Saudi Arabia investing billions in global technology fund

A man looks at mobile phones at the SoftBank Group Corp.’s headquarters in Tokyo. (Reuters)
Updated 15 February 2017
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Saudi Arabia investing billions in global technology fund

JEDDAH: Public Investment Fund (PIF) has taken another strong step in its mission to support Saudi Vision 2030 with its move to set up a strategic partnership with SoftBank Group Corp. (SBG), according to top businessmen and analysts. 
“This is a bold move by the PIF to explore global opportunities into tech ventures,” Basil Al-Ghalayini, CEO of BMG Financial Group, told Arab News.
His comments came as the PIF joined forces with Japanese telecom firm SoftBank to form a tech investment fund worth as much as $100 billion, making it one of the largest on the planet.
PIF — Saudi Arabia's sovereign wealth fund — is expected to put up as much as $45 billion of the money, with SoftBank throwing in at least $25 billion.
PIF, under the leadership of Deputy Crown Prince Mohammed bin Salman, has revised its long-term investment strategy to coincide with the country’s Vision 2030.
Saudi authorities have described SoftBank’s "strong investment performance" as a key reason for investing in the new tech fund.
Ihsan Bu-Hulaiga, head of the Joatha Consulting, told Arab News that the new fund reflects the implementation of PIF’s new strategy after restructuring and expanding its financial might from $160 billion to $2 trillion.
He said: “The engagement of PIF with SoftBank is more a meeting of mindsets than a mere financial collaboration.”
Bu-Hulaiga added: “In perspective, PIF compliments with SoftBank experience to provide benefits to highly selective global technology start-ups.” 
In a statement, SBG said it will use its deep operational expertise and network of portfolio companies in order to add value to the fund’s investments.
“Making such investments is critical for developing a stake in the most rapidly developing and transformative sector of the global economy,” a Gulf analyst, who declined to be named, told Arab News.
“The key is to build linkages that maximize the broader benefits for the Saudi economy. This is a positive beginning but what matters is all that is built around it: Partnerships, alliances, knowledge transfer, research, etc,” he added.
The SBG statement said the fund will be managed in the United Kingdom by a subsidiary of SoftBank Group Corp. and will deploy capital from SBG and investment partners.
SBG expects to invest at least $25 billion over the next 5 years. SBG has concluded a non-binding memorandum of understanding on Oct. 12, with the Public Investment Fund under which the PIF will consider investing in the Fund and becoming the lead investment partner, with the potential investment size of up to $45 billion over the next five years.
In addition, a few large global investors are in active dialogue to join SBG and PIF to participate in this fund. The overall potential size of the fund can go up to $100 billion, according to the SBG statement.
“The Public Investment Fund is focused on achieving attractive long-term financial returns from its investments at home and abroad, as well as supporting the Kingdom’s Vision 2030 strategy to develop a diversified economy. We are delighted to sign this MOU with SBG given the long history, established industry relationships and strong investment performance of SBG and Masayoshi Son,” the Saudi deputy crown prince was quoted as saying in the statement.
Masayoshi Son, chairman & CEO of SoftBank Group Corp., commented: “With the establishment of the SoftBank Vision Fund, we will be able to step up investments in technology companies globally. Over the next decade, the SoftBank Vision Fund will be the biggest investor in the technology sector. We will further accelerate the Information Revolution by contributing to its development.”
Rajeev Misra, head of strategic finance, SoftBank Group, is leading the fund project for SBG.
SBG has engaged former Deutsche banker Nizar Al-Bassam and ex-Goldman partner Dalinc Ariburnu for the project. PIF also had its own team of experts engaged.
Commenting on the tech investment fund, Sami A. Al-Nwaisir, chairman of Al-Sami Holding Group, told Arab News: “The PIF’s move is consistent with Saudi Vision 2030 in order to build the largest sovereign fund and, at the same time, increase the possibility of generating more revenues to the Saudi budget.”
The general role of the PIF is to function like a tool in framing fiscal policies in order to bring stability to the economy and provide liquidity, he pointed out.
Al-Ghalayini also said that the PIF’s partnership goes in line with the government's Vision 2030 program and plans to diversify revenue away from oil. 
“But with such a fund size of $100 billion, it will be worth watching where the fund plans to deploy this capital,” he said. 
“Furthermore, with such a supply into the Venture Capitals’ funding channels, valuations of target companies might go up,” he added. 
Economists say the PIF’s latest move strengthens Saudi Arabia’s ambitious plan to create a huge sovereign wealth fund that would be worth SR7 trillion ($1.9 trillion) by 2030, which would make it by far the biggest in the world.
PIF earlier invested $3.5 billion in US ride-hailing firm Uber.
At an annual rate of $20 billion, the new London-based fund could at current levels account for roughly a fifth of global venture capital investment, Reuters reported.
In the year to September, venture capital-backed companies globally raised $79 billion, according to data from KPMG and CB Insights, with tech start-ups attracting the lion's share of that cash.
“SoftBank Chairman Masayoshi Son is very good at looking for companies with big growth prospects, and that will create fierce competition," said Hiroyuki Kuroda, secretary general of the Venture Enterprise Center in Japan, was quoted as saying in the Reuters report.
SoftBank, a $68 billion telecommunications and tech investment behemoth, has also been stepping up investment in new areas. It agreed to buy UK chip design firm Arm Holdings in July in Japan's largest ever outbound deal.


