iQiyi and Tencent’s WeTV, two of China’s most popular streaming services, may be banned in Taiwan next month as the government prepares to close regulatory loopholes that enabled them to operate through local partnerships.
In an announcement posted this week, Taiwan’s Ministry of Economic Affairs said Taiwanese companies and individuals will be prohibited from providing services for OTT firms based in mainland China. The proposed regulation will be open to public comment for two weeks before it takes effect on Sept. 3.
Though Taiwan, which has a population of about 24 million people, is self-governed, the Chinese government claims it as a territory. The proposed regulations means Taiwan is joining other countries, including India and the United States, in taking a harsher stance against Chinese tech companies.
iQiyi and Tencent’s WeTV set up operations in Taiwan through “illegal” partnerships, the Ministry of Economic Affairs said in its announcement, working through their Hong Kong subsidiaries to strike agreements with Taiwanese companies.
But NCC spokesperson Wong Po-Tsung said the proposed regulation isn’t targeted solely at Chinese OTT operators. According to the Taipei Times, he stated “the act was necessary because the cable television service operators have asked that the commission apply across-the-board standards to regulate all audiovisual service platforms, which should include OTT services. It was not stipulated just to address the problems caused by iQiyi and other Chinese OTT operators.”
Wong added that Taiwan is a democratic country and its government would not block people from watching content from iQiyi and other Chinese streaming services.
Once the act is passed, Taiwanese companies that break it will face fines of NTD $50,000 to NTD $5 million [about USD $1,700 to USD $170,000].
TechCrunch has contacted iQiyi and Tencent for comment.
Hello and welcome back to TechCrunch’s China Roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world. This week, we have several heavy-hitting rumors swirling around, from Huawei’s chips for cars to Tencent’s potential buyout of its video rival iQiyi.
China tech at home
Huawei’s foray into autos
Huawei might be bringing the technology behind its Kirin smartphone processor into cars. According to Chinese tech publication 36Kr, Huawei has signed a strategic deal with domestic electric car giant BYD, which would be using the Kirin chips to digitize the “cockpits” (generally refer to the drivers’ cabins) in its cars.
The Kirin chips are developed by Huawei’s semiconductor subsidiary HiSilicon to hedge against U.S. sanctions and become self-sufficient in core smartphone technologies. What’s noticeable is that BYD, backed by Warren Buffet, had previously announced to adopt Qualcomm’s Snapdragon automotive chips in its electric vehicles, a partnership that was set to begin in 2019. Could the potential collaboration with Huawei be part of BYD’s move to decrease reliance on imported technologies?
BYD said it “does not have information to disclose at the moment,” while Huawei declines to comment on the rumor.
The potential alliance would not be all that surprising given the duo has already been working together closely. In March 2019, the companies, both Shenzhen-based, unveiled a strategic partnership to apply Huawei’s AI and 5G technologies in BYD’s alternative energy vehicles and monorails.
More big moves from BYD — the automaker is rushing to become self-sufficient in the production of electric vehicles. After raising a 1.9 billion yuan ($270 million) Series A in late May, its chipmaking subsidiary BYD Semiconductor completed another 800 million yuan ($113 million) Series A+ round this week, apparently due to investors’ immense interest in getting involved in the only Chinese company capable of making the core chip part of electric cars called insulated gate bipolar transistors, or IGBTs.
ByteDance just paid 1.1 billion yuan ($160 million) for a big plot of land to build offices in the heart of Shenzhen’s Nanshan district, according to public information disclosed by the government. Shenzhen is home to multiple Chinese tech heavyweights, including Tencent, Huawei and DJI. It also houses the China offices of foreign retail giants such as Lazada and Shopify, given the city’s rich manufacturing and logistics resources.
That gives ByteDance, the parent of TikTok, a significant presence in Tencent’s backyard. ByteDance is known to have aggressively lured talents from the entrenched tech trio of Baidu, Alibaba and Baidu by offering lucrative packages. Being in Shenzhen will no doubt give the company more access to Tencent’s talent pool.
