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Hi there!

Great to have you back! In this issue, let’s take a look at the “unfathomable absurdity” (according to China) of US restrictions on advanced chipmaking tech, the Biden administration’s urgent efforts to close trade loopholes, and President Xi’s “Directive 79” which aims to boot American technology from Chinese state-owned enterprises within five years. 

I also dive into some latest insights around jobs of the future: what they are (hint: they’re all in STEM), the projected growth of STEM occupations, and specific human skills that will be more in demand than ever as prompt engineering takes off.

This issue features the usual bunch of AI Insights and recommendations for the week's podcasts, books, shows, charts, and tweets, followed by a final chuckle.

Let’s get going.

Industry Highlights: Washington’s Chipmaking Technology Restrictions and China’s Directive 79

Chinese foreign minister Wang Yi has said US efforts to deny China access to advanced chipmaking technologies have reached “bewildering levels of unfathomable absurdity.” 

What’s been going on? 

The Financial Times has reported on how the US is pressuring Japan and the Netherlands to tighten restrictions on exports of chipmaking equipment to China after we imposed unilateral export controls in 2022 to hinder Chinese efforts to acquire advanced semiconductors with potential military applications. 

Despite these controls, Chinese companies Huawei and Semiconductor Manufacturing International Corporation (SMIC), both on the US trade blacklist, announced they had produced an advanced chip for Huawei's Mate 60 series phone. 

As The Strategist explains, efforts were made to limit China's semiconductor production to older 14-nm technology. These controls have yielded mixed results. The Mate 60 phones feature 7-nm chips, which outperform their 14-nm counterparts due to the use of smaller transistors. This enables a higher transistor density on the chip, leading to enhanced performance and lower power consumption. While the 7-nm chip still lags behind the 3-nm chip found in Apple's latest iPhone 15, produced by Taiwan Semiconductor Manufacturing Company (TSMC), it demonstrates China's increasing capabilities in chip manufacturing.

The Biden administration wants Japan and the Netherlands to close gaps in the existing export control regime. Possible measures include restricting exports of less sophisticated machines and introducing restrictions on servicing and repairs for machines already sold to Chinese clients before the controls were implemented. The US is also trying to persuade South Korea to impose similar controls, as China's heavily subsidized chipmakers have been using less sophisticated equipment to produce advanced chips at a loss. 

The US has raised concerns about Japanese and South Korean semiconductor companies selling critical equipment parts to sanctioned Chinese entities. Chinese imports of foreign semiconductor equipment surged before the Dutch and Japanese controls were introduced. As long as trade loopholes exist, Chinese firms will find ways to exploit them. 

Meanwhile, China isn’t sitting still while these trade restrictions squeeze their access to chipmaking technology. The country has embarked on a drive for technological self-sufficiency to reduce reliance on the West for food, raw materials, and energy, focusing on semiconductor production.

Premier Li Qiang reaffirmed this commitment to develop robust domestic supply chains during China's annual legislative sessions, ramping up spending on science and technology by 10% this year, amounting to approximately US$51 billion. 

Meanwhile, a directive known as Document 79 requires state-owned companies in several sectors to “replace foreign software in their IT systems by 2027.” According to the WSJ, some insiders refer to the effort as Delete A, for “Delete America.”  

This will hurt multinational tech companies who have made a killing riding China’s boom years. IBM has downsized in China after experiencing a steady decline in revenues. Cisco is losing orders to local vendors “due to nationalist sentiments,” while Dell’s Chinese market share has almost halved to 8% over five years. Hewlett Packard’s China revenue dropped from 14% in 2018 to 4% in 2023 and HP plans to sell its 49% stake in its Chinese joint venture.

Adobe, Citrix, and Salesforce have all made “strategic adjustments” to their Chinese presence. Microsoft recently announced China now accounts for just 1.5% of its overall sales - which was a surprise to me after the much-publicized meeting between Bill Gates and Xi Jinping where Xi referred to Gates as an “old friend.”

