TSMC is urgently seeking equipment suppliers from whom it can buy CoWoS (Chip on Wafer on Substrate) machines, as Nvidia, AMD, and Amazon expand orders for AI chips, local media outlet Economic Daily News exclusively reported on Monday. TSMC has increased its equipment orders for CoWoS by 30% to meet growing AI-fueled demand, the report claimed.

Why it matters: The AI boom has reshaped the semiconductor landscape, positioning chip-making companies as critical enablers of the tech revolution while presenting complex challenges related to supply chain resilience and technological advancement. 

Details: CoWoS is a high-density advanced packaging technology developed by TSMC for high-performance chips. The current shortage of CoWoS packaging capacity has become the main bottleneck in the production chain for AI chip orders.

• Nvidia is TSMC’s largest customer of CoWoS advanced packaging, accounting for 60% of the production capacity, according to the report. Recently, in response to the strong demand for AI computing, Nvidia has increased its orders from TSMC, while AMD, Amazon, and Broadcom have also been placing urgent orders.
• Due to its shortage of CoWoS machines, TSMC has sought the assistance of local equipment suppliers including Scientech Corporation, AllRing-Tech, Grand Process Technology, E&R Engineering Corporation, and Group Up Industrial. TSMC has increased its original equipment orders by up to 30%, with delivery expected in the first half of 2024. Mass production will commence in the second half of 2024.
• Currently, TSMC’s monthly capacity of CoWoS advanced packaging is approximately 12,000 units, sources familiar with the matter told Economic Daily News. To accommodate the proposed production expansion, the monthly capacity of CoWoS will be increased to between 25,000 and 30,000 units.
• Major customers such as Nvidia and AMD have increased their orders of TSMC wafers in the third quarter, boosting TSMC’s 7nm and 5nm advanced process capacity utilization.
• Pressure on CoWoS production capacity is expected to ease after next summer, TSMC’s president C. C. Wei stated during a recent earnings call. The Economic Daily News report revealed that TSMC has been expanding its facilities at plants including Zhuke, Zhongke, Nanke, and Longtan, so as to increase CoWoS production capacity.

Context: On September 24, Chinese media outlet IThome reported that Qualcomm’s next generation Snapdragon 8 Gen 4 may have been manufactured using TSMC’s N3E process technology, as indicated by leaked documents from Qualcomm.

• On September 8, TSMC announced net revenue for August 2023 of approximately NT$188.69 billion ($5.87 billion), representing an increase of 6.2% from the previous month.

Pre-sales for China’s Nov. 11 Singles Day shopping festival began this morning, marking the kickoff of the country’s biggest e-commerce season. As a dizzying array of activities—including steep sales and weeks-long promotional games—push product, Chinese brands will rack up the year’s biggest sales figures.

An increasing number of Chinese brands are finding success in overseas markets, and more are going around third-party platforms to sell directly to shoppers hailing from North America to Southeast Asia. The trends sees export brands attempting to circumvent the global sourcing soup which has ensnared conventional selling channels during a year in which they have been walloped by the Covid-19 pandemic and hobbled by geopolitics. 

Refining the overseas sales model

E-commerce in China is dominated by a few massive platforms, which offer sellers an array of infrastructure and services from payment to marketing. When Chinese brands have looked for overseas markets, they’ve tended to rely on Amazon as the global equivalent. 

This situation, however, is changing, with more Chinese consumer-facing brands and retailers choosing to build their own online channels—either websites or apps—to sell directly to consumers rather than relying solely on marketplace platforms.

Direct-to-customer sales are on the rise amid a growing trends for Chinese businesses to sell to overseas markets via digital cross-border channels.

• We don’t know how big the direct sales market is, but e-commerce site tools company Ueeshop CEO Lin Yongpeng predicts 50% growth year-on-year.
• “The changes of consumer behavior that’s brought about by the pandemic is here to stay. Considering the supply and demand, we are optimistic about the long term development of cross-border e-commerce businesses in the long run. Of course, companies that take their bets early will enjoy the first-mover advantages,” Tiger Brokers analyst Eline Wang told TechNode.
• China announced in May plans to build 46 cross-border e-commerce pilot zones across the country, bringing the total number to 105. The zones will offer preferential policies such as tax exemptions on retail exports.

Third-party shopping sites, such as Amazon and Alibaba cross-border e-commerce platform Aliexpress, are benefiting from the shift, but their role in helping Chinese cross-border brands expand globally is taking a back seat to direct-to-customer channels.

Singles Day

Nov. 11 began as a day when single adults celebrated their unattached status—symbolized by the standalone “1” numerals in the 11-11 date. Alibaba first popularized the day as a shopping promotion in 2009, marketing the day as an opportunity for singles to treat themselves with a little frivolous spending. Falling five months after the mid-year 618 shopping festival and a month after the Golden Week holiday, it has evolved into a weeks-long sales season.

But this year, there’s a question mark over the sales season: shopping platforms and governments have been subsidizing consumption almost all year in a bid to drive post-Covid recovery. These sales produced the biggest-ever 6.18 spending festival. After a year of heavy shopping, do consumers have any appetite left? 

China’s cross-border e-commerce market

China’s cross-border e-commerce market, which includes both imports and exports, has grown swiftly over the past few years. Sales for this retail segment hit RMB 186 billion ($27.8 billion) in 2019, with average annual growth of 49.5% each year since 2015, according to a report (in Chinese) from Askci Consulting. Sales are expected to reach RMB 280 billion in 2020.

• The proportion of imports among total e-commerce sales surged past 20% in 2018, from less than 10% between 2008 to 2012, the Askci showed. 
• China cross-border online sales jumped (in Chinese) 52.8% to RMB 187.4 billion in the first three quarters of this year, compared with the same period a year earlier. To compare, overall import and export trade volume rose 0.7% year on year during the same period, according to data from the General Administration of Customs.

Direct to customers

More Chinese brands are taking an approach to online sales familiar from Western brands. Fashion brands like H&M and the Gap have always tried to get customers to buy from their own sites or apps rather than a third party platform. Unlike them, however, Chinese brands adopting direct sales models have stayed online, avoiding costly investments in brick and mortar.

• Many Chinese brands have been active in global markets for years through platforms like Amazon, but increasing traffic from social networks like Instagram has encouraged Chinese brands to try self-run online stores built on brand awareness. With online marketing costs hitting a historic low, there seems to be little reason to continue relying on a single selling channel.
• The number of brands opting to sell directly to customers is rising in markets across the globe. Direct-to-consumer brands in India, another vast and growing e-commerce market, reported 78% annual growth in third-quarter sales through their own websites, compared with 31% year-on-year growth during the same time period for the overall e-commerce industry, according to a report from e-commerce platform Unicommerce. The report showed the number of brands building their own websites jumped 51% during the same period. 

Shein: the pioneer

Shein, a Nanjing-based fast-fashion brand, has been one of the most successful companies at leveraging direct-to-consumer sales to boost international growth. Practically unknown to Chinese customers, the retailer is already the leading fast fashion app in a handful of Western countries, including the US, France, Spain, and the UK.

• Reuters ranked the Chinese retailer is ranked the largest online fashion company in the world by sales of self-branded products, overtaking established rivals like Zara and H&M, citing data from Euromonitor.
• The Shein app notched 229.4 million downloads as of end September, compared with H&M’s 123.5 million and Zara’s 90.6 million, Sensor Tower data showed.
• Though it sells to nearly every country, nearly half of Shein’s customers are in North America, according to September data from Similar Web. Europe is the firm’s second-largest market, where Italy represents 11%, France 7%, and Spain 5% of the company’s total users.
• The 12-year-old fashion retailer doubled traffic and sales from its official website in 2019 compared with the previous year. Annual gross merchandise volume (GMV) hit RMB 20 billion in 2019 and exceeded (in Chinese) RMB 40 billion for the first half of 2020. It is expected to reach RMB 100 billion this year, local media reported.
• Shein’s success could be attributed to a range of factors, from its affordable fashion positioning to viral online marketing strategies on social platforms like Instagram and Pinterest. But its direct-to-consumer model is the foundation for its success, facilitating brand storytelling, a CRM system, and cost management.
• The company reportedly received in August hundreds of millions of dollars in its Series E at a $15 billion valuation, and is aiming for a US listing as early as this year, a source with knowledge of the matter told TechNode.
• It hasn’t all been smooth sailing. The company has seen its fair share of controversy, from selling a necklace featuring a swastika pendant to alleged copyright infringement (in Chinese).
• Other Chinese brands exporting to overseas buyers through self-run websites include Anker, a Changsha-based electronic accessories manufacturer, and electronics gadget seller Banggood.

