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An engineer sets up a CloudMinds robot with a 5G sign before a performance at the World Robot Conference (WRC) in Beijing, China August 20, 2019. Photo: Reuters

Robotics start-up CloudMinds returns to China after US sanctions hurt its business in Silicon Valley

  • CloudMinds lost almost 75 per cent of orders in the US and cut 80 per cent of its US workforce after Washington imposed sanctions over national security risks
  • As the pandemic eases in China, CloudMinds is targeting the retail and security sectors as well as janitorial and reception service

Cloud robotics and artificial intelligence start-up CloudMinds has abandoned plans to go public in the US, as it eyes a move to Shanghai and listing on China's new Nasdaq-style board, after its business was hit by rising tensions between the world’s two largest economies.

The company was founded in Silicon Valley in 2015 by Bill Huang, a Chinese born engineer who spent most of his working career in the US, including several years at the famed Bell Labs in New Jersey, where core technologies such as the transistor, lasers and mobile phone networks were first developed.

“Definitely, we will not consider listing in the US any more after the sanctions,” Huang, the CEO of the SoftBank-backed CloudMinds, said in an interview with the South China Morning Post last Thursday.

In July last year the provider of cloud-based systems for robots was blocked from exporting any of its US-developed technology to China, Reuters reported in March. Then in May this year CloudMinds was banned from buying US products without Washington’s approval on the grounds that it posed a “significant risk” of supplying US technologies for military end-use in China.

“The sanctions disabled our operations in the US. We lost almost 75 per cent of orders in the country and 80 per cent of our US workforce has been cut for obvious reasons. Six months ago, we had nearly 100 employees in the US while now we have less than 10.”

How CloudMinds’ CEO turned to China for technology the US couldn’t offer

Huang has a unique perspective on the current tech war, describing the resulting decoupling as something he “has never seen before.”

Huang was one of the first mainland Chinese to attend graduate school in the US after diplomatic relations between the two countries were reestablished in 1979.

“The past three years has seen the situation become worse and worse … Now in Silicon Valley, they refuse Chinese talent, money, and markets. They were planning to sanction China, but in reality, they are hurting their own country.”

CloudMinds is among the raft of Chinese tech companies, from giants like Huawei Technologies to lesser-known start-ups, caught in the escalating tensions between the world’s two largest economies. Last week FBI director Christopher Wray said Beijing regularly used espionage and cyberattacks to gain access to cutting-edge US technologies.

“China often steals American intellectual property and then uses it to compete against the very American companies it victimises, in effect, cheating twice,” he said in a speech to the Hudson Institute, a US think tank.

In 2007, Huang moved back to China to join China Mobile under the Thousand Talents recruitment plan, which has since been played down by Beijing after it became another flashpoint in the relationship between the two countries.

After eight years with China Mobile, Huang left to start CloudMinds. “I saw the chance to change the world. I found that the only way to make robots intelligent was to build a cloud architecture,” said Huang.

Bill Huang, the founder of CloudMinds. Photo: Handout

Instead of relying on self-contained “brains” inside its robots – where data-processing capacity is constrained by the particular processing chips installed – CloudMinds leverages the almost limitless computing power of the cloud to power its robots.

The operating platform consists of three main systems – a cloud brain, a nerve network and robot controllers. The platform is scalable and allows customers to customise the robots, which can be used in hospitals, shopping malls, hotels, and banks to answer customer queries or do routine tasks like making coffee.

With robotics technology coming to the fore during the coronavirus pandemic, Huang sees opportunity in the mainland market for the CloudMinds technology and its leasing business model.

“When the robots cannot solve the problems during the work, we will send people to help. The problem-solving process will be recorded by the robot and become part of the data for self-learning,” said Huang. “If you assume the robots are children and people are adults, our idea is these kids can eventually become adults to solve the problems.”

China to take ‘whatever measures necessary’ to defend entity list firms

With the current commercial market for robotics limited by production constraints and high prices, CloudMinds has adopted a leasing model, where customers pay for the use of the product rather than buy it outright. “The market can grow quickly under the leasing model and a bigger market will lower costs,” Huang said.

Earlier this year CloudMinds delivered over 1,000 robots to hospitals across the country, including in Wuhan, the epicentre of the coronavirus outbreak in China, where they carried out a variety of tasks including administering medication, taking vital signs from patients, and disinfecting facilities.

“We think robots will be on the front lines to defeat the pandemic in future while humans will retreat to the backstage,” said Huang. “Their performance in the pandemic makes people realise that robotics can achieve commercialisation soon with 5G technology support … Our aim is to make household companion robots within 10 years.”

As the pandemic eases in China, CloudMinds is targeting the retail and security sectors as well as janitorial and reception service, which Huang says is still an untapped field. However, he believes the biggest long term opportunity for the robot industry is in serving China’s ageing population.

CloudMinds deployed robots in Wuhan during the coronavirus outbreak. Photo: Handout

CloudMinds’ revenue increased 529 per cent year on year to US$121 million in 2018, according to the IPO prospectus filed with the New York Stock Exchange, before its decision to move the listing to Shanghai. The company’s net loss widened to US$156.8 million in 2018 from a loss of US$47.7 million in 2017 due to heavy research and development investment.

“Research and development is more than half of our total cost,” Huang said, adding that the company possesses more than 1,700 patents.

Seeing his robotics technology deployed in Wuhan brought back memories for Huang. That is where he earned his bachelor’s degree before leaving the city in 1982 to study at the University of Illinois at Chicago. Now he is facing the challenge of a US imposed ban on critical computer chips needed for his robots.

“We have a plan to solve the possible problem of chip supply. We even plan to produce chips by ourselves,” said Huang, who expects China will have the capability to provide home grown chips for robots within two years. “But in the near future, we still have to rely on US chips. I think the collaboration between the US and China is vital. In past years, the cooperation was successful and fruitful.”

This article appeared in the South China Morning Post print edition as: Robotics firm scraps idea for US listing