A picture of a microchip with a Chinese national flag on it.
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Escaping China’s silicon straightjacket

Protocol | China

Good morning. In this week's Protocol | China: Beijing seeks to leapfrog foreign chipmakers, online brokerages look like the next tech crackdown target, and a metaverse influencer "born" last month takes center stage.

Swap out your silicon?

China has a plan to leapfrog foreign chipmakers: waving "zai jian" to silicon.

There's a natural opening for China. Moore's Law — which observes that silicon chips' computing power doubles roughly every two years — won't hold forever. That's just fine with Beijing, which is leaning into the "post-Moore's law era," to borrow a phrase first used by Vice Premier Liu He in May. To technology leaders and government, it means the seemingly decades-long lead that foreign chipmakers have over China could be leapfrogged with new materials, reported Dave Yin in Protocol. They're leaning into it.

  • In August, China's Ministry of Industry and Information Technology unveiled plans to include "carbon-based materials" in its plan to achieve "breakthrough" technologies.
  • "We need more breakthroughs in theoretical research, especially in the fields of compound semiconductor and material science, which are led by the U.S. and Japan," Huawei founder Ren Zhengfei said during a private speech at an August innovation summit.

The inflection point for Beijing was 2014. That's the year Beijing announced its "Made in China" policy, aiming to achieve self-sufficiency in a number of core technologies. Among them: chips. Major subsidies for R&D in the semiconductor space have since followed.

  • Research by Protocol | China shows that something else changed in 2014: Before 2014, semiconductor standards issued by China's national domestic semiconductor equipment and materials standards body, Technical Committee 203, exclusively mentioned silicon — the basis of most modern chips — or, less frequently, germanium.
  • But since 2014, TC203 has diversified its standards to mention compound semiconductors such as gallium arsenide, gallium nitride, silicon carbide, gallium phosphide, indium antimonide and zinc oxide. About 20% of all standards it's considered or drafted in the past two years mention compound technology.
  • Beijing named two compound semiconductors (silicon carbide and gallium nitride) in its most recent five-year plan.

So the future isn't necessarily silicon-based. Compound semiconductors have several properties that compare favorably to silicon: They could be up to 100 times faster, have better thermal conductivity and require less energy. But they are significantly harder to manufacture right now. To be sure, China's not the only country keenly interested in compound semiconductors; but the potential shift away from silicon provides Beijing with an opening.

China's far behind in indigenous chip capacity. But it's clearly trying hard to catch up. And remember, it was decades behind the West economically and militarily, too, before substantially catching up in what feels like a flash.

On Protocol | China

Chinese tech companies are erasing Uyghur and Tibetan. With both Western regions considered "sensitive" hotbeds of ethnic tensions with the majority Han, Chinese tech companies like Bilibili have started simply blocking any posts or content using those languages. It's a brute-force approach with predictably brutish effects on those languages' long-term prospects. Protocol's China team has more.

New Oriental dropped education and turned to farming. Beijing's ed-tech crackdown has been so swift and so severe that it's essentially killed once-dominant companies in the space. The latest example is New Oriental, for years a giant in China's private education and test-prep industry (a company for which your host briefly worked as an English teacher in 2003). Now it's sending its employees to help hawk agricultural goods via ecommerce in the kind of pivot a firm makes in last-ditch survival mode. Shen Lu has more.

China went nuts when one of its teams won the League of Legends Tournament. Even casual fans or non-fans celebrated in the streets, indicating that esports has turned the corner to become a mainstream sport that wins hearts and minds. Zeyi Yang has the story.

A MESSAGE FROM DIALPAD

For years, people wrote off the contact center as a cost center. That's crazy. Contact centers are wells of information and insights. There's so much data in customer service calls, outbound sales calls, group meetings and one-to-ones. In fairness, it's technology, as much as perception, that's to blame.

Learn more

Big Brother Beijing

China's next tech crackdown: online brokerages. On Monday, the Economic Daily, an outlet controlled by the Central Committee of the Chinese Communist Party, called out Robinhood-like Chinese online brokerages for potentially "offering illegal financial activities" in China. The named cross-border brokerages — Futu Securities and Tiger Brokers — are both listed in the U.S. and are popular among Chinese investors who trade global stocks. The article alleged that these apps may be compromising users' personal data. This follows a mid-October warning from Party mouthpiece People's Daily about regulatory risks these platforms could soon face.

China's capital will join the blockchain. The municipal government of Beijing has set aside the equivalent of $37 million to build a blockchain platform for government affairs, Asia-focused tech outlet Forkast has reported. Once built, the "Beijing Municipal Experimental Blockchain Platform" will be used to store information like company registration, personal IDs, driver's licenses and household registrations. Beijing is currently inviting public bids for the project, so it will be some time before we can see how a Chinese blockchain governance platform will function.

