Tag Archives: technology

Surprise Seizure In South China Sea

THE SEIZING OF a US Navy underwater drone by the PLA-Navy points to the potential for a small incident to take on greater import as Sino-American relations become more uncertain ahead of Donald Trump assuming the US presidency.

The drone was conducting a military oceanographic survey to map underwater channels in what the US claims are open waters some 160 kilometres off the Philippines, but China considers to be its own.

The incident comes hard on the heels of the publication of satellite photographs showing anti-aircraft batteries on seven of China’s artificial islands in the South China Seas and US President-elect Donald Trump’s questioning of Washington’s commitment to the ‘One China’ policy and his taking of a telephone call earlier from Taiwan’s President Tsai Ing-wen.

Having had the unpredictability card played against it, Beijing may be countering in kind.

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Droning On

DJI Phantom 2 drone with GoPro camera. Licenced under Creative Commons.

IT IS A sign of the increasing sophistication of the country’s technology that Beijing is imposing controls on exports of some advanced drones and supercomputers. Or at very least a sign that Beijing wants its technology so regarded.

From the middle of this month, export licenses will be required for drones that can fly 1,500 meters high, stay airborne for longer than an hour and handle strong winds. Licences will be granted or withheld on grounds of national security, which will, in the manner of the times, inevitably be judged case by case.

There is also a bit of tit-for-tat at play. The export licensing scheme also covers supercomputer chips and follows US restrictions on computer hardware that can be sold to China. China’s Tianhe-2 is currently the world’s fastest supercomputer though the Obama administration has announced a programme to reclaim that title for the U.S. The Americans have concerns that the Tianhe-2 is being used for nuclear-weapons development

Meanwhile, China has become a leader in drone manufacturing. DJI Technology, the Shenzhen-based company whose drones have been flown (uninvited) into the White House grounds in Washington and onto the roof of the office of the Japanese prime minister in Tokyo, had sales of $500 million in 2014, more than any another maker of unmanned aircraft.

Sales of its best-selling Phantom line of commercial drones (seen above mounted with a GoPro camera) are unlikely to suffer from the new regulations, and so DJI will remain on track to become this year the first drone maker to record $1 billion in sales.

Update: DJI has 70% of the world market for commercial drones and is valued at $10 billion, according to an FT interview with one of its earliest outside investors, Neil Shen, who runs the China arm of the Silicon Valley investment firm, Sequoia Capital.

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Filed under China-Russia, China-U.S., Industry

How Sino-Centric Is The World Wide Web?

As Mark Zuckerberg, the founder of Facebook, wanders around Shanghai, he will no doubt reflect, and not for the first time, on the fact that China accounts for barely 500,000 of his highly successful social network’s 400-plus million users around the world. He might also like to consider this: by 2016 China will have more internet users, at nearly 800 million, than the U.S., the U.K., France, Germany, India and Japan — combined.

That forecast comes from The Connected World, a Boston Consulting Group report published at the time of the annual Davos shindig in January. If more than a quarter of the 3 billion people in the world the report reckons will be online by 2016 are in China, compared to a tenth in the U.S., should we be thinking of China as being at the center of the Internet and the global digital economy rather than the U.S.?

It may be misguided to think of anything as distributed as the Internet as having a center. Yet sheer weight of population is fast swelling the China node, and challenging the notion that China, by its own volition, can be a web world of its own.

The first e-mail sent from China contained the message, “Across the Great Wall, we can reach every corner of the world” — even if the opposite hasn’t proved particularly to be the case. Yet more and more of that world is increasingly inside the Great Wall. With a population of 1.3 billion and an internet penetration rate of 38.3% at the end of last year, there is plenty of scope for grow the ranks of netizens. In raw number of internet users, China passed the U.S. in 2008, though fewer than one in four Chinese was online then compared to almost three out of four Americans. Between 2007 and 2010 China added more Internet users than exist in the U.S. It now has 513 million netizens. The U.S. has 245 million. If China now had America’s current online penetration level (78.3%), it would already have more than 1 billion internet users.

China, like other emerging economies, is also riding a second underlying trend, a world going digitally mobile. It doesn’t have to put a PC on every desk to get its citizens online, just put a smartphone in their hand. Two-third’s of China’s online population accesses the Internet via mobile phone. This year, for the first time, more smartphones will be bought in China than in any other country. China can leapfrog the desktop just as some emerging economies skipped the landline in telephony.

It can also go straight to the social Web. Tencent’s QQ messaging service is what set the company on the road to becoming China’s largest Internet company by market capitalization. Its Weibo (microblogging) service is easing ahead of rival Sina’s (they have more than 500 million users between them). Its Weixin mobile app took barely 400 days to acquire 100 million users. Social networking is a substitute for having no siblings to talk to at home, we are told. Well perhaps. More likely, weak IP protection and weak competition from TV has driven heavy use of the Internet in China for entertainment, particularly online music and videos, and the conversations that follow that. Tencent has adeptly cashed in on that with online games and entertainment. Consumers expect to pay for mobile phone services. They have grown used to them being free on a PC, to the detriment of any business in a country that was an early adopter of desktop computing.

