February 22, 2019

Trump can’t stop China from becoming an “AI superpower”, experts warn

By Luke Christou

Despite Donald Trump’s best efforts, China will continue to chip away at the United States’ lead in the field of artificial intelligence (AI) throughout 2019 according to a new report published by GlobalData exploring the trends and developments expected in the technology industry over the coming year.

Trump recently announced the American AI Initiative, designed to secure the US’s status as the leader in AI by encouraging investment in the technology. In doing so, the US became the 19th country to set an official AI strategy.

While China has not been mentioned outright, the East Asian nation and its own “New Generation Artificial Intelligence Development Plan” are the most likely target of Trump’s initiative.

While the US still leads the way for the number of startups working on AI, China has already overtaken it for research and investment in AI technology. And according to GlobalData analysts, China will strengthen its position over the next year, despite Trump’s best efforts.

“Despite the launch of the American AI Initiative in February 2019, China will continue to erode the US’s leadership in AI,” the report reads. “2019 will see even more from Chinese vendors, whose drive into AI has been highly impressive.”

Baidu, Alibaba and Tencent: Leading the China AI push

In 2015, China set itself the goals of moving away from cheap, low quality manufacturing and to start producing high value products and services. Focusing on high-tech fields, including information technology, robotics, green energy and aerospace, China hopes to reduce its reliance on other nations. By 2020 it hopes to produce 40% of all core components and materials, and 70% by 2025. Leading in areas such as artificial intelligence is viewed as key to China achieving its goal.

Leading the charge are a collection of AI-focused companies that have been deemed “national champions” by to GlobalData, which will be vital to China’s success in the field.

“Led by Baidu, Alibaba and Tencent and also featuring the likes of Cambricon, Horizon Robotics and Bitmain, China is on track to become an AI superpower,” the report states.

“AI is key to the success of Made in China 2025 and the government has designated Baidu, Alibaba and Tencent (along with iFlytek) as national champions, tasked with spearheading the country’s AI development. Cambricon, SenseTime and Horizon Robotics are also developing world class AI technologies.”

However, if China is to overtake the US as the leading nation for AI technology, it will have to ensure that innovation is focused on the right areas.

Delivering on AI’s business potential

It is widely accepted that AI is set to revolutionise industry in the coming years. GlobalData has previously warned that businesses have half a decade to embrace AI or risk failure.

Yet, despite AI spending having hit $219bn in 2018, the hype surrounding AI and its transformative potential is beginning to fade, and in order to be successful, AI companies will need to start delivering results for the businesses investing in their technologies.

“When selling to enterprises, the most successful AI vendors will be those that focus on tackling specific business challenges, as opposed to simply touting the potential of AI to transform industries”.

China’s focus on specific areas of AI, such as facial recognition and AI chips as the report notes, could end up setting it apart from the US tech giants that are exploring the range of possible uses of AI technology.

US tech giants to remain AI leaders

Despite China making up ground on the United States’ AI industry, GlobalData predicts that the likes of Amazon, Google, Microsoft and IBM will continue to strengthen their position as leaders in the field of AI. With billions of pounds to spend on ensuring that they remain in the race to develop the latest emerging technologies, “heavy investment, targeted acquisitions, and strategic partnerships” will mean that US tech giants will keep up with the likes of Baidu, Alibaba and Tencent.

The ongoing US-China trade war will continue to make things tough for US tech companies. Particularly those that operate in China, such as Apple, which was recently forced to issue a profit warning with falling sales is China cited as one of the causes, are at risk. Yet, with China strengthening across the tech industry, no end to the trade war is in sight.

“The US-China trade war will continue in 2019 fueled by China’s growing influence across every segment of the technology sector and the Trump administration’s desire to put ‘America First’,” the report predicts.

Verdict deals analysis methodology

This analysis considers only announced and completed artificial intelligence deals from the GlobalData financial deals database and excludes all terminated and rumoured deals. Country and industry are defined according to the headquarters and dominant industry of the target firm. The term ‘acquisition’ refers to both completed deals and those in the bidding stage.

GlobalData tracks real-time data concerning all merger and acquisition, private equity/venture capital and asset transaction activity around the world from thousands of company websites and other reliable sources.

More in-depth reports and analysis on all reported deals are available for subscribers to GlobalData’s deals database.

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