Buying Qimonda's China Assets

According to Taiwan's China Times newspaper(link), the Shandong-based Langchao Group will buy Qimonda's R&D facility in Xi'an and the Huarun Group will buy Qimonda's assembly and testing plant in Suzhou. The Taiwanese newspaper sees this as a strategic move for China to occupy upstream and downstream memory technologies and complete the DRAM production chain in China if one includes Korean Hynix's fab in Wuxi. There are several problems with this analysis. First, who cares about completing the production chain within one country. The critical segment of memory, the fabrication--which itself is hard to separate cleanly from the design in these memory products, is still in Korean hands. Second, it is really unclear what use the R&D facility in Xi'an will be to Langchao. Can this group of engineers in Xi'an create a manufacturing-ready cutting edge DRAM design? Probably not. And even if they could, would Langchao be able to do anything with it?

Perhaps Langchao's move is related to the rumors of the Shandong provincial government's own plans to build an IDM or pureplay foundry in the provincial capital of Jinan (see my very unromantic February 14 post). Combining this R&D facility with an actual fab makes the most sense in terms of utilizing a memory design R&D facility, but entering the memory business at this stage seems foolish from both a public policy and commercial perspective. Unfortunately, that may not stop Shandong and Langchao from investing.

Lenovo's Retreat to the China Market

In my July 11 post, I asked if Lenovo's efforts to consolidate its sway in rural China and the domestic market more generally were creating a position from which it would try to compete again in the global market or simply represented a retreat from the global marketplace. Second quarter results are suggest a tentative answer. On the surface, Lenovo appears to be regaining global market share, but the reality is that Lenovo is gaining in China while losing more the global market in Europe and North America (link). As Bruce Einhorn observed recently at his BW blog, Lenovo appears to be sliding back to the very China-oriented market position it had before purchasing IBM's PC division (link).

One Chairman, Two Companies? More Signs of a Grace-Hua Hong Merger

Hua Hong after four months of reorganization has announced that Mr. Wenbiao Fu will be the new chairman of the firm (link). This appointment suggests that the Grace-Hua Hong merger (see my post from November 1 2008) is finally going to reach fruition as Mr. Fu is already serving as chairman of Grace, a post he assumed on February 12 after stepping down as Chairman of the powerful municipal government agency, the Shanghai Municipal Informatization Committee.

NucTech, Namibia and State Procurement

The corruption scandal in Namibia involving NucTech (link), a firm spun-off from Tsinghua and run by Hu Jintao's son (Hu Haifeng) until he was promoted to head Tsinghua Holdings last May, reminds me of my visit to NucTech a number of years ago when it still had Tsinghua attached to its name. The company seemed to be reliant on state procurement rather than leveraging any internal capabilities just like many other xiaoban qiye (school-run enterprises). The ongoing probe by the EU to look into allegations that NucTech used soft loans from the Chinese government to win customers in the EU (link) suggests that state backing is still critical to its business.

Globalfoundries as an Emerging Competitor?

The announcement that ST will sign on as Globalfoundries' first major outside (i.e. non-AMD) customer (link) could be seen as a sign that the Big Four pureplays (TSMC, UMC, SMIC and Chartered) are headed towards an even more competitive foundry market. The speculation that ST is turning to Globalfoundries because ST was disappointed with TSMC's problems with 40nm technology reinforces the image of Globalfoundries as a serious competitor. I suspect the hype around the ST signing will prove to be just that and Globalfoundries will remain more of a niche player.

Tencent's Search Engine as Competition Policy?

Rumors are floating about that Tencent and Alibaba will release their own search engines. More intriguing still, according to the Marbridge Daily, Tencent's search engine has significant government support because the government wants a domestic competitor to Baidu. My guess is that the government's concern has to do with the lack of competition in this market rather than any dissatisfaction with Baidu's ability to keep the foreigners, well really just Google, at bay.

Lenovo Reinforces Rural Position

Lenovo's new "1+N+N" strategy of having county-level stores, plus township-level retailers and village-based "convenience windows" appears to be a bid to retain its strong hold over channels in rural China. Whether this market will be a base upon which Lenovo can leverage to compete in urban China and abroad or is the beginning of a long slow retreat to the periphery of the PC market to be seen.