Posts Tagged ‘smartphones’

China attempts to soothe small businesses’ social tax fears as trade war dims growth outlook

September 7, 2018

Premier Li Keqiang promises to maintain status quo amid fears small firms could be driven out of business

South China Morning Post

PUBLISHED : Friday, 07 September, 2018, 8:44pm
UPDATED : Friday, 07 September, 2018, 8:44pm

Beijing has taken the unusual step of assuring China’s small businesses that the government will not abruptly raise their social tax burdens after a planned regulatory change to tighten fee collection stirred fury and fear among small manufacturers.

At a regular State Council meeting on Thursday, Premier Li Keqiang promised the government would maintain for now the status quo on the collection of corporate contributions to social funds and would study lowering social welfare contribution rates to ensure “there is no increase in the corporate burden”.

The move is a clear attempt to assuage the concerns of many small, private factory owners who fear they will be driven out of business if they are forced to pay their social welfare fees in full.

Chinese employers are obliged to pay several social taxes every month based on their workers’ wages. These comprise contributions to the national social security fund (equivalent to 19 per cent of the total payroll), health care insurance fund (10 per cent), and unemployment, work injury and childbirth insurance (about 2 per cent).

Implementation of social payment rules, however, is often lax, especially among small, private sector manufacturers, and the authorities in charge of collection often tolerate underpayment. But from January the duty of collecting the fees will shift to local taxation bureaus, which will have the incentives and means to ensure businesses pay their dues in full.

This tightening of the collection process could deal another blow to China’s economy even as it struggles with slowing domestic demand and an escalating trade war with the United States. At the very least, the change could wipe out profits at many of China’s private businesses.

A report by brokerage Guotai Junan Securities estimated that the rule change would cost Chinese employers an extra 2 trillion yuan (US$292.16 billion) next year, or about the same as the combined profits of all of China’s privately owned businesses in 2017.

A tightening of the tax collection process could deal another blow to China’s economy. Photo: Bloomberg

Jason Zhang, who runs a factory in the southern city of Shenzhen making cables for smartphones and computers, said it would cost him about 1 million yuan a month if he was forced to pay social welfare fees strictly in line with state regulations.

Zhang said he currently pays social welfare fees for about half of his 800 workers and that his profit would be wiped out if he paid the full amount. Even without the higher costs, Zhang said his factory’s 10 million yuan profit in 2017 would drop by 30 per cent due to falling demand if the US imposed tariffs on Chinese electronic components, as it had threatened to do.

The new social welfare collection rule could be the straw that broke the camel’s back for his business and many similar factories, he said.

“A lot of entrepreneurs like me cannot afford such a drastic change,” Zhang said.

Concern about social welfare fees is part of a bigger debate on whether the government is taxing Chinese businesses and individuals too heavily, especially after the US and other countries cut their tax rates. Appeals for Beijing to cut business taxes to improve competitiveness have increased since US President Donald Trump signed into law in December a reduction in the corporate income tax rate from 35 per cent to about 21 per cent.

The Chinese government has already promised to reduce the burden of tax and fees on businesses. In its annual work report in March, Li said he would cut the corporate tax burden by 800 billion yuan and administrative fees by a further 300 billion yuan this year.

However, many small firms may not feel any easing of their burden as a result of stricter collection methods by tax authorities.

For example, some Chinese venture capital funds were abruptly told by the tax authorities last month that they should pay the full 35 per cent tax rate on their income instead of a preferential 20 per cent rate they had been allowed to pay for years.

The planned change prompted the China Merger and Acquisition Association, an industry group, to appeal to the government to avoid raising taxes on venture capital firms at a time when the country is trying to finance a series of new hi-tech initiatives.

Li touched the issue on Thursday, ordering tax authorities not to increase the “overall tax burden” on venture capitalists.

Wu Qi, a senior fellow at the Beijing-based Pangoal Institute, said China needed to enact meaningful tax cuts for small, private sector businesses amid the nation’s broad economic slowdown and the external headwinds caused by the trade war.

Such cuts would “be the most effective tool” to help stabilise growth, as the government had vowed to do and had the capacity to do, Wu said.

China’s tax revenue in the first seven months of the year rose 14 per cent from the same period of 2017 to 10.8 trillion yuan. The rate was more than twice the 6.8 per cent by which the nation’s gross domestic product rose in the first half of the year.

Tang Dajie, secretary general of the China Enterprise Institute, said a rapid rise in the cost of raw materials, rents, taxes and social security payments this year had created a major threat to the viability of private firms.

Despite Beijing’s promise to cut social security contribution rates, Tang said only a few rich provinces would be able to do so given the government’s initiative to rein in local government debt. When the social contribution rate was reduced several years ago, only a few provinces cut it by 1 percentage point to 19 per cent.

Tang said China should also slash its value-added tax rates as they were are among the highest in the world. In May, Beijing trimmed the highest VAT band by 1 percentage point to 16 per cent.