When in-house makes sense

Brands considering self-run e-commerce websites need to weigh a number of considerations built into each selling model, including time, effort, access to customer data, and upfront costs as well as long-term cost-savings.

• Sales or branding: Selling through third-party e-commerce platforms is, in a large part, buying traffic from their huge user bases. Platforms leave little space for merchants to create a unique customer experience; the priority is driving sales rather than connecting with customers and brand-building. Proprietary e-commerce platforms, meanwhile, are better platforms for companies looking to tell a brand story and increase customer interaction as well as brand loyalty. However, third-party e-commerce platforms, with its massive user base, may offer brands an easier start and better chance to take off.
• Cost of traffic is higher for brands operating on third-party e-commerce platforms due to competition between rival brands listed on the same marketplace. Direct channels can be more profitable in the long term; however, brands need to invest time and effort in building its user base in the beginning. Incremental costs for getting self-operated channels up and running reduce over time, said Tiger Brokers’ Wang. 
• User data ownership. Brands that are leveraging marketplaces like Amazon don’t have direct access to user data, a coveted asset for precise customer targeting and other marketing and merchandising functions. On the contrary, brands operating their own online stores have full ownership over customer data, local media (in Chinese) points out.
• Regulations: Marketplace sites have their own set of rules, governing everything from product categories to the number of SKUs that can be listed. For example, Fulfillment by Amazon (FBA) sellers, who partner with the platform to keep large inventories in the company’s warehouses for quick delivery times, are vulnerable to the platform’s policy changes. In 2016, Amazon raised its fees before the holiday season due to limited warehouse space, impacting many FBA sellers. 
• However, the absence of platform regulation in direct sales also creates risks of shady practices like sales of counterfeits, inviting new regulations. In April, the General Administration of Customs rolled out a set of rules for supervising product returns on cross-border e-commerce sites, offering streamlined processes for product returns and expanding logistical support, and more.

Why now?

B2C commerce sites selling directly to customers isn’t new. Chinese e-commerce companies Lightinthebox and DX.com reached their height of popularity around 2013 before losing ground to third-party platforms due lack of branding and sales of counterfeit items.

• A new wave of direct sales pioneers, including Anker and Shein, have seen impressive growth over the past two years. Their success is drawing more followers.
• The US was the most important market for most Chinese direct-to-consumer e-commerce sites. Markets such as Mexico, Italy, and Ireland are also seeing robust growth, Ueeshop’s Lin said in a recent speech (in Chinese).
• A wide array of supporting tools and services have helped pave the way for self-operated channels. E-commerce site builders Shopify and Magento, sorting systems (in Chinese), and third-party payment solutions have lowered the threshold for brands looking to build their own channels. Companies servicing self-run e-commerce sites are enjoying the boom as a result: Shopify’s total revenue in the second quarter nearly doubled to $714.3 million from the same quarter a year earlier. New stores created on the Shopify platform grew 71% in Q2 2020 compared with Q1 2020.

Amazon has opened a pop-up store on Chinese social e-commerce platform Pinduoduo that will run until the end of December, the company said on Monday.

Why it matters: The move, which TechNode reported on Sunday, will help Amazon boost its existing cross-border e-commerce business in China after shutting its third-party e-commerce marketplace business in April.

• Partnership with Pinduoduo, which says it has 536 million total users, will facilitate Amazon’s lower-tier market penetration in China.
• As Pinduoduo pushes further into higher-tier cities, the Amazon tie-up brings Pinduoduo much-needed support in repositioning itself as a reliable marketplace for finding high-quality, authentic products.
• Shares for Nasdaq-listed Pinduoduo, which sank more than 20% after it reported a wider-than-expected loss in Q3, is facing an uphill battle in its competition with rivals including Alibaba and JD.com.

Details: The new storefront, which went live on the Chinese social e-commerce platform at midnight on Monday, offers customers a curated selection of about 1,000 products imported from overseas, Amazon said in a statement sent to TechNode.

• Items offered include some of the most popular imported product categories from cosmetics to baby goods. Brand names such as Champion, Waterpik, and Enfagrow are among the offerings coming from countries including Australia, Japan, the US, and Germany.
• In its statement, Amazon reiterated its “strong” commitment to China and pledged to continue to invest and grow the Amazon Global Store business in China.
• “We will focus our efforts on cross-border sales in China and to keep improving the experience for Chinese customers,” the company said.

Context: Amazon’s cross-border e-commerce business in China, which sells “tens of millions products,” is accessible through its Chinese website Amazon.cn, the Amazon mobile app, and its WeChat mini program.

• In April, Amazon announced it would be shutting down its China third-party seller e-commerce marketplace to sharpen focus on its cross-border selling and cloud computing service businesses in the country.

Amazon marketplace resurfaces in China with store on Pinduoduo

Amazon will launch a storefront on Chinese social e-commerce platform Pinduoduo, people familiar with the matter told TechNode on Sunday.

Why it matters: While Amazon appeared to have drawn down its business in China earlier this year amid fierce competition with rivals such as Alibaba and JD.com, a partnership with e-commerce upstart Pinduoduo could help the US e-commerce giant to retain a presence in one of the world’s biggest consumer markets.

• The deal grants Amazon access to Pinduoduo’s 429.6 million monthly active users.
• A tie-up with Amazon, meanwhile, would be important for Pinduoduo to build a relationship with overseas retailers as well as expand its product categories. This could be particularly critical for the Tencent-backed social e-commerce app, which is feeling the squeeze from “forced exclusivity” in competition with other marketplaces for sellers.
• The Amazon brand helps boost Pinduoduo’s reputation as a platform for bargain-hunters as it moves to expand its presence in higher-tier markets.
• Pinduoduo’s users from first-tier cities spend well over RMB 5,000 ($710) per year, based on annualized figures for the third quarter of 2019, company founder and CEO Colin Huang has said.

Details: The new storefront will launch Sunday evening at midnight, according to the source.

Context: Amazon announced in April that the company would be shutting down its China e-commerce marketplace to sharpen focus on its cross-border selling and cloud computing service businesses in the country.

• Amazon China held less than 1% share of China’s total e-commerce market as of June 2018, according to market research institute eMarketer (in Chinese).
• “Amazon’s commitment to China remains strong,” the company said in a statement in response to the withdrawal in April.
• Pinduoduo posted weaker-than-expected third quarter earnings on Wednesday due to slowed revenue growth and wider losses, specifically citing heightened forced exclusivity practices in the industry.

Outpaced by local rivals, Amazon struggles to remain relevant in China

Amazon Web Services has installed the president of Amazon China as its executive director for the country as the US web giant looks for expansion in the local cloud market, according to Sina Finance (in Chinese).

Why it matters: The move supports Amazon’s efforts to focus more on cloud computing and cross-border e-commerce after it announced plans to shrink online retail offerings in the country earlier this year.

• The company told TechNode in April that it would cease support for third-party merchants on Amazon China’s website from July 18.
• Amazon faces overwhelming competition from domestic players in the country.

Details: Current Amazon Global Vice President and Amazon China President Zhang Wenyi takes on the new role of vice president of global markets for AWS and executive director for China. It remains unclear if she will remain in her other roles.

• Zhang will take over from Rong Yongkang, who will continue to lead AWS’s new market expansion efforts.
• She will be responsible for operation, sales, marketing, and other aspects, as well as cloud ecosystem partnerships, and relations with government and other stakeholders
• Zhang joined Amazon in 2013 as vice president of global business and general manager of Kindle in China. In her new post, Zhang will report directly to AWS CEO Andy Jassy.

Context: Foreign cloud providers have been eager to gain a foothold in China’s fledgling cloud market, but they face strong headwinds due to local regulatory restrictions.

• AWS entered China in 2016. Last year, it accounted for a little under 6% of the country’s s public cloud market, according to IDC.
• As its other businesses dwindle in China’s cutthroat market, Amazon plans to focus more resources on China’s cloud market, which is currently disproportionately dominated by Alibaba Cloud.

Amazon halts sales of paper books in China, more businesses to close in near future — Global Times

What happened: E-commerce giant Amazon has halted official sales of paper books in China while the platform’s third party sellers will also go offline soon. The China unit will only handle cross-border e-commerce and cloud via Amazon Web Service from July 18, according to a statement. E-book sales will not be affected by the adjustment.

Why important: The move comes after the US firm’s revenue expanded at the slowest rate for four years in the first quarter this year. The international sales division, which covers China and India, has run up losses for three straight years, which Amazon attributes to fierce local competition and strict restrictions. In China, Amazon has been left behind by local players like Alibaba and JD which Amazon says have a “greater” understanding of local users. Amazon claims regulations and license requirements are restricting its development. “Our international operations may not be profitable on a sustained basis,” the company said.

