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  • Chip wars: How ‘chiplets’ are emerging as a core part of China’s tech strategy

    Chip wars: How ‘chiplets’ are emerging as a core part of China’s tech strategy

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    July 13 (Reuters) – The sale of struggling Silicon Valley startup zGlue’s patents in 2021 was unremarkable except for one detail: The technology it owned, designed to cut the time and cost for making chips, showed up 13 months later in the patent portfolio of Chipuller, a startup in China’s southern tech hub Shenzhen.

    Chipuller purchased what is referred to as chiplet technology, a cost efficient way to package groups of small semiconductors to form one powerful brain capable of powering everything from data centers to gadgets at home.

    The previously unreported technology transfer coincides with a push for chiplet technology in China that started about two years ago, according to a Reuters analysis of hundreds of patents in the U.S. and China and dozens of Chinese government procurement documents, research papers and grants, local and central government policy documents and interviews with Chinese chip executives.

    Industry experts say chiplet technology has become even more important to China since the U.S. barred it from accessing advanced machines and materials needed to make today’s most cutting edge chips, and now largely underpins the country’s plans for self-reliance in semiconductor manufacturing.

    “U.S.-China competition is on the same starting line,” Chipuller chairman Yang Meng said about chiplet technology in an interview with Reuters. “In other (chip technologies) there is a sizeable gap between China and the United States, Japan, South Korea, Taiwan.”

    Barely mentioned before 2021, Chinese authorities have highlighted chiplets more frequently in recent years, according to a Reuters review. At least 20 policy documents from local to central governments referred to it as part of a broader strategy to increase China’s capabilities in “key and cutting-edge technologies”.

    “Chiplets have a very special meaning for China given the restrictions on wafer fabrication equipment,” said Charles Shi, a chip analyst for brokerage Needham. “They can still develop 3D stacking or other chiplet technology to work around those restrictions. That’s the grand strategy, and I think it might even work.”

    Beijing is rapidly exploiting chiplet technology in applications as diverse as artificial intelligence to self-driving cars, with entities from tech giant Huawei Technologies to military institutions exploring its use.

    More major investments in the area are on the way, according to a review of corporate announcements.

    CHINA’S CHIPLET ADVANTAGE

    Chiplets, or small chips, can be the size of a grain of sand or bigger than a thumbnail and are brought together in a process called advanced packaging.

    It is a technology the global chip industry has increasingly embraced in recent years as chip manufacturing costs soar in the race to make transistors so small they are now measured in the number of atoms.

    Bonding chiplets tightly together can help make more powerful systems without shrinking the transistor size as the multiple chips can work like one brain.

    Apple’s high-end computer lines use chiplet technology, as do Intel and AMD’s more powerful chips.

    About a quarter of the global chip packaging and testing market sits in China, according to Dongguan Securities.

    While some say this gives China an advantage in leveraging chiplet technology, Chipuller chairman Yang cautioned the proportion of China’s packaging industry that could be considered advanced was “not very big”.

    Under the right conditions, chiplets that are personalised according to the needs of the customer can be completed quickly, in “three to four months, this is the unique advantage China holds,” according to Yang.

    Needham’s Shi said according to import data published by China’s customs agency, China’s purchase of chip packaging equipment soared to $3.3 billion in 2021 from its previous high of $1.7 billion in 2018, although last year it fell to $2.3 billion with the chip market downturn.

    Since early 2021 research papers on chiplets started surfacing by researchers of the Chinese military People’s Liberation Army and universities it runs, and state-run and PLA-affiliated laboratories are looking to use chips made using domestic chiplet technology according to six tenders published over the past three years.

    Public documents by the government also show millions of dollars worth of grants to researchers specializing in chiplet technology, while dozens of smaller companies have sprouted throughout China in recent years to meet domestic demand for advanced packaging solutions like chiplets.

    CHIPLETS ON THE TABLE

    Against the backdrop of escalating U.S.-China tension, Chinese company Chipuller acquired 28 patents either owned by zGlue or invented by people whose names are on zGlue’s patents, according to an analysis using IP management technology firm Anaqua’s Acclaim IP database.

    The acquisition was through a two-step transfer, first through British Virgin Islands-registered North Sea Investment Co Ltd, according to documents seen by Reuters and confirmed by Yang.

    The Committee on Foreign Investment in the United States (CFIUS), a powerful Treasury-led committee that reviews transactions for potential threats to U.S. security, did not respond to a Reuters request for comment about whether such sales would require their approval.

    CFIUS lawyers Laura Black at Akin’s Trade Group, Melissa Mannino at BakerHostetler and Perry Bechky at Berliner Corcoran & Rowe say patent sales alone would not necessarily give CFIUS authority over the deal, as it depends whether the assets purchased constitute a U.S. business.

    Representative Mike Gallagher, an influential lawmaker whose select committee on China has pressed the Biden administration to take tougher stances on China, told Reuters zGlue’s case highlights the “urgent need to reform CFIUS”.

    “(People’s Republic of China) entities should not be able to act with impunity to take advantage of distressed U.S. firms to transfer their IP to China,” he said in an emailed statement.

    Chipuller’s Yang said zGlue’s lawyer communicated with both CFIUS and the Department of Commerce to ensure the sale to North Sea would not fall foul of export controls.

    These discussions did not include mention of Chipuller or the possibility of a Chinese entity ending up in possession of the patents, according to a Chipuller spokesperson.

    “Everything was done very transparently and in accordance with (U.S.) law,” Yang said.

    Yang said he considered himself a founder of zGlue as he became an investor in the company in 2015, soon after its formation, and later became a director and chairman.

    CFIUS visited zGlue offices in 2018 to conduct an investigation because the company’s largest non-U.S. investor, Yang, was from China, the chairman said.

    “So we have spent a lot of time communicating with CFIUS,” Yang said, adding that Chipuller currently does not supply any Chinese military or U.S.-sanctioned entities.

    Chipuller isn’t the only firm with chiplet technology.

    Huawei, China’s tech and chip design giant that has been put on the U.S.’s most restricted list, has been actively filing chiplet patents.

    Huawei published over 900 chiplet-related patent applications and grants last year in China, up from 30 in 2017, according to Anaqua’s director of analytics solutions Shayne Phillips.