Nearly half of millennials have deleted Facebook app, study shows

September 6, 2018

On a day when its chief operating officer was on Capitol Hill this morning getting a grilling from DC lawmakers, Facebook is also the focus of a newly released Pew Research Center study that’s chock-a-block with negative trends for the beleaguered social giant.

Among the more attention-grabbing findings: More than one in four people have deleted the Facebook app from their phones, a figure that gets a lot higher when you focus just on 18- to 29-year-olds (44 percent of whom say they’ve done so). All told, 74 percent of Facebook users, according to the Pew data, say they’ve taken one of the following actions in the past year.

They’ve either:

  • adjusted their privacy settings
  • taken a break from Facebook for at least a few weeks
  • or deleted it from their phone altogether

Pew gathered these findings by surveying a group of US adults between May 29 and June 11, so definitely with plenty of time for them to have formed opinions and changed their behaviors in light of the Cambridge Analytica scandal.

“It’s certainly been a year of scandals for the social media behemoth,” reports TechCrunch about today’s survey findings, “which started 2018 already on the back foot already in the wake of Kremlin-backed election interference revelations — and with Mark Zuckerberg saying his annual personal mission for the new year would be the embarrassingly unfun challenge of ‘fixing Facebook.’

“Since then things have only got worse, with a major global scandal kicking off in March after fresh revelations about the Cambridge Analytica data misuse sandal snowballed and went on to drag all sorts of other data malfeasance skeletons out of Facebook’s closet.”

While there’s a bit of divergence in the Pew data between older and younger Facebook users, with the latter especially showing a particular ease with breaking away from the platform, it’s worth noting that the data isn’t showing much of a difference depending on if the user is a Democrat or Republican.

The Pew researchers found that Republicans, more so than Democrats, think the platform tends to censor political speech. One the arguments that also got wrapped up in Wednesday’s hearings that featured representatives of Facebook and Twitter — and even controversial broadcast firebrand and conspiracy-peddler Alex Jones, right there in the front row at the Senate hearing.

Still, according to Pew: “Despite these concerns, the poll found that nearly identical shares of Democrats and Republicans (including political independents who lean toward either party) use Facebook. Republicans are no more likely than Democrats to have taken a break from Facebook or deleted the app from their phone in the past year.”

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Could it soon be game over for the Fortnite craze?

September 5, 2018

It is a question that millions of parents want answered: will the wildly popular online survival battle game Fortnite soon lose its grip on the attention of their school-age children?

Much of the video game industry is also wondering whether the Fortnite balloon has popped, or is simply leaking air, after the first disappointing revenue data since the game’s release last year, with experts saying its publisher Epic Games needs to put these doubts to rest if it is to succeed in its expansion plans.

Fortnite’s popularity took off last year after the release of a free “battle royale” version that lets up to 100 players vie to be the last character standing on ever-shrinking terrain. Dropped onto the battlefield with nothing, players have to scrounge for weapons as the fight for survival begins.

© GETTY IMAGES NORTH AMERICA/AFP/File | Yes, Fortnite game tournements fill stadiums, such as this one in Los Angeles earlier this year

Although the game is free, Epic Games had been successful in getting players to pay for goodies, which is its main revenue stream.

As of July the game had brought in more than a $1 billion in revenue.

But that data also gave analysts cause for concern that the Fortnite juggernaut may have tripped: revenue edged only 2 percent higher in July from the previous month.

It was a lacklustre response to the recently launched paid “battle pass” that offered players new equipment and outfits for avatars, raising questions about how much longer Epic Games can keep players shelling out money for what are essentially cosmetic changes to the game.

“Epic Games has made a lot of mistakes which could knock them from their peak, players could get tired if the game doesn’t evolve and there is too much cosmetic” change, said Frederic Gau, president of Gozulting consulting firm.

Epic Games has also bet on eSports to reinforce the popularity of Fortnite, investing nearly $100 million in such video game competitions.

“One hundred million dollars of cash prizes seems a lot but prizes for each competition are not that” large, said Andrew Kitson, head of telecoms, media and technology industry research at Fitch Solutions.

– China ally –

Enabling the popularity of Fortnite is the fact it is available on different game consoles plus smartphones. For smartphones, it first launched for iPhone, then a few weeks later on Android, the operating system used on 85 percent of smartphones and particularly dominant in Asia.

“Android can provoke two different effects,” said Laurent Michaud at IDATE Digiworld, a think tank and consultancy specialising in the internet, telecommunications and media sectors.

“It can boost other platforms or create its own proper segment, because often is is different players who play,” he said.

China also offers enormous potential for growth, both in terms of smartphone players and as well as eSports, with the Chinese giant Tencent having already pre-registered 10 million players.

“Smartphones represent now 50 percent of global video game revenue and China represents half of that market,” said Michaud. “Today the Chinese play mostly on smartphones.”

Tencent, which is a big publisher of smartphone games as well as being behind the WeChat messenger, holds 40 percent of Epic Games.

