TikTok has contested claims made by the US Department of Justice in a federal appeals court, asserting that the government has inaccurately characterised the app’s ties to China. The company is challenging a law that mandates its Chinese parent company, ByteDance, to divest TikTok’s US assets by January 19 or face a ban. TikTok argues that the app’s content recommendation engine and user data are securely stored in the US, with content moderation conducted domestically.
The law, signed by President Joe Biden in April, reflects concerns over potential national security risks, with accusations that TikTok allows Chinese authorities to access American data and influence content. TikTok, however, contends that the law infringes on free speech rights, arguing that its content curation should be protected by the US Constitution.
The legislation also impacts app stores and internet hosting services, barring support for TikTok unless it is sold. The swift passage of the measure in Congress highlights ongoing fears regarding data security and espionage risks associated with the app.
California Democrats are urging the Biden administration to halt plans for new restrictions on US technology exports to China, arguing that unilateral measures could harm American businesses while benefiting foreign competitors. These lawmakers, including Senator Alex Padilla and Representative Zoe Lofgren, expressed concerns that further controls on semiconductor manufacturing equipment could lead to a ‘death spiral’ for longstanding US companies, especially as allies like Japan and the Netherlands have not matched the most stringent US restrictions.
The Commerce Department reportedly plans a new rule to expand US power over exports to China while exempting Japan and the Netherlands, sparking concern among California’s representatives. They argue that additional unilateral export controls should be paused until their impact on US competitiveness in the semiconductor industry is fully assessed.
Why does this matter?
The letter from California Democrats highlights growing resistance to Biden’s semiconductor policies, especially from a state home to major chipmaking equipment firms like LAM, Applied Materials, and KLA. The lawmakers are not seeking to reverse existing restrictions on China but are calling for a more coordinated approach with US allies to ensure that American companies are not disadvantaged.
Companies from US and China are leading the race in AI research, with Alphabet, the parent company of Google, at the forefront. A recent study from Georgetown University revealed that Alphabet has published the most frequently cited AI academic papers over the past decade. Seven of the top ten positions are held by US companies, including Microsoft and Meta, reflecting their dominance in the field.
Chinese firms are not far behind, with Tencent, Alibaba, and Huawei securing spots within the top ten. These companies have shown remarkable growth, particularly in the number of papers accepted at major conferences. Huawei has outpaced its competitors with a 98.2% annual growth rate in this area, followed by Alibaba at 53.5%.
The competition extends beyond academic publications to patents. Baidu, a leading Chinese tech firm, topped the list of patent applications with over 10,000 submissions from 2013 to 2023. Baidu’s growth has been particularly striking, with a 228% increase in patent applications year-on-year in 2020. US companies hold three spots in the top ten for patents, with IBM making the list.
Samsung Electronics is the only Korean company to make the top 100, ranking No. 14 for highly cited AI articles and No. 4 for patents. However, Samsung’s growth in these areas has been slower compared to other global leaders, with modest increases in conference paper acceptances in recent years.
Huawei Technologies is on the brink of releasing a new AI chip, Ascend 910C, to challenge Nvidia’s dominance in the Chinese market. The company has made significant strides despite US sanctions, with Chinese internet firms and telecom operators recently testing the processor.
Huawei claims that the Ascend 910C rivals Nvidia’s H100, a powerful AI chip that has been unavailable in China.
Why does this matter?
The development signals Huawei’s ongoing efforts to circumvent restrictions and bolster its position in the AI sector.
Mainland China has seen a significant surge in AI company registrations, with over 237,000 new firms added in the first half of this year, according to Qichacha, a corporate database platform. The increase in AI companies brings the total number of AI-related companies to 1.67 million due to Beijing’s dedicated efforts to promote AI development.
Notably, almost 90% of these companies, amounting to over 1.48 million, were established after 2017. This surge followed the State Council’s publication of the Next Generation Artificial Intelligence Development Plan, aiming to position China as a global leader in AI technology.
The boom in AI firms highlights China’s burgeoning unicorn landscape, producing four prominent ‘AI tigers’ – Baichuan, Zhipu AI, Moonshot AI, and MiniMax – each securing billions in investments. However, the fierce competition in the sector has also led to a decline in operational AI companies, with only about 419,000 of the new enterprises from last year still active.
Despite the competitive pressures, Beijing continues to bolster the AI industry through supportive policies. Premier Li Qiang introduced the AI Plus initiative at the Two Sessions earlier this year, aiming to integrate AI technology across traditional industries to enhance efficiency and drive economic growth.
China has approved 487 new AI algorithms for use in deepfake technologies. These include products from major domestic tech companies such as Baidu, Alibaba, and Tencent and foreign firms like Hewlett-Packard. The approval is part of the country’s regulatory efforts under the Cyberspace Administration of China (CAC), which mandates the registration of AI algorithms used in deepfakes. Notable approvals include Baidu’s image generator, Tencent’s search algorithm, and Alibaba’s document creation tool.