    Huawei declined to comment.

    Reuters identified over a dozen announcements over the past two years for new factories or expansions of existing ones from companies using chiplet technology in manufacturing across China’s tech sector, representing an investment totalling over 40 billion yuan.

    They include domestic giants TongFu Microelectronics (002156.SZ) and JCET Group (600584.SS), as well as fast-growing startups such as Beijing ESWIN Technology Group, which spent 5.5 billion yuan on a factory for its chiplet-focused subsidiary that began operating in April.

    One article published in May by an outlet run by China’s Ministry of Industry and Information Technology (MIIT) urged big Chinese tech firms the use of domestic packaging companies such as TongFu to help build China’s self-sufficiency in computing power.

    “Use Chiplet technology to break through the United States’ siege of my country’s advanced process chips,” it said.

    MIIT did not respond to a request for comment.

    Chipuller chairman Yang puts it this way: “Chiplet technology is the core driving force for the development of the domestic semiconductor industry,” he said on the company’s official WeChat channel. “It is our mission and duty to bring it back to China.”

    ($1 = 7.2205 Chinese yuan renminbi)

    Reporting by Jane Lanhee Lee and Eduardo Baptista; Additional reporting by Echo Wang and Stephen Nellis; editing by Kenneth Li, Brenda Goh and Lincoln Feast.

    Our Standards: The Thomson Reuters Trust Principles.

    Reports on global trends in computing from covering semiconductors and tools to manufacture them to quantum computing. Has 27 years of experience reporting from South Korea, China, and the U.S. and previously worked at the Asian Wall Street Journal, Dow Jones Newswires and Reuters TV. In her free time, she studies math and physics with the goal …

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  • Indian PM Modi wraps up Washington trip with appeal to tech CEOs

    Indian PM Modi wraps up Washington trip with appeal to tech CEOs

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    WASHINGTON, June 23 (Reuters) – Indian Prime Minister Narendra Modi met with U.S. and Indian technology executives in Washington on Friday, the final day of a state visit where he agreed new defense and technology cooperation and addressed challenges posed by China.

    U.S. President Joe Biden rolled out the red carpet for Modi on Thursday, declaring after about 2-1/2 hours of talks that their countries’ economic relationship was “booming.” Trade has more than doubled over the past decade.

    Biden and Modi gathered with CEOs including Apple’s (AAPL.O) Tim Cook, Google’s (GOOGL.O) Sundar Pichai and Microsoft’s (MSFT.O) Satya Nadella.

    Also present were Sam Altman of OpenAI, NASA astronaut Sunita Williams, and Indian tech leaders including Anand Mahindra, chairman of Mahindra Group, and Mukesh Ambani, chairman of Reliance Industries, the White House said.

    “Our partnership between India and the United States will go a long way, in my view, to define what the 21st century looks like,” Biden told the group, adding that technological cooperation would be a big part of that partnership.

    Observing that there were a variety of tech companies represented at the meeting from startups to well established firms, Modi said: “Both of them are working together to create a new world.”

    Modi, who has appealed to global companies to “Make in India,” will also address business leaders at the Kennedy Center for Performing Arts.

    The CEOs of top American companies, including FedEx (FDX.N), MasterCard (MA.N) and Adobe (ADBE.O), are expected to be among the 1,200 participants.

    NOT ‘ABOUT CHINA’

    The backdrop to Modi’s visit is the Biden administration’s attempts to draw India, the world’s most populous country at 1.4 billion and its fifth-largest economy, closer amid its growing geopolitical rivalry with Beijing.

    Modi did not address China directly during the visit, and Biden only mentioned China in response to a reporter’s question, but a joint statement included a pointed reference to the East and South China Seas, where China has territorial disputes with its neighbors.

    Farwa Aamer, director for South Asia at the Asia Society Policy Institute, in an analysis note described that as “a clear signal of unity and determination to preserve stability and peace in the region.”

    Alongside agreements to sell weapons to India and share with it sensitive military technology, announcements this week included several investments from U.S.-firms aimed at spurring semiconductor manufacturing in India and lowering its dependence on China for electronics.

    White House national security spokesperson John Kirby said the challenges presented by China to both Washington and New Delhi were on the agenda, but insisted the visit “wasn’t about China.”

    “This wasn’t about leveraging India to be some sort of counterweight. India is a sovereign, independent state,” Kirby said at a news briefing, adding that Washington welcomes India becoming “an increasing exporter of security” in the Indo-Pacific.

    “There’s a lot we can do in the security front together. And that’s really what we’re focused on,” Kirby said.

    Some political analysts question India’s willingness to stand up to Beijing over Taiwan and other issues, however. Washington has also been frustrated by India’s close ties with Russia while Moscow wages war in Ukraine.

    DIASPORA TIES

    Modi attended a lunch on Friday at the State Department with Vice President Kamala Harris, the first Asian American to hold the No. 2 position in the White House, and Secretary of State Antony Blinken.

    In a toast, Harris spoke of her Indian-born late mother, Shyamala Gopalan, who came to the United States at age 19 and became a leading breast cancer researcher.

    “I think about it in the context of the millions of Indian students who have come to the United States since, to collaborate with American researchers to solve the challenges of our time and to reach new frontiers,” Harris said.

    Modi praised Gopalan for keeping India “close to her heart” despite the distance to her new home, and called Harris “really inspiring.”

    On Friday evening, Modi will address members of the Indian diaspora, many of whom have turned out at events during the visit to enthusiastically fete him, at times chanting “Modi! Modi! Modi!” despite protests from others.

    Activists said Biden had failed to strongly call out what they describe as India’s deteriorating human rights record under Modi, citing allegations of abuse of Indian dissidents and minorities, especially Muslims. Modi leads the Hindu nationalist Bharatiya Janata Party (BJP) and has held power since 2014.

    Biden said he had a “straightforward” discussion with Modi about issues including human rights, but U.S. officials emphasize that it is vital for Washington’s national security and economic prosperity to engage with a rising India.

    Asked on Thursday what he would do to improve the rights of minorities including Muslims, Modi insisted “there is no space for any discrimination” in his government.

    “There is no end to data that shows Modi is lying about minority abuse in India, and much of it can be found in the State Department’s own India country reports, which are scathing on human rights,” said Sunita Viswanath, co-founder Hindus for Human Rights, an advocacy group.

