Posts Tagged ‘Google’

India: Google engineer latest victim of mob lynchings fueled by WhatsApp rumors

July 15, 2018

At least 25 people have been killed since May in incidents of mob violence triggered by rumors circulated on WhatsApp. The authorities are clueless as to who is behind the hoax messages.

    
A protester holds a placard during a demonstration against the mob lynchings in the India

A 32-year-old Google engineer was beaten to death and three others were severely injured in the southern Indian state of Karnataka on Friday in the latest incident of mob violence fueled by fake social media messages.

The victims were assaulted after one of them reportedly offered imported chocolates to school children, according to local media reports. The assailants assumed the group were trying to kidnap the children — the attack bore terrifying similarity to a string of mob lynchings in recent weeks.

Police arrested 25 people on Sunday.

Since May, at least 25 people have become victims of vigilante justice triggered by fake warnings of kidnappers or organ harvesters circulated on the Facebook-owned messaging platform WhatsApp.

The perpetrators in most cases are villagers, many of them first time smartphone users unable to discern between real and fake videos sent via the platform.

Technology-driven menace

An explosion in smartphone use is widely regarded as a major cause of the problem.

Nearly one in three Indians own a smartphone. Last year, 134 million smartphones were sold in India, which is the world’s second-biggest market, after China.

The smartphone revolution has changed the way people access information. Political parties, led by Prime Minister Narendra Modi’s Bharatiya Janata Party, are increasingly harnessing the new medium to garner support — in many cases through incendiary content.

Read moreIndia’s Dalits outraged at increase in caste-motivated attacks

Earlier this month, a mob killed five men in the western state of Maharashtra after videos circulated on WhatsApp warning about the presence of organ harvesters. The videos were fake, with one showing children who died from a nerve-gas attack in Syria.

On July 6, the army had to be called in the eastern state of Assam to rescue three priests who were under attack from a mob, incensed by hoax messages about child kidnappers carried on WhatsApp.

In June, two young men were lynched in the state on similar suspicions.

Alarmed by the string of lynchings, the Electronics and Information Technology Ministry has called on WhatsApp to remain “accountable, responsible and vigilant” and act immediately to curb the spread of false information.

“WhatsApp needs to recognize India offers a huge market for them. They are making good money out of India operations,” Information Technology Minister Ravi Shankar Prasad said earlier this month. “Therefore, they must focus on the security-related aspects of people of India.”

Read moreAttacks on Africans expose India’s racist inclinations

An Indian newspaper vendor reading a newspaper with a full back page advertisement from WhatsApp intended to counter fake informationWhatsApp published full-page advertisements in leading Indian newspapers

WhatsApp media blitz

Earlier this week, WhatsApp, which counts India as its biggest market, with more than 200 million users, published full-page advertisements in leading newspapers offering tips to users on how to identify false information.

“We are starting an education campaign in India on how to spot fake news and rumors,” a WhatsApp spokesman said in a statement. “Our first step is placing newspaper advertisements in English and Hindi and several other languages. We will build on these efforts.”

WhatsApp also launched a new feature that will label forwarded messages as such, informing receivers that the sender is not the creator of the message.

“It’s a good beginning,” Altaf Halde, cybersecurity global business head at the cybersecurity consulting firm Network Intelligence, told DW. “We need a mix of technology and people awareness to deal with the problem. More education is needed, but it will not happen overnight.”

Unlike its parent company, Facebook, messages on WhatsApp are difficult to monitor, as they are encrypted. This makes it hard for law enforcement agencies to trace the creators of the false content.

Tagging forwarded messages with the originating number is not an option, experts warn.

“That’s going to pose serious privacy-related questions,” Saket Modi, the chief executive of online cyber security firm Lucideus, told DW. “I don’t want my number to be flashed every time my message is forwarded.”

Saket Modi also feels awareness is key as the majority of WhatsApp users in the country are first-time smartphone users.

https://www.dw.com/en/india-google-engineer-latest-victim-of-mob-lynchings-fueled-by-whatsapp-rumors/a-44679902

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EU’s Attack on Android Boosts Rivals in the Battle of the Apps

July 15, 2018
App developers may be able to get a foothold on Android phones — Android investigation expected to be wrapped up in coming days
The Android pavilion at the Mobile World Congress (MWC) in Barcelona.

Photographer: Simon Dawson/Bloomberg

Google’s latest European Union woes could mean opportunity knocks for app developers stymied by contracts that pre-install the U.S. giant’s own services on Android phones and tablets, according to analysts and companies.

The Alphabet Inc. unit is expected to face an antitrust fine over Android in the coming days that could top last year’s record 2.4 billion-euro ($2.8 billion) penalty for shutting out rivals to its shopping search service.

But more significant could be an accompanying order freeing up phone manufacturers to choose non-Google apps to install on Android phones. That would yield crucial real estate for app developers given that about 80 percent of smart mobile devices use Android.

“It would dramatically help us,” said Gabriel Weinberg, chief executive officer of Paoli, Pennsylvania-based DuckDuckGo Inc., a search engine that doesn’t track users. “It’s clear to me that people would choose other options if the choice was easier to make.” DuckDuckGo said it hasn’t complained to the EU about Google, pointing to the effort involved.

Google dominates mobile search in Europe, with 97 percent of the market, while its Chrome web browser has a 64 percent market share on mobile, according to web traffic analysis firm StatCounter. The company’s control of ads on millions of Android phones will help it capture a third of all global mobile ads in 2018, bringing in some $40 billion in sales outside the U.S., said research firm eMarketer.

The EU’s investigation targets contracts that require smartphone makers who want to install Google’s Play store to add a bundle of Google services, including search, web browser, email and mapping. EU officials worry that users stick with the default they get on their phones.

Email is “probably the most vulnerable one for Google” if device makers were able to install their own email app as default or add Microsoft Corp.’s Outlook, said Daniel Gleeson, a senior analyst at research firm Ovum Plc.There is “definitely potential in maps” where any advertising revenue loss for Google from location services would be very serious, he said, citing Here Technologies as a potential rival.

Google and the Brussels-based European Commission declined to comment for this article. Microsoft declined to comment about possible opportunities for its services. Here Technologies didn’t respond to a request for comment.

