Hello, this is Kenji from Hong Kong, where we are in the midst of the mid-year earnings season. The overall tone so far seems to be tilting toward the negative side, and the tech sector is no exception. While JD.com pleasantly surprised the market with its results, both Tencent Holdings and Alibaba Group Holding reported zero top line growth for the first time since their listings over a decade ago. Smartphone maker Xiaomi saw its net profit for the first half of the year dip 95 per cent, while component makers such as Sunny Optical and AAC saw their bottom lines cut by half or more.
The weak results are a function of various factors, primarily Covid-19 lockdowns, rising input costs, a tight regulatory regime for the tech sector and heightened geopolitical tensions — all which have combined to decelerate the Chinese economy as a whole.
And now, a new downward push is coming from the inland province of Sichuan, perhaps more familiar in its traditional spelling of “Szechwan,” from its connection with the local spicy cuisine. A severe power shortage in the area is forcing factories to shut down, snarling supply chains for everything from automobiles to Apple products. It is not clear how long the situation will drag on, but it has already brought another aspect of supply chain vulnerability to light.