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Yesterday — July 8th 2020Your RSS feeds

What India’s TikTok ban means for China

By Manish Singh

For more than a decade, China has limited how foreign tech firms that operate inside its borders do business. The world’s largest internet market has used its Great Firewall to block Facebook, Twitter, Google and other services in the name of preserving its cyber sovereignty.

The walled-garden approach has helped homegrown giants like Tencent and Alibaba Group win the local market, while giving the Chinese government a better hold on what gets communicated on these platforms. China has even suggested that other nations deploy similar measures.

Be careful what you ask for: Last week, dozens of Chinese firms got a front-seat view to the challenges their global counterparts face in their territory. With a press release, India declared that the world’s second-largest internet market was shutting the door to dozens of Chinese firms for an indefinite period.

India said it would ban 59 apps and services, including ByteDance’s TikTok, Alibaba Group’s UC Browser and UC News, and Tencent’s WeChat over cybersecurity concerns.

New Delhi is open to meeting these firms and hear their defenses, but for now, local telecom operators and other internet service providers have been ordered to block access to these services. Google and Apple have already complied with India’s order and delisted the apps from their app stores.

India’s order is already shifting the market in favor of local firms, several of which have rushed to cash in on the app ban. A crop of recently launched short-form video sharing services have amassed tens of millions of users just this week.

But depending on how long the ban remains in place, the move could also derail a big funding source for thousands of Indian startups. The vast majority of India’s unicorns count Chinese VCs as some of their biggest and longest-term backers. New Delhi’s order could also change how American giants, many of which are already bullish on India, review the market moving forward.

Today, we will explore various ways India and China’s situation could play out and impact various stakeholders. But first, some background on how tension escalated between the two nuclear-armed nations.

Karma Automotive raises $100 million as it looks to resell it EV platform to other automakers

By Darrell Etherington

Karma Automotive has raised a $100 million lifeline from outside investors, as reported by Bloomberg, with the struggling electric vehicle maker’s fortunes likely buoyed by the current market optimism on other EV companies including Tesla. Karma is the reincarnated version of Fisker Automotive, which previously faced bankruptcy before being acquired by Wanxiang Group in 2014.

Karma Automotive has made more progress than Fisker ever did, including actually delivering around 500 of its inaugural Revero electric sport sedan in 2019. The company will be continuing to sell the Revero, which retails staring at around $140,000, and will also be looking to add a high horsepower GTE version, as well as a supercar for an even higher-tier customer.

The automaker also says that it’s in discussions with a partner for a commercial delivery truck, which it intends to develop in prototype form by year’s end. There are a number of different companies pursuing delivery vans for use by courier companies including UPS and FedEx, and the increase in e-commerce spending does present an opportunity for multiple players to succeed in this category, even as there is a rush on in terms of entrants.

Karma will also seek to leverage and extend the benefits of its fresh investment by shopping around its EV platform to other automakers and OEMs, the company says, and also will eventually expand beyond pure EVs to hybrid fuel vehicles. In short, it sounds like Karma is willing to try just about everything and anything to chart a path towards profitability, but time will tell if that’s intelligent opportunism, or scattershot desperation.

Before yesterdayYour RSS feeds

Apple and Google block dozens of Chinese apps in India

By Manish Singh

Two days after India blocked 59 apps developed by Chinese firms, Google and Apple have started to comply with New Delhi’s order and are preventing users in the world’s second largest internet market from accessing those apps.

UC Browser, Shareit, and Club Factory and other apps that India has blocked are no longer listed on Apple’s App Store and Google Play Store. In a statement, a Google spokesperson said that the company had “temporarily blocked access to the apps”on Google Play Store as it reviews New Delhi’s interim order.

Apple, which has taken a similar approach as Google in complying with New Delhi, did not respond to a request for comment.

On Thursday, Indian Prime Minister Narendra Modi also shut his Weibo account.

More to follow…

 

Match Group completes separation from IAC, new board includes Wendi Murdoch and Ryan Reynolds

By Anthony Ha

IAC and Match Group announced that they have completed a “full separation.”

Previously, Match Group (which owns Tinder, Hinge, OkCupid, PlentyOfFish and Match itself) was a publicly traded company, with digital holding company IAC as its majority shareholder. Last year, the companies announced a plan that would see IAC’s ownership of Match distributed to IAC’s shareholders — a plan that is complete as of this morning.

The separation also involves a leadership change, with Mark Stein and Gregg Winiarski stepping down from the Match Group board. The company has four new board members: ExecOnline CEO Stephen Bailey, the NBA’s executive president for digital media Melissa Brenner, investor and entrepreneur Wendi Murdoch and actor Ryan Reynolds (also an owner of Aviation American Gin and Mint Mobile).

“Most millennials and Gen Z can’t remember what dating was like before the advent of Tinder, OkCupid and Hinge,” Reynolds said in a statement. “These brands have enormous responsibility and opportunities to affect societies, all while embracing new technologies and remaining at the forefront of pop culture. I’m ready to roll up my sleeves and work with the team on their future growth and success.”

Shar Dubey will continue to serve as Match Group’s CEO, a position she took at the beginning of this year, while Joey Levin remains a both IAC’s CEO and Match Group’s executive chairman.

“This is just the largest transaction at the core of our strategy throughout these 25 years,” said IAC Chairman Barry Diller in a statement. “Be opportunistic, be balance sheet conservative, build up enterprises and when they deserve independence let them have it. Be a conglomerate and an anti-conglomerate, a business model that has been unique to us.”

Private equity firm Great Hill Partners acquires stock media service Storyblocks

By Frederic Lardinois

Storyblocks, the subscription-based stock media service, today announced that it has been acquired by private equity firm Great Hill Partners. The firm previously backed companies like Wayfair (and then exited that specific investment in 2017) and Custom Ink. Great Hill also acquired Gizmodo Media Group in 2019. Storyblocks and Great Hill did not disclose the price of the acquisition.

Storyblocks was founded in 2009 and raised about $18.5 million since its launch. Over the years, it went through a few changes. Its early focus was on video content and until 2017, it operated under the VideoBlocks moniker (before that, it was FootageFirm). The company’s focus was always on its buffet-style subscription service, though it also offered an “a la carte” marketplace for one-time purchases. Only a small fraction of users actually bought from the marketplace, so last year, it doubled down on its subscription library.

“Our mission was really all about this idea of affordability and access,” Storyblocks CEO TJ Leonard told me ahead of today’s announcement. “That’s core to our DNA. It always will be. But as we look to the future, we see ourselves supporting our customers across their entire workflow as they work to keep up with the content demand of their audience. You wrap all that together and it felt like the moment was right to take the next step. Update, North Atlantic Capital, QED [Investors] — all of our early investors — have done an awesome job supporting the business over the last eight years to help us get to this point. But Great Hill brings a track record — and I think an expertise — that is perfect for this next stage for us.”