OsmAnd, an offline mapping application, reported “a really huge difference” when it was pre-installed on a small manufacturer’s tablet in 2013, said Chief Executive Officer Victor Shcherb. “It created a huge traffic from day zero on that device,” which was later discontinued.

Shcherb said his company competes only indirectly with Google Maps since his application tends to cater to users looking for specialist mapping services, such as for hiking. Still the EU’s decision could help the app reach a wider audience, he said.

Google ceded some market share to Russian search engine Yandex NV after it agreed to allow users in the nation to choose their own preferred search engine on Android phones. Yandex says it now has nearly 48 percentof the search market, up from around 37 percent. Google also paid a fine as part of a settlement of an antitrust probe by Russia’s Federal Anti-Monopoly Service last year.

Nudging computer users to choose their own internet browser was also the EU’s preferred way to end more than a decade of antitrust disputes with Microsoft in 2009, which helped push some web users to shiny new web software made by Google — at that time just a precocious new kid on the block.

Android is “a multi-lane highway of choice” and people can download competing apps at any time, the company’s general counsel Kent Walker said in a 2016 blog post. Google’s apps account for less than one-third of preloaded apps on a device, he said, and “a consumer can swipe away any of our apps at any time.”

Why Google Is Again in the EU’s Antitrust Crosshairs: QuickTake

Google also argues that its actions to police the Android ecosystem and prevent multiple versions of Android — also part of the EU probe — help app developers to make products that work across millions of devices. Giving away Android for free also helps reduce smartphone costs, it said. Google relies instead on advertising to make money from Android.

People download lots of other apps, according to a survey by the Developers Alliance, an association of 70,000 developers, which counts Google as a member.

Among 2,000 Android users surveyed in France, Germany, Italy and Spain, around 28 percent download additional search apps, 29 percent download at least one new app store, and 23 percent download at least one alternative web browser to the apps that come pre-installed, the alliance said.

Critics say it’s hard to challenge Google. Aptoide, an app store that competes with Google Play, filed an antitrust complaint with the EU in 2014 over contracts that prevent device makers engaging with it.

Aptoide Chief Executive Paulo Trezentos said the company has been growing “but not so much in the [handset] manufacturing side.” It is increasingly relying on users downloading the store via the web browser. The app store is rarely pre-installed, partly because it can’t counter Google’s offer to device-makers to bundle its app store with other Google apps.

Some analysts see little hope for increased competition in markets where Google has become well-entrenched.

“This order will come way too late because user addiction has moved from the [Play] store to the Google services,” said Richard Windsor, owner of research company Radio Free Mobile. It’s “going to be a tough call” for anyone to come up with a better range of products than Google.

— With assistance by Mark Bergen, and Ilya Khrennikov

https://www.bloomberg.com/news/articles/2018-07-15/eu-s-attack-on-android-boosts-rivals-in-the-battle-of-the-apps

French Davos Castigates U.S. Web Giants for Not Playing Fair

July 8, 2018

What was meant to be an opportunity to mingle in the sun in a southern French city turned partly into a public denunciation of tax practices of U.S. web giants.

Image result for Google, france, photos, signage

Aix-en-Provence is host to an annual weekend gathering of politicians and chief executives that is sometimes described as a more relaxed (and warmer) version of Davos. Decision-makers can network between talks at a local university and cocktail receptions at a private mansion-turned art museum before heading to a night at the opera.

This year, the U.S. internet giants didn’t have an easy ride. In public sessions over the weekend, companies such as Alphabet Inc.’s Google, Amazon.com Inc. and Netflix Inc. have borne the brunt of discontent by politicians, companies and the public alike. There has been public outrage in France in recent years for what many consider to be low levels of taxes paid by businesses that generate hundreds of millions in revenues.

“France took the leadership on taxing Google, Apple, Facebook, Amazon, and believe me, we will manage to tax the Internet giants by the end of 2018 or at the latest early 2019 because it’s not only a question of justice but also of sovereignty,” Economy Minister Bruno Le Maire said in a panel on Sunday, in comments welcomed by the audience.

Network Infrastructure

Earlier Alain Weill, chief executive officer at Altice Europe NV — owner of French telecoms company SFR — said though Google and Netflix benefit from the domestic network infrastructure and urge local operators like SFR to improve it, they aren’t required to contribute by making investments themselves.

Part of the problem rests with the legal framework, Weill said, urging lawmakers and regulators to level the playing field.

“Rules for pure players like Netflix should be the same as the rules for more traditional companies,” he said. He gave the example of Google being allowed to do targeted ads while TV networks in France cannot.

“That’s what lawmakers should be working on,” he said. “Otherwise we are victims of discrimination.”

His view was echoed by Xavier Bertrand, leader of a province in northern France, who described the current state of play as unfair competition.

Sebastien Missoffe, the managing director of Google France, said that the search giant had paid an average corporate tax rate of 26 percent annually in the past decade. “We cannot suggest that Google doesn’t pay taxes,” in France, he said. The audience’s reaction: boos.

https://www.bloomberg.com/news/articles/2018-07-08/french-davos-castigates-u-s-web-giants-for-not-playing-fair

Fighting Big Tech’s ‘manipulation engine’

July 6, 2018
The VR pioneer Jaron Lanier talks about Silicon Valley myths, shepherds’ flutes and why we should be paid for using social media
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Lanier blowing into a woodwind instrument with several chambers

By John Thornhill


Jaron Lanier arrives a little late for our lunch at a Peruvian restaurant in London’s Fitzrovia, having been distracted by a Ukrainian shepherd’s flute. As excuses go, that one is certainly novel.
His polite minder had warned me of the delay, explaining that Lanier had been “sucked into the vortex” of Hobgoblin Music, a shop for rare musical instruments next door. When Lanier finally emerges, he says the Ukrainian flute would be “disturbing if I were a sheep”, but is still kind of interesting. “There are a few temptations there but I’m undecided at the moment.”Lanier is not the type to remain undecided for long. An imposing bear of a man with long, tangled brown dreadlocks, Lanier rarely passes unnoticed, even in an anonymous black T-shirt and black trousers. He sends the cutlery flying on the adjacent table as he settles into his seat but does not seem to notice.

