China lays out latest regulation for AI

Plus: Indian games hit with new tax and Foxconn has a new plan for India

Welcome back,

This week we’re looking at China’s latest draft regulation for AI which has lifted some guardrails but is still as focused on content as you’d expect.

In India, there’s also draft legislation for tech which is going to upset gaming companies, who must now fork out for a 28% tax. That could severely limit the country’s promising gaming sector, which is forecast to reach $5B in revenue by 2025.

In other news, Foxconn is making a new plan to manufacture in India; Chinese hackers accessed emails (but apparently not information) from senior US politicians; FTX backer Temasek says it isn’t looking at crypto deals for now; and Netflix is among the content firms taking a big swing at Anime.

We’ll catch you later this week with an ATR original story.

Enjoy the rest of the week,

Jon

News in focus

China lays out its latest regulation for AI

China just laid out its latest version of rules for AI and, unsurprisingly to all, the emphasis is on content control.

The Cyberspace Administration of China has envisaged a system that requires companies to gain a licence before they are allowed to release generative AI systems. 

The money quote:

Content should “embody core socialist values”, according to the draft rules from April, and must not contain anything that “subverts state power, advocates the overthrow of the socialist system, incites splitting the country or undermines national unity”.

But, it is notable that the draft regulations have changed since April, with Bloomberg reporting that this is a “friendlier” approach to AI—meaning that some specific restrictions or guardrails have been lifted.

Still, the regulatory uncertainty has meant that Chinese AI rollouts have taken longer than expected, Reuters noted, with regular security assessments required and an obligation to tell the truth. That can be tricky as anyone who ever used ChatGPT knows (ask the US-based lawyer, whose ChatGPT argument contains false information), but China also wants assurances that the information AI training models are gobbling up is also true.

Still, more are launching: JD.com just unveiled a large language model called ChatRhino link

Finally, The New York Times found Baidu’s Ernie bot performed better than ChatGPT in Chinese but, yeah, it dodged sensitive questions

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India hands tax blow to gaming industry

India dealt a significant blow to the online gaming industry when it added a 28% tax to online games, which had been exempt to date.

“The council said there should be no distinction between “game of skill” and “game of chance,” closing a loophole that has allowed fantasy sports companies to justify their offerings as skill-based.”

The change will impact firms like local gaming outfit Nazara, fantasy sport companies Dream11 and MPL. A number of affected companies wrote a letter to explain that ‘skilled’ online gaming is different to games of chance (gambling) and should be treated differently. They claim their industry generates $2.5B in annual revenue and is expected to grow by 30% each year to reach $5B by 2025.

Experts fear the introduction of the tax could decimate the industry, which has seen companies like Dream11 become profitable and is one of the fastest growing tech sectors in India.

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Foxconn takes a new approach to manufacturing in India

Foxconn may have ended its joint venture to build devices in India but it has already moved on to other targets. The prolific manufacturer of iPhones is said to be in talks with TSMC and Japan’s TMH Group for technology and joint venture partnerships to start semiconductor fabrication units in India.

Foxconn has not given up on manufacturing in India, and it reportedly plans to apply to be a part of India’s new investment scheme for chips. The firm is already expected to secure a 300-acre plot near Bengaluru airport for its iPhone facility.

Meanwhile, conglomerate Tata Group is close to an agreement to acquire Apple supplier Wistron’s factory as soon as August, which would mark the first time a local company moves into the assembly of iPhones.

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China

US officials say Chinese hackers accessed the email accounts of Commerce Secretary Raimondo and other State and Commerce Department officials in the weeks before Secretary of State Blinken traveled to Beijing in June, however they downplayed the idea that the hackers stole sensitive information, insisting that no classified email or cloud systems were penetrated link

The group exploited a bug in Microsoft’s cloud email service to spy on two-dozen organisations, including some government agencies link

Crypto company Multichain ceased operations following the arrest of the CEO in China, and seizure of his devices link

There’s concern that the Biden administration's theory that it can slow China’s economic growth by cutting it off from advanced computer chips could backfire Link

Holland’s ASML is facing tighter restrictions on its ability to work with Chinese customers—new Dutch export control rules forbid it from maintaining, repairing and providing spare parts for controlled equipment without government approval link

Apple launched an online store on WeChat link

Didi narrowed losses in first quarter thanks to improved demand as domestic competition heats up link

ByteDance will allow shares owned by US employees to vest without waiting for the company to list in the stock market, thereby letting them cash out link 

Huawei is poised to overcome US ban with the return of 5G phones, according to research firms link

Huawei has also found alternative revenue sources including $560 million in revenue from patent licensing deals last year—that’s a line item it has never disclosed as part of annual income before link

In a sign that China’s government is shifting its attitude to tech companies: Alibaba, Tencent and Meituan were praised by Beijing for helping China’s tech progress link

Intel CEO wrapped up a low-key China trip as US chip giant taps hot Chinese demand for semiconductors link

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Hong Kong

Mainland Chinese are taking advantage of Hong Kong’s crypto grey zones link

But there’s no immediate evidence that Hong Kong’s crypto policy has produced jobs yet link

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Taiwan

TSMC and Foxconn were hit hard in biggest Taiwan tech slump in 10 years as sales dropped 20% year-on-year thanks to weaker consumer electronics demand link

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India

BYD has proposed a $1B India plan to build EVs and batteries link

Disney is exploring strategic options for its Star India business, including a joint venture or a sale link

It looks like Reliance will increase its stake in Dunzo after the struggling delivery service cut more jobs to reduce costs—it recently deferred 50% of June salaries link

Flipkart paid out $700M to employees following after its split with PhonePe devalued shares of the payment business link

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Southeast Asia

Apple Pay is rumoured to be headed to Vietnam—although probably not for some time link

Temasek says it's not looking to invest in crypto firms amid current regulatory uncertainties—it famously backed FTX link

Gaming firm Razer is probing a ‘potential hack’ after its data was offered for US$100,000 worth of crypto link

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Japan

Sony’s Crunchyroll eyes India as Japanese anime becomes $20B industry link

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South Korea

South Korea to require firms to report crypto holdings from next year link

LG Electronics plans $39.5B investment to reach $79B in sales by 2030 link

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Rest of Asia

Netflix is investing heavily to create new content in Asian markets like South Korea, Japan and India, recruiting new partners and searching for emerging talent to capture audiences in the increasingly important region link

Turkey’s e-commerce law to tightened regulations was upheld by a court in a blow to Alibaba’s Trendyol business and other rivals link