Leonard, who just like the rest of the team is staying on, noted that Storyblocks is profitable and wasn’t actively trying to raise any capital to sustain its business or looking for an exit. Instead, he argued, this sale was simply a logical progression.

“We’ve long felt that even though the business is more than ten years old, there’s still a lot of chapters left in our story. We’re really excited to continue to chase them down,” he said. “And we’ve said all along that if we were going to find a new partner, our first criteria was that they needed to believe in the same mission and vision that we had, they needed to believe the same market opportunity that we saw — and they needed to feel like we had the right model and the right team to go take advantage of that opportunity. As we got to know Great Hill better, it was clear that we were really well aligned across all those important points.”

He also noted that he tends to think of Great Hill as “a growth-oriented private equity investor, almost a growth equity investor masquerading with a private equity structure” given that the firm tends to acquire companies but then also often spins them out again. “All of our conversations have been oriented around how do we change what’s working today and accelerate it. How do we take our long term strategic growth plan that sets certain goals over the next five years and accomplish them in three,” he said.

Storyblocks will continue to operate as usual and continue to invest in its content libraries, Leonard told me. COVID-19 only made the demand for stock footage go up (Storyblocks now sees twice as many downloads per week compared to the start of 2020), but the company was already seeing a growing demand for its service before the pandemic, in large parts because the demand for video content only continues to increase.

“This doesn’t feel like an ending. It feels like we have a lot of good work to do,” said Leonard. “It feels like in a lot of ways, the market is just kind of catching up to what we’ve believed since our founding, which is that if you can help people create more high-quality video content, do it at an affordable price, do it in a way that saves them time, then there’s a huge opportunity out there.”

Masayoshi Son resigns from board of Alibaba; defends SoftBank Group’s investment strategy

By Manish Singh

SoftBank Group founder Masayoshi Son said on Thursday he is leaving the board of Jack Ma’s Chinese e-commerce giant Alibaba Group today, a month after Ma left the board of Son’s technology group.

Son said he sees the move as “graduating” from Alibaba Group’s board, his most successful investment to date, as he swiftly moved to defend the Japanese group’s investment strategy, which has been the subject of scrutiny and public mockery in recent quarters.

Son said his conglomerate’s holding has recovered to the pre-coronavirus outbreak levels. The firm has benefited from the rising value of Alibaba Group and its stake in Sprint, following the telecom operator’s merger with T-Mobile. Son said his firm has seen an internet rate of return (or IRR, a popular metric used by VC funds to demonstrate their performance) of 25%.

In a shareholder meeting today, he said he was worried that many people think that SoftBank is “finished” and are calling it “SoftPunku,” a colloquial used in Japan which means a broken thing. All combined, SoftBank’s shareholder value now stands at $218 billion, he said.

Son insisted that he was leaving the board of Alibaba Group, a position he has held since 2005, on good terms and that there hadn’t been any disagreements between him and Ma.

Son’s move follows Jack Ma, who co-founded Alibaba Group, leaving the board of SoftBank last month after assuming the position for 13 years. Son famously invested $20 million in Alibaba 20 years ago. Early this year, SoftBank still owned shares worth $100 billion in Alibaba.

A range of SoftBank’s recent investments has spooked the investment world. The firm, known for writing big checks, has publicly stated that its investment in ride-hailing giant Uber, office space manager WeWork, and a range of other startups has not provided the return it had hoped.

Several of these firms, including Oyo, a budget-lodging Indian startup, has moreover been hit hard by the pandemic.

Son, who has raised $20 billion by selling T-Mobile stake, said after factoring in other of his recent deals SoftBank had accumulated $35 billion or 80% of the total planned unloading of investments.

BMW, Mercedes Benz end ‘long term’ automated driving alliance, for now

By Kirsten Korosec

BMW Group and Mercedes-Benz AG have punted on what was meant to be a long term collaboration to develop next-generation automated driving technology together, less than a year after announcing the agreement.

The German automakers called the break up “mutual and amicable” and have each agreed to concentrate on their existing development paths. Those new paths may include working with new or current partners. The two companies also emphasized that cooperation may be resumed at a later date.

The partnership, which was announced in July 2019, was never meant to be exclusive.  Instead, it reflected the increasingly common approach among legacy manufacturers to form loose development agreements in an aim to share the capitally intensive work of developing, testing and validating automated driving technology.

The two companies did have some lofty goals. The partnership aimed to develop  driver assistance systems, highly automated driving on highways, and automated parking and launch those technology in series vehicles scheduled for 2024.

It seems that the perceived benefits of working together were overshadowed by reality: creating a shared technology platform was a more complex and expensive task than expected, according to comments from the companies. BMW and Mercedes-Benz AG said they were unable to hold detailed expert discussions and talk to suppliers about technology roadmaps until the contract was signed last year.

“In these talks — and after extensive review — both sides concluded that, in view of the expense involved in creating a shared technology platform, as well as current business and economic conditions, the timing is not right for successful implementation of the cooperation,” the companies said.

BMW and Mercedes have other projects and partners. BMW, for instance, is part of a collaboration with Intel, Mobileye, Fiat Chrysler Automobiles and Ansys. Daimler and Bosch launched a robotaxi pilot project in San Jose last year.

Meanwhile, both companies are still working together in other areas. Five years, BMW and Daimler, the parent company of Mercedes-Benz, joined Audi AG to acquire location and technology platform HERE. That ownership consortium has since grown to include more companies.

And last year, BMW Group and Daimler AG also pooled their mobility services in a joint venture under the umbrella of the NOW family.

Separately, BMW said Friday it will cut 6,000 jobs in an agreement reached with the German Works Council. The cuts, prompted by sluggish sales caused by the COVID-19 pandemic, will be reportedly accomplished through early retirement, non-renewal of temporary contracts, ending redundant positions and not filling vacant positions, Marketwatch reported.

Affirming the position of tech advocates, Supreme Court overturns Trump’s termination of DACA

By Jonathan Shieber

The U.S. Supreme Court ruled today that President Donald Trump’s administration unlawfully ended the federal policy providing temporary legal status for immigrants who came to the country as children.

The decision, issued Thursday, called the termination of the Obama-era policy known as the Deferred Action for Childhood Arrivals (DACA) program “arbitrary and capricious.” As a result of its ruling, nearly 640,000 people living in the United States are now temporarily protected from deportation.

While a blow to the Trump Administration, the ruling is sure to be hailed nearly unanimously by the tech industry and its leaders, who had come out strongly in favor of the policy in the days leading up to its termination by the current president and his advisors.