    Reporting by Steve Holland, Simon Lewis and Jeff Mason; additional reporting by Trevor Hunnicutt, Doina Chiacu, David Brunnstrom and Kanishka Singh; Editing by Don Durfee and Grant McCool

    Our Standards: The Thomson Reuters Trust Principles.

    Jeff Mason

    Thomson Reuters

    Jeff Mason is a White House Correspondent for Reuters. He has covered the presidencies of Barack Obama, Donald Trump and Joe Biden and the presidential campaigns of Biden, Trump, Obama, Hillary Clinton and John McCain. He served as president of the White House Correspondents’ Association in 2016-2017, leading the press corps in advocating for press freedom in the early days of the Trump administration. His and the WHCA’s work was recognized with Deutsche Welle’s “Freedom of Speech Award.” Jeff has asked pointed questions of domestic and foreign leaders, including Russian President Vladimir Putin and North Korea’s Kim Jong Un. He is a winner of the WHCA’s “Excellence in Presidential News Coverage Under Deadline Pressure” award and co-winner of the Association for Business Journalists’ “Breaking News” award. Jeff began his career in Frankfurt, Germany as a business reporter before being posted to Brussels, Belgium, where he covered the European Union. Jeff appears regularly on television and radio and teaches political journalism at Georgetown University. He is a graduate of Northwestern University’s Medill School of Journalism and a former Fulbright scholar.

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  • Analysis: China’s intensifying nuclear-armed submarine patrols add complexity for U.S., allies

    Analysis: China’s intensifying nuclear-armed submarine patrols add complexity for U.S., allies

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    HONG KONG, April 4 (Reuters) – China is for the first time keeping at least one nuclear-armed ballistic missile submarine constantly at sea, according to a Pentagon report – adding pressure on the United States and its allies as they try to counter Beijing’s growing military.

    The assessment of China’s military said China’s fleet of six Jin-class ballistic missile submarines were operating “near-continuous” patrols from Hainan Island into the South China Sea. Equipped with a new, longer-range ballistic missile, they can hit the continental United States, analysts say.

    The note in the 174-page report drew little attention when it was released in late November, but shows crucial improvements in Chinese capabilities, according to four regional military attaches familiar with naval operations and five other security analysts.

    Even as the AUKUS deal will see Australia field its first nuclear-powered submarines over the next two decades, the constant Chinese ballistic missile patrols at sea pile strain on the resources of the United States and its allies as they intensify Cold War-style deployments.

    “We’re going to want to have our SSNs trying to tail them… so the extra demands on our assets are clear,” said Christopher Twomey, a security scholar at the U.S. Naval Postgraduate School in California, speaking in a private capacity. SSN is a U.S. designation for a nuclear-powered attack sub. “But the point here is that the information – the near continuous patrols – has changed so rapidly that we don’t know what else has changed.”

    The new patrols imply improvements in many areas, including logistics, command and control, and weapons. They also show how China starting to operate its ballistic missile submarines in much the same way the United States, Russia, Britain and France have for decades, military attaches, former submariners and security analysts say.

    Their “deterrence patrols” allow them to threaten a nuclear counterattack even if land-based missiles and systems are destroyed. Under classic nuclear doctrine, that deters an adversary from launching an initial strike.

    The Chinese subs are now being equipped with a third-generation missile, the JL-3, General Anthony Cotton, the commander of the U.S. Strategic Command, told a congressional hearing in March.

    With an estimated range of more than 10,000 kilometres (6,214 miles) and carrying multiple warheads, the JL-3 allows China to reach the continental United States from Chinese coastal waters for the first time, the Pentagon report notes.

    Previous reports had said the JL-3 was not expected to be deployed until China launched its next-generation Type-096 submarines in coming years.

    The Chinese defence ministry did not respond to a request for comment on the Pentagon report and its submarine deployments. The Pentagon did not comment on its earlier assessments or whether the Chinese deployments posed an operational challenge.

    The U.S. Navy keeps about two dozen nuclear-powered attack subs based across the Pacific, including in Guam and Hawaii, according to the Pacific Fleet. Under AUKUS, U.S. and British nuclear-powered subs will be deployed out of Western Australia from 2027.

    Such submarines are the core weapons for hunting ballistic missile subs, backed by surface ships and P-8 Poseidon surveillance aircraft. The U.S. also has seabed sensors in key sea lanes to help detect submarines.

    Timothy Wright, a defence analyst at London’s International Institute for Strategic Studies, said U.S. forces could probably cope with the situation now, but would have to commit more assets in the next 10 to 15 years once the stealthier Type-096 patrols begin.

    China’s rapid expansion of its nuclear forces mean U.S. strategists must contend with two “nuclear peer adversaries” for the first time, along with Russia, he added.

    “That will be of concern to the United States because it will stretch U.S. defences, hold more targets at risk, and they will need addressing with additional conventional and nuclear capabilities,” he said.

    COMMAND AUTHORITY

    China’s navy has for years been thought to have the capability for deterrence patrols, but issues with command, control and communications have slowed their deployment, the military attaches and analysts say. Communications are crucial and complex for ballistic missile subs, which must remain hidden as part of their mission.

    The Jin-class subs, expected to be replaced by the Type-096 over the next decade, are relatively noisy and easy to track, the military attaches said.

    “Something concerning command authority must have also changed, but we just don’t have very good opportunities to talk to the Chinese about this kind of stuff,” Twomey said.

    The Chinese military has emphasised that the Central Military Commission, headed by President Xi Jinping, is the only nuclear command authority.

    Hans Kristensen, director of the nuclear information project at the Federation of American Scientists, said he believed command and communications issues remained a “work in progress”.

    “While China probably has made progress on establishing secure and operationally meaningful command and control between the Central Military Commission and the SSBNs, it seems unlikely that the capability is complete or necessarily fully battle hardened,” he said, using the designation letters for a nuclear-powered ballistic missile submarine.

    Two researchers at a Chinese navy training institute in Nanjing warned in a 2019 underwater-warfare journal of poor command organisation and co-ordination among submarine forces. The paper also urged improvements in submarine-launched nuclear strike capability.