As well as being an obsessive collector — and player — of several hundred musical instruments (favourite: the Laotian khaen), Lanier is a Berkeley-based composer, computer scientist, virtual reality enthusiast, author, Microsoft-affiliated researcher and scourge of social media. To revert to epithetic journalese, he is a one-man polemical polymath.

In a Silicon Valley culture that mythologises youth and creative destruction, the 58-year-old Lanier can sometimes seem like the eccentric uncle in the room, worrying about the impact of technology on humanity and determined to keep society in the loop. He was one of the early pioneers of virtual reality, founding VPL Research in the mid-1980s and developing VR goggles and gloves. But he never fully bought into the tech sector’s “magical thinking” and later sold out to Sun Microsystems. If you do not believe in the Silicon Valley myth of the great man, he later wrote, it is hard to aspire to be one.

In a series of subsequent books and essays, Lanier has been both evangelist and heretic, enthusing about technology’s creative possibilities while warning of its destructive effects. He was among the first to raise the alarm about the harmful fallout of social media on our lives, a theme developed with passionate force in his latest book, Ten Arguments for Deleting Your Social Media Accounts Right Now. We would all have a clearer understanding of our world, he claims, if we relabelled the likes of Facebook and Google as “behaviour manipulation empires”. His argument is that “pervasive surveillance and constant, subtle manipulation is unethical, cruel, dangerous and inhumane”. In short, this weaponised form of advertising is polarising society, destroying democratic debate, and turning us into “assholes”.

Image may contain: 1 person, smiling, closeup

I had read that Lanier considered music his first love. He tells me how his mother Lilly taught him Beethoven piano sonatas as a young child, even if he insisted on playing in his own “comically overwrought style”. That emotional connection has fuelled a lifelong fascination with performing music, which he describes as a kind of “instantaneous creation of the future”. “For the most part, the world of music is joyous and generous,” he says, noting that even the Laotians indulge his idiosyncratic khaen-playing style.

Such passing joy contrasts with Lanier’s childhood, which reads like one of JG Ballard’s bleaker novels. His beloved mother, a piano-playing prodigy from Vienna and a Holocaust survivor, was killed in a car crash in the US when he was nine. He and his father then moved to the New Mexico desert, where they lived in a tent for two years while they designed and built a home in the form of a geodesic dome. Later, while studying at university, Lanier paid for his tuition by breeding goats and selling their milk and cheese.

According to a New Yorker profile, Lanier’s girlfriend was so disconcerted by his disheveled appearance that she took him to a laundromat on their first date. You can perhaps see why The New York Times columnist Maureen Dowd has described Lanier as the “most unusual person I’ve ever met”.

He calls the likes of Google and Facebook ‘behaviour manipulation empires’, and fears the weaponised form of advertising that polarises us, turning us into ‘assholes’

Lanier’s traumatic early life, nomadic intellect and fascination with technology have given him an unorthodox perspective. As an FT columnist who writes about the impact of technology, I had long been intrigued to meet the writer who has done so much to delineate the contours of our shape-shifting digital world. First, though, I decide we had better order some food.

The light, airy Pisqu seems strangely quiet on a Friday lunchtime in the heart of London. It is located just off Oxford Street on Rathbone Place, where the great 19th-century essayist William Hazlitt once lived. Pisqu is, however, well suited to cater to Lanier’s emailed list of dietary restrictions: “No meat. No cephalopods. No sugar. No alcohol.” Lanier has developed an obsession with the octopus, which he values both for its intelligence and amazing ability to morph. We both order the ceviche of sea bass, sweet potato, coriander, Inca corn and lime tiger’s milk, a pleasing contrast of tastes and textures. Given that alcohol is off-limits, we stick with tap water.

I am intrigued by how Lanier can be so productive across so many different fields. He describes his work style as “compressed procrastination”, switching from one activity to another, like cross-training. “You can get away with feeling like you’re being lazy all the time and yet at the end of the day all the things have gotten done,” he says.

Fortified by the ceviche, Lanier launches into an unsparing assault on the Big Tech companies — although he stresses that the problem is not so much the technology itself or even the corporate leadership as the economic incentive system in which we operate. Sadly, the early libertarian idealism of the internet has resulted in the creation of “gargantuan, global data monopsonies”. Like many internet pioneers, Lanier wants to revive the technology’s original promise. “I miss the future,” he says.

Lanier argues that these platform companies are using their colossal computing power to gain a vast informational advantage, keeping the economic rewards for themselves while radiating risk out to everyone else. “It’s reminiscent of a gambling economy where the only sure position is in the casino.”

He is particularly damning of social media companies, even if he accepts that their services have real benefits: connecting patients suffering rare diseases or helping users find lost pets. The trouble is, as he puts it, that Facebook, Google, Twitter, YouTube and Instagram all have a “manipulation engine” running in the background, working to the advantage of unscrupulous advertisers, scammers or Russian spies.

“The current incentive structure is that any time two people have any contact, it’s financed by a third person who believes they can manipulate the first two,” he says, sweeping his dreadlocks off his shoulders like some demure debutante. “There’s never before been a society in which everybody is under constant observation, constant surveillance and in which they’re constantly receiving this stream of experience that is being dynamically adjusted to find ways of manipulating them.”

PISQU
23 Rathbone Place, London W1
Two-course set lunch x 2 £24.00

Starter of ceviche with sea bass, sweet potato, Inca corn and lime tiger’s milk £2 supplement x 2 £4.00

Main course of avocado risotto x 1

Main course of grilled seafood x 1

Side dish of yucas (deep-fried cassava) £3.50

Service charge £3.94

Total £35.44

He says his wife Lena, who has been successfully battling cancer, has found it hard to track down useful information about her condition online because the internet is so crowded with garbage from hucksters and fakers. “It’s like a labyrinth of deception.”

He accepts that his campaign will not persuade many people to delete their apps. Social media has been designed to be addictive and its dominant companies enjoy “preposterously grand network effects” that make it hard to quit. But he hopes enough people will disentangle themselves for long enough to ensure there is a small, sheltered island of alternative public debate.

