SHENZHEN/SHANGHAI/TAIPEI In the first few weeks of 2019, 20 engineers from Huawei Technologies arrived in the riverside town of Jiangyin in eastern China on a secret mission. They took up stations at the state-backed Jiangsu Changjiang Electronics Technology, China's largest chip packaging and testing company where they HUA WEI went to work upgrading the facilities and increas trans. "CHINA CAN MAKE IT ing the site's capacity ahead of a production surge in the autumn. "These Huawei staff are on-site almost seven Huawei is quietly ramping up orders from days a week, from day to night, nitpicking and re- viewing all the details ... demanding strictly that the Asian suppliers -- and leading a wave local company meets global standards as soon as of de-Americanization in Chinese technology possible," one chip industry executive familiar with the situation told the Nikkei Asian Review. "It's CHENG TING-FANG and LAULY LI Nikkei staff writers honestly like preparing for wartime." All across Asia, companies in the computer chip industry were receiving similar messages from -Huawei: Boost your production, and we will buy your product. In a slowing global market, Huawei made a commitment that was impossible to resist: The company guaranteed up to 80% utilization rates for the next two years to potential and current suppliers Spooked by the arrest in December 2018 of its chief financial officer, Meng Wanzhou - daughter of the company's founder and CEO, Ren Zhengfei - and anticipating an escalation from the White House, Huawei activated a plan to decouple itself from its U.S. suppliers by pushing fellow Asian companies to speed up and scale up. By May, when the U.S. announced strict new lim- its that all but prevented American companies from selling technology to Huawei, the Chinese telecom giant was already on a war footing. Others in China have followed its lead, preparing to move wholesale away from their reliance on U.S. technology in what could become a permanent "de-Americanization" of the Chinese tech industry. "We see a clear trend of Chinese companies de- coupling from U.S. suppliers, " said Scott Lin, senior vice president of WIG Holdings, the world's big- An engineer stands under a 5G base gest semiconductor distributor. "After all, no one station antenna testing system at Huawol's wants to be suddenly cut off from supplies." Songshan Lake Manufacturing Center Now that these plans are in motion, Lin said, in Dongguan, China. "there is no turning back." Nikkei Asian Review - Special excerpt from Sept. 16-22, 2019 Print edition. Nikkei Inc. No reproduction without permission.ON THE COVER Globally, Huawei is WARNING SIGNS Ren, a former engineer Hot and cold: Huawei's efforts to go global NO. 1 statements by American lawmakers and was found to have from China's People's Liberation Army intelligence agencies alleging that the sold equipment to in telecom gear sales Huawei moves founded Huawei in the southern industrial 2001 * Huawei sets up U.5. subsidiary Futurewei Technologies, slong with three other research Chinese company presented an espionage Iran in defiance of city of Shenzhen in 1987. From its roots as a and development centers risk. Later that year, the government barred sanctions. ZTE had tiny manufacturer of networking switches, any public institutions, including the mili- been under investi- NO.2 the company has grown to become a global 2007 * By the end of 2107, is a partner to all of Europe's top network operators, in 2008, & named tary, from using Chinese-made equipment. gation since 2012, In smartphone shipment leader in telecom and a national champion by Businessweek as among the world's 10 most influential companies Huawei Chief Financial Officer Meng Warzhou, In May this year, the White House but the escalation in China. Huawei is now the world's larg- 2011 . Establishes 2012 Laboratories, its innovation center arrested in December 2018, leaves her family moved to cut Huawei off from its American spurred Huawei est supplier of telecom equipment, with home flanked by private security in Vancouver on May B. suppliers. Huawei was put on the US. to formulate a con- NO.5 operations in 170 countries. In 2018, it over- 2017 Surpasses Ericsson to become No. 1 global telecom gear provider Department of Commerce's "Entity crete contingency in chip design, savita took Apple to become the world's second U.S. moves List," blacklisting it for U.S. companies. plan, sources told and sturage hardware biggest smartphones manufacturer. It now 2018 - Feb. FBI Director Chris Wray tells Senate Intelligence Committee that the agency chips, Skyworks Solutions and Qorvo pro- Qualcomm, Micron Technology, Texas Nikkei. As soon as employs 194,000 staff, with annual revenues is "deeply concemed" about use of ZTE and