    The navy must “strengthen ballistic missile nuclear submarines on patrol at sea, so as to ensure that they have the means and capabilities to carry out secondary nuclear counterattack operations when necessary,” the researchers wrote.

    SOUTH CHINA SEA ‘BASTION’

    With the advent of the JL-3 missile, Kristensen and other analysts expect Chinese strategists to keep their ballistic missile subs in the deep waters of the South China Sea – which China has fortified with a string of bases – rather than risk patrols in the Western Pacific.

    Collin Koh, a security fellow at Singapore’s S. Rajaratnam School of International Studies, said China could keep its ballistic missile submarines in a “bastion” of protected waters near its shores.

    “If I was the planner, I would want to keep my strategic deterrence assets as close to me as possible, and the South China Sea is perfect for that,” Koh said.

    Russia is thought to keep most of its 11 ballistic missile submarines largely in bastions off its Arctic coasts, while U.S., French and British boats roam more widely, three analysts said.

    Kristensen said the more numerous Chinese submarine deployments have meant the PLA and U.S. militaries increasingly “rub up” against each other – increasing the odds of accidental conflict.

    “The Americans of course are trying to poke into that bastion and see what they can do, and what they need to do, so that is where the tension can build and incidents happen,” he said.

    Reporting By Greg Torode in Hong Kong and Eduardo Baptista in Beijing; Additional reporting by Idrees Ali in Washington; Editing by Gerry Doyle.

    Our Standards: The Thomson Reuters Trust Principles.

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  • Apple CEO praises China’s innovation, long history of cooperation on Beijing visit

    Apple CEO praises China’s innovation, long history of cooperation on Beijing visit

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    SHANGHAI, March 25 (Reuters) – Apple (AAPL.O) CEO Tim Cook on Saturday used his first public remarks on his visit to China to praise the country for its rapid innovation and its long ties with the U.S. iPhone maker, according to local media reports.

    Apple (AAPL.O) CEO Tim Cook on Saturday used his first public remarks in China in recent years to praise the country for its rapid innovation and its long ties with the U.S. iPhone maker, according to local media reports.

    Cook is in Beijing to attend the China Development Forum, a government-organised event being held again in full force after the country ended its COVID controls late last year.

    Besides Cook, the event is being attended by senior government officials as well as CEOs of firms such as Pfizer and BHP.

    “Innovation is developing rapidly in China and I believe it will further accelerate,” Cook was quoted by The Paper news outlet as saying.

    His visit comes at a time of rising tensions between Beijing and Washington and as Apple has been looking to reduce its supply chain reliance on China and moving production to new up and coming centres such as India.

    Last year, production at the world’s largest iPhone factory run by Apple supplier Foxconn was heavily disrupted after China’s zero-COVID policies fuelled worker unrest.

    Cook also visited an Apple Store in Beijing on Friday, pictures of which went viral on Chinese social media.

    During his speech, Cook also discussed education and the need for young people to learn programming critical thinking skills, announcing that Apple plans to increase spending on its rural education programme to 100 million yuan, the local media reports said.

    Reporting by Brenda Goh

    Our Standards: The Thomson Reuters Trust Principles.

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  • Analysis: China’s massive older chip tech buildup raises U.S. concern

    Analysis: China’s massive older chip tech buildup raises U.S. concern

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    OAKLAND, Calif./SHANGHAI/WASHINGTON Dec 13 (Reuters) – China’s largest chip maker SMIC (0981.HK) is ramping up production of a decade-old chip technology, key to many industries’ supply chains, setting off alarm bells in the United States and prompting some lawmakers to try to stop them.

    The United States and allied nations could further step up restrictions if China announces a trillion yuan ($144 billion) support package for its chip industry, as Reuters exclusively reported on Tuesday, said TechInsights’ chip economist Dan Hutcheson.

    Starting with the Trump administration, the United States has been tightening the noose around China’s high-tech ambitions. It cut off the world’s largest telecommunications firm Huawei Technologies from the U.S. market and technologies, as well as cut off air supply to China’s advanced chip making through a series of rules this year.

    But why worry about older chip technology?

    China, which in 2020 had 9% of the global chip market, has a track record of dominating key technologies by flooding the market with cheaper products and wiping out global competition, say China watchers.

    They did it with solar panels and 5G telecom equipment, and could do it with older technology chips, said Matt Pottinger, former Deputy National Security Advisor of the United States during the Trump administration who has been studying chip policy at the Hoover Institution.

    “It would give Beijing coercive leverage over every country and industry – military or civilian – that depend on 28 nanometer chips, and that’s a big, big chunk of the chip universe,” he said.

    “28 nanometer” refers to a chip technology commercially used since 2011. It is still widely used in automotive, weapons and the explosive category of internet of things gadgets, said Hutcheson.

    Hutcheson, who has been monitoring chip production capacity for four decades, said the concern is that Semiconductor Manufacturing International Corp (0981.HK) and other chipmakers in China could use government subsidies to sell chips at a low price. And a possible new round of financial support from Beijing would increase chip production even further.

    “The Chinese could just flood the market with these technologies,” he said. “Normal companies can’t compete, because they can’t make money at those levels.”

    U.S. LAWMAKERS PUSHING AGAINST SMIC

    Those concerns have pushed some lawmakers to use legislation for setting the defense budget hold back SMIC.

    While the measure is weaker than what was initially proposed, this week U.S. Senators are expected to pass the annual National Defense Authorization Act 2023 that includes a section barring the U.S. government from using chips from SMIC and two other Chinese memory chip makers. It is not clear what impact the restriction, which kicks in five years after it becomes law, will have on SMIC.

    Founded in 2000 with backing from Beijing, SMIC has long struggled to break into the ranks of the world’s leading chip manufacturers.

    But it is a giant in older technology, including chips that regulate power flows in electronics. And its revenue was close to $2 billion in the third quarter this year, roughly double the same period last year on the back of the global chip shortage.

    SMIC FILLING SUPPLY GAP

    With U.S. export controls making it impossible to produce advanced chips, SMIC is doubling down on mature technology chips and has announced four new facilities, or fabs, since 2020. When those come online, it would more than triple the company’s output, estimates Samuel Wang, Gartner chip analyst. He said there is a huge ramp up in new chip fabs across China.

