Earlier this week, Chinese conglomerate Dalian Wanda made a big splash in Hollywood with its first major event in the U.S.
Wednesday, another Chinese behemoth — LeEco — is expected to officially launch in the U.S. two smartphone models — Le Max 2 and Le S3 — and four TVs in its Super 4 line. The new products — leaked ahead of time — will be shown off in the morning at an event in San Francisco.
So far, Chinese investment into the U.S. has been largely driven by private sector acquisitions. But now, Chinese companies like Wanda and LeEco are looking to actually build their brands on American soil.
You may not have heard of the company yet, but it’s already huge in China. One of the country’s largest smartphone and TV makers, its Le Vision Pictures is also one of China’s three biggest film studios by total box-office sales. The company has a live-streaming music and sports platform, a bicycle business, cloud services and it owns China’s second-largest ride-hailing company. Oh, and it’s developing a self-driving car.
Not that LeEco hasn’t been busy in the U.S. as well. Earlier this year, it acquired Vizio, the biggest U.S. maker of TVs for $2 billion and financed Faraday Future, an electric car start-up based in Los Angeles. And for its new global headquarters, it bought a nearly 50-acre plot in San Jose, California, from Yahoo.
LeEco will start by selling its TVs and smartphones to U.S. consumers. Ultimately, it wants in on the running to develop an ecosystem that will help us move seamlessly from our smartphones to our cars and to our homes — a race that Western behemoths like Amazon, Google and Facebook are fiercely competing in. LeEco’s name is a nod to that very goal. Le means “joyful” in mandarin and Eco for the ecosystem it is creating. Joyful ecosystem.
But here may be the challenge: Can a Chinese company make it big with American consumers? LeEco is headquartered in Beijing where the government, under Xi Jinping‘s leadership, has been playing an increasing role in the way Chinese companies are run.
Earlier this month, The Washington Post published an editorial that raised red flags over the possibility of China’s Communist Party using its entertainment assets to spread propaganda. It singled out Wanda, which has been making a big push into the U.S. by acquiring AMC Theatres and Legendary Entertainment and bidding for Paramount Pictures and Carmike Cinemas.
Politicians are also becoming increasingly wary of Chinese investment into the U.S., which soared to $18 billion in the first six months of the year, a threefold increase from the same period last year. Earlier this month, the Government Accountability Office agreed to a request from 16 members of Congress to review the legal powers of a foreign investment committee.
Texas congressman John Culberson wrote, referring to Wanda, “These acquisitions, as well as many more co-financing arrangements, allow Chinese state-controlled companies a significant degree of control over the financing and content of American media that raises serious concerns about how this may be used for propaganda purposes.”
To be sure, Wanda is making inroads in the U.S. market through acquisitions of well-known American companies. LeEco is bringing in its own branded products and letting U.S. consumers decide for themselves whether they want to buy its Le Max 2 or Apple‘s iPhone 7.
But as LeEco officially puts a stake in the ground in Silicon Valley, it’s certainly possible the Chinese company could develop an appetite for American-grown companies. It hopes to scoop up Bay Area talent with plans to hire 12,000 people to work out of its new global headquarters in San Jose.
Silicon Valley, long accustomed to an inflow of Chinese money, sees opportunity. Venture capital firm Greylock Partners — an early investor in the likes of Facebook and Airbnb — is excited about Chinese companies. It’s invested in a Shanghai-based music-video app, Musical.ly, that is exploding in popularity among teenagers.
Josh Elman, partner at Greylock, told CNBC that it doesn’t spend a lot of time worrying about the political risk of Chinese companies. “The Chinese ecosystem of entrepreneurship and building large tech companies has evolved with the government into a fairly well-understood situation of engagement,” he said.
Elman also noted that the timing of LeEco’s smartphone launch in the U.S. is “unique.” In the wake of Samsung’s smartphone fiasco, “the world is looking for new consumer electronics brands.”