I have been struck in recent months by how technology investors in the Chinese capital markets are shifting away from “soft tech”, B2C applications usually focused on social networks, e-commerce or, in general, using the internet to reduce friction, and toward “hard tech”, companies generally focused on semiconductor engineering, robotics or component manufacturing.
The trend, reported in media such as the Financial Times, reflects the priorities set by a government concerned about China’s technological dependence on countries such as the United States, Taiwan or Korea for the chips and components needed to make consumer or industrial electronics products, and is generating numerous problems for internet companies that had been leveraging their growth with debt and that now find that their usual investors, far from increasing their financing, decide to throw in the towel and put their money into other companies.
China’s success in the B2C world has been based on copying the models companies that enjoyed success in the West while vetoing the access of those companies to the domestic market, which allowed Chinese clones to grow in it. After managing to test their model in a market with sufficient scale to make a profit, some of these companies managed to find success in new markets. Alibaba and ByteDance, born out of imitation, grew in a highly protected environment and…