    “All this will start to have an impact from early 2024 and will be full blown by 2027,” said Wang, adding the chip supply increase will put downward pressure on chip prices.

    The importance of older chip technology hit the industry in the face in 2021 as a shortage of those chips prevented manufacturing of millions of cars and consumer electronics.

    Mark Li, Bernstein Research’s chip analyst in Asia, said the company is becoming a formidable competitor to Taiwan’s UMC Microelectronics Corp (6615.T) and U.S.-headquartered GlobalFoundries Inc (GFS.O).

    “SMIC has been much more willing to add capacity than other fabs at the low-end, and especially in this shortage we’ve seen in the past two years,” he says. “It’s not an issue now…but who knows, maybe in a few years there will be another shortage and capacity will be a big problem.”

    ($1 = 6.9430 Chinese yuan renminbi)

    Reporting By Jane Lanhee Lee in Oakland, Calif and Josh Horwitz in Shanghai, and Alexandra Alper in Washington D.C.; Editing by Josie Kao

    Our Standards: The Thomson Reuters Trust Principles.

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  • Exclusive: U.S. to remove some Chinese entities from red flag list soon, U.S. official says

    Exclusive: U.S. to remove some Chinese entities from red flag list soon, U.S. official says

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    WASHINGTON, Dec 14 (Reuters) – The Biden administration plans to remove some Chinese entities from a red flag trade list, a U.S. official told Reuters on Wednesday amid closer cooperation with Beijing.

    The plan to remove them soon from the so-called “unverified” list is thanks to greater willingness from the Chinese government to permit U.S. site visits, the person said.

    The Commerce Department declined to comment.

    Reuters could not determine the number or names of entities designated for removal.

    The decision signals a degree of renewed cooperation between Washington and Beijing, the world’s largest economies which are locked in a heated trade and technology war.

    The decision, which mean U.S. exporters will no longer have to conduct additional due diligence before sending goods to the Chinese entities, may not herald a broader thaw.

    Asked about the decision at a Chinese foreign ministry briefing on Thursday, spokesman Wang Wenbin said they urged the United States to stop taking unfair and discriminatory practices against certain Chinese companies.

    “China will continue to uphold the legitimate and justified interests of Chinese companies,” he said.

    The Biden administration is also expected to add Chinese memory chipmaker YMTC to a tougher export control list as soon as this week, according to another person familiar with the matter.

    YMTC did not immediately respond to a request for comment.

    Companies are added to the unverified list because the United States cannot complete on-site visits to determine whether they can be trusted to receive sensitive U.S. technology exports. Such U.S. inspections in China require the approval of China’s commerce ministry.

    Under new rules announced in October, if a government prevents U.S. officials from conducting site checks at companies on the unverified list, Washington may after 60 days add them to the entity list, which means much tougher penalties.

    “The goal of (that rule) was to drive better behavior from countries that were not allowing end-use checks,” U.S. export control chief Alan Estevez said at an event earlier this month. “We are seeing better behavior,” he said, specifically singling out Beijing.

    In October, YMTC was added to the unverified list along with dozens of other Chinese entities, fueling widespread speculation that the company would be added to the entity list. Suppliers are barred from shipping U.S. technology to entity-listed companies unless the suppliers can attain a difficult-to-obtain license.

    A person familiar with the matter said YMTC was among some companies that received site visits in late November, suggesting that the chipmaker’s expected addition to the entity list may be related to other matters.

    YMTC was already under investigation by the Commerce Department over allegations it violated U.S. export rules by supplying chips to entity-listed Chinese telecoms equipment giant Huawei without a license.

    U.S. lawmakers from both political parties have called on the Biden administration to add YMTC to the list. Its planned addition was first reported by the Financial Times.

    Reporting by Alexandra Alper and Karen Freifeld; Additional reporting by Eduardo Baptista in Beijing; Editing by Chris Sanders, Howard Goller and Raissa Kasolowsky

    Our Standards: The Thomson Reuters Trust Principles.

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  • EXCLUSIVE Russian software disguised as American finds its way into U.S. Army, CDC apps

    EXCLUSIVE Russian software disguised as American finds its way into U.S. Army, CDC apps

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    LONDON/WASHINGTON, Nov 14 (Reuters) – Thousands of smartphone applications in Apple (AAPL.O) and Google’s (GOOGL.O) online stores contain computer code developed by a technology company, Pushwoosh, that presents itself as based in the United States, but is actually Russian, Reuters has found.

    The Centers for Disease Control and Prevention (CDC), the United States’ main agency for fighting major health threats, said it had been deceived into believing Pushwoosh was based in the U.S. capital. After learning about its Russian roots from Reuters, it removed Pushwoosh software from seven public-facing apps, citing security concerns.

    The U.S. Army said it had removed an app containing Pushwoosh code in March because of the same concerns. That app was used by soldiers at one of the country’s main combat training bases.

    According to company documents publicly filed in Russia and reviewed by Reuters, Pushwoosh is headquartered in the Siberian town of Novosibirsk, where it is registered as a software company that also carries out data processing. It employs around 40 people and reported revenue of 143,270,000 rubles ($2.4 mln) last year. Pushwoosh is registered with the Russian government to pay taxes in Russia.

    On social media and in U.S. regulatory filings, however, it presents itself as a U.S. company, based at various times in California, Maryland and Washington, D.C., Reuters found.

    Pushwoosh provides code and data processing support for software developers, enabling them to profile the online activity of smartphone app users and send tailor-made push notifications from Pushwoosh servers.

    On its website, Pushwoosh says it does not collect sensitive information, and Reuters found no evidence Pushwoosh mishandled user data. Russian authorities, however, have compelled local companies to hand over user data to domestic security agencies.

    Pushwoosh’s founder, Max Konev, told Reuters in a September email that the company had not tried to mask its Russian origins. “I am proud to be Russian and I would never hide this.”

    Pushwoosh published a blog post after the Reuters article was issued, which said: “Pushwoosh Inc. is a privately held C-Corp company incorporated under the state laws of Delaware, USA. Pushwoosh Inc. was never owned by any company registered in the Russian Federation.”

    The company also said in the post, “Pushwoosh Inc. used to outsource development parts of the product to the Russian company in Novosibirsk, mentioned in the article. However, in February 2022, Pushwoosh Inc. terminated the contract.”

