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Five Chinese Tech Companies and their Global Equivalents

Patrick Kim | August 11, 2016 | | 1 Comment
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The success of China’s technology companies is one of the most exciting and promising aspects of the country’s economic rise. While many accusations have been leveled at Chinese tech giants for copying other companies' technology, these companies are now pushing the limits of innovation and our understanding of how technology fits into daily life. Setting aside doubts about imitation, we can readily identify the five most dynamic tech companies —Baidu,-- Baidu, Alibaba, Tencent, Xiaomi, and Lenovo—and to understand their roles in China's economy, let's compare them to their international equivalents:

Baidu – Google

Baidu is effectively the Google of China, having accumulated an 80% market share of search after Google exited the country. With all the data and advertising money from Chinese Internet traffic (the largest internet market in the world), Baidu is able to devote a lot of resources into AI research. Baidu’s deep learning research is spearheaded by former Stanford AI professor and Google scientist Andrew Ng, who has set out to prove Chinese companies’ merit in innovation. 

One of the most high-tech projects Baidu is undertaking is called DuSee, an AR (augmented reality) tool which will be built into widely used apps like Baidu Maps and Baidu Search. You may be familiar with the AR experience Pokemon Go has popularized, where a digital animation appears over the area scanned by a phone’s camera. DuSee is similar to Pokemon Go in that it makes use of a phone’s camera to scan the environment and project a digital image onto it, but promises to take AR a step further. Exhibitions of DuSee have revealed the capability to turn flat images into 3D simulations, and Andrew Ng has proposed that the technology would actually have the capability to create virtual objects that interact with their environment. What DuSee will eventually mean for Baidu’s millions of mobile users is not yet clear, but it is currently China’s biggest AR project, and has Ng claiming that “AR has potential to take off very quickly.” 

While Google has been working on automated driving for much longer (since 2009), Baidu has potential to influence the budding industry. Baidu’s automatic driving team is likely to become the dominant provider in China, where roads conditions and driving behaviors are unique compared to other parts of the world. In cars of the future, Baidu sees real opportunity to expand its revenue sources. “Chinese carmakers started making cars 100 years after others and a lot of the core technology aren’t in Chinese hands, such as engines,” said Baidu Senior VP Wang Jing in an interview with Bloomberg Technology. “With electric cars, with intelligent cars, the core technology shifts from the engine and gearbox to artificial intelligence and that’s an area where China is very close to the U.S., giving China the chance to catch up and seize leadership.”

At the core of both the DuSee and the self-driven car project is Baidu’s extensive research and funding in AI. Baidu is able to use the extensive data accumulated by its search engine to feed into AI projects, and CEO Robin Li is perfectly confident letting the investment community know that Baidu’s earnings will be dulled by the amount of spending going into areas of long-term development like O2O (offline to online) and AI. While some critics label Baidu a Google rip-off, the company cannot so easily be called into question over its willingness to take risks in pursuing innovation.

Alibaba – Amazon

Alibaba made its fame through its Taobao e-commerce business, which radically changed the way Chinese people shop. CEO Jack Ma made Taobao free for its first three years, reflecting Alibaba’s motto, “customer comes first, employees come second, and investors come third.” The data on consumer behavior that Alibaba Group accumulated from sites like Taobao, Tmall, and Alipay gave the company a lot of weight in China’s Internet industry, and Jack Ma was able to build an ecosystem with stakes in virtually every area of digital consumption. Alibaba’s investments include e-commerce, digital media, smartphones, financial services, education, travel, retail logistics, cloud services, and others, reflecting Ma's passion for everything consumer-facing. 

What makes Alibaba significant, as CTO Jeff Zhang claims, is the diversity and scale of data that comes from all the companies that fall under the Alibaba Group. Zhang believes that the diversity of Alibaba’s data sources makes it a top competitor in data processing and analytics. Alibaba is very similar to Amazon in that it sees the future of its business in data storage and processing through cloud services. While Amazon is far ahead of any competitor in cloud services (currently a bigger business for Amazon than e-commerce), Alibaba is still surging forward in its monetization of e-commerce, and the effect is buoying its other businesses such as digital media and cloud services. The company just reported its best quarter ever since its IPO, and strength in innovation is reflected by high-tech projects such as intelligent systems to track down counterfeiters and automated warehouses controlled by a smart logistics system. 

