Washington this week targeted Chinese facial recognition startups SenseTime, Megvii and Yitu over national security concerns and foreign policy interests, aggravating the clash between the two economic superpowers over who will dominate the technologies of the future.
Megvii and Yitu are worth $4 billion and $2.4 billion respectively, according to CB Insights.
The three tech startups, along with a handful of other Chinese firms like AI-driven surveillance camera maker Hikvision and voice recognition firm iFlyTek, are now banned from buying US products or importing American technology.
The US Commerce Department added them to a trade blacklist this week, saying the companies had been implicated in human rights violations against Uyghurs and other members of Muslim minority groups in Xinjiang. Twenty government and security bureaus in China’s Xinjiang region were also included in the ban.
Chinese authorities dismissed the human rights allegations, and threatened retaliation against US companies.
“The US accusations against China are groundless and senseless. They only expose the evil motives of the United States to interfere with counterterrorism efforts in Xinjiang and thwart China’s development,” China’s Foreign Ministry spokesman Geng Shuang said on Tuesday, telling reporters to “stay tuned” for retaliation.
Beijing wants to turn China into a global AI leader by 2030. In 2017, it set out goals to build a domestic artificial intelligence industry worth about $150 billion in the next few years.
The potential economic and social benefits for AI breakthroughs are enormous. AI-powered machines are already being used to provide customer service, manage logistics, monitor equipment on factory floors, optimize energy consumption, and analyze medical records, according to a 2017 study from consulting firm McKinsey. McKinsey estimates that the total market for AI applications will reach $127 billion by 2025.
SenseTime, Megvii and Yitu are smaller companies, but they were flourishing thanks to a glut of venture capital cash and the Chinese government’s push for investments into AI.
The tech firms are some of China’s most prominent in the areas of facial recognition and artificial intelligence. Hikvision is a $42 billion company and the world’s largest video surveillance gear maker. SenseTime and iFlyTek were named to China’s National AI team in 2017.
While the move is “aimed more at the Xinjiang issue and not squarely at China’s AI ambitions,” it does fit into a broader narrative within the US government, said Paul Triolo, who specializes in global technology policy at Eurasia Group.
The “United States and China are in a long term struggle for dominating the technologies of the future, and part of that narrative is that China is using technologies such as AI in the service of government surveillance and in ways that go against Western values in terms of things like privacy,” he said.
Megvii also said “there are no grounds” for the company being added to Washington’s trade blacklist.
“We are … in compliance with all laws and regulations in jurisdictions where we operate. We require our clients not to weaponize our technology or solutions or use them for illegal purposes,” the company said.
SenseTime and Yitu did not respond to requests for comment.
All of these companies have likely stockpiled supplies of computer chips and are working to develop alternatives, according to Triolo.
“Like Huawei, they will be able to continue to supply customers but the action could threaten there ability to design new and more advanced systems if they cannot find comparable alternatives to US supplied components,” he said.
And as Huawei has shown, it only takes dependence on one American firm to cripple global ambitions.
Washington added the Chinese technology company to the trade blacklist in May. The company said it has since found alternative suppliers for many of the parts it used to buy from American companies, but it couldn’t find a good replacement for Google services.