The Five Most Important Chinese Challengers to U.S. Giants
By Monika Ghosh
Published November 17, 2020
China’s tech industry has grown rapidly since 2010. These five companies are the face of Chinese tech, and presenting a keen challenge to their U.S. counterparts.
For a long time, China was internationally known as a source of cheap labor. It was the final word in affordable manufacturing facilities, for avant-garde tech gadgets and global companies alike. At this time, China’s technology products weren’t perceived as innovative – rather, they were imitations of better-known Western products. But all this began to change around 2010.
China quickly began to catch up to the U.S. in the global technology race. Now, its homegrown tech giants offer tough competition to their established and older U.S. counterparts. The country’s technological dominance has not only set the country years ahead in digitalization, but has also has stoked fears of challenging the global economic order and sparked the ongoing U.S.-China trade war.
The U.S. has been cracking down on Chinese companies, trying to deter them from listing on U.S. stock exchanges, and squash China’s emergence as a global power player. But this has only increased the Chinese government’s resolve to create self-reliant and sufficient home markets and effectively decouple the Chinese economy from that of the U.S.
Here’s a list of five Chinese tech behemoths that compete with the biggest U.S. tech giants.
While Google complied at first, it refused to do so after 2010 following a debilitating cyber attack. At present, while Google has offices in China, its search engine remains banned in the world’s most populous country.
But Google’s loss was Baidu’s gain. Like Google, it specializes in Internet services. But over the years, it has expanded its scope and become more than just a search engine. It now has prominent projects in areas ranging from artificial intelligence to autonomous driving.
The global ecommerce giant ultimately conceded defeat to local players like Alibaba-owned Taobao and Tmall, and JD.com. It surrendered with a mere 6% market share in the Chinese ecommerce sector, according to a Wall Street Journal report.
Though Jack Ma stepped down as the Chairman of the Group this year, the company is remains at the top of the food chain in the Chinese ecommerce sector. In a three-day period around this year’s Singles Day, an annual China-wide shopping event where ecommerce players offers steep discounts, Alibaba sales exceeded US$74 billion.
3. NIO vs Tesla
Tesla is now the most valuable automaker in the world, and by a very well-padded margin, making its Chinese competitor NIO a much smaller fish in the sea. However, Nio may be ranked only as the sixth most valuable carmaker, but it places ahead of storied automakers like General Motors and BMW.
Often called the Tesla of China, this comparatively young NYSE-listed Chinese startup is growing fast. NIO’s shares have risen by 1,200% since the start of the year, and the company delivered over 12,200 cars in Q3 2020, while Tesla delivered close to 140,000 vehicles in the same period.
It is interesting to note that before its monumental growth in 2020, NIO’s sales and dwindling cash reserves were inching the company toward balance sheet doom. However, as consumer perception changed from skepticism to opportunism, the startup turned things around. According to a Bloomberg report, this turnaround can be largely attributed to the $1 billion investment from municipal Chinese entities that the company bagged in April this year.
4. DiDi Chuxing vs Uber
Uber and DiDi have a long history. Uber exited the Chinese market after selling its business to DiDi in August 2016. In return for the sale, Uber obtained an 18.8% stake in DiDi, which has subsequently diluted to about 15% following a new funding rounds for the Chinese company. Uber is currently mulling over selling its entire stake in the SoftBank-backed startup, which is worth about $6.3 billion.
While DiDi was initially focused on the Chinese market, the tech startup is now pushing back against Uber on the global stage. As announced in April, DiDi’s three-year goals include reaching over 100 million daily trips globally, 800 million monthly active users, and an 8% penetration rate in the home mobility market by 2022.
These goals, while seemingly impressive, were branded as ‘vague,’ ‘uninspiring,’ and ‘ambitious’ by a Reuters report, which added, “Didi’s plan seems out of touch and suggests it isn’t looking in all its mirrors.” The report refers to DiDi’s lack of acknowledgement of how COVID-19 has affected consumer habits, and its apparent ignorance of predictable future changes in consumer travel preferences.
It is important to remember that DiDi has ventures in financial services, autonomous driving, ecommerce, and more. It is, therefore, a significant contender to its U.S. counterpart, and may triumph by virtue of diversification if nothing else.
In its absence, Tencent’s WeChat and QQ have become the Chinese social media platforms of choice. WeChat has come to be classified as a ‘superapp,’ since it not only offers instant messaging, but also online games, shopping and financial services, much like Facebook. For Chinese companies and startups, the platform has become indispensable for announcements and marketing.
It is important to note that some also refer to Renren as China’s Facebook, although Tencent-owned WeChat remains the largest social media platform in China.
While the Chinese contenders remain smaller in size than U.S. big tech companies, they show great potential. Many factors remain obstacles to these companies’ global ambitions, perhaps foremost among them a general distrust of Chinese entities (Huawei is a good example of this). Yet, with time and a slight rebrand, they might grow to pose a serious challenge to the established players of the West.
As Uber’s Eric Allison once said, “Strategic planning must consider who our future competitors will be, not only who is here today.”
In short, U.S. tech giants should heed these potential Chinese challengers with caution – and put strategies into place for the day when their market leadership is openly challenged.
AutoX Founder and CEO Jianxiong Xiao talks about how AutoX is trying to make AVs affordable and accessible for everyone. By Hamza ElMokhtar Shili, Keopagnapech Ngoun, and Saven Pat Have you ever got into your car and felt drowsy on your commute home after a tiring day, or while driving during a [...]
Prominent China-based VC Qiming Venture Partners closes its RMB Fund VI months to focus on early-to-growth stage healthcare and Technology, Media and Telecom (TMT) companies. Chinese venture capital firm Qiming Venture Partners has closed its RMB Fund VI at RMB 2.852 billion (US$440 million), [...]
The fresh funding brings Zuoyebang’s total capital haul to US$2.9 billion. The startup claims to have over 170 million monthly active users. Zuoyebang, which claims to be the largest edtech company in China in terms of number of users, has raised over $1.6 billion in an E+ funding round, the [...]
JD Health’s strong IPO performance indicates that the market is still open for prospective issuers after Ant’s IPO was abruptly scuttled earlier this year. The healthcare affiliate of Chinese ecommerce giant JD.com debuted on the Hong Kong exchange in the second-biggest IPO of 2020 on [...]
As per the draft rules, 38 types of apps are now required to tell users about the personal information they collect, and are prohibited from collecting any data not related to the services they offer. In an effort to tackle cybersecurity and privacy failures, China on Tuesday, December 1 revealed [...]
December 4, 2020
SIGN UP FOR JUMPSTART'S WEEKLY NEWSLETTER
For upcoming news, opportunities, giveaways and more!