Amazon just launched a lending service in China while shuttering its local marketplace – CNBC

What happened: Amazon has launched a new lending service called “Lending Referral Program” for merchants in China, according to a post on the company’s sellers forum. The service aims to help China-based sellers, who sell products to Amazon consumers across the world, expand their business on the site by connecting them with local lenders. Under the program, prequalified sellers can apply for short-term loans to help them purchase more inventory. The e-commerce firm has partnered with financial service provider Shanghai Fuyou Commercial Factoring and will seek more lending partners in the future.

Why it’s important: Amazon’s latest initiative comes a month after closing its China marketplace. The US e-commerce giant has struggled against competition from rival Alibaba and other domestic players. Failing to serve Chinese consumers, Amazon is now shifting focus to merchants—still an important front for the company considering that more than 40% of its merchants are in China and they account for a significant share of Amazon’s global marketplace sales. Amazon previously said that withdrawing from the domestic marketplace would allow it to focus more on its cross-border e-commerce business.

Amazon Web Services enters the Hong Kong cloud market – ZDNet

What happened: Amazon Web Services (AWS) has officially launched in Hong Kong, expanding into its eighth market in Asia Pacific as demand for cloud services rises across the region. Amazon’s cloud services arm announced on Thursday that customers can now run applications and store their content in data centers in Hong Kong while connected to the AWS network. The cloud service provider said the decision to ramp up expansion efforts in the Asian market was prompted by rising demand for large-scale cloud technology infrastructure from startups, enterprises, and government entities in the region.

Why it’s important: AWS currently leads the global cloud services market with share of more than 30%. In Hong Kong, AWS still faces competition from Chinese tech giants like Alibaba Cloud and Tencent Cloud, who have been cultivating the market for years. Alibaba Cloud currently leads Asia’s burgeoning cloud market, according to Gartner estimates released earlier this week. Amazon’s expansion into Asia has been challenging, especially in China. The company recently decided to withdraw part of its e-commerce business in the country, and focus its resources on its cloud computing business and cross-border e-commerce.

Amazon is shrinking its e-commerce offerings in China, where market share for the US mega e-tailer is barely negligible amid fierce competition from countless rivals including giants such as Alibaba and JD.

“We will cease support for third-party merchants on Amazon China’s website starting Jul. 18, 2019,” (our translation) the company said in a statement to TechNode on Thursday. Amazon provides its merchants with tools to boost selling, including fulfillment and advertising services, according to its website.

Its withdrawal from the domestic marketplace will allow the company to sharpen focus on its cross-border e-commerce business, which mainly sells overseas products to Chinese customers, and its cloud computing service, it said in the statement.

The global e-commerce giant had struggled to gain share since it strode into China’s booming e-commerce industry in August 2004 through the acquisition of online book seller Joyo for $75 million from Xiaomi founder Lei Jun, the largest shareholder of the company at the time.

Yet according to market research institute eMarketer, Amazon China held less than 1% share of the total e-commerce market as of June 2018, eclipsed by Alibaba, which holds a share of more than half the market, and JD.com with less than a fifth. Social e-commerce platform Pinduoduo, local retailer Suning, and Tencent-backed Vip.com round out the top five.

Long time coming

To some, the news is just a formal acknowledgement of Amazon’s reality in China.

“Honestly, I didn’t even know they still had a domestic business left,” Ker Zheng, marketing specialist at a Shenzhen-based e-commerce solution provider Azoya, told TechNode.

“They should have done away with the domestic business a long time ago. There’s no point to compete with Alibaba, JD, and JD isn’t even that profitable,” he added.

Netizens on social media appear to agree. “Amazon shut their in-house inventory business several years ago. Third-party merchants business is also not doing well. For me, Amazon has quit the game for a long time,” (our translation) one  Weibo user using the handle Summer wrote in a post dated Thursday.

The company’s strategic decision to retain key segments is a reflection of its platform’s polarity in China. “Not a big deal for me as long as Kindle and the cross-border operation is around. Amazon offers smaller discounts than Taobao and JD,” a Weibo user going by Shanika said.

China’s e-commerce market requires deep commitment that not all companies are prepared for.

“Basically all platforms provide a commodity service, since everyone sells the same products. To differentiate you have to either provide a lower price or a better customer experience, which means wider product selection, faster shipping. All of that requires a ton of investment and not making money for a long time. JD is willing to do it but not Amazon,” Zheng said.

Commitment can also mean evolving with consumers. Cao Lei, director of the China E-Commerce Research Center, attributes the company’s failure to gain a solid foothold to its lack of innovation. “The e-commerce platforms in China, both old and new, have developed lots of localized business models, such as Pinduoduo’s “group purchase” model and multi-echelon distribution model, to acclimatize themselves to the local market. But Amazon has missed many chances to make innovations, and lost a large number of users,” said Cao.

Regardless of its missteps, Amazon maintains that the move is not a complete pull-back from the China market, but is “a transitional period” (our translation).

However, the US giant also lags the competition in the cross-border e-commerce segment.

China’s leading e-commerce platforms, including Alibaba and JD, announced commitments to assist with importing a combined $250 billion worth of foreign goods at the first-ever China Import Expo held in Shanghai in November.

Rivals Tmall Global, NetEase Kaola, JD Worldwide, and Xiaohongshu lead the market, leaving Amazon China with a 6% share of the vertical as of the fourth quarter of 2018, according to data from research institute Analysys.

“[It] makes much more sense to focus on cross border imports since they have an advantage in sourcing foreign goods,” Zheng of Azoya told TechNode.

Cloudy Skies

The company’s other remaining business in China faces hurdles of its own. Amazon Web Services (AWS), the empire’s cloud computing platform, is a slow mover in the burgeoning cloud computing market.

Figures from Synergy Research Group showed that it held the leading share of the Asia-Pacific region with 24.1% share in revenue in the fourth quarter of 2018. However, in China, domestic tech giants hold the lion’s share with AliCloud comprising 40.5%, Tencent coming in a distant second with 16.5%, and AWS with around 9.7% share.

AWS made its China debut in August 2016, when it licensed the rights to Chinese telecommunication and data service provider Sinnet to offer local cloud services. China’s cyberspace watchdog requires foreign enterprises partner with local companies in order to run cloud infrastructure services in China for data security reasons.

Stay or go?

Early reports about the company’s shrinking China business were fractured, signaling internal confusion about the move.

Reuters reported on Wednesday that Amazon was preparing to close its China marketplace by withdrawing support for third-party merchants over the next 90 days. Chinese media also reported the closure of its main domestic retail business in China, citing a source as saying some employees are now hunting for new jobs.

However, according to China Business Journal, Amazon China announced the decision to close its e-commerce business including the proprietary retail segment in an internal meeting that took place Thursday morning.

Amazon China’s president, Zhang Wenyi, who took the post in April 2016, will reportedly leave, according to an unnamed executive. Around 2,000 people work for the company in China, and will learn more about the company’s layoff plans next week, said the source.

Amazon is not the first international retailer to fail in China.  The platform’s refusal to adapt to Chinese consumer preferences may have also taken a toll.

“If Amazon continues its cross-border e-commerce into China, it is highly suggested that they adapt and provide Chinese consumers the entertaining shopping experience that Chinese consumers like, instead of a global interface and rigid structure pushed to the consumer,” said Ron Wardle, CEO of e-commerce solutions firm, Export Now (Shanghai) Inc.

Cao of the E-Commerce Research Center agreed that Amazon China’s special “foreign-company style” corporate culture led to its weak execution of innovative ideas. “Decisions such as changing festival logos and launching new projects have to be approved by the company’s US headquarters, which results in its inefficiency and lack of indigenization,” he said.

JD.com founder and CEO Richard Liu—a leading figure in China’s e-commerce landscape whose own company and management has recently come under close scrutiny—uses a battle metaphor to describe the dynamic in a March 2018 video interview.

“It’s like soldiers who are told that they only have 10,000 bullets and before shooting each of the bullets, they have to check with the general whether more ammunition is coming. How can you expect the soldiers to win a war like this?” Liu said.

Additional reporting by Emma Lee and Wei Sheng. With contributions from Colum Murphy.

“黑五”来袭，亚马逊中国如何打造纯正的海淘狂欢？– ifeng.com

What happened: Global e-commerce giant Amazon is bringing the Black Friday sales to China. From November 22 to November 24 (Beijing time), Amazon China’s international sales channel allows users to purchase discounted items as same as how global consumers including those from US, UK, Germany, and Japan do. According to Amazon, the event waives global shipping fees for cross-border orders over RMB200 ($28.8).

