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Tech and Investment: 2019 and 2020 | Key Insights from WIM Salon x Beijing
COVID-19 and China
Dare to Innovate -- WIM Salon x Beijing 2019 | Image credit: EqualOcean

A year of global geopolitical turbulence, 2019 also saw a rally in the capital markets, with so-called value stocks, all of a sudden, outperforming their growth counterparts. Although all the industry behemoths' market caps grew significantly within this period (American leaders Apple, Microsoft and Alphabet added extra 66%, 54% and 29% respectively, China's Alibaba and Tencent were boosted by 60% and 20%), it was a somewhat flat year for big tech in terms of game-changing innovation.

Many bellwethers can support this statement. Let's delve into electronics, which is, in a number of ways, an epitome of tech as we know it. In this regard, we'll look at two things: the surface and the core. The global smartphone market – a multibillion sector that stopped growing as far back as in 2018 – speaks for the surface, while the semiconductor industry makes up the core.

A new normal is that fewer smartphones are being sold and shipped these days. The industry is stagnating. When the quantitative factor doesn't stir development, qualitative, purely technological breakthroughs are needed. And how are the world's major Original Equipment Manufacturers (OEM) reacting to the market oversaturation? They are putting more cameras on the next generations of their handsets. Nothing new. 

As for microelectronics, despite the fact that Moore's Law is running out of steam, the biggest corporations are still pushing to adhere to it. One of the hottest stories in this sphere was about CS-1, an over-one-trillion-transistor AI accelerator designed by California-based startup Cerebras. Again, no groundbreaking innovation, just more transistors than before. 

However, there are multiple budding sectors where new, exciting things happened over last year. Among the people keeping their eyes on those fields, the most curious are wealth managers, especially Private Equity/Venture Capital (PE/VC) investors that constantly seek disruptive growth, putting it over any low-risk options. 

We had two of these argonauts – Baidu Ventures Vice President Felix Fang and Wayne Shiong, partner at China Growth Capital (CGC) – in the venue on December 27. Evgeny Kosolapov, who is currently representing the "Russian Zhongguancun" (as he said) – Skolkovo Innovation Center – in China, took part in the event too. Flip the Script Founder Yichi Zhang joined the trio, hosting the conversation. The following are a few topics we discussed, and our guests' takes on them.

Booming industries in 2019

Focused on China-originated high-tech, CGC's Wayne Shiong named two fields that have been in the limelight over the past twelve months: semiconductors and drug development. This is no surprise, given the country's enormous support for home-grown pioneers in these domains and the burgeoning global startup scene in both microelectronics and healthcare.

Felix Fang's bailiwick is AI applications in finance, big data and enterprise services. The Baidu Ventures VP argued that 2019 was a big year for the so-called 'Industry Internet' (产业互联网, not to be confused with the Industrial Internet of Things; here, for example, EqualOcean explains the difference between the two concepts) as well as for marketplace startups. Lately, 2B services are maturing in China, with more growth-stage companies taking on the industry incumbents.

As a part of the Chinese branch of Skolkovo, Russia's largest tech hub, Evgeny Kosolapov has been blazing a trail for his homeland's fast-growing enterprises intending to settle in China. He stated that nowadays the Middle Kingdom is a hard nut to crack if all you have is an idea or a business model. That's why most of the Russian startups that have succeeded here are operating in knowledge-intensive fields such as advanced chemicals or new materials. "I’d call 2019 a year of biomedicine," said Evgeny. "While 2018 was a year of IT."

Big expectations: from 2020 on

According to Mr. Shiong, the enterprise services sector will show its clout in China next year. Felix Fang was at one with his venture peer, specifying the issue: he believes that risk control and safety Software-as-a-Service (SaaS) will be heating up next year.

The representative of the "Big Finland" (this is how Mr. Kosolapov, in his allusive manner, called Russia) chose to go with a long shot. "Quantum computing is what we are waiting for," he said. A little far-fetched, maybe?

On 5G

All the hype around the fifth generation of wireless technology, known as 5G, is not for no reason. The concept is widely projected to become the bedrock of a handful of industries, galvanizing economies across the world.

"There are some state-of-the-art concepts that can’t be implemented without a more advanced wireless technology," said Mr. Fang. "For instance, 4G is not enough for connected vehicles." The Skolkovo representative is rather skeptical about the recent 5G craze; he added that people tend to get overexcited when expecting a looming upgrade in a certain sphere. He went on by saying that after something new comes into fruition, we often ponder over why we did it.

New emerging regions

China is no longer a tech prodigy. Growing into the second-largest PE/VC market in the world, it has doled out seats on the ride to the younger developing nations that are just now starting to move at a similar rate of knots.

Who else but Baidu Ventures, which has over 40 companies from outside of China in its portfolio, to tell us about the global private equity trends. Mr. Fang confirmed that countries like India have lately been scrutinized by the investor. CGC is also actively looking for opportunities in rapidly growing regions such as Africa and Southeast Asia. Indonesia, a nation of 270 million people and over 17,000 islands, has been presenting great room for venture capitalists, Mr. Shiong noticed. 

What's next?

In a nutshell, the event went exactly how we promised: countless industry insights, free snacks and good vibes. As for 2019, it was full of uncertainties, and lacking in significant technological improvement. Nonetheless, it was, in many respects, a decent year to close the decade.

Stay in touch. We are preparing more for 2020.

Editor: Luke Sheehan
ANALYST
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