Apple Invests $1 Billion in Didi, Uber’s Rival in China
Investment in Didi Chuxing comes as tech giant’s global fortunes are flagging
Apple announced a $1 billion investment in China’s ride-hailing app, Didi Chuxing.
Here’s what you need to know about Apple’s biggest investment this year. Photo:
Associated Press
By
RICK CAREW in Hong Kong and
DAISUKE WAKABAYASHI in San Francisco
Updated May 13, 2016 12:39 a.m. ET
Apple Inc. is betting $1 billion on China’s homegrown competitor to Uber
Technologies Inc., marking the technology giant’s largest investment in a
critical market at a time when its global fortunes are flagging.
The investment in Didi Chuxing Technology Co., announced late Thursday in
California, came on the day that Apple briefly ceded its spot as the world’s
most valuable company to Google parent Alphabet Inc., a lingering effect of
a quarterly earnings announcement that spooked investors about Apple’s
future. Among the worrying signs from its earnings report last month were
indications of slowing sales in China where Apple had been posting booming
sales.
Didi Chuxing—which investors are valuing at over $25 billion, making it one
of China’s most valuable startups—is locked in a fierce battle with UberChina
to attract riders and investors in China’s ride-share market.
Apple declined to elaborate on the motivation for the deal. However, the
company has been working on building an autonomous electric vehicle with
a team of more than 1,000 employees. Other ride-sharing services have
shown an interest in autonomous vehicles. Uber has a large team of
employees working on autonomous vehicle technology, while General Motors
and Lyft are planning to start testing a fleet of self-driving taxis within a year.
The investment in Didi is an unusual one for Apple, which tends to prefer to
buy small startups outright and absorb their technology into its product
pipeline. This is the largest investment for Apple since it acquired
headphones and streaming music service Beats Electronics for $3 billion in
2014, a deal that helped the company launch its Apple Music service. It is
also unusual for Apple to participate in a fund-raising round for a startup.
The $1 billion investment barely makes a dent in the company’s cash
holdings of $233 billion.
The investment could encourage the adoption of its Apple Pay and other
services in China, although the announcement didn’t elaborate on
cooperation plans between the two sides.
As its second-largest market for iPhones, China is a key market for Apple.
Apple Pay was launched in China in February, and it is vying against China’s
leading mobile payment services from Internet giants Alibaba Group Holding
Ltd. and Tencent Holdings Ltd.
But Apple has come up against some regulatory challenges in China.
Apple’s online book and movie services were suspended by Chinese
regulators in the country last month, as the country cracks down on online
media, according to people familiar with the discussions. There has so far
been no resolution.
Apple sales to Greater China, which the company designates to include
Taiwan and Hong Kong, rose 84% in the past fiscal year ended September
2015, as sales of its larger-screen iPhone surged. But as the Chinese
economy started to slow, Apple’s sales in the country also took a hit. In the
quarter ended March, Apple said sales to the region fell 26% from a year
earlier.
Apple Chief Executive Tim Cook, who has worked hard to build strong
relationships in China with regular trips to the country, last month said he
was more optimistic about the country’s economy. China may not provide the
huge growth that it once did, Mr. Cook said, but “it’s a lot more stable than
what I think is the common view of it.”
Recently, Mr. Cook has also said that Apple won’t be afraid to use its balance
sheet to its advantage at a time when asset values are declining, especially
among start-ups which are starting to face challenges in fund-raising.
Didi is part of the country’s boom of Internet service apps racing to build
scale through subsidies. Its expansion has been fueled mainly by
investments from Internet giants and investment firms so far. It is new for a
maker of highly profitable hardware to invest in the sector.
“Didi exemplifies the innovation taking place in the iOS developer community
in China,” said Mr. Cook in a statement. “We are extremely impressed by the
business they’ve built and their excellent leadership team, and we look
forward to supporting them as they grow.”
The deal came together quickly. Didi President Jean Liu said she met with Mr.
Cook in Cupertino, Calif., on April 20 and hammered out the agreement in
the weeks since.
ENLARGE
A pedestrian passed a Didi pickup station in Shanghai
in March. PHOTO: ASSOCIATED PRESS
http://on.wsj.com/1WuKZ8d
“We are very confident we will benefit
each other on product, on technology
and on many other levels,” Ms. Liu said
on a call with reporters Friday.
She declined to give further details or confirm if Apple Pay or autonomous
cars will be areas of collaboration.
For Didi, the deal—which is its single largest investment so far—is a coup
that adds Apple to its roster of investors that already include the two largest
Internet companies in China: e-commerce giant Alibaba Group Holding Ltd.
and social-and-gaming company Tencent Holdings Ltd. The two Chinese
Internet giants had supported rival taxi-hailing services that merged to form
Didi.
In China’s fast-growing market for ride-sharing, both Didi and UberChina are
providing huge subsidies to drivers and riders to sign up for their services.
While many global startups including some in Silicon Valley have had
difficulty raising money amid a slowdown in the global economy, Didi has
been an exception. Its valuation has soared from just $6 billion in February
2015 when it was formed from the combination of two competing taxi-hailing
companies. Investors are betting that the company will be able to eventually
turn a profit after attracting more Chinese riders to its service.
Didi dominates the country’s taxi-hailing market, and has a larger share than
UberChina in the private-car-hailing segment, though the two companies
disagree on the exact figures. Didi has expanded its private-car services to
compete more directly against Uber, while adding other services such as
buses and chauffeurs who drive customers’ own vehicles. As of January, Didi
was operating in more than 400 cities in China. UberChina, which operates in
more than 45 cities currently in China, aims to expand to 100 cities in China
by the end of this year.
—Eva Dou in Beijing contributed to this article.
Write to Rick Carew at rick.carew@wsj.com and Daisuke Wakabayashi
atDaisuke.Wakabayashi@wsj.com
Corrections & Amplifications:
Apple Inc., with a market cap of $494.83 billion, remained the largest U.S.
company based on market capitalization at the close of trading on Thursday,
despite having fallen behind Google’s parent, Alphabet Inc., during the
trading day. An earlier version of this article incorrectly implied that Alphabet
had taken the No. 1 spot as of Thursday’s close, with a market cap of
$494.86 billion, because of erroneous information from FactSet, the data
provider.
QUESTIONS:
1. What troubles is Apple generally having? What is the basic strategic dilemma of any firm that has gotten as big as
Apple has? Why is growth difficult?
2. What is Apple’s latest move in China? Why would it be interested in Didi?
3. Is this a significant event? After all, the $1 billion investment barely makes a dent in the company’s cash holdings
of $233 billion.
4. What is the longer-term strategy? Where is Apple headed? More importantly, where would the big payoff among its
new businesses be?