Why it’s important: Amazon’s Black Friday sale is likely to attract more consumers though Alibaba is still leading cross-border commerce. Amazon’s sales directly offer items labeled with clear discounted prices, whereas the Singles’ Day online shopping mania created in China asks consumers to use coupons and follow complicated sales rules – often confusing consumers and raising doubt about the reliability of the discounted deals. However, Amazon’s special sales need more time to educate the market. The company also lacks strong ecosystem partners including logistics support in China.

Supermicro tells customers it is looking for Chinese spy chips on motherboards ‘despite lack of proof’ – SCMP

What happened: Computer hardware firm Supermicro said yesterday (October 22) that it would review its motherboards for malware chips, which according to a report by Bloomberg had been planted by Chinese spies during the manufacturing process in China. The company said that it was undertaking a “complicated and time-consuming” review of its products the lack of proof that the chips existed.

Why it’s important: Compromised Super Micro motherboards allegedly made their way into the servers of multiple US government agencies and 20 companies, including Amazon and Apple. Bloomberg claimed that their use would give Beijing access to internal networks. However, Supermicro has denied the claims, while Apple CEO Tim Cook has said the article should be retracted. Amazon Web Services CEO Andy Jassy joined Cook in suggesting a retraction. Analysts have said that the placement of the chips is plausible, but would result in very high costs. Additionally, every compromised motherboard increases the risk of detection.

Beijing Sinnet Technology (光环新网) announced that will offer not more than 2 billion yuan to buy specific operating assets of Amazon Web Services (AWS) in China, TechNode’s Chinese sister site has reported. The assets will include but are not limited to, servers and other IT devices and based on them, Sinnet will provide and operate cloud services based on Amazon cloud technology in China. According to the announcement, the decision was adopted on November 10 and an agreement on the sale of assets in installments was signed with Amazon.

The move was prompted by China’s new cyber security rules which state that all foreign cloud computing providers entering the Chinese market must offer IaaS (Infrastructure as a Service, a form of cloud computing that provides virtualized computing resources over the internet) in partnership with Chinese enterprises. For example, CenturyLink (世纪互联) is cooperating with Microsoft on its cloud services and Oracle has signed an agreement with Tencent. Apple also announced transferring data on local customers on cloud services to a government-owned company in June.

Amazon has authorized Sinnet to operate Amazon’s cloud technologies and related services (AWS) in the Beijing area as early as in the end of July 2016. Regarding the acquisition, Sinnet has stated that the move was carried out in order to comply with the local laws and regulations and further improve the security and service quality of AWS services.

As for AWS, they too have stated that they sold a part of their physical infrastructure assets its Chinese partner Sinnet in order to comply with the law and that the deal did not involve intellectual property transfer.

The new measures for foreign cloud services were announced within the new cybersecurity law by the Chinese Ministry of Industry and Information Technology at the beginning of this year and were put into effect in June. The new law spurred complaints from foreign companies and China watchers. Many have claimed that the law will make it harder for non-Chinese businesses to trade and that the law will be used to push out foreign influences from China.

The law stipulates that data on Chinese citizens can only be kept in China. It also prevents the transfer of any economic, scientific or technological data overseas on either national security or public interest grounds, as defined by the Chinese government.

“Ecosystem” is a word that gets thrown a lot in the tech industry but there is a definition of this buzzword which is actually worth your attention. Digital ecosystems, or business ecosystems, are a model in which traditional industry boundaries are radically reordered, where sectors that once seemed disconnected fit together seamlessly and where users, their data, and businesses are part of a large co-dependent machine, according to a McKinsey analysis titled “Competing in a world of sectors without borders.” The report shows how China’s tech giants are developing this model and setting an example for global players.

The term business ecosystem was coined by James F. Moore who studied the co-evolution of social and economic systems. It is now widely adopted in tech companies but it is quietly seeping into other areas.

The model is a good reference for China’s digital landscape. Consider Alibaba—it can be defined as a retailer and a financial company. It has cloud technology, logistics, entertainment, healthcare, and even maps. It’s O2O, B2B, B2C, C2C and probably every other acronym you could think of.

Alibaba, of course, is not the only example, other companies in China such as Tencent and Baidu, and even insurance company PingAn are building their own ecosystems. PingAn has moved on from insurance to financial services to AI development, and it has also created the PingAn Good Doctor app that connects patients with doctors.

China’s tech giants owe their turbo-charged rise to unique regulatory, demographic, and developmental conditions. They were founded at a time when the efficiency of the traditional industries was low: e-commerce gained massive user number because classical retail was underdeveloped; delivery companies expanded because of the unreliability of China Post; healthcare apps gained momentum because of the inefficiencies of the healthcare system; mobile payments took the population by storm because plastic never had time to gain traction.

By not being defined or constrained by a single industry, Chinese tech companies have accelerated the blurring of the borders between areas such as these. Much like WeChat which has become “the everything app” by joining social media, content, shopping, and more, these companies are trying to become “the everything company,” simultaneously competing in multiple sectors.

Emerging markets like China are a good starting point for developing cross-industry ecosystems because businesses and expectations are not as defined as they are in more developed countries. But similar paths are being taken around the world. Japan’s Rakuten Ichiba has online stores, runs Viber, offers e-money, credit cards, and even travel. Amazon has launched Amazon Go store, acquired Whole Foods, and is providing vehicle searches in Europe. Telecommunication companies Telstra and Telus are combining tech and healthcare. Ford is redefining itself as a mobility company, not just a car-maker.

With the help of AI and big data, these companies are creating ecosystems that enable users to access all kinds of products and services through a single gateway.

“Ecosystem orchestrators use data to connect the dots—by, for example, linking all possible producers with all possible customers, and, increasingly, by predicting the needs of customers before they are articulated,” the report explains. “The more a company knows about its customers, the better able it is to offer a truly integrated, end-to-end digital experience.”

Companies like these may seem like outliers today, but they are already changing the face of the economy. McKinsey recently asked 300 CEOs worldwide in 37 sectors about advanced data analytics. It turned out that one-third of them have considered cross-sector dynamics while many of them stated that they worry that companies from other industries have clearer insight into their customers.

The new model is threatening to sweep the floor under certain (not all) traditional industries—soon they will have to face competition from companies and industries that they previously never considered rivals. In the future, companies will define their business models not by how they play against traditional industry peers but by how they can stand against ecosystems.

The report suggests that within about a decade 12 large ecosystems will emerge in retail and institutional spaces. It advises companies to follow data insights, build emotional ties with customers because they will bring more customers, and diversify company partnerships. It also warns that for many companies the attempt at creating an ecosystem has been a costly failure. But the report does not mention how the economy will look like when these massive, multi-industry ecosystems rise. What will the era of digital ecosystems and tech-based conglomerates bring us as consumers?

For now, it is hard to predict outcomes. It is quite certain that ecosystems will offer more convenience and better solutions, but it is also imaginable that they will bring us more walled gardens, more antitrust lawsuits such as the one Google faced in the EU, and even bigger data privacy concerns.

China’s two e-commerce majors announced impressive news on the same day: Alibaba Holding Group’s market cap broke the $400 billion mark for the first time; rival JD also saw its share price hit a record high of $46.84.

Alibaba’s shares reached a record high of just over $160 in trading Thursday, generating a market cap of $409 billion. The price has since slipped but is part of an onward trend for the e-commerce and tech giant which has seen its share price rise steadily since a low of $60.89 in February 2016. In Q2 2017 alone, the company’s stock has risen 31% on the New York Stock Exchange. The surge followed the announcement in March of revenue growth of 45% to 49% over the following year.

This new high has been a long time coming. Alibaba’s launch price was $68 per share on September 19, 2014, and closed at $93.89. It then promptly slid for the next month. By March 2017, 2.5 years since going public, they had recovered to just over $100, a gain of just 11% compared to a 28% increase for the NASDAQ in general and 21% for the Dow Jones Industrial Average.

After its overvaluation at launch, Alibaba’s recent rally shows an increase of 135% meaning it is catching up with other global big boys.

Over the same period, Amazon’s market capitalization rose from $152 to $407 billion, and then on to $499.96 billion today, a 228% increase. Similar patterns can be seen for other tech majors such as Facebook, Alphabet, and Apple. On the day of Alibaba’s IPO in 2014, Tencent’s shares were at HK$125, HK$207 in early March and HK$305 now, 145% growth, an even greater increase than Alibaba’s recent surge.

JD has seen a similar pattern to rival Alibaba, after its IPO a couple of months earlier. By the time Alibaba joined it as a publicly-listed company, JD was trading at $28.35 and also reached a new high on Thursday, of $46.84, an increase of 65%.

“Our rivals don’t buy technology companies. They buy products, but not companies,” claims Baidu CEO Robin Li as his company announces its acquisition of natural language processing company Kitt.ai at the Create 2017 Baidu AI Developers Conference in Beijing.