At the beginning of 2018, many of tech’s most prominent executives, including the CEOs of Apple, Facebook, Amazon and Google, joined more than 100 American business leaders in signing an open letter asking Congress to take action on the DACA program before it expired in March.

Tim Cook, Mark Zuckerberg, Jeff Bezos and Sundar Pichai made a full-throated defense of the policy and pleaded with Congress to pass legislation ensuring that “Dreamers,” or undocumented immigrants who arrived in the United States as children and were granted approval by the program, can continue to live and work in the country without risk of deportation.

At the time, those executives said the decision to end the program could potentially cost the U.S. economy as much as $215 billion.

In a 2017 tweet, Tim Cook noted that Apple employed roughly 250 “Dreamers.”

250 of my Apple coworkers are #Dreamers. I stand with them. They deserve our respect as equals and a solution rooted in American values.

— Tim Cook (@tim_cook) September 3, 2017

The list of tech executives who came out in support of the DACA initiative is long. It included: IBM CEO Ginni Rometty; Brad Smith, the president and chief legal officer of Microsoft; Hewlett Packard Enterprise CEO Meg Whitman; and CEOs or other leading executives of AT&T, Dropbox, Upwork, Cisco Systems, Salesforce, LinkedIn, Intel, Warby Parker, Uber, Airbnb, Slack, Box, Twitter, PayPal, Code.org, Lyft, Etsy, AdRoll, eBay, StitchCrew, SurveyMonkey, DoorDash and Verizon (the parent company of Verizon Media Group, which owns TechCrunch).

At the heart of the court’s ruling is the majority view that Department of Homeland Security officials didn’t provide a strong enough reason to terminate the program in September 2017. Now, the issue of immigration status gets punted back to the White House and Congress to address.

As the Boston Globe noted in a recent article, the majority decision written by Chief Justice John Roberts did not determine whether the Obama-era policy or its revocation were correct, just that the DHS didn’t make a strong enough case to end the policy.

“We address only whether the agency complied with the procedural requirement that it provide a reasoned explanation for its action,” Roberts wrote. 

While the ruling from the Supreme Court is some good news for the population of “Dreamers,” the question of their citizenship status in the country is far from settled. The U.S. government’s response to the COVID-19 pandemic has basically consisted of freezing as much of the nation’s immigration apparatus as possible.

An executive order in late April froze the green card process for would-be immigrants, and the administration was rumored to be considering a ban on temporary workers under H1-B visas as well.

The president has, indeed, ramped up the crackdown with strict border control policies and other measures to curb both legal and illegal immigration. 

More than 800,000 people joined the workforce as a result of the 2012 program crafted by the Obama administration. DACA allows anyone under 30 to apply for protection from deportation or legal action on their immigration cases if they were younger than 16 when they were brought to the U.S., had not committed a crime and were either working or in school.

In response to the Supreme Court decision, the President tweeted “Do you get the impression that the Supreme Court doesn’t like me?”

Do you get the impression that the Supreme Court doesn’t like me?

— Donald J. Trump (@realDonaldTrump) June 18, 2020

 

 

Colin Kaepernick joins Medium board of directors and inks partnership publishing deal

By Jonathan Shieber

The online publishing platform Medium said that it has added former San Francisco 49ers quarterback and civil rights advocate Colin Kaepernick to its board of directors.

The company also said it had inked a partnership agreement with Kaepernick to develop projects focused on race and civil rights in America under the Kaepernick Publishing imprint — Kaepernick’s personal publishing company founded in 2019.

Medium’s decision to bring Kaepernick on board as a director and publisher for the site follows an industry-wide reckoning within startups around the country about their role in perpetuating racial disparity in America. The accounting comes as protests in cities across the country shine a spotlight on police brutality and the political and economic disenfranchisement of the nation’s Black communities in the wake of the Memorial Day murder of George Floyd by Minneapolis police officers.

According to Medium’s chief executive Ev Williams, the deal with Kaepernick is the culmination of a long-running discussion between the company and the athlete/activist.

“We’ve been in talks with Colin for some time, and we are honored to be electing him to join our board,” said Williams, in a statement. “Colin’s voice and actions have led the discussion on racial justice, and the world is finally catching up to him.”

Kaepernick will be writing stories and working on features for Medium’s Level, which describes itself as a publication for the “interested man” and its new blog on anti-Black racism and civil rights, Momentum. The activist and former quarterback will also interview leaders, activists and athletes for the Medium platform.

“I am excited for Kaepernick Publishing to partner with Medium to continue to elevate Black voices in the news and publishing industry,” said Kaepernick, in a statement. “I also look forward to creating new opportunities and avenues for Black writers and creators with my new role as a Board member.”

Medium currently boasts 170 million monthly readers across its blogs and editorially driven publications, including ZORA and Level, which are aimed at women and men of color, according to the company. Medium also publishes GEN, focused on “politics, power, and culture”; the technology-focused masthead, OneZeroElemental, a health-focused site; Forge, for self-help and advice; and Marker, which the company bills as a business-focused site.

Momentum is the latest addition to Medium’s suite of curated blogs and publications.

To date, Medium has raised more than $130 million from investors, including Andreessen Horowitz, Spark Capital, GV, Greylock Partners, The Chernin Group, Lowercase Capital and Obvious Ventures.

Decrypted: The tech police use against the public

By Zack Whittaker

There is a darker side to cybersecurity that’s frequently overlooked.

Just as you have an entire industry of people working to keep systems and networks safe from threats, commercial adversaries are working to exploit them. We’re not talking about red-teamers, who work to ethically hack companies from within. We’re referring to exploit markets that sell details of security vulnerabilities and the commercial spyware companies that use those exploits to help governments and hackers spy on their targets.

These for-profit surveillance companies flew under the radar for years, but have only recently gained notoriety. But now, they’re getting unwanted attention from U.S. lawmakers.

In this week’s Decrypted, we look at the technologies police use against the public.


THE BIG PICTURE

Secrecy over protest surveillance prompts call for transparency

Last week we looked at how the Justice Department granted the Drug Enforcement Administration new powers to covertly spy on protesters. But that leaves a big question: What kind of surveillance do federal agencies have, and what happens to people’s data once it is collected?

While some surveillance is noticeable — from overhead drones and police helicopters overhead — others are worried that law enforcement are using less than obvious technologies, like facial recognition and access to phone records, CNBC reports. Many police departments around the U.S. also use “stingray” devices that spoof cell towers to trick cell phones into turning over their call, message and location data.

African payment startup Chipper Cash raises $13.8M Series A

By Jake Bright

African cross-border fintech startup Chipper Cash has closed a $13.8 million Series A funding round led by Deciens Capital and plans to hire 30 new staff globally.