This shift is shaking things up for big global tech companies, who are finding their foothold in China slipping away. It's a whole tech tussle that's reshaping the global scene, making everyone rethink their next moves in the high-stakes world of semiconductors and global tech dominance.

The Future of Work: STEM Jobs Are Booming

Speaking of semiconductors; an SIA/Oxford Economics study found an estimated 67,000 jobs “for technicians, computer scientists, engineers in semiconductor industry—and 1.4 million such jobs across the U.S. economy—risk going unfilled by 2030 due to a shortage of STEM talent.” 

The US Bureau of Labor Statistics projects a 10.8% increase in STEM employment by 2032, dwarfing the increase in non-STEM jobs. It’s important to realize that not all of these jobs will be filled by young people fresh out of college. Many will be taken by employees in so-called “sunset” roles that are vulnerable to automation and are motivated to retrain. A Financial Times article on this topic gives the example of Standard Chartered Bank, which is offering training to staff to help those in at-risk jobs prepare for “sunrise” roles where demand is expected to increase. Reportedly, over 32,000 employees (!) out of the bank’s 80,000-strong workforce have taken up the offer and are upskilling in everything from sustainable finance to data analytics.

Of course, we’ll also need many more STEM grads to meet projected growth. But are we producing enough to stay competitive? Not if you compare the US with China and India. We’re also lagging behind Russia:

Clearly, it’s a great time to be in STEM. Where are the hottest jobs? Another FT article identified high demand in professions including wind turbine technicians, nurse technicians, data scientists, information security analysts, software developers, and AI prompt engineers. 

These insights also confirmed what many commentators have been saying since the earliest emergence of AI: human skills will always be needed. There will be increasing demand for critical, regulatory, and creative skills to oversee and check AI work. Teodora Danilovic, a prompt engineer at AutogenAI, told FT that human skills are essential when overseeing AI; our contextual understanding, grasp of bias, creativity, emotional intelligence, and our ability to think of unknown unknowns, where AI is very limited. 

As AI and other technological developments continue transforming industries, jobs in white-collar sectors like consulting, compliance, and law will also evolve. Digital twins, virtual and augmented reality, and the metaverse are other areas expected to shape future job opportunities.

Remember, STEM isn’t just about hard skills. Future jobs will require a combination of tech skills, critical thinking, interpersonal and communication skills, creativity, emotional intelligence, and the ability to adapt to rapidly evolving technologies. STEM graduates often find it difficult to apply the concepts they’ve learned at college to real-world situations.

As the New York Academy of Sciences notes:

“Especially in a job market that’s becoming increasingly saturated with degree-holding individuals, having or not having soft skills could be a deciding factor among suitable candidates. The competitive market will force graduates to look beyond their technical skills gained from college and adapt to competition that wants more than just the hard calculations.”

AI Insights

• South Korean seniors are getting AI-powered companion dolls. Local governments in South Korea have deployed nearly 7,000 of the dolls to dementia patients and seniors. The dolls, which cost US$1,800 each, can hold LLM-powered conversations and remind their owners to take medication. I just wish they didn’t make me think about the creepy killer dolls from Barbarella.

• Reddit has introduced a “digital bouncer” to filter harassment. The LLM-powered filter, which can be set to low or high, was trained on previously flagged content. If you’re a Reddit user, you may have noticed a new tag called “potential harassment”.

• Elon Musk’s xAI will open-source its Grok chatbot. Seen as a counterpunch and alternative to OpenAI’s closed model, the open-source ChatGPT rival will have a live search engine connected to X, feature a context window, and will eventually be integrated with Teslas. ChatGPT has an enormous head start in the AI race, so it’s no surprise that Musk is pulling out all stops to catch up.   

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The Supply Aside

📕 Read - Cultures of Growth: How the New Science of Mindset Can Transform Individuals, Teams, and Organizations

In Cultures of Growth, Mary C. Murphy takes Carol Dweck’s groundbreaking theory of growth mindsets and moves its application from high-potential individuals to high-performing teams. Her theory is that a growth mindset can transform any group or team to reach breakthroughs while helping each person achieve their potential. 