Kitt.ai has “wake” technology—algorithms that let devices be programmed to wake up and start listening to human voices when prompted with a keyword—that is crucial to Baidu’s “wake up” plans for making its AI operating DuerOS fully compatible with the IoT. As general manager of the Baidu DuerOS platform, Jing Kun, said at the conference, “If we want to wake up everything, it has to be listening.” As Jing explained, “Our competitors can listen, but they don’t understand.” He identified the three key steps for a device to be able to have natural conversations with human and “listen,” “understand,” and “fulfill.” DuerOS already has voice recognition accuracy of 97% and the company is also strong in “understanding” with its masses of data and keyword queries, according to Jing.

Kitt.ai’s Founder and CEO Chen Guoguo was promptly summoned on stage. He gave a demo of Snow Boy, the Seattle-based company’s wake recognition software that compresses its coding so it can be used on almost anything. Chen taught a Mac laptop to wake up if it heard “Jing Kun, ni hao!” (“Hello, Jing Kun!”) being called and explained how the system works with any programming language and is compatible with Amazon’s Alexa. The company has previously received investment from Amazon’s Alexa Fund.

DuerOS Developer Kits

Jing also announced the release of DuerOS compatible kits, chipsets of varying sizes and capabilities that are now available to developers via applying through the DuerOS website. The entire DuerOS system and Baidu’s data are available free of charge to developers, covering everything from smart home devices to encyclopedia interfaces.

Jing whipped the smallest smartchip out of his back pocket and held it next to an RMB 1 coin to show off its tiny dimensions. “Just add a microphone and speakers and you can make your appliances talk,” said Jing.

DuerOS compatible with Alexa—in 60 seconds

US-made products can hope for better access to the China market now that DuerOS can integrate with hardware such as Amazon’s Alexa speaker. DuerOS Head Engineer Luo Xin demonstrated that just 17 lines of code were needed to link the operating system to a speaker and the whole thing took him a minute. “This used to take a team of five around six months of debugging to achieve,” said Luo.

Developers can also download this code from the DuerOS website.

LEGO is hoping for more collaboration

As a heartwarming aside, conference goers were shown a video of a Du Zhipeng who had written to Baidu for help in making a robot toy for his nephew that would respond to voice command. With a bit of support, he built a Lego toy with a DuerOS chipset inside and was whisked on stage with his nephew and Aman Wang, VP of marketing for Lego China.

Wang said she hoped that there would be more examples of collaboration and that “We’re happy and excited to see the robot built by Mr Du and that it’s a completely different kind of toy.”

Baidu for the future of China

Baidu CEO Robin Li made some bold claims during his appearance on stage. The new slogan for Baidu is “Use technology to make a complicated world simpler.” “Developers have the greatest power in the development of human civilization,” was one.

He claimed China’s historic closing to the world was not the right approach and ended the keynote speeches with his call to the thousands of developers: “Open beats closed—let’s create a new world together!”

Chinese e-commerce giant Alibaba launched the smart speaker Tmall Genie X1 today, elbowing its way into the crowded digital voice assistant market where there’re already big name incumbents like Amazon, Apple, Google, and JD (their main e-commerce competitor).

Powered by a custom Smart Audio chip, the 126mm-tall virtual assistant speaker supports an 6-beam microphone array on the top and a subwoofer at the lower part of the device. The gadget needs less than 10 seconds to get connected to the network, outperforming the average of 30 seconds for most current smart home devices on the market.

Enabled by AliGenie, the voice assistant service developed by Alibaba’s homegrown team, Tmall Genie X1 allows users to control with verbal commands. Voice print technology ensures more accurate and secure commands, allowing users not only to purchase from Alibaba’s shopping sites but also to make payments through the device.

X1 supports connection with other smart home appliances on Alibaba’s smart home platform such as Tmall Box, air conditioner, and air purifiers.

Unsurprisingly, X1 enjoys advantages in price over similar products from US tech giants. With a price tag of only RMB 499 ($73), it’s far more affordable than Apple’s Home Pod ($349), Google Home ($129), and Amazon Echo ($230). JD’s DingDong is priced from RMB 499 – RMB 698, depending on the model.

The product is open for limited public testing starting today, while the official sales date is slated for August 8^th.

Alibaba’s virtual assistant now only supports commands in Chinese, which means it’s facing Chinese customers for the time being and won’t form any tangible threats to US companies in their home markets. But it will sure further squeeze their growth in the Chinese market.

The Chinese tech giant is also facing serious competition from domestic competitors. Tencent has launched AI assistant Dingdang earlier this year. All out in AI, Baidu also laid out in the sector through the acquisition of Alexa-like service Raven Tech.

After 6 years of explosive growth, China’s e-commerce is slowing down with saturation seemingly the main culprit: from an impressive growth rate of 74% in 2011, it has fallen to an expected 19% in 2017. However, consumption itself is the opposite of sluggish. In fact, by 2021 China is expected to add another consumer market the size of Germany’s.

Although the main factors driving China’s online market, such as the rising middle class and demographic changes, have been constant, a recent report published by McKinsey (in Chinese) reveals that there are new shifts in the market that companies need to be aware of. Here are the five trends that explain the evolution of China’s digital consumers.

1. Omnichannel shopping becomes mainstream

People want to try out gadgets before they commit. This is why for consumer electronics selling products through both online and offline channels is especially beneficial. When consumers do online research and then visit the brand store or showroom, the probability of buying the product rises up to 80%.

Consumers also have more demands when it comes to services such as delivery and online customer service. More advanced omnichannel experiences such as VR and online customization of products have also drawn demand from consumers.

2. Buying anytime and anywhere with context-triggered shopping

Whether they are hanging out with friends or swiping through WeChat, consumers want goods to be available for purchase at any time, any place and by any means. Immediate availability means that many consumers will not have time to change their minds. Delivery is also a crucial part of making the sale – for many sellers, tomorrow is just not good enough

3. Keeping touch with consumers through social media

Sales through social platforms are expected to be the next big growth area. Among digital consumers, 85% regularly interact through social media, but for now, they only spend 10% of their shopping time on social platforms. Chinese consumers value recommendations from friends and family, which means B2C brands can use social platforms to spread positive shopping experiences.

4. Personalized goods and services are on the rise

Consumers are craving more customized products and services for themselves and their families, such as specific designs, short-term rentals, and trials. This gives brands opportunities to test more innovative models which can help them gain an edge among competitors.

5. Big data will lead to a better understanding of consumers

Nobody likes spam, and according to social media users, most of them are receiving just that. Seeking advice in offline environments such as stores has also been lacking a personal touch. This is why retailers should focus on gathering data that can be used to understand the consumers and offer them exactly what they need.

The McKinsey analysis also noted that companies in China are now abandoning classical online sales models and looking at new trends and channels that will enable them to stay on top of their game.

But identifying trends may not be enough to drive growth. Companies need to zoom in on specific consumer segments to fully exploit new trends, according to a report on Chinese digital consumers by Boston Consulting Group (BCG) in cooperation with Alibaba.

In the past, retailers mostly targeted their consumers according to demographic factors like age, gender, and income. Today, companies need to understand how trends affect shopping habits turning their shoppers into more heterogeneous groups. The BCG report has identified five profiles that explain how macro trends play out on a microeconomic level.

1. The Savvy Shopper

Chinese consumers are more brand-aware than in other parts of the world and thanks to the web they are able to “shop the world.” When it comes to demographics, savvy shoppers can belong to any gender and age. They are growing more independent in the products they buy. A good example is Chinese men living in first-tier cities who have been spending more time on grooming and searching for the best products to keep themselves look good.

2. The Single Person

Marriage trends in China are catching up with the West, meaning there are more singles than ever. This means that many consumers now have a different lifestyle; they live, dine, travel, and pursue activities by themselves. It also means that products designed for singles, such as furniture, smaller appliances, and food packages are rising.

3. The Eco-conscious Consumer

Sustainability and environmentally-friendly products have also seen a rise in popularity. According to Alibaba, 66 million customers bought five or more eco products in 2015, compared to only 4 million in 2011.

4. The Passionate Trend Seeker

In the past, many Chinese consumers were focused more on professional advancement, and they had simple hobbies that did not require high levels of spending. However, this is changing. Exotic travel destinations, extreme sports, pursuing hobbies and other experiences which enrich lives are gaining traction in China.

5. The Connected Consumer

Chinese consumers are digitally connected in a remarkable degree; they often buy products online for the sake of convenience instead of price. This also means that they are open to new technologies, including smart devices and appliances.

