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Exclusive: China readies Tencent penalty in antitrust crackdown – sources

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By Pei Li and Julie Zhu

(Reuters) – China is preparing a substantial fine for Tencent Holdings as part of its sweeping antitrust clampdown on the country’s internet giants, but it is likely to be less than the record $2.75 billion penalty imposed on Alibaba earlier this month, two people with direct knowledge of the matter said.

Tencent should expect a penalty of at least 10 billion yuan ($1.54 billion), significant enough for the State Administration of Market Regulation (SAMR) to make an example of it, both people said.

Tencent faces penalties for not properly reporting past acquisitions and investments for antitrust reviews, an offence with a fine capped at 500,000 yuan per case, and for anticompetitive practices in some of its businesses, with music streaming in particular focus, said the sources.

Neither SAMR nor Tencent immediately responded to Reuters’ requests for comment.

“The attitude from the regulator is that unlike Alibaba you are not the biggest target here, but it would be impossible not to penalise Tencent now that the campaign is in action,” said one of the people.

China has in recent months sought to curb the economic and social power of its once loosely regulated internet giants, in a clampdown backed by President Xi Jinping.

Tencent and Alibaba Group Holding Ltd are China’s two biggest tech conglomerates, with market values of $776 billion and $642 billion, respectively.

Earlier this month, SAMR imposed its record fine on Alibaba after an investigation found the e-commerce firm had abused its dominant market position for several years.

Tencent’s vast businesses include video games, content streaming, social media, advertising and cloud services.

SAMR’s investigation partly focuses on Tencent Music Entertainment Group, which was spun off and listed in the United States in late 2018, two of the people and an additional two sources close to the business said. Tencent Music Entertainment did not immediately respond to request for comment.

The regulator has informed Tencent that it should expect a fine, give up exclusive music rights, and may even be forced to sell the acquired Kuwo and Kugou music apps, said the people.

However, Tencent’s core businesses, video games and WeChat, are likely to remain intact, said one of the people.

STREAMING STRANGLEHOLD

Tencent Music, China’s answer to Spotify, acquired competitor apps Kugou and Kuwo in 2016, and pursued exclusive streaming rights with record labels including Universal Music Group, Sony Music Group and Warner Music Group Corp.

It then sublicensed some of the rights to competitors including NetEase Cloud Music, which complained that the arrangement was unfair and prices too high.

SAMR launched a probe into Tencent Music in 2018 but dropped it in 2019 after the company agreed to stop renewing some of the exclusive rights, which normally expire after three years, two sources told Reuters previously.

However, it kept exclusive rights to Jay Chou, the most influential pop star in the Chinese-speaking world, using it as a competitive edge against smaller rivals NetEase Cloud Music and Alibaba-backed Xiami Music.

SAMR has told Tencent Music that it should expect to give up some of the remaining exclusive rights, two of the people said.

It may also be required to sell Kugou and Kuwo to competitors or other investors, one of the options being proposed to senior government officials in Beijing, three sources said.

A forced sale of those units would set a precedent and might be hard to execute, two of them cautioned.

Final confirmation of Tencent’s punishment will need a nod from China’s central leadership, the people said.

Tencent is lobbying for a more lenient penalty, they added.

“Tencent doesn’t mind paying a hefty fine and is willing to pay more if it needs to, as long as its core businesses remain intact,” said one of the people, referring to its video games and WeChat app units.

Last month, Reuters reported that Tencent will need to meet certain conditions in its plan to merge Huya and Douyu, two leading video game streaming platforms, including giving up exclusivity to broadcast Tencent games to competing streaming sites.

SAMR said this week it is investigating Tencent-backed Meituan over claims the food delivery giant forced vendors to use their platform exclusively, the same offence Alibaba was penalised for.

($1 = 6.4860 Chinese yuan)

(Reporting by Pei Li and Julie Zhu; Editing by Tony Munroe and Sam Holmes)

Image Credit: Reuters

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Source: https://datafloq.com/read/exclusive-china-readies-tencent-penalty-antitrust-crackdown-sources/14282

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‘SNL’ host Elon Musk takes a Saturday off from Tesla’s troubles

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By Joseph White

DETROIT (Reuters) – Elon Musk’s turn as host of this week’s “Saturday Night Live” television program will be a light-hearted, brand-building break from the pressures of running Tesla Inc and SpaceX – or land the billionaire in another bucket of hot water.