Huswai technology; he and other intelligence agency chiefs wam Americans against using Huawei products vide high-end radio frequency technology; Instruments, Qorvo, Lumentum Holdings, Meng was arrested of more than $105 billion -- comparable Synopsys and Cadence Design Systems Synopsys and Cadence Design Systems, as in Canada, the with Google's parent company, Alphabet. Apr. U.5, bans its companies from supplying ZTE, starving the Chinese smartphone provide chip-design tools; Google and well as Google -- whose Android operat- company began to That size makes it a huge market for maker of key components; reaches a desk in July to lift sanctions Microsoft supply software. Further down ing system Huawei uses - all confirmed stockpile key components and to qualify suppliers of components and software. May U.S. military bans use of Huawei phones on bases the supply chain, chemical companies such that they would have to stop working new suppliers. Huawei's annual procurement budget is as Applied Materials, Coming. 3M and with Huawei. Some later resumed limited around $70 billion. The company spends International moves Dow Chemical sell their products into other shipments. In August, the Department of DE-AMERICANIZATION For years, $15 billion every year an semiconductors Aug. Australia announces it will bar Huawei enterprises that help Huawei to develop ad- Commerce added a further 46 Huawei RichWave, a little-known Taiwanese maker alone; only Apple and Samsung Electronics from national rol out of 59 networks vanced panels and build semiconductors. affiliates, including more than 10 key re- of Wi-Fi front-end modules -- an important spend more. In 2018, it bought more than Dec. Huawol CFO Mang Wanzhou Dec. U.K. telecom network operator BT says Huawei's scale, and its links to the search facilities, to the blacklist. The sanc- piece of communications technology 200 million displays and hundreds of mil- is arrested in Canada it will remove Huawei equipment from 4G Chinese state, have long been a cause for tions were designed to cripple Huawei's within smartphones and other devices - ions of camera lenses. networks and exclude it from SG rollout concern in the U.S. The company has had ability to compete and to innovate has been trying to engage with Huawei. A lot of those components come from the Japan says it will ban Huawei from public procurement shead of the country's 5G tender three bids for American tech companies "Huawei is at the center of the US. China RichWave competes with far larger U.S. In 2018, Huawei procured $11 billion blocked by U.S. authorities on national se- tech cold war primarily because of concern American rivals, such as Skyworks, Qorvo worth of goods from American suppliers. 2019 - Jan. U.S. goverment indicts Huawei on more than 20 charges, Including fraud, theft of trade secrets and obstruction of justice curity grounds -- 3Com in 2008, Motorola's over the firm's dominance, globally, of and Broadcom, all of which have success- Qualcomm, Intel and Texas Instruments wireless infrastructure unit in 2010, and next-generation wireless technology" said fully negotiated their way into Huawei's supply Huawei with various types of " Mar. Huswei sues U.S. goverment over a ban on public agencies buying 3Leaf Systems in 2011. In 2012, a report by Paul Triolo, the head of geatechnology re- supply chain. RichWave, though, just the comparty's equipment the U.S. House Intelligence Committee al- search at consultancy Eurasia Group. could not get certified as a supplier. "It's honestly like May Trade talks between U.5. and May Google, which makes the Android leged that Huawei was spying on American If the plan was to slow Huawei's tech- This summer, the company suddenly China collapse; U.5. Department operating system used on Huawei phones, enterprises in an attempt to gain access to nical progress, it may have backfired. In- got the green light from Huawei. It began preparing for wartime of Commerce vows to add Huswei suspends business with the Chinese advanced technology The company has stead, it appears to be accelerating China's shipping products in August. to "Entity List, " severely restricting company supplies from U.S. companies, but consistently denied the allegations. desire to develop homegrown alternatives "Our relationships with this Chinese A chip industry executive later that month issues a 90-day Things escalated after U.S. President to American technology. client just skipped the traditional business on Hurl's production surge plans at supplier grace period Changjing Electronics Technology Donald Trump took office. In January Huawei had anticipated the Americans' engagement process and jumped to direct June Huawei says it's willing to sign June Huawei signs deal with Russian 2018, the