Meng Wanzhou’s release and Huawei’s future

Hello and welcome back to ProWellTech’s China roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world.

On Friday, Huawei’s chief financial executive Meng Wanzhou was released from house arrest in Vancouver after reaching a breakthrough deal with the U.S. Justice Department. Chinese startups that announced major funding rounds this week include Momenta, a Daimler-backed autonomous driving startup, Nreal, an augmented reality company, and Hai Robotics, a warehouse robotics maker.

Landmark deal

Meng, the daughter of Huawei’s founder Ren Zhengfei, entered an agreement with the U.S. Justice Department in which she admitted to some wrongdoing while prosecutors deferred wire and bank fraud charges against her and could dismiss the indictment in 2022.

In 2018, Meng was arrested in Vancouver, Canada on suspicion she violated U.S. trade sanctions against Iran. Over the years, her case has become an irritant in straining U.S.-China relations. Around the time Meng took off for Shenzhen, home to Huawei’s headquarters, on Friday, China released two Canadians who have been detained on spying charges. Beijing has repeatedly denied connections between the detention of the two Canadians and Meng’s arrest.

Through a remote court appearance via video on Friday, Meng pleaded not guilty to charges of conspiracy to commit bank fraud, conspiracy to commit wire fraud, bank fraud and wire fraud. However, she admitted to the basic facts underpinning the DOJ’s charges, which include “multiple material misrepresentations to a senior executive of a financial institution regarding Huawei’s business operations in Iran in an effort to preserve Huawei’s banking relationship with the financial institution.”

“Meng Wanzhou, CFO of Huawei Technologies, admitted today that she failed to tell the truth about Huawei’s operations in Iran, and as a result, the financial institution continued to do business with Huawei in violation of U.S. law. Our prosecution team continues to prepare for trial against Huawei, and we look forward to proving our case against the company in court,” said Assistant Attorney General Kenneth A. Polite Jr. of the DOJ’s Criminal Division in a release.

China’s news outlets have largely left out Meng’s confirmation of wrongdoings and internet users rushed to triumph the Huawei executive’s release after three years. Within hours, posts hashtagged #MengWanzhouReturningToMotherland have garnered over 1 billion views on Chinese microblogging platform Weibo.

“We look forward to seeing Meng Wanzhou returning home safely to be reunited with her family. Huawei will continue to defend itself against the allegations in the US District Court for the Eastern District of New York,” the company said in a statement.

Ment said upon her release the past three years have been “a disruptive time” for her as “a mother, a wife and a company executive.” In a statement, she said support from China, both at the governmental and civil level, gave her faith and kept her going during the “dark moments.”

Meng’s return might boost employee morale at Huawei but the telecom equipment and smartphone giant continues to suffer from the aftershocks caused by U.S. sanctions. Huawei will see revenue from its smartphone business drop by at least $30-40 billion in 2021, its chairman Eric Xu said Friday. Once a global handset leader, Huawei has fallen out of the top ranks and been unseated by its Chinese rivals, with Xiaomi overtaking Apple as the second best-selling brand worldwide in Q2.

In 2019, Huawei lost access to critical chip components and software after the Trump Administration put it on an export blacklist. The firm has since stepped up efforts to make its own handset chips and operating system but these technologies have proven hard to come by in a short span of time.

Fundings

In other news, General Motors said it will pour $300 million into Chinese autonomous driving technology provider Momenta, which already counts Toyota, Chinese state-backed SAIC Motor and Mercedes-Benz AG among its investors.

Substantial funding has become necessary for competing in China’s autonomous driving race, and coalition with entrenched automakers are even more important as robotaxi upstarts begin testing their commercial viability by deploying advanced or autonomous driving solutions in trucks, buses and passenger cars.

Over the past year, we’ve seen Momenta’s rivals Pony.ai, WeRide, and Deeproute securing financings in the hundreds of million dollars.

Nreal, founded by Magic Leap veteran Xu Chi, said it has raised $100 million to expand overseas and develop new AR products. We covered its $15 million Series A round back in 2019 and the startup has reportedly reached a staggering $700 million valuation as of the current raise, according to CNBC. Nreal has been touting headsets that are more affordable and lightweight to its Western peers.

Lastly, Hai Robotics, a Shenzhen-based startup that makes case handling robots for warehouses, just raised $200 million. Industrial robots are in demand in China as the government calls for greater efficiency to deal with labor shortage in its manufacturing sector. As Huang He, an investor focused on industrial autoamtion, previously told me:

Youngsters these days would rather become food delivery riders than work in a factory. The work that robots replace is the low-skilled type, and those that still can’t be taken up by robots pay well and come with great benefits.

Nonetheless, he warned that the market might be overheated:

There’s this bizarre phenomenon in China, where the most funded and valuable industrial robotic firms are generating less than 30 million yuan in annual revenue and not really heard of by real users in the industry.

In August, another warehouse robotics startup, Syrius, which is also based in the hardware haven of Shenzhen, announced it had raised over $20 million led by ByteDance.