2019-10-12_The_Economist_

66 Business The EconomistOctober 12th 2019

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his firm’s investments, has sold autono-

mous street-sweeping robots to authori-

ties in Changsha, the capital of Hunan

province. Horizon Robotics, which is val-

ued at $3bn, furnishes specialised av com-

puters for companies like Cowa.

The ability to make money now by auto-

mating simpler tasks keeps the firms going

on the way to fuller autonomy—a luxury

few American rivals, up against powerful

incumbents like municipal-services com-

panies, enjoy. At the same time, they are

shielded from foreign competition by rules

that limit overseas av companies to minor-

ity stakes in Chinese-led joint-ventures.

Chinese av companies have one final

advantage over their Western peers: explic-

it support from the Chinese state. “There’s

a lot of fuel coming from the government

planning,” says an executive of one Chi-

nese firm. The government wants compa-

nies like his to succeed, and is willing to

use its autocratic muscle to build infra-

structure, promote new technology and re-

write policy. It will spend up to $220bn on

5 gby 2025, according to state media, and

plans to install av infrastructure through-

out the 2020s, including telecoms net-

works to capture data from vehicles and

their surroundings, cloud-computing ca-

pacity to process these data and map ser-

vices to guide the cars.

In addition, the authorities promote av-

friendly standards and regulations. They

can stitch “National Test Roads” into the

urban fabric without the fuss Western au-

thorities can expect from local residents.

In one-party states like China “you have

single-focus government that can make

things happen”, sums up Amer Akhtar of

DeepMap, a Californian maker of software

for maps which avs need to navigate.

The road is not all smooth for China’s av

industry. Together with the rest of Chinese

tech, it is caught up in the Sino-Amercian

economic war. In May America’s govern-

ment barred its companies from supplying

Huawei, on the ground that its kit might al-

low Chinese eavesdropping. On October

7th another eight Chinese companies were

added to the blacklist, including those

working on things useful to avs, like com-

puter vision (see next article).

The prospect of losing access to Ameri-

can technology is particularly worrisome

for av companies, because the Chinese car

industry relies heavily on foreign suppliers

for the electronics that power modern ve-

hicles. Last year Chinese imports of inte-

grated circuits totalled $312bn, ten times

the value of imported car parts. Chinese

entrepreneurs eyeing the Chinese av mar-

ket have founded plenty of promising

startups—but many of them in Silicon Val-

ley, subject to American law. Efforts to

make more cutting-edge gubbins at home

are moving slowly.

Nor are Chinese av developers immune

from the biggest problem which afflicts

their Western rivals. Like them, Pony.ai,

WeRide and others continue to lose money.

This may not change soon. The desire of

motorists to own self-driving cars has yet

to be tested. The business model of ride-

hailing, where future profitability is in part

predicated on the eventual removal of cost-

ly human drivers, looks shaky. Investors

are growing impatient with loss-making

firms such as Uber, which has shed a third

of its stockmarket value since going public

in May. It may take longer for software to

become competitive with Homo sapiensin

China, where labour remains relatively

cheap. As one global car executive puts it,

“If drivers are abundant but space on the

road is not, the problems you should be

solving first are not about taking the driver

out of the car.”

China’s approach to self-driving reflects

its attitude to development more broadly:

heavy on infrastructure and government

oversight, lighter on cutting-edge technol-

ogy and civil liberties. It may one day pre-

vail over the Western path to autonomy.

Whether Chinese av companies will stand

on their own four wheels as profitable

businesses is another matter. 7

Life in the slow lane

Selected autonomous-vehicle milestones

Source:TheEconomist

1939 World’s Fair Futurama exhibit shows cars

guided by automated highways

1940 Norman Geddes, in “Magic Motorways”,

predicts AVs by the 1960s

1957 RCA Labs shows an AV guided by circuits

embedded in a Nebraska road

1960 A British AV, guided by magnets in the road,

drives round a test track at 130kph

1987 European countries spend €749m on a

self-driving research project called EUREKA

1987 HRL Laboratories’ off-road AV navigates tricky

terrain at an average speed of 3kph

1995 “No Hands Across America”, a 5,000km

journey driven 98.2% autonomously

2004 The DARPA Grand Challenge offers $1m for

an AV that navigates 240km offroad. No entry

is successful

2005 The second Grand Challenge is held. Five

teams complete a slightly easier route

2008 Rio Tinto, a mining firm, begins testing

self-driving mine trucks

2009 Google begins the self-driving car project

that will become Waymo

2010 An Audi AV climbs Pikes Peak, a popular

race route, at high speed

2012 Nevada issues America’s first licence to

operate a driverless car, to Google

2016 First AV fatality, when Tesla Model S

crashes into a lorry in Florida

2018 Waymo launches a limited self-driving taxi

service in parts of Phoenix, Arizona

F

or twoyears reports of mass incarcera-

tion have seeped out of the remote Chi-

nese province of Xinjiang. Over 1m people,

mainly Uighurs and other Muslim minor-

ities, have been locked up in camps. Mil-

lions more live under a police state. Ameri-

can officials, fearful of upending trade

negotiations, have dithered over a re-

sponse. On October 7th, three days ahead of

the 13th round of talks, they put their foot

down. The Commerce Department banned

American firms from selling software and

hardware to 20 public-security organs. It

also blacklisted eight Chinese companies

whose products, it says, facilitate the Or-

wellian surveillance in Xinjiang.

The ban hits at the heart of China’s arti-

ficial-intelligence (ai) ambitions. The

eight firms include startups working on fa-

cial recognition (Megvii, SenseTime, Yitu),

voice recognition (iFlytek), digital foren-

sics (Xiamen Meiya Pico) and chipmaking

gear (Yixin), as well as Shenzhen-listed

makers of video-surveillance kit (Hikvi-

sion and Dahua). Together they are worth

around $75bn. In August Megvii and Yitu

were designated as national champions.

How much will it hurt? Most of the

firms are probably using American compo-

nents. The 10% post-ban drop in the share

price of Ambarella, an American maker of

computer-vision chips, suggests that the

Chinese are important customers. Huawei,

a telecoms giant on the same blacklist

since May over concerns that Chinese

spooks use its gear to spy on America, ex-

pects to lose $10bn in sales this year as a re-

sult, mainly from its smartphone business.

Things may not be so bad for the octet,

at least in the short run. They have been

hoarding parts in anticipation of a ban and

have sought other suppliers. Since the ar-

ray of components they require is tiny next

to Huawei’s needs, they can buy essential

ones on secondary markets. Jefferies, a

bank, reckons domestic chipmakers such

as DeePhi, Horizon and HiSilicon, an arm

of Huawei, can make up any shortfall.

The firms were quick to downplay the

ban’s impact on their business. Xiamen

Meiya Pico said its hardware was mostly

home-grown and “highly replaceable”.

iFlytek said the restrictions would have “no

significant impact” on daily operations.

Most cameras built by Hikvision and Da-

hua are thought not to contain sophisticat-

ed American innards. For the “very small

fraction” that cannot be substituted, Hikvi-

SHANGHAI

America blacklists China’s best

artificial-intelligence firms

Sino-American economic war

One in the AI