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(Bloomberg) -- South Korea is adding a new artificial intelligence chip to its arsenal of semiconductors as the nation seeks a bigger slice of the global tech market and an upgrade of its industrial capabilities.The Sapeon X220, unveiled Wednesday by the largest local carrier SK Telecom Co., is designed to speed up servers that cater to a growing number of mobile devices -- from drones to self-driving vehicles -- that perform better with AI. It’s the latest product of the nation’s decade-long push to broaden its dominance beyond memory chips, where Samsung Electronics Co. and SK Hynix Inc. control roughly two-thirds of the global market.South Korea sees data-processing chips as a major engine for future economic growth, along with fifth-generation wireless networks. The government has provided more than 600 billion won ($542 million) in support to develop such chips and plans to invest another trillion won over the next decade, viewing them as crucial in automating factories and improving the competitiveness of the country’s exports.“As we teamed up with the government, we said, ‘Let’s make AI available and affordable for all of our companies,’” said Lee Jong-min, an SK Telecom vice president overseeing the chip development. “South Korea has the demand, the full stack of tech needed to meet the demand, and the ability to take it to the next level.”Semiconductors account for about one-fifth of South Korea’s exports, most of them memory chips. The country is now turning to application-specific integrated circuits, or ASICs, such as the X220, which is tailored for AI operations. It follows a similar $1 billion investment plan announced by the U.S. government this summer, which also emphasized AI and public-private collaboration.As the first country in the world to roll out commercial 5G last year, South Korea believes it also can lead in adopting and optimizing AI by virtue of the nation’s compact size, wide broadband coverage and smartphone penetration.Competition is heating up in the AI semiconductor space, with the likes of Amazon.com Inc. and Alphabet Inc.’s Google investing in their own bespoke server silicon. As more devices than ever come online, companies are betting they can unlock value and insights from the resulting trove of data through machine learning and analysis at scale.Like SK Telecom, U.S. competitors offer such cloud services to other companies, and the investment in designing the chips makes sense when factoring in the cost of electricity and the chips’ ability to handle greater volumes of data more efficiently.Read more: Chip Industry Sees Danger of AI in Explosion of Electricity UseSK Telecom’s chip, the size of a postage stamp, is the first Korean ASIC for data centers to be commercialized, according to the company. It represents the latest push by the Seoul-based carrier to expand beyond its traditional mobile and broadband businesses and keep up in an era of AI-driven innovation.The global AI chip market is currently led by Nvidia Corp., a graphics-card giant whose market value has eclipsed that of Intel Corp., the company historically most associated with semiconductor breakthroughs. Demand for Nvidia’s GPUs has spiked in recent years, as the perennially increasing demands of high-resolution video games have been joined by a boom in cryptocurrency mining and other data-intensive applications that benefit from massively parallel processing. Even smartphone processors from the likes of Apple Inc. and Huawei Technologies Co. now come with dedicated cores for handling AI tasks, and the need for more ASICs like the Sapeon X220 is forecast to rise as artificial intelligence gains more ground in global technology.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Xiaomi Corp. fell as much as 4.2% Wednesday after disclosing internet services revenue grew at its slowest pace in three years, prodding investors to cash in gains from the Chinese smartphone maker’s 2020 rally.China’s No. 2 smartphone maker reported overall revenue rose 34.5% to 72.2 billion yuan ($11 billion) in the September quarter, its fastest pace of growth in two years. It grabbed market share from Huawei Technologies Co. when American sanctions deepened particularly in overseas markets from Europe to India, which yielded more than half of its revenue for the first time. But internet services like music and video grew just 8.7%, down from the previous quarter’s 29% as the Covid-19 boom in Chinese online activity tapered off.Several brokerages cut their price targets on Xiaomi, citing its 140% run-up since the start of 2020 and warning that investors may be underestimating Huawei’s ability to remain a formidable competitor. Xiaomi’s share gains are partly based on the argument it’s one of the biggest beneficiaries of the Trump administration’s campaign to rein in Huawei and contain China’s technological ascendancy. Its unit shipments surged 42% in the third quarter globally, researcher IDC estimated, by far the best performance among brands from Samsung Electronics Co. to Apple Inc. Huawei’s own volumes plummeted 22% over that period, and it now has to defend its No. 2 position against the likes of Vivo.What Bloomberg Intelligence SaysXiaomi’s 51% sequential smartphone sales jump in 3Q may temporarily alleviate concerns of its slowing internet services revenue growth. The Chinese vendor gained the most domestic market share at the expense of Huawei in 3Q, according to IDC.\- Anthea Lai, analystClick here for the research.Xiaomi reported a rise in adjusted net income to 4.1 billion yuan from a year earlier, beating projections for 3.3 billion yuan. Executives warned that component shortages may continue to plague Xiaomi and its peers, as factories worldwide continue to grapple with Covid-era production disruption while demand for parts like memory and processors remains strong.