Having Tencent behind it is a major advantage for penetrating the Chinese market.

“A success in China will show whether Fortnite will continue growing as a game for the general public,” said Gau.

“It could also help enormously in it developing in eSports. It could either cause it to explode or steal its momentum elsewhere — it’s a bet.”

But analysts say Epic Games has yet to address its major fault — that Fortnite doesn’t have sufficient variety compared to its principal online rivals, in particular eSport stars Dota2 and League of Legends which regularly reinvent themselves.

Kitson at Fitch Solutions said he thinks Fortnite is a one dimensional game, as were some older games that were still able to build a player community.

“Fortnite is not a commercial failure but not a long term shot,” he told AFP. “But Epic Games can learn a lot from it to make a better one next time.”

But even if Epic Games rushes out a new version of Fortnite — the battle royale version was its second — the consultant Gau sees another problem: “for many it is their a second game”.

He said analysts will be looking closely if the sales of FIFA football and Call of Duty first-person shooter franchises hold up as well as in previous years, because “that wouldn’t be a good sign for Fortnite as players are returning to their favourite game.”


Australia bans China’s Huawei from 5G mobile network build — Huawei says it is no espionage threat

August 23, 2018

Australia’s government has banned major Chinese telecoms firm Huawei Technologies Co. Ltd. from supplying equipment for the country’s planned 5G mobile network, citing risks of foreign interference and hacking.

Image may contain: one or more people

Huawei’s Australian arm, which strenuously denies it is controlled by Beijing, said on Twitter on Thursday that the action was an ‘extremely disappointing result for consumers.’ (Reuters)

The federal government says the involvement of any companies “likely to be subject to extrajudicial directions from a foreign government that conflict with Australian law” presented too much of a risk.

Huawei is the world’s third-largest smartphone maker, behind only Apple and Samsung and is also the world’s largest supplier of wireless networking equipment.

While the tech giant was once a copycat company mimicking technology available in the West, it has poured huge sums of money into research and development in recent years and has built itself into a leading provider of telecommunications infrastructure.

But as a Chinese company, Huawei (which was founded by former People’s Liberation Army engineer Ren Zhengfei) is obliged to comply with government demands and could be compelled to gather intelligence on its behalf. That is the concern that lies at the heart of the decision to block the company from Australia’s 5G rollout.

Reports this morning suggest Scott Morrison, as acting Home Affairs Minister during a cabinet reshuffle amid ongoing leadership uncertainty in the party, pulled the trigger on the decision to ban Huawei in a bid to bolster his own credentials for the top job.

The possibility of blocking Huawei from building out Australia’s 5G network was first publicly flagged in June.

“It’s hard to see how compromising your telecommunications network is in the national interest,” a Liberal party member told the Australian Financial Review at the time.

Huawei has publicly argued it would never hand over Australian customer data to Chinese spy agencies but this morning the government announced no combination of technical security controls sufficiently mitigated the risk.

“While we are protected as far as possible by current security controls, the new network, with its increased complexity, would render these current protections ineffective in 5G,” the government said in a statement.

The decision also affects ZTE Corp, a Chinese telecommunications equipment company that makes mobile devices sold in Australia through Telstra, Optus and others.

MORE: Espionage fears dog China’s biggest smartphone makers

MORE: Cyber experts warn Huawei poses a threat to Australian security

Huawei Australia has continued to highlight its credentials, saying it has “safely & securely delivered wireless technology” in the country for almost 15 years.

“This is a [sic] extremely disappointing result for consumers,” it tweeted. “Huawei is a world leader in 5G.”

Acting Home Affairs Minister Scott Morrison said the government was committed to protecting vital 5G networks.

“The security of 5G networks will have fundamental implications for all Australians, as well as the security of critical infrastructure, over the next decade,” he said in a statement.

According to Australian Strategic Policy Institute cybersecurity expert Tom Uren, it would be impossible to employ Huawei without some degree of risk.

Australia fears sensitive infrastructure will fall into the hands of Beijing if the company is handed major contracts

Chinese telecoms equipment maker Huawei Technologies

“The main concern is that they could covertly intercept our communications, and get access to our devices — computers, phones, anything with a signal,” Mr Uren told in June.

He said being on the network would give them the opportunity to hack our private data, and feed this back to the Chinese government.

“There’s been a number of US reports documenting how the People’s Liberation Army has collaborated with companies to get valuable negotiation information, or get intellectual property.”

Nigel Phair, the director of the Canberra-based Centre for Internet Safety echoed those concerns. Speaking to back in January, he said: “The reality is in the modern day of cyber security and espionage, you can never be too careful. Governments need to approach such issues from a risk management perspective … I don’t think you can be too cautious.”

— With AAP

See also Reuters:

See also:


Huawei says it is no espionage threat

In the wake of reports saying it will likely be blocked from upcoming 5G infrastructure in Australia, technology company Huawei is once again wading into political waters in an attempt to shut down accusations that it has close ties to the Chinese government and is a cyber-espionage risk.