The raise caps an event filled run for the San Francisco based payments company, founded two years ago by Ugandan Ham Serunjogi and Ghanaian Maijid Moujaled.

The two came to America for academics, met in Iowa while studying at Grinnell College and ventured out to Silicon Valley for stints in big tech: Facebook for Serunjogi and Flickr and Yahoo! for Moujaled.

The startup call beckoned and after launching Chipper Cash in 2018, the duo convinced 500 Startups and and Liquid 2 Ventures — co-founded by American football legend Joe Montana — to back their company with seed funds.

Two years and $22 million in total capital raised later, Chipper Cash offers its mobile-based, no fee, P2P payment services in seven countries: Ghana, Uganda, Nigeria, Tanzania, Rwanda, South Africa and Kenya.

“We’re now at over one and a half million users and doing over a $100 million dollars a month in volume,” Serunjogi told TechCrunch on a call.

Chipper Cash does not release audited financial data, but does share internal performance accounting with investors. Deciens Capital and Raptor Group co-led the startup’s Series A financing, with repeat support from 500 Startups and Liquid 2 Ventures .

Deciens Capital founder Dan Kimmerling confirmed the fund’s lead on the investment and review of Chipper Cash’s payment value and volume metrics.

Parallel to its P2P app, the startup also runs Chipper Checkout: a merchant-focused, fee-based mobile payment product that generates the revenue to support Chipper Cash’s free mobile-money business.

The company will use its latest round to hire up to 30 people across operations in San Francisco, Lagos, London, Nairobi and New York — according to Serunjogi.

Image Credits: Chipper Cash

Chipper Cash has already brought on a new compliance officer, Lisa Dawson, whose background includes stints with the U.S. Department of Treasury’s Financial Crimes Enforcement Network and Citigroup’s anti-money laundering department.

“You know in the world we live in the AML side is very important so it’s an area that we want to invest in from the get go,” said Serunjogi.

He confirmed Dawson’s role aligned with getting Chipper Cash ready to meet regulatory requirements for new markets, but declined to name specific countries.

With the round announcement, Chipper Cash also revealed a corporate social responsibility component to its business. Related to current U.S. events, the startup has formed the Chipper Fund for Black Lives.

“We’ve been huge beneficiaries of the generosity and openness of this country and its entrepreneurial spirit,” explained Serunjogi. “But growing up in Africa, we’ve were able to navigate [the U.S.] without the traumas and baggage our African American friends have gone through living in America.”

The Chipper Fund for Black Lives will give 5 to 10 grants of $5,000 to $10,000. “The plan is to give that to…people or causes who are furthering social justice reforms,” said Serunjogi.

In Africa, Chipper Cash has placed itself in the continent’s major digital payments markets. As a sector, fintech has become Africa’s highest funded tech space, receiving the bulk of an estimated $2 billion in VC that went to startups in 2019.

Africa Top VC Markets 2019

Image Credits: TechCrunch

Those ventures, and a number of the continent’s established banks, are in a race to build market share through financial inclusion.

By several estimates — including The Global Findex Database — the continent is home to the largest percentage of the world’s unbanked population, with a sizable number of underbanked consumers and SMEs.

Increasingly, Nigeria has become the most significant fintech market in Africa, with the continent’s largest economy and population of 200 million.

Chipper Cash expanded there in 2019 and faces competition from a number of players, including local payments venture Paga. More recently, outside entrants have jumped into Nigeria’s fintech scene.

In 2019, Chinese investors put $220 million into OPay (owned by Opera) and PalmPay — two fledgling startups with plans to scale first in West Africa and then the broader continent.

Over the next several years, expect to see market events — such as fails, acquisitions, or IPOs — determine how well funded fintech startups, including Chipper Cash, fare in Africa’s fintech arena.

Audi sets up Silicon Valley office to develop automated driving systems for US market

By Kirsten Korosec

Audi has opened an office in Silicon Valley that aims to adapt and develop advanced driver assistance systems for the U.S. market. 

The Audi Automated Driving Development (A2D2) R&D office will be located in San Jose and initially staffed with about 60 employees. The company said A2D2 will have the “flexibility to quickly develop new software and to collaborate with nearby startups for production-intent applications.”

This new R&D office is focused on advancing so-called Level 2 systems, a designation by the Society of Automobile Engineers (SAE), in which two primary functions are automated and still have a human driver in the loop at all times. There are five levels of automation under SAE’s definition. Level 4 means the vehicle can handle all aspects of driving in certain conditions without human intervention and is what companies like Argo AI, Aurora, Cruise and Waymo are working on. Level 5, which is widely viewed as a distant goal, would handle all driving in all environments and conditions.

The focus on Level 2 is an important distinction. Audi had developed a Level 3 automated system called Traffic Jam Pilot that was supposed to be in the latest-generation A8 that debuted in 2017. After numerous delays, Audi decided in May to scrap plans to roll out the Level 3 automated driving system. Traffic Jam Pilot theoretically allows the vehicle to operate on its own without the human driver keeping their eyes on the road. But it has never been commercially deployed. 

The company told TechCrunch back in May that the lack of a legal framework raised concerns about liability. To further complicate the problem, the A8 has been progressing through its generational life cycle. Audi was faced with continuing to pour money into the feature to adapt it without promise of a framework progressing.

Now, Audi has turned its attention and capital toward advanced driving assistance systems that can actually be launched in passenger vehicles. A2D2 will be the first office dedicated to developing ADAS hardware and software specifically for North American roads and driving behaviors, the company said.

“Given the rapid advancement of driver assistance technologies in North America, it’s important to be part of the latest breakthroughs, work with leading edge of technology startups and attract the top talent,” said Frank Grosshauser, senior director, ADAS, Audi of America.

The A2D2 office is hugely important to the further advancement of systems here in the U.S. in the interim, not just in terms of assisted driving but all of the various sensors and systems and how they can be brought together to further improve the driving experience, safety and use for our customers in the not too distant future, an Audi spokesperson wrote in an email.

The A2D2 office has outfitted several Audi Q7 development vehicles with roof-mounted sensor kits to collect data to develop various cloud-based automated driver-assistance functions planned for introduction by 2023, the company said. The A2D2 development vehicles are wrapped in a QR code that links to a web page where people can get updates on Audi’s progress. 

Audi is also working on automated driving technology with Car.Software, a newly founded Volkswagen Group unit. All Volkswagen Group brands have concentrated their automated driving development activities within this unit, the company said. 

Volkswagen sinks another $200 million into solid-state battery company QuantumScape

By Kirsten Korosec

Volkswagen said Tuesday it has invested another $200 million into QuantumScape, a Stanford University spinout developing solid-state batteries as the automaker bets on a next-generation technology that will unlock longer ranges and faster charging times in electric vehicles.