largest carrier in the U.S. AT&T, game plan. In March 2016, the US. gov- replacement (of other suppliers]," said s "no-spy" agreement with the U.5.; telecom MT5 to develop the country's dropped plans to sell Huawei's flagship emnment put ZTE, another Chinese tele- Kick Huang, RichWave's general man- later that month, predicts it will take 50 networks a $30bn revenue hit over two years Mate 10 smartphone, following public com company on the Entity List, after it ager for China. "And we are not the only July Huawei lays off 400 employees at Futurewei, blaming U.S. sanctions The rise and Ranking by market share Annual shipments Market share by shipments Aug. 9 Huawei unveils afemative operating system Harmony 05, saying it could replace rise of Huawei by shipments an millions of units 2012-18 change In percent) Anchoid in two days if necessary 400 607 growth 50 2012-18 change Huawei Up 10.7 percentage points Aug. 18, 19 US. Department of Commerce adds 46 Huawei affiliates to Entity List 200 Apple but extends reprieve by another 70 days; President Donald Trump says America will Samsung not do business with Huawei, Isbeling it a "national security threat" 20 Illustration by Eric Chow Aug. 22, 23 Huawei sheds 100 jobs in Australia over ban from country's 5G network; 100 10 admits it no longer partners with U.S. chip design tool providers Cadence Design Systems and Synopays 2012 '18 GR 214 '18 2012 14 '16 18 32 110Up to 80% Utilization rate" beneficiary in this trade war." utive with direct knowledge of the trials are spreading. This to secure supplies Huawei P30 Pro: COVER GLASS, GLASS DISPLAY-RELATED ASSEMBLY Huawei's outreach to Chinese and other told Nikkei. The Chinese company began year, Xiaomi, an- "Over the next two years sum of its parts BACKING, METAL FRAMES PARTS Asian suppliers has been far-reaching. to put several of those designs into mass other leading smart- Flex (U.5.) U.S. component makers have supplied Corning (U.S.J OLED PANELS Suspended shipments in May; Nikkei has learned that alongside Jiangsu production in the spring of 2019. phone supplier, has critical parts for Huawei phones. Here's Lost supply share to Lens BOE Technology was accused by Huawei Changjiang Electronics Technology, other "It's not like most outsiders think -- [that] invested in how that's begun to change Technology (China) of detaining assets leading chip assembly and testing provid- Huawei only started to develop those cru- eral local chip-related companies, include Lens Technology (Chinal LG Electronics FIH Mobile (Taiwan) ers, including ASE Technology Holding cial RF parts after the supply was cut off," ing Bluetooth and audio chip startup OPERATING SYSTEM Key supplier of screen glass (South Korea) Subsidiary of Foxconn; among siliconwarePrecisionIndustries, Powertech the executive said. "The quality and per- Bestechnic, and design service provider to Samsung and Apple TOUCH MODULE assemblers gaining market Google Android (U. Technology and King Yuan Electronics formance may not be 100% as good as [U.S. VeriSilicon Holdings. Alibaba Group BYD (Chinal Supports Gmail, YouTube, etc.; O-Film Tech (China) share at Flex's cameras all received the nod from Huawei to ex- supplier Skyworks; but it is workable, and Holding also unveiled its own artificial Huawel's proprietary Harmony OS has been Abo longtime assembler BYD (China) FINGERPRINT CHIP pand their production inside China, as did maybe users won't feel a big difference." developed to replace Android, but a of Huawei phones Also gained market share from intelligence chip platform, based on open- near-term rollout appears challenging Goodlx (Chinal Flex printed circuit board makers Unimicron Many second- and third-tier suppliers, source technology, in July. Wingtech Technology (China) Technology. who previously would have had no chance "Huawei is the most obvious and ag CAMERA-RELATED PARTS Taiwan Semiconductor Manufacturing to enter Huawei's supply chain, have now gressive case," WIG's Lin said. "But it is 18:08 LENSES Co, the world's biggest contract chip- been handed a once-in-a-lifetime opportun not the exception." Largan Precision (Taiwan) AUDIO PARTS, INCLUDING MICROPHONES, SPEAKERS maker, has been asked by Huawei to put nity to move up the ladder, Roger Sheng, Also a key Apple supplier AAC Technologies (Chinal new customized chips into production a veteran tech analyst at consultancy REAL IMPACT Even as prepared as it Kantatsu (Japan) GoorTek (China) with the aim of Gartner in Shanghai, said. The shift away was, Huawei has been hurt by the US. Owned by Foxconn-controlled Sharp Merry Electronics (Taiwan) replacing chips from American manufacturers may outlast attacks on its supply chain and its cus- Sunny Optical (China) China's biggest smartphone-lens BATTERY PACKS