The firm, headquartered in Shenzhen, China, has for years fought back against claims from government officials around the world who say its products—which include high-end phones and laptop computers—could be exploited by Beijing and used to snoop on consumers or infiltrate critical infrastructure. The latest debate focuses on 5G, the next generation in wireless telecommunications.

Reports from Australian media indicate that national security chiefs in the country are seeking to block Huawei’s work into the new network due to cyber-spying concerns. As a result, the firm is again stepping into the world of geopolitics, following a well-publicized battle with the U.S. establishment.

As noted by Reuters, if Australia’s Parliament limits Huawei’s work on the upcoming mobile network infrastructure it could strain the current trading relationship with China. Yet while security chiefs previously warned that Huawei’s work into 5G networks may give it an “electronic backdoor to Australia” the under-fire tech company hit back at the criticism on Monday, branding it “ill-informed and not based on facts.”


A logo of Huawei is seen during the Mobile World Congress in Barcelona, Spain, on February 27.REUTERS/YVES HERMAN

“We are a private company, owned by our employees with no other shareholders,” Huawei Australia chairman John Lord and board directors John Brumby and Lance Hockridge wrote in an open letter, published online. The trio continued: “In each of the 170 countries where we operate, we abide by the national laws and guidelines. To do otherwise would end our business overnight.”

Australia is currently mulling over new legislation, dubbed the Foreign Interference Bill, which will force companies to self-register ties to foreign governments in an attempt to curb political meddling. The Sydney Morning Herald has reported that the bill is likely to be passed in Parliament by June 21.

In their letter, Huawei executives cited the firm’s work alongside well-regarded companies including Vodafone, BT, Deutsche Telecom and Telefonica. It said it had an “open invitation” for Australian officials and security agencies to meet with its researchers to “better understand” its technology.

Huawei, with 700-plus staffers in Australia, is now the world’s largest network equipment maker. In their open letter, the executives said excluding Huawei would not “be in Australia’s best interest.”

They wrote: “Countries like the United Kingdom, Canada, Germany, Spain, Italy and New Zealand, just to name a few, have managed to embrace Huawei’s technology within their own national security frameworks. We believe this can be done in Australia also.” The news comes amid a tussle between the U.S. government and ZTE, another China-based tech giant, over spying fears and sanction issues.

5G sign

A 5G sign is seen at the Mobile World Congress in Barcelona, Spain, on February 28.REUTERS/YVES HERMAN

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From laboratory in far west, China’s surveillance state spreads quietly

August 14, 2018

Filip Liu, a 31-year-old software developer from Beijing, was traveling in the far western Chinese region of Xinjiang when he was pulled to one side by police as he got off a bus.

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FILE PHOTO: SenseTime surveillance software identifying details about people and vehicles runs as a demonstration at the company’s office in Beijing, China, October 11, 2017. REUTERS/Thomas Peter/File Photo

The officers took Liu’s iPhone, hooked it up to a handheld device that looked like a laptop and told him they were “checking his phone for illegal information”.

Liu’s experience in Urumqi, the Xinjiang capital, is not uncommon in a region that has been wracked by separatist violence and a crackdown by security forces.

But such surveillance technologies, tested out in the laboratory of Xinjiang, are now quietly spreading across China.

Government procurement documents collected by Reuters and rare insights from officials show the technology Liu encountered in Xinjiang is encroaching into cities like Shanghai and Beijing.

Police stations in almost every province have sought to buy the data-extraction devices for smartphones since the beginning of 2016, coinciding with a sharp rise in spending on internal security and a crackdown on dissent, the data show.

The documents provide a rare glimpse into the numbers behind China’s push to arm security forces with high-tech monitoring tools as the government clamps down on dissent.

The Ministry of Industry and Information Technology and the Public Security Bureau, which oversee China’s high-tech security projects, did not respond to requests for comment.

The scanners are hand-held or desktop devices that can break into smartphones and extract and analyze contact lists, photos, videos, social media posts and email.

Hand-held devices allow police to quickly check the content of phones on the street. Liu, the Beijing software developer, said the police were able to review his data on the spot. They apparently didn’t find anything objectionable as he was not detained.

The data Reuters analyzed includes requests from 171 police stations across 32 out of 33 official mainland provinces, regions and municipalities, and appears to show only a portion of total spending.

The data shows over 129 million yuan ($19 million) in budgeting or spending on the equipment since the beginning of 2016, with amounts accelerating in 2017 and 2018.

For a graphic on China’s investment on surveillance, click

In Shanghai, China’s gleaming international port city, two districts budgeted around 600,000 yuan each to purchase phone scanners and data-ripping tools. Beijing’s railway police budgeted a similar amount, the documents show.

“Right now, as I understand it, only two provinces in the whole country don’t use these,” said a sales representative at Zhongke Ronghui Security Technology Co Ltd, a Shaanxi-based firm that produces the XDH-5200A, one of the scanners detailed in several police procurement documents.

