Hello, this is Kenji. I ended my third stint in Hong Kong last week and returned to Nikkei’s Tokyo newsroom on Monday. While there are certain changes to my portfolio, I will continue to be involved in the tech newsletter, as I have been since its beginning six years ago.
Flashing back to our maiden issue — as Tech Scroll Asia — on April 3, 2019, the top story was a scoop by Nikkei Asia’s Taipei tech correspondents Cheng Ting-Fang and Lauly Li on Foxconn making a foray into the auto market. Six years on, the Taiwanese contract electronics manufacturer is indeed producing electric vehicles, and it just hosted its first major event in Tokyo on Wednesday to explain its business strategy to local automakers, suppliers and reporters.
Foxconn’s auto ambitions are not the only parallel between then and now. Back then, Sino-American tensions were flaring up during US President Donald Trump’s first term.
Today, China and the rest of the world are reeling from the sweeping “reciprocal” tariffs of Trump 2.0, as well as the unpredictability of the US president. This latter facet was underscored by Trump’s last-minute flip-flop to pause the imposition of the “reciprocal” part of the tariffs for 90-days for all countries and regions except China, where the rate was further raised to 125 per cent. This came immediately after Beijing announced it would retaliate by raising tariffs on American imports to 84 per cent. That higher rate took effect on Thursday afternoon.
Governments around the world are being forced to make tough decisions. Should they seek to negotiate some sort of deal with Trump, like Japan, or confront him, like China has?
The global corporate world is also scrambling for cover, and tech companies are no exception. In many ways, in fact, they may be the most hard-hit given the vast, finely tuned supply chain underpinning their business. This intricate web was built up over decades under the premise of free trade, though recent years have required more concessions to realities such as mounting national security concerns and rising labour costs in China.
Things could be entirely different this time around than they were in 2019. “This much at least is now clear: the US and China are in a full-blown trade war, and grand bargain delusions can be shelved,” said Arthur Kroeber, co-founding partner and head of research at China-focused Gavekal Dragonomics.
What we are witnessing this week is likely to be just the dawn of a profoundly different world.
Nowhere to run
Top global tech and electronics brands and their suppliers in Asia have been caught in the crosshairs of President Donald Trump’s new tariff regime.
Cheng Ting-Fang, Lauly Li and Yifan Yu, Nikkei Asia’s tech correspondents in Taipei and Silicon Valley, report on how companies including Apple, Dell, HP and Lenovo are scrambling to respond to America’s unprecedented and unpredictable trade policies.
Immediately after Trump announced his “reciprocal” tariffs, some suppliers were pressed to ramp up production and ship more smartphones, laptops and servers to the US to beat the deadline for the levies. Finding a more lasting solution, however, is not straightforward, as the tariffs were slapped not only on China but basically all Asian countries, to varying degrees.
“Many of our clients that previously chose Vietnam over the Philippines have come to us in the past few days, asking us to help package and ship products from our Philippines facilities, as the country faces only a 17 per cent tariff,” said a tech supplier executive who requested anonymity.
Trump’s policies could even end up fundamentally reshaping global trade flows.
An electronics component supplier serving HP, Dell and Apple said they used to look at the world as “China versus non-China”. Since Trump’s reciprocal tariffs, however, “we need to look at the world again, from a ‘US versus the rest of the world’ point of view.”
Nintendo hits ‘pause’
In the depths of the Covid-19 pandemic, a bored, miserable, hunkered-down world turned to Japan for inspiration. Nintendo’s Switch console and its Animal Crossing: New Horizons game stood ready to provide escape from crisis, write the Financial Times’ David Keohane and Leo Lewis.
The 135-year-old company had evolved for this moment. The console was a revolutionary hybrid of handheld and home gaming system; the game was the classic Nintendo recipe of soothing, funny and engrossing. The Kyoto-based toymaker, whose machines have now entertained generations X, Y, Z and alpha, was in its element.
On Wednesday last week, Nintendo unveiled the Switch 2 — the follow-up to the 2017 console, the all-in commercial wager of Japan’s most globally adored company and, it hopes, another digital comfort blanket for troubled times. It is a crucial moment not just for Nintendo itself, but also the entire gaming sector, analysts say.
But on the very same day Nintendo made its announcement, Donald Trump walked into the White House Rose Garden and unleashed the “liberation” of massive tariffs on a wide range of trading partners.
Having shifted production to south-east Asia in recent years in anticipation of trade tensions between the US and China, Nintendo was directly affected by some of the steepest new tariffs. About 48 hours after the launch, it suspended pre-orders of the Switch 2 in the US, becoming one of the first companies wounded by a new era of trade uncertainty.
Ingredients for success
As the trade war between the US and China rages, Belgian chemical maker Solvay launched Europe’s first plant to process rare earth elements for use in permanent magnets, as the bloc aims to reach 30 per cent self-sufficiency in critical minerals by 2030.
The newly expanded production facility is in La Rochelle in western France and will provide materials for permanent magnets, which are critical for electric vehicles, new energy facilities and defence equipment, write Nikkei Asia’s Cheng Ting-Fang and Mailys Pene-Lassus.
Solvay CEO Philippe Kehren, who spoke at the inauguration ceremony of the plant on Tuesday, just a day before the Trump “reciprocal” tariffs were to kick in, said the new project will “be a way to de-risk sourcing for our European partners.”
Foxconn reaches out
Jun Seki, former chief operating officer of Nissan Motor, was back in Japan this week as Foxconn’s chief strategy officer for electric vehicles. He was in Tokyo for an event on Wednesday to show that the Taiwanese electronics manufacturer is a serious player in the auto market. In an exclusive interview with Nikkei Asia’s Yuichi Shiga, Seki expressed eagerness to work with Japanese automakers, including his old employer Nissan.
If Foxconn is able to truly break into Japan’s auto market, long criticised by Trump as “inaccessible”, it would be a watershed moment. But that will first require winning over hearts and minds. At the Wednesday event, Seki said the initial response in Japan to the Taiwanese company’s foray “was seen with suspicious eyes”. The image of Foxconn in the country as being “an invader, a pirate, or Darth Vader in the movie ‘Star Wars,’ are all complete false accusations”.
The company currently makes all of its EVs in Taiwan, but this is only temporary, according to Seki, adding that he is eager to produce in Japan. Localisation is “our motto”, and US production is also on the horizon, he said. “What we sell in the US will be made in the US.”
Suggested reads
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Nintendo postpones launch of Switch 2 in China (Nikkei Asia)
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Samsung boosts profits as customers stockpile chips ahead of US tariffs (FT)
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Mitsubishi Chemical, Asahi Kasei pause battery materials push on EV slowdown (Nikkei Asia)
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The relentless innovation fuelling China’s ‘brutal’ car wars (FT)
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AI race gives Washington another reason to be tough on TikTok (FT)
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Japan’s carbon fibre makers at risk from mooted EU crackdown (Nikkei Asia)
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Not just DeepSeek: Japan’s AI players chase efficiency over size (Nikkei Asia)
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Samsung turns to China to prop up ailing chip business (FT)
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Trump tariffs aren’t stopping this Japan chip sector supplier (Nikkei Asia)
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PwC China plans to spin off cyber security arm (FT)