More than from Intel and the trade war, he added: "Even if the U.S. tomer base. The U.S. has been lobbying its maker Xilinx, sources later allows Huawei to use American com- allies to try to restrict Huawei's markets, Desay Battery (Chiru] $ 105 CMOS IMAGE SENSORS familiar with the Sunwoda (China ponents, it's never going to go back to the and the constant neg- Sony (Japan) Amperex Technology (TDK] matter said. Win old days, like nothing had happened." ative news flow has CAMERA DESIGN [Hong Kong billion Semiconductors, Moves toward "de-Americanization" inevitably cast a Leica (Germany Fixit a contract manu- WIRELESS CHARGING un par with OPTICAL COMPONENTS Luxshare-ICT (China) Google parent Alphabet facturer of power amplifiers, ap " We see a clear trend of Chinese FOR 3D SENSING Lumentum (U.5J Also makes Apple's cables and AirPods tical parts and companies decoupling from U.S. Halted shipments to Huawei; Shenzhen Sunway Communication (China) radio frequency unclear if resumed components, has suppliers. ...There is no turning back Another Apple supplier Ilustration by Eric Chow received increased orders from Scott Lin HiSilicon Technologies, Huawei's chip president of WPG Holdings, the world's ctor distributor NAND FLASH COMMUNICATION AND MEMORY CHIPS RADIO FREQUENCY CHIPS design arm. MediaTek, the world's sec- AUDIO and-largest mobile chipmaker after Samsung Electronics CHIPS Huawel's HiSilicon Technologies Fixit Qualcomm, and Japan's Murata South Korea] radio frequency transceiver (China) Ramping up World's biggest NAND Huawei's Manufacturing have also gained orders, Skyworks Solutions front-and module Key chip manufacturers asked by Huawei to increase production flash memory maker H Silicon DRAM CHIPS multiple industry sources confirmed Technologies FIH Mobile -- a subsidiary of Hon Hai Companies Description 5K Hynix (South Korea) Samsung Electronics (South Korea] With Skyworks and Corvo temporarily Toshiba (Japan) [Chinal China Semiconductor Precision Industry, commonly referred to Gained orders for Huswei-designed mid to low-end chips Manufacturing No. 2 NAND maker SK Hynix (South Korea) halting supply, Japan's Murate Manufacturing gained orders, as Foxconn - and BYD, a Chinese man- Intemational Co. Micron (15.) Micron (U.S.) newcomers like RichWave (Taiwan) ufacturer, have won new contracts to as- Jiangou Changjiang China's biggest chip packaging and testing house Halted shipments to (potential replacements) quickly gained supply certification semble Huawei smartphones. Huawei's Electronics Technology Huswei following U.5. ban; Changxin Memory Technologies (China) Dorve front-end module (U.S.) Talwan Talwan Semiconductor| Huawel has stepped up orders as it puts more self-designed, has partly resumed China doesn't yet produce high-and mobile previous major manufacturer, U.S.-based Manufacturing Co customized chips into production following U.S. ban (potential replacement) DRAM; is keen to develop its own OTHER CHIPS Flex, suspended some shipments after the Win Semiconductors Gained orders for Huswei-designed radio frequency chips; a Tsinghua Unigroup's Tsinghua Unigroup (Chinal American ban came into effect. contract manufacturer for Skyworks Solutions and Corvo Qualcomm (L.S.) Yangtze Memory ASE Technology World's biggest chip packaging, assembly and testing service Major mobile chip manufacturer has Some suppliers confirmed that Huawei Technologies (China MOBILE PROCESSOR5 (beneath DRAM chip) Holding provider halted shipments to Huawel since May; has also been secretly preparing its own Yet to mass-produce, but Siliconware Precision Acquired by ASE Hunwei's HiSilicon Technologies (design) (Chins unclear if resumed technologies for years, but has not put Industries Yangtze is China's hope Chip architecture based on tech from SoftBank-controlled Arm to take on Samsung and them into large scale use. The company Holdings [U.K.). which reportedly stopped working with Huswei Media Tek (Taiwan) Powertech Technology World's biggest memory chip packaging and testing service provider Micron in the global in May, manufactured by Taiwan's TSMC, sole manufacturer of Qualcomm rival; has gained share has been trialing its own radio frequency King Yuan Electronics |Major chip testing service provider NAND market Huswei high-end processors (as well as iPhone core processors! components for a decade, one tech exec- Source: Industry sources, Nikkei Asian Review analysis Source: iFiet (wwwfiet. com), Berratwin Remurch, Goldman Sachs, Nikkei Anjan Review analysisJED DEDICATION CATION pall over its performance. Ren has said he its new OS, and that it would "only take ATTRACTIVE OFFER expects the company's revenue to fall by one to two days" to migrate Android to $30 billion this year. It has had to retreat Harmony