The representative said police stations across the whole country could consult a centralized repository of extracted data. “Almost every police station will have the equipment.”

Chinese-made devices cost as little as about 10,000 yuan for smaller ones, to hundreds of thousands of yuan for more sophisticated ones, according to prices seen at a police equipment fair in Beijing earlier this year.

The scanners have not been immediately apparent in cities like Shanghai and Beijing.

At recent checks at Beijing bus and train stations, and the heavily guarded Tiananmen square area, there were no signs of the devices. But a police officer at Beijing Railway Station confirmed they “have access when needed” to smartphone forensic technology.


These sorts of scanners are used in countries like the United States but they remain contentious and security forces need to go through a lengthy legal process to be able to forcibly break into a suspect’s phone.

In China, while a number of firms say they have the ability to crack many phones, police are generally able to get users to hand over their passwords, experts say.

The procurement documents show some police stations asked for tools that can pull data from a phone user’s accounts on Twitter (TWTR.N), Facebook (FB.O) and its WhatsApp chat service, Alphabet Inc’s (GOOGL.O) Google Chrome browser and Japan’s Line messaging platform.

A May 25 filing from a customs bureau in Beijing budgeted 5.7 million yuan for smartphone forensic tools from two providers, Meiya Pico and Resonant Ltd. It listed messaging platforms and “overseas” apps the devices could read.

“Basic content collection functions” must include “mobile phone passwords, address books, call history, SMS records, MMS, pictures, audio and video data, calendars, memos and mobile app data,” the document said.

Others listed tools that can breach well-known smartphone brands such as Samsung Electronics (005930.KS), Blackberry, China’s own Xiaomi (1810.HK) and Huawei [HWT.UL], as well as Apple Inc’s (AAPL.O) tough-to-crack iPhone. Samsung, Blackberry, Xiaomi and Huawei did not respond to requests for comment. Apple declined to comment.

Wu Wangwei, an engineer at the Beijing-based Dasi Kerui Technology, which trains police personnel to use the scanners said the equipment had become “very common”.

“The smartphone has become the most important source of evidence,” he said. Police will always use it “if the case needs it”.

Chinese court cases often cite “electronic investigations,” including the collection and accessing of smartphones and tapping into social media accounts, but it is unclear what forensic equipment is involved.


China spent roughly 1.24 trillion yuan on domestic security in 2017, accounting for 6.1 percent of total government spending and more than was spent on the military. Budgets for internal security, of which surveillance technology is a part, have doubled in regions including Xinjiang and Beijing.

“A good bunch of that went to some very obscure, miscellaneous security spending categories … including technology,” said Adrian Zenz, an academic who specializes in Chinese security spending.

According to two officials at the Ministry of Industry and Information Technology, including one who worked on police projects in Xinjiang, surveillance techniques are tested in the region before being rolled out in other provinces.

The projects get both public and private financing. Those that have been tested in Xinjiang and later adopted in other provinces include surveillance camera systems, database software and smartphone forensics hardware, one of the officials said, requesting anonymity because the plans are not public.

“Even if it is not the original plan, if the technology can be tested then it will be cheaper so it can easily be deployed some other place,” the person said.


China’s high tech surveillance gadgets, sometimes referred to as “black tech”, often make the headlines. They include police glasses with built-in facial recognition, cameras that analyze how people walk, drones and artificially-intelligent robots.

A fast-growing industry has developed supplying the government’s surveillance needs, propelling firms like the camera maker Hangzhou Hikvision (002415.SZ) and SenseTime, a fast-growing facial recognition firm.

The scanners though are key to harvesting data from individuals, whether on the militarized streets of Xinjiang or behind closed doors in Shanghai or Beijing.

In a cramped training center at Jundacheng Technology in Beijing’s tech district, engineers showed Reuters one such machine: a gray, shoebox-sized computer that was hooked up to and ostensibly extracting data from a Samsung smartphone.

The training firm is one of many that has cropped up to meet a demand for surveillance tools from military, police and private firms.

The scanner was made by Cellebrite, an Israeli company, but firms including Xiamen Meiya Pico (300188.SZ), Hisign Technology and Pwnzen Infotech also make versions widely used in China. Marketing materials promise the ability to crack into most smartphones, including iPhones.

The hype though can run beyond the reality, experts say.

Chinese scanner makers often tout the ability to crack smart phone security systems, including Apple’s iPhone, but industry insiders admit this usually doesn’t mean the latest models.

“I can only recover older iPhone versions, the most recent ones I can’t,” Zhang Baizheng, who heads digital forensics training school Beijing Judacheng, told Reuters during a recent visit to the center.

Apple is also taking steps to stop devices like those used by Chinese police from cracking its phones. New versions of its iOS operating platform disable the USB port after an hour without password access, blocking a key cracking route.

According to one of the Ministry of Industry and Information Technology officials, such security precautions may not matter.

Most people in China would comply with police requests to unlock their devices, he said.

“In China, it’s not wise to refuse.”