Alibaba’s ascent to the world’s fourth most valuable company is in some ways the most appealing story of China’s economic miracle. Possessing a charismatic visionary in Jack Ma, the company went from a small group of 17 friends gathered in Ma’s Hangzhou apartment in 1999 to achieving a record IPO float in 2014. Ma, however, does not seem to be primarily interested in money. When eBay offered to buy or partner with Alibaba, Ma refused because he felt that eBay CEO Meg Whitman didn’t want to do anything special for the Chinese market, but was rather concerned about making Wall Street happy. Ma has since stepped down as CEO in order to pursue the real world problems China faces, like the environment. However, according to many experts, Ma still remains the main decision maker and source of inspiration for Alibaba’s far-reaching global activities. 

Tencent – Facebook

Tencent developed WeChat, one of the most successful and useful apps that exists. According to an Economist article, “those who spend time in China and the West say leaving WeChat is like stepping back in time.” WeChat has a simple yet effective design appealing to social users, while managing to fit in an array of features that range from rich text communication, mobile payments, securities trading, social media sharing, taxi-hailing, and video messaging.

While many in the West use Facebook, Snapchat, Instagram, and other apps for their social media needs, Chinese users can accomplish all of the same functions with WeChat. In Chinese companies, WeChat often takes the place of sending an email or making a phone call to your co-workers. The ease of WeChat group chats makes communication between team members simple and convenient. WeChat has tapped into Chinese cultural traditions, too. Around Chinese New Year, managers and bosses will send holiday gift money known as “red packets” (红包 hóngbāo) to their employees through WeChat groups. It's sort of a holiday tradition to compete with your co-workers in seeing who can snatch up the hongbao the fastest, and get the largest share of the prize money. 

WeChat has some 630 million monthly active users in China, meaning most people use WeChat, especially in cities. There are an additional 70 million overseas users, mostly in Southeast Asia and India. The mass appeal of WeChat has made it an estimated 12 times more valuable than Japanese messaging app LINE. Paired with Tencent’s strategic prowess is in monetization, WeChat makes an average annual revenue per user of 7 USD. In comparison, Facebook’s Whatsapp makes an average annual revenue per user of just 0.06 USD.

Pony Ma, Tencent CEO and the man behind the success of WeChat, is one of the lesser-known multibillionaires of the world. He makes few public appearances and many just know him as a self-professed computer geek. However, the fact that he is one of China’s most powerful men tells a lot about the way modern China has evolved. Pony grew up during the cultural revolution and attended Shenzhen University during the time Deng Xiaoping’s economic liberalization was coming into full swing. He was one of those in his generation who “jumped into the sea,” or went into business and partook in the development of China from a raw, underdeveloped country to an economic powerhouse. Ma’s first ambition was to become an astronomer, but due to the pragmatism of the era, became instead a shrewd and sometimes ruthless businessman. Later he would claim, "At Tencent, we may be businessmen, but we are still chasing our IT, our science. We are still striving to create something really cool, trying to create things we couldn't even imagine without our new technologies. I am still clinging to this enthusiasm." 

Tencent began in 1998 as a desktop instant messaging program QQ, which remains popular in China today despite being eclipsed by WeChat. As 30-year-old product manager Genie Lin at Tencent recalls, the idea for WeChat came when it occurred to the management at Tencent that “though we all had smartphones, there were no instant messaging apps.” Pony had built a culture revolving around product geeks at Tencent, and his relentless product-oriented approach proved a winning formula once he pivoted toward mobile with WeChat. “We are users ourselves, we are our own customers, and we decided we needed that,” recalls Genie Lin. Pony remains intensively focused on perfecting his products, and is reported to give frequent suggestions to the company’s estimated 500 product teams through WeChat groups. 

WeChat isn’t Tencent’s only asset, however. The Shenzhen-based giant competes with Alibaba and Baidu for supremacy in China's Internet world, and is also doing a lot of investment activity outside of China. Like Alibaba, Tencent has a diverse range of investments that are helped by the company’s backend technology. Tencent not only has the creative data solutions to support 700 million WeChat users, but is also able to offer users a free 10 terabytes of storage, which would cost you $100 a month with Google. Most recently, Tencent invested in Hollywood film studio STX, and just last month acquired Clash of Clans developer Supercell in a deal worth more than $10 billion. Many experts predict Tencent to emerge as one of the main forces in the global technology industry, pointing to how the success of WeChat compelled Mark Zuckerberg to make a $19 billion move for Whatsapp in 2014.

