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Will US Blacklisting Chinese AI Firms Escalate Trade War?

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Will US Blacklisting Chinese AI Firms Escalate Trade War?

Key takeaways

  • The US has blacklisted 28 Chinese AI companies, signalling an escalation in the ongoing trade war.
  • These companies are implicated in human rights violations, particularly related to surveillance of Uighurs in Xinjiang.
  • American firms are now restricted from exporting hardware to the blacklisted Chinese AI organisations.
  • Prominent companies such as SenseTime and Hikvision are among those affected by the embargo.

Takeaways drafted with AI from the article text.

The recent announcement from the US Commerce Department on the blacklisting of 28 Chinese artificial intelligence companies has sent a clear signal that the trade war between the two superpowers is only going to escalate. The reason for the embargo is that the companies provide AI technologies like surveillance cameras, facial recognition software and other technologies which are used for suppression of human rights and surveillance of the Muslim minority community Uighurs in the Xinjiang state of China. The embargo means American companies are prohibited from exporting hardware components to the 28 AI organisations listed. Experts have for long highlighted human right violations in the country and how AI companies are winning contracts to provide technologies which are used are for government’s objectives of surveillance on the Chinese Muslim minority.  Some of the most prominent Chinese AI firms which were blacklisted work in facial recognition (Megvii, SenseTime, Yitu), voice recognition (iFlytek), digital forensics (Xiamen Meiya Pico) and video-surveillance manufacturing (Hikvision and Dahua). 

Which Are The Most Prominent Blacklisted Chinese AI Companies? 

SenseTime, considered the most valuable AI startup in the world at $7 billion, was included in Entity List. The company is backed by companies like SoftBank, Alibaba, and  Qualcomm, and also has a research partnership with MIT. The export ban has also forced MIT to review its research partnerships with companies like SenseTime, stating it will modify its future collaborations based on the government’s embargo.  One of the biggest suppliers of surveillance technology Hikvision also found its name on the US export ban list for this reason. The firm had won multiple security contracts from the government for creating surveillance systems, including one known as social prevention and control system, amounting to 1.85 billion yuan ($260 million) in the Xinjiang region. With 1/3rd of its revenue coming from outside of China, the firm may get impacted by the US export ban list. Alibaba-backed Megvii, which is valued at $4 billion, also found itself on the US export ban list due to its facial recognition technology being used in surveillance systems and citizen law enforcement systems. The listing has undoubtedly damaged the firm’s short term prospects related to its coming IPO in Hong Kong Stock Exchange where its US partner Goldman Sachs said it was reviewing its role in the partnership. 

The Aftermath 

The announcement of US blacklisting of Chinese AI firms is only going to make matters complicated as far global trade goes. Analysts had been expecting relief in the tensions between the two nations before the upcoming talks between President Trump and Xi Jinping. The move is being suggested as a bad sign for the worsening global economy, whereas human right activists are celebrating it very much on social media channels.  US had earlier placed five other organisations on its Entity List including a supercomputing company that sourced its components from US companies  Huawei too had been blacklisted by the US owing to concerns on spying on American users. Also, the export ban will hurt the US economy too as those companies may lose a substantial chunk of customers.  Companies like Hikvision and iFlyTek have already announced they have been preparing for such a situation ever since the US-China trade war came to light. The firms are working on getting its supply of chips from non-US as well as home-grown companies. “We will not be strangled,” said iFlyTek’s chief executive in a company letter. 

Will China Boost Its Home-Grown Chip Capabilities?

While China is the biggest manufacturing hub in the world, its domestic technology companies still have to rely on US semiconductor companies like Intel, Nvidia, Advanced Micro Devices and Qualcomm for hardware components, many of who have manufacturing units in neighbouring Taiwan and contracts with Taiwan Semiconductor Manufacturing Company (TSMC). According to analysts, China’s largest chip-maker, Semiconductor Manufacturing International Corp. is still way behind foreign companies in terms of the tech know-how for designing advanced chips.  The latest blacklist gives more incentive for China to advance their chip manufacturing prowess, say experts. The government has long recognised the lack of AI chips capabilities in the country. To bridge the gap, top domestic tech giants like Huawei and Alibaba recently introduced specialised chips that cater to the scale of AI workloads in the country. Now that US companies have been barred from selling their hardware to many Chinese companies, the government and tech industry players may enhance their efforts further to compete in the global AI race.       

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