Apple Watch, FitBit could feel cost of US tariffs

Updated 20 July 2018
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Apple Watch, FitBit could feel cost of US tariffs

SAN FRANCISCO: The latest round of US tariffs on $200 billion of Chinese goods could hit the Apple Watch, health trackers, streaming music speakers and other accessories assembled in China, government rulings on tariffs show.
The rulings name Apple Inc’s watch, several Fitbit Inc. activity trackers and connected speakers from Sonos Inc. While consumer technology’s biggest sellers such as mobile phones and laptops so far have faced little danger of import duties, the rulings show that gadget makers are unlikely to be spared altogether and may have to consider price hikes on products that millions of consumers use every day.
The devices have all been determined by US Customs and Border Patrol officials to fall under an obscure subheading of data transmission machines in the sprawling list of US tariff codes. And that particular subheading is included in the more than 6,000 such codes in President Donald Trump’s most recent round of proposed tariffs released earlier this month.
That $200 billion list of tariffs is in a public comment period. But if the list goes into effect this fall, the products from Apple, Fitbit and Sonos could face a 10 percent tariff.
The specific products listed in customs rulings are the original Apple Watch; Fitbit’s Charge, Charge HR and Surge models; and Sonos’s Play:3, Play:5 and SUB speakers.
All three companies declined to comment on the proposed tariff list. But in its filing earlier this month to become a publicly traded company, Sonos said that “the imposition of tariffs and other trade barriers, as well as retaliatory trade measures, could require us to raise the prices of our products and harm our sales.”
The New York Times has reported that Trump told Apple CEO Tim Cook during a meeting in May that the US government would not levy tariffs on iPhones assembled in China, citing a person familiar with the meeting.
“The way the president has been using his trade authority, you have direct examples of him using his authority to target specific products and companies,” said Sage Chandler, vice president for international trade policy at the Consumer Technology Association.
The toll from tariffs on the gadget world’s smaller product lines could be significant. Sonos and Fitbit do not break out individual product sales, but collectively they had $2.6 billion in revenue last year. Bernstein analyst Toni Sacconaghi estimates that the Apple Watch alone will bring in $9.9 billion in sales this year, though that estimate includes sales outside the United States that the tariff would not touch.
It is possible that the products from Apple, Fitbit and Sonos no longer fall under tariff codes in the $200 billion list, trade experts said. The codes applied to specific products are only public knowledge because their makers asked regulators to rule on their proper classification. And some of the products have been replaced by newer models that could be classified differently.
But if companies have products whose tariff codes are on the list, they have three options, experts said: Advocate to get the code dropped from the list during the public comment period, apply for an exclusion once tariffs go into effect, or try to have their products classified under a different code not on the list.
The last option could prove difficult due to the thousands of codes covered, said one former US trade official.