• How Chinese government policy gives Chinese startups an advantage
• Why business people are so popular in China
• How innovation is different in China compared to the Valley
• Why WeChat is so much better than every other social network

• Steve Hoffman: Making Elephants Fly: The Process of Radical Innovation
• Yuval Noah Harari: Homo Deus: A Brief History of Tomorrow
• Emma Lee: Tencent reports 58% profit surge on strong Q1 driven by WeChat and gaming
• Matthew Brennan: 2017 WeChat User Report Is Out!
• Eva Xiao: WeChat just launched a search engine. Baidu should worry.
• How to leave a review on iTunes

• John Artman, @knowsnothing, TechNode
• Matthew Brennan, @MattyBGoooner, ChinaChannel

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• Music: “Theme from Penguins on Parade” by Lee Rosevere, Music for Podcasts 3

Editor’s note: This originally appeared on Analyse Asia, a weekly podcast hosted by Bernard Leong, dedicated to dissecting the pulse of business, technology, and media in Asia. The podcast features guests from Asia’s vibrant tech community.

Ben Bajarin from Creative Strategies and Techpinions joined us in a two-part conversation to discuss the recent Consumer Electronics Show (CES) 2017 in Las Vegas. We discussed the major themes which have emerged from the show: the developing television sets and screens from Asian OEMs, the dominance of the Amazon Echo, the rising average selling price of personal computers and finally, the automotive industry making their appearance with cars. Last but not least, we reflected on the growing presence of the Asian OEMs and Shenzhen manufacturing companies in the show over the past few years and their innovations this year.

Listen to the episode here or subscribe.

Here are the interesting show notes and links to the discussion (with timestamps included):

• Ben Bajarin (@benbajarin, LinkedIn, Techpinions profile) from Creative Strategies and Techpinions.
  • What have you been up to since we last spoke? [0:39]
• CES 2017 (Part 1) [2:06]
  • An introduction to Consumer Electronics Show (CES) & its significance in tech. Annual event for most technology companies except Apple and this year is held on 9-12 Jan 2017 in Las Vegas.
  • Ben’s introduction to CES [2:32]
  • How do you usually cover CES? What do you look out for during the events with the different exhibition halls or product launches from companies such as Samsung or Huawei? [4:57]
  • Do you see the international booths particularly from China getting larger as compared to the US booths in CES shows for the past few years? [7:19]
  • What are the major big themes that emerge from CES 2017? Reference: A Few Big Themes from CES 2017 in Techpinions (require subscription) [9:16]
    • On Bigger, Brighter, Thinner TVs [9:47]
    • The rising average selling price of PCs [11:30]
    • Year of the smart home: Amazon Echo and Alexa.  [13:45]
      • How the Amazon Echo or Google Home are driving sales of other home products in retail during Christmas. [16:50]
    • Voice UI everywhere [17:50]
    • Cars are interesting again [20:15]
  • What are the Asian OEMs particularly China are up to in CES 2017 and any interesting innovations from their end? [22:58]
    • Shenzhen section of CES 2017

TechNode does not necessarily endorse the commentary made in this program.

Asia has an illegal wildlife trading problem, and some of the world’s largest e-commerce platforms are at the center of it.

The Indian government has released a list of 106 websites that are currently being used to trade wild animals and their body parts. It’s a comprehensive record, that covers all the top names in e-commerce, including Alibaba, Amazon, Snapdeal, eBay and even YouTube.

The list was made as part of a monitoring effort by India’s central government, who scan the sites to crackdown on illegal trading and other cybercrime.

While companies, including Alibaba and Amazon, have made overt commitments to removing accounts and cracking down on trading networks within their own systems, e-commerce sites continue to act as a tool for traders in everything from drugs to ivory.

Several Chinese tech companies, including Alibaba, Sina and Tencent, have signed zero-tolerance policies toward illegal wildlife trading  since the Chinese government stepped up their monitoring efforts in 2012.

According to a report by advocacy group Traffic, illegal wildlife advertisements discovered on Chinese sites dropped sharply from a peak of almost 60,000 in 2012 to under 10,000 in late 2014. However the report also notes that social media platforms could now be taking a lump of the trades that were once found on e-commerce sites. WeChat, the country’s most popular social media tool, is commonly used to facilitate private sales.

Here’s a full list of the sites named by the Indian government:

Wang Boyuan from Technode and TechCrunch China joined us for a conversation on Jingdong or JD.com. We discussed the backstory behind the company and the key people behind the second largest e-commerce company in China. He also explained the different revenue streams behind JD.com and how Tencent is backing of it as a proxy against Alibaba in China’s e-commerce space.

Download MP3 here (20.7 MB) or Subscribe via RSS

Analyse Asia with Bernard Leong is a weekly podcast dedicated to the pulse of technology, business & media in Asia. They interview thought leaders and leading industry players and gain their insights to how we perceive and understand the market. Analyse Asia is a content partner of TechNode.

TechNode does not endorse any commentary made in the program.

Notes:

• Wang Boyuan, Writer and Editor, TechCrunch China [0:50]
  • How did you start your career in journalism? [1:10]
  • What are the interesting stories that you have covered this week? [1:40]
    • Warcraft’s movie success in China
• JD.com or Jingdong [2:55]
  • E-commerce company, listed on NASDAQ at US$31.2B market capitalization, founded by Liu Qiangdong in 1998.
  • What’s the mission and vision of JD.com? [3:10]
  • What’s the backstory of JD.com and how it did evolve from 360buy.com to JD.com? [4:00]
  • Tencent’s investment in JD.com [6:40]
  • Who are the key executives in JD.com besides the founder Liu Qiangdong? [7:00]
    • Shen Haoyu 沈皓瑜, the CEO of JD Mall.
  • Who are the board of directors within JD.com? [8:00]
    • Liu has 82.5% of voting power in the board. Martin Lau, President of Tencent sits on the board. Louis Hsieh from New Oriental is linked to Xu Xiaoping of Zhenfund, “The Ron Conway of China”.
  • What are the core revenue drivers for JD.com? [9:00]
    • Retail sales are still their main income. In Q1 of 2016, JD.com earned 54 billion yuan ($8.3 billion) in net revenue, up 47.3 percent year on year, with its gross merchandise volume growing by 55 percent to about 129 billion yuan. Orders rose by over 50 percent in the first three months with more than two thirds coming from mobile terminals such as smartphones.
  • Is JD.com in iOS and Android and also in WeChat? [9:50]
  • What are the core features on the JD.com platform and some of the recent innovations introduced to the e-commerce platform (for example, equivalent of JD Prime similar to Amazon Prime, Amazon dash buttons)? [10:24]
  • How does JD.com compare with Alibaba, for example, their clash on Singles Day? What’s the strategic partnership between Tencent and JD.com? [15:13]
  • JD.com has a financing arm called JD Finance, and recently, the parent company invested US$1B along with Sequoia and other players into JD Finance. What’s the rationale behind this move? [16:23]
  • Will JD.com expand out to the world soon? [20:13]

Whether it’s a MOOC or a live-streamed tutoring session, the bottleneck for most edutech startups is usually the same: teachers.

“Chat [is] this two-way medium. It’s really well-suited for education,” says David ‘DC’ Collier, the CEO of Rikai Labs, an English education startup based in Shanghai. “You’re chatting with a chatbot and…actually learning at the same time.”

Rikai Labs is using chatbots to boost the scalability of its English education platform. Instead of only interacting with either a computer or a human, like in a one-on-one video session, Rikai Labs implements something called  “Artificial Artificial Intelligence”, which blends the two.

For example, during any given lesson, Rikai Lab students will converse with both chatbots and human teachers, running through structured content as well as more open-ended role play. Lessons are conducted through WeChat’s chat interface.

“We don’t really regard the AI as necessarily replacing the teacher,” says Mr. Collier. “It’s more like a teacher’s assistant.”

The concept of “AAI” comes from Amazon’s Mechanical Turk, which outsources tasks that are difficult or unsuitable for computers to human beings. These tasks are known as “Human Intelligence Tasks” (HITs) and include things like labeling pictures and transcribing spoken audio files. For Rikai Labs, “Human Intelligence Tasks” include open conversations between students and teachers, who don’t need to be trained in order to talk to humans. Rikai Labs’ chatbots, which the company calls “teacherbots”, are responsible for simpler interactions, such as providing practice material and responding to student answers.

“[Chatbots are] taking out all of the drudgery,” says Mr. Collier. “Hopefully, [teachers] would be able to deal with twenty students at the same time.”

As Rikai Labs’ chatbots get smarter, the student-to-teacher ratio should increase, says Mr. Collier. The platform’s chatbots, like Rikai Labs’ students, learn from teacher corrections, which happen not only during human-to-human interactions, but also bot-to-human interactions as well. When Rikai Labs’ students are practicing with chatbots, for example, teachers can observe and jump in at any time to correct mistakes. As the amount of training material increases, Rikai Labs’ chatbots will become better and better at catching grammar mistakes and teaching students, says Mr. Collier.

