Inside Huawei’s Mate 60 and a high-tech take on lunch

Hi, everyone. This is Kenji from Hong Kong.

The closely watched meeting between US President Joe Biden and Chinese President Xi Jinping that ended Thursday morning, east Asia time, was generally positive in the sense that the two leaders were finally able to have a face-to-face talk.

Though there were few concrete results, one of the main goals of the San Francisco summit, namely to normalise a communication channel for emergencies, seems to have been achieved. Biden said in the run-up to his second meeting as president with Xi that it was important to “get back on a normal course, corresponding and being able to pick up the phone and talk to one another in a crisis”.

A key point of tension between the two nations, however, remains: technology. It is not yet clear what exactly was discussed during their summit, but a recent five-part series in the Chinese state-owned Xinhua news outlet gives a clue as to how Beijing views the bilateral relationship and what the key issues are.

Titled “Pushing forward Sino-American relations back to the right track”, the series uses the phrase “science and technology (keji)” a total of seven times, indicating the importance Beijing places on unfettered exchanges in this field. The series also criticises Washington for “politicising” and “weaponising” tech and trade issues.

Getting back on “the right track” is easier said than done, however. Both sides, for example, have imposed various export restrictions on cutting-edge chips or on the raw materials used in their production. And at a press conference shortly after their summit, Biden once again called Xi a “dictator,” a comment sure to provoke a backlash from Beijing.

This week, we have an in-depth report on how China is skirting US restrictions to gain access to the advanced machines needed to produce cars and aeroplanes — and potentially military weapons.

More machines, please

Semiconductors are not the only advanced technology that China wants to obtain from the west. Machine tools are also apparently high on its wish list.

Dubbed “mother machines”, this equipment is widely used in processing precision parts indispensable for a wide range of industrial products like cars and aircraft. But they can also be used to develop weapons of mass destruction, including nuclear armaments.

In this Nikkei Film, a team of journalists led by Toru Tsunashima, Tetsuya Abe and Kazuhiro Kida investigates how cutting-edge machines made by Japanese and German manufacturers are ending up in the hands of the China Academy of Engineering Physics, or CAEP.

CAEP describes itself as “China’s sole nuclear weapons development and production unit” on its website and plays a key role in Beijing’s effort to catch up with Washington in terms of nuclear capabilities.

Through numerous interviews and analysis of open-source data, the team uncovered how China’s main research institute for nuclear weapons was able to gain access to embargoed machines.

The case points to the difficulties in implementing export controls of high-tech equipment, as well as the dilemma for companies doing business with China.

The article on which the video is based is available here, and the Japanese version is here.

In search of a winner

With both start-up and Big Tech company valuations hitting stratospheric levels, some global investors are scratching their heads over the best way to back the generative artificial intelligence boom, writes Mercedes Ruehl in Singapore.

Singapore’s GIC, one of the world’s biggest institutional investors, has some simple advice: stick with the familiar big names over buzzy start-ups.

The chief executive of the sovereign wealth fund, Lim Chow Kiat, said listed companies such as Microsoft, Meta and Google parent Alphabet were capturing “a lot of the value already”.

“Customers are paying for [their services] already. So, actually, that is quite a good place for investors to double down on,” he told the Financial Times in an interview.

AI has stretched the market caps of big tech companies, with trillions added to their collective valuations since last year. But most of them have predicted that AI will drive up their revenues, with Microsoft taking an early lead in incorporating it into its products, helped by its large stake in ChatGPT creator OpenAI.

The frenzy since the launch of the ChatGPT chatbot a year ago has prompted warnings from experts that most start-ups in the sector are overvalued and, more importantly, will fail to make money.

“Our observation is that [start-up] valuations are too high. Of course one or two of them may eventually succeed and justify this valuation,” Lim said.

Calling on China suppliers

Huawei’s high-end smartphone Mate 60 Pro, released in August, is an example of how US-led export restrictions on cutting-edge technology are encouraging the use of local components by Chinese companies.

A teardown of the flagship phone by Nikkei’s Masaharu Ban and Nami Matsuura, together with Tokyo-based research firm Fomalhaut Techno Solutions, revealed that 47 per cent of its components by cost come from China. This marks a great leap from the 29 per cent of China-made parts in its predecessor, the Mate 40 Pro, released three years ago.

The main reason for the jump is a switch in suppliers of the most expensive component, the organic light-emitting diode display, to state-owned BOE Technology Group from South Korea’s LG Display.

Meanwhile, the share of Japanese components dropped to 1 per cent from 19 per cent, largely due to the camera image sensor being switched to Samsung from Sony Group. South Korean suppliers’ overall share increased by 5 percentage points to 36 per cent.

Thinking outside the box

Bento, a Japanese-style boxed lunch, may not be so high-tech, but the vending machines to serve them up hot and the supply chain management system that makes it all possible are filled with patent-backed technology.

Jason Chen, a former Sony chip designer who has found a new calling as a Hong Kong food tech entrepreneur, is bringing this innovation to the home of the bento, writes Nikkei Asia’s Kenji Kawase. The “hot-chain” logistics are monitored and controlled by GPS and cloud-based Internet-of-Things technology to ensure the precooked meals are not only hot but also germ-free.

Chen’s first bento vending machine in Japan is scheduled to start serving hungry customers on Friday in Kitahama, a central business district in Osaka.

Suggested reads

1. ‘Zelda’ film tests Nintendo’s ability to tap intellectual property trove (FT)

2. China’s chipmaking equipment imports surge 93% despite curbs (Nikkei Asia)

3. Foxconn plans for any China fallout from founder’s presidential bid in Taiwan (FT)

4. Hungary’s Chinese EV ambitions thwarted by anti-immigration grief (Nikkei Asia)

5. Wall Street and Beijing fight callout of ransomware attack on China’s biggest bank (FT)

6. Gaming start-up VNG aims to launch Vietnam’s answer to ChatGPT (Nikkei Asia)

7. Tech leakage to China can’t be stopped but can be delayed, says expert (Nikkei Asia)

8. China’s biggest chipmaker warns geopolitics is stoking global glut (FT)

9. Nvidia develops AI chips for China in latest big to avoid US restrictions (FT)

10. Apple supplier Foxconn gives conservative outlook for 2024 (Nikkei Asia)