autonomous driving to internet of things applications in future, and with Huawei holding off the likes of Ericsson and Nokia. But consumers still struggled to find must-have use cases and killer apps in 2020 – will that change in 2021?

Celia Chen, Pan Che

TikTok’s year of living dangerously

ByteDance’s wildly-popular short video app TikTok, the first-ever global tech hit for a Chinese company, found itself caught in the middle of souring relations between Washington and Beijing.

The logo of TikTok is seen on the screen of a smartphone in Arlington, Virginia, the United States, Aug. 30, 2020. Photo: Xinhua

Following a review of its 2017 acquisition of US app Musical.ly by the Committee on Foreign Investment in the United States (CFIUS), Washington ordered the divestment of TikTok’s US operations from ByteDance, citing national security concerns in August.

With its back up against the wall and a tight deadline, ByteDance worked out a proposal to let Oracle take a 12.5 per cent stake and store all its US user data on its cloud to comply with US national security requirements, while Walmart will have a 7.5 per cent stake with ByteDance remaining a majority shareholder.

But prospects for an outright sale were complicated after Beijing updated its tech export restrictions to cover two key technologies used by the short video app in late August. As matters stand, neither the US or China have approved the Oracle deal.

At home, ByteDance expanded aggressively into new sectors such as education technology, e-commerce and enterprise applications, ramping up its competition with big tech rivals.

Coco Feng, Tracy Qu

China’s digital currency draws near

China made strides in the race to roll out the world’s first sovereign digital currency. The so-called Digital Currency Electronic Payment (DCEP) began trials in Shenzhen, Suzhou and Chengdu, as well as the Xiong’an New Area.

Mu Changchun, head of the central bank’s DCEP research institute, underlined in October the need for “centralised supervision” by the People’s Bank of China. He also clarified that DCEP will not compete with WeChat Pay and Alipay, the nation’s two leading digital wallets with a combined market share of more than 90 per cent.

Coco Feng

Tencent hits all-time high but challenges remain

Tencent Holdings’ shares hit a record high in 2020 as the internet and gaming giant shrugged off the previous year’s regulatory woes and benefited from a pandemic-driven gaming boom. However, its mega app WeChat was caught up in the US-China tech spat alongside ByteDance’s TikTok, as the US administration sought to ban the apps in the US on national security grounds. The Indian government also cut off WeChat and blacklisted over 200 Chinese apps in 2020 after border tensions flared between New Delhi and Beijing, a move which also saw Tencent game PUBG Mobile banned.

Next year Tencent, along with other big tech firms, will also face a more stringent regulatory environment at home, as Beijing tightens its grip on the power of internet companies with its new draft antitrust rules.

“Regulatory scrutiny as well as geopolitical tensions may be unpredictable risk factors that could have an outsize impact on Chinese internet companies in 2021,” Bloomberg Intelligence analyst Vey-Sern Ling wrote in a recent note. “It is uncertain whether US President-elect Joe Biden will choose to pursue actions initiated by President Trump, which include pending bans on WeChat and TikTok … A rising concern is whether US actions will prompt similar action by major allied countries.”

Iris Deng

E-commerce evolves

The pandemic and related lockdowns drove strong e-commerce growth. China recorded over 749 million online shoppers as of June, up 110 million from the same time in 2019, according to a September report from the China Internet Network Information Centre (CNNIC). Shopping festivals such as Alibaba Group Holding’s Singles’ Day broke new records.

To meet the demands of budget-conscious shoppers and consumers in lower tier cities, JD.com and Alibaba’s Taobao introduced new discount apps. Meanwhile, firms such as Meituan and Pinduoduo tapped into online grocery shopping as they saw growing demand for food products during the pandemic. Delivery and logistics robots continued to receive more attention.

Live-streaming had a breakout year, spurred on by big name influencers. Tencent-backed Kuaishou and ByteDance-owned Douyin both took advantage of their content platforms to join the online shopping frenzy. The year ended on a cautious note though as China’s market regulator signalled tighter antitrust regulation – meaning that contracts that tie vendors to a single platform may be outlawed in future.

