Alibaba’s Shocking Strategy ‘Reset’ – Canceling Cloud Listing Due to Semiconductor Regulations – Bloomberg

As the battle for supremacy between the US and China over technology intensifies, China’s Alibaba Group plans to separate and list its $11 billion (approximately 1.66 trillion yen) cloud business They made a surprising change in policy by canceling the event.

According to Chairman Tsai Chong-shin and CEO Wu Young-ming, who were long-time close aides to Alibaba co-founder Jack Ma, a “reset” of strategy is needed.

In his first public appearance since taking office, Mr. Wu said that the United States’ stricter restrictions on semiconductor exports to China had forced him to reconsider his plan to split Alibaba into six parts. The company also confirmed that plans for an initial public offering (IPO) for its popular food business, Hema Sensei, will be suspended.

Following the announcement on the 16th, Alibaba’s American Depositary Receipts (ADRs) fell 9.1% on the U.S. stock market on the same day, wiping out more than $20 billion in market capitalization. In the Hong Kong market on the 17th, Alibaba’s stock price fell by more than 10% at one point.

The decision was made just as Chinese authorities are loosening their grip on the high-tech industry and trying to recover once the coronavirus pandemic is over.

The Biden administration has restricted exports of semiconductors specifically designed for artificial intelligence (AI) to China. The semiconductors are essential to the data centers and top-of-the-line computing operations that power Alibaba’s cloud services.

“The situation has changed,” Chairman Tsai explained in a conference call with analysts after the financial results were announced. He stressed the need to focus on securing investment funding, saying that “developing serious business based on highly networked and highly scaled infrastructure in an AI-driven world requires investment.” .

Alibaba, China’s largest e-commerce company, is owned by social media giant Tencent Holdings ( Together with Tencent, the company has publicly raised the challenges posed by U.S. trade restrictions. The Biden administration’s efforts to block the Chinese government’s acquisition of advanced semiconductors for military use are starting to have an unexpected impact on China’s private sector.

But analysts say other factors may be at play in Alibaba’s change in direction.

The company’s cloud business has slowed in recent years, and its market share has declined. Li Chendong, director of Haitung, a technology think tank in Beijing, said the best time for Alibaba to explore listing its cloud division has “already passed.” He said, “The strength of the business itself is the problem.”

Alibaba’s strategy has faced headwinds for some time. With sentiment towards consumer-related stocks sluggish, the possibility of a Hong Kong IPO for Hema Shusheng has diminished.

Alibaba’s former CEO, Daniel Zhang, resigned as chairman and CEO of Baka’s cloud business, which he had assumed a few months ago, and logistics division Naitori filed for a Hong Kong IPO in late September, but its valuation has declined. remains unclear.

But despite the warning signs, the news has sent shockwaves through Wall Street. “I was quite surprised. My first thought was that the whole corporate restructuring that was announced earlier was in jeopardy,” said Kevin Nett, head of Asian equities at Tocqueville Finance.

Alibaba announced on the 16th that its sales for the July-September period rose 8.5% year-on-year to 224.79 billion yuan (approximately 4.67 trillion yen), barely exceeding average expectations. Profit was 27.7 billion yuan. The company turned into a surplus from a deficit in the same period last year. It was a solid but lackluster quarterly result.

Original title: Alibaba Plunges $20 Billion as Chip War Prompts Breakup Rethink (excerpt)