Residents of Shenzhen will see truly driverless cars on the road starting Thursday. AutoX, a four-year-old startup backed by Alibaba, MediaTek and Shanghai Motors, is deploying a fleet of 25 unmanned vehicles in downtown Shenzhen, marking the first time any autonomous driving car in China tests without safety drivers or remote operators on public roads.
The cars, meant as robotaxis, are not yet open to the public, an AutoX spokesperson told TechCrunch.
The milestone came just five months after AutoX landed a permit from California to start driverless tests, following in the footsteps of Waymo and Nuro.
It also indicates that …
Bill Zhang lowered himself into lunges on a squishy mat as he explained to me the benefits of the full-body training suit he was wearing. We were in his small, modest office in Xili, a university area in Shenzhen that’s also home to many hardware makers. The connected muscle stimulator attached to the suit, called Balanx, is designed to bring so-called electronic muscle stimulation, which is said to help improve metabolism and burn fat.
“We are not really aiming at Chinese consumers at this point,” said Zhang, who started Balanx in 2014. “The suit is for the more savvy consumers in the West.”
Chinese entrepreneurs don’t expect relationships between the countries to warm up anytime soon, but many do believe the new office will make “less erratic” and “more rational” policy decisions, according to conversations TechCrunch had with seven Chinese hardware startups. Chinese tech businesses, big or small, are adapting swiftly in the new era of U.S.-China competition as they continue to woo overseas customers.
Designed in China
Zhang is just one of the many entrepreneurs looking to bring state-of-the-art Chinese hardware to the world. This generation of founders no longer hawk cheap electronic copycats, the image attached to the old “Made in China” regime. Decades of knowledge transfer, product development, manufacturing, export practice and policy support have made China a powerhouse for producing new technologies that are both edgy and still widely affordable.
Anker’s power banks, Roborock’s vacuums and Huami’s fitness trackers are just a few items that have gained loyal followings in several overseas markets, not to mention global household names like Huawei, Xiaomi, Oppo and DJI.
Consumer sentiment is also changing. Europeans’ perception of “Made in China” quality and innovation has “improved significantly” over the last 10 to 15 years, said Frank Wang who oversees marketing at Xiaomi -backed Dreame which makes premium home appliances including cheaper alternatives to Dyson hairdryers and vacuums.
The new players are eager to replicate the success of their predecessors. They seek media attention and retail partners at international trade fairs like CES, teach themselves Facebook and Google campaigns, and court gadget lovers on crowdfunding platforms. Investors ranging from GGV Capital to Xiaomi rush to back scrappy startups that are already shipping millions of units around the globe.
For Donny Zhang, a Shenzhen-based electronics parts supplier to hardware companies, businesses have been shrinking as soon as the trade war began. “My clients are taking the brunt because the costs of procurement have increased,” he said of those who directly or indirectly deal with American firms.
While many export-led hardware businesses loathe decreasing profitability, some learn to adapt and look for a silver lining. That has unexpectedly spurred new directions for factory owners in China. Indiegogo, one of the world’s largest crowd-funding platforms, saw the changes first hand.
“Once tariffs increase, there’s not much profit margin left for manufacturers because the middlemen already eat up the bulk of their profit,” Lu Li, general manager for Indiegogo’s global strategy, told TechCrunch.
“A good solution is for factories to skip the middlemen and sell directly to consumers with their own brands. Once the goal of brand building is clear, they often come to us because they need marketing help as a first step to establish themselves as a global consumer brand.”
The trend, dubbed “direct-to-consumers” or D2C, also plays into China’s national plan to encourage manufacturing upgrade and homegrown innovations to compete globally, an initiative that began to take shape around 2015. The development naturally makes China Indiegogo’s fastest-growing region in the last two years: in the first three quarters of 2020, businesses coming from China jumped 50% year-over-year, according to Li.
Having an appealing product and brand is just the prerequisite. Ever-changing trade policies and geopolitics have forced many Chinese businesses to localize seriously, whether that means setting up a foreign entity or building a local team.
For Tuya, which provides IoT solutions to device makers around the world, the trade war’s effect has been “minimal” since it has operated a U.S. entity since 2015, which employs its local sales and technical support staff. Most of its research and development, however, still lies in the hands of its engineers in India and China, the latter of which can be a potential contention point, as shown by TikTok’s recent backlash in the U.S.
“The key is compliance. We have a dedicated team of security experts to work on compliance issues. For instance, we were one of the first to get GDPR certified in Europe,” said the company’s chief marketing office Eva Na.
The company’s readiness is prompted by practical needs though. Many of its clients are large Western corporations that demand strict legal compliance in vendors, so Tuya began collecting the needed certificates early on. Connecting 200,000 SKUs today, Tuya’s footprint is found in over 190 overseas countries, which account for over 60% of its business.
Well-funded Tuya may have the financial and operational capacity to sustain an overseas team; but for smaller startups, localization can be a costly and tedious learning curve. Many opted to set up a Hong Kong entity to tap the city’s status as a global financial hub and evade trade restrictions on China, an advantage of the territory that began to crumble following Beijing’s implementation of the national security law.
