US chip curbs start to bite and India explores an e-rupee

Hi everyone! This is Cheng Ting-Fang from Taipei. For the past two weeks the global semiconductor industry has been busy digesting a 139-page document released earlier this month detailing Washington’s latest export controls on China’s chip sector.

When I arrived at the annual forum hosted by the Taiwan Semiconductor Industry Association on Wednesday, several industry executives were greeting each other with the same whispered question: “How will the US restrictions affect your company?”

On stage, association head and Taiwan Semiconductor Manufacturing Co. Chairman Mark Liu said the intensifying geopolitical tension has brought “severe challenges” to all industries, not just chips. But he appeared reluctant to discuss the matter in detail. The industry heavyweight did not offer any further comments, even when a group of reporters squeezed toward his seat ahead of the forum and chased him to the elevator after the event ended.

Liu’s fellow keynote speaker was Ofer Shacham, vice-president in charge of chip design at Facebook parent Meta, a client of TSMC. Shacham said what many in the room were likely thinking when he described the current international situation as “complicated.” Of the 100 or so executives who attended the event, few wanted to go on the record about the new tensions engulfing their industry.

Even Apple feels the heat

Washington’s latest round of export restrictions and rising geopolitical tensions have sent a chilling effect down the tech supply chain, affecting even Apple’s procurement plans. The iPhone maker has put the brakes on plans to start using chips from China’s tech champion Yangtze Memory Technologies, write Cheng Ting-Fang, Lauly Li and Yifan Yu for Nikkei Asia.

Apple had already completed the months-long process to certify YMTC’s 128-layer 3D NAND flash memory for use in iPhones but did not put the chips into the mass production lines, according to several supply chain sources. Mounting geopolitical pressure and criticism from US policymakers led Apple to change course, they said.

Many tech executives agree that the latest US curbs on China will have a substantial impact. Applied Materials, the biggest American chip equipment maker, has lowered its guidance for the current quarter, while chip machine maker Lam Research predicted it will lose up to $2.5 billion in revenue next year due to the new rules, with “significantly lower” sales in China.

Norio Nakajima, head of Japanese electronic component maker Murata Manufacturing, summed up his concerns over the US curbs in an interview with Nikkei Asia: “The world is decoupling at a faster pace than I had feared.”

Tencent’s buyback spree

Chinese social media and gaming group Tencent has increased its share repurchases to more than $3 billion so far this year as the company’s stock price plumbs four-year lows, writes the Financial Times’ Ryan McMorrow.

The buybacks are part of a strategic shift for the Chinese tech giant. Beijing’s antitrust scrutiny of its aggressive domestic dealmaking has slowed its huge investment outlay and prompted the group to cash out some of its investment empire valued at about $140 billion.

The Shenzhen-based company has focused on returning cash to shareholders with China’s sagging economy and President Xi Jinping’s crackdown on gaming denting its business and outlook.

It has repurchased 76 million shares so far this year, compared to the cumulative 26 million shares repurchased on the open market over the past decade.

The repurchases come as Tencent has also begun handing out some of its shares in groups like JD.com to its shareholders. Tencent distributed $16 billion of shares in the ecommerce group to investors earlier this year and is reportedly eyeing its stake in delivery group Meituan to fund further shareholder returns.

Under fire

Kakao has become a nearly indispensable part of daily life in South Korea, writes Nikkei Asia’s Kim Jaewon. Tens of millions of users rely on its services for banking, online shopping, hailing taxis and sending messages to family and friends.

So when a fire at a data centre brought down those services for over 24 hours over the weekend, the fallout grabbed headlines and even prompted comment from the country’s president. Kakao’s share price plunged on Monday as users rushed to download rival apps, the same day President Yoon Suk-yeol called for a government review into the company’s market dominance.

Then on Wednesday one of Kakao’s two chief executives, Namkoong Whon, resigned to take responsibility for the disruption. Whether this is enough to put an end to Kakao’s woes, however, remains to be seen. The company has already been struggling this year with poor performance in its ecommerce and online ads businesses amid a slowdown in growth, according to analysts.

Let’s get digital

Cash-heavy India is dipping its toe into the waters of digital currencies, writes Nikkei Asia’s Sayan Chakraborty.

The nation of 1.4 billion warmed to online payments during the COVID pandemic, with the number of such transactions climbing 64% to 72 billion in the year through March. Now the Reserve Bank of India is looking to use that growing acceptance as a springboard for an electronic rupee.

The RBI envisions a “risk-free central bank digital money” that is freely convertible to cash. It plans to test the concept in coming months with “limited pilot launches,” but has not given a timeline for a full-scale roll out of an e-rupee.

But even as digital payments gain ground, India remains a cash-loving society. The volume of banknotes in circulation rose 5% on the year in fiscal 2022, underscoring their enduring popularity, with the high-denomination 500 rupee bill accounting for 35% of the total volume.

And even mass acceptance of an e-rupee would not be without possible problems, with analysts warning that a sudden shift away from physical notes could disrupt brick-and-mortar banks.

Suggested reads

1. Foxconn aims to supply nearly half of world’s EVs (FT)

2. Lam Research expects $2.5bn revenue hit from China chip ban (Nikkei Asia)

3. India’s homegrown ‘Twitter’ courts political parties to shed nationalist tag (FT)

4. Kakao’s co-chief resigns over messenger app service outage (FT)

5. Japan eyes US-style defense research agency as tech race heats up (Nikkei Asia)

6. Netflix returns to subscriber growth, led by Asia-Pacific gains (Nikkei Asia)

7. VW unveils 2.4bn euro venture with Chinese AI chip specialist (FT)

8. Tesla posts record revenue as Musk shrugs off demand fears (Nikkei Asia)

9. World’s top chip equipment suppliers halt business with China (FT)

10. Indian edtech Byju’s raises $250m from existing investors (Nikkei Asia)