“While we are still confident about the fourth quarter, the supply shortage issues will stay for us and for other vendors as well,” President Wang Xiang told reporters. “We will see a fairly big challenge in fourth quarter and the challenge could persist to next year.”Xiaomi remains one of the few major Chinese tech companies to enjoy strong growth abroad -- and in developed markets, to boot -- at a time governments from the U.S. to India are erecting barriers to the country’s businesses. Overseas revenue from Xiaomi’s smaller Internet of Things division, which sells gadgets like like smart cookers and robot vacuums, rose 56.2% in the third quarter. In India, it’s managed to cling to the top spot despite a deep, nationwide Covid-19 lockdown and bans on several of its apps.At home, it’s benefiting from rapid Chinese adoption of 5G-enabled smartphones as the network rollout gains pace.Read more: Huawei Sells Budget Phone Brand After U.S. Cuts Chip SupplyHuawei this month struck a deal to sell its budget brand Honor to a Chinese government-backed consortium, which may heighten competition in the smartphone arena. But the threat from Huawei itself is likely to diminish until it can somehow get around a ban on American software and circuitry, such as by building its own Android-based operating system of apps.In the short run, Xiaomi could gain as many as 15 million units in additional smartphone shipments thanks to Honor’s exit, Citigroup analyst Andre Lin wrote in a memo ahead of the earnings. “But if Honor remained a major competitor, Xiaomi’s 2021 consensus forecasts would face downside revisions of 5%-10% in shipments,” Lin said.Citing national security concerns, the U.S. has waged a far-ranging campaign against Huawei since 2018 that landed its chief financial officer under house arrest in Canada and fomented bans against the use of the company’s 5G equipment in countries from the U.K. to Japan. The final blow came when the White House enacted sweeping restrictions against suppliers this year, closing off loopholes that let Huawei procure ready-made semiconductors to keep its consumer business afloat.Read more: Huawei’s Latest Phone Marks End of Era As U.S. Spurs RethinkFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Huawei Technologies Co. sold its Honor smartphone business to a Chinese government-backed consortium for an undisclosed amount, hiving off the entry-level devices arm after the Trump administration cut off its access to American technology.The consortium was formed by the Shenzhen Smart City Technology Development Group Co. and more than 30 of Honor’s partners, agents and dealers, from private giants such as Suning.com Co. to government-affiliated entities such as a branch of China Postal and Telecommunications. Huawei will no longer hold any shares in Honor after the transaction.The deal could help augment a brand that’s gained popularity among younger budget-conscious users in recent years and made headway in overseas markets like Europe. It’s unclear if the Honor spin-off will lead to a resumption of American chip supply to its new owners. Shares in rival smartphone maker Xiaomi Corp. slid as much as 6% on Tuesday in Hong Kong.“This move has been made by Honor’s industry chain to ensure its own survival,” the company said in a statement. “Huawei’s consumer business has been under tremendous pressure as of late. This has been due to a persistent unavailability of technical elements needed for our mobile phone business.”Honor was an integral part of Huawei’s smartphone business, once larger than Samsung Electronics Co.’s but now struggling to secure enough crucial components and software for production. The sale illustrates the uneven impact of White House sanctions on China’s largest technology company, whose consumer business is ailing even as its networking unit soldiers on. Shenzhen-based Huawei is said to have safeguarded its core telecom equipment business by stockpiling critical components to continue supplying its home country’s 5G rollout through at least 2021.Citing national security concerns, the U.S. has waged a far-ranging campaign against Huawei since 2018 that landed its chief financial officer under house arrest in Canada and fomented bans against the use of the company’s 5G equipment in countries from the U.K. to Japan. The final blow came when the White House enacted sweeping restrictions against suppliers this year, closing off loopholes that let Huawei procure ready-made semiconductors to keep its consumer business afloat.Huawei’s smartphone shipments plummeted 22% in the September quarter because of the U.S. sanctions, according to research firm IDC. It now has to defend its No. 2 position against fellow Chinese players from Vivo to Xiaomi Corp., which recorded a 42% jump in third quarter shipments, data from IDC show.Honor has been operating as a budget phone brand alongside mainstream phones like the Mate series, and doesn’t compete directly with the best offerings from Apple Inc. or Samsung. Honor-branded phones are sold as low as 899 yuan ($137) and go up to around 4,000 yuan. The most expensive Huawei phones go for as much as 17,000 yuan -- surpassing the most expensive iPhone 12 Pro Max. Honor also competes with its own parent in a range of consumer electronics from gaming laptops to smart watches.Honor’s other new owners include local corporations such as Shenzhen Expressway and Shenzhen Energy. It can lean on Suning, the country’s largest electronics chain backed by Alibaba Group Holding Ltd., to help enhance distribution. “The change in ownership will not impact Honor’s development direction or the stability of its executive and talent teams,” the company said in a statement to local newspapers. “It is the best solution to protect the interests of Honor’s consumers, channel sellers, suppliers, partners and employees.”(Updates with share action and more buyers from the second paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.