Presidential hopeful criticizes lack of tech knowledge in US Government

Senator Elizabeth Warren has launched a Twitter tirade to blast Government officials who are seeking regulatory advice from those who will be subject to the stricter regulation.

Although understanding the consequences of new regulation from those who would be deemed most impacted in a sensible way to operate, it does appear Warren believes there is too much reliance on outside sources.

Critics of government agencies and regulatory officials will be quick to raise a glass. For some, the competency of bureaucrats is woefully lacking when it comes to understanding the nuances of the technology industry. This is perhaps understandable, the segment moves at a remarkable pace after all, however it does create the difficult regulatory landscape where companies are free to duck and dive through the grey areas of inaction, inadequacy or a lack of progress.

“I’ve got a plan to end lobbying as we know it — but strengthening Congress’ independence requires us to do more,” Warren said on Twitter. “We must invest in resources to allow members of Congress to make informed decisions without relying on self-interested outside sources.

“My plan revives and modernizes the Office of Technology Assessment, shores up congressional support agencies, and transitions congressional staff to competitive salaries — so we can have competent public policy that actually holds big corporations accountable.”

Warren has hit the nail on the head when it comes to understanding why the chasm between the technology industry and the rules governing it is so wide; those who understand how the industry works, go work for the private sector. This is down to the salaries which are being paid, and also the work itself. Do the best and brightest in the work want to work drafting rules and red-tape, or would they rather work on creating cutting edge technologies and services?

Pumping more cash into these agencies and organizations will not solve the problem of a skills shortage, but it will address one of the difficulties.

To be fair to Warren, she is addressing a problem which plagues politics; the influence of interest groups. This is not an issue restricted to Washington, though as the US is home to some of the worlds’ most influential technology companies, it is perhaps more apparent in the country than anywhere else.

With the issue of net neutrality, the telcos threw cash at the lobbyists. And when it comes to the break-up of Big Tech, Silicon Valley began signing cheques which would make eyes water. Over the course of 2018, Google spent $21.7 million on lobbyists, AT&T spend $18.5 million, Amazon $14.4 million, Facebook $12.6 million and Comcast $15.6 million. These figures are only lobbyist spend in the US, and it is also worth bearing in mind associations would have their own spend as well.

The lobby industry is a powerful one in the US, this is not something which will change unless there is a significant upheaval, though politicians and officials could be less susceptible to it. This is where Warren is making a very valid point.

Industry should be consulted on up-coming regulatory evolution, this is only reasonable as regulation is not supposed to destroy business models, however it is important those asking the questions should have a comprehensive understanding. It will (theoretically) stop officials being misled, over- or under-compensating and aids future proofed regulation.

This will be a monumental challenge for Warren and her team, though it is a lot more achievable than previous claims make by the Presidential hopeful.

In announcing her plans to charge towards the White House, Warren also declared war on Silicon Valley. In an age where politicians are making big promises, Warren raised the stakes by suggesting the break-up of Big Tech.

Dissecting these companies is a daunting task, but it is also one which a few might question the logic of. Yes, the internet giants need to be held more accountable through regulation and greater scrutiny on acquisitions which could lead to a less competitive marketplace, however these are the companies which are driving the US economic dominance on the world stage. Weakening the positions of these companies could very well undermine the pursuit of success and open the door for competitors in other nations to mount a challenge.

However, with the announcement made via Twitter, the US Government would certainly be in a better position if more ably-minded, tech enthusiasts were on the payroll. Many criticise the sluggish nature and short-sightedness of governments, irrelevant to their nationality or location, and Warren is proposing a model to reassert the capability of the Government.

Another question which you have to ask is where the money to fund these salaries is going to come from? Either some departments are deprived, taxes are further straining, monies are borrowed, or industry is asked to contribute. The latter is the most likely, though this would give another reason for industry to line the pockets of the lobbyists.

In truth, this suggestion is a nightmare for the residents of Silicon Valley. These companies have benefitted unimaginably from the regulatory chasm, seeking profits through the introduction of new business models which traditional industry could not dream of.

Ironically, the suggestion of tackling lobbyists will probably make the whisperers and nudgers even richer.

Industry quietly lobbies against Trump’s anti-globalisation agenda

Slowing down the progress made by Huawei on the global stage might be a win for the White House, but US firms are not seeing the benefits as some are reportedly lobbying against the infamous ban.

In a televised interview this morning, Huawei Founder Ren Zhengfei suggested sales forecasts will be negatively hit by the firms debut onto the US ‘Entity List’, taking two years to get back onto the 2018 trajectory. For the White House, this might be vindication of its aggressive anti-Huawei agenda, but not everyone is happy about how events are unfolding.

According to Reuters, US semiconductor firms are quietly lobbying the US Department of Commerce in an attempt to limit the negative impact of the ban. Let’s no forget that while the White House might seem against globalisation trends right now, the success of these firms is largely based on the idea of free-trade and capitalising on the rapid evolution of international markets.

The issue which these firms face is one of commercial loss and gain. Huawei is one of the industry’s biggest consumers of semiconductor products, with the firm rumoured to spend roughly $20 billion a year on such products. When you look at the impact on some firms, you can see why the semiconductor industry is getting a bit twitchy.

Last week, Broadcom lowered its sales forecast for the year by $2 billion, pointing towards one of its customers being caught up in an international trade-war. Although Broadcom has not explicitly stated how much of the total revenues are attributable to Huawei, firms are only compelled to do so when it is more than 10% of the total, the numbers would suggest it is not far off that percentage.

And Broadcom is not alone on relying on Huawei as a customer. Qorvo depends on Huawei for 11% of its total revenues, while Lumentum has said Huawei accounted for 18% of all shipments during the last quarter. As a result, Lumentum’s sales forecast is now $30-35 million less for the year. Xilinx is another chipmaker which has been impacted by the ban on selling components to Huawei, and there are others as well including Intel and Qualcomm.

As a result, numerous lobbying efforts are reportedly being held behind closed doors to mitigate the impact. This might be exemptions or the creation of loopholes, but the friendly-fire is quite notable in this segment.

What is worth noting is that there are other lobby efforts going on also. Google is rumoured to be in active conversations, suggesting its operating system Android should be exempt from the ban on the grounds of national security. Google is arguing that should it be banned from working with Huawei, it would not be able to provide timely security updates which could make the devices vulnerable to hacking and data breaches.

However, there is a commercial angle to all of these arguments which might gain more traction in the minds of the government puppeteers.

At Google, the firm has a dominant position in the OS market. Huawei’s alternative OS might not be able to dislodge this position, but it does have a significant domestic market to drive user adoption. If a suitable alternative to Android emerges from the Chinese telco flagbearer, it would not be unimaginable to see mass adoption in the Chinese market. Once it has domestic domination, it would not be unusual to see international expansion to the China-friendly nations. This would potentially erode Google’s influence on the world.

In the semiconductor space, the risk is of the emergence of a homegrown Chinese-semiconductor industry.

This is not to say China does not already have a presence in the semiconductor space but forcing Huawei away from the US could be the catalyst the slumbering sector needs. Companies like Shenzhen Fastprint Circuit Technologies and Jiangsu Changjiang Electronics Technologies have been making financial gains in recent months, both in terms of revenues and share price, while Huawei’s HiSilicon has also been ramping up.

The US is dominant in the semiconductor market and will probably continue to be. There is a gap in competence for core technologies in the Chinese segments to eclipse this position, though the risk is erosion of profits. The more competitors there are on the market, the lesser the market share for US firms. This assumption might well be exaggerated when you consider the preference of Chinese firms for a homegrown supply chain.

For the semiconductor industry, this should be seen as a red-flag. The Semiconductor Industry Association (SIA) has already suggested the industry is in a bit of a slump at the moment, with sales for April down 14.6% year-on-year. The SIA does have international members, though its biggest role is to represent the interests of US manufacturers. The last thing these firms need right now is more bad news when the market is already dampening.

The result of this friendly-fire is conversations behind closed-doors. The Trump administration is seemingly trying to dilute the influence of China on the rest of the world, though it appears to be having the same impact on some US firms. We’ve said this before, but the result of this trade-war seems to be nothing by a net-loss globally right now; no-one is winning, and it seems to be a matter of damage limitation.

What the White House should be wary of is whether this anti-China agenda is starting to look like a personal vendetta for the President. If there is notable damage to US firms as well as Chinese, the White House must question whether the current strategy is the most effective.

Is ‘Make America Great Again’ is the motto of the White House, it would be useful for the rest of us to understand how much friendly-fire will be tolerated in the quest to destroy the Silk Road.

US raises suspicions of Chinese influence in Eastern Europe

The US Department of State has raised concerns over Chinese presence in Eastern Europe as a potential danger for corruption and government espionage ambitions.

During a briefing ahead of Secretary of State Mike Pompeo’s trip to Budapest, Bratislava, Warsaw, Brussels and Reykjavik, two administrative officials fielded questions over the objectives of the roadshow. Russia and China featured heavily throughout the briefing, though Eastern Europe has been highlighted as a potential source of problems for the US.

“The short answer is yes, we are more concerned about the Chinese presence, the Huawei presence in Central and Eastern Europe than in Western Europe,” a senior official said in a briefing. “I should be clear that, of course, we see this as being problematic across the board, but I think what sets Central and Eastern Europe apart is you have a large number of mostly small and midsize states that – many of whom have a higher propensity to corruption.

“And so I think from a Chinese perspective, they see in Central and Eastern Europe EU member-states – I think 12 out of the 16 members of 16+1 are EU memberships or EU member-states. So they see relatively small countries with a recent history of communism with significant pathways of corruption that lend themselves more readily to state penetration in key sectors, and then they have a springboard to operate within EU fora.

“And all you need to do is look at the success that the Chinese have had importing individual Eastern European member-states of the EU to block the EU on things like recognition of the human rights problem in China or a support for the US position in the South China Sea.”

While these accusations are more broad than simply the telecommunications industry, Eastern Europe has been a field of success for Huawei and ZTE in recent years. With perhaps more lax rules and less paranoid governments than the more ‘developed’ nations across the bloc in years gone, recent events will certainly not make for pleasant reading.

Aside from the suspicion this trip has been seemingly designed to turn the Eastern European nations against China, an arrested Huawei employee in Poland appears to have turned the country against China. After several informal conversations about the saga, there does seem to be a general feeling Poland is marching towards an official ban in line with the US.

The Poland issue is somewhat of an interesting one as the government would have to weigh up the benefits of keeping its US ally happy alongside the societal benefits of being Huawei-friendly. Poland is effectively the Eastern European HQ of Huawei, with the firm employing roughly 900 people across the country. A ban would rid of the country of these jobs, as well as any notable investment and also the in-direct employment Huawei’s presence stimulates in other businesses.

The US wants to remain the leading economic superpower of the world, and this aggression against Chinese international expansion seems to be one of the strategies to maintain this position. It isn’t necessarily doing much to hide these tactics or ambitions, but that doesn’t seem to matter; they are working.