Ren Zhengfei, the reclusive founder and CEO of China’s embattled tech giant, Huawei, is defiant about American efforts to impede his company with lawsuits and restrictions.
“There is no way the US can crush us,” Ren said in a rare recent interview with international media. “The world cannot leave us because we are more advanced.”
It might sound like bluff and bluster, but these words carry a measure of truth. Huawei’s technology road map, especially in the field of artificial intelligence, points to a company that is progressing more rapidly—and on more technology fronts—than any other business in the world. Apart from its AI aspirations, Huawei is an ascendant player in the next-generation 5G wireless networking market, as well as the world’s second-largest smartphone maker behind Samsung (and ahead of Apple).
“The [Chinese] government and private sector approach is to build companies that compete across the full tech stack,” says Samm Sacks, who specializes in cybersecurity and China at New America, a Washington think tank. “That’s what Huawei is doing.”
But it’s Huawei’s AI strategy that will give it truly unparalleled reach across the whole of the tech landscape. It will also raise a host of new security issues. The company’s technological ubiquity, and the fact that Chinese companies are ultimately answerable to their government, are big reasons why the US views Huawei as an unprecedented national security threat.
In an exclusive interview with MIT Technology Review, Xu Wenwei, director of the Huawei board and the company’s chief strategy and marketing officer, touted the scope of its AI plans. He also defended the company’s record on security. And he promised that Huawei would seek to engage with the rest of the world to address emerging risks and threats posed by AI.
Xu (who uses the Western name William Xu) said that Huawei plans to increase its investments in AI and integrate it throughout the company to “build a full-stack AI portfolio.” Since Huawei is a private firm, it’s tricky to quantify its technology investments. But officials from the company said last year that it planned to more than double annual R&D spending to between $15 billion and $20 billion. This could catapult the company to between fifth and second place in worldwide spending on R&D. According to its website, some 80,000 employees, or 45% of Huawei’s workforce, are involved in R&D.
Huawei’s vision stretches from AI chips for data centers and mobile devices to deep-learning software and cloud services that offer an alternative to those from Amazon, Microsoft, or Google. The company is researching key technical challenges, including making machine-learning models more data and energy efficient and easier to update, Xu said.
But Huawei is struggling to convince the Western world that it can be trusted. The company faces accusations of intellectual-property theft, espionage, and fraud, and its deputy chairwoman and CFO (and Ren’s daughter), Meng Wanzhou, is currently under house arrest in Canada, awaiting possible extradition to the US. America and several other countries have banned the sale of Huawei’s devices or are considering restrictions, citing concerns that Huawei’s 5G equipment that could potentially be exploited by the Chinese government to attack systems or slurp up sensitive data.
Xu defended the company’s reputation: “Huawei’s record on security is clean.”
But AI adds another dimension to such worries. Machine-learning services are a new source of risk, since they can be exploited by hackers, and the data used to train such services may contain private information. The use of AI algorithms also makes systems more complex and opaque, which means security auditing is more challenging.
As part of an effort to reassure doubters, Xu promised that Huawei would release a code of AI principles in April. This will amount to a promise that the company will seek to protect user data and ensure security. Xu also said Huawei wants to collaborate with its international competitors, which would include the likes of Google and Amazon, to ensure that the technology is developed responsibly. It is, however, unclear whether Huawei might allow its AI services to be audited by a third party, as it has done with its hardware.
“Many companies across the industry, including Huawei, are developing AI principles,” Xu told MIT Technology Review. “For now, we know at least three things for certain: technology should be secure and transparent; user privacy and rights should be protected; and AI should facilitate the development of social equality and welfare.”
As Huawei advances in AI and progresses toward its aim of becoming a “full stack” company, however, it may increasingly seem too powerful for many in the West.
Already, it boasts a dizzying array of offerings. Last year, Huawei launched an AI chip for its smartphones, called Ascend, that is comparable to a chip found in the latest iPhones, and tailor-made for running machine-learning code that powers tasks like face and voice recognition. The technology for the chip came from a startup called Cambricon, which was spun out of the Chinese Academy of Sciences, but Huawei recently said it would design future generations in-house.
Huawei also sells a range of AI-optimized chips for desktops, servers, and data centers. The chips lag behind those offered by Nvidia and Qualcomm (both US companies) in terms of sophistication, but no other business can boast such a range of AI hardware.
Then there’s the software. Huawei offers a cloud computing platform with 45 different AI services—similar in scope to offerings by Western giants like Google, Amazon, and Microsoft. In the second quarter of 2019, Huawei will also release its first deep-learning framework, called MindSpore, which will compete with the likes of Google’s Tensorflow or Facebook’s PyTorch.
AI is also woven into Huawei’s ambitions to provide the 5G equipment that will connect everything from industrial machinery to self-driving cars. “We need to use AI to reduce maintenance costs,” Xu said. “Telecom networks are becoming more and more complex—70% of network failures are caused by human errors, and if we use AI in network maintenance, over 50% of potential failures can be predicted.”