Yujie Xue, Minghe Hu

Live-streaming takes off

Live-streaming tempted farmers, government officials and even chief executives of big tech companies to get in front of the camera. The total transaction value of livestreaming e-commerce is expected to reach almost 2 trillion yuan (US$305.3 billion) in 2021, almost double from the 1.05 trillion seen this year, according to a joint report by accounting firm KPMG and Alibaba.

But it also became clear that many small brands and lesser-known influencers are still struggling to make money from the medium. The issue of fake user traffic also came into focus after US short-seller Muddy Waters accused Chinese social media firm Joyy of using bots to inflate viewer numbers. While Joyy refuted the claims and said the report “lacked a basic understanding” of China’s live-streaming business, industry insiders said the issue would not likely go away.

Tracy Qu, Iris Deng

China's online celebrity Zhang Mofan, right, introduces fresh mangos to her online clients and fans through the live-streaming at her house in Beijing. Photo: AP

AI is inevitable but remains controversial

In 2020, facial recognition technology – one prominent application of AI where computer vision is used to scan faces against a stored database – faced more resistance. The US Black Lives Matter movement raised questions over its use in law enforcement and the EU considered an outright ban in public spaces.

In 2019, many of China’s AI companies were blacklisted by the US over their alleged involvement in developing facial recognition that tracks local minorities, such as Uygurs. This year, more large tech companies fell under US scrutiny for facial recognition profiling, including Zhejiang Dahua Technology, Huawei and Alibaba.

Data privacy moved up the agenda in China. While the country is home to 18 of the world’s 20 most-monitored cities globally – according to a Comparitech study – several Chinese cities tightened regulations on the use of facial recognition personal data in line with increasingly stricter government rules.

However, although facial recognition-controlled toilet paper dispensers faced a backlash in China in 2020, it seems as though wider application of the technology outside security and surveillance, will be on the cards in 2021.

Masha Borak

Driverless cars just around the corner?

A key part of the AI revolution is the technology of autonomous driving (AD) – which came several steps closer to reality in China in 2020. Baidu’s AD unit Apollo rolled out its first robotaxi services in China’s capital Beijing in September, coming after similar services in Changsha in Hunan province and Cangzhou in Hebei province.

Testing base of Apollo Park in Yizhuang for autonomous driving and V2X. Photo: Handout

Baidu Apollo has been granted five licences by authorities in Beijing to test autonomous cars in designated areas within China’s capital city, without an on-board safety driver. On-board safety drivers had previously been a compulsory requirement for AD cars in most Chinese cities.

Meanwhile, start-up WeRide said its robotaxi service in Guangzhou had won over a group of loyal customers, although passengers were keen on expanding its limited service range.

Fully autonomous technology has been hard to achieve due to the complexities inherent in navigating busy, real-world traffic environments. High development costs for enabling tech such as lidars, sensors and on-board-computing units also means that profitability for robotaxi service providers remains some way off.

Pan Che

Genshin Impact has a fairytale-like anime style visual. Photo: Handout

Gaming back with a bang

Global lockdowns to combat Covid-19 helped fuelled a boom for video gaming. Research firm Newzoo estimates that the global gaming market will grow 19.6 per cent to US$174.9 billion this year. China is the world’s biggest gaming market with estimated revenue of US$44 billion.

The surge allowed the sector to rebound from a regulatory winter in China. In 2018 and 2019, more than 28,000 gaming companies went under in the country, amid a nine-month freeze on new game licences as part of a regulatory review. But throughout the first half of this year, more than 22,000 new game-related companies were registered.

Tencent, the world’s largest gaming company, saw a 45 per cent increase in revenue from video games in the third quarter year-on-year. Meanwhile, Chinese firm miHiYo had a global hit with Genshin Impact, signalling the growing prominence of Chinese games developers on the global stage.

Josh Ye

Which stories mattered most to you in 2020? Find out with our Year In Review 2020 retrospective.