New research from a survey of 4,300 Chinese consumers suggests a path forward for brands and marketers seeking the next wave of growth.
The chairman and CEO of China’s e-commerce giant describes Alibaba’s approach to innovation and how he balances analytics and instinct to push himself to spot hidden opportunities.
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Months ago, long before President Donald Trump “hereby ordered” U.S. companies to find places other than China to make their goods, Seattle-based shoe and apparel company Brooks Running was already starting down that path. Not because of a presidential order, but because of the impact of the administration’s tariffs on its business.
“When the tariffs started to get real last year, we just decided there was no rational reason to delay some of the moves we had been planning,” CEO Jim Weber told GeekWire.
Brooks Running made the plans in January after realizing that the trade war wouldn’t be going away any time soon. Trump has threatened to raise tariffs on shoes from 20 percent to as high as 45 percent.
Brooks, which once had around 45 percent of its production coming out of China, will be “out of China completely by next May or June,” Weber said. While larger shoe companies may be able to absorb tariffs through strategies like shipping Chinese-made goods to other markets, that wasn’t an option for a smaller company like Brooks. Instead, the company plans to expand in Vietnam.
It’s one example of the ways technology and product development companies are adjusting to the impact of the U.S.-China trade war. The latest kerfuffle began a week ago when President Donald Trump threatened to raise tariffs from 25 to 30 percent on $250 billion of Chinese goods, which was in response to Beijing’s plan for more levies on American goods.
Even those not directly hit with higher costs are feeling the strain in less obvious ways.
For Vancouver, Wash.-based RealWear, which makes virtual displays for industrial workers, the specifics of the trade war matter less than the environment the tensions create. “The biggest damaging thing for me has been relationships” with Chinese companies, RealWear CEO Andy Lowery said.
The most prominent example is Huawei, the Chinese tech company that has been blacklisted by the federal government. The Trump administration has not yet allowed any U.S. companies to sell to Huawei, the world’s second-largest smartphone maker, despite indicating that it might do so.
Lowery said that his company decided to move away from Huawei as a customer. Even though his company doesn’t share technology with Huawei, Lowery said he wanted to avoid any potential perception of such practices.
RealWear is just one of many companies that has distanced itself from Huawei. Microsoft reportedly stopped accepting new orders from the Chinese company. The biggest recent blow came from Google, which pulled its apps from Huawei devices in response to the U.S. blacklist.
The Google ban comes at an especially inconvenient moment for Huawei, which is preparing for a significant smartphone launch on Sept. 13. Spokesperson Joe Kelly told Reuters last week that Huawei “will continue to use the Android OS and ecosystem if the U.S. government allows us to do so.” In a statement earlier this month, Huawei called the U.S. blacklist efforts “unjust” and “politically motivated.”
“There are companies that are recognizing that tech is very sensitive,” said J. Norwell Coquillard, executive director of Washington State China Relations Council (WSCRC). “They are changing their efforts to work in other countries.”
But for some companies, eating the cost is easier than moving production. In January, electric bicycle maker Rad Power Bikes decided to absorb the 25 percent tariff on Chinese-manufactured e-bikes that went into effect last summer. (Initially, Seattle-based Rad Power had raised its prices by $200 per bike to offset some of the increased costs.) Rad Power said their plans have not changed following more recent tariff developments.
“We are sacrificing margins to ensure customers don’t have to pay a higher price,” said Mike Radenbaugh, founder and CEO of Rad Power. “Thankfully we have tremendous consumer demand, but the tariffs cut into our ability to scale as quickly as we could otherwise.”
For other tech companies, the giant tariff announcements are less important than the details. Modumetal, a Seattle startup that makes corrosion-resistant steel for the oil and gas industry, has been watching highly specific trade cases related to steel imports.
Large volumes of Chinese-made steel imports have created a difficult environment for U.S. companies to compete, said Modumetal CEO Christina Lomasney. If American steel manufacturers aren’t able to survive in the long term, that means fewer potential partners for Modumetal in the U.S.
The struggles of technology firms have been mild compared to the hardest-hit U.S. industries, such as agricultural exporters, textile manufacturers and automakers. In Washington state, farmers have seen exports to China fall for crops like cherries and apples.
Tim Boyle, the CEO of Portland, Ore.-based Columbia Sportswear, told the New York Times that the latest U.S. tariff plans were “insane.” Trump’s call for tariff increases threw the company’s existing plans into disarray. Columbia manufactures more than 10 percent of its products in China and has considered moving production to Ethiopia, although some specialized products are difficult to produce elsewhere.