How he can write so sweepingly about the effects of social media if he long ago stopped using it? That, he concedes, is a “valid, inevitable criticism”, but counters that “those people who are in prison will know more about prison life than the reporter writing about prison life. Yet we need the reporter to be outside or else there will be no report at all.”

One of his biggest critiques of social media is that it de-contextualises and mashes up meaning. Every statement is chopped up into algorithmic-friendly shreds and recontextualised, often triggering a “cranky backlash” that renders it meaningless; the election of Donald Trump was the natural outcome of this cognitive confusion. Lanier says he has met Trump several times over the past three decades and has always regarded him as a typical New York conman. But, he argues, Trump has been reprogrammed by his interactions with social media. “What has happened with Trump is that he’s taking on a personality disorder that’s associated with social media addiction, the snowflake personality, where the person is super-insecure, super-ready to jump into a bizarre social pissing match.”

According to Lanier, Trump’s election has shaken the social media companies out of their complacency. The subsequent scandal surrounding Cambridge Analytica’s abuse of Facebook data has further rattled Silicon Valley and left the sector open to outside thinking. “I’m still considered a bit of an outlier, and my ideas might be somewhat radical but they’re definitely treated as a normal part of the conversation now.”

Despite growing talk about the need for state intervention, Lanier does not have much hope for regulation, fearing that it might only strengthen the incumbents. Somewhat surprisingly, he says Facebook and Google are more likely to reform themselves, partly in their own self-interest and partly under pressure from their own ethically minded employees. “The one thing that will kill them totally is if the good engineers start leaving. Then the companies will die.”

Lanier has been working with a group of radical economists to design an alternative information economy. He is an eloquent champion of the Data-as-Labour movement, arguing that if people do use social media then they should at least be paid for their posts and photographs. He hints that he is involved in backroom dialogues with the tech companies to bring about such a restructuring. “I don’t see how any society can hope to survive unless there’s at least some degree of alignment between society’s interests and economic incentives.”

In his darker moments, he wonders whether we might have lost control to our digital creations. “I’ve started to think of social media a little bit, you know, how Richard Dawkins suggested that we think of the gene as if it had a will of its own.” Is it a coincidence, he asks, that social media is trying to undermine the politicians who are trying to tame it?

Just when European governments are moving to regulate social media and data privacy, they are assailed by populist movements. The test case may come in Germany, which Lanier describes as “the centre of resistance to a lot of the madness” today. He sees evidence of the same destabilising process at work in Italy, Poland, south-east Asia, India and Africa. “If somebody wants to disrupt a particular area, they just make everybody cranky and paranoid and cynical in the way that you can using these tools because that’s what the tools are precisely optimised to do. And so we’ve entered a world of insanity. The Trump election is only one example. There will be many more until we fix it.”

Lanier speaks in enthusiastic waves of well-modulated paragraphs but still polishes off his avocado risotto with gusto. My grilled fish are delicate, if somewhat dry, spiced up by the criolla sauce. He shoots a glance of disapproval when my fork wanders near a piece of octopus.

Since completing his book, he has come up with a new metaphor for the interaction between social media and politics: toxoplasmosis, a parasitic disease that rewires rodent brains to make them less fearful of cats. Once the reckless mice are devoured, the parasite reproduces itself in the cats’ guts. He suggests that Trump — or the Russians — eat the metaphorical mice only because the social media parasite is making people crazy. As I raise a sceptical eyebrow, he laughs: “I’m expecting the metaphor commandos to fire into this restaurant at any minute and put me under arrest.”

Lanier retains credibility among many West Coast technologists because of his pioneering work on VR. He became fascinated by VR as a “lonely, traumatised kid” seeking a way to connect with people through shared imagination. In his quixotic book on VR, Dawn of the New Everything, he described wanting to replicate the trifecta of his childhood sensory delight: the art of Hieronymus Bosch, the music of Johann Sebastian Bach, and Mexican chocolates tinged with cinnamon.

Lanier debates with himself whether Mexican, Brazilian or Peruvian cuisine is the finest in Latin America but declares himself happy with Pisqu. We’ve been talking so intensely that we don’t find time for dessert. That’s a shame because the Amazonian chocolate mousse with passion fruit sounds pretty tempting.

As a VR pioneer, Lanier has argued for “post-symbolic communication” in which symbols such as words fade away to be replaced with a form of communication through improvising a shared reality. But he also came to realise that such a powerful technology could alter people’s behaviour. “This was a very terrifying realisation. Inherently, VR is the most purified form of both the best and the worst of technology’s potential.”

Hard as it is to credit at times, Lanier calls himself an optimist. But I admire the personal credo he described during a prize acceptance speech in 2014 in which he argued that death and loss were inevitable and so boring. “It is the miracles we build, the friendships, the families, the meaning, that are astonishing, interesting, blazingly amazing. Love creation,” he declared.

He supports the idea that the world is broadly healthier, better educated and happier. But he argues this has only come about because of the activism of the discontented. His stark criticisms serve a higher purpose. “At every increment of improvement in human history somebody got pissed off and said, ‘This can be better, this must be better’. To be an optimist has to mean being a critic. The enemy of the future is not the pessimist but the complacent person.”

And with that final rhetorical flourish, the happy but discontented critic heads back to the music store — to check out that Ukrainian shepherd’s flute.

The man who would monetise the web

John Thornhill is the FT’s innovation editor

Follow @FTLifeArts on Twitter to find out about our latest stories first. Subscribe to FT Life on YouTube for the latest FT Weekend videos

https://www.ft.com/content/a3ea16f6-7edd-11e8-bc55-50daf11b720d

https://en.wikipedia.org/wiki/Jaron_Lanier

European copyright overhaul rejected by MEPs

July 5, 2018

Partial win for internet companies after halt to update intended for digital age

Image may contain: 1 person, closeup
Former Beatle Sir Paul McCartney is in favour of revising copyright rules © AFP

By Mehreen Khan in Strasbourg

The European Parliament has narrowly voted to reject draft reforms to the EU’s copyright laws, delivering a partial victory for campaigners including Google and Wikipedia that say the rules will severely restrict internet freedom.

MEPs decided to stop progress in negotiations on an update of the EU’s copyright directive, designed to give news publishers and other media fairer fees from internet giants.