Volkswagen’s relationship with QuantumScape, which had early backing from Kleiner Perkins and Khosla Ventures, actually stretches back to 2012. The two companies formed a joint venture in 2018 to accelerate the development of solid-state battery technology and then produce them at commercial scale.

Volkswagen made an initial $100 million investment into QuantumScape in September 2018. The additional $200 million aims to accelerate that joint development work, according to Thomas Schmall, chairman of the board of management of Volkswagen Group components, which has end-to-end responsibility for batteries.

The companies have plans to set up a pilot plant for the industrial-level production of the solid-state batteries. Volkswagen said plans for this pilot factory will be “firmed up” sometime this year.

Two years ago, Volkswagen set a target to establish a production line for these batteries by 2025.

Today’s electric vehicles use lithium-ion batteries. A battery contains two electrodes. There’s an anode (negative) on one side and a cathode (positive) on the other. An electrolyte sits in the middle and acts as the courier that moves ions between the electrodes when charging and discharging. Solid-state batteries use a solid electrolyte and not a liquid or gel-based electrolyte found in lithium-ion batteries.

Developers claim that solid electrolytes have greater energy density, which translates into squeezing more range out of a smaller and lighter battery. Solid electrolytes also are supposed to be better at thermal management, reducing the risk of fire and the reliance on the kinds of cooling systems found in today’s EVs.

The cost of solid-state batteries has been a difficult hurdle to overcome. Yet the promise of this technology at commercial scale has prompted a number of automakers to pursue it. BMW, Honda, Hyundai, Nissan and Toyota are just a handful of automakers investing in the research and development of solid-state battery technology.

Tibet to become China’s data gateway to South Asia

By Rita Liao

A sprawling 645,000-square-meter data facility is going up on the top of the world to power data exchange between China and its neighboring countries in South Asia.

The cloud computing and data center, perched on the plateau city Lhasa, the capital of Tibet, and developed by private tech firm Ningsuan Technologies, has entered pilot operation as it announced the completion of the first construction phase, China’s state news agency Xinhua reported (in Chinese) on Sunday.

Northeast of the Himalayas, Tibet was incorporated as an autonomous region of China in 1950. Over the decades, the Chinese government has been grappling with demand from many Tibetans for more religious freedom and human rights in one of its most critical regions for national security.

The plateau is now a bridge for China to South Asia under the Belt and Road Initiative, Beijing’s ambitious global infrastructure project. Ningsuan, a Tibet-headquartered company with data control centers in Beijing and research teams in Nanjing, is betting on the increasing trade and investment activity between China and India, Nepal, Bangladesh and other countries that are part of the BRI.

This generates the need for robust IT infrastructure in the region to support data transmission, Hu Xiao, Ningsuan’s general manager, contended in a previous media interview.

While hot days and spotty power supply in certain South Asian regions incur higher costs for running data centers, Tibet, like the more established data hub in Guizhou province, is a natural data haven thanks to its temperate climate and low average temperature that are ideal for keeping servers cool.

Construction of the Lhasa data center began in 2017 and is scheduled for completion around 2025 or 2026, a grand investment that will total almost 12 billion yuan or $1.69 billion. The cloud facility is estimated to generate 10 billion yuan in revenue each year when it goes into full operation.

Alibaba has skin in the game as well. In 2018, the Chinese e-commerce giant, which has a growing cloud computing business, sealed an agreement (in Chinese) with Ningsuan to bring cloud services to industries in the Tibetan region that span electricity supply, finance, national security, government affairs, public security, to cyberspace.

Self-driving vehicle startup Argo AI completes $2.6B deal with Volkswagen, expands to Europe

By Kirsten Korosec

Volkswagen Group finalized Tuesday its $2.6 billion investment into Argo AI, the Pittsburgh-based self-driving car startup that came out of stealth in 2017 with $1 billion in backing from Ford.

The deal turns Argo into a global company with two customers — VW and Ford — as well as operations in the U.S. and Europe and an instant jump in its workforce. Autonomous Intelligent Driving, the self-driving subsidiary that was launched in 2017 to develop autonomous vehicle technology for the VW Group, will be absorbed into Argo AI. AID’s Munich offices will become Argo’s European headquarters.

That integration, which can begin now that the deal has closed, will expand Argo’s workforce to more than 1,000 people. Argo also has offices in Detroit, Palo Alto, and Cranbury, New Jersey. The company has fleets of autonomous vehicles mapping and testing on public roads in Austin, Miami and Washington, D.C.

Argo AI is developing the virtual driver system and high-definition maps designed for Ford’s self-driving vehicles. That mission now expands to VW. Ford and VW will share the cost of developing Argo AI’s self-driving vehicle technology under the terms of the deal.

“Building a safe, scalable and trusted self-driving service, however, is no small task. It’s also not a cheap one,” Ford Autonomous Vehicles LLC CEO John Lawler said in a blog post.

Two years ago, Ford said it would spend $4 billion through 2023 in a newly created LLC dedicated to building out an autonomous vehicles business. Ford Autonomous Vehicles LLC houses the company’s self-driving systems integration, autonomous-vehicle research and advanced engineering, AV transportation-as-a-service network development, user experience, business strategy and business development teams.

Lawler emphasized that “sharing development costs” doesn’t mean Ford is reducing its overall spend in autonomous vehicles. Instead, the company said it will reallocate money towards development of transportation as a service software and fleet operations for its eventual self-driving service.

Despite this shared investment, Ford and VW will not collaborate on the actual self-driving vehicle service.

Lawler, who is also vice president of mobility partnerships at Ford, said the U.S. automaker “will remain independent and fiercely competitive in building its own self-driving service.”

Argo’s board will now be comprised of two VW seats, two Ford seats and three Argo seats.

China Roundup: SoftBank leads Didi’s $500M round and Meituan crosses $100B valuation

By Rita Liao

Hello and welcome back to TechCrunch’s China Roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world. Last week, we had a barrage of news ranging from SoftBank’s latest bet on China’s autonomous driving sector to Chinese apps making waves in the U.S. (not TikTok).

China tech abroad

The other Chinese apps trending in America

TikTok isn’t the only app with a Chinese background that’s making waves in the U.S. A brand new short-video app called Zynn has been topping the iOS chart in America since May 26, just weeks after its debut. Zynn’s maker is no stranger to Chinese users: it was developed by short-video platform Kuaishou, the nemesis of Douyin, TikTok’s Chinese sister.

The killer feature behind Zynn’s rise is an incentive system that pays people small amounts of cash to sign up, watch videos or invite others to join, a common user acquisition tactic in the Chinese internet industry.