That uncertainty appears to be the point for both Musk and NBCUniversal’s <CMCSA.O> venerable comedy sketch show.

Musk has been encouraging fans and detractors to anticipate shenanigans, potentially involving the Dogecoin cryptocurrency. Musk has touted Dogecoin on his Twitter account, and the cryptocurrency’s value has soared ahead of his appearance.

“I’m a wild card, no telling what I might do,” Musk, wearing a black bandana, joked in a brief promotional video for the show alongside Saturday’s musical guest, Miley Cyrus.

“Same here,” Cyrus said. “Rules? No thanks.”

Musk has been in New York this week preparing for the appearance. A photo posted to the “Saturday Night Live” Twitter account on Wednesday showed him hunched over papers, wearing a “Nuke Mars” T-shirt. Musk has mused about using nuclear weapons to reshape the Red Planet for human habitation.

Some “SNL” cast members have expressed displeasure at the show’s decision to give its platform to one of the world’s richest people. Musk’s appearance has drawn comparisons to the show’s controversial decision in 2015 to invite Donald Trump to host as he was preparing for his presidential run.

Although it is rare for a business executive to host “SNL,” South Africa-born Musk, 49, is no stranger to pop culture or comedy.

He has appeared on “The Simpsons,” “Rick and Morty,” and “South Park,” and dates a pop star, Canadian singer Grimes. Musk’s persona helped inspire Robert Downey Jr’s portrayal of superhero Iron Man in a series of Marvel films.

His humor also shows in the names of Tesla car models S, 3, X and Y (“sexy”). He once built and sold flamethrowers to promote his tunnel venture, the Boring Company. In 2018, Musk smoked marijuana on a live web show, and later offered $420 a share – a drug reference – to take Tesla private.

While Musk has been getting ready for the cameras, Tesla has been in a rough patch.

Longtime major shareholder Baillie Gifford disclosed it had sold 41% of its Tesla shares. Police in California are investigating a fatal accident in which a Tesla crashed into an overturned truck. Documents prepared by California regulators said Tesla executives do not believe Tesla can deliver the “Full Self Driving” autonomous vehicle technology this year, contradicting Musk’s statements.

(Reporting By Joe White, Editing by Nick Zieminski)

Image Credit: Reuters

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Source: https://datafloq.com/read/snl-host-elon-musk-takes-saturday-teslas-troubles/14510

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U.S. Commerce chief cites auto chips shortage in jobs report

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WASHINGTON (Reuters) – U.S. Commerce Secretary Gina Raimondo said on Friday the semiconductor shortage was a factor in April’s jobs report that showed hiring unexpectedly slowed.

The Bureau of Labor Statistics said the auto sector shed 27,000 jobs in April as automakers were forced to cancel production shifts and furlough workers amid the chips shortage.

“We’re working very hard to get the president’s plan passed in Congress to fund a semiconductor fund. The fact of the matter is we need to get back into the business of making more chips in America. And the supply chain issues are very real,” Raimondo told MSNBC.

(Reporting by David Shepardson and Susan Heavy; Editing by Chris Reese)

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Source: https://datafloq.com/read/us-commerce-chief-cites-auto-chips-shortage-jobs-report/14509

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U.S. auto part makers brace for a bumpy ride as chip shortage to intensify

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By Ankit Ajmera

(Reuters) -U.S. auto parts suppliers warned of more production cuts at major automakers as a global semiconductor chip shortage worsens before easing in the second half of the year and aiding in a partial recovery of lost sales.

The chip shortage came at an inopportune time for automakers as demand rebounded from pandemic lows due to low interest rates and consumers’ preference for personal transport amid the health crisis.

“We’ve embedded a 3% reduction in industry production to factor in what we’re anticipating and expecting as further announced downtime that hasn’t been publicly announced at this point,” Lear Corp Chief Financial Officer Jason Cardew said on Friday.

“We have line of sight on a more meaningful reduction (in production) in the second quarter than IHS Markit and others are projecting,” Cardew said.

Ford Motor Co, a major customer for Lear and peers including BorgWarner and Magna International, has said the chip shortage would halve its vehicle output in the second quarter.