Rules firm up for cross-border data flows. China's cyberspace watchdog recently released long-anticipated draft rules that clarify a security assessment process required before entities transfer data out of China's borders. Upon initial analysis of the draft rules, Stanford University's DigiChina project found that the concept of "data handler" that appeared in major draft data laws is now defined, but the definitions for the types of data that need to go through security assessments are still vague.

After-school tutoring will be back … sort of. The Wall Street Journal reported Monday that Beijing is planning to grant over a dozen licenses to tutoring firms that will allow them to provide after-school classes to primary and junior high school students. The companies will need to run this part of their businesses on a nonprofit basis, but they can profit from other activities. This doesn't mean after-school tutoring will be back to the pre-crackdown state, because licensed companies still need to comply with strict rules on tutoring; for example, they can't offer subject-based courses on weekends and holidays.

China goes global

Crypto refugees seek a second home. Binance and Huobi, two prominent crypto exchanges that started in China, are both in the process of finding a friendly regime to host their operations. Binance's co-founder Yi He told Insider that the company has a shortlist of five countries, some in Europe, as potential locations for Binance's physical headquarters. Meanwhile, Huobi announced it will move its spot trading operations to Gibraltar, a British territory that's been courting crypto firms. The location could become a regional hub for Huobi to service the European market, Jeff Mei, Huobi's director of Global Strategy, told Protocol.

SoftBank lost big from China's tech crackdown. Japanese tech investor SoftBank has lost at least $54 billion in net assets over the past three months, in large part due to Beijing's relentless crackdown on the tech sector, according to The Wall Street Journal. SoftBank is heavily invested in Chinese tech, and owns nearly 25% of ecommerce behemoth Alibaba, which has become one of the biggest targets of regulatory scrutiny. SoftBank also took a loss from its investment in DiDi. "It is a time of severe trials for China's high-tech stocks," CEO Masayoshi Son said at a Tokyo news conference. "We are right in the middle of a storm."

Forget "wumao." New firms are selling Chinese propaganda for profit. China's desire to tell a favorable story about itself overseas has resulted in a growing market for private propaganda, displacing the once-ubiquitous "wumao," those government servants who posed as pro-Beijing commenters online. After analyzing hundreds of Chinese government procurement announcements related to overseas social media, analyst Maggie Baughman has found that private companies are pivoting their business models to meet Beijing's new need to "tell its story." One example is the Beijing-based Yiqilian, a marketing firm that makes heavy use of Facebook and has carried out tourism promotion campaigns for several Chinese provincial governments.

Straight from China's web

Recruitment in China's Big Tech sector is slowing. Chinese tech publication LatePost has found that the increase in both the number of jobs and the salaries that seven large Chinese tech firms posted this year slowed compared to last year's growth rate. The seven companies are Alibaba, Baidu, Pinduoduo, Meituan, ByteDance, Kuaishou and Tencent, among which Alibaba and Kuaishou saw the slowest growth.

Retirement? What's that? How do big Chinese tech companies treat their retired employees? Some day, we'll find out; many companies have not even thought about it at all because they are so overwhelmingly young. But last Friday, Tencent announced its formal retirement package for the first time. According to Chinese publication LatePost, the average age of Tencent employees is 35, so there are still 35 years ahead for them before they can enjoy their benefits.

Meet China's biggest metaverse influencer. This past week's big social media star in China was Liu Yexi, a computer-generated personality launched as a "metaverse makeup influencer" on Halloween. Just 10 days and two videos on Douyin later, Liu has already accumulated 4 million followers, Chinese publication InYouMedia reported. The unthinkably fast ascension of Liu, backed by a heavy investment in CGI technology and a company that has successfully launched several virtual idols, is another example of how metaverse and influencer marketing is merging in China, as Protocol's Shen Lu reported in October.

One more thing

Greetings, time-space companions. Citizens across China have started receiving text message warnings from local governments about COVID-19 risks as new outbreaks occur across 20 provinces. The messages contain a curious new term: "time and space companions" (时空伴随者). There's no unified definition of the term. But according to local CDC officials in Chengdu, it is defined as anyone who has been in relative proximity to a COVID-positive person for more than 10 minutes, as determined via cell phone signals. Anyone who's detected as a "time-space companion" needs to get an immediate test to see if they're also positive.

Correction, Nov. 10, 2021: An earlier version of this article misattributed some Protocol | China research. That attribution has been removed.

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