if needed. An aggressive global talent hunt underpins from the American market almost entirely, Harmony was initially slated to roll out Getty Images while European market smartphone ship- on smart televisions, watches and speak- Huawei's rapid rise ments fell by 16% in the second quarter, ers, not on handsets -- a fact that market according to research company Canalys. watchers said shows that the process of LAULY LI and CHENG TING-FANG Nikkei staff writers Despite the hits to its overseas sales, replacing Android might not be so simple. Huawei has proved surprisingly resilient, At the recent IFA 2019 electronics expo in Copies of "Dedications The Huawei Philosophy said Arisa Liu, an analyst at the Taiwan Berlin, though, Huawei's consumer busi- of Human Resource Management" stand on Institute of Economic Research. "But ness head Richard Yu told Chinese media cdisplay at Huawei's headquarters in Shenzhen. Washington could still come up with that it may introduce the Harmony smart- TAIPEI/SHENZHEN/CHENGDU, China Four years ago, - from DNA data storage to atomic-scale manufacturing and new ways and tighter controls. If it's a phone version with the flagship PD, due card high of 38% in the quarter ending in headhunters started calling a top engineer at Taiwanese optical computing. The company said that it invested $1.5 prolonged [clampdown], some Huawei to be announced next March. June 2019, according to Canalys. smartphone maker HTC. They were persistent, calling three billion in developing artificial intelligence last year. projects will still be delayed and its tech Huawei has acknowledged that it needs Beijing moved a licensing round for times a week -- but the engineer, who asked to be identified Some in the industry say that Huawei poaches more development will be slowed. But ... it's not an ecosystem of services to get Harmony fifth-generation networks forward to June, only as Emily, turned down their overtures. than talent from its competitors. The company has been dying or crashing." off the ground, and has said it will invest accelerating the rollout of the technology Others could not resist the opportunity. Over the next few engaged in lawsuits with the U.S. telecom carrier T-Mobile, Perhaps the biggest question hanging $1 billion to support developers to build to give a boost to Huawei, which will pro- months, dozens of her colleagues -- including the engineers telecom equipment makers Cisco Systems and Motorola, and over the company apps on its platform. vide much of the infrastructure for the who made up the "Magic Lab," HTC's most important research semiconductor startup Cnex Labs, all of which allege that their is over the software Privately, some Huawei employees ac- new networks. And the Chinese govern- and development team - took up offers from recruiters to join Chinese rival stole technology. Huawei denies all allegations of 38% that it uses on its knowledge how sizable the task is. "We ment is set to unveil its own blacklist, seen Huawei. Some were offered as much as twice their existing wrongdoing. phones. Google's have fully prepared for some tough times as a warning to international companies salaries to make the switch, as the company, at that time just Even some of Huawei's own suppliers are suspicious. "To Android operating if we need to use our own operating sys- not to cut off supplies to Huawei. a producer of low-end smartphones, snapped up the talent it be honest, although Huawei is an important client for us, we turnwel share of system has an 80% tem," one manager told Nikkei. "An 05 American logistics company FedEx is needed to challenge market leaders Samsung Electronics and have to stay vigilant when their people visit our facilities, " one market in the quarter share of the global really needs massive [numbers of] users in Beijing's sights, after being accused of Apple executive at a company in Huawei's supply chain told Nikkei. a record high smartphone market, and accumulated time for feedback and sending packages of Huawei equipment "Huawei was the most aggressive company when it came "Their staff are often quite eager to know the parameters of our and is used by debugs so that it can run smoothly. We be- to the wrong destinations, and of holding to attracting us to work for them," Emily told the Nikkei Asian equipment, the materials we use and details of our processes. Samsung Electronics, lieve all the Chinese developers will be on onto more than 100 parcels of Huawei- Review. "Three out of five people I knew leaving HTC at the Fears of corporate espionage, combined with Huawei's Xiaomi, Oppo and our side, but it will still take some one to related shipments, rather than shipping time were going to Huawei, and they were all the crucial close links to the Chinese