Enterprise

Profits over politics: AWS and Microsoft execs warn of China’s AI threat while growing AI hubs inside China

The two biggest U.S. cloud companies are expanding their artificial intelligence and cloud services in China despite warnings of China’s AI threat from their own executives.

AWS balancing act

AWS is balancing profit potential in China with AI risk its own CEO warned about.

Illustration: Christopher T. Fong/Protocol

There’s no law against U.S. companies developing AI in China, but the two biggest U.S. cloud companies are expanding their artificial intelligence and cloud-related efforts there despite warnings from their own executives about the AI-related threats posed by China’s government.

AWS is hiring for several AI engineering roles based in China. The company, which has two AI development labs in the country, says it has a “long-term commitment in China.” At the same time, Amazon’s CEO and former AWS chief Andy Jassy recently sat on an influential national commission that argued the U.S. was at risk of losing its technology leadership position to China as AI developments advance there.

According to Amazon’s company job postings, AWS is looking for data scientists and other AI and machine-learning specialists in Beijing, Shanghai and Shenzen. Parent company Amazon is also hiring for technical AI positions in those cities.

“You will be at the heart of a growing and exciting focus area for AWS and work with other acclaimed engineers and world-famous scientists,” states one job description for an applied scientist position in Shanghai. The gig calls on a PhD-level engineer or computer scientist to join the company’s “tip-of-the-arrow tech leaders” to work on “high visible, high impact AI/ML projects for Chinese customers” and interact closely with customers and the academic community there. The company also seeks applied scientist interns with experience in AI such as natural-language processing to work at Hengtong Business Park, a large office space in Beijing.

Academic AI researchers historically have ignored borders and politics, instead collaborating globally in search of scientific advancement. Tech corporations developing AI often are reliant on researchers with academic ties. And, of course, corporations sometimes disregard inconvenient political considerations that get in the way of profits.

But geopolitical voices are growing louder in the conversation around AI advancement. China’s national efforts to develop -- and in some ways, control – corporate AI and other emerging tech worry people throughout Western governments concerned about China’s use of facial recognition and algorithmic social scoring, flagrant human rights abuses and the increased potential for AI-fueled military dominance.

In fact, AI tech leaders – including representatives of AWS, Microsoft and Google – recently played an integral role as members of a U.S. commission that published an influential report in 2021 which cautioned against letting China surpass the U.S. in AI technology development.

Still, all the while, in discordance with that message, AWS and Microsoft have eagerly expanded their efforts to supply and harness the raw materials for advanced AI development inside China.

Amazon declined to comment for this story. Microsoft did not respond to requests to comment for this story.


Locally sourced AI and data

AWS dominates cloud market share in the U.S., but its cloud business is much smaller in the China market. There, AWS is usually lumped into the “others” category amid the biggest players: Chinese tech giants Alibaba, Huawei, Tencent and Baidu.

As AWS grows its AI talent in China, the company has also expanded its cloud capabilities there, a necessary component for much of today’s data and compute-heavy AI projects. The company added a third cloud region where it provides cloud services in the country in June, with separate data center facilities offering redundant power, networking and connectivity to customers in China.

In China, localization is mandatory. Rather than providing services to customers directly, AWS is legally required by China to provide its services through China-based partners. The company partners with operator and service providers Beijing Sinnet Technology and Ningxia Western Cloud Data Technology in order to meet local government ownership, regulatory licensing and cybersecurity requirements.

Building a cloud and adjacent AI business in China requires that local data be accessible on local servers, said Tracy Tsai, a research vice president for technology product management at Gartner Research. “Localization with local data and custom models for local application, use cases and ecosystem are essential for AI models if AWS wants to grow its cloud business in China, especially for local Chinese customers,” she said.

AI needs data, and because customers in China want customized technologies, much of the data used to build AI to meet their needs must be locally sourced. For one thing, that requires Chinese language support for automatic speech recognition to serve industries with unique jargon such as health care, oil and gas or manufacturing, said Tsai.

When companies do business in China, everything needs to be “contextualized and localized, even when it comes to holding client reports and building tables for data,” said Mark Donatelli, managing partner at marketing data technology consultancy Cimply, who recently served as senior vice president of global data strategy at IPG-owned Kinesso. “Sometimes that means actually connecting via terminal to that data in China so you can run queries and build and train AI,” he said.

Because of those data infrastructure requirements, Donatelli said, it makes sense that AWS is hiring people in China to build AI. “They love heavy engineering nerds,” he said of Amazon, “and China just has so many hands on keyboards and so much national effort into winning from an engineering standpoint.”

AI developed in China is likely to directly or indirectly become part of the overall product strategy for companies, said Tara Murphy Dougherty, CEO of Govini, which provides a machine-learning-based system to help government agencies find and select tech providers. “The way technology companies, especially these tech companies, operate is they’re unlikely doing custom work that doesn’t drive their overall portfolio of intellectual property and technology development,” she said.

Still, China’s restrictions on AI and other technology could get in the way when it comes to transferring data and tech back to the U.S., said an export controls lawyer who spoke on condition of anonymity. “It’s possible that technologies that are developed by AWS in China could be subject to Chinese export controls when that technology is going to be transported to Seattle or wherever,” said the lawyer.

National security meets big cloud AI

China’s national efforts to develop AI and other emerging technologies were a serious concern at the National Security Commission on AI, a short-lived federal initiative launched in 2020 to review the state of AI and machine learning in the U.S., including risks associated with AI-related military advances by foreign countries.

