Indonesia’s battery travails and China’s EV largesse

Hello, this is Kenji from Hong Kong.

Over the past week, I have been following the developments surrounding Chinese electric vehicles. European Commission president Ursula von der Leyen announced the start of an investigation into the country over subsidies for its EV sector on September 13, warning that global markets are “now flooded” with “artificially” low-priced Chinese EVs supported by “huge state subsidies”.

Delving into the numbers, we found that the Chinese EV sector has indeed been heavily supported by the government for years, though whether Brussels will ultimately impose tariffs on imports from China is not clear. Von der Leyen herself said she wished “to keep open lines of communication and dialogue with China,” and emphasised that the probe is not about decoupling but de-risking.

China is not the only country leveraging subsidies in an attempt to shape the EV market. France recently announced a new policy that would leave most if not all China-made electric cars ineligible for French subsidies.

The intensifying battle to control the EV market is having other effects as well. International auto shows are becoming decidedly less international as countries from the US to Japan focus on building up their own industries. And on the supply chain side, the race for battery materials is leaving countries like Indonesia struggling to achieve their electric ambitions.

On the chip front, join us next week for a webinar with Chris Miller, author of “Chip War”, G. Dan Hutcheson, vice chair of TechInsights, and Nikkei Asia’s chief tech correspondent Annie Cheng Ting-Fang, to discover the untold stories of the global battle for semiconductor dominance. Register here and be sure to submit your questions for the panel.

Stuck in the middle

Indonesia aspires to transform itself from a provider of raw materials into a major EV battery producer. But its dreams are being thwarted by the very competition it hoped to leverage, reports Nikkei Asia’s Erwida Maulia in Jakarta.

Indonesia is the world’s largest producer of nickel, a key material in batteries, but it lacks another important ingredient: lithium. Government officials have gone on a global hunt to secure reserves, but China, which has its own ambitions for EV dominance, has a grip on much of the world’s current supply.

US attempts to build up its own EV industry are hitting the south-east Asian nation in another way.

The Inflation Reduction Act provides incentives for EV-related companies operating in the US or in countries that have free trade agreements with it. Countries that don’t have such arrangements, like Indonesia, are left out in the cold. Moreover, the act excludes “foreign entities of concern” from receiving incentives. This includes China, which is bad news for Indonesia, as it has received a significant amount of Chinese investment in battery-related projects.

Under Huawei’s hood

Huawei has developed its own processors for its latest smartphone, a significant breakthrough that will help reduce its dependence on foreign technology in the face of US sanctions, writes the Financial Times’ Qianer Liu.

With this push, the Chinese group has followed Apple to join an elite group of tech companies capable of designing smartphone processor chips, an analysis of the Mate 60 Pro has shown.

The smartphone’s “system on a chip” has eight central processing units, four of which rely on the designs of Arm, while the other four feature Huawei’s designs and adaptations, according to three people with direct knowledge of the phone’s development and Geekerwan, a Chinese technology testing company.

The SoC has a graphics processing unit and neural processing unit developed by Huawei, reducing patent licensing costs and helping the company to differentiate its products from rivals.

Huawei’s strategy is similar to Apple’s Silicon initiative, in which the iPhone maker has spent years improving on Arm’s basic architecture to give its products an edge in performance. The complexity and cost of semiconductor development means only a few companies are capable of such an approach.

Still, a number of testing teams have found that Huawei’s semiconductor capabilities remain one to two years behind those of chips made by the US group Qualcomm, the leading mobile chipmaker.

By the numbers

The European Commission has opened an investigation into China’s use of subsidies to boost its EV industry, but getting a clear sense of just how much money the government is handing out is far from easy. With such numbers unavailable in official macro data, disclosures by listed companies offer an insightful alternative.

Using a database of over 5,000 mainland-listed companies compiled by information provider Wind, Nikkei Asia’s Kenji Kawase mapped out which listed Chinese companies have directly benefited from government money. Half of the top 10 recipients during the first half of the year were actually EV-related, with lithium battery major Contemporary Amperex Technology (CATL) topping the list at Rmb2.85bn ($391mn). State-owned automaker SAIC Motor, a regular in the top 10 subsidy rankings, came third, bagging over Rmb2bn in government handouts.

Whether Chinese government subsidies to the EV sector are “distorting our market” as President von der Leyen alleges, it is hard to argue that local automakers and companies in related sectors have not been major beneficiaries of government subsidies over years.

Warfare 2.0

Russia’s invasion of Ukraine has been going on for over a year and a half, upending early expectations of a quick victory by Moscow and challenging the conventional wisdom that the more heavily armed and armoured side will necessarily prevail. Much of this unexpected outcome comes from the use of new technologies that are changing the face of warfare, Nikkei’s Takayuki Tanaka and Takeshi Kumon report from Kyiv.

From cardboard drones to open-source information being used to analyse combat situations, the battlefield in Ukraine has become a testing ground for new technologies. Away from the front lines, a volunteer “IT army” has launched cyber attacks against Moscow.

As Ukrainians defend their country, governments and defence companies around the world have been taking notes, gathering data that could influence military capabilities in the future.

Lessons are already being learned. Japan, for example, has begun to improve its early-detection radar and communication systems to prepare for contingencies — such as a fleet of cardboard drones coming from China.

Suggested reads

1. WhatsApp launches in-chat payments service for businesses in India (FT)

2. Japan’s world-leading chip materials makers risk being acquired (Nikkei Asia)

3. SoftBank leads Mapbox fundraising as it pushes into AI (FT)

4. A shot across the bow’: how geopolitics threatens Apple’s dependence on China (FT)

5. Hong Kong virtual bank ZA bets on city’s blockchain goals (Nikkei Asia)

6. TotalEnergies invests $300mn in green power JV with Adani Group (Nikkei Asia)

7. Arm IPO delivers $84mn fees bonanza for its advisers (FT)

8. China accuses US of hacking Huawei servers since 2009 (Nikkei Asia)

9. SoftBank seeks OpenAI tie-up as Son plans deal spree after Arm IPO (FT)

10. Toyota gigacasting prototype cuts production from hours to minutes (Nikkei Asia)

#techAsia is co-ordinated by Nikkei Asia’s Katherine Creel in Tokyo, with assistance from the FT tech desk in London.

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