    After Pushwoosh published its post, Reuters asked Pushwoosh to provide evidence for its assertions, but the news agency’s requests went unanswered.

    Konev said the company “has no connection with the Russian government of any kind” and stores its data in the United States and Germany.

    Cybersecurity experts said storing data overseas would not prevent Russian intelligence agencies from compelling a Russian firm to cede access to that data, however.

    Russia, whose ties with the West have deteriorated since its takeover of the Crimean Peninsula in 2014 and its invasion of Ukraine this year, is a global leader in hacking and cyber-espionage, spying on foreign governments and industries to seek competitive advantage, according to Western officials.

    Reuters Graphics

    HUGE DATABASE

    Pushwoosh code was installed in the apps of a wide array of international companies, influential non-profits and government agencies from global consumer goods company Unilever Plc (ULVR.L) and the Union of European Football Associations (UEFA) to the politically powerful U.S. gun lobby, the National Rifle Association (NRA), and Britain’s Labour Party.

    Pushwoosh’s business with U.S. government agencies and private companies could violate contracting and U.S. Federal Trade Commission (FTC) laws or trigger sanctions, 10 legal experts told Reuters. The FBI, U.S. Treasury and the FTC declined to comment.

    Jessica Rich, former director of the FTC’s Bureau of Consumer Protection, said “this type of case falls right within the authority of the FTC,” which cracks down on unfair or deceptive practices affecting U.S. consumers.

    Washington could choose to impose sanctions on Pushwoosh and has broad authority to do so, sanctions experts said, including possibly through a 2021 executive order that gives the United States the ability to target Russia’s technology sector over malicious cyber activity.

    Pushwoosh code has been embedded into almost 8,000 apps in the Google and Apple app stores, according to Appfigures, an app intelligence website. Pushwoosh’s website says it has more than 2.3 billion devices listed in its database.

    “Pushwoosh collects user data including precise geolocation, on sensitive and governmental apps, which could allow for invasive tracking at scale,” said Jerome Dangu, co-founder of Confiant, a firm that tracks misuse of data collected in online advertising supply chains.

    “We haven’t found any clear sign of deceptive or malicious intent in Pushwoosh’s activity, which certainly doesn’t diminish the risk of having app data leaking to Russia,” he added.

    Google said privacy was a “huge focus” for the company but did not respond to requests for comment about Pushwoosh. Apple said it takes user trust and safety seriously but similarly declined to answer questions.

    Keir Giles, a Russia expert at London think tank Chatham House, said despite international sanctions on Russia, a “substantial number” of Russian companies were still trading abroad and collecting people’s personal data.

    Given Russia’s domestic security laws, “it shouldn’t be a surprise that with or without direct links to Russian state espionage campaigns, firms that handle data will be keen to play down their Russian roots,” he said.

    ‘SECURITY ISSUES’

    After Reuters raised Pushwoosh’s Russian links with the CDC, the health agency removed the code from its apps because “the company presents a potential security concern,” spokesperson Kristen Nordlund said.

    “CDC believed Pushwoosh was a company based in the Washington, D.C. area,” Nordlund said in a statement. The belief was based on “representations” made by the company, she said, without elaborating.

    The CDC apps that contained Pushwoosh code included the agency’s main app and others set up to share information on a wide range of health concerns. One was for doctors treating sexually transmitted diseases. While the CDC also used the company’s notifications for health matters such as COVID, the agency said it “did not share user data with Pushwoosh.”

    The Army told Reuters it removed an app containing Pushwoosh in March, citing “security issues.” It did not say how widely the app, which was an information portal for use at its National Training Center (NTC) in California, had been used by troops.

    The NTC is a major battle training center in the Mojave Desert for pre-deployment soldiers, meaning a data breach there could reveal upcoming overseas troop movements.

    U.S. Army spokesperson Bryce Dubee said the Army had suffered no “operational loss of data,” adding that the app did not connect to the Army network.

    Some large companies and organizations including UEFA and Unilever said third parties set up the apps for them, or they thought they were hiring a U.S. company.

    “We don’t have a direct relationship with Pushwoosh,” Unilever said in a statement, adding that Pushwoosh was removed from one of its apps “some time ago.”

    UEFA said its contract with Pushwoosh was “with a U.S. company.” UEFA declined to say if it knew of Pushwoosh’s Russian ties but said it was reviewing its relationship with the company after being contacted by Reuters.

    The NRA said its contract with the company ended last year, and it was “not aware of any issues.”

    Britain’s Labour Party did not respond to requests for comment.

    “The data Pushwoosh collects is similar to data that could be collected by Facebook, Google or Amazon, but the difference is that all the Pushwoosh data in the U.S. is sent to servers controlled by a company (Pushwoosh) in Russia,” said Zach Edwards, a security researcher, who first spotted the prevalence of Pushwoosh code while working for Internet Safety Labs, a nonprofit organization.

    Roskomnadzor, Russia’s state communications regulator, did not respond to a request from Reuters for comment.

    FAKE ADDRESS, FAKE PROFILES

    In U.S. regulatory filings and on social media, Pushwoosh never mentions its Russian links. The company lists “Washington, D.C.” as its location on Twitter and claims its office address as a house in the suburb of Kensington, Maryland, according to its latest U.S. corporation filings submitted to Delaware’s secretary of state. It also lists the Maryland address on its Facebook and LinkedIn profiles.

    The Kensington house is the home of a Russian friend of Konev’s who spoke to a Reuters journalist on condition of anonymity. He said he had nothing to do with Pushwoosh and had only agreed to allow Konev to use his address to receive mail.

    Konev said Pushwoosh had begun using the Maryland address to “receive business correspondence” during the coronavirus pandemic.

    He said he now operates Pushwoosh from Thailand but provided no evidence that it is registered there. Reuters could not find a company by that name in the Thai company registry.

    Pushwoosh never mentioned it was Russian-based in eight annual filings in the U.S. state of Delaware, where it is registered, an omission which could violate state law.

    Instead, Pushwoosh listed an address in Union City, California as its principal place of business from 2014 to 2016. That address does not exist, according to Union City officials.