The update would be the first since 2001 and the plan to revise copyright rules for the digital age has produced one of the fiercest battles fought over EU tech policy, with lobbying from opponents led by internet giants and the backing of figures such as Tim Berners-Lee. Those in favour of the plans, which have been over two years in the making, include publishers as well as Sir Paul McCartney, the former Beatle, and others in the music sector.

One of the most contentious aspects of the plan rejected by MEPs would have required internet platforms — notably YouTube, which is owned by Google — to use content filters, so that material uploaded by users did not breach copyright rules. It would have also meant that search providers such as Google could have been asked to pay publishers for showing brief clips of content.

A petition against the reforms called “Save Your Internet” has gathered over 700,000 signatures in recent weeks. Wikipedia, which has run banners on its French, Spanish and Italian sites urging its users to press MEPs to reject the reforms, would have been exempted from the filter obligations.

MEPs will now have to rework the intended regulations before a fresh vote in September. Should a compromise be reached, the parliament would negotiate with EU governments and the European Commission on a final text.

The commission proposed a revamp of its copyright rule in 2016 to help redress the balance between content creators — like newspapers and magazines — and internet companies on whom they increasingly rely to support their business models.

Supporters of tougher EU copyright laws argue that Europe’s publishers and creators need greater protection from US internet giants during a time of transatlantic tension over trade.

“It is inexplicable how some people want to support internet capitalism when others are calling for ‘America First’ and exploiting our creative industries. We should be standing at the side of Europe’s creatives,” said Axel Voss, the centre-right MEP in charge of agreeing a compromise, ahead of the vote.

Mr Voss described campaigns declaring the end of internet freedom and “death of memes” as “fake news”.

Anders Lassen, president of the European Grouping of Societies of Authors and Composers which backed the reforms, said the vote was a missed opportunity. “This vote was never about censorship or freedom of speech. It was only about updating the copyright rules to the 21st century and ensuring that creators get a fair remuneration when their works are used in the digital space,” he said.

Maud Sacquet, policy manager at the Computer & Communications Industry Association, which represents Google and Facebook and lobbied against the reforms, said: “The parliament has now an opportunity to adopt balanced and future-proof copyright rules, an important step to achieve a real, thriving digital single market.”

Andrus Ansip, vice-president of the commission in charge of digital policy, said it was time for both sides of the campaign to “stop the lobby slogans and start looking for a solution”.

“We should not accept leaving artists and quality media unprotected,” said Mr Ansip.

https://www.ft.com/content/4b2fdf68-8046-11e8-bc55-50daf11b720d

China and US: the tech fear behind Donald Trump’s trade war

July 5, 2018

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America’s anxiety about Chinese technological prowess is reflected in Washington where politicians are rethinking their attitudes to foreign investment
© Getty

By Shawn Donnan in Washington

The ZGC Innovation Center bills itself as a one-stop incubator for the tech start-ups of the American future. Its main facility is in Santa Clara, California, just down the road from the Google and Apple campuses. Its new Boston location is squeezed between two of the world’s most prestigious educational institutions — Harvard University and the Massachusetts Institute of Technology.

As well as abundant office space and laboratories, the centre offers another attraction to ambitious entrepreneurs in artificial intelligence, robotics and other technologies: capital via its investment fund. “Our full incubation and business supporting services in the centre will dramatically speed up your start-up growth,” its website declares.

Yet the incubator could also just as easily be ground zero in a 21st-century innovation war between the world’s two largest economies. Behind the Silicon Valley and Boston facilities is Zhongguancun Development Group, a venture capital fund that originated in Beijing’s technology district and is owned by the city’s municipal government. It is at the sharp end of what has become one of the most neuralgic issues in Washington.

While the headlines about the Trump administration’s trade war with Beijing often focus on raw materials such as steel, aluminium and soyabeans, the underlying motivation of the new protectionist mood is American anxiety about China’s rapidly growing technological prowess.

At a time when the US is engaged in a battle for technological pre-eminence with China, the ZGC project is exactly the sort of state-backed Chinese investment that American politicians across the political spectrum view with scepticism.

“China has targeted America’s industries of the future, and President Donald Trump understands better than anyone that if China successfully captures these emerging industries, America will have no economic future,” Peter Navarro, the White House’s director of trade and industrial policy and a leading China hawk, told reporters recently.

Mr Trump’s most immediate fight has taken the form of US tariffs on $34bn in imports from China that are due to take effect on Friday as part of a squeeze intended to end what the US says has been years of state-endorsed Chinese intellectual property theft. But it is also part of a broader battle against what the White House has labelled China’s “economic aggression”.

Viewed from America, President Xi Jinping’s Made in China 2025 industrial strategy is a state-led effort to establish Chinese leadership in the technologies of the next generation of commerce and military equipment — notably AI, robotics and gene editing.

National security concerns trump technology deals

CHINA MOBILE

Citing national security concerns, the Trump administration said on Monday it was denying an application by China Mobile to offer telecoms services in the US.

MONEYGRAM

In January, Cfius rejected a $1.2bn bid by Ant Financial, the payment arm of Alibaba, to buy MoneyGram. Lawyers said the decision reflected concerns about how a Chinese company might use customer data.

QUALCOMM

In March, Mr Trump blocked a $142bn hostile bid for US chipmaker Qualcomm by Singapore-based Broadcom after Cfius warned the deal could end up giving Chinese companies an advantage in 5G technology.

Many US officials are now questioning one of the basic assumptions about how the American economy operates: its openness to foreign investment. Nathan Sheets, a former Treasury undersecretary for international affairs in the Obama administration, says that when he entered government, he was sceptical of any efforts to restrain foreign investment but left convinced of the need to fight back.

“When I open up my textbook and read about the glories of foreign investment . . . one doesn’t have in mind a government amassing a war chest of several billion dollars and then going into a country to systematically buy up companies and technology,” he says. “As I left the Treasury I was quite concerned about where this was heading.”

While some technology executives extol the potential for co-operation in areas such as AI, the Washington establishment increasingly sees them as central to a growing geopolitical competition.

Some US analysts fear it might be too late to take decisive action to prevent Chinese inroads into the tech sector. “We may have missed the gluttony on this already,” says Ely Ratner, another former official in the Obama administration. “The time we really needed this was a few years back.”