This may help it in its push into video gaming, an area that has long been dominated by Tencent, the world’s biggest games publisher. Meanwhile, the world’s second-largest games company — NetEase — is right next door in Guangzhou, an hour’s drive away from central Shenzhen.
Shakeup in video streaming
Reuters reported this week that Tencent has approached Baidu to become the biggest shareholder in iQiyi, the video streaming giant controlled by Baidu. Tencent’s video platform competes neck to neck with iQiyi to churn out variety shows and dramas that will convince Chinese audiences to pay for online content.
Both companies are bleeding money on video production. IQiyi, which shed from Baidu to list on Nasdaq, widened its net loss to 2.9 billion yuan ($406.0 million) in Q1 this year, up from 1.8 billion yuan the year before. Selling iQiyi to deep-pocketed Tencent may further ease the financial burden on Baidu, which is busy coping with ByteDance’s threat to its core advertising business. Both Tencent and iQiyi declined to comment on the report.
Robotics startup Geek+ raises $200 million
Geek+, a startup that specializes in making logistics robots that are analogous to those of Amazon’s Kiva machines, just closed a substantial Series C round. The company is one to watch as retail companies in China and North America are increasingly looking to automate their warehouses.
China tech abroad
China’s gay dating app Blued goes public on Nasdaq
JD’s long-awaited secondary listing is here. The online retailer’s shares rose 5.7% to HK$239 ($30.8) on its first day of trading on the Hong Kong Stock Exchange. Several U.S.-listed Chinese companies have filed to list in Hong Kong because of a new bill that will impose more scrutiny on Chinese firms trading on the U.S. stock markets.
Bilibili, a Chinese video streaming website that was once regarded as a haven for youth subculture, has been steadily making its way into the mainstream as users age up and content diversifies. The NASDAQ-traded company recorded a 70% year-over-year growth to reach 172 million monthly active users by the first quarter, placing it in the same rank as video services operated by Tencent and Baidu’s iQiyi.
Daily time spent per user soared to a record of 87 minutes, which is likely linked to the extended stay-at-home order imposed on students during COVID-19.
In the same period, Tencent Video reported 112 million subscribers, while iQiyi commanded 118.9 million, almost all of whom are paying. Bilibili, by contrast, saw only about 8% of its MAU paying.
Bilibili’s growth engine is fundamentally different from the two giants though. While Tencent Video and iQiyi bet on Netflix -style, professionally produced programs, Bilibili relies on a wide array of user-generated content in the style of Youtube. The number of monthly creators grew 146% to 1.8 million, who collectively submitted 4.9 million pieces per month. Among its top creators is, lo and behold, the Communist Youth League of China.
The Youth League is among Bilibili’s top 7 creators, and it gets the most likes of any contributor. It and other state-sanctioned influencers have been flooding the site with virus-related conspiracy theories and fanning anti-American sentiment. https://t.co/u5k0FTQwm2pic.twitter.com/EbXaK7P7kY
The site also has an unconventional way of monetizing its audience. It doubles as a mobile gaming platform — to be expected given its young user base — and earned half of its revenue from video games in Q1. Other avenues of revenue generation come from virtual item sales during live broadcasting, advertising, and sales from content creators who operate online shops via Bilibili.
Despite healthy user growth, Bilibili widened net loss to 538.6 million yuan or US$76.1 million in the first quarter, a steep increase from 195.6 million yuan from the year before. It cites COVID-19 in causing delays in merchandise deliveries through its platform.
Nonetheless, the company bolstered its cash reserve to 10 billion yuan or $1.14 billion after Sony’s outsized $400 million strategic investment, which would explore synergies in animation and games between the partners. The online entertainment upstart is among a small crop of companies that have attracted financing from both Alibaba and Tencent, which are long-time archrivals.
“In Q1, we still generate positive operating cash flow, and our actual cash burn in Q1 was 200 million yuan, which is much less than loss in our P&L,” Bilibili chief financial officer Fan Xin asserted during the company earnings call.
The article was updated on May 19, 2020 to reflect a corrected statement from Bilibili on the company’s cash reserve.