    Pushwoosh used LinkedIn accounts purportedly belonging to two Washington, D.C.-based executives named Mary Brown and Noah O’Shea to solicit sales. But neither Brown nor O’Shea are real people, Reuters found.

    The one belonging to Brown was actually of an Austria-based dance teacher, taken by a photographer in Moscow, who told Reuters she had no idea how it ended up on the site.

    Konev acknowledged the accounts were not genuine. He said Pushwoosh hired a marketing agency in 2018 to create them in an attempt to use social media to sell Pushwoosh, not to mask the company’s Russian origins.

    LinkedIn said it had removed the accounts after being alerted by Reuters.

    Reporting by James Pearson in London and Marisa Taylor in Washington
    Additional reporting by Chris Bing in Washington, editing by Chris Sanders and Ross Colvin

    Our Standards: The Thomson Reuters Trust Principles.

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  • Biden predicts Democrat midterms win, says economy improving

    Biden predicts Democrat midterms win, says economy improving

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    ROSEMONT, Ill., Nov 4 (Reuters) – U.S. President Joe Biden, battling to show restive voters he has boosted the economy, touted his economic policies on Friday and said he planned to talk with oil companies about high prices and record profits, as he predicted Democrats will prevail in Tuesday’s midterms despite polls showing Republican gains.

    On a three-day, four-state campaign swing, Biden stopped at Viasat Inc. (VSAT.O), a U.S. communications firm in Carlsbad, California, to tout efforts to increase semiconductor chip production and resolve supply chain issues that erupted early in his presidency.

    With some Republican support, Biden signed into law in August the Chips and Science Act to jumpstart domestic semiconductor production in response to slowed production of automobiles and high-tech products like those built by Viasat.

    At Viasat, Biden said the government’s latest jobs report showing the U.S. economy added 261,000 jobs last month was a sign of progress.

    He said he planned to have a “come to the Lord” talk with U.S. oil companies soon to complain about their record profits at a time when Americans are paying high prices at the pump.

    The meeting is not yet set up, Biden clarified to reporters after the speech, and the White House said the president was just making clear that he was serious about forcing companies to change their behavior.

    Biden left California to attend a Chicago-area fundraiser on Friday night for two Democratic Illinois House members, Representatives Lauren Underwood and Sean Casten, both at risk of losing their seats if Republicans do well in midterm elections on Tuesday.

    “I’m not buying the notion that we’re in big trouble” Biden told donors gathered at the event before adding that he believes Democrats will keep the house and senate

    [1/3] U.S. President Joe Biden delivers remarks on the CHIPS and Science Act at Viasat Inc., a technology company that will benefit from the passage of the CHIPS and Science Act, in Carlsbad, California, U.S., November 4, 2022. REUTERS/Mike Blake

    Earlier in the day, Biden declared inflation was his number one priority, stressing he was taking Americans’ economic concerns seriously as voters go to the polls on Tuesday to decide whether he and his Democrats hang on to control of the U.S. Congress.

    “Folks, our economy continues to grow and add jobs even as gasoline prices continue to come down,” he said. “We also know folks are struggling from inflation.” But he said there are “bright spots” where the country is rebounding.

    Forecasts show Republicans are poised to take control of the U.S. House of Representatives and perhaps the Senate as well, which would give them the power to block Biden’s legislative agenda for the next two years.

    The party in the White House historically loses control of Congress during the first half of a new president’s term.

    However, Biden said he thought Democrats might buck the trend this time. “We’re going to win this time around. I feel really good about our chances,” he said, adding Democrats have a good chance of winning the House of Representatives.

    Biden’s campaign swing will conclude with a joint appearance in Philadelphia on Saturday with former President Barack Obama.

    Democrats’ electoral hopes have been hammered by voter concerns about high inflation, and Biden’s public approval rating has remained below 50% for more than a year, coming in at 40% in a recent Reuters/Ipsos poll.

    Biden has also warned of what Democrats say are the dangers that Republicans backed by former President Donald Trump pose to U.S. democracy.

    Reporting by Trevor Hunnicutt, Andrea Shalal and Steve Holland; Additional reporting by Daniel Trotta; Editing by Kim Coghill, Josie Kao and Michael Perry

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  • Adidas ends Ye deal over hate speech, costing rapper his billionaire status

    Adidas ends Ye deal over hate speech, costing rapper his billionaire status

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    • Adidas ends partnership immediately
    • To take about $250 mln hit to 2022 net income
    • Gap, Balenciaga have also cut ties with Ye

    Oct 25 (Reuters) – Adidas AG (ADSGn.DE) terminated its partnership with rapper and fashion designer Ye on Tuesday after he made a series of antisemitic remarks, a move that knocked the musician off the Forbes list of the world’s billionaires.

    Adidas put the tie-up, which has produced several hot-selling Yeezy branded sneakers, under review this month.

    “Adidas does not tolerate antisemitism and any other sort of hate speech,” the German company said on Tuesday.

    “Ye’s recent comments and actions have been unacceptable, hateful and dangerous, and they violate the company’s values of diversity and inclusion, mutual respect and fairness,” it said.

    Forbes magazine said the end of the deal meant Ye’s net worth shrank to $400 million. The magazine had valued his share of the Adidas partnership at $1.5 billion.

    The remainder of Ye’s wealth comes from real estate, cash, his music catalogue and a 5% stake in ex-wife Kim Kardashian’s shapewear firm, Skims, Forbes said.

    Representatives for Ye, formerly known as Kanye West, did not immediately respond to a request for comment.

    For Adidas, ending the partnership and the production of Yeezy branded products, as well as stopping all payments to Ye and his companies, will have a “short-term negative impact” of up to 250 million euros ($248.90 million) on net income this year, the company said.

    Ye has courted controversy in recent months by publicly ending major corporate tie-ups and making outbursts on social media against other celebrities. His Twitter and Instagram accounts were restricted, with the social media platforms removing some of his online posts that users condemned as antisemitic.

    In now-deleted Instagram posts earlier this year, the multiple Grammy award-winning artist accused Adidas and U.S. apparel retailer Gap Inc (GPS.N) of failing to build contractually promised permanent stores for products from his Yeezy fashion line.