China’s Chatbot Industry Is Still Early Stage

In China, chatbots are nowhere near as hyped up as they are in Western countries, where tech giants like Facebook, Google, Microsoft, and Amazon are actively investing in chatbot technology. For example, Google and Facebook are developing powerful natural language processing (NLP) tools, which are the backbone of chatbots – they’re what enable them to understand human speech and respond accordingly.

In May, Google open sourced SyntaxNet, the company’s NLP engine that can parse text and understand grammar. Facebook has its own natural language tool called DeepText, which helps chatbots mimic human speech by learning from Facebook content. China’s tech giants, on the otherhand, have been pretty quiet when it comes to chatbots, though related fields, such as artificial intelligence and natural language processing, are obviously areas of interest, especially for Baidu.

Besides Rikai Labs, there are a few other WeChat chatbot accounts. There’s Microsoft’s Xiaobing (小冰), a flirtatious female bot that users can chat or play games with (she challenged me to a Chinese idiom competition. I lost). Another chatbot WeChat account is Turing Robot (图灵机器人), whose conversational abilities appear to be less mature than those of Xiaobing.

Still, when it comes to more commercial or service-oriented WeChat accounts, chatbots are rarely implemented, says Mr. Collier.

“WeChat is just an amazingly underused platform,” he told TechNode. ” [In] Slack, everyday people are releasing cool new applications that really use the platform. [In] WeChat, people are just shoving marketing material on webpages.”

WeChat’s Developer API supports many functions that are useful for chatbots, such retrieving text-to-speech output, says Mr. Collier. However, most WeChat applications stick to HTML5 pages and rarely take advantage of WeChat’s built-in chatbot potential. In addition, though other chat platforms, such as Line and Facebook Messenger, have the ability to utilize chatbots, WeChat is the only one that can really monetize it as a business, due to its micropayments system WeChat Wallet.

Of course, chatbots still have a long way to go, especially when it comes to open-ended and less structured chat dialogue. “We’re trying to take a fairly curated approach…so it’s not just random chat,” says Mr. Collier. “Over time, we’ll have to see how scalable we’re able to [teach] people.”

“We’ll probably need a bot to watch the teacherbot or something like that, so we don’t get a Microsoft Tay kind of situation,” he adds.

The Shanghai-based startup will face stiff competition from all directions, as China’s English education market is highly lucrative and fiercely competitive. The industry includes large, traditional education companies, such as Education First and Wall Street English, as well as startups, such as Liulishuo (流利说) and 51talk.

Currently, Rikai Labs’ service is free – students can start lessons by following the company’s WeChat account – but doesn’t have that much content. According to Mr. Collier, the company plans to launch another version in two months, and will charge students 20 RMB (about $3 USD) per lesson in future versions.

Image credit: Shutterstock

China’s electronics appliance maker GOME and Amazon have entered a strategic partnership, they announced last week.

As a top home appliance retailer in China, GOME operates 1,800 offline stores across more than 400 cities in China. Its offline and logistics resources will allow Amazon to upgrade their logistics services, especially into lower- tier cities. The offline retailer plans to set up a dedicated supply chain team for Amazon’s projects, the firm added.

Under the deal, GOME has opened a store on Z.cn, Amazon’s Chinese-facing online marketplace. The products on sale currently include traditional home appliances, but the company aims to introduce 10,000 product categories by the end of this year, according to a company statement. The services will start in Beijing and to cover first- and second-tier cities later this year.

Additionally, the two parties will cooperate in the development of supply chains, logistics and after-sales service.

Like most brick-and-mortar stores in China, GOME is having a tough time as more consumers are buying online through the country’s extensive e-commerce network. This tie-up is a major move for the firm as they look to integrate online and offline shopping experiences.

GOME will also gain access to more high-end customers through the partnership. An Amazon report shows that over 90% of cross-border shoppers, which constitutes a great proportion of Amazon’s clients, have bachelor degrees or higher.

Last year, Alibaba Group inked a similar partnership with Suning Commerce, a major rival of GOME, through a $4.6 billion investment to crate synergies in e-commerce and logistics.

Image credit: Amazon

China’s tech giants are not afraid to burn cash in pursuit of a greater market share, and Alibaba’s newly acquired media asset, Hong Kong-based flagship newspaper South China Morning Post (SCMP), has dropped their paywall to do just that.

While newspapers across the world are looking to business model innovation and paywalls to boost revenue, the SCMP officially threw out their subscriber system in a bid to boost readership and ad revenue.

“Our focus now should not be on finding the right media business model,” said Alibaba chairman Jack Ma in a SCMP article yesterday. “Our priority should be on how we should change to better adapt to the reading habits of our readers.”

“With the paywall removal, it paves the way for the SCMP to grow its readership globally,” said SCMP editor in chief Tammy Tan.

The strategy parallels current trends of expansion across technology companies in China. Lowering entry barriers in hopes of securing a large market share is a tactic Alibaba has employed across their own e-commerce platforms, as well as their affiliated products. The company has been a primary player in China’s on-demand wars, funding massive subsidies for startups and services with a high cash-burn rate.

It’s a strategy that was conceived and born in China for a reason. Massive market saturation and a highly-mobile population bred the need for revenue burning tactics. It’s the same market that saw Xiaomi rocket to one of the world’s most valuable startups by providing a low-cost, market friendly entry point for China’s growing mobile population.

However Ma’s strategic focus on expanding their consumer base over profitability is an unproved theory in the world of print media. “Free services do not mean cheap services,” said Ma in reference to the paywall removal. “Rather, offering free but quality services is how we can succeed and sustain our growth,” he said, drawing parallels with the growth of TaoBao, the company’s flagship consumer e-commerce platform.

One of the primary benefits of expanding the readership of the SCMP by lowering the paywall would be increasing their advertising reach, which could in turn drive more consumers to their e-commerce platforms. Alibaba has expanded heavily into entertainment and other IP content on the same premise, driving traffic through the SCMP and other peripheral assets could help attract a higher-end clientele to the company’s increasingly global platforms.

SCMP’s total group revenue, which also includes a handful of other publications, was $160 million USD in 2015, which in a drop in the ocean compared to Alibaba’s other revenue streams which generated over $12.3 billion USD in 2015. The company will be hoping to convert any lost paywall revenue into ad revenue or sales revenue on their e-commerce platforms.

Alibaba’s purchase of SCMP has some parallels with the purchase of the Washington Post by Amazon founder Jeff Bezos, however it’s worth noting that Bezos focussed heavily on business model innovation for the US newspaper, with restructuring programs and digital-only features including their own news reader application. Alibaba and Ma have remained tight-lipped on any further possible changes to the SCMP.

Amazon.com Inc. is making an aggressive expansion into global logistics, pitting their cross-border e-commerce business against Alibaba Group Holding Ltd. in a bid to drive down shipping costs from the world’s biggest manufacturing nations, reports show.

The U.S. company’s roadmap includes building cargo and customs management services from China and India to core markets including Japan, Europe and the United States, according to internal Amazon documents reviewed by Bloomberg dating back to 2013.

 It’s a bold plan which pits them directly against Alibaba, who have been spending aggressively to expand their homegrown logistics brand as well as their global logistics network. The cross-border e-commerce market is expected to become a $1 trillion USD industry by 2020.

The project, dubbed ‘Dragon Boat’, would also pose new competition to Amazon’s local shipping counterparts, FedEx and UPS. “Sellers will no longer book with DHL, UPS or Fedex but will book directly with Amazon,” said the 2013 report secured by Bloomberg. “The ease and transparency of this disintermediation will be revolutionary and sellers will flock to FBA given the competitive pricing.”

Amazon’s shipping costs have been rising sharply in the past year, causing concern from investors. Their latest earnings report shows a 37 percent jump in shipping costs year over year. 

In a regulatory report cited by Reuters, Amazon registered a Chinese freight forwarding subsidiary, Beijing Century Joyo Courier Service, with China’s transport authorities in 2015, along with a complimentary application to the U.S. Federal Maritime Commission from their China subsidiary in November. Amazon also filed with the Shanghai Shipping Exchange to serve as a shipping broker for a dozen trade routes, including China to Europe and China to the U.S.

In September 25th, TechNode Demo Day San Francisco will be held in the AWS Pop-up Loft by TechNode, focusing on Asia’s budding entrepreneurship ecosystem.

The event will feature speakers from TechCrunch, CheetahMobile, and Amazon Global, sharing their valuable experiences in China and the global mobile internet. 

