Li Yuan
The acquisition this month by ride-hailing company Didi Chuxing
Technology of Uber Technologies' China operation was a reminder of
how strong Chinese tech companies have become domestically at
outmaneuvering foreign rivals.
But the biggest buzz in China's internet industry isn't about
besting global tech giants by better adapting existing business
models for the Chinese market. Rather, it's about competing
head-to-head with the U.S. and other tech powerhouses in the
hottest area of technological innovation: artificial
intelligence.
Venture capitalists have been pouring money into startups
focused on AI, which broadly refers to efforts to make computers
emulate human cognitive functions such as recognizing speech or
images. Chinese tech companies such as search giant Baidu have been
investing heavily in the technology, and poaching high-level talent
from foreign rivals.
Enthusiasts of the technology in China say those resources,
along with some particular advantages in China, such as the sheer
volume of data generated by its enormous population of internet
users, makes this an area where China can excel.
"China is poised to be a leader in AI because of its great
reserve in AI talent, excellent engineering education and massive
market for AI adoption," says Kai-Fu Lee, a former Microsoft and
Google executive who is now chief executive of Sinovation Ventures.
The firm, formerly known as China's Innovation Works, has invested
$100 million in 25 AI-related startups in the U.S. and China in the
past three years.
AI's application in business is at a relatively early stage
globally, and it's still too early to predict the victors.
Deep-pocketed U.S. tech titans including Microsoft, International
Business Machines and Google parent Alphabet also are plowing
resources into AI. Google made a splash in that area earlier this
year when its AlphaGo AI machine beat a South Korean grandmaster at
the chess-like game of Go.
But Chinese AI experts are winning international accolades, too.
MIT Technology Review listed Baidu as No. 2 on its list of the 50
smartest companies in 2016, after Amazon.com. The editors cited the
Chinese company's AI work, particularly in speech recognition,
where it's teaching its system to process spoken words sometimes
more accurately than people can.
Baidu said Wednesday that its speech-recognition software
performed three times faster than humans for English language, with
a lower error rate, in a joint experiment the company did with
Stanford University pitting the software against 32 people typing
text on smartphones.
Baidu's Institute of Deep Learning set up a Silicon Valley lab
in 2013 so it could compete with Google, Apple and Facebook for
talent. Baidu's AI efforts today are headed by Andrew Ng, an
adjunct professor at Stanford who led an AI project at Google and
co-founded online-education company Coursera before Baidu tapped
him as chief scientist in 2014. Mr. Ng says he joined Baidu because
of its early and intense focus on AI.
Beyond optimizing its search engine and enhancing its ability to
recognize voice, Baidu also is applying AI to automobiles, aiming
to mass-produce a driverless car in five years. The company last
year spent 10.2 billion yuan ($1.5 billion), or 15% of revenue, on
research and development, of which AI is a crucial part. By
comparison, Alphabet spent $12.3 billion on R&D, or 16% of
revenue.
An advantage Chinese companies have is an enormous internet-user
base of nearly 700 million -- a pool that's largely off-limits to
foreign companies such as Google because China's government blocks
many of their services. More users and more usage mean more data.
And China generally has weaker data-protection rules than the U.S.,
industry insiders say, making the information even more valuable.
"In AI, if you have a lot more data, you'll be standing at a much
higher starting point," says Sinovation's Mr. Lee.
The relative lack of technological sophistication in China's
traditional industries also gives AI companies opportunities in
China that can help sustain startups. 4Paradigm Data Tech, founded
by a former Baidu deep-learning programmer, has in just a year
amassed more than a dozen banking and insurance customers,
including state lenders such as China Merchants Bank. 4Paradigm
helps customers develop AI software to match customers and services
more efficiently.
Didi's founder and chief executive, Cheng Wei, is among those
advocating that China focus intensely on AI. Speaking to government
officials and administrators in May, he said the first half of the
internet age -- in which companies raced to connect computing
machines with people -- has finished. "The second half is about
artificial intelligence," he said.
Didi, which raised $7.3 billion in its latest fundraising effort
in June and had about $10.5 billion in disposable funds, has
established a Didi Research center to focus on AI technologies
including machine learning and computer vision. The company hopes
the technologies optimize its dispatch system and route planning. A
few hundred scientists work on the deep-learning technologies, it
says.
For Mr. Cheng, competition with the U.S. in AI has significant
implications. In his speech, he said China missed opportunities to
build its own successful operating systems for computers and
smartphones, areas dominated by Microsoft, Apple and Google. He
warned his audience not to miss the next opportunity in driverless
cars, which use AI to enable navigation.
"Google's driverless technology leads the world, and autonomous
driving is the operating system of cars," he said. "If we don't
stand up to [the] challenge, we may have to use American technology
[again] in the future."
--Follow
Li Yuan
on Twitter @LiYuan6 or write to li.yuan@wsj.com.
(END) Dow Jones Newswires
August 24, 2016 12:12 ET (16:12 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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