Paying people to use & recommend your app to others i.e. the classic Qutoutiao (趣头条 Fun Headlines) model popularized in China from around 2017 has now made it over to the States

Given how many unemployed people there are due to Covid-19. Never been a better time to test this https://t.co/nXXoCrlTvW

— Matthew Brennan (@mbrennanchina) May 27, 2020

The other app that’s been trending in the U.S. for a while is News Break, a hyper-local news app founded by China’s media veteran Jeff Zheng, with teams in China and the U.S. It announced a heavy-hitting move last week as it onboards Harry Shum, former boss of Microsoft AI and Research Group, as its board chairman.

Alibaba looks for overseas influencers

The Chinese e-commerce giant is searching for live-streaming hosts in Europe and other overseas countries to market its products on AliExpress, its marketplace for consumers outside China. Live-streaming dancing and singing is nothing new, but the model of selling through live videos, during which consumers can interact with a salesperson or session host, has gained major ground in China as shops remained shut for weeks during the coronavirus outbreak.

In Q1 2020, China recorded more than 4 million e-commerce live-streaming sessions across various platforms, including Alibaba. Now the Chinese giant wants to replicate its success abroad, pledging that the new business model can create up to 100,000 new jobs for content creators around the world.

Oppo in Germany

Oppo announced last week its new European headquarters in Düsseldorf, Germany, a sign that the Chinese smartphone maker has gotten more serious on the continent. The move came weeks after it signed a distribution deal with Vodafone to sell its phones in seven European countries. Oppo was also one of the first manufacturers to launch a 5G commercial phone in Europe.

Chinese tech stocks return

We speculated last week that Hong Kong might become an increasingly appealing destination for U.S.-listed Chinese tech companies, many of which will be feeling the heat of tightening accounting rules targeting foreign companies. Two firms have already taken action. JD.com and NetEase, two of China’s biggest internet firms, have won approvals to list in Hong Kong, Bloomberg reported, citing sources.

China tech back home

SoftBank doubles down on Didi

Massive losses in SoftBank’s first Vision Fund didn’t seem to deter the Japanese startup benefactor from placing bold bets. China’s ride-hailing giant Didi has completed an outsized investment of over $500 million in its new autonomous driving subsidiary. The financing led by SoftBank marked the single-largest fundraising round in China’s autonomous driving sector.

The capital will give Didi a huge boost in the race to win the autonomous driving race, where it is a relative latecomer. It’s competing with deep-pocketed players that are aggressively testing across the world, including the likes of Alibaba, Tencent and Baidu, and startups such as Momenta, NIO and Pony.ai.

Marriage of e-commerce and live streaming

Speaking of live-streaming e-commerce, two of China’s biggest internet companies have teamed up to exploit the new business model. JD, the online retailer that is Alibaba’s long-time archrival, has signed a strategic partnership with Kuaishou — yes, the maker of Zynn and TikTok’s rival in China.

The collaboration is part of a rising trend in the Chinese internet, where short video apps and e-commerce platforms pally up to explore new monetization avenues. The thinking goes that video platforms can leverage the trust that influencers instill in their audience to tout products.

Meituan hit record valuation

Despite reporting an unprofitable first quarter, Meituan, a leader in China’s food delivery sector, saw its shares reach a record high last week to bring its valuation to over $100 billion.

Notion got banned in China, briefly

Notion, the fast-growing work collaboration tool that recently hit a $2 billion valuation and has attracted a loyal following in China, was briefly banned in China last week. It’s still investigating the cause of the ban, but the timing noticeably coincided with China’s annual parliament meeting, which began last week after a two-month delay due to COVID-19. Internet regulation and censorship normally toughen around key political meetings in the country.

Audi launches high-tech car unit Artemis to fast-track a ‘pioneering’ EV to market

By Kirsten Korosec

Audi has created a new business unit called Artemis to bring electric vehicles equipped with highly automated driving systems and other tech to market faster — the latest bid by the German automaker to become more agile and competitive.

The traditional automotive industry, where the design to start of production cycle might take five to seven years, has been grappling with how to bring new and innovative products to market more quickly to meet consumers’ fickle demands. The model is more akin to how Tesla or a consumer electronics company operates.

The first project under Artemis will be to “develop a pioneering model for Audi quickly and unbureaucratically,” Audi AG CEO Markus Duesmann said in a statement Friday. The unit is aiming to design and produce what Audi describes as a “highly efficient electric car” as early as 2024.

Artemis will be led by Alex Hitzinger, who was in charge of Audi’s Autonomous Intelligent Driving, the self-driving subsidiary that was launched just in 2017 to develop autonomous vehicle technology for the VW Group. AID was absorbed into the European headquarters of Argo AI, a move that was made after VW invested $2.6 billion in capital and assets into the self-driving startup.

Hitzinger, who takes the new position beginning June 1, will report directly to Duesmann. Artemis will be based at the company’s tech hub of its INCampus in Ingolstadt, Germany.

Artemis is under the Audi banner. However, the aim is for this group’s work to benefit brands under its parent company VW Group.  Hitzinger and the rest of his team will have access to resources and technologies within the entire Volkswagen Group . For instance, Car.Software, an independent business unit under the VW Group, will provide digital services to Artemis.  The upshot: to create a blueprint that will make VW Group a more agile automaker able to bring new and technologically advanced vehicles to market more quickly.

VW Group plans to produce and sell 75 electric vehicle models across its brands by 2029, a group that includes VW passenger cars and Audi. The creation of Artemis hasn’t changed Audi’s plans to produce 20 new all-electric vehicles and 10 new plug-in hybrids by 2025.

“The obvious question was how we could implement additional high-tech benchmarks without jeopardizing the manageability of existing projects, and at the same time utilize new opportunities in the markets,” Duesmann said.

Virgin Orbit’s first orbital test flight cut short after rocket released from carrier aircraft

By Darrell Etherington

On Monday, Virgin Orbit attempted the first full flight of its orbital payload launch system, which includes a modified Boeing 747 called ‘Cosmic Girl’ that acts as a carrier aircraft for its air-launched rocket LauncherOne. While Virgin Orbit has flown Cosmic Girl and LauncherOne previously for different tests and demonstrations, this was the first end-to-end system test. Unfortunately, that test ended much earlier than planned – just shortly after the LauncherOne rocket was released from Cosmic Girl.

We've confirmed a clean release from the aircraft. However, the mission terminated shortly into the flight. Cosmic Girl and our flight crew are safe and returning to base.