The event will also include a panel discussion on the role of government support in helping startups expand into the Asian market and pitch competitions for startups from China, Taiwan, Hong Kong, South Korea, Japan and the U.S. to pitch their idea to renowned judges.

Online registration is here. See you there!

Event Details

Date: Friday, September 25th, 2015

Time: 9:45 AM to 4:30 PM (PDT)

(Registration opens at 9:45 AM)

Venue: AWS Pop-up Loft 925 Market Street, San Francisco, CA 94103

The speakers and companies include

1. Ned Desmond – COO of TechCrunch 

2. Josh Ong – US Director of Communications of CheetahMobile

3. Adam Fitzgerald – Head of Worldwide Developer Marketing of Amazon Global

4. Edith Yeung – Partner of 500 startups

5. Gary Gong  – Executive Vice President of Institute for Information Industry (III)

6. Chan Zhao – Head of Plug & Play China

7. James Jung – CEO of Besuccess

Pitching Asian startups include

KonoLabs (Korea)

Trigger (US)

Car+ (China)

Lovelinku (China)

Lapieces (Japan)

Playmore (HK)

CodeMentor (Taiwan)

Defiderm (Taiwan)

Phone Doctor Plus (Taiwan)

Agenda

Morning Session

09:45 – 10:00 Registration 

10:00 – 10:15 Opening Remarks delivered by TechNode

10:15 – 10:35 Opening Remarks delivered by TechCrunch

10:35 – 11:00 Keynote delivered by Cheetahmobile

11:00 – 11:25 Keynote delivered by Amazon Global

11:25 – 11:50 Keynote delivered by 500 Startups

11:50 – 12:30 Panel discussion “How government/institute help startups expand into the Asian market” delivered by Institute for Information Industry (III), Plug & Play and Besuccess 

12:30 – 13:30 Social Mixer, sponsor by Cheetahmobile

Afternoon Session

13:30 – 16:30 Startup Pitch

18:00 – 20:00 VIP Dinner

R.S.V.P. by September 24th, 2015 (Link)

Amazon has invested $20 million of funding in Shanghai-based online food vendor Yummy77. It is the first time for the U.S. e-commerce giant to invest in a Chinese company after entering Chinese market for ten years. Amazon disclosed that it will hold a minority stake in Yummy77, which will continue its independent operation after the funding.

The fund is expected to help Yummy77 to enrich product categories and expand operation networks beyond Shanghai.

Launched in Feb 2013, Yummy77 is focused on fresh and gourmet foods, such as seasonal fruit, fresh seafood, eggs, meat, dairy products, etc., taping the growing demand among urban residents for high-quality imported foods and swift delivery. The company’s sales reportedly exceeded 100 million yuan (around $16 million) in December last year and its registered users reportedly surpassed 1 million as of Feb. this year.

Amazon launched online fresh food business Amazon Fresh in 2007 in the U.S. market. But it does not provide this service in China. It is worth noting that Yummy77 is the B2C fresh food unit of TRUE, a listed subsidiary of Chia Tai Group.

As one of the global pioneers in e-commerce industry, Amazon’s performance Chinese market is eclipsed by its Chinese peers. The company is putting more focus and becoming more active in Chinese market with the landing of Kindle devices and cloud service AWS in China last year.

image credit: Yummy77

Kincle Fire HD

After tapping Chinese tablet market with Kindle Paperwhite and Kindle Fire HD series last June, Amazon is going to deepen is forays into the market by officially releasing three Kindle devices on Amazon China in a roll tomorrow, including two latest refresh of the Kindle Fire lineup, Kindle Fire HDX 7” and Kindle Fire HDX 8.9”, as well as Kindle Fire HD.

The specs and new features of these products are the same as their U.S. counterparts. The minimum prices for Kindle Fire HDX 7”, Kindle Fire HDX 8.9” and Kindle Fire HD is 1.699 yuan ($278.75), 2,999 yuan and 1,099 yuan, respectively.

Amazon also buddied up with leading Chinese music and video apps, including Baidu Music, Douban FM, iQiyi and Sohu Video to optimize video and music functions of their products.

image credit: Amazon

The new generation of Kindle Paperwhite is launched on Amazon China today. Only one model is available that is sold at RMB899, a little bit higher a price than that for the one without special offers in USD. Specs and new features are no different from the US model that was launched in September this year.

According to a letter from Jeff Bezos, CEO of Amazon, to Chinese readers, Amazon China now offers 60,000-ish digital books, half of which are sold below RMB4.99 (about $0.8). More than 6000 are for free.

Within 2 weeks of public vote stage, 121446 votes in total are counted. And today, we are happy to reveal these best internet service/sites of 2009 voted by Chinese grassroot. The results can not represent every Chinese netizen’s opinion, but we believe, it’s a honest result which do worth your attention.

Here is the 2009 ChinaMode Report (Part I): Most Recognized International Service of 2009 voted by Chinese netizen]

Chinese web, an market which has never been easy for international Internet service/companies/sites is even getting tougher to enter and conquer: unfortunately, several very popular service are not available in China  in 2009. But still, we are wondering which service/sites have drew Chinese users’ attention, and here is the result of Most Recoginzed International Service of 2009 in China.

The Top 10

Ordered by the number of votes, the top 10 international service are: Twitter (20.68%), YouTube (17.75%), Gmail (17.16%), Google Reader (11.09%), Facebook (9.49%), Google Wave (8.58%), Wikipedia (8.08%), Flickr (3.08%), Amazon (2.16%), Dropbox (1.95%).

Surprise and Non-surprise?

1. Although Twitter and YouTube are not available anymore in China, but still they took the No.1 and runner-up. It reflects the top 2 hottest markets right now in China: microblogging and video-sharing.

2. Gmail, one of the best Google products is widely used by Chinese users; Google Reader is also used as the major tool for reading RSS; Google Wave is a bit hit in global market, China is not an exception; Flickr still gets Chinese attention, as Chinese local photo-sharing market is still quiet; Amazon and Wikipedia are relatively ‘old’ and famous name.

3. Dropbox, this very convenient cross-platform file-sharing and sync startup service, surprisingly, takes the 10th. No similar service in China.

4. No one knows what will happen to Google China in 2010, but what so ever, YouTube, Gmail, Google Reader and Google Wave, result shows Google has big impact on Chinese web, although it’s beaten by Baidu in Chinese web search market.

5. We wrote about Facebook in China months ago, and 50 comments left by our readers. If you are wondering the current status of Facebook in China, it is also not available but unlike Twitter and YouTube, the result says Facebook is only voted the 5th although it continues growing and making profit in global space.

I am not the right person to comment on this from the tech point of view, but still I felt it’s truly exciting after read the post about Amazon’s move to Singapore which is written by my friend Mohan Belani of E27. You can read Amazon’s official announcement here.

Interesting enough, as one of the organizers of GTUG (Google Technology User Group) Shanghai, I’ve been thinking of having someone talking about Cloud Computing in the next event. (The best candidate based in Shanghai is ChinaNetCloud).

1. Are we waiting for Amazon web services coming to China in the second half of 2010? If you search for “云计算” (which is Cloud Computing in Chinese), you can find loads of buzz from Chinese industry and it seems that all the Chinese star companies are seriously considering it as part of company strategy. Baidu is a cool company, but its Box Computing concept is a bit confusing.

Although I found the nice diagram above clearly pointing out 21ViaNet (China), Inc. the leading data center service provider’s thoughts on its own cloud computing service, called CloudEx. Obviously, 21ViaNet is positioning its CloudEx as the competitor of Amazon web service. Still, for most of the middle/small companies, Cloud Computing is still “somewhere in the Cloud” in China, i.e. they don’t know how they can access the cloud computer and how they can benefit from it, and of course we are missing good cloud service too.

2. Every time when friends ask me for my views on Singapore’s web industry. Always, the Singapore’s government is one of the keywords in my answer. It was a great pleasure to meet some officials from Singapore government when I was there for UnConference 2009 organized by E27, and I was also quite impressed by the conversation with them. They understand the trend and more importantly they are not only good thinkers but also the users and practitioners. Sadly, I have not met one from Chinese government who is able to talk about virtual world, microblogging, amazon web service etc, but officials in Singapore, they do. Mohan said they have been discussing with Amazon since Nov, 2008, and their effort is paid-off. With the deployment of Amazon web service, Singapore will have the advantage to be the first entry for western service moving to Asia too.

If you think Amazon web service into Singapore is only a technology achievement, you are wrong. It is not only about the cloud infrastructure, it could speed up the building of a healthy ecosystem for Singapore IT industry, as Mohan commented:

The primary beneficiaries for these will be the web technology startup entrepreneurs.