Xu’s statements on AI ethics are also, in a sense, part of an effort to lead the world’s AI development. Ensuring ethical AI will mean crafting technical standards, which will be important to shaping the future of the technology itself. The United States has exerted an outsize influence over its development of the internet through technical standards.
To that end, the Chinese Association for Artificial Intelligence, a state-run organization, set up a committee earlier this year to draft a national code of AI ethics. Several of China’s big tech companies, including Baidu, Alibaba, and Tencent, also have initiatives dedicated to understanding the impact of AI.
Agreeing on AI ethics and standards could prove a challenge as tensions between East and West escalate, however. A number of national governments, as well as organizations like the EU, are also seeking to set the rules of the road. “AI brings value as well as problems and confusions,” Xu told MIT Technology Review. “Global collaboration is needed to address these problems.”
And international collaboration is not exactly a forte of the US right now. Indeed, outside of its own borders, the American government can do only so much to hamper Huawei. Some allies are apparently tiring of US strong-arm tactics; the UK and Germany both seem increasingly unlikely to ban Huawei from supplying 5G equipment and other products and services.
The company’s interest in ingratiating itself with wary countries also has its limits. In recent comments its CEO, Ren, contended that the international picture is changing, at least in technological terms. “If the lights go out in the West, the East will still shine,” he said. “And if the North goes dark, there is still the South. America doesn’t represent the world. America only represents a portion of the world.”
Either way, there will be Huawei.
These ten enterprise M&A deals totaled over $40B in 2019
It would be hard to top the 2018 enterprise M&A total of a whopping $87 billion, and predictably this year didn’t come close. In fact, the top 10 enterprise M&A deals in 2019 were less than half last year’s, totaling $40.6 billion. This year’s biggest purchase was Salesforce buying Tableau for $15.7 billion, which would…
It would be hard to top the 2018 enterprise M&A total of a whopping $87 billion, and predictably this year didn’t come close. In fact, the top 10 enterprise M&A deals in 2019 were less than half last year’s, totaling $40.6 billion.
This year’s biggest purchase was Salesforce buying Tableau for $15.7 billion, which would have been good for third place last year behind IBM’s mega deal plucking Red Hat for $34 billion and Broadcom grabbing CA Technologies for $18.8 billion.
Contributing to this year’s quieter activity was the fact that several typically acquisitive companies — Adobe, Oracle and IBM — stayed mostly on the sidelines after big investments last year. It’s not unusual for companies to take a go-slow approach after a big expenditure year. Adobe and Oracle bought just two companies each with neither revealing the prices. IBM didn’t buy any.
Microsoft didn’t show up on this year’s list either, but still managed to pick up eight new companies. It was just that none was large enough to make the list (or even for them to publicly reveal the prices). When a publicly traded company doesn’t reveal the price, it usually means that it didn’t reach the threshold of being material to the company’s results.
As always, just because you buy it doesn’t mean it’s always going to integrate smoothly or well, and we won’t know about the success or failure of these transactions for some years to come. For now, we can only look at the deals themselves.
Jumia, DHL, and Alibaba will face off in African ecommerce 2.0
The business of selling consumer goods and services online is a relatively young endeavor across Africa, but ecommerce is set to boom. Over the last eight years, the sector has seen its first phase of big VC fundings, startup duels and attrition. To date, scaling e-commerce in Africa has straddled the line of challenge and…
The business of selling consumer goods and services online is a relatively young endeavor across Africa, but ecommerce is set to boom.
Over the last eight years, the sector has seen its first phase of big VC fundings, startup duels and attrition.
To date, scaling e-commerce in Africa has straddled the line of challenge and opportunity, perhaps more than any other market in the world. Across major African economies, many of the requisites for online retail — internet access, digital payment adoption, and 3PL delivery options — have been severely lacking.
Still, startups jumped into this market for the chance to digitize a share of Africa’s fast growing consumer spending, expected to top $2 billion by 2025.
African e-commerce 2.0 will include some old and new players, play out across more countries, place more priority on internet services, and see the entry of China.
But before highlighting several things to look out for in the future of digital-retail on the continent, a look back is beneficial.
Jumia vs. Konga
The early years for development of African online shopping largely played out in Nigeria (and to some extent South Africa). Anyone who visited Nigeria from 2012 to 2016 likely saw evidence of one of the continent’s early e-commerce showdowns. Nigeria had its own Coke vs. Pepsi-like duel — a race between ventures Konga and Jumia to out-advertise and out-discount each other in a quest to scale online shopping in Africa’s largest economy and most populous nation.
Traveling in Lagos traffic, large billboards for each startup faced off across the skyline, as their delivery motorcycles buzzed between stopped cars.
Covering each company early on, it appeared a battle of VC attrition. The challenge: who could continue to raise enough capital to absorb the losses of simultaneously capturing and creating an e-commerce market in notoriously difficult conditions.
