TSMC and Sony team up, China's AI stocks swing

Hello everyone, it's Cissy from Hong Kong, your #techAsia host this week. It's been seriously hot here recently. On Sunday, the temperature downtown hit 36.9 C, making it the hottest day Hong Kong has recorded since 1884. The heat was partly blamed on Typhoon Dolphin trapping warm air over the city. But honestly, I didn't find it that horrible when I went out in the evening for a quick hike. There was a nice breeze, so it actually felt pretty pleasant. While the rising temperatures have been hard to ignore, so has the sense that China's technology race is heating up at the same time, particularly in hardware. One of the clearest examples came from the country's humanoid-robot sector. Unitree, China's highest-profile maker of such robots, has drawn extraordinary retail demand before its scheduled public listing in Shanghai later this month. The final online allocation rate for the IPO -- which attracted 9.78 million online subscription applications -- was less than 0.0181%, the lowest on record for the Shanghai exchange's STAR Market. That enthusiasm points to a broader shift in China's tech story: The focus is starting to move beyond AI models toward the physical systems that can put AI to work. Humanoid robots are emerging as one of the biggest investment themes, even though the technology remains at an early stage of commercialization and the U.S. is increasingly treating it as part of its broader strategic competition with China. Washington has banned the import of China-made humanoids, citing national security and cybersecurity risks. The stock rally is spilling into other parts of the hardware sector. Chinese memory-chip maker CXMT was added to the MSCI China All Shares Index this week, underscoring how quickly the company has gone from a U.S. sanctions target to a major index constituent. A joint vision Sony Group and Taiwan Semiconductor Manufacturing Co. are gearing up to mass-produce next-generation image sensor chips in Kumamoto, Japan, as early as 2029, write Nikkei's Keigo Yoshida, Koichi Kitanishi and Ryosuke Eguchi. Production will be handled by a joint venture that will be about 60% owned by Sony and about 40% by TSMC. The two companies are expected to establish the joint venture by the end of fiscal 2026, which runs through March 2027. The expected payoff: sharper camera sensors for Apple's iPhone, plus a long-term bet on "physical AI" that helps robots and vehicles see and understand the world around them more precisely. For Sony, which already commands more than half the global CMOS image sensor market, the deal is about staying ahead of fast-rising rivals like China's OmniVision and South Korea's Samsung, while shifting toward what its CEO calls a "fab-light" model that spreads out the manufacturing bill. For TSMC, it's a chance to diversify beyond its bread-and-butter cutting-edge chips and deepen its foothold in Japan, all while betting big on where AI chip demand is headed next. Going big China's ByteDance is seeking to challenge its Silicon Valley rivals by building an AI model that could approach the size of Anthropic's most advanced Mythos system, reveal the Financial Times's Zijing Wu and Eleanor Olcott. TikTok's parent company is at an early stage of training a model with as many as 10 trillion parameters -- three times larger than Moonshot's Kimi K3, the biggest Chinese model released to date, according to people with knowledge of the developments. Anthropic doesn't disclose the size of its models, but industry estimates suggest its most advanced Mythos 5 has about 8 trillion parameters. Mythos, which was briefly suspended in June due to cybersecurity concerns, is now available only to approved clients. The size of ByteDance's model does not mean it will produce a better AI model than Anthropic. Parameter counts set the fundamental capacity or memory limits for models to store information. Actual capability also depends on other factors such as data quality and training methods. However, ByteDance's efforts to train one of the world's largest AI models signal Chinese ambitions to catch up to -- and even overtake -- its U.S. peers in advanced AI. A wild ride AI valuation jitters have rattled China's stock market in recent weeks, testing Beijing's push for a steady "long bull" market. The "national team" of state-owned investment companies stepped in around July 19, deploying $8.9 billion to support the market as chip stocks fell across Asia, writes Nikkei Asia's Wataru Suzuki. The intervention appears to have worked, at least for now. CXMT shares more than quintupled on their debut, while the Shanghai Composite has fallen about 4% since July, far less than declines in South Korea and Japan. ETFs tracking China's top tech boards also saw record net buying in July, suggesting state money is rotating into technology stocks. But the bigger test is still ahead, with listings by YMTC, Unitree Robotics and AI company MiniMax set to add pressure to the tech-heavy market. Policymakers appear focused less on stopping declines than on preventing the kind of sharp sell-offs and margin calls that exacerbated the 2015 crash. The rare earths riddle China's rare-earth export controls are forcing the rest of the world to rethink how to build alternative supply chains. But early attempts show how difficult that will be. India is putting $765 million into domestic rare-earth magnet production and has attracted plenty of bidders. But the plan would require five companies to build the entire supply chain, from oxides to finished magnets, potentially giving up the scale advantages China has built over decades. India also lacks enough refining capacity and would need to source raw materials from countries including Myanmar, Vietnam and Laos, according to Nikkei Asia's Ananta Agarwal. Australia, meanwhile, is making more progress in attracting U.S. money. Sunrise Energy Metals jumped 20% after the U.S. Department of Defense extended a conditional $400 million loan for its Syerston scandium project. But China still dominates the roughly 60-ton global scandium market, and Western defense and chip companies are running down stockpiles that could be depleted later this year, writes Nikkei Asia's Shaun Turton. The broader lesson is pretty simple: China's dominance in refining, processing and specialized equipment can't be replicated with a checkbook alone. Suggested reads 1. Key Nvidia supplier Foxconn downplays rising competition in AI servers (Nikkei Asia) 2. Moonshot shake-up seeks to win Beijing nod for stock market debut (FT) 3. US court pauses Pentagon's blacklisting of China's WuXi AppTec (Nikkei Asia) 4. Turkey's cyber law shifts sweeping powers to presidency (FT) 5. Tencent Q2 results beat estimates on robust AI-enhanced advertising (Nikkei Asia) 6. Atlassian shakes off 'SaaSpocalypse' as chief vows to spend $250mn buying shares (FT) 7. Compal bets on expansion in Taiwan, Vietnam and US for AI servers (Nikkei Asia) 8. Lex: Alibaba's latest AI model puts it back in the great game (FT) 9. Sony, TSMC deal brings overseas investment in Japan chipmaking to $37bn (Nikkei Asia) 10. SoftBank's $8bn gain on Intel stake helps Japanese group beat expectations (FT) Podcast: Tech Latest Memory crunch gives China's CXMT a breakthrough moment Welcome to the Tech Latest podcast. Hosted by our tech coverage veterans, Katey Creel and Shotaro Tani, every Tuesday we deliver the hottest trends and news from the sector. In this episode, Katey speaks with Taipei correspondent Lauly Li about the AI-fueled memory chip shortage and how it is helping China's CXMT break into the global PC supply chain. Find us on Apple Podcasts | Spotify | YouTube | YouTube Music | Amazon Music | Voicy For more great stories like this delivered to your inbox every week, sign up to our #techAsia newsletter. Current subscribers can update their newsletter preferences by clicking here.