Reporting by Cate Cadell; Editing by Adam Jourdan and Philip McClellan




Apple contractor Foxconn posts below-forecast profit on soaring operating costs

August 14, 2018

Foxconn posted second-quarter net profit well below expectations as a rise in component costs and unsold inventory weighed on the performance of the Apple supplier and world’s top contract electronics maker, analysts said.

The company, formally known as Hon Hai Precision Industry Co. Ltd, reported net profit of T$17.49 billion ($567.25 million) late on Monday, 20 percent short of analyst expectations and slightly below the year-earlier results. Foxconn shares fell more than 3 percent on Tuesday.

Foxconn earns most of its profits from manufacturing smartphones for Apple and other brands. (Reuters)

Analysts said the results reflected concerns about a loss of momentum in global smartphone sales. Last week, Foxconn unit FIH Mobile Ltd. posted a wider first-half loss and acknowledged that it faced a high risk of saturation in the smartphone market.

Foxconn’s results showed that its gross margin narrowed in the second-quarter in part owing to the cost of carrying unsold inventory of the iPhone X. Overall global smartphone shipments fell 3 percent to 350 million units in the April-June quarter compared with a year earlier, market research firm Strategy Analytics says.

However, Vincent Chen, an analyst at Yuanta Research, predicted a brighter outlook projected by Apple would benefit Foxconn and boost its margins in the third quarter.

Apple has forecast above-consensus revenue for later in the year, when it typically launches new iPhone models. Reports suggest these models will use OLED screens, which can display colors more vividly.

“We expect Hon Hai to be the main assembler of OLED version new iPhones and we believe the OLED iPhone model will see better demand in 2H18F,” Chen said in a research note.

The company’s report also illustrates its moves to diversify by pushing into new areas such as display screens — it bought Sharp Corp. earlier this year — autonomous car startups and investments in cancer research.

Still, Foxconn earns most of its profits from manufacturing smartphones for Apple and other brands and from Foxconn Industrial Internet, a unit that makes networking equipment and smartphone casings, among other things.

“Investment in factory automation and component price hikes capped gross margin,” said Fubon Research analyst Arthur Liao. Foxconn’s operating costs jumped 18.8 percent in the quarter.

Liao noted that Foxconn absorbed some expenses related to the Sharp acquisition this quarter, as well as development costs from setting up a factory in the US, and taking Foxconn Industrial public in June.


How is Social Media Impacting The Human Brain?

August 6, 2018

No automatic alt text available.

Social media is making children regress to mentality of three-year-olds, says top brain scientist

Social media and video games are creating a generation of children with the mental and emotional immaturity of three-year-olds, one of Britain’s most eminent brain scientists has warned.

Baroness Susan Greenfield, a senior research fellow at Oxford University and former director of the Royal Institution of Great Britain, said she was concerned children were losing their ability to think for themselves, empathise and communicate with each other.

Instead, they were being bombarded with instant gratification through social media and gaming which meant that like three-year-olds they would need “something every moment to distract them so they can’t have their own inner narrative, their own inner thought process.”

“What I predict is that people are going to be like three-year-olds: emotional, risk-taking, poor social skills, weak self-identity and short attention spans,” said Baroness Greenfield, who was one of the first academics to warn four years ago that social media and video gaming were re-wiring children’s brains.

“Give them a box to play with rather than an X-box so they can use their imagination. If you watch a child who is reading stories, you can see it gives them a better attention span,” added Baroness Greenfield, who was professor of synaptic pharmacology at Oxford University.

“I have started to look at things they don’t do – that is promoting physical exercise, eating together and above all telling stories.”

Her book, Mind Change, four years ago warned that children’s brains were being re-wired by their engagement with new technology.

The result was that they were likely to become more narcissistic with lower self-esteem and higher depression rates as communication through social media replaced face-to-face conversations. “I do feel vindicated. I wished I had not been,” she said.

She backed regulation to force the social media and gaming firms to do more to protect children from online harms, echoing The Daily Telegraph’s campaign for a statutory duty of care to be imposed on the companies.

She said the firms should be made to “fess up” to the addictive designs and techniques they used to keep people online. “If people were aware of how they were being manipulated, they would rebel against it,” she said.

“I want parents to be so aware of the [risks of the technology] that they intervene to stop their children doing it, like with smoking.”


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Money Beats Human Rights: Google plans censored search for China

August 2, 2018

If completed, move is certain to fuel controversy among human-rights advocates and many of tech company’s own employees

People wait in line at the Google booth at the Big Data expo in Guiyang, Guizhou province, China, in May. The tech giant is said to be testing a search engine that adheres to the country’s controls.
People wait in line at the Google booth at the Big Data expo in Guiyang, Guizhou province, China, in May. The tech giant is said to be testing a search engine that adheres to the country’s controls. PHOTO: ALEKSANDAR PLAVEVSKI/EPA-EFE/REX/EPA/SHUTTERSTOCK

Google is testing a mobile version of its search engine that would adhere to China’s strict controls over content, a person familiar with the matter said, indicating renewed interest in a market that the Alphabet Inc. GOOGL 0.47% unit abandoned eight years ago in protest over government censorship.