Xiaomi – Apple

Xiaomi is China’s most unique smartphone producer, making it roughly comparable to Apple in that it offers distinct value to the customer. Xiaomi became famous in China for making iPhone-like technology available for much cheaper prices only marginally higher than the material cost of making the phones, according to CEO Lei Jun. While Xiaomi products are a great deal cheaper than their Apple counterparts, Xiaomi is similar to Apple in that it carefully centers its products around its customers. Xiaomi product managers are devoted to closely listening to customer forums for advice on how to tweak products. The company also keeps tight control over the production process so that changes can be implemented quickly and so that supply never exceeds demand. A new batch of phones are shipped out every week reflecting advice customers give, a process Xiaomi calls “design as you build.” Xiaomi’s highly adaptable engineering mentality and cost-effective business model make the company distinctively Chinese, and deserving also of comparison with Apple as a smartphone industry innovator.

Part of what makes the Xiaomi business model so unique is the fact that Xiaomi does not own any physical stores or do any traditional advertising. Instead, the company relies entirely on social media and word-of-mouth to increase its sales. At the core of the value of the products is the fact that you aren’t paying for any advertising costs, and Xiaomi has expanded this philosophy to all areas of consumer tech.

Xiaomi’s advertising strategy is to sell the idea of a lifestyle rather than just another smartphone. While smartphones sales have flagged since Xiaomi first came out with their cheap smartphone models, probably the most interesting and promising aspect of Xiaomi is their foray into IoT (Internet of Things). Xiaomi now sells drones, laptops, wirelessly controlled lighting systems, watches, devices like Apple TV, virtual reality headsets, and a plethora of other hardware that are all part of its comprehensive product ecosystem. Some of its most interesting current IoT products include remotely controlled lighting systems and air purifiers. While IoT’s more sophisticated applications still have a long way to go, gadgets like Xiaomi’s air purifier impress Chinese consumers with their ability to improve home air quality before a user even sets foot in the door.

Lenovo – Samsung 

Lenovo has a diverse product portfolio rivaling that of electronics giant Samsung, with whom it competes directly in many markets. Lenovo also has become China’s most international company through acquisitions of Motorola and IBM’s ThinkPad, which gave the company direct access to consumer markets globally.

However, Lenovo’s self-proclaimed strength is in manufacturing. Lenovo has many of its own production facilities, as well as close ties to manufacturers and distributors that give it control of the production process unrivaled among tech giants. Like Xiaomi, Lenovo has extolled the importance of its proximity to the production line in meeting the ever-changing demands of consumers in the high-paced tech world. CEO Yang Yuanqing is quoted as saying, "selling PCs is like selling fresh fruit. The speed of innovation is very fast, so you must know how to keep up with the pace, control inventory, to match supply with demand and handle very fast turnover." In 2012, Lenovo built a $793.5 million factory in Wuhan, which helped it to overcome Samsung as the number one smartphone maker in China in 2014 by churning out some 30 to 40 million handsets a year. Vertical integration has kept costs down, a key factor in Lenovo’s pursuit of the domestic market and in penetrating domestic markets such as Southeast Asia, India, Russia, Brazil, and Africa.

The ability to flexibly produce many different products has helped Lenovo tap into international markets, such as in Africa where sturdier phones with longer battery life are popular. While differentiation in the crowded smartphone market has proved difficult for many companies, it is sometimes simple innovations like these which have made Lenovo handsets stand out. Part of the reason Lenovo has chosen to keep at least 50% of its production in-house is its belief that a lot of the innovative discoveries in technology are made at the production level.

Lenovo has done significantly more than other Chinese companies to create a global culture. Its executives rotate between the two headquarter offices in Beijing and North Carolina and the R&D center in Japan every two years. In the past, two foreigners have served as Lenovo executives. A team dedicated to smoothing over the merging process tracks the cultural progress of acquisitions and mergers. The corporation also holds an annual meeting in English at which the management of the newly acquired companies learn how they fit into Lenovo’s plans. The company culture's global pedigree enables its products to sell abroad more easily than those of other Chinese companies, and Lenovo's Phab2 Pro phone was chosen as the first device to sport Google's new Tango AR technology. 

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Patrick Kim

Patrick Kim

Patrick Kim is an editor at TutorMing. He has a B.A. in East Asian Studies from UCSB, and has worked in China for 3 years. His hobbies are soccer, being outdoors, and studying Chinese.

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