Balanx, the smart training suit maker, has a Hong Kong entity like many of its export-facing hardware peers. To cope with new global headwinds, it registered a virtual company in Nevada but quickly realized the entity is of little use unless it has an on-the-ground operation in the U.S.
“Many local banks would ask for utility bills and etc. if I want to open an account, which we don’t have. We realized we must have a local team,” asserted the founder.
Zhang is positive that small companies like his own will remain under the radar in spite of U.S. sanctions. “Just avoid having any government connection,” he said.
Indeed, some of the more “benign” and niche products are continuing to thrive in their global push. PopuMusic, a Xiaomi-backed startup making smart instruments like ukulele and guitar to teach beginners, is one. “We aren’t affected by the trade war. We are in a business that’s neither threatening nor aggressive,” said Zhang Bohan, founder of PopuMusic, which counts the U.S. as one of its biggest overseas markets.
Chinese brands are also seeing their edge as the coronavirus sweeps across the globe and confines millions at home. Hardware makers like Balanx, Dreame and PopuMusic have long learned to master e-commerce and logistics in a country where online shopping is ubiquitous.
“Consumers in Europe and the U.S. are growing more accustomed to e-commerce, a bit like those in China five to eight years ago,” said Wang of Dreame.
Rather than rethinking the U.S., PopuMusic is forging further ahead by launching a new connected guitar via an Indiegogo campaign. Global expansion is at the core of the startup’s vision, the founder said. “We are global from day one. We had an English name before even coming up with a Chinese one.”
In the process of making big bucks, hardware makers may have to downplay their “Made in China” or “Designed in China” brand, said Li of Indiegogo. This could help them avoid unnecessary geopolitical complications and attention in their international push. But one has to wonder how this new generation of entrepreneurs is reckoning with their national pride. How do they deal with the mission passed down by Beijing to promote Chinese innovation in the global marketplace? It’s a line that Chinese entrepreneurs have to tread carefully in their global journey in the years to come.
Further confirmation that the esports market is booming amid the pandemic comes today with the news that esports ‘total solutions provider’ VSPN (Versus Programming Network) has raised what it describes as ‘close to’ $100 million in a Series B funding round, led by Tencent Holdings . Other investors that participated in the round include Tiantu Capital, SIG (Susquehanna International Group), and Kuaishou. The funding round will go towards improving esports products and its ecosystem in China and across Asia.
Founded in 2016 and headquartered in Shanghai, VSPN was one of the early pioneers in esports tournament organization and content creation out of Asia. It has since expanded into other businesses including offline venue operation.
In a statement, Dino Ying, CEO of VSPN (see also our exclusive interview) said: “We are delighted to announce this latest round of funding. Thanks to policies supporting Shanghai as the global center for esports, and with Beijing, Chengdu, and Xi’an expressing confidence in the development of esports, VSPN has grown rapidly in recent years. After this funding round, we look forward to building an esports research institute, an esports culture park, and further expanding globally. VSPN has a long-term vision and is dedicated to the sustainable development of the global esports ecosystem.”
Dino Ying, VSPN CEO
Mars Hou, general manager of Tencent Esports, commented: “VSPN’s long-term company vision and leading position in esports production are vital for Tencent to optimize the layout of the esports industry’s development.”
We had a hint that Tencent might invest in VSPN when, in March this year, Mark Ren, COO of Tencent Holdings, made a public statement that Tencent would provide more high-quality esports competitions in conjunction with tournament organizers like VSPN.
As we observed in August, Tencent, already the world’s biggest games publisher, that it would consolidate Douyu and Huya, the previously competing live-streaming sites focused on video games.
In other words, Tencent’s investment into VSPN shows it is once again doubling-down on the esports market.
This Series B funding round comes four years after VSPN’s 2016 Series A funding round, which was led by Focus Media Network, joined by China Jianteng Sports Industry Fund, Guangdian Capital, and Averest Capital.
Now, VSPN has become the principal tournament organizer and broadcaster for PUBG MOBILE international competitions, and China’s top competitions for Honor of Kings, PUBG, Peacekeeper Elite, CrossFire, FIFA, QQ Speed, and Clash Royale. This will tally-up 12,000 hours of original content. The company has partnered with over 70% of China’s esports tournaments.
In March, another huge esports player, ESL, joined forces with Tencent to become a part of the PUBG Mobile esports circuit for 2020.
In addition to its core esports tournament and content production business, VSPN has branded esports venues in Chengdu, Xi’an, and Shanghai. In May, VSPN launched its first overseas venue, V. SPACE in Seoul, South Korea.
And even offline events are coming back. VSPN hosted the first large-scale esport event with offline audiences in August this year. And the LOL S10 event will open 6,000 tickets. However, all tournaments will operate under strict COVID-19 prevention measures and approval processes by the Chinese government, and not all esports events are allowing offline audiences. In the main, only high-level ones are approved.
VSPN said it will continue to focus on building an esports short-form video ecosystem, improving the quality of esports content creation, and reaching more users via different channels. VSPN currently houses more than 1,000 employees in five business divisions.