“We move stuff around to take advantage of inexpensive labor,” Boyle told the Times. “So when we make a wager on investment, this is not Vegas. We have to have a reasonable expectation we can get a return.”
But not all retailers are feeling the effects equally. Nordstrom CFO Anne Bramman told investors on a recent earnings call that the impact of tariffs would be “relatively immaterial” in 2019. Investors don’t appear to be as hopeful: Nordstrom’s stock has fallen sharply in response to previous tariff news.
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Add LinkedIn to the list of social media platforms being used for nefarious purposes by a foreign government. A New York Times report on Tuesday called the Microsoft-owned site, with 645 million users, “another vehicle for potential disinformation and, more important, an ideal one for espionage recruitment.”
Western counterintelligence officials told the Times that LinkedIn is a prime hunting ground, with foreign agents approaching thousands of users on the site, and that Chinese spies are the most active.
“Instead of dispatching spies to the U.S. to recruit a single target, it’s more efficient to sit behind a computer in China and send out friend requests to thousands of targets using fake profiles,” said William R. Evanina, the director of the National Counterintelligence and Security Center, a government agency that tracks foreign spying and alerts companies to possible infiltration.
The Times cites multiple recent cases in which LinkedIn proved to be en effective recruiting tool under the guise of corporate recruiting or offers for speaking engagements and more.
Three years after the 2016 U.S. presidential election and Facebook-enabled Russian scandal, the report comes amid heightened scrutiny by Facebook, Twitter and YouTube. The companies have reportedly been deleting accounts and dealing with disinformation being spread by Chinese government operatives about the pro-democracy protests taking place in Hong Kong.
A spokeswoman for LinkedIn said a team at the company works proactively against fake accounts. A company blog post last week said that between January and June 2019, LinkedIn took action on 21.6 million fake accounts.
“We enforce our policies, which are very clear: The creation of a fake account or fraudulent activity with an intent to mislead or lie to our members is a violation of our terms of service,” LinkedIn spokeswoman Nicole Leverich told the Times.
Read the full New York Times story for more details.
If you’re in luxury goods and services, China is the story.
An aging population, automation, and the democratization of people’s jobs will be crucial factors for companies in China to manage.
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LAUSANNE, Switzerland — Fifty years ago this month, NASA’s Apollo 11 mission transformed the idea of putting people on the moon from science fiction to historical fact. Not much has changed on the moon since Apollo, but if the visions floated by leading space scientists from the U.S., Europe, Russia and China come to pass, your grandchildren might be firing up lunar barbecues in 2069.
“Definitely in 50 years, there will be more tourism on the moon,” Anatoli Petrukovich, director of the Russian Academy of Sciences’ Space Research Institute, said here today during the World Conference of Science Journalists. “The moon will just look like a resort, as a backyard for grilling some meat or whatever else.”
Wu Ji, former director general of the Chinese Academy of Sciences’ National Space Science Center, agreed that moon tourism could well be a thing in 2069.
“People will go there for space holidays, and come back,” Wu said. “The staff of the hotel will work there. So that will be permanent human habitability on the moon in 50 years.”
“Robotic staff?” Petrukovich asked.
“No, not necessarily,” Wu answered.
Today’s session in Lausanne, titled “The Moon and Beyond,” provided a status report on international space cooperation as well as speculative glimpses at the next 50 years of space exploration.
Petrukovich and Wu were joined in their flights of fancy by Thomas Zurbuchen, associate administrator of the Science Mission Directorate at NASA Headquarters; David Parker, the European Space Agency’s director of human and robotic exploration; and Lori Garver, a former NASA deputy administrator who now serves as CEO of the nonprofit Earthrise Alliance.
Bacik in the 1960s, the U.S. and Soviet space programs were driven by a Cold War race to the moon — and some high-ranking officials already see a second space race looming. ““We’re in a space race today, just as we were in the 1960s, and the stakes are even higher,” Vice President Mike Pence said in May when he announced that the United States would aim to put astronauts on the moon by 2024.
But at today’s session, space scientists played down the prospects for a ’60s-style space race. “It’s not a race,” Petrukovich said, “but you see, political figures are like kids in a kindergarten. … Either nobody wants it, or everybody wants it. So it is a kind of race, but in this race, everybody is helping the neighbor.”