Europe’s Volkswagen, another customer for the three suppliers, has said it is in “crisis mode” over the lack of badly needed automotive chips, with the shortage intensifying and hitting its profits in the second quarter.

Lear, which makes automotive seating, cut its global vehicle production forecast to a 9% rise, from up to 12% it had predicted at the beginning of the year, while also expecting second-quarter revenue to fall 9% from the first.

Auto suppliers also cautioned that the pain from the shortage could linger at least until the next year.

“We don’t expect the supply/demand imbalance to fully recover to normalized levels until 2022,” said Joseph Massaro, chief financial officer of Aptiv, a maker of advanced driver assistance systems, vehicle computers and high-voltage cabling.

Auto suppliers are also grappling with pressure on their margins from rising costs of key inputs such as steel and copper.

However, many expect to offset some of those costs as automaker customers focus on building higher margin, more profitable pickup trucks and sport utility vehicles.

“On the biggest raw material purchases, we have about 60% pass through with our customers,” BorgWarner Chief Executive Officer Frederic Lissalde said.

Still, most suppliers have raised or reaffirmed their full-year financial outlooks, thanks to the better-than-expected performance in the first quarter.

Analysts highlighted risks associated with the production outlooks from some suppliers as chip demand rises from other sectors such as enterprise, cloud and consumer electronics following speedy COVID-19 vaccinations and economies reopening.

“The question in my mind is can this (production loss) be made up later on in the year. And that’s really an unknown,” Magna Chief Financial Officer Vincent Galifi said.

(Reporting by Ankit Ajmera in Bengaluru; Editing by Sriraj Kalluvila)

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Source: https://datafloq.com/read/us-auto-part-makers-brace-bumpy-ride-chip-shortage-intensify/14508

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Auto sector urges U.S. Congress to help fund its computer chip needs

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By David Shepardson

WASHINGTON (Reuters) -The U.S. auto industry and United Auto Workers union on Friday urged Congress to tie billions of dollars in government funding to boost semiconductor production to help fill the needs of automakers forced to slash production because of chip shortages.

Congress “should prioritize production of the semiconductors necessary to assemble vehicles here in the United States. This will ensure that motor vehicle manufacturers have a fair share of chips needed to meet consumer demand,” said the American Automotive Policy Council, Motor & Equipment Manufacturers Association and UAW on Friday in a joint statement.

Tech companies and other industries have repeatedly urged the administration not to pick “winners and losers” or attach conditions to funding to address the chip shortage.

The Bureau of Labor Statistics said the U.S. motor vehicle and parts sector lost 27,000 jobs in April.

The letter seen by Reuters said the U.S motor vehicle industry is estimated to have lost over 330,000 production units as a result of the chip shortage.

Carmakers across the world curbed output, hampering attempts to recover from the pandemic, due to a shortage of chips used in everything from computer management of engines to driver assistance systems.

The global chip shortage hit automakers hard after many canceled orders when plants were idled during the coronavirus pandemic. At the same time, demand for chips boomed from consumer electronics makers churning out premium devices for people spending more time at home.

Automakers have warned the chips crisis could last until 2022 and have pressed the U.S. government to act.

Ford Motor Co last week warned the shortage may slash second-quarter production by half and for 2021, cost it about $2.5 billion and about 1.1 million units of lost production.

President Joe Biden has proposed $50 billion to boost U.S. semiconductor production.

The letter urged the government to “include specific funding for semiconductor facilities that commit to dedicating a portion of their capacity to motor vehicle-grade chip production.”

On Friday, the National Electrical Manufacturers Association, Association of Home Appliance Manufacturers and Air-Conditioning, Heating and Refrigeration Institute urged Commerce Secretary Gina Raimondo to ensure chip supplies are “fairly allocated across industry sectors.”

The groups said they were “dismayed” Raimondo said she was seeking to prioritize automakers. “We simply ask for fairness so that the health, safety, comfort, productivity, and other needs of Americans can be met,” they wrote.

The department did not immediately comment. Raimondo told MSNBC Friday that the auto chip crisis was a factor in April’s jobs report. The auto sector shed 27,000 jobs in April.

(Reporting by David ShepardsonEditing by Chizu Nomiyama, Keith Weir and David Gregorio)

Image Credit: Reuters

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Source: https://datafloq.com/read/auto-sector-urges-us-congress-help-fund-computer-chip-needs/14507

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