Plans for Google’s censored search product aren’t completed, and it may never come to fruition, the person said. Chief among the hurdles, Google would need approval to re-enter the search market from Chinese authorities, who block access within the country to Google’s search engine as well as many other foreign news and social-networking sites.

If the effort were to proceed, it would mark a sharp about-face for Google that is certain to fuel controversy among human-rights advocates and many of its own employees, as well as U.S. politicians. When Google abandoned its Chinese search operations in 2010 to protest the state’s censorship, co-founder Sergey Brin described the government as having the “earmarks of totalitarianism” of the Soviet Union, where he was born.

A Google spokeswoman noted that the company already offers several other apps in China, including one for translation, and that it works with Chinese developers and has invested in Chinese companies including e-commerce giant Inc.

Google’s Chinese search effort, which was reported earlier by the Intercept, is coming to light at a time of rising trade tensions between the U.S. and China, which also could complicate Google’s plans. The Wall Street Journal reported Wednesday that the Trump administration is considering more than doubling its proposed tariffs on $200 billion of Chinese goods to 25% as it seeks to pressure Beijing into further negotiations.

China has long operated one of the most extensive internet censorship systems in the world, and its efforts have only increased since Google’s search departure. President Xi Jinping’s administration has tightened limits on expression on Chinese websites and pushed to give the Communist Party’s propaganda outlets and an even more prominent voice in the public sphere.

At the same time, China’s population of internet users also has ballooned–to more than 770 million as of last year, by far the world’s largest—as has the clout of its domestic internet giants like Alibaba Group Holding Ltd. and Tencent Holdings Ltd.

China has been the subject of a vexing internal debate at Google for more than a decade. The company began offering a filtered version of its search engine to Chinese users in 2005, despite the reservations of some executives who believed censorship violated the company’s goal of making the world’s information “universally accessible and useful.”

Even after shutting its censored search engine, Google maintained a presence in China, employing engineers, salespeople and product managers and working to introduce new services for consumers.

Google’s Android is the dominant operating system for Chinese smartphones, but the Google-licensed version of Android isn’t available in China. That has opened the door for Chinese phone makers such as Xiaomi Inc. to create their own versions of Android that don’t provide revenue to Google, and others, such as search company Baidu Inc., to create their own app stores.

Google Chief Executive Sundar Pichai has steadily stepped up Google’s activity in China since he took over in 2015. Google last year opened an artificial intelligence lab in Beijing and the company has begun offering Android apps, including a translation service and a file-storing app.

Other initiatives, including Google’s effort to launch an Android mobile app store in the country, have failed to gain approval from local authorities.

Other U.S. tech giants have made concessions to the Chinese government. Apple Inc. last year was criticized after it removed software from its app store in China that allowed users to circumvent the country’s vast system of internet filters.

“We believe in engaging with governments even when we disagree,” Apple Chief Executive Tim Cook told analysts last year. He added that doing business in markets like China, despite local restrictions, brings benefits to customers and “is in the best interests of the folks there.”

While Apple’s business centers on selling smartphones, search and content are core to Google.

Capitulating to government censorship risks inflaming Google’s vocal workforce. Its employees have used internal company forums to debate other Google policies, including a partnership with the U.S. Department of Defense to help aid the image-recognition of its drones. Google said earlier this year it wouldn’t renew that contract in part because of employees’ concern.

U.S. lawmakers already are scrutinizing Google’s data-sharing agreements with Chinese handset makers including Huawei Technologies Co. A group of Republican Senators wrote a letter to Mr. Pichai in June, suggesting the company was hypocritical for ending a partnership with the Pentagon while continuing to work with Chinese companies.

“While we regret that Google did not want to continue a long and fruitful tradition of collaboration between the military and technology companies, we are even more disappointed that Google apparently is more willing to support the Chinese Communist Party than the U.S. military,” the group said.

Write to Douglas MacMillan at

Appeared in the August 2, 2018, print edition as ‘Google Tests Censored Chinese Search Engine.’



Apple earnings arrive with trillion-dollar value near

July 31, 2018

Apple will release quarterly earnings figures Tuesday as it flirts with a history-making, trillion-dollar market value based on its share price.

To hit the trillion-dollar mark, Apple shares would have to climb about seven percent from the $189.91 price logged at the close of official trading Monday on the Nasdaq.

The market is eager for news about demand for iPhones and how the company is riding out trade turbulence between the US and China.

© AFP/File | Apple is flirting with a history-making, trillion-dollar market value based on its share price

President Donald Trump’s trade wars include 25 percent US tariffs on $34 billion in Chinese goods, with more on the way, and steep tariffs on steel and aluminum, which provoked China and others to hit back with import duties on US goods.