“In these cultures,” she writes, “great ideas come from people from all backgrounds and at all levels—not just those anointed as brilliant or talented.” This book includes plenty of real-life examples from Murphy’s research, including her examination of the cultures at Patagonia and Microsoft.

What Else I’m Reading

• Former US Treasury Secretary Steven Mnuchin could buy TikTok: Mnuchin has spoken to potential co-investors about acquiring TikTok from its Chinese parent company, a day after House lawmakers passed a bipartisan bill that would ban the wildly popular social media app in the US. Meanwhile, TikTok’s CEO, Singaporean entrepreneur Shou Zi Chew, said on Wednesday that the company will exercise its legal rights to prevent a ban. 

• How Machine Learning Will Transform Supply Chain Management: Supply chain managers are increasingly realizing that their traditional planning systems can’t keep up in terms of agility and resilience. Optimal Machine Learning (OML) enables a decision-support engine that can process a vast amount of historical and current supply and demand data and rapidly produce recommendations for production quantities, shipping, and more. 

• UK to ban foreign state ownership of British newspapers: The move, supported by both parties, comes in reaction to a proposed takeover of the Daily Telegraph and Spectator by a United Arab Emirates-backed investment firm, RedBird IMI. The fund is 75%-owned by Sheikh Mansour, who is deputy prime minister and vice president of the UAE, and well-known in the UK for transforming Manchester City Football Club.

📺 Watch - Big Vape: The Rise and Fall of Juul on Netflix

“I don’t think anyone could have anticipated how many children would want this product.” 

Big Vape is the story of a marketing campaign that led a scrappy electronic cigarette startup to become a multibillion-dollar company. Juul launched a “wildly irresponsible” campaign targeting youth culture that immediately attracted the attention of the FDA. Once the genie was out of the bottle, viral social media videos and Apple-style marketing where the products are “beautiful objects to be worshipped” sent kids wild for Juul and its flavor pods. Watch for the moment the co-founders sell out to Altria (Philip Morris) for $12.8 billion, much to the horror of their employees. 

👂 Listen - View From The Top: Reed Hastings

This View From The Top interview features Netflix Chairman and Co-Founder, Reed Hastings. He discusses his early life and some of the influences that set him on his path to disrupting the entertainment industry. Hastings isn’t afraid to tackle prickly topics such as severance packages and how to hire and fire, along with AI, gaming, and his vision for the future of entertainment. Lots of valuable lessons packed into just under one hour. 

💡 Think - Time is Running Out For TikTok

TikTok's recent push to get its 170 million American users to protest against US legislation backfired, drawing attention to potential Chinese interference through its parent company, ByteDance.

The legislation doesn't aim to ban TikTok. Instead, it requires severing ties with ByteDance or losing access to the US market, a scenario reminiscent of past tech disputes without directly comparing to specific cases. Despite TikTok's claims that divesting is impossible, the crux of the issue lies with its China-based algorithms, which Beijing deems crucial and raise fears about content manipulation and data misuse for political ends. 

It's a simple concept of what's good for the goose. How is it fair that some US social media companies cannot access the Chinese market, yet TikTok is allowed free reign to do as they please? I find it telling that the CCP is keen on protecting its 'secret sauce' algorithms—these same algorithms that are not exposed to its citizenry but are happily exported to the West. And finally, India has banned TikTok since 2020, which hasn't seemed to impact their economy, tech, or social standing worldwide. Hopefully, we can find a happy medium here somewhere.

Charts of the Week

Quote of the Week

Tweet of the Week

The Final Chuckle

Thanks so much for reading. I’d love to know what you think about this issue and how I can make it more useful to you.

If you have suggestions or topics you want to see me address, email me at [email protected]!

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Happy reading this weekend!

-- Naseem