— Virgin Orbit (@Virgin_Orbit) May 25, 2020

Cosmic Girl took off just before 12 PM PT (3 PM ET) from Mojave Air and Spaceport in California. The aircraft was piloted by Chief Test Pilot Kelly Latimer, along with her co-pilot Todd Ericson. The aircraft then flew to its target release point, where LauncherOne did manage a “clean release” from the carrier craft as planned at around 12:50 PM PT (3:50 PM ET), but Virgin noted just a few minutes later that the mission was subsequently “terminated.”

While the Cosmic Girl crew and all other employees are confirmed safe by the company, this is likely to be a disappointing test. Still, Virgin Orbit’s CEO Dan Hart and VP Will Pomerantz cautioned that many first test missions for new launch systems don’t go quite as planned – which is why you test, after all.

The full planned flight map today for Virgin One’s orbital test.

The company will still likely be able to collect a lot of valuable data from this mission, which should provide insight into what went wrong. We’ll also be reaching out to the company to seek details of what caused the early ending to today’s mission. Once the company addresses the problems, it’s likely to set another attempt, and that might not be as far away as you might expect because Virgin has been very active on its launch vehicle pipeline and has backup craft nearly ready to fly.

China Roundup: A blow to US-listed Chinese firms and TikTok’s new global face

By Rita Liao

Hello and welcome back to TechCrunch’s China Roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world. It’s been a tumultuous week for Chinese tech firms abroad: Huawei’s mounting pressure from the U.S., a big blow to U.S.-listed Chinese firms, and TikTok’s high-profile new boss.

China tech abroad

Further decoupling

Over the years, American investors have been pumping billions of dollars into Chinese firms listed in the U.S., from giants like Alibaba and Baidu to emerging players like Pinduoduo and Bilibili. That could change soon with the Holding Foreign Companies Accountable Act, a new bill passed this week with bipartisan support to tighten accounting standards on foreign companies, with the obvious target being China.

“For too long, Chinese companies have disregarded U.S. reporting standards, misleading our investors. Publicly listed companies should all be held to the same standards, and this bill makes commonsense changes to level the playing field and give investors the transparency they need to make informed decisions,” said Senator Chris Van Hollen who introduced the legislation.

Here’s what the legislation is about:

1) Foreign companies that are out of compliance with the Public Company Accounting Oversight Board for three years in a row will be delisted from U.S. stock exchanges.

PCAOB, which was set up in 2002 as a private-sector nonprofit corporation overseen by the SEC, is meant to inspect audits of foreign firms listed in the U.S. to prevent fraud and wrongdoing.

The rule has not sat well with foreign accounting firms and their local regulators, so over time PCAOB has negotiated multiple agreements with foreign counterparts that allowed it to perform audit inspections. China is one of the few countries that has not been cooperating with the PCAOB.

2) The bill will also require public companies in the U.S. to disclose whether they are owned or controlled by a foreign government, including China’s communist government.

The question now is whether we will see Chinese companies give in to the new rules or relocate to bourses outside the U.S.

The Chinese firms still have a three-year window to figure things out, but they are getting more scrutiny already. Most recently, Nasdaq announced to delist Luckin, the Chinese coffee challenger that admitted to fabricating $310 million in sales.

Those that do choose to leave the U.S. will probably find a warmer welcome in Hong Kong, attracting investors closer to home who are more acquainted with their businesses. Alibaba, for instance, already completed a secondary listing in Hong Kong last year as the city began letting investors buy dual-class shares, a condition that initially prompted many Chinese internet firms to go public in the U.S.

TikTok gets a talent boost 

The long-awaited announcement is here: TikTok has picked its new chief executive, and taking the helm is Disney’s former head of video streaming, Kevin Mayer.

It’s understandable that TikTok would want a global face for its fast-growing global app, which has come under scrutiny from foreign governments over concerns of its data practices and Beijing’s possible influence.

Curiously, Mayer will also take on the role of the chief operating officer of parent company ByteDance . A closer look at the company announcement reveals nuances in the appointment: Kelly Zhang and Lidong Zhang will continue to lead ByteDance China as its chief executive officer and chairman respectively, reporting directly to ByteDance’s founder and global CEO Yiming Zhang, as industry analyst Matthew Brennan acutely pointed out. That means ByteDance’s China businesses Douyin and Today’s Headlines, the cash cows of the firm, will remain within the purview of the two Chinese executives, not Mayer.

Huawei in limbo following more chip curbs

Huawei is in limbo after the U.S. slapped more curbs on the Chinese telecoms equipment giant, restricting its ability to procure chips from foreign foundries that use American technologies. The company called the rule “arbitrary and pernicious,” while it admitted that the attack would impact its business.

Vodafone to help Oppo expand in Europe 

As Huawei faces pressure abroad due to the Android ban, other Chinese phone makers have been steadily making headway across the world. One of them is Oppo, which just announced a partnership with Vodafone to bring its smartphones to the mobile carrier’s European markets.

All of China’s top AI firms now on U.S. entity list 

The U.S. has extended sanctions to more Chinese tech firms to include CloudWalk, which focuses on developing facial recognition technology. This means all of the “four dragons of computer vision” in China, as the local tech circle collectively calls CloudWalk, SenseTime, Megvii and Yitu, have landed on the U.S. entity list.

China tech back home

China’s new trillion-dollar plan to seize the tech crown (Bloomberg)

China has a new master plan to invest $1.4 trillion in everything from AI to 5G in what it dubs the “new infrastructure” initiative.

Fitbit rival Amazfit works on a reusable mask

The smartwatch maker is eyeing a transparent, self-disinfecting mask, becoming the latest Chinese tech firm to jump on the bandwagon to develop virus-fighting tech.

ByteDance moves into venture capital investment

The TikTok parent bankrolled financial AI startup Lingxi with $6.2 million, marking one of its first investments for purely monetary returns rather than for an immediate strategic purpose.

Bilibili is the new Youtube of China

The once-obscure video site for anime fans is now in the mainstream with a whopping 172 million monthly user base.

Xiaomi’s investment powerhouse reaches 300 companies 

It’s part of the smartphone giant’s plan to conquer the world of smart home devices and wearables.

Alibaba pumps $1.4 billion into content and services for IoT

Like Amazon, Alibaba has a big ambition in the internet of things.

The FBI is mad because it keeps getting into locked iPhones without Apple’s help

By Walter Thompson
Riana Pfefferkorn Contributor
Riana Pfefferkorn is the associate director of Surveillance and Cybersecurity at the Stanford Center for Internet and Society.

The debate over encryption continues to drag on without end.

In recent months, the discourse has largely swung away from encrypted smartphones to focus instead on end-to-end encrypted messaging. But a recent press conference by the heads of the Department of Justice (DOJ) and the Federal Bureau of Investigation (FBI) showed that the debate over device encryption isn’t dead, it was merely resting. And it just won’t go away.

