#techAsia

April 20, 2023

Hello everyone, this is Cissy from Hong Kong.

I was busy with various exhibitions last week as the city has been gearing up with an extensive list of events since February to show that "Hong Kong is Back" after COVID-19 curbs were lifted.

Growing numbers of tourists have been coming from the mainland in the past few months following China's reopening. At the jam-packed Hong Kong Convention and Exhibition Centre, nine out of 10 people I came across were speaking Mandarin. One was even saying to her partner loudly: "Look, it's all mainlanders!"

At the Hong Kong Electronics Fair, the exhibitors were almost all from the mainland, too. Most of the exhibitors I spoke with had suffered greatly during COVID because they were export-driven and had to shift to domestic consumers to cope with travel restrictions, lockdowns and production disruptions. They had little success, however, partly because they had to redesign their products for a different market, but also because it is extremely difficult to find clients in China -- even for local companies -- if you are new to the market.

At another event, the InnoEX IT expo, I saw Huawei's "training servers," which are used in data centers to train AI models and transform cities into so-called smart cities. A single server measures roughly 80 cm high, 18 cm wide and 45 cm deep, and I was told that thousands of such machines are needed to train a large language model, the technology that underpins ChatGPT-like services.

I knew that large language model training consumes a lot of electricity and that there are widespread concerns about its impact on the climate. But seeing an actual server and imagining the emissions from thousands of them being used for a single large language model, let alone by dozens of Chinese companies pursuing generative AI projects, I still felt shocked.

The center of it all

Within three to five years, Tokyo is expected to surpass Singapore to become the second-biggest data center hub in Asia, only after Beijing, as demand for data processing at home and abroad is growing rapidly in Japan, write Nikkei's Kentaro Takeda and Yukiko Une.

The digital transformation of Japanese enterprises, the increase in staff working from home, and concerns from certain foreign businesses about using Chinese data centers are all factors contributing to the data center boom in Japan, making the country an appealing option as a gateway to Asia.

The capacity of data centers in Greater Tokyo totaled 865 megawatts at the end of 2022, half that of Beijing, but could reach 1,970 MW in three to five years, while Beijing is predicted to increase its capacity to 2,069 MW.

A key requirement for being a data center leader, however, is keeping costs low, which could be a challenge for Tokyo, given that electricity is two to three times more expensive in the Japanese capital than in mainland China. Singapore lost a bid to host data centers to Malaysia and Thailand owing to high power and land expenses.

Flocking together

Sega Sammy, the Japanese games company, has swooped on Finnish developer Rovio, with a 706 million euro ($776 million) bid to unite the console classic Sonic the Hedgehog with smartphone gaming pioneer Angry Birds, write the Financial Times' Tim Bradshaw and Leo Lewis.

Rovio was one of the first big gaming success stories following the launch of Apple's iPhone App Store, with Angry Birds seeing more than 1 billion downloads between 2009 and 2012.

However, Rovio has struggled to find a follow-up hit. Angry Birds' popularity has not proven as enduring as other mobile games such as Candy Crush Saga, in part due to an industry shift in business models from paid-for downloads to free-to-play titles. Sega's 9.25 euro a share offer values Rovio at almost a fifth less than the price at which it went public in 2017.

Rovio's tie-up with Sega will see the Angry Birds franchise matched with a company that has succeeded in keeping Sonic spinning for more than 30 years, including a Hollywood movie sequel last year starring Jim Carrey.

The deal will boost Sega's presence in mobile gaming at a time when its legacy business making "pachinko" pinball machines, primarily popular among older players in Japan, has been declining for many years.

AI in Asia

Google and Meta are leaning into generative AI to build new features into their platforms to engage Asian consumers while an advertising slowdown cuts into their revenues, writes Nikkei Asia's Dylan Loh.

Meta is planning to apply generative AI to all its offerings including Facebook and Instagram, while Google in Southeast Asia unveiled generative AI functions for its virtual cloud and workspace segments last month.

"We're really excited about, you know, the Asia-Pacific angle, because this is where the largest base of our users are," Dan Neary, Meta's vice president for the region, told Nikkei Asia. "Even at an industry level, this is where the growth is happening -- certainly we believe this is where our next billion users are going to come from."

But skeptics say it is too early to say with any certainty that AI technology will help the tech duo to grow their users and advertising revenues, as companies must continue to invest in human creativity and intuition, and localize their products and services.

Clouds over TSMC

Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, is forecasting its first full-year revenue decline since 2015 amid sluggish demand and consistently high inventory levels, writes Nikkei Asia's Lauly Li.

The chipmaker had anticipated modest sales growth for the year, but now expects a decline in the low-to-mid single digits. The slashed outlook came as recovery in end-market demand from China's reopening turned out to be lower than expected, while inventory adjustments are also taking longer than expected.

TSMC is continuing its capacity expansion plans in the U.S., Japan, Taiwan and the Chinese city of Nanjing, and is also engaging with customers and partners about possibly building a specialty chip plant in Europe. However, the company is encountering "some challenges in obtaining permits" in the U.S., according to CEO C.C. Wei, who didn't elaborate on details.

Despite the dimmer outlook for the year, TSMC still posted better-than-expected quarterly results. Its net profit for January-March grew 2.1% on the year to 206.99 billion New Taiwan dollars ($6.8 billion), while revenue came in at $16.72 billion, reaching the low end of the company's guidance.