    [1/3] Singer Kanye West walks past models after presenting his Fall/Winter 2015 partnership line with Adidas at New York Fashion Week February 12, 2015. REUTERS/Lucas Jackson/File Photo

    He also accused Adidas of stealing his designs for its own products.

    On Tuesday, Gap, which had ended its partnership with Ye in September, said it was taking immediate steps to remove Yeezy Gap products from its stores and that it had shut down YeezyGap.com.

    “Antisemitism, racism and hate in any form are inexcusable and not tolerated in accordance with our values,” Gap said in a statement.

    European fashion house Balenciaga has also cut ties with Ye, according to media reports.

    “The saga of Ye … underlines the importance of vetting celebrities thoroughly and avoiding those who are overly controversial or unstable,” said Neil Saunders, managing director of GlobalData.

    Adidas poached Ye from rival Nike Inc (NKE.N) in 2013 and agreed to a new long-term partnership in 2016 in what the company then called “the most significant partnership created between a non-athlete and a sports brand.”

    The tie-up helped the German brand close the gap with Nike in the U.S. market.

    Yeezy sneakers, which cost between $200 and $700, generate about 1.5 billion euros ($1.47 billion) in annual sales for Adidas, making up a little over 7% of its total revenue, according to estimates from Telsey Advisory Group.

    Shares in Adidas, which cut its full-year forecast last week, closed down 3.2%. The group said it would provide more information as part of its upcoming Q3 earnings announcement on Nov. 9.

    ($1 = 1.0044 euros)

    Reporting by Mrinmay Dey, Uday Sampath and Aishwarya Venugopal in Bengaluru and Lisa Richwine in Los Angeles; Editing by Tomasz Janowski, Sriraj Kalluvila, Bernadette Baum, Anil D’Silva and Cynthia Osterman

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  • Elon Musk says SpaceX will keep funding Starlink in Ukraine despite losing money

    Elon Musk says SpaceX will keep funding Starlink in Ukraine despite losing money

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    Oct 15 (Reuters) – Elon Musk said on Saturday his rocket company SpaceX would continue to fund its Starlink internet service in Ukraine, citing the need for “good deeds,” a day after he said it could no longer afford to do so.

    Musk tweeted: “the hell with it … even though starlink is still losing money & other companies are getting billions of taxpayer $, we’ll just keep funding ukraine govt for free”.

    Musk said on Friday that SpaceX could not indefinitely fund Starlink in Ukraine. The service has helped civilians and military stay online during the war with Russia.

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    Although it was not immediately clear whether Musk’s change of mind was genuine, he later appeared to indicate it was. When a Twitter user told Musk “No good deed goes unpunished”, he replied “Even so, we should still do good deeds”.

    The billionaire has been in online fights with Ukrainian officials over a peace plan he put forward which Ukraine says is too generous to Russia.

    He had made his Friday remarks about funding after a media report that SpaceX had asked the Pentagon to pay for the donations of Starlink.

    SpaceX did not respond to a request for comment. The Pentagon declined to comment.

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    Reporting by David Ljunggren, Matt Spetalnick and Caroline Stauffer; Editing by Sandra Maler

    Our Standards: The Thomson Reuters Trust Principles.

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  • Dow posts record closing high, stocks gain for 3rd week; dollar dips

    Dow posts record closing high, stocks gain for 3rd week; dollar dips

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    • S&P 500, Nasdaq end session lower
    • Evergrande averts default with surprise interest payment
    • U.S. 10-year yields lower

    NEW YORK, Oct 22 (Reuters) – The Dow Jones industrial average registered a record closing high on Friday and major equity indexes posted a third straight week of gains while the U.S. dollar slipped.

    On the day, MSCI’s broadest gauge of global shares (.MIWD00000PUS) was flat, and the S&P 500 (.SPX) and Nasdaq (.IXIC) ended lower.

    Stocks came under pressure after Federal Reserve Chair Jerome Powell said the U.S. central bank was “on track” to begin reducing its purchases of assets. read more

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    Intel’s stock (INTC.O)fell 11.7% and was among the biggest drags on the S&P 500. Late Thursday, Intel reported sales that missed expectations and pointed to shortages of chips holding back sales of its flagship processors. read more

    American Express Co’s stock (AXP.N) gained, boosting the Dow after the company beat profit estimates for the fourth straight quarter.

    Next week brings reports from several key mega-cap names including Amazon (AMZN.O). read more

    The dollar pared losses after Powell’s comments, but the dollar index was last down 0.10% at 93.64, and is off from a one-year high of 94.56 last week. read more

    “There’s a bit of a positioning unwind taking place. We’ve obviously seen a firmer dollar since the September” Fed meeting, said Mazen Issa, senior FX strategist at TD Securities in New York. “That also dovetails with the seasonal tendency for the dollar to soften into the end of the month.”

    Investors also digested news that China Evergrande Group (3333.HK) appeared to avert default with a source saying it made a last-minute bond coupon payment. read more

    The Dow Jones Industrial Average (.DJI) rose 73.94 points, or 0.21%, to 35,677.02, the S&P 500 (.SPX) lost 4.88 points, or 0.11%, to 4,544.9 and the Nasdaq Composite (.IXIC) dropped 125.50 points, or 0.82%, to 15,090.20.

    The pan-European STOXX 600 index (.STOXX) rose 0.46% and MSCI’s gauge of stocks across the globe shed 0.03%.

    The MSCI index posted gains for a third straight week along with the three major U.S. stock indexes.

    In the U.S. bond market, yields on longer-dated U.S. Treasuries slid.

    The yield on 10-year Treasury notes was down 1.6 basis points to 1.659% after rising to a five-month high of 1.7064% late Thursday.

    Oil rose and ended up for the week, near multi-year highs. Brent crude futures rose 92 cents to settle at $85.53 a barrel, and registered its seventh weekly gain. U.S. crude futures gained $1.26, to settle at $83.76, and rose for a ninth straight week. read more

    Spot gold was up 0.6% at $1,793.82 per ounce.

    Among cryptocurrencies, bitcoin last fell 2.21% to $60,841.96.

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    Additional reporting by Simon Jessop in London, and Karen Brettell, Sinead Carew and Herbert Lash in New York and Kevin Buckland in Tokyo
    Editing by Hugh Lawson Mark Potter and David Gregorio

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