“We take seriously China’s ambition to surpass the United States as the world’s AI leader within a decade,” wrote the commission in a lengthy March 2021 report. “If the United States does not act, it will likely lose its leadership position in AI to China in the next decade and become more vulnerable to a spectrum of AI-enabled threats from a host of state and non-state actors,” it cautioned, calling the fight over the soul of AI a matter of preserving values such as human rights and individual liberty.

Jassy was a member of the commission, which culminated in October 2021. So was Google Cloud Vice President and General Manager for AI and Industry Solutions, Andrew Moore.

Moore said the work of the commission was not intended to deter collaboration between the U.S. and China in AI development.

Recalling his time on the commission, Moore told Protocol last week, “There were several discussions where there was general agreement that no one is suggesting that the United States sort of cut ties with Chinese AI research.” Cross-border academic research among people in the U.S. and China is “friendly,” he said, but continued, “It is also watched. That big AI conferences and technology organizations are watching. Yes, there’s big participation by the U.S., there’s big participation by China and by many other countries, and it is kind of used as a barometer of scientific progress.”

Google opened an AI research center in China in 2017, but the company said it shut it down two years later. "We do not conduct AI research in China and are not hiring AI employees or interns there,” said a Google spokesperson. “Additionally, we do not offer Google Cloud Platform in mainland China. To operate their cloud services in mainland China, foreign cloud providers are required to partner with an approved local company. Unlike other companies, we have not done so."

Microsoft also had a representative on the National Security Commission on AI: its chief scientific officer Eric Horvitz, who focuses on AI, machine learning and natural language understanding technologies at the company.

And of the three, Microsoft may be the most entrenched in China. The company has fostered and invested in AI research and development there for decades through its Microsoft Research Asia center founded in 1998. More recently in 2018, Microsoft established its government-funded, public-private “AI innovation hub” in Shanghai. The company also is seeking out computer scientists to work in Beijing on its deep-learning AI cloud infrastructure projects.

“Many C-level executives, founders of the major high tech Chinese companies, are from [Microsoft Research Asia] Beijing,” said Tsai, who said hiring AI talent in China is necessary to produce deep-learning models. “Diversity of data, talent, product team and cultural understanding are all relevant and crucial for any big deep-learning model,” she said.

“The reason we [went] to China, is because we wanted to expand [Microsoft Research]. And then, we know China has a huge number of raw talent on top of that,” said Dr. Hsiao-Wuen Hon, managing director, corporate vice president and chairman of Microsoft’s Asia-Pacific research and development group in a 2018 Microsoft podcast. “To a large extent, we contributed a big part to the effort to bring China to the world class research landscape,” he said.

Amazon’s Washington state neighbor now aims to expand its cloud operations in China. Microsoft said in March it will expand its Azure cloud services, including its AI services, to a new region in North China this year through its partnership with 21Vianet, the local operator it has collaborated with to run cloud services there since 2014.

“The bottom line is the Chinese government could walk into any of those data centers, and they do, and look at everything,” said Dan Harris, a lawyer with Harris Bricken, which works with companies doing business in China.

“The bottom line is the Chinese government could walk into any of those data centers, and they do, and look at everything.”

Tech and data at risk?

At Amazon’s annual AWS re:Invent conference in 2019, participants were invited to visit the AWS China Region booth to learn about the AWS China Gateway and have a chance at winning a cute souvenir: an AWS ball cap adorned with a stuffed panda cuddling up on its brim. By then, AWS had sold its cloud services to China-based and multinational companies in China for six years.

In that time, the company has facilitated AI development there. Amazon’s China Gateway website says the company has “2 labs in Shenzhen and Shanghai to support the high demands and rapid development on IoT and artificial intelligence,” and notes the company’s “Long-term commitment in China.” The site emphasizes the company’s compliance with China’s legal and regulatory requirements which demand that AWS services be located in mainland China, “physically and logically” separated from other AWS Regions.

Swag from the AWS China Region booth at the AWS Re:Invent conference in 2019 Swag from the AWS China Region booth at the AWS Re:Invent conference in 2019Image: Amazon

Plenty of customers work with AWS in China, where the company offers several of its cloud applications, including CodeBuild and CodeDeploy, which can be used to automate and deploy custom machine-learning models. The company has listed China’s mobile tech company Papaya and crypto company Binance among customers. Toyota, Siemens and SoftBank Robotics Group also have used AWS China services. SoftBank Robotics' China team works with AWS to operate robots used in retail stores, education, banking and elder care settings. Siemens has used it for its Smart Home IoT home monitoring service.

A 2019 Amazon presentation showed the steps necessary for customers to be certified to use AWS services in China, which include applying for a state-issued internet content provider number through local AWS partners. That number, provided by the Ministry of Industry and Information Technology of the People’s Republic of China, allows companies to publish web applications in the country.

A 2019 Amazon presentation shows the process required for customers to be certified to use AWS partner services in China. A 2019 Amazon presentation shows the process required for customers to be certified to use AWS partner services in China.Image: Amazon

“They all want the money, and they’re not going to not serve the Chinese market, and if they have to build the AI in a separate bubble they will,” said Donatelli.

China's government has signaled interest in collecting data from private companies, including foreign multinationals. Already, multiple data exchange platforms employed to trade data – including data used to build AI -- have been set up throughout the country, some with backing from city or provincial governments and ministries. Amazon’s SEC filings acknowledge “substantial uncertainties” regarding interpretation of the People’s Republic of China’s laws and regulations.

“I don’t think they’re blind to [the risks]; they don’t want to talk about it,” said Harris of companies developing AI in China. “The thing is, companies generally are concerned with only their bottom line, and that’s what the shareholders are concerned with, so if it’s not illegal, they’re doing it.”

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