In addition to the aforementioned challenges, Nigeria also had (and continues to have) shoddy electricity.
Both Konga — founded by Nigerian Sim Shagaya — and Jumia — originally founded by two Nigerians and two Frenchman — were forced to burn capital building fulfillment operations most e-commerce startups source to third parties.
That included their own delivery and payment services (KongaPay and JumiaPay). In addition to sales of goods from mobile-phones to diapers, both startups also began experimenting with verticals for internet based services, such as food-delivery and classifieds.
While Jumia and Konga were competing in Nigeria, there was another VC driven race for e-commerce playing out in South Africa — the continent’s second largest and most advanced economy.
E-tailers Takealot and Kalahari had been jockeying for market share since 2011 after raising capital in the hundreds of millions of dollars from investors Naspers and U.S. fund Tiger Global Management.
So how did things turn out in West and Southern Africa? In 2014, the lead investor of a flailing Kalahari — Naspers — facilitated a merger with Takealot (that was more of an acquisition). They nixed the Kalahari brand in 2016 and bought out Takelot’s largest investor, Tiger Global, in 2018. Takealot is now South Africa’s leading e-commerce site by market share, but only operates in one country.
In Nigeria, by 2016 Jumia had outpaced its rival Konga in Alexa ratings (6 vs 14), while out-raising Konga (with backing of Goldman Sachs) to become Africa’s first VC backed, startup unicorn. By early 2018, Konga was purchased in a distressed acquisition and faded away as a competitor to Jumia.
Jumia went on to expand online goods and services verticals into 14 Africa countries (though it recently exited a few) and in April 2019 raised over $200 million in an NYSE IPO — the first on a major exchange for a VC-backed startup operating in Africa.
Jumia’s had bumpy road since going public — losing significant share-value after a short-sell attack earlier in 2019 — but the continent’s leading e-commerce company still has heap of capital and generates $100 million in revenues (even with losses).
Airbnb’s New Year’s Eve guest volume shows its falling growth rate
Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between. It’s finally 2020, the year that should bring us a direct listing from home-sharing giant Airbnb, a technology company valued at tens of billions of dollars. The company’s flotation will be a key event in…
Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
It’s finally 2020, the year that should bring us a direct listing from home-sharing giant Airbnb, a technology company valued at tens of billions of dollars. The company’s flotation will be a key event in this coming year’s technology exit market. Expect the NYSE and Nasdaq to compete for the listing, bankers to queue to take part, and endless media coverage.
Given that that’s ahead, we’re going to take periodic looks at Airbnb as we tick closer to its eventual public market debut. And that means that this morning we’re looking back through time to see how fast the company has grown by using a quirky data point.
Airbnb releases a regular tally of its expected “guest stays” for New Year’s Eve each year, including 2019. We can therefore look back in time, tracking how quickly (or not) Airbnb’s New Year Eve guest tally has risen. This exercise will provide a loose, but fun proxy for the company’s growth as a whole.
Before we look into the figures themselves, keep in mind that we are looking at a guest figure which is at best a proxy for revenue. We don’t know the revenue mix of the guest stays, for example, meaning that Airbnb could have seen a 10% drop in per-guest revenue this New Year’s Eve — even with more guest stays — and we’d have no idea.
So, the cliche about grains of salt and taking, please.
But as more guests tends to mean more rentals which points towards more revenue, the New Year’s Eve figures are useful as we work to understand how quickly Airbnb is growing now compared to how fast it grew in the past. The faster the company is expanding today, the more it’s worth. And given recent news that the company has ditched profitability in favor of boosting its sales and marketing spend (leading to sharp, regular deficits in its quarterly results), how fast Airbnb can grow through higher spend is a key question for the highly-backed, San Francisco-based private company.
- 2009: 1,400
- 2010: 6,000 (+329%)
- 2011: 3,1000 (+417%)
- 2012: 108,000 (248%)
- 2013: 250,000 (+131%)
- 2014: 540,000 (+116%)
- 2015: 1,100,000 (+104%)
- 2016: 2,000,000 (+82%)
- 2017: 3,000,000 (+50%)
- 2018: 3,700,000 (+23%)
- 2019: 4,500,000 (+22%)
In chart form, that looks like this:
Let’s talk about a few things that stand out. First is that the company’s growth rate managed to stay over 100% for as long as it did. In case you’re a SaaS fan, what Airbnb pulled off in its early years (again, using this fun proxy for revenue growth) was far better than a triple-triple-double-double-double.
Next, the company’s growth rate in percentage terms has slowed dramatically, including in 2019. At the same time the firm managed to re-accelerate its gross guest growth in 2019. In numerical terms, Airbnb added 1,000,000 New Year’s Eve guest stays in 2017, 700,000 in 2018, and 800,000 in 2019. So 2019’s gross adds was not a record, but it was a better result than its year-ago tally.
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