When Chinese tech companies are welcome neither at home nor in the United States, maybe “elsewhere” is the only place to go.
In 2021, both sustained hostility in the U.S. and increasing regulatory scrutiny in China have pushed Chinese tech companies to think about their other options. Maybe it’s time to bring their talents and money to another market, where opportunities are vast and restrictions are few. As a result, be it Europe, the Middle East, Africa or Latin America, footprints of Chinese tech companies can be found everywhere.
As 2021 ends, Protocol looked back at how Chinese tech companies spread into overseas markets this year. Major firms such as Tencent and ByteDance unsurprisingly took the lead, but smaller, more obscure companies also made important headway. Before anyone notices, they might grow to be the next regional giant no one can ignore anymore.
Tencent can’t stop, won’t stop its global gaming expansion
Instead of asking which gaming studio Tencent is investing in this time, you might as well ask which one the Chinese giant hasn’t invested in or snapped up. In 2021, Tencent embarked on an investment spree, pouring capital into gaming studios in the U.K., Germany, Netherlands, Finland, Sweden, Romania, Russia, Czechia, Japan, Canada and of course, the United States. It does seem like Tencent has a particular interest in European studios — potentially to avoid American regulators’ scrutiny of Chinese companies.
Some of these investments gave Tencent full control of the studio, while others are only for a minority stake. But Tencent usually doesn’t seek to rebrand the studios as Tencent subsidiaries, instead preferring to keep its involvement low-profile in what analysts call a “silent pursuit of global gaming domination.”
But the company did expand its own footprint too, setting up three overseas gaming studios this year — in Seattle, Montreal and Singapore — and doubling the size of its Los Angeles office. Job listings for these new studios suggest Tencent really wants its own AAA game: big-budget, high-quality titles for console or PC that represent the highest level of the industry. And analysts believe the company’s overseas spread will reduce the risks it faces within China as regulators enact ever more strict gaming limits.
No ceiling for TikTok’s growth
Elevated to global popularity during the pandemic, TikTok continues to smash its competitors in the social media realm this year. It crossed several major benchmarks: 3 billion global installs by July — the only non-Facebook app to reach that threshold — and 1 billion monthly active users by September. An App Annie analyst told Nikkei Asia this summer that TikTok's total screen time in the U.S. and U.K. had surpassed that of YouTube.
With its new global success, TikTok is finding itself in positions similar to what predecessors such as Instagram and Facebook have faced. In Myanmar, it failed to take down videos that government soldiers posted to intimidate protestors. In the U.S., it was questioned by the Senate on whether it has done enough to combat content that glorifies eating disorders.
With sky as the limit, what does TikTok have in mind next? To actually make money off its popularity. Ironically, TikTok’s global success doesn’t really pay the bills, so the app is looking to sell more ads in the future and help influencers match with brands.
DiDi low-key expands overseas despite chaos at home
From a rushed IPO on the New York Stock Exchange to being reprimanded and put under cybersecurity review in China, and to eventually de-listing, DiDi has had a turbulent year. But before those events unfolded, the company had been making headway into the Latin American and African markets.
At the time when it submitted its prospectus, DiDi said about 12% of its annual active users were outside of China. It operates in 16 countries in total, nine of which are in the Latin America region. DiDi beat Uber in China in 2016, but it has been clashing with the global giant again in countries like Brazil and Chile. It also started operation in South Africa in March and entered Egypt in September, and is reported to be expanding to Nigeria soon.
There is one front where DiDi has pulled the brake, though: Europe. As the Telegraph reported, DiDi suspended its Europe expansion plans for at least 12 months, both stopping hiring in the U.K. and planning a layoff of Europe-based staff.
Chinese smartphone brands rose to the top of the market
Xiaomi, Vivo, Oppo, Realme, Tecno: These brand names probably don’t ring a bell for most consumers in the United States, but they are well-known to smartphone buyers in many regions. Offering a cheap and versatile Android alternative, these Chinese brands have continued to ship to every corner of the world.
