When Chinese AI unicorns SenseTime, Megvii and Yitu were sanctioned by the US in October last year, it looked like a major threat to the survival of their business.
“The industry started to be aware of the problem [of dependence on surveillance] as early as last year, before the Entity List ban, but the US-China tech war was a catalyst,” said an investor in Chinese AI unicorn Megvii Technology, a facial recognition company that was added to the Entity List in October 2019.
Instead, US products are imported via third party traders or distributors, according to another investor in one of the AI unicorns, who requested anonymity due to the sensitive nature of the subject. In the case of CloudWalk, which derived around 60% of its 2018 revenue from surveillance according to local media reports, the US Department of Commerce cited the company’s involvement in “high-technology surveillance against Uygurs, ethnic Kazakhs, and other members of Muslim minority groups in the Xinjiang Uygur Autonomous Region”.
Megvii said in an IPO filing that has since lapsed that applications under the category of “city IoT solutions” – which enable government agencies to “enhance public safety, optimise traffic management and improve urban resource planning” – generated almost 700mil yuan in sales the first half of 2019, contributing to 73% of the total, and up from 61% a year earlier.