China AI champions like SenseTime are scrambling to survive Trump’s blacklist

The co-founder of China’s SenseTime Group was visiting New York to encourage more collaboration with the US on artificial intelligence when he heard the news: The Trump administration had blacklisted his company. So much for more cooperation.

Xu Bing, the 29-year-old co-founder, knew SenseTime was at risk given rising tensions between China and the US, but the timing took him by surprise. He was spending a few days showing off his latest products and meeting other AI researchers earlier this month when the Commerce Department put his company and seven others on its Entity List, prohibiting American companies from providing crucial supplies like semiconductors. His phone flooded with calls and emails from worried employees and investors.

SenseTime is emblematic of the clash between the world’s two biggest economies. China is seeking to evolve economically by moving beyond manufacturing into the technology vanguard, with the explicit goal of dominating key fields like AI. Donald Trump’s administration is increasingly adamant about containing China’s rise, arguing that companies like Huawei Technologies steal intellectual property and threaten national security, while start-ups like SenseTime and Megvii Technology are complicit in human rights violations in the country’s Xinjiang region.

The company’s founders are a bit stunned at getting caught in the crossfire. They are mostly academics who decided to commercialise their technology five years ago, drawing attention from both US and China governments because of the applications for surveillance. Now, they plan a shift away from hardware, which requires American chips, to focus on software for facial recognition and other applications. The founders think they can survive the existential threat.

“Long-term, the fundamentals of business are still most important,” says Xu, “so that’s what we will focus on.”

SenseTime, whose US$7.5 billion valuation is the highest for an AI start-up in the world, is trying to reassure investors, employees and customers. The company said in a statement that it is “deeply disappointed” at the blacklisting decision and will seek relief. It emphasised it complies with all laws in local jurisdictions.