The US does not have the infrastructure necessary to properly scrutinise investments, says Mr Ratner, who advised the then vice-president Joe Biden on China policy. For that reason alone a “freeze on Chinese investment makes sense in some industries”.

Chinese entities participated in up to 16 per cent of all venture deals in early-stage technology companies in the US between 2015 and 2017, a sharp increase in the previous years, according to Michael Brown and Pavneet Singh, industry experts working for the Defense Innovation Unit Experimental, the Pentagon’s Silicon Valley outpost. Between 2010 and 2017, China participated in 81 AI financings in the US which raised $1.3bn, and $2.1bn of deals in augmented reality start-ups.

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Neither the Zhongguancun Development Group nor its US arm, ZGC Capital, responded to requests for comment. But on its website the Chinese parent company is open about the purpose of its overseas ventures.

“Following with national strategy ‘the Belt and Road Initiatives’ . . . ZDG is actively [expanding] its overseas business,” it says, citing Mr Xi’s global development strategy. The goal is to “learn overseas experience of [an] innovation ecosystem”.

The model is akin to that followed by a growing number of Chinese tech companies and funds that have turned up in places like Silicon Valley looking to absorb knowledge and start-ups, says Brewer Stone, a partner at boutique investment bank Nfluence, which specialises in US-China tech investments.

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The White House’s director of trade Peter Navarro has accused China of targeting America’s industries of the future © Reuters

“Much of it is just commercial investment . . . Their number one interest is in finding good quality companies to invest in and earn good returns,” Mr Stone says.

Many Chinese investors are looking for companies that can help their growth plans in China. But occasionally he has detected what in hindsight can seem like odd co-ordinated behaviour. A few years ago, Mr Stone says, he received three or four calls in one month from Chinese companies wanting to invest in businesses that were suppliers to tech titan Apple. “It implied that there could be some kind of co-ordination behind the scenes, although obviously I don’t have proof of that.”

While many in Washington look with growing suspicion on Chinese tech investments, there are no shortage of American companies eager for the funding — especially those that are looking to gain entry into a tricky but very large market.

Formlabs, a maker of industrial 3D printers based near Boston which counts former Google executive chairman Eric Schmidt among its early investors, recently set out to raise capital with one goal in mind: attracting investors who could help it crack China.

Nathan Sheets, a former Treasury undersecretary in the Obama administration, has become convinced of the need to look again at foreign investments © Bloomberg

The result, announced by the company in May, was a $30m investment from a group that included Shenzhen Capital Group, a venture capital firm launched in the late 1990s by the southern city’s municipal government.

The new investors did not gain any board seats or secure access to any of its intellectual property, says chief executive Max Lobovsky, who founded the company in 2011 with two fellow MIT graduates. But they did bring promises to help Formlabs increase its “strategic ties” to China and relationships with potential customers and suppliers. “Those were really valuable things they were offering. That’s why we wanted to do it with them,” he says.

Even though Mr Trump’s focus on Chinese technology has strong bipartisan support in Washington, its tactics have been heavily criticised. The biggest blunder, many critics argue, has been the Trump administration’s willingness to wage concurrent trade wars. The IP-driven tariffs push against China has been accompanied by one that has hit allies such as Canada and the EU that might have joined a fight against Beijing.

Mr Trump has already backed down on some of his own threats of tough measures. An initial plan called for the US to impose tough restrictions on Chinese investment in key sectors such as AI and robotics and curb exports of “industrially significant” products — a rollout of the measures had been expected on June 30.

Instead, the administration decided last week, to defer to pending congressional reforms of the Committee on Foreign Investment in the US. The inter-agency committee scrutinises foreign acquisitions of US businesses for potential national security threats.

Administration officials insist the Cfius reforms will give it wide latitude to block Chinese investments as needed, something it has been doing with increasing rigour in recent years. But to many the softer approach announced by the administration amounted to a strategic capitulation.

“It just reinforces that this is the gang that can’t shoot straight,” says Rob Atkinson, president of the Information Technology and Innovation Foundation, a think-tank. “If I were the Chinese I’d think this is a pretty good thing . . . This is a battle that if it is not won in the next year it’s too late. This is our [Washington’s] last chance.”

The Trump administration, critics like Mr Atkinson say, has also blundered through other important recent episodes. When the US commerce department earlier this year banned ZTE, the Chinese handset and telecoms network equipment maker, from buying US chips and other components over the violation of US sanctions on Iran and North Korea, it in effect put the company out of business.

However, Mr Trump subsequently bowed to a request from Mr Xi to become involved in the ZTE case, tweeting that the ban meant “too many jobs in China lost”. His intervention led to a lifting of the ban and the adoption of a plea deal that was not only seen as a major concession but also left allies — being targeted at the same time with tariffs — bemused.

“We’re treating the Chinese better than we are treating our friends,” says Derek Scissors, a China expert at the conservative American Enterprise Institute, who sees the tariffs Mr Trump is threatening against European car imports as a similar bit of malpractice. “We’ve now got this threat looming in the distance over our allies that is far worse than anything we are doing to the Chinese. We really have lost the plot on who is causing our trade problems.”

Formlabs’ Mr Lobovsky worries that the efforts by Mr Trump and others to increase scrutiny of Chinese investment might discourage investors or thinly staffed start-ups from considering deals, he says. He also sees what looks to him like an industrial policy that could backfire by blocking US companies from interacting with dynamic counterparts in China, or being able to do business there.

From his vantage point the current protectionism seems short-sighted. In 3D printing lies a future for supply chains that might eliminate the need for companies to produce in low-cost countries like China. If that were to happen it could move the manufacturing that Mr Trump is so eager to repatriate one step closer to home.

“The Trump administration should focus on making our economy and tech industry stronger,” Mr Lobovsky says. “If everyone is so worried about Made in China 2025 why don’t we do Made in USA 2025 to compete?”

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Investing: Chinese and US policies hold back deals

One of the stated goals of Donald Trump’s trade policies is to provoke overseas companies into investing in the US. Don’t want to pay tariffs? Build a factory in America instead.

But there are already signs that when it comes to China the US president’s trade wars are having the opposite effect.

