Google’s JD.com Deal Shows Silicon Valley Still Wants In on China
Posted June 18, 2018 4:36 p.m. EDT
For Google, a half a billion dollars is a drop in the bucket. But that money could have an outsize impact on the U.S. tech giant’s ability to re-enter China.
Google said Monday that it would invest $550 million in JD.com, one of China’s biggest e-commerce companies. The investment was a reminder that China, with all its promise, has been largely closed off to U.S. tech giants, thanks to government censorship and fierce competition from homegrown rivals like Alibaba.
That doesn’t mean that Silicon Valley moguls have abandoned hopes of building up their Chinese presences. Here’s where some of the top tech companies stand with their forays into China.
The company pulled its search services from mainland China in 2010, and its other important businesses have been hobbled. Android, for example, is the most popular mobile operating system in China, but Google services are stripped out for Chinese users.
As part of the JD.com investment, the Chinese online retailer will promote products on the Google Shopping platform. The company also has other business lines in that country:
— A patent licensing partnership with Tencent, one of China’s biggest internet companies.
— An artificial intelligence lab in Beijing, a nod to China’s rapidly growing strength in the field.
— Investments in startups like Chushou, a Chinese equivalent to the Twitch video game streaming site, and XtalPi, a biotechnology company.
— A small set of apps, like ones for file management and language translation.
China has blocked the social network in the mainland since 2009. But that hasn’t stopped the company from trying to re-establish beachheads in the country, including with a much-ballyhooed visit by Mark Zuckerberg in 2016, where he demonstrated his Mandarin speaking skills. Late last year, though, the executive who had led much of Facebook’s inroads into China left the company.
For now, here’s what Facebook has going in the country:
— A partnership with Xiaomi, the electronics maker, on creating virtual reality headsets for its Oculus platform. (Facebook knows Xiaomi well: The current head of Oculus, Hugo Barra, came over from the Chinese startup.)
— Facebook released Colorful Balloons, a photo-sharing app similar to Facebook’s Moments, through a separate local company. (Colorful Balloons reportedly sank soon after its unveiling.)
— Though Facebook doesn’t operate in China, it remains an important market for ad spending, with advertising from Chinese companies and — somewhat surprisingly — local governments and state news media appearing on the social network to reach international audiences.
Unlike its internet-based rivals, Apple is free to sell its products and services in China, from iPhones to music streaming.
With 41 stores and hundreds of millions of iPhones sold in the country, there is arguably no U.S. company in China as successful. But it has often found itself trying to strike a delicate balancing act, especially as the United States and China spar over trade. At times, Apple has complied with government demands, like removing apps that help Chinese users skirt censorship laws or opening a local data center in partnership with a local company.
Here’s one explanation why:
— China is the second-largest market for Apple, contributing more than 20 percent of overall sales. In Apple’s most recent fiscal year, which ended Sept. 30, the company reported $44 billion in net sales within China. (That figure was down from the previous year, thanks to lower iPhone sales.)
The company isn’t blocked in China. (Like Apple, it has sometimes bowed to Chinese government censors.) Its business just isn’t very big, dwarfed by Chinese rivals like Alibaba.
Amazon has put more money and attention on other emerging markets, especially India. That helps explain why it challenged Walmart over control of Flipkart, the India e-commerce company. But it hasn’t given up on doing business in China:
— Its Prime shopping service was introduced in China in 2016.
— China-specific versions of Kindles debuted last year.
— Amazon’s cloud services offering, known as Amazon Web Services, remains a huge, promising business. But the company has had to sell some physical assets to its local partner to comply with Beijing rules.
Ultimately, though, it appears Amazon’s ambitions for China are limited, given that the company has opened an outlet on Alibaba’s Tmall platform and run Kindle promotions across its Chinese rival’s services.