The Chinese government’s crackdown on its tech industry continues to impact companies and their owners. About $1.5 trillion has been wiped off China’s economy, and a growing number of Chinese businessmen are dropping ranks on the global billionaires’ index. And it all seems to be getting started.

CNBC reports that the world’s largest chipmaker Taiwan Semiconductor Manufacturing Company (TSMC) has overtaken Chinese tech behemoth Tencent to become Asia’s most valuable firm, further spiraling the downturn emanating from the crackdown that started about a year ago.

Beijing’s regulatory crackdown on the country’s tech sector has slammed the valuations of Chinese tech giants Tencent and Alibaba, and both the companies have recorded significant losses, losing their financial status in Asia and global markets.

According to the report, TSMC, a major supplier to Apple, overtook Tencent earlier in August. The Taiwanese chipmaker is now sitting at the top spot by market capitalization — among Asia firms — at more than $538 billion, according to data from Refinitiv Eikon as of Wednesday morning during Asia hours.

Tencent sat in second place, with a market capitalization of more than $536 billion while Alibaba was a distant third at about $472 billion.

The report further noted that the market capitalizations of both Tencent and Alibaba were hit again on Tuesday — losing more than $20 billion each — after China’s market regulator issued draft rules aimed at stopping unfair competition on the internet.

China’s State Administration for Market Regulation highlighted the move on the tech sector as part of the  regulator’s push to tighten laws surrounding antitrust and competition. Other areas that have come under regulatory scrutiny from Beijing include financial technology as well as the collection and use of data.

Chinese technology stocks have tumbled as uncertainty continues to cloud the sector. The Hang Seng Tech index, which tracks the largest technology companies listed in Hong Kong including Tencent and Alibaba, has dropped more than 25% since the start of the year.

Although TSMC’s growth got a boost from the global semiconductor shortage driven by supply chain disruptions due to the pandemic, along with a surge in demand from industries such as automobiles and data centers, China’s regulatory clampdown on its tech industry paved the way for the current position it occupies on the value chain. Since the start of the year, TSMC’s stock has risen by more than 6%.

But Tencent is anticipating a stretch of the regulatory straits. The company warned Wednesday more regulations will likely come for the internet sector in China but said it is “confident” it can be compliant.

“We should expect … in the near future, more regulations should be coming,” Martin Lau, president of Tencent, said during an earnings call on Wednesday.

Lau said that internet regulation is a “global trend” but China is ahead of Europe and the U.S. in terms of the “execution of a more structural regulation framework.”

“I think this should be expected because the regulation has been actually quite loose over an industry like the internet, considering its size and the importance,” he added.

The Tencent president said regulators are focused on “rectifying industry misbehaviors” and emphasizing social responsibility. But ultimately the goal is “long-term sustainable development of the internet industry.”

“The government does recognize the importance on the economic and social sides of the internet industry and also the contribution of the industry to global competitiveness.

“I would say there will be short-term uncertainties and there are a lot of new regulations that will be coming, but we are pretty confident that we can be compliant,” Lau said.

American companies and US rural communities in Texas, Indiana and Mississippi are adopting LaFiya TeleHealth Kiosk, a complete suite of medical devices and telehealth capabilities. With Lafiya Kiosk, you walk into a “clinic”, and you can speak with a doctor in any location with the Lafiya app. And if that doctor wants to take data, the kiosk-equipped ultrasound scanner, sensors, etc are there to help. It comes with solar support, and connected with a satellite which means it can be put anywhere.

Our playbook in Africa is to have the kiosks in many local governments, making it possible for citizens to have access to medical doctors, unbounded by geography. We will create thousands of jobs while doing great on healthcare. Rural America has responded and we are assembling for them.

Our technology is HIPAA compliant and designed with the best engineering practice in medical practice. Our bar is so high that we’ve started selling in America.

Senators: this is a very nice community project

Lafiya is a Tekedia Capital portfolio company; we fund winners learn more here.

Comment on LinkedIn Feed

Comment: What happened to primary healthcare clinics in towns and villages?

The only difference is that ….”if the doctor wants to take data, the kiosk-equipped ultrasound scanner, sensors, etc are there to help”…..there is none in the health centres.

….”It comes with solar support, and connected with a satellite which means it can be put anywhere”…… can’t the village and towns primary health centre have that?

Nice project, but I am sorry to say that we must be sustainable, pragmatic, thorough and intentional in dealing with Nigerian problems. As far as health structure is concerned, this kiosk will not solve the problem. The systems in them could as well go into the health centres, and we continue to build from a substantive structures

My Response:  Let me try and provide guidance here.

“What happened to primary healthcare clinics in towns and villages?” – the doctors have left for UK, Canada and US. Clinics are not buildings. They are centers of medical professionals. Lafiya telehealth will allow rural people to have access to doctors anywhere.

Unlike the empty primary centers, you have tools which will help the medical professionals collect data from patients, even remotely.

“….”It comes with solar support, and connected with a satellite which means it can be put anywhere”…… can’t the village and towns primary health centre have that?” – we are not aware that villages can provide internet connectivity. Having connectivity is the core of our solution.

We are looking for health entrepreneurs who will own these systems, making them available to people. The one in your Eke market day can cost each user say N500 and that person can speak with a doctor in Lagos. After all testing, the doctor puts a prescription which can be picked up in a local pharmacy.