The Silicon Valley-based company is expected to unveil new iPhone models in the fall, sticking with its practice of releasing upgraded models annually ahead of the year-end holiday shopping season.

Sales of iPhones in the quarter could be tame since many fans have historically either bought handsets in prior months or are holding out for new models on the near horizon.

Apple earnings are likely to be solid, with the average price of iPhones sold rising as buyers opt for the top-end iPhone X.

Billions of dollars that Apple has been spending to buy back shares could help propel the company past a trillion-dollar value mark in the stock market.

Early this year, Apple announced it would buy back $100 billion in shares.

Apple has managed to shine, despite bruises to its image that included being accused of keeping young people addicted to smartphones, slowing performance of older iPhones to motivate upgrades and sidestepping taxes by nestling cash in offshore havens.

The market will be watching to see whether a battery replacement program and software changes to improve performance of older iPhones are costing the company.

Apple has battled with the US government over making iPhones so secure even police can’t peek at data, and prides itself on not making money off people’s personal information the way ad-targeting companies such as Facebook do.

Apple has hammered away at the growing amount of money it takes in from music, applications, games, subscriptions and services it sells to people using its devices.

Money made from services is seen as an important element of diversification away from having to rely heavily on selling iPhones.

A 31 percent rise in services to $9.2 billion in the first three months of this year followed big jumps in Apple Pay, Apple Music and other programs.


Samsung Electronics Posts Flat Second-Quarter Net Profit

July 31, 2018

Samsung mobile operating profit declines 34%, revenue down 20%

Sales of the Galaxy S9, which hit shelves in March, could be 20% or more lower than that of the previous year’s model, analysts say.
Sales of the Galaxy S9, which hit shelves in March, could be 20% or more lower than that of the previous year’s model, analysts say. PHOTO:KIM HEE-CHUL/EPA/SHUTTERSTOCK

SEOUL— Samsung Electronics Co. reported flat second-quarter net profit, as a big drop in mobile-phone profit dragged down results that were buoyed by its strength in memory chips.

The world’s largest handset maker ships one of every five smartphones globally. But consumers are holding on to their devices longer than before, and balking at price tags for new high-end phones at $1,000 or more.

For the quarter ended June 30, Samsung said its mobile division revenue, which includes its telecom network-equipment business, declined 20% to 24 trillion South Korean won ($21 billion), from 30.01 trillion won a year earlier. The unit’s operating profit fell to 2.67 trillion won from the year-earlier total of 4.06 trillion won.

Samsung, in its earnings release, said it would try to rejuvenate sales by moving up the release of its flagship Galaxy Note 9 phone, as the large-screen handset is debuting at a New York event on Aug. 9, weeks earlier than the previous year’s model. The company also signaled it would get more aggressive on pricing.

The Suwon, South Korea-based company said overall net profit was 11.04 trillion won, versus 11.05 trillion won a year earlier. Revenue fell to 58.5 trillion won from 61 trillion.

Analysts polled by S&P Global Market Intelligence had expected the company to post net profit of 11.1 trillion won and revenue of 58.8 trillion won for the quarter.

The firm’s overall results were enough to halt what had been four straight quarters of record-breaking profits. The performance was largely fueled by strong demand for Samsung-made memory chips, which go in rivals’ smartphones, self-driving cars and data servers. Last year, Samsung surpassed Intel the world’s largest chip maker by revenue.

For the current quarter, Samsung’s dominance as a memory-chip supplier helped cushion the blow from its smartphone struggles. Semiconductors accounted for 78% of the firm’s operating profits, growing to 11.61 trillion won, the division’s best-ever results.

With smartphones, weaker sales of Samsung’s high-end devices, particularly of its latest flagship device, the Galaxy S9, surprised mobile executives, The Wall Street Journal reported earlier this month. Sales of the Galaxy S9, which hit shelves in March, could be 20% or more lower than that of the previous year’s model, analysts say.

The souring market has prompted a greater sense of internal urgency at Samsung, spurring executives to pursue plans to introduce a foldable-screen phone by early next year. Such a device would create an entirely new product category and boast a screen roughly the size of a tablet, which can be folded into a consumer’s pocket.

Samsung’s handset division is particularly threatened by a mobile-sales slowdown because it predominantly makes money from selling new devices to consumers. Unlike rival Apple Inc., Samsung has no significant business selling services, such as an app store or streaming music, which can bring in revenues from existing phone users holding off on upgrades.

The outlook for the soon-to-be-released Galaxy Note 9 isn’t strong, analysts say. In a recent research note, Susquehanna analyst Mehdi Hosseini expected shipments of the large-screen Galaxy Note 9 to reach just 5 million devices this year, a steep decline from the 12 million Galaxy Note 8 units sold last year.

Samsung Electronics shares, which underwent a 50-to-1 stock split in May, are down about 9% this year, as investors wonder how much staying power the recent memory-chip success will last.

Write to Timothy W. Martin at

Appeared in the July 31, 2018, print edition as ‘Weakness In Mobile Hits Profit At Samsung.’