Both Zurbuchen and Parker took advantage of the session to highlight their latest moves in space cooperation, including partnerships with commercial and academic space ventures.
Zurbuchen touted this week’s announcement about 12 lunar experiments — including Astrobotic’s MoonRanger rover and Texas Tech University’s dirt-drilling LISTER probe — that would be put aboard commercial lunar landers in years to come. (LISTER is an acronym that also pays tribute to the late Clive Lister, a University of Washington professor who made important contributions to the study of heat flow through Earth’s ocean floors.)
Parker announced that ESA’s 22 member states have authorized the agency to ask European companies for cost-specific proposals relating to the International Habitation Module for the moon-orbiting Gateway space platform that’s due to take shape in the 2020s, plus an Earth Return Orbiter that would bring samples back from Mars.
Later in the day, Zurbuchen said in a tweet that he and Parker signed a joint statement of intent relating to science benefits from that sample return mission.
What about China? Today, U.S. law places heavy restrictions on space cooperation with Beijing — but Wu made clear that he hoped that stance would soften in the years ahead.
He explained that China’s solar-powered Chang’e-4 probe and its Yutu 2 rover can operate on the far side of the moon for only two weeks out of every month, due to the lunar night. “We hope that U.S. technology can send a nuclear power station there, and then people can work in the lunar night,” he said.
In return, Wu said China was willing to make its Queqiao communications relay satellite available for future far-side lunar missions. “There’s no problem for China to collaborate with other countries, and we welcome other nations to use this relay satellite to help their landing on the far side,” he said.
Wu said China plans to put astronauts on the moon eventually, but he acknowledged that NASA and its partners would get there first. He pointed out that it’ll take several years for China to build its own space station in Earth orbit. “That takes a lot of effort from us,” he said. “If we add a lunar landing on the moon, it’s not impossible, but it’s something in parallel with that.”
So, will English be the moon’s official language 50 years from now? Will it be Chinese, or some new sort of international language? In a response to a question, Zurbuchen said he likes the idea of having a Star Trek-style universal translator that’s attached to a person’s ear and can instantly turn a phrase like, say, “One giant leap for mankind” into “人类的一次巨大飞跃.”
“I actually think to get to that is a decade. … The language, I just don’t think on a time scale of 50 years is a problem,” he said.
Garver, whose new nonprofit venture aims to use space imagery to raise awareness about earthly issues, had a different take on the 50-year question. She predicted that the moon was likely to have a status similar to that held by Antarctica today — as a place for scientific research and some tourism, but limited habitation. The biggest impact of the next 50 years of space exploration and observation could well be seen not on the moon or Mars, but on our original home planet.
“I imagine that we will have solved our Earth-based problems,” she said, “partly through our knowledge that we’ve gained through the perspective of space.”
GeekWire’s Alan Boyle helped organize today’s “Moon and Beyond” session at the World Conference of Science Journalists, and as a result, WCSJ funding is covering the bulk of his travel expenses to Lausanne.
The relationship between China and the rest of the world is changing, and a great deal of value could be at stake depending on whether there is more or less engagement. Businesses will need to adjust to the uncertainty ahead.
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President Donald Trump appeared this morning on CNBC’s Squawk Box, talking about tariffs and trade.
But President Trump also used some of the airtime to respond to questions about the growing power of tech companies as well 5G, Huawei and the proposed T-Mobile-Sprint deal.
Asked whether Facebook, Google and Amazon are too big and need broken up, President Trump responded by saying “they discriminate against me,” claiming that the “real collusion is between the Democrats and these companies.”
“They were so against me during my election run, and everybody said if you don’t have them, you can’t win,” he said. “Well, I won, and I will win again because we are doing well. We are not the fools anymore.”
CNBC returned to the question of regulation of big tech a few minutes later, asking President Trump to put his personal feelings aside to comment on whether the tech titans need regulation.
President Trump argued that “something is going on” with the growing power of tech companies, pointing out that the European Union is “suing them all of the time.” He added that the U.S. is going to look at the issue differently, not pointing to any specific plan to do so.
And, since the European Union is positioning for billions in fees and penalties with the tech companies, President Trump concluded that the U.S. should get in on that, too.
“They are actually attacking our companies, but we should be doing what they are doing,” Trump said. “They think there is a monopoly. But I am not sure that they think that, they just figure this is easy money; ‘We will sue Apple for $7 billion and we will make a settlement or we will win the case.’ So, I think it is a bad situation, but obviously there is something going on in terms of monopoly.”
Later in the interview, President Trump was asked about 5G, Huawei and the Sprint-T-Mobile merger, and he complimented the geniuses in Silicon Valley.
I made a priority: 5G. And before I got here, we were way behind. But now we are going to actually be leading very shortly. You know, we are leading in everything. We are, we are. If you look at China — China, as great, they are, and they are great — they don’t have near the capability of our geniuses in Silicon Valley that walk around in undershirts and they are worth $2 billion a piece, OK. They don’t have nearly the genius that these people have, and they practically admit it. They don’t want to exactly say that, so they go out and try to buy the companies. So now we have restrictions on that too, which we put in under my administration, very recently because they were buying all of our companies. They couldn’t do it. But we have the most brilliant people. We have the most brilliant.
You can watch the full interview on CNBC here, with President Trump’s full comments on tech regulation in minute 20 of the interview and comments on telecom in minute 24.
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Wei Guo loves WeWork. He just thinks his co-working space offers something a little different.
Guo, a high-profile early-stage Chinese investor who has backed more than 300 startups, is the founder of OnePiece Work, a “cross-border” co-working space operator that just expanded outside of California for the first time with a new location in Seattle.
OnePiece Work offers similar amenities to WeWork, which has close to 20 locations in the Seattle region, and a bevy of other co-working spaces around town. Its Seattle outpost, located downtown at 720 3rd Ave, has desk space, conference rooms, common work areas, and more. It’s the eighth location for OnePiece Work, with additional outposts across Silicon Valley and Los Angeles.
OnePiece Work aims to provide members with a “gateway” to international markets. The company is a manifestation of the work that Guo has done over the past decade between China and the U.S., the world’s top two tech economies.
Guo is a Forbes 30 under 30 investor whose portfolio includes startups such as Lime, Boom, Hims, and various companies based in the U.S. and China. He launched the Wei Fund in 2015 and UpHonest Capital in 2017, raising investment from both U.S. and Chinese investors. His exits include Scout, Chariot, Worklife, Virtroid, and tbh.
“We focus on people who want to expand globally, who have this global DNA,” Guo told GeekWire.
OnePiece Work also hopes to build stronger tech connections between the U.S. and China amid a politically-charged environment most recently highlighted by the Huawei controversies and new Trump administration policies that are reportedly curbing Chinese investments in U.S. tech startups.
“We want to be a bridge between the two largest economies in the world,” Guo said. “There’s a gap, and we can help minimize it.”
There are several existing tech-related connections between Seattle and China. Chinese tech giants such as Alibaba, Tencent, and Baidu all have sizable engineering offices in the region. A first-of-its-kind U.S.-China tech institute run by the University of Washington and Tsinghua University, and funded in part by Microsoft, recently graduated its first class.
China President Xi Jinping spent three days in Seattle four years ago as part of a visit that included meetings with Microsoft and Boeing. At the time, the president said Washington was the leading state in U.S. exports to China, and China was the No. 1 trading partner of the Port of Seattle.
Guo said OnePiece Work was drawn to Seattle because of the region’s engineering and data science talent. He’s also noticed a difference between entrepreneurs in Seattle and other places such as Silicon Valley, which he described as “crowded” and “too competitive” with “too much noise.”
“Every time I’ve been to Seattle, I feel like it’s quiet — it makes people think independently and deeply,” said Guo, who spends most of his time in the Bay Area. “That’s the good thing about Seattle entrepreneurs — they look quiet, but on the inside they have a deep understanding of their industry and their business. They think a lot.”
He’s not the first to point out differences between tech workers in the two regions. This week at our GeekWire Cloud Summit, Icertis CEO Samir Bodas noted that “Seattle is a great place if you are building a startup for the long game.”
— Janet Knight (@MrsJanetLyn) June 5, 2019
Guo said he’s looking to invest in Seattle-area startups. He’s most excited about data-driven companies working in industries such as real estate, food tech, IoT, and e-commerce.
Current startups working out of OnePiece Work in Seattle include Seattle Food Tech, maker of plant-based meat, and 6crickets, a company that helps parents find after-school programs and camps for their kids.
Guo’s VC firm, UpHonest Capital, is currently investing out of its third fund. The company makes investments across the U.S. and China, but is also expanding to other areas such as Latin America and Southeast Asia.