In the first six months of 2018 Chinese foreign direct investment into the US tumbled to just $1.8bn, according to figures compiled by the Rhodium Group, a consultancy. In 2016 it had reached a record $46bn.

One reason for that drop is the heightened scrutiny Chinese acquisitions have been receiving in recent years from the Committee on Foreign Investment in the US, the panel that reviews transactions for national security threats.

Deals that have been blocked over the past year include Ant Financial’s bid for MoneyGram, which was rejected because of concerns about the potential use of customer data, and China Mobile’s application to offer services in the US.

Chinese restrictions on outbound investment have not helped either. In recent months, Beijing has blocked a number of high-profile and acquisitive private companies from making further overseas deals.

Yet there is also clearly a Trump effect to the recent decline in Chinese investment and the president seems mindful of it. Asked why he had dropped plans for hard restrictions on Chinese investment in a recent Fox Business News interview, Mr Trump pointed to his relationship with Xi Jinping, China’s president.

“What I didn’t like was pinpointing China, because it’s not fair. I get along with China. I like the president. He’s president for life,” he said. “We can call him the king, right?”

https://www.ft.com/content/40304bea-7eb9-11e8-bc55-50daf11b720d

The China-U.S. Power Struggle Is Just Beginning

July 5, 2018
Xi’s ‘Chinese Dream’ envisions a nation less beholden to West — China economic rivalry destined to strain relations with U.S.
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Chinese President Xi Jinping has an ambitious master plan for his country’s transformation into a wealthy, technology-driven global economic power. And U.S. companies need not apply.

That’s why the current trade rumble between the U.S. and China, in which the Trump administration is threatening to slap tariffs on $34 billion of Chinese imports and Beijing promises to respond in kind, is far more than just a spat over market restrictions, intellectual property rights and the epic U.S. deficit.

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Xi Jinping Photographer: Fred Dufour-Pool/Getty Images

On a deeper level, the standoff reflects an escalating economic and military rivalry between a status quo power and one of the most remarkable growth miracles in history. It’s a clash between two divergent systems, (one state-directed, the other market-driven) with markedly divergent world views and national aspirations. That strategic tension seems likely to intensify, regardless of how the current brinkmanship over tariffs plays out.

It’s also a battle for global influence. Whereas the U.S. has long sought to spread democracy and free markets to other nations, China’s ruling Communist Party is just starting to pitch its heavy-handed growth model as an alternative for developing nations. And Xi is backing it up with hundreds of billions of dollars in loans for infrastructure projects from Asia to Europe and beyond.

In the U.S., a bipartisan consensus has begun to emerge that now is the time to stand up to China, even if many oppose President Donald Trump’s tactics. Senate Minority Leader Chuck Schumer, a Democrat, has attacked Trump for not being tougher on China, saying last week that failure to change Beijing’s behavior now could hurt the U.S. economy “for generations to come.”

With a roughly $13 trillion economy and expanding wealth, China is now going head-to-head with the U.S. in advanced manufacturing and digital technologies. It also has the wherewithal to make rapid technological progress in defense, particularly with air-to-air missile systems that pose a strategic challenge in Asia for the U.S. and its allies.

Xi is playing a long game, pursuing what he calls the “Chinese Dream,” or “the great rejuvenation of the Chinese nation.” To get there, he has set targets to double his country’s per capita gross domestic product (from 2010 levels) to $10,000 by 2021 and refashion China into a tech powerhouse, competitive in robotics, new energy-vehicles, chips, software and other bleeding-edge industries under his Made in China 2025 program. A separate development strategy envisions China ruling in artificial intelligence by 2030.

The aim is to produce global champions — not just national ones — and Xi’s government is ready to use the commanding heights of its one-party state to steer subsidies and use preferential policies and ambitious local content rules favoring Chinese companies to get there. At stake are industries that make up about 40 percent of China’s value-added industrial manufacturing sector, according to an analysis by the U.S. Chamber of Commerce, citing data by the Rhodium Group, a research firm.

Predatory Economics

China’s push for more self-reliance may reverse the trend toward deeper economic integration with the U.S. that came following China’s accession into the World Trade Organization in 2001. China is the single largest foreign purchaser of U.S.-manufactured goods — led by transportation, chemical, computer and electronics — outside of North America, according to the National Association of Manufacturers. Chinese goods have also flooded across American shores, pushing up the U.S. trade deficit with China more than fourfold to $375 billion last year.

James Mattis

Photographer: Tomohiro Ohsumi/Bloomberg

The Trump administration views such deficits as alarming and Chinese trade practices as brash mercantilism, even a national security threat. U.S. Defense Secretary Jim Mattis labeled China a “strategic competitor using predatory economics” in January as he unveiled the Pentagon’s National Defense Strategy.

Xi views his economy’s shift into higher-tech manufacturing not only as a crucial part of its development, what with surging labor costs, a rapidly aging population and high corporate debt levels — but also as a fulfillment of China’s destiny. That process is well underway: China is set to overtake the entire euro area this year, according to data compiled by Bloomberg.

Talks to avoid a trade war have stalled in part over U.S. demands that China reduce state support for high-tech industries. While China has signaled a willingness to buy more American goods to balance out the deficit, it has refused to trade away what it views as an essential part of its economic future.

How ZTE Ended Up in Middle of U.S.-China Trade War: QuickTake

Tech companies are on the front lines of this contest for global supremacy. Back in 2013, Chinese investigators started making life difficult for American tech “guardian warriors” like Google, Intel Corp., Apple Inc. and Microsoft Corp. after a magazine with ties to the Communist Party sounded the alarm about their dominant role in Chinese networks and business.

The U.S. has been just as inhospitable to Chinese tech concerns, with telecommunication makers like Huawei Technologies Co., ZTE Corp. and China Mobile Ltd. being viewed as national security risks. The Trump administration has also weighed restrictions on Chinese companies and start-ups in sectors ranging from aerospace to robotics.

This week’s tariffs, however, may show which side has the stronger hand. The first batch will take force Friday barring any last-minute deal. Trump has threatened duties on another $200 billion worth of Chinese goods if Beijing imposes countermeasures.

Xi is betting that Trump will back down as price increases in politically sensitive states make him worry about losing the next election in 2020. Xi enjoys something closer to life-time job security, thanks to the repeal of Chinese presidential term limits in February.

Donald Trump at a rally in South Carolina on June 25.

Photographer: Mandel Ngan/AFP via Getty Images

The sharp downturn in Chinese stock markets amid rising trade tensions is scarcely a threat to his rule. His party-led government has a big say over strategy and investments plans at giant state-owned enterprises, which control 40 percent of China’s industrial assets and some of the world’s biggest banks.

Still, anti-trade rhetoric underpinned Trump’s election win, and if anything the former New York real estate developer has doubled down on using tariffs in spats with both foes and allies. Although polls suggest Trump faces difficult mid-term elections in November, a fight to replace a U.S. Supreme Court justice may prompt his political base to overlook slightly higher monthly bills.

Economists and trade experts who testified in June before the U.S.-China Economic and Security Review Commission, set up by Congress to track the national security implications of trade with China, say tariffs are likely to inflict a lot of economic damage on both economies and depress global trade.

Great Unwinding

China will also return the favor — Beijing has announced plans to target U.S. auto, aircraft, plastics and chemicals sectors — and “the imposition of tariffs will not solve the underlying Chinese distortive behavior,” warned Linda Menghetti Dempsey, vice president of International Economic Affairs at the National Association of Manufacturers.

Instead of using tariffs, the U.S. could’ve sought to join with the European Union and Japan to bring a case against China at the World Trade Organization. But that’s unlikely after Trump slapped tariffs on EU nations and Japan, while also undermining the WTO. His withdrawal from the 11-nation Trans-Pacific Partnership trade deal removed another key device to alter China’s behavior.

Some prominent academics are calling for more drastic measures to undercut China’s practice of trading market access for technology transfers, such as unwinding Asian supply networks in high-end tech sectors.

Just Beginning

Harvard Business School Professor Willy C. Shih favors tax incentives, and even setting up import processing zones in the U.S. to repatriate offshore suppliers for the likes of Intel, Apple and Microsoft. “It would strengthen our ability to sustain the most advanced semiconductor fabs in the United Sates,” Shih said.

In the end, the U.S. and China economic rivalry probably won’t be decided by administrative law judges or trade negotiators, but in the global marketplace. Right now, the U.S. still enjoys a lead in many tech and manufacturing sectors, particularly aerospace and biotech.

Yet the days when China could be dismissed as merely a low-wage assembly center for Western manufacturers are long gone. This is a country on what it views as a historic mission to become a 21st century economic power, and the contest is just beginning.

Bloomberg

https://www.bloomberg.com/news/articles/2018-07-04/beyond-the-trade-drama-u-s-china-rivalry-has-only-just-begun

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Taiwan smartphone maker HTC to lay off 1,500 workers

July 3, 2018

Taiwan’s struggling smartphone maker HTC announced Tuesday it would slash 1,500 jobs, around a fifth of its total workforce, in the biggest staff cull for three years following heavy losses.

The announcement of the cuts to its manufacturing workforce comes despite a new deal with Google, completed in January, which boosted HTC’s first quarter performance after a dismal 2017.

© AFP | While analysts said the Google agreement would mean some immediate benefits for HTC, they said it was unlikely to see a turnarund in its fortunes

Once a star of the intensely competitive smartphone sector, HTC has been struggling in the face of stiff competition from Apple and Samsung as well as strong Chinese brands such as Huawei.

It incurred a net loss of Tw$16.91 billion ($554 million) in 2017 and a loss per share of Tw$20.58, the highest since it listed on the Taiwan Stock Exchange in March 2002.

Losses of Tw$9.8 billion in the last three months of 2017 represented its worst ever quarterly results.

HTC described the cuts — which will be implemented by the end of September — as “a decisive step in the realignment of resources across the organisation” that would allow “more flexible operations management”.

Shares in the firm plunged almost six percent in Taipei on Tuesday.

Under the $1.1 billion deal with Google, the US tech giant took on half of HTC’s research and development staff — about 2,000 people.

Many of them had already been working on its Pixel handset, manufactured by HTC, as well as acquiring intellectual property licensing.

The deal reflected Google’s wish to emulate the success of Apple iPhones by controlling the hardware as well as the software used in the premium-priced handsets.

Following the Google deal, HTC announced its first quarterly gains for almost three years in May, posting a net profit of Tw$21.1 billion.

But while analysts said the Google agreement would mean some immediate benefits for HTC, such as more capital and cost reductions, they predicted a turnaround in its fortunes was unlikely.

In 2015, the company cut more than 2,000 jobs, slashing its workforce by 15 percent after posting its then biggest ever quarterly loss of Tw$8.0 billion.

HTC has previously said it wants to better coordinate its smartphone and virtual reality businesses.

The company is among major tech firms including Facebook and Samsung to venture into virtual reality and released its first VR headset Vive in 2016.

However, analysts have been sceptical about the earning potential of its investments in virtual reality and other emerging areas.

AFP

Investors Double Down on FAANG in Rocky Quarter for Stocks

June 29, 2018

The tech-heavy Nasdaq Composite thrived in a tumultuous quarter for stocks as investors parsed trade tensions, political uncertainty and signs of slowing momentum

Investors increasingly worry that a market whose gains have been heavily dependent on tech stocks could reverse sharply in the second half.
Investors increasingly worry that a market whose gains have been heavily dependent on tech stocks could reverse sharply in the second half. PHOTO: AGENCE FRANCE-PRESSE/GETTY IMAGES

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The Nasdaq Composite Index overcame an early slump in the second quarter and is on course to book its eighth straight quarter of gains, as fears of a trade war stifling global growth pushed investors to dump industrial stalwarts and increase their bets on shares of large technology companies.

The tech-heavy index thrived in a tumultuous three months for U.S. stocks, which struggled to gain ground as investors were buffeted by worries about trade tensions, political uncertainty in the eurozone and signs of slowing momentum in the global economy.

The S&P 500 and the Dow Jones Industrial Average rose 2.9% and 0.5%, respectively, for the quarter through Thursday, trailing the Nasdaq’s 6.2% advance. The first two remain well below their January records, while the Nasdaq notched a series of all-time highs in June.

The one-directional nