G20 to showcase China’s high-speed rail - Jakarta and Beijing plan to demonstrate their partnership in making transportation more efficient

First posted in Asia Times. More than 1,300 journalists have already registered to cover the Group of Twenty summit to be held on November 15 and 16 in Bali. The pre-summit buzz seems to be focusing on such questions as: Will US President Joe Biden attend? If he does, will he meet with Russian President Vladimir Putin? If they meet, will Ukrainian President Volodymyr Zelensky be invited to sit in? If so, will there be any substantive outcome? So on and so forth. The Western media missed mentioning an unprecedented event that will take place at the G20. Indonesian President Joko Widodo, widely known as Jokowi, will be taking his Chinese counterpart Xi Jinping for a ride on Indonesia’s first bullet train. Taking Xi for a ride The short ride around Bandung in West Java will be a test run at a more leisurely pace than the train’s designed speed of 350km/h. Full commercial operation after the shakedown of the high-speed railway (HSR) is expected to begin in June 2023. By then, the travel time from Jakarta, the national capital, to Bandung, the capital of West Java, will shorten from more than three hours to 40 minutes. The 142.5-kilometer linkage is the first phase. The second phase at a distance of 520km will extend the HSR from Bandung to Surabaya and will begin later in 2023. When completed, the HSR will in essence run the length of Java, the most populated island of Indonesia. Kereta Cepat Indonesia China will own and operate the HSR. KCIC is a joint venture, 60% owned by Indonesia and 40% by China. In 2008, Japan first proposed the high-speed rail project connecting Jakarta to Surabaya. After a lot of back-and-forth wrestling over the required financial investment, Indonesia finally decided to take a serious look at the project in 2015. To Japan’s surprise, out of the blue, China submitted the winning bid. Since the global financial crisis of 2008, China had been busy investing in infrastructure. By 2015, China had become the owner of the world’s largest network of high-speed railways. China used its experience and, ahem, track record to qualify for the Indonesia bid. Widodo went to Japan and China to compare the two HSR systems for himself. Not only has China’s system exceeded Japan’s Shinkansen in performance, but China’s proposal included technology transfer and willingness to assume of cost overruns. Japan would not commit to either. China ready to build HSR anywhere Taiwan-based commentator Lai Yueqian (赖岳谦) has explained why this G20 showcasing is a highly significant development. The test ride is Beijing’s way of announcing to the world that China is ready to market and build HSR anywhere in the world and Indonesia is China’s partner in this venture. Lai has advanced degrees in international relations from France. He foresees that the KCIC-owned HSR could extend north from Jakarta to Singapore, through Malaysia and Thailand into China and link up with China’s own HSR to become part of the Belt and Road Initiative (BRI) to Central Asia and beyond. G20 members account for 85% of the world’s gross domestic product, 75% of international trade and two-thirds of the world’s population. There is no more ideal venue than the leaders’ summit for the host country, Indonesia, and China to unveil their intentions to contribute to global trade by building transportation infrastructure around the world. When China first began to consider building an HSR network to cover its vast territory, it approached Japan and France and proposed a 50/50 joint venture that would include their technical assistance. Those two countries had been up to then the only sources of HSR technology. Both refused the deal that would include technology transfer and both assumed that China could not go it alone. Instead, China has since built HSR through mountains, deserts, over open waters, high altitudes and permafrost and proves that it can go anywhere. The railcars are being supplied by China Railway Rolling Stock Corporation (CRRC) in adherence to their specifications for the Fuxing railcars; Fuxing represents China’s highest level of HSR technology. China to share HSR technology These cars feature advanced smart technology, safety protocols, and strong environmental adaptability. Called electric multiple units (EMUs), the cars are equipped with 2,500 monitoring points for timely detection, early warning and diagnoses of all key systems. As reported by Straits Times, “The Jakarta-Bandung high-speed railway will enrich the development of infrastructure facilities and generate fresh growth points in both the services sector and trade in services in Indonesia and Southeast Asia.” The Biden administration and cohorts in Washington favoring confrontation with China are likely to be oblivious to the implications of China’s success in HSR. Earlier this month, I suggested that sanctions on sales of semiconductor devices and equipment to China is rule-based disorder. Since then, Biden has doubled down and imposed virtually a total ban on semiconductor trade with China. Speculations are rife in Taiwan that should China decide to invade the island in response to the American chokehold, the US military has contingency plans to hustle key technical and management staff of Taiwan Semiconductor Manufacturing Company (TSMC) on to a plane and fly them out to Arizona. Mind you, this is based on American assumptions, not on any evidence of China’s actual intentions. In effect, Biden’s chip ban will disrupt and damage a safe, secure and booming global semiconductor industry and turn it into tatters and pieces. American producers from process equipment to design software systems to advanced devices will all suffer drastic reduction in revenue and potentially fatal loss of funds to develop the next generation of advances. As with HSR, China will eventually succeed in circumventing America’s ban on semiconductor trade. Then Washington will experience a “see I told you so,” self-fulfilling confirmation that China poses a threat to America’s security. In the meantime, Saudi Arabia has told Biden to “get lost” by cutting oil production instead of increasing output as he requested. Biden’s diplomatic response is to decide which cudgel to use on the Saudis. Talk about how to lose friends and piss off people. The United Arab Emirates has also followed Saudi Arabia’s footsteps by becoming China’s second-largest (after Saudi) economic partner in the Middle East. China’s COSCO Shipping has chosen Khalifa Port in Abu Dhabi as the base of its Middle East operations. Everybody in the world, except the Americans, seems to understand that bilateral trade builds and strengthens bilateral relations. Disrupt trade and those relations start to drift. Missed opportunity CRRC is the company, I reported more than three years ago, that set up assembly facilities outside of Chicago and Boston to replace outdated subway cars with new, state-of-the-art cars at a cost 20% lower than competitive bids and containing more than 60% made-in-America content. The first delivery was met with rave reviews and praise as an outstanding case of win-win success. Thus encouraged, the Chinese company started to make plans to study the feasibility of replacing the subway cars in New York and Washington, DC. That was when the wise old folks in Congress, such as the Senate majority leader, Chuck Schumer, put a kibosh on the process. Senator Schumer raised the alarm that subway cars are perfect for Beijing to use for spying on the American commuters. Thus, today New Yorkers continue to ride on the noisy, dilapidated, rocking and rolling, more than century-old subway cars, secure in knowing that no one is going to spy on them. By golly. At this point, all Washington seems to know is to take cheap shots at China, denigrate beneficial projects around the world, and obstruct China’s progress wherever possible. The rest of the world is increasingly skeptical and unsure that following the US is in their best interest.

US pushes ‘rule-based disorder’ Latest set of sanctions targeting the chip industry will do no one any good, certainly not the US itself

First posted in Asia Times. Upon becoming president of the United States, Joe Biden immediately set forth to promote “rule-based international order,” ostensibly for the world community, but the message was really intended for China. The “world order,” according to Biden, was for Beijing to conduct its foreign affairs in line with Washington’s expectations. Now into the second year of his regime, it has become increasingly clear that Biden’s idea of order is actually disorder and is causing chaos not only in the world but especially to the American economy. The latest example is the most recent series of sanctions and embargoes forbidding sales of semiconductor chips and manufacturing equipment to China. Up to now, China has been far and away the largest buyer for semiconductor processing equipment and is the major market for advanced chips designed by such Silicon Valley companies as Nvidia and made by such foundries as Taiwan Semiconductor Manufacturing Company (TSMC). The ban seeks all the members of the semiconductor industry, foreign and domestic, to go cold turkey and stop doing business with China. Heretofore, the industry has been a prime example of a virtuous circle created by globalization. In simplified terms, we can say that innovations in chip designs for new uses are created in Silicon Valley, fabricated by foundries in Taiwan and South Korea, and then shipped to China to assemble into devices and final products, which are then sold around the world. Companies engaged in making fabrication and processing equipment kept pushing the boundaries of their technology and collaborated with the foundries to produce the next generation of advanced chips. The equipment companies were not just in the US but also in Japan and the Netherlands. Everyone wins in a virtuous circle In a virtuous circle, everybody does what he does best and contributes to a supply chain at the most cost-effective efficiency. Everybody wins in such a circle. By breaking up the circle, everybody loses. South Korean foundries such as Samsung sell 40% of their output to China, including foundries they operate inside China. China represents around 30% of sales for semiconductor fabrication equipment from American companies such as Applied Materials and Lam Research. China is also the most important market for ASML, the Netherlands-based company that is in essence the only maker of advanced lithographic machines. Despite the just-imposed ban, the company has continued to increase its local hire in China to support its sales and technical services. Every member of the circle now faces a perplexing dilemma: Do they obey the Washington edict at the expense of their financial interests and companies’ futures? Or do they pay a lot of money to lawyers and lobbyists to plead on their behalf and secure certain dispensations that would allow their continuing to do business with China, perhaps at a more subdued level? Or do they find questionable routes and intermediaries to continue their sales to China? Or can they flat out defy Washington? In theory, their lost sales to China would be replaced by the expansion of a new and growing US market, as foreign companies such as TSMC and Samsung are enticed or coerced into building new fabs in the US. The challenge is whether other members of the circle can survive long enough while waiting for the new capacities in America to make up the immediate shortfall around the world. Furthermore, there are serious concerns and doubts as to whether new fabs could actually happen in the US. The cost of defying Washington’s order will be high, but the industry can already see that the cost of yielding to Biden’s sanctions makes no sense given the devastating consequences. TSMC obediently gave up on serving Huawei, its most important customer, under orders from Donald Trump’s White House more than two years ago. Now it apparently has given up on the rest of the China market in exchange for locating fabs in the US. Since then, the market capitalization of the company has declined by half from its peak. Washington offers losing propositions Washington doesn’t offer any incentives or rewards, just threats and intimidation if they are not obeyed. This is what a hegemon does, but increasingly the world is disenchanted and not convinced South Korea is the latest to feel the sting that goes with being a loyal American ally. Washington expected the Koreans to give up their huge markets in China, and the reward was for their president to face a rude and very public brushoff when he greeted Biden at the UN General Assembly (UNGA) in New York recently. According to K J Noh, who understands the Korean language, South Korean President Yoon Suk-yeol cursed in the foulest terms at the way he was treated. Hard to blame him though. Biden is asking his country commit economic seppuku but acted like Yoon was some Asian scumbag – another gaffe that the White House staff will have to repair. The European Union has also learned that there is no upside in being a groupie of American foreign policy. By joining the US in supporting the Ukrainians and sanctioning Russia in the Ukrainian war, the EU is facing a bleak cold winter with a shortfall of fuel to heat homes and fire the boilers that the German industries will need to keep operating. Facing record-breaking inflation, the people in the EU are becoming restless and beginning to agitate and question the reasons for antagonizing Russia and bringing economic misery on to themselves. Shortly before the UNGA, the Shanghai Cooperation Organization concluded its annual conference, held in Samarkand, Uzbekistan. Under China’s leadership, the SCO welcomed Iran and Belarus as new members, with a long list of other nations applying to join, including Turkey, Saudi Arabia, Egypt and others. The SCO now accounts for half of the world’s population and more than 25% of global GDP. Non-aligned countries find the SCO increasingly attractive as an antidote to American unilateralism. Geopolitical rivals such as India and Pakistan or Saudi Arabia and Iran can leave their contentions outside and join the organization to work on trade and economic cooperation, and collaborate on combating terrorism. Unlike the American led groups of nations, political or military alliances are specifically excluded within the SCO. There are, by the way, no nations waiting to join the US alliance to contain China. As I observed in June, the US approach to recruiting others to join in an alliance to contain China is a faltering strategy that will lead to America’s self-destruction. Biden’s insistence on decoupling China from the semiconductor supply chain is another step in that direction. Another step to self-destruction Washington seems not to have anticipated China’s likely response to the latest sanctions. Its semiconductor industry is redoubling its efforts and investments to develop technical advances that would replace the chips and fab equipment that have been cut off by the American sanctions. China has the raw technical manpower graduating from their colleges and universities every year and has recruited senior engineers and fabrication technologists – Asia Times called them godfathers – from Taiwan, Japan and South Korea to advise on the technical and management direction. News from China already indicates that they are making breakthroughs getting around the American embargoes. Even American analysts say that the trade barriers are doomed to fail. In the long run, the Biden sanctions will help China create its own independent semiconductor industry and leave the currently established providers out in the cold. When and if China decides to retaliate in full, it has the wherewithal to inflict pain in kind. China’s CATL is the world’s largest producer of lithium batteries for electric vehicles. The company has announced plans to build a US$7 billion plant in Hungary to serve European automakers. Its plans for North America are on hold since Nancy Pelosi’s jaunt to Taipei. China also has a virtual stranglehold on the world supply of rare earth minerals, some crucial in strategic military applications, and can elect to restrict sales to the US. Most recently, the Pentagon was aghast to find that the engine of the F-35 fighter depends on rare-earth magnets made in China. This latest “discovery” shows the deep integration of the two major economies and the difficulty of disentangling and decoupling the two. It also can show the destructive power of paranoia in Washington. The wise old gnomes in the bowels of the Pentagon probably wouldn’t suggest tearing apart all the existing F-35s to remove the magnets from China, but could certainly see this matter as another “urgent” reason to increase the defense budget greatly in order to develop a domestic replacement. The hostile drumbeats from Washington reverberate within the echo chamber for the benefit of the handful of allies sitting inside, seemingly unaware of the ongoing peaceful cooperation between China and the rest of the world. It’s hard to know when the American people will say enough is enough and vote for a thorough reform of how Washington makes friends instead of enemies.

Chip industry’s virtuous circle made vicious by Biden’s policy- Forcing chip foundries to turn over internal files is a lose-lose proposition

First posted in Asia Times. A report of this posted appeared in China Daily. Chinese version posted in Sing Tao Daily. I commented on this subject in China Economic Net. Same piece also appeared in China Daily. Some years ago, before my retirement, I offered the observation that the semiconductor industry had become a remarkably virtuous circle across the world. As everyone knows, in a virtuous circle, all participants win. True enough, semiconductor technology was discovered and developed in California’s Santa Clara county, south of San Francisco, which is how it became known to the world as “Silicon Valley.” There Intel Corporation pioneered the advances in its microprocessor technology and created the mega personal-computer industry. Other entrepreneurs in the valley soon followed Intel, either to compete with better circuit designs or to develop complementary integrated circuits to expand the use of semiconductors in a multiplicity of applications. Thus the role of semiconductors proliferated into everyday use, and they now serve many essential functions not conceived by the original inventors. A recent example is the dependence on microchips to execute many functions in automobiles. A worldwide shortage of chips for cars has brought the manufacture of autos to a near standstill. The severe economic consequences of this stoppage have given US President Joe Biden’s administration the excuse to take unprecedented action; more on that later in this article. As the industry evolved, the mantra was to design and make every generation of chips faster, cheaper and smaller. The complexity of each generation raised the cost of making them exponentially. Today, the cost of fabricating (the industry’s term for producing chips) the most advanced devices is in the billions of dollars. Soon, companies in the US dropped out of making their own chips because of the escalating capital investment required to keep up. The techno-entrepreneurs concentrated on designing new devices for new applications. All that required was some computer-aided design stations and a group of smart circuit designers. TSMC fills a need Taiwan Semiconductor Manufacturing Company saw this developing industry trend and decided to concentrate on fabrication technology and kept committing the capital investments needed to keep up with the advances in process technology. TSMC’s strategy was to serve as everybody’s foundry and offer semiconductor fabrication as a service for a fee. To be credible, it promised strict confidentiality, to protect the client’s trade secrets and never to make its own devices to compete with its customers. The “fabless” companies rushed to Taiwan to take advantage of this win-win business arrangement. As a matter of self-interest, these companies willingly shared their know-how with TSMC to improve the manufacturing process so that TSMC steadily improved its fabrication techniques. The fabless companies received their proprietary chips at reasonable cost in a timely manner without a heavy capital commitment. Very quickly, TSMC became the world’s leading semiconductor foundry service company. Others followed suit and copied the TSMC model, but the Taiwanese company captured more than 50% of world’s chip-foundry business and maintained its grip as the leader of semiconductor manufacturing technology. Companies that have enjoyed great success taking advantage of the TSMC business model include Apple, Nvidia and Huawei. Apple designed proprietary chips for all of its product lines across the board and has them made in third-party foundries, mostly by TSMC. Nvidia is the world leader in designing chips for complex computational tasks such as in computer games, machine learning and artificial-intelligence applications and even for mining cryptocurrencies. TSMC is a major supplier of Nvidia’s chipsets. Huawei relied on TSMC’s advanced fabrication technology to make the Chinese company’s proprietary chips for its smartphones and, of course, for its fifth-generation (5G) telecommunication equipment. US, Taiwan and China form a virtuous circle For a while, this was a virtuous arrangement. Apple took its designs to Taiwan and assembled its chipsets into iPhones, iPads and computers in China and sold them worldwide. Nvidia had its chip designs made in Taiwan and also enjoyed worldwide sales. But then Huawei got too successful and became the world leader in 5G and a major supplier of smartphones. The former Donald Trump administration in the US thought the one way to stop Huawei was to deny it access to TSMC’s foundry services and also to any American-owned semiconductor technology. Trump’s successor Joe Biden has gone a step further by becoming the Godfather of the worldwide semiconductor industry and make an offer the foundries cannot refuse: Turn over your confidential files to the US Department of Commerce (DOC) or else we will stop you from operating. The foundries were given 45 days to comply after the September announcement, and it appears that the leaders, TSMC and Samsung, will comply and others will follow suit. Neither Taipei nor Seoul can stand up to Washington and fight this strong-armed unethical outrage. The US has long envied China’s ability to set industry policies in accordance to national priorities. Apparently, the latest DOC edict is Biden’s attempt to mimic Beijing and favor domestic industry, namely Intel, with policy and financial subsidy. TSMC will lose TSMC’s position in the industry will no doubt be diminished. It will not able to collaborate in the manner it was used to and now will only be able to serve its customers in China with great difficulty, if at all. Its covenants with its customer is in tatters. If TSMC relocates some of its facilities to the US to please Washington, it will face the same set of comparative disadvantages of having to operate in America that caused Intel to fall generations behind. Cutting off China will force that country to accelerate the development of indigenous semiconductor technology. It will be stymied for an interim period but in the end, China will have its own semiconductor production and market. As TSMC loses its luster, skilled management and technical personnel will seek opportunities elsewhere. Some might migrate to the US but more are likely to look for jobs in China, where they will not be penalized for language or cultural disconnect. It’s not at all certain that Intel can catch up to TSMC thanks to Washington’s assistance. Besides policy and financial subsidy, doing so will also require people with motivation and skillsets. In that respect, China far outnumbers the US. Washington seems to think its is playing a win-lose game. It doesn’t seem to appreciate that by cutting China off, American companies will be deprived of access to the largest market in the world. When the world’s semiconductor market is split into two, the halves will be less than the whole. Thus a virtuous circle will become dysfunctional, and everybody will lose.

Podcast discussion on Huawei, TSMC and Meng Wanzhou

https://podur.org/2020/06/18/aep-55-the-meng-wanzhou-case-part-3-with-george-koo/

China’s smartphone is paving the way to AI supremacy

I wrote the short piece below in early September to help publicize Kai-fu Lee's book and speaking tour.

Artificial intelligence (AI) used to be a popular sci-fi topic but the idea that the computer can do things that the human cannot, took a lot longer to come into reality.  Even today, AI is far from perfect; a self-driving car can still run over a pedestrian.

However, thanks to the development of deep learning in AI, Waymo, the self-driving startup spun off from Google, is already valued at well over $1 billion despite not yet having a commercial version that would replace the driver behind the wheel. Deep learning is the concept that the algorithm can self improve based on the date fed into the AI program. This is why Waymo vehicles constantly drive around Mountain View to generate more data and thus keep refining the computer model intended to replace the human driver.

According to Kai-fu Lee, within the last three years, deep learning has also enabled China to catch up to Silicon Valley in AI. Lee has just written a new book entitled, “AI Superpowers: China, Silicon Valley, and the New World Order,” in which he explains that China’s adoption of the smart phone and mobile computing has allowed China to catch up to Silicon Valley and in some situations even surpassed Silicon Valley.

Today 800 million smart phones in China are used in many more ways than in the US and thus can generate orders of magnitude of more data for their applications based on AI. For example, the smart phone in China can serve as a digital wallet to send and receive money. The homeless sitting on the sidewalk can panhandle by dangling the computer code for the passersby to scan by phone if they wish to donate to the panhandler’s bank account. The AI algorithm may not be as powerful as that written in Silicon Valley, but the availability of vast amounts of data can more than make up the difference.

After getting his PhD in AI from Carnegie Mellon, Dr. Lee joined Apple and led the development of the voice recognition system that became Siri. This was even before Steve Jobs rejoined the company. He then went to China to start R&D centers for Microsoft and Google before becoming a leading venture capital investor of AI startups in China. He is certain that AI will be as revolutionary to the world as the steam engine that led to the first industrial revolution and electricity to the second.

As part of his book tour, Dr. Lee will visit the Bay Area to talk about AI, the strides China has made and the implications for the world. He will speak at the Santa Clara Convention Center on September 26, jointly sponsored by The Committee of 100, The Commonwealth Club and NACD, northern California chapter. Go to
https://mailchi.mp/committee100/committee-of-100-upcoming-event-speaker-series-with-kai-fu-lee-on-ai?e=a984dceae2

For more information and to register.

The author is a retired international business consultant, a member of Committee of 100 and occasional contributor to online Asia Times.

 

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Leapfrog for Cchina to catch Silicon Valley in AI

Edited version first appeared in Asia Times.

Kai-fu Lee’s book on artificialIntelligencehttps://www.amazon.com/AI-Superpowers-China-Silicon-Valley-ebook/dp/B0795DNWCF will be published by Houghton Mifflin Harcourt in September and Dr. Lee is already scheduled to make several appearances in the Bay Area to talk about his book around the last week of September.

The full title of his book is “AI Superpowers: China, Silicon Valley, and the New World Order.” In his book, Lee makes the startling contention that within the last three years, China has caught up to Silicon Valley in AI. And, no, Mr. Trump, it’s not because the Chinese has stolen the algorithm from Google. Rather, China leapfrogged the US in mobile computing, which enabled China to take a different path to AI nirvana.

Dr. Lee is one of the pioneer creators and thinkers of artificial intelligence. After he obtained his doctorate degree in AI from Carnegie Mellon, he joined Apple in Cupertino to develop the voice recognition system and then left for China to build research centers of excellence for Microsoft and Google. Now he is the premier venture capitalist investing in AI startups in China.

Nowadays, artificial intelligence has become part of daily conversation, even if not everyone understands what AI is all about. Wall Street considers AI to be the latest winning investment in technology following the Internet and the smart phone. Lee believes development of AI is even more profound than that, equating the future impact of AI on the human civilization to be as fundamentally revolutionary as the invention of the steam engine that ignited the first industrial revolution and electricity for the second.

Deep learning raised the power of artificial intelligence

AI became a real emerging technology when researchers moved machine learning to the next level called “deep learning.” Properly designed algorithm, called neural network, can learn to fine tune its algorithm by repetitive trial and error calculations, at lightening speed, until the best solution is derived based on the data set fed to the algorithm. The bigger the data set that’s fed to the algorithm, the better is the resulting optimization and solution.

The importance of big data, explains Lee, has allowed China to close the gap with Silicon Valley in AI because China generates much more useful and higher quality data than in the US. Lee credits Steve Job and the introduction of the smart phone as the event that pushed China into AI development.

Observers in the West may not have noticed that as China’s economy grew at dizzying rates in the 40 years since reform began, the country leapfrogs certain crucial development along the way. Telecommunication is one such example. When China began its economic reform, its telecommunication network was woefully inadequate. The country was so under invested in copper wire lines overland that it was easier for the consumer to adopt the mobile phone rather than waiting for the allocation of a landline.

The smartphone facilitated China’s entry into AI

When Apple introduced the iPhone in 2007, China already had the largest number of mobile phones users in the world, and the users were primed to upgrade to a smartphone, albeit not always an iPhone but a lower priced, domestically made alternate. At the time most Chinese did not own a computer at home and the smartphone gave the Chinese user Internet access bypassing the need to buy a computer.

Chinese entrepreneurs quickly learn to develop apps specifically for the smartphone. For example, being decades behind the West, the use of credit card never really took off in China. Now with WeChat, considered a “superapp” by Lee, the smartphone can be linked to the owner’s bank account and the phone becomes a digital billfold able to make and receive payments.

The American AI monitors the user preferences such as what website the user visits. In China, Tencent, the owner of WeChat, can gather data not only on what the user looked at, but what he/she bought, from whom, where and when. The data collected is much higher quality and multi-faceted. In addition, China has at least 3 times more users generating data for feeding into AI optimization than in the US.

The author argues that while China remains behind the US on the creative side of writing AI algorithm, China has been closing the gap and in some aspects surpassing Silicon Valley for certain uses of AI. This has occurred within the most recent three years because China has been gushing high quality data derived from the smartphone.

Data drive the AI virtuous cycle

The vast quantity of quality date is helping China refine their AI, which helps to improve the product offering, which increases customer acceptance, which generates even more data to optimize the AI program. Lee calls this the virtuous cycle of AI whereby the availability of date would allow an inferior AI algorithm to surpass the performance of a superior AI that do not have access to as much data.

One example would suffice to illustrate the difference between China and the US. A program in China called Smart Finance has used AI and access to the user’s smartphone to determine the creditworthiness of the individual and grant the user a personal loan. No collateral, no credit report, no personal references, and no banking information are needed. And the single digit loan default rate is the envy of commercial banks.

Apparently AI correlation of hundreds of data points residing in the smartphone (Lee calls them weak features) can more accurately evaluate the reliability of the borrower, even if no human banker can fathom why. The iteration of AI over millions of smartphones have established predictive rules and the accuracy will only improve with use—and default becomes even more uncommon.

While ground breaking AI research will continue in the US, China is graduating upwards of a million AI engineers every year. They are motivated and will work long hours to find new products and services based on AI solutions. And the access to huge amount of data will more than offset their not being as good in designing the algorithm.

China’s leadership recognizes the importance of AI and has allocated financial support to encourage and further AI research. The US? Not so much federal support and America will continue to depend on private sector efforts. Private sector AI will remain proprietary and be kept behind closed doors.

The author does not express much anxiety over the possible rivalry between the US and China. He is much more concerned with eventual advances in AI that could lead to wide spread displacement of human by machines. Owners of the powerful AI could become members of a small elite class that enjoy all the wealth and status while an “useless” class of masses can no longer generate enough economic value to support themselves.

This is where Lee becomes very personal drawing from his own dramatic experience as a cancer survivor. He suggests that no matter how advanced AI becomes, it can never replace human interaction that offer love and compassion. He proposes that we begin to prepare for the day by placing higher priority and monetary value for socially beneficial activities. In other words a drastic and basic reordering of our value system based on humanity.

His book is a thoughtful treatise on the possible benefits and destructive damages AI poses to the world. Anyone wanting to understand the downside of unbridled AI advances on the humankind will find relevant questions and answers in this book.

The Committee of 100 is the cosponsor with the Commonwealth Club of Dr. Kai-fu Lee’s speaking engagement in Santa Clara on September 26. Go to here for more information. Dr. George Koo is a retired China business consultant and a regular contributor to online Asia Times.

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Chinese American Career Development in Silicon Valley

Below is the text of my speech given on July 9, 2016 at a career development conference sponsored by Chinese American Semiconductor Professionals Association held in Santa Clara.

Good afternoon everybody. I stopped going to work on a regular basis since 2008  (my ex-colleagues might even say it was earlier than 2008) and I got off the board of a large cap, NYSE listed public company in 2014. Other than writing occasional op-ed pieces for online Asia Times, I am enjoying my retirement.

We live in America, a society where old soldiers are quickly forgotten. So this is an unexpected surprise and pleasure to be invited to speak before you today.

Fortunately for me, we Chinese respect our elders and presume that they have grown wiser from the accumulation of life experiences and thus they are not to be quickly put into the dumpster. Also fortunate for me, I know Simon Ma and he invited me. So, thank you Simon.

I have lived in Silicon Valley practically before there was a Silicon Valley, since 1971, and I am delighted today to share with you some of my lessons learned.

 My talk today is roughly divided in four parts. First as brief as possible I need talk a little about my career to put what I have to say in proper context.

I certainly am not about suggest that what I have to say is the only path to enlightenment but I hope you could better understand my remarks in light of the life I’ve had.

Next, taking advantage of the vantage point of a senior citizen, I am going to tell you some stories of some of the Chinese America pioneers that broke the glass ceiling and pave the way for succeeding generations such as you folks in the audience to succeed.

I am honored and pleased to say that these individuals are contemporaries and friends of mine.

Of course, there is a price to be paid for success, whatever that might mean to each one of you individually. Since the theme of this conference is how to succeed, I can presume that you are all interested what that means.

So I plan to summarize for you what I think are the essential characteristics for success in your professional career.

Lastly, if you don’t already know and feel it already, America is not a level playing field for us Chinese. To have a successful career and not just a so-so career, you need to be sensitive and aware of how the field is tilted against you.

 As I have been writing my autobiography for my grandchildren, I reflect that I have been lucky and enjoyed the best of two worlds.

First, I finished 6^th grade in China and thus has a solid foundation in Chinese, which I was able to maintain by avidly reading 三国演义 (Romance of Three Kingdoms) and later on when I was in college, an endless supply of武侠小说 (martial arts novels).

Second, I was fortunate to get a scholarship and attend MIT and got a quality education.

Third, I met May Jen who became my wife without her love and support, I wouldn’t have a story to tell today.

I won’t bore you with the details of my life or professional career, but just to let you know that I started in a major American company, a predecessor of today’s Honeywell.

I was considered a rising star. The company did not have an organized education assistance program in those days but the corporate vice president in charge of R&D took me out to lunch one day and offered me leave with pay so that I can complete my doctorate degree while keeping my position at the company.

My Chinese language background, my technical background and my consulting experience enable me to jump off the normal career path to become an advisor to Corporate America on doing Chinese in China.

Thus I had the privilege of a front row seat as I witnessed the rise of China.

My China experience directly led to an invitation to serve of on the board of the world’s largest integrated resort/casino company in the world.

Throughout my working career I developed the knack to write clearly and succinctly. In putonghua, we would call it 一针见血 style.

In my retirement, I use my skill to become a regular contributor to online Asia Times where I strive to present a point of view representing Chinese in America and not the general mainstream public.

As I said at the beginning of my talk, this—hopefully you would consider it as brief—self-introduction is to give context to the rest of my presentation.

 When my family arrived as refugees from China in 1949, ethnic Chinese residing in America make up around one tenth of one percent of this country’s population.

By the time my wife and I immigrated to Silicon Valley from New Jersey, the Chinese population in America has just about tripled, but still a relatively insignificant number.

There was no such place known as Silicon Valley, just fruit orchards in Santa Clara. To buy Chinese groceries and have a dim sum lunch, we would need to drive into Chinatown in San Francisco.

Today we are around 4 million around the country. I can get groceries at Ranch 99 and dim sum lunch in downtown Mountain View, both about 1.5 miles away from home.

 Another way of looking at the Chinese American influence in Silicon Valley is to trace the formation of professional Chinese American organizations here.

The San Francisco chapter of the Chinese Institute of Engineers has been around for almost 100 years. My friend, the late Lester Lee, was a member, but I was not too familiar with this organization and their activities until today.

AAMA was established in 1980 by a bunch of technical types that gathered in the cafeteria of Lester Lee’s then company. The feeling that Asian Americans in the valley needed a mutual support network was the motivation to start AAMA.

I joined around 1983 and chaired a series of annual conferences on cross border strategic alliances starting in 1990 and became the chairman of the organization around 1996.

AAMA started out as Asian American Manufacturers’ Association. Somewhere along the way, the name was switched to Asian American Multi-technology Association because we don’t manufacture anything anymore but there was value in keeping the AAMA brand.

Ten years after AAMA, Monte Jade Science and Technology Association was established.  It was the idea of Zhuang Yi-der who was then head of Taiwan’s Science Division based in Silicon Valley. To this day, Monte Jade has the support of the Science Division.

The formation was a reflection of increasing presence of high tech companies from Taiwan in Silicon Valley and increasing presence of ex-pats here from Taiwan.  At the beginning and for a long time, the lingua franca at the dinner meetings was Putonghua. At AAMA meetings English was always the spoken language.

Shortly after Monte Jade, Chinese American Semiconductor Professional Association was established. Again this was a reflection of the dominating presence of Chinese engineers in the semiconductor industry both here in Silicon Valley and in Taiwan.

In fact some years later, Professor Annalee Saxenian of Berkley who studied the impact of immigrants on Silicon Valley made the observation that in Silicon Valley, IC stood for Indians and Chinese. Without these two groups of immigrants, the valley would implode.

Ten years after formation of Monte Jade came the formation of Hua Yuan Science and Technology Association. This time the founders came from PRC and they immediately became visible by hosting delegations from China to Silicon Valley. )

The most famous deal still talked about was struck between Jack Ma of Alibaba and Jerry Yang of Yahoo at a golf outing sponsored by HYSTA. At the time, Yahoo was the big brother and Alibaba the young upstart.

Last year I spoke at the first annual conference of The Society of Chinese Physician Entrepreneurs. The founder of SCAPE is a practicing physician affiliated with Stanford and the organization was founded in 2014.

I mentioned SCAPE just as the latest organization to be established in Silicon Valley that I am aware of and is an indicator of how much we Chinese like forming affiliations and associations, sort of professional 同乡会.

 Now I would like to tell you about some of the Chinese American pioneers that broke through the glass ceiling in Silicon Valley.

The earliest was David S. Lee (李信麟). In the late 60’s he started a printer company called Diablo Systems that was acquired by Xerox. As soon as his company was acquired, Xerox replaced him with a white guy because who have ever heard of a Chinese knowing how to manage.

So David left and started another printer company called Qume Systems. This was before ink jet or laser printers and David invented a daisy wheel printer.

Qume was acquired by ITT Corporation and this time, David was asked to stay and run the computer peripherals division. When IBM rolled out the PC, ITT asked David to lead the effort to compete with IBM.

To gain a competitive advantage, David took the PC designed by ITT to Taiwan and asked Acer and Mitac to make the PC as OEM supplier. That’s how those companies got into the PC business, and David came to be known as the father of Taiwan’s PC industry.

Since then David has gone on to start and run other companies, served on the board of many companies and on advisory boards of venture capital companies.

He also took time to serve as chairman of CIE, AAMA and Monte Jade. Very early on, after his reputation as a business leader was firmly established, he recognized the importance of being part of the American political process.

He along with Lester Lee and Stanley Wang, founder of Pantronix--one of your gold sponsors, would fund raise for political candidates. They would actively encourage and support Asian candidates regardless of party affiliation. Many others in Silicon Valley have since followed their example.

Because of his prominence and activism, he was appointed to serve on the board of regent of the UC university system for 12 years and he served on many presidential panels and commissions, appointed by both Republican and Democratic presidents.

After his PhD from MIT, David K. Lam landed in H-P in Silicon Valley. One day he noticed that all of the sudden, a white guy that used to report to him was made the manager over him.

David Lam resigned and started Lam Research in 1980 and he became the first Chinese American to take his company public in 1984. Those of you in CASPA would know that Lam Research is one of the major semiconductor manufacturing equipment companies in the world.

Similar to David Lee, this David has gone on to start other ventures, advise still more others and sit on board of some.

He also has sat in presidential and state level commissions. In the early 90’s, his leadership established AAMA as the preeminent Asian American professional organization in Silicon Valley.

One of his smartest moves, David convinced Pauline Lo Alker to assume the leadership of AAMA after him, which she did for the next four years from 1991-94.

Pauline was charismatic and a high-energy person. You would find it hard to say no to her. She got people energized and engaged in AAMA and she began an active mentoring program for the young professionals. Under her leadership, AAMA became known as the meeting place for valuable networking and relationship building.

Pauline began her career facing two handicaps. She was Asian and female. Even though she was trained in computer programming, her first job was as a typist in the computer department of GE.

Once given the opportunity to show her ability, she moved up quickly and landed a job in Silicon Valley. From technical positions she moved into sales and marketing and became the vice president for a workstation company called Convergent Technologies, a rising hot company in its days.

She then started a workstation company called Counterpoint, which was acquired by Acer, the Taiwan PC company. By the time she was leading AAMA, venture investors had recruited her to turn around the fortunes of Network Peripherals. She did that and took the company public.

At various times, Pauline has received national recognition as one of the most influential woman executive and role model for aspiring women in the high tech industry.

The above three individuals achieve their success as hugely capable entrepreneurs. Because of their accomplishments, Asian Americans are no longer perceived as just good engineers.

Because of their prominent success stories, the venture capitalists on Sand Hill Road no longer ignore Asians with business plans. These firms even began to hire partners with Asian faces.

I cannot begin to tell you how different Silicon Valley was before and after these pioneers made their mark. I honestly believe their record pave the way for all the others to follow.

John Chen was different. More than a decade younger, he was not an entrepreneur per se. Instead he showed that he knows how to manage and run companies and can turn sick companies into healthy ones.

When he was asked to take over Sybase in 1997, he already had a proven track record in senior management positions. Sybase was literally on a financial death spiral when he took over.

He changed the company business focus, returned the company to profitability and sold the company to SAP for almost $6 billion thirteen years later. He is now trying to do the same with Blackberry.

John sits on two major corporate boards, Disney and Wells Fargo as well a bunch of high tech start-ups and as trustee of a number of national NGOs.

He also led the fund raising drive to build the library in honor of Chancellor Tien Chang-lin at UC Berkeley.

Bob Lee basically climbed the corporate ladder within one company becoming the Executive Vice President of Pacific Bell. He retired after a 26-year career with the telecom company.

In his day, if you go by size of the company, he was the highest ranking corporate executive of Chinese ancestry in the San Francisco Bay Area.

He was chairman of the board of Blue Shield of California, served on the board of numerous smaller companies and non-profit groups. In particular he was active on the board of Asian Pacific Fund and Youth Tennis.

Both Bob and John Chen had served as past chairman of The Committee of 100, a national organization of prominent Chinese Americans.

Like Bob, Albert Yu is also a lifer who spent virtually his entire career in one company. In this case it was Intel.

The difference is that during his stint there, Intel grew from virtually a start-up to the leading semiconductor company in the word.

Albert led Intel’s effort in microprocessor development, the dominance of Intel’s microprocessor in the PC industry was the reason for Intel’s success. He clearly played a major role in Intel's rise.

After 30 years, Albert retired from Intel as their senior vice president. He wrote two books on management Intel style along with many technical papers.

After retirement, he continued to advise companies and sat on the boards of some of the companies in the valley.

His passion was mentoring Asian Americans. He organized mentoring sessions inside Intel and after his retirement he was active participant of mentoring programs organized by Monte Jade and others.

I save Ken Fong for last on this list because he started a company in biotech when electronics and semiconductors dominated the valley.

Secondly, like John Chen, Ken is not retired but actively working. He sold his company to Becton Dickinson for undisclosed hundreds of millions and he has been busy investing and coaching young biotech startups, both here in the US and in China.

Ken has been very generous with his wealth--not only writing checks for charitable causes, but he actively supports Asian American candidates running for political office.

Because of Ken being politically active, he was appointed to the board of trustees of the California State Universities. He was the second Chinese American to serve in this capacity. The first was Stanley Wang of Pantronics.

Ken and I are part of a team organizing a public forum co-sponsored by the Commonwealth Club where we present topics and speakers different from the usual American mainstream.

The topics involve sensitive areas on US China relations that we believe important for the American public to know more about. We have invited speakers from China and U.K. in this endeavor and Ken has generously underwritten the expenses in bringing the speakers over.

I have selected for discussion today the glass ceiling breakers that I knew personally and are friends of mine. I don’t claim this list to be all inclusive. I am sure there are others worthy of mention.

My point is that by breaking the glass ceiling, they made it easier for the many that have followed their footsteps.

 It should be obvious from the success stories I just told you that there is no single route to getting there. What they do have in common, however, is that they all gave back to their community in one way or the other.

Now, I would like to share with you what I think are essential attributes necessary to succeed. If you think about it, these are really quite self evident, so I am going to go over them quickly and we can always discuss any of them in depth during the panel discussion.

But first, what do we mean by success? It’s not the same for everybody. Some want to be famous. Others want to be rich or powerful or both. Still others want to be comfortable in his/her own skin.

Each of you has to decide for yourself.

Know yourself. What I mean is that each one of you needs to take a realistic look at yourself and have the ability to objectively identify your strengths and your weaknesses.

Know others to me means that you have solid interpersonal skills, you know how to establish rapport and empathy with others. You also know how to size up others and decide if their skills complement yours.

Both attributes are, in my view, important if you decide to start a new venture and need to build a team. You can’t find a team with complementary skills if you don’t know what skills you have and don’t know how to identify needed skills in others.

In America, everyone is selling him or herself all the time. You are constantly being evaluated on who you say you are. If you choose to be humble typical of a reticent Chinese; that might be OK in China but here you are putting yourself on discount.

Of course, you will need excellent presentation skills, verbally and also in writing.

Whether you are joining a young startup or a giant corporation, you need to know how to be a team player. Sometimes you are a member of the team and other times you might be leading the team. Either way, you need to help the team move together. This means no back stabbing, no forming factions, no acts of a lone ranger.

I might add that one of the best places to practice team building is to volunteer, such as one of these sponsoring organizations. Why? Because when everybody is a volunteer, there is no command structure, as you would have in a company. To get anything done and move together as a team, you have to have good persuasive skills.

To be a good leader, you must be willing to lead the charge up the hill and not sit in the back and order everybody else to face the enemy fire.

A good leader also knows how to be decisive and know when a decision has to be made and move on. Sometimes the timing is such that you are required to make decisions sooner than you’d like, but you have to have the will and confidence to make the tough calls.

One attribute that will help you being a decisive leader is the ability to think of contingencies. In other words, for every critical decision, you will have thought of alternative scenarios and what-ifs. In this way, if you make a wrong call, you will be in a position to know how to rectify the situation.

Last but not least, I believe it’s important to give back for several reasons. For one, you will feel better about yourself and that will show when you interact with others. For another, others have helped you on your climb to the top and you have a moral obligation to do the same.

 This is my last slide and I have two thoughts to leave with you.

Contrary to common wisdom, America is not a level playing field. Yes, America is the land of opportunity for anyone willing to work hard, but it does not mean that you will be treated the same way as the person next to you.

If you are Asian, if you don’t speak accent free English and if you not the assertive type, you can expect to put out 110% or even 120% of effort in order to get the same recognition and respect as the white person.

This is just the way it is. If you should be fortunate and work in a place where your race, accent and manner is not held against you, so much the better, but at least you should be prepared and ready to accept the bias as an added challenge.

Silicon Valley is more likely to be equitable than elsewhere in the United States. If you ever relocate to other parts of the country, you should be prepared to over come hidden and unconscious bias.

An even more insidious form of racial bias that you must be aware of is the U.S federal government considers each and every one of you a potential spy for China just and only because you are Chinese.

I am part of the task force in the Committee of 100 that goes around the country giving half-day workshops on how to avoid being a victim of racial profiling. We don’t have time to go into this today.

For the purpose of today’s discussion, let me simply give you some practical advice.

If you work in high tech or in government labs or even in academia, you should assume that someone is reading your email and listening in on your telephone conversation, and I don’t mean hackers from PRC. The initials I am thinking of are FBI, CIA or NSA or ATF or DEA.

I just heard on the public radio that since 9-11, we now have over 40 government agencies that are running undercover investigations. Not all of them are concentrating on Chinese espionage—thank goodness--but a sobering thought nonetheless.

You don’t want do anything that can be misinterpreted as something unsavory.

Just keep in mind that our law enforcement agencies are quick to jump to conclusion and in cases where national security is involved, you are presumed guilty and it’s up to you to prove that you are innocent.

If the FBI breaks down your door and want to question you, just remember that you have the right to remain silent and to legal counsel. Don’t make the naïve mistake of thinking that if you cooperate, you can extricate yourself and convince them that they have made a mistake.

When they come to see you, they are already convinced that you are guilty of something. Your agreeing to talk to them will simply give them additional opportunity to find flaws in what you said and accuse you of perjury and other charges. The only protection for you is for you to have your lawyer with you.

With that cheerful note, I am finished with my presentation and look forward to a vigorous panel discussion.