According to one market report by Counterpoint Research, Chinese smartphone brand Xiaomi briefly became the world’s best-selling smartphone brand in June, marking its highest international status ever. It is selling like crazy in Brazil, India, Russia and many smaller markets; so do its peers Vivo and Oppo. And after a new deal with Google, Huawei’s spin-off smartphone brand Honor is planning to return to the international market.
Meanwhile, the African mobile phone market is still dominated by Shenzhen-based Transsion, a Chinese company that doesn’t sell in China today. Transsion’s 2020 annual report said the company maintained a 40% market share of the African smartphone market and was eyeing new markets like Bangladesh.
Singapore became Chinese Big Tech’s second home
Global, but not too far away from home: Singapore has become Chinese tech companies’ favorite place to put down their international pin. ByteDance has posted hundreds of open positions based in Singapore this year, and an employee said the city-state will be “an important headquarters” in the future. MiHoYo, the Chinese gaming company whose most recent product Genshin Impact just won the Best Mobile Game award at TGA 2021, also set up its international hub in Singapore.
The trend is particularly prominent for cryptocurrency-related companies, many of which are leaving mainland China and Hong Kong due to regulatory uncertainty. The Singaporean government, to the contrary, is actively courting Chinese crypto talents. When the push and pull forces come together, it’s no surprise the Chinese-born crypto exchange Huobi eventually announced it would set up its regional headquarters in Singapore.
A stealthy comeback to India
Many Chinese tech companies are probably still traumatized by India’s sudden ban of 59 Chinese apps in June 2020, a decision the Indian government decided to make permanent in 2021. While border skirmishes between China and India have calmed down, the two countries haven’t really returned to being friends, and that means Chinese companies need to be more creative if they wish to return to the billion-person market with vast potential.
Tencent, for example, was reported in April to be working on a localized version of its hit battle royale game PUBG Mobile. In July, Battlegrounds Mobile India was released, but it was published by the Korean studio Krafton — in which Tencent has a significant stake — instead of by Tencent itself. Similarly, after Chinese fast-fashion brand SHEIN was banned from India, it opted to sell on Amazon in India instead of through its own website.
For now, Chinese smartphone makers are still having a good time in India, selling over 50% of the smartphones in the country. But they need to be careful, as the Indian government is reportedly investigating whether these brands pose a security threat to the country.
Building social media platforms for the Middle East
Replicating TikTok’s success would be difficult, but China’s social media entrepreneurs have determined it would be easier if they focus on one regional market: the Middle East. According to Chinese digital outlet Xiaguang She, 13 of the top 20 popular apps in Saudi Arabia in May were developed by Chinese companies.
Yalla, an audio-based socializing app launched four years before Clubhouse, has managed to maintain a much longer span of popularity by just aiming at one region, accumulating millions of active users so far. Newborn Town, another Chinese company, has also launched three successful apps that cater to the socializing and dating needs of users in the Middle East. More Chinese companies are on their way there.
Why did they choose the Middle East? Because the region is known for having a large base of young users and fewer real-life socializing opportunities than some other markets due to religious rules. But also, Chinese companies are more willing to cater to local needs — censoring sensitive and inappropriate content — for their apps to stay in the local governments’ good graces. In a November interview, Yalla’s founder Yang Tao said, “A social media and entertainment platform needs to stay away from the sensitive macro issues if it wants to survive long.”
The Big Tech fight over the clouds in Southeast Asia
With a rising tech scene and demand of over 600 million people, building digital infrastructure in Southeast Asia is a lucrative business recognized by tech giants on both sides of the Pacific Ocean. Amazon, Microsoft, Google, Alibaba, Tencent and Huawei have all been busy building big data centers in the region.
While the American cloud services providers still maintain a lead, Alibaba, with a 5% market share, is catching up quickly. In 2021, Alibaba was building a third data center in Indonesia, its first one in the Philippines and planning another first in Thailand next year. Tencent and Huawei, while still small players now, are also building more data centers in Indonesia and Thailand. The results will show soon: In December, Alibaba said its cloud services revenue had a 60% year-over-year growth in Southeast Asia.