Inside China Tech: Shake-ups and shakedowns

Here is a round-up of our top stories in the world of China technology this past week. They include a boardroom battle inside China’s biggest chip maker, tighter antitrust regulations on Chinese tech giants, and AI being used to improve the efficiency of thermal power plants. Boardroom battle A boardroom shake-up at China’s leading wafer foundry Semiconductor Manufacturing International Corporation (SMIC) could be an attempt to bring stability to a national chip champion trying to reduce the country’s reliance on core US semiconductor technology. Chiang Shangyi, who spent nine years as head of R&D at Taiwan foundry giant TSMC before retiring in 2006, was appointed executive director and vice-chairman of SMIC and a member of its strategic committee. “SMIC needs stable management right now,” said Stewart Randall, head of electronics and embedded software at Intralink, a Shanghai-based consultancy. Liang Mong Song, co-CEO of SMIC, is said to have resigned over the appointment of Chiang, according to Liang’s resignation letter seen by several Chinese media outlets. US to blacklist dozens of Chinese firms including SMIC, sources say Liang also worked for TSMC before joining SMIC but was overlooked for the top R&D job when Chiang left, according to Taiwan media reports at the time. SMIC said in a statement on Wednesday that it was communicating with Liang to verify his intention to resign. SMIC, which has received significant amounts of state funding, is seen as China’s best shot to catch up with its global peers like TSMC in semiconductor manufacturing as the country continues its drive for greater self-reliance in core technologies. However, under the cloud of US sanctions, analysts say that SMIC’s pursuit of a leading edge strategy is not going to work. “We only need to look at Samsung and Intel to know that even if you don’t have one hand tied behind your back like SMIC does, it is still difficult to catch up with TSMC,” said Randall. Gu Wenjun, chief analyst at Shanghai-based semiconductor research firm ICwise, said Chiang’s appointment will tilt SMIC to a more “pragmatic and balanced” development in the next phase. The boardroom shake-up comes at a time when the Chinese foundry is facing increased US scrutiny over its alleged ties to the Chinese military, which SMIC has repeatedly denied. Confronting Big Tech China’s market regulator flexed its muscles this week, slapping fines of US$76,300 each on Alibaba, Tencent-backed China Literature and Shenzhen Hive Box for not properly reporting past acquisitions for clearance. “The internet industry is not outside of antitrust law,” the State Administration for Market Regulation (SAMR) said on Monday. “Although the fines are relatively small, the punishment signals to society that we are tightening up antitrust regulation in the internet space.” The latest move follows the issuance of new draft rules by SAMR in November, aimed at stopping monopolistic practices, protecting fair market competition and safeguarding consumer interests in the internet space. The cases involve Alibaba’s past equity investments in major Chinese mall operator Intime, China Literature’s acquisition of film studio New Classics Media and SF Express-backed Shenzhen Hive Box’s acquisition of a smart locker rival in May. Although the companies failed to seek regulatory clearance, the deals were not deemed to be “excluding or restricting market competition,” so a fine, rather than break-up, was ordered, SAMR said. China tightens scrutiny of social media e-commerce in new draft regulation China’s tighter regime comes amid wider reviews of big tech in the US and Europe to better regulate the grip companies such as Amazon, Facebook and Google have on economies and peoples’ lives. “In the past, our platform economy was not developed to this level, and we didn’t need such [detailed antitrust] rules. But now it’s time,” said Mei Xinyu, a researcher at China’s Ministry of Commerce. Some analysts see China’s tighter industry regulation as a positive step. “The sprawling business expansion of China’s big tech giants is getting in the way of innovation,” said Kering Wang, a blockchain entrepreneur and investor. “No matter what you try to start on now, you find that BAT (Baidu, Alibaba and Tencent) and other big tech companies like Xiaomi are standing in your way.” Alibaba owns the South China Morning Post. AI on the boil JD Digits, the digital technology arm of e-commerce firm JD.com, has launched an artificial intelligence-driven system that improves the efficiency of thermal power plants, as China’s tech giants continue to apply AI technologies to a range of traditional industries to improve performance. Minghe Hu writes that the AI control system automatically adjusts a range of variables for thermal boilers in real time, including the coal feeding process, air distribution and water vapour levels. The combustion efficiency of boilers fitted with the new AI-control system increased to 93.9 per cent from 92.75 per cent for boilers without it in a March test, according to a statement from JD.com, which added that an increase in boiler thermal efficiency of only 0.5 per cent would save the country US$1.07 billion a year in coal consumption and pollution control costs. The project is a partnership with state-owned China Energy Investment Corporation and involves more than 70 power boilers in Langfang, the steel heartland of China’s pollution-prone Hebei province. China remains heavily dependent on fossil fuels and accounts for nearly 30 per cent of global greenhouse gas emissions. However, in recent years the country has taken steps to rein in the pace of new coal power plant construction to reduce overcapacity and pollution levels. A team at JD built the system and the algorithms on which it is based by studying an array of internal data on the boilers. “The algorithms used in the thermal power optimisation project could also be used in similar industries and related fields in the future … to bring efficiency gains to more industries and create greater value to society,” said Xianyuan Zhan, a data scientist at JD Digits.