“The systems in them could as well go into the health centres, and we continue to build from a substantive structures.” – we prefer market systems instead of sending them to people always on strikes.

Lafiya Cloud Hospital – A Telehealth System At Best

The appointment of Lina Khan as the chair of the US Federal Trade Commission (FTC) appears to have ushered in a new wave of antitrust inquiries targeting US tech giants. The Independent reports that the Commission has re-filed its complaint against Facebook, arguing that the company should be broken up and forced to sell Instagram and WhatsApp.

The revised complaint argues that Facebook has a monopoly over social networking in the US and argues that Facebook has looked to make it difficult for other companies to compete.

The complaint is partly redacted, and the FTC’s filing asks that it is sealed for 10 days.

The new case comes amid mounting scrutiny over the size and power of Facebook’s empire, and the way that it has bought up competitors as they have grown.

The case makes reference to an email from Mark Zuckerberg, sent in 2008, in which he said “it is better to buy than compete”. The FTC’s lawyers argue that Facebook has acted in accordance with that strategy, tracking its rivals and buying them when they become big enough to be threats.

Those purchases have included Instagram and WhatsApp, both of which today make up a large part of the Facebook company. Mark Zuckerberg has been active in looking to integrate those three apps, in the name of ease of use – though critics have pointed out that such technological developments would make it harder for regulators to break up the three apps.

The case accuses Facebook of operating a monopoly for “personal social networking services” in the US, because it controls both Facebook and Instagram. It notes that the closest competitor is Snapchat, but that has far fewer users than either of the two Facebook social networking apps.

The lawsuit also accuses Facebook of continuing to operate in such a way and that it uses the companies it has bought to create a “protective ‘moat’ around its personal social networking monopoly”. It will continue to buy or “kneecap” companies if it is not stopped, the FTC says.

In its conclusion, it asks that Facebook be asked to sell its businesses, including Instagram and WhatsApp and potentially others, to ensure they are able to properly compete. It also asks that Facebook be restricted from making similar purchases in the future, including by rules that would force the company to seek approval if it wants to make similar deals.

Khan’s appointment in June has been driving uneasy feelings through the tech industry, as she has been, prior to her appointment, a big critic of the tech giants.

Facebook and Amazon had requested that Khan recuse herself from FTC’s antitrust investigations into their companies, on the argument that her past criticisms of them meant she “wouldn’t be a neutral or an impartial evaluator” of antitrust issues.

Khan believes that antitrust enforcement in the US has been lax for years, allowing the big tech to indulge in anticompetitive and monopolistic practices unchallenged. These recent moves targeting the big tech shows her determination to change the status quo in Silicon Valley.

There is a huge paralysis in the world of Chinese technology: the government is unleashing high voltage searchlights on the operations of the companies. Just last month alone, the assaults wiped more than $1 trillion on the market caps of these companies: “Alibaba shares hit a record low on Thursday in Hong Kong, as the Chinese tech industry grapples with another wave of regulation in an increasingly broad crackdown from the government. This time, the drop came after the government said it was looking at expanding rights for drivers for online giants and increasing oversight of live streaming. The impact of the crackdowns wiped $1 trillion off the Chinese tech industry last month.”

The selloff has prompted some global fund managers including Cathie Wood to dump their holdings in Chinese stocks over the past few months. In fact, some investors are questioning allocations toward Chinese assets altogether.

The new moves are incremental but investors are not at a point where they “will cease to price in any more additional policies,” said Shine Gao, fund manager at Taicheng Capital Management Co. “Even if the worst is over for big tech firms in terms of new regulations, we should expect that their growth won’t be what it was.”

The Hang Seng Index fell as much as 2.3% Thursday while the Hang Seng Tech Index, which counts many Chinese tech giants as its members, dropped to the lowest since its July 2020 inception.

Tencent reversed earlier gains of as much as 3.4% to trade down nearly 3% in Hong Kong as its warnings for more regulatory curbs on the industry overshadowed second quarter earnings that beat estimates.

Among other tech names, food-delivery giant Meituan tanked as much as 7.2%, following a similar drop in ride-hailing company DiDi Global Inc. in the U.S. Video streaming giant Kuaishou Technology slid as much as 4.7%.

People, everything China does is big either on growing or destroying. 

But note one thing: these paralyses would not be the end. Yes, these companies would work hard to find ways to grow so that they can keep trading in foreign stock markets where they currently trade. Alibaba has been wounded in China due to the clampdown, and the US investors are certainly not happy.  So Alibaba needs to find ways to mitigate this domino. Simply, I expect it to look for more markets and territories to enter.

Africa seems to be a good destination. Do not be surprised if Alibaba decides to acquire Jumia in the next coming months to pacify investors in the US that it is looking beyond China for its future. I also see opportunities for leading promising startups in the continent. Chinese firms will need to pick many pieces from many countries, and then combine them for a continental impact.

Yet, personally, the long-term view for me is that China wants its companies to focus on the hard technology nexus to position the nation to compete for the opportunities of the future. Apps, games, ecommerce, etc are ephemeral, the government will make life hard for both entrepreneurs and investors in these domains. If the nation succeeds, everyone will go into making chips, quantum computing and those hard and boring things. That is one way to compete against Russia and the United States.

This clampdown is just beginning!