TikTok’s fate and Taiwan tech suppliers’ shift

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Hi everyone, this is Yifan from the San Francisco Bay Area. For the past five years, I have been covering tech for Nikkei Asia from the centre of American innovation. While there has been a lot of talk about so-called tech decoupling in recent years, I’ve witnessed first-hand how intertwined the U. and Asia tech worlds are — Silicon Valley’s interest in China and Chinese tech is not going away anytime soon!

Case in point: TikTok. For the past month, the highly popular short-video sharing platform has dominated nearly all my personal and work conversations, whether it’s at brunch with friends in Big Sur or afternoon coffee with a VC near Sand Hill Road. The ongoing drama of TikTok in the US always comes up at some point, and everyone has a different theory on how it will end.

But one TikTok executive made a really good point over a cup at Philz Coffee last week. This is not “TikTok vs Washington”, they said, but “TikTok vs Washington vs Beijing”.

While TikTok has repeatedly denied its ties to China, Beijing potentially has as much sway over its fate as does Washington, which is attempting to force a divestment of the platform by its Chinese parent ByteDance. And what ByteDance wants might not be the same as what Beijing wants. Even if ByteDance founder and chair Zhang Yiming and the board were willing to sell TikTok at a good price, Beijing might block the deal to avoid “losing face”. Chinese leaders, after all, might be more concerned about showing weakness to the US and western world than ByteDance losing billions if TikTok is banned in America.

As Xi told Biden during their phone call this week, if the US continues to “suppress China’s trade and technology development” with export controls and sanctions, “China is not going to sit back and watch.”

Southeastern shift

Column chart of $bn showing Taiwan’s investment in Vietnam, Thailand and Malaysia has grown as supply chains shift

The powerful earthquake that struck the ocean near Taiwan on Wednesday morning, killing at least nine people and shaking the island’s critical high-tech industries, may well serve as a further reminder for suppliers of the need to diversify their operations.

The industry is facing pressure from more than just natural disasters. It’s also caught between geopolitical tensions. After decades of concentrating production in China and Taiwan, electronic assemblers such as Foxconn, Quanta and Wistron, along with major chip suppliers from TSMC to UMC, are setting up operations in new locations across south-east Asia, Japan and even Europe, Nikkei Asia’s chief tech correspondent Cheng Ting-Fang writes.

Their overseas push is bringing an army of suppliers with them, notably to south-east Asia. As a result, countries in the region are seeing the money flow in. Taiwan’s investment in Thailand, Vietnam and Malaysia rose 146 per cent in 2023 versus the previous year to more than $2.2bn, according to government data.

Fast fashion, big profits

Online fast-fashion group Shein has more than doubled its profits as it awaits regulatory approval from Beijing to go ahead with a blockbuster listing in New York or London.

Shein hit a record of more than $2bn in profits for 2023 and also recorded roughly $45bn in gross merchandise value, the total value of goods sold on its website, four people close to the company told the Financial Times’ Ryan McMorrow, Eleanor Olcott, Mercedes Ruehl and Ivan Levingston.

The group’s bumper profits last year compare with $700mn of net income for 2022 and $1.1bn in 2021. The company has emerged as a fast-fashion powerhouse based on its model of making thousands of clothing styles in China and air-shipping them to Gen Z shoppers in the US and Europe.

While Shein has moved its headquarters to Singapore on paper, roughly 90 per cent of its staff are still based in China, necessitating Beijing’s sign-off for its foreign listing plans.

Investors in China are watching the status of its IPO closely. They see it as a bellwether of Beijing’s attitude towards companies that were founded in China but reincorporated overseas to avoid geopolitical tensions. It is also a test of Beijing’s willingness to let Chinese companies raise billions of dollars on Wall Street after its crackdown on the technology sector.

Tick-tock for TikTok

It took the US House of Representatives just a week to pass a bill aimed at forcing TikTok to either cut ties with its Chinese parent, ByteDance, or be banned from operating in America. But the fate of TikTok in the US might not be decided as quickly as some US lawmakers might’ve hoped, Nikkei Asia’s Yifan Yu writes.

The bill now heads to the Senate for review, but it looks like some Senators would rather come up with their own bill instead of voting on the House one. If that’s the case, the Senate and House will have to reconcile the difference and combine their bill before it can be sent to the president’s desk.

But whether, when and what bill will eventually reach that stage are just some of the many questions hanging over TikTok. Nikkei Asia mapped out the most likely paths forward for TikTok based on the current situation.

Do let us know how you think the saga will play out as well. And make sure to check out our Tech Latest podcast, where we delve into more details.

Open in Asia

AI companies in Asia might need to be on higher alert now, as ChatGPT developer OpenAI prepares to launch its base in the region with an office in Tokyo this month. The office will help OpenAI provide tailored corporate services and participate in creating a governance framework for the technology in the region, Nikkei’s Akira Oikawa reports.

Through the developer’s partnership with Microsoft, many Japanese companies are already leveraging OpenAI’s generative AI technology. OpenAI will likely begin offering corporate services, including customer support, through the Tokyo office. Hiring local talent in Japan is also on the horizon.

The leader in generative AI has been expanding its international footprint. It opened offices in London and Dublin last year.