China has also walled off its domestic market to censor and protect domestic industries. There are only two major economies where Facebook isn’t the leader in social networking and Google in search. One is Russia. The other is China, where Renren leads in social, and Baidu in search. Google’s problems in China are too well documented to need rehearsing here, but it is worth noting that Zuckerberg’s 500,000 Facebook users in China constitute a 0.0004% local market share. It has 50% in the U.S.

China’s Internet companies have been in the happy position of being fast followers of the leading global companies, able to learn from them without facing undue competition from them and all the while riding a fast growing economy playing catch-up in Internet use. It seems inevitable that there will be foreign pressure to open up China’s Internet market, just as there has been to open up other sectors of the economy. Domestic Internet companies are starting to position themselves for that eventuality. The recently announced proposed merger of the online video sites Youku and Tudou is sector consolidation to that end.

% of online population whose first language is English or ChineseEach country will fashion the Internet in its own image to a certain extent. Whether the Internet more globally is Anglo- or Sino-centric is determined not only by users but also by usage and content. More than half the content on the Internet is still in English. That is despite the fact that the share of all Internet users who count English as their first language is shrinking (the blue line in the chart to the left). In 2000, it was almost two in five. As of March last year, the latest available figures, it is, at 27%, barely one in four. Over the same period the share of native Chinese speakers (the green line in the chart) has risen to 24%, or almost one in four, from 9% or one in eleven. Native Chinese language speakers are the second largest group online after English speakers. (Japanese, Spanish and German round out the top five languages online, accounting for a dominating 68%).

Where Chinese’s sway falters is that English is the dominant second language and language of business. Even if the official push to promote China’s culture increases the volume of Chinese language cultural and entertainment material online, the international audience for it will be relatively limited. A tonal language like Chinese is ill-suited to the battering it gets when spoken by non-native speakers. English has proved far more robust. It has even spawned a variant, Globish, for just that purpose.

A shift in geographic center towards the emerging economies is not the only change shaping the Internet. Bits and bytes now follow the Brics, as trade once followed the flag, perhaps. Reflecting the shift from nation states to a global economy bestrode by mulitnationals, it is also forming around digital ecosystems that have companies at their center, such as Google, Facebook and Apple in the U.S., Tencent and Baidu in China and Yandex in Russia. They are shaping an Internet economy that cuts across old national boundaries. BCG forecasts the Internet economy will be worth $4.2 trillion in the 20 richest nations by 2016. By that time, IBM has forecast, 1 trillion devices, from phones to fridges and control systems will be connected to it. BCG says the Internet economy will account for 8% of G-20 nations’ GDP, up from 4.1% in 2010. That would be like adding another Italy or Brazil to the G-20 (we are a sucker for such analogies; and, yes, we know GDP figures are probably not adept at capturing Internet economic activity).

Yet China’s Internet giants have a long way to become the corporate hubs of global digital ecosystems. The commercial growth to come domestically may act as a deterrent to them becoming so. In 2010, the search engine market was worth $1.75 billion and is forecast to reach $14.5 billion by 2015. But over the same period, e-commerce is forecast to expand from $75 billion to $315 billion, at which point it would pass the value of e-commerce in the U.S., estimated to grow from $180 billon to $304 billion in 2010-2015.

China’s sheer size makes national bricks and mortar retailing difficult. E-commerce is further boosted by cheap shipping and high rates of urban broadband penetration, already on a par with America’s at 68%. However, as BCG says, broadband infrastructure alone isn’t enough to push a country to the forefront of the Internet economy. Also needed are “a favorable regulatory environment, strong payment systems, consumer protection for e-commerce transactions, and a willingness on the part of governments, business and consumers to go online”.

Forecasts about the Internet in China should always carry a large caveat not only about the commercial environment, but also about the political uncertainties surrounding them. China censors its social networks internally and the wider web externally with its Golden Shield, more familiarly known as Great Firewall. Leaders brought up in the era of state-run broadcasters and newspapers have very different hopes, fears and aspirations for the Internet than the generation that is growing up with it. China’s digital natives have just as much scope to use it to change society and commerce as their equivalents elsewhere. The question is the degree to which they will be constrained from doing so. What is certain is that the rising tides of the global web, like those of the global economy, are shifting in their direction.

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China Racks Up Another World’s No 1: PC Market

China has for the first time passed the U.S. to become the world’s biggest PC market, according to the latest quarterly shipments estimates by IDC, a U.S. IT market-research firm. Some 18.5 million units, worth $11.9 billion, shipped in China during the second quarter, compared to 17.7 million units, worth $11.7 billion, in the U.S., the firm says. That makes China account for 22% of the global PC market compared to the U.S.’s 21%. (IDC excludes tablets and other handhelds from its count.)

On a full year basis, IDC says, it still expects the U.S. to remain the largest market in 2011, with 73.5 million units forecast to be shipped versus 72.4 million in China. Next year, though, that order could be reversed, IDC predicts.

While this Bystander sees this tipping point as no more than symbolic of a trend that has been forming for some time (and China is already the world’s largest market for a range of products from steel to cars), it does confirm our thought that a Chinese buyer of HP’s PC business that is now up for sale would make sense, a successor to Lenovo’s purchase of IBM’s PC business in 1995.

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