The US just blacklisted 8 Chinese AI firms. It could be what China’s AI industry needs.

The US Commerce Department has said it is adding 28 Chinese government organizations and private businesses, including eight tech giants, to its so-called Entity List for acting against American foreign policy interests.

What does that mean? The move effectively bars any US companies from selling technology to the blacklisted firms and organizations without US government approval.

Why? The US says they have been involved in human rights violations against Uighurs and other predominantly Muslim ethnic minorities in the Xinjiang region.

Which companies? The list notably includes several companies that serve on China’s national AI team, which the government formed as part of its strategy to become a global leader in the technology. These are video surveillance company Hikvision, voice recognition giant iFlytek, image recognition companies Megvii and SenseTime, and machine vision and voice recognition company Yitu. Following the US’s recent blacklist of Huawei, it’s the country’s latest attempt to stunt the growth of China’s booming AI industry by starving it of US products, services, and technical know-how.

What are the impacts? China’s AI industry needs AI chips. China buys 90% of its chips from foreign companies, and US-based Nvidia dominates global development and production of graphic processing units, the most popular chip for powering deep-learning algorithms. Being blacklisted will threaten to cut off these companies’ supply. It could also hinder their ability to collaborate with US universities and receive foreign investment.

Could it backfire? The Chinese government has long recognized the country’s weakness in producing AI chips and has pushed to advance a domestic chip manufacturing industry. In the last few months, for example, Huawei and Alibaba unveiled their own powerful specialized semiconductors. The US’s blacklist could spur both government and industry to double down on their indigenous chip investments, accelerating the country’s technological independence.

How did the companies respond? Several of the blacklisted companies claim they have been misunderstood. Both Hikvision and Megvii released statements to say they are committed to advancing the positive impacts of their technology. “To the Company’s knowledge, around 1% of its total revenue was derived from projects in Xinjiang in 2018,” Megvii said. “Furthermore, no revenue was generated from Xinjiang in the six months ended June 30, 2019.”

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