government, contributed to the U.S. LG Electronics. That huge user base has two years for the ecosystem to thrive." them to China. talents that knew how to build premium phones." government's escalating crackdown on the company. In May, translated into a massive ecosystem of Domestic consumers might be patient, Ren himself has said that he would Huawei's drive to become the world's largest smartphone the U.S. Department of Commerce put Huawei on its "Entity mobile apps, and the services that Google but losing access to Google's services rather the government not back down maker has been fueled by an aggressive global hunt for List," a trade blacklist that prevents American companies from offers alongside it -- Google Play, Gmail, could have a real impact on Huawei's in- in the trade war, even if Huawei is held science and engineering talent. The company made its first selling technology to Huawei. In August, the U.S. government YouTube and Google Maps -- are a major ternational smartphone ambitions. "With- hostage. In any case, Beijing is unlikely smartphone, running on the Android operating system, a added 11 Huawei research institutes, including the Milan draw for users. out Android and those popular apps, it's to see the company as a bargaining chip. decade ago. In 2016, the year after it enticed dozens of staff research institute that employs Lombardi, to the Entity List. Without a permit from the U.S. gov- likely that Huawei would be forced to Market watchers and tech industry execu- from HTC, Huawei shipped 30%% more smartphones than it did Huawei has hit back, launching an even more aggressive emment, Huawei's new smartphones become only 'China's Huawei' instead of tives said that Huawei's success underpins in 2015. In 2017, it sold more than 150 million handsets; in talent hunt with even greater incentives for R&D talent, launched after the ban may not have ac- the more powerful 'global Huawei' that it China's ambition to become a technology 2018, it shipped more than 200 million. including 2.01 million yuan (around $282,000) starting salaries cess to Google's mobile services. is currently," a tech executive told Nikkei. superpower; it is too big to fail. The company says that it now has 800 physicists, more than for newly graduated young employees with doctorates. Its Iwas wian by Eric Chow In August, Huawei introduced its own "It's the most successful Chinese tech 700 mathematicians and 120 chemists working for it. Among average salary of $300,000 for Al specialists is now higher than "Harmony" operating system. Although NATIONAL PRIDE One undeniable fac- company by revenue, by technology and those hires are high-profile figures such as the award winning some senior engineer positions at companies such as Apple Huawei said it will prioritize using for behind Huawei's resilience is the sup- by execution. It's the national pride," said engineer Tong Wen, and the Italian microwave technology and Google, according to job recruiting platform Glassdoor. Android on its phones if allowed to do so, part that it has received from Beijing. The Jonah Cheng, chief investment officer at expert Renato Lombardi, who runs a global research facility for Those large sums may be tempting, but further crackdowns it claims it is very sim- company's name means "China can make J&J Investment, and a former UBS tech Huawei in Milan. Eighty-five thousand of Huawei's employees could still limit the company's ability to bring in researchers. ple for mobile app it," and there is a sense that protecting the analyst. "For most Chinese people, hitting - 44% of its total headcount -- work in R&D, Huawei Alex Capri, senior fellow in the Business School at the National developers company from foreign aggression has be- Huawei is an attempt by the U.S. to destroy spokesperson Joe Kelly told Nikkei, including 20,000 working University of Singapore, said that Huawei's aggressive to build come a national project. the whole of China. ... China is unlikely to on fifth-generation technology alone. expansion into R&D has made it a magnet for talent, but *this apps on In the face of the trade war, Chinese con- give in and allow Huawei to fall." N Huawei also sponsors universities to the tune of more than is all coming under increasing scrutiny and will likely be the sumers are buying local. Huawei's share of $300 million per year, and maintains a specialist research unit, subject of further technology licensing and controls.* [ the domestic smartphone Nikkei staff writer Yifan Yu in Palo Alto, U.5., called the "2012 Laboratories," which focuses on developing market advanced to a re- contributed to this report. technologies that will give it an edge decades in the future Nikkei staff writer Nikki Sun in Hong Kong contributed to this report