China Tech News: Algorithms Under Scrutiny, Xiaomi EV Automation

China Tech Roundup: Regulatory Shifts and Key Acquisitions

Welcome to this week’s digest of developments in the Chinese tech sector, brought to you by TechCrunch. This roundup focuses on recent events and their potential global implications.

Increased Regulatory Scrutiny of Tech Giants

Beijing continues its sustained campaign to moderate the power held by leading technology companies within the nation. The latest focus centers on the potentially manipulative application of algorithms in user recommendation systems.

Regulators are actively addressing concerns regarding the exploitative practices enabled by these algorithm-driven recommendations. This signifies a continued effort to prioritize user experience and fair market competition.

Notable Acquisitions in the Automotive and VR Spaces

Several significant acquisition deals were announced this week, indicating strategic investments in emerging technologies. These moves highlight the ambitions of major Chinese tech firms.

Xiaomi is set to acquire Deepmotion, a startup specializing in autonomous vehicle technology. This acquisition will bolster Xiaomi’s capabilities in the rapidly evolving self-driving car market.

Furthermore, reports indicate that ByteDance is in the process of acquiring Pico, a virtual reality hardware manufacturer. This potential purchase demonstrates ByteDance’s commitment to expanding its presence in the metaverse and VR space.

The acquisition of Pico would position ByteDance as a key player in the development and distribution of virtual reality hardware. This move is expected to accelerate innovation in immersive digital experiences.

These acquisitions represent a strategic push by Chinese tech companies to diversify their portfolios and establish leadership positions in cutting-edge technological fields.

Algorithmic Oversight in China

A comprehensive new regulation has been proposed by Beijing to govern the application of algorithms by technology companies functioning within China. These algorithms are central to the operation of numerous profitable tech ventures, encompassing areas like short-form video platforms, news aggregation services, ride-sharing, food delivery, and online retail.

An overview of this policy was previously reported by Manish Singh, and this article provides a detailed examination of the 30-point document released by China’s primary cyberspace administration.

Concerns Driving the Regulation

Chinese authorities have expressed significant concern regarding the potential for algorithmically-driven content to deviate from the principles promoted by the Communist Party. There is also apprehension that such content could potentially harm the interests of the nation.

The core principle guiding this regulation is that algorithms should consistently serve and prioritize the interests of the country.

Transparency and Accountability

Regulators are demanding increased transparency regarding the inner workings of companies’ algorithmic systems. They are also establishing accountability for the outcomes generated by these systems’ code.

For instance, companies will be held responsible for the effects of their algorithmic decisions.

Consumer Protection and Fairness

The government is actively addressing the issue of discriminatory algorithms and seeking to restore a degree of control to individual consumers.

This includes measures designed to prevent algorithms from unfairly influencing user experiences.

Control of Public Discourse

A key objective of the regulators is to prevent large internet companies from unduly influencing public opinion or thought. While not explicitly stated in the document, censorship control will likely remain under the purview of governmental authorities.

Government Oversight and Access

Similar to other facets of the technology sector, certain algorithms will require governmental approval prior to deployment. Furthermore, tech companies will be obligated to provide access to their algorithms to law enforcement agencies during investigations.

Impact on Tech Businesses

Should this law be enacted, it will fundamentally alter the operational framework of Chinese tech companies that depend on algorithms for revenue generation. Programmers will need to meticulously review these regulations and ensure their code complies with the requirements.

The proposed legislation appears to extend beyond the scope of the European Union’s data regulations, although the practical enforcement of the Chinese law remains to be observed.

Xiaomi's Investment in Autonomous Driving

During Xiaomi's most recent earnings conference, the company announced its intention to acquire DeepMotion, an autonomous driving startup located in Beijing. This acquisition is designed to bolster Xiaomi’s efforts in the development of self-driving technology.

The transaction is valued at approximately $77.3 million, with a significant portion being allocated as stock compensation. Payments will also be structured to occur as specific developmental milestones are achieved, as detailed by Xiaomi President Wang Xiang.

Lei Jun's Prior Indication of Entry

Prior to this announcement, Xiaomi’s founder, Lei Jun, had already signaled the company’s ambition to participate in the competitive autonomous vehicle market. On July 28th, Lei Jun revealed on Weibo, the prominent Chinese social media platform, that Xiaomi was actively seeking to hire 500 specialists in autonomous driving technology throughout China.

Challenges with Automation Claims in the Chinese EV Market

The integration of automated features is increasingly being utilized as a key marketing strategy by emerging Chinese electric vehicle manufacturers. However, there is a frequent tendency to blur the lines between advanced driver-assistance systems (ADAS) and true Level 4 autonomous driving capabilities.

This practice of exaggeration in promotional materials can be deceptive to consumers and raises concerns regarding the actual technological proficiency of these relatively new EV companies.

Synergy with Xiaomi's EV Manufacturing Plans

Xiaomi has independently announced its plans to produce electric vehicles through a dedicated subsidiary focused on automotive manufacturing. The expertise DeepMotion provides in ADAS will logically enhance the capabilities of Xiaomi’s forthcoming vehicle lineup.

As Wang Xiang clarified, DeepMotion’s technologies will be a valuable asset.

DeepMotion's Technological Focus

It is important to note that DeepMotion, established by former Microsoft engineers, concentrates on perception technologies and the creation of high-precision mapping solutions. This specialization positions the company within the realm of vision-based autonomous driving systems.

Currently, many leading Chinese EV manufacturers are utilizing consumer-level lidar technology for vehicle automation.

ByteDance's Move into Virtual Reality

Reports from Chinese VR news outlet Vrtuoluo indicate that ByteDance is poised to acquire Beijing-based VR hardware manufacturer Pico for a sum of 5 billion yuan, equivalent to $770 million.

Currently, ByteDance has not yet responded to requests for confirmation regarding this potential acquisition.

The high cost associated with premium processors frequently results in substantial pricing for sophisticated VR headsets.

Industry analysts note that a majority of VR hardware companies have not yet achieved widespread adoption among consumers.

These companies are often characterized by significant financial losses, relying heavily on venture capital funding and strategic partnerships to sustain operations.

Strategic Implications of the Acquisition

While the acquisition may involve a company operating at a loss, Pico represents a significant player within the Chinese VR market.

This provides ByteDance, the parent company of TikTok, with a rapid pathway into VR hardware production.

As the leading global distributor of short-form video content and an increasingly ambitious entrant into the video game industry, ByteDance possesses substantial creative resources.

The success of this venture will largely depend on ByteDance’s ability to develop compelling virtual content should the deal with Pico be finalized.

It remains to be seen how ByteDance will leverage its expertise to create engaging experiences within the virtual realm.

• ByteDance is considering a $770 million acquisition of Pico.
• VR headset costs are driven by expensive components.
• Most VR companies haven't reached the mass market and rely on funding.

The acquisition would allow ByteDance to quickly enter the VR manufacturing space.

ByteDance’s existing strengths in content creation and distribution could be pivotal in driving VR adoption.