At the presser, Attorney General William Barr and FBI Director Chris Wray announced that after months of work, FBI technicians had succeeded in unlocking the two iPhones used by the Saudi military officer who carried out a terrorist shooting at the Pensacola Naval Air Station in Florida in December 2019. The shooter died in the attack, which was quickly claimed by Al Qaeda in the Arabian Peninsula.

Early this year — a solid month after the shooting — Barr had asked Apple to help unlock the phones (one of which was damaged by a bullet), which were older iPhone 5 and 7 models. Apple provided “gigabytes of information” to investigators, including “iCloud backups, account information and transactional data for multiple accounts,” but drew the line at assisting with the devices. The situation threatened to revive the 2016 “Apple versus FBI” showdown over another locked iPhone following the San Bernardino terror attack.

After the government went to federal court to try to dragoon Apple into doing investigators’ job for them, the dispute ended anticlimactically when the government got into the phone itself after purchasing an exploit from an outside vendor the government refused to identify. The Pensacola case culminated much the same way, except that the FBI apparently used an in-house solution instead of a third party’s exploit.

You’d think the FBI’s success at a tricky task (remember, one of the phones had been shot) would be good news for the Bureau. Yet an unmistakable note of bitterness tinged the laudatory remarks at the press conference for the technicians who made it happen. Despite the Bureau’s impressive achievement, and despite the gobs of data Apple had provided, Barr and Wray devoted much of their remarks to maligning Apple, with Wray going so far as to say the government “received effectively no help” from the company.

This diversion tactic worked: in news stories covering the press conference, headline after headline after headline highlighted the FBI’s slam against Apple instead of focusing on what the press conference was nominally about: the fact that federal law enforcement agencies can get into locked iPhones without Apple’s assistance.

That should be the headline news, because it’s important. That inconvenient truth undercuts the agencies’ longstanding claim that they’re helpless in the face of Apple’s encryption and thus the company should be legally forced to weaken its device encryption for law enforcement access. No wonder Wray and Barr are so mad that their employees keep being good at their jobs.

By reviving the old blame-Apple routine, the two officials managed to evade a number of questions that their press conference left unanswered. What exactly are the FBI’s capabilities when it comes to accessing locked, encrypted smartphones? Wray claimed the technique developed by FBI technicians is “of pretty limited application” beyond the Pensacola iPhones. How limited? What other phone-cracking techniques does the FBI have, and which handset models and which mobile OS versions do those techniques reliably work on? In what kinds of cases, for what kinds of crimes, are these tools being used?

We also don’t know what’s changed internally at the Bureau since that damning 2018 Inspector General postmortem on the San Bernardino affair. Whatever happened with the FBI’s plans, announced in the IG report, to lower the barrier within the agency to using national security tools and techniques in criminal cases? Did that change come to pass, and did it play a role in the Pensacola success? Is the FBI cracking into criminal suspects’ phones using classified techniques from the national security context that might not pass muster in a court proceeding (were their use to be acknowledged at all)?

Further, how do the FBI’s in-house capabilities complement the larger ecosystem of tools and techniques for law enforcement to access locked phones? Those include third-party vendors GrayShift and Cellebrite’s devices, which, in addition to the FBI, count numerous U.S. state and local police departments and federal immigration authorities among their clients. When plugged into a locked phone, these devices can bypass the phone’s encryption to yield up its contents, and (in the case of GrayShift) can plant spyware on an iPhone to log its passcode when police trick a phone’s owner into entering it. These devices work on very recent iPhone models: Cellebrite claims it can unlock any iPhone for law enforcement, and the FBI has unlocked an iPhone 11 Pro Max using GrayShift’s GrayKey device.

In addition to Cellebrite and GrayShift, which have a well-established U.S. customer base, the ecosystem of third-party phone-hacking companies includes entities that market remote-access phone-hacking software to governments around the world. Perhaps the most notorious example is the Israel-based NSO Group, whose Pegasus software has been used by foreign governments against dissidents, journalists, lawyers and human rights activists. The company’s U.S. arm has attempted to market Pegasus domestically to American police departments under another name. Which third-party vendors are supplying phone-hacking solutions to the FBI, and at what price?

Finally, who else besides the FBI will be the beneficiary of the technique that worked on the Pensacola phones? Does the FBI share the vendor tools it purchases, or its own home-rolled ones, with other agencies (federal, state, tribal or local)? Which tools, which agencies and for what kinds of cases? Even if it doesn’t share the techniques directly, will it use them to unlock phones for other agencies, as it did for a state prosecutor soon after purchasing the exploit for the San Bernardino iPhone?

We have little idea of the answers to any of these questions, because the FBI’s capabilities are a closely held secret. What advances and breakthroughs it has achieved, and which vendors it has paid, we (who provide the taxpayer dollars to fund this work) aren’t allowed to know. And the agency refuses to answer questions about encryption’s impact on its investigations even from members of Congress, who can be privy to confidential information denied to the general public.

The only public information coming out of the FBI’s phone-hacking black box is nothingburgers like the recent press conference. At an event all about the FBI’s phone-hacking capabilities, Director Wray and AG Barr cunningly managed to deflect the press’s attention onto Apple, dodging any difficult questions, such as what the FBI’s abilities mean for Americans’ privacy, civil liberties and data security, or even basic questions like how much the Pensacola phone-cracking operation cost.

As the recent PR spectacle demonstrated, a press conference isn’t oversight. And instead of exerting its oversight power, mandating more transparency, or requiring an accounting and cost/benefit analysis of the FBI’s phone-hacking expenditures — instead of demanding a straight and conclusive answer to the eternal question of whether, in light of the agency’s continually-evolving capabilities, there’s really any need to force smartphone makers to weaken their device encryption — Congress is instead coming up with dangerous legislation such as the EARN IT Act, which risks undermining encryption right when a population forced by COVID-19 to do everything online from home can least afford it.

The bestcase scenario now is that the federal agency that proved its untrustworthiness by lying to the Foreign Intelligence Surveillance Court can crack into our smartphones, but maybe not all of them; that maybe it isn’t sharing its toys with state and local police departments (which are rife with domestic abusers who’d love to get access to their victims’ phones); that unlike third-party vendor devices, maybe the FBI’s tools won’t end up on eBay where criminals can buy them; and that hopefully it hasn’t paid taxpayer money to the spyware company whose best-known government customer murdered and dismembered a journalist.

The worst-case scenario would be that, between in-house and third-party tools, pretty much any law enforcement agency can now reliably crack into everybody’s phones, and yet nevertheless this turns out to be the year they finally get their legislative victory over encryption anyway. I can’t wait to see what else 2020 has in store.

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