The green light for new algorithms is the second-largest since the regulations took effect in January 2023. The regulations aim to control technologies that create realistic virtual scenes using deep learning and augmented reality. Companies failing to comply face removal from domestic app stores. The CAC has released six allowlists, with the biggest batch of 492 algorithms approved in June.
Cai Peng, a partner at Beijing’s Zhong Lun Law Firm, notes that the increasing size of these lists indicates a more streamlined process between regulators and applicants. The roughly two-month application process involves detailed document submission and revisions as requested by the CAC.
The latest approvals include a healthcare knowledge algorithm for Douyin, a music generator from Microsoft’s Xiaoice, and a character dialogue generator for NetEase. Foreign brands like HP and Yum China also had their algorithms approved. China’s regulatory framework for AI, which includes mandatory registration of generative AI models before public use, reflects the country’s striving to leadership in AI regulation.
Hundreds of Chinese sellers on Temu have protested against what they describe as excessively high penalties imposed by the platform. Temu, an international online marketplace owned by PDD Holdings, has seen increased competition with rivals like Shein since its launch in September 2022. Merchants claim that new penalties introduced in April can reach up to five times the value of a sale when customers return products, causing significant financial strain.
A garment seller from Guangzhou reported that Temu has not adequately addressed their concerns despite urging vendors to register their fines. That led to a larger protest involving around 400 to 500 merchants from China on 29 July. Protesters shared videos online showing large crowds outside Temu’s headquarters, highlighting the widespread discontent among sellers.
Temu acknowledged the protest, noting that most participants were garment sellers who were also active on Shein. The company emphasised its efforts to resolve disputes and maintain quality standards, though some merchants argue that the penalties drive them out of business. Despite the challenges, Temu claims that most merchants on the platform are flourishing and benefit from increased sales and customer satisfaction.
Many sellers, however, remain in a difficult position. One vendor, facing fines nearly triple her initial estimate, expressed the struggle of balancing penalties with minimal profits. Another merchant, unable to quit due to financial commitments, described the situation as having ‘no way out.’ Temu maintains that while penalties are essential for quality control, they aim to enforce them fairly and resolve disputes effectively.
Shanghai has announced a massive $13.8 billion investment to bolster its integrated circuit, biomedicine, and AI industries. The biggest city in China is making a significant push to solidify its position as a global tech leader.
The AI sector will benefit significantly, with investments directed towards intelligent chips, software, autonomous driving, and intelligent robots. The following initiative is part of Shanghai’s broader strategy to foster innovation and build a competitive edge in the global market.
Funds will support original innovation, enhancing Shanghai’s technological capabilities. This move is expected to accelerate the development of globally competitive enterprises within the city, driving growth and attracting talent.
By focusing on these key sectors, Shanghai aims to solidify its reputation as a leading commercial hub. The strategic investment underscores the city’s commitment to advancing technological innovation and economic development.
The rise in digital assets is helping Russia and China overcome payment difficulties caused by sanctions. Qifa, a digital platform established in 2013, has shifted its focus from importing Chinese goods to facilitating bilateral trade. As sanctions complicate direct bank settlements, Qifa has turned to digital currencies and cryptocurrencies to speed up transactions.
Payments between the two countries face delays of one to three months due to increased compliance checks from Chinese banks. Many banks are cautious of secondary US sanctions, leading to bottlenecks and the need for alternative methods like small regional banks. Digital currencies like tether now play a crucial role in easing these issues, allowing for quicker settlements.
Russia’s legislation is adapting to the use of digital financial assets for cross-border payments. This includes considering a bill to legalise all cryptocurrencies for foreign trade. These changes aim to bypass traditional banking systems and avoid long payment delays, providing a more efficient solution for businesses.
Qifa is set to list on the Moscow Exchange and is expanding its operations to Kazakhstan and other former Soviet countries. Western sanctions continue to affect trade, especially concerning dual-use goods that could support Russia’s military. However, companies like Qifa are finding innovative ways to maintain and grow their business despite these challenges.
Apple’s market share in China declined by two percentage points in the second quarter of 2024, dropping from 16% to 14%, according to data from market research firm Canalys. The drop highlights the challenges Apple faces in its third-largest market as it battles intensifying competition from rivals like Huawei.
Huawei saw a 41% year-on-year increase in smartphone shipments during the quarter, driven by the launch of its Pura 70 series. This surge has propelled Huawei back into the high-end smartphone segment, despite facing US sanctions that have restricted its access to global chip supplies. Huawei’s market share in China is projected to reach 19% in 2024, making it the top vendor.
Overall, China’s smartphone shipments rose by 10% in the quarter, with Vivo leading at 19% market share, followed by Oppo, Honor, and Huawei. Apple’s market share drop resulted in its ranking falling from third to sixth place. To combat the decline, Apple has ramped up its discounting efforts, offering significant price cuts on select iPhone models.
Despite being deemed a national security threat by American officials, Huawei’s sales have rebounded, demonstrating resilience in the face of U.S. restrictions. Analysts predict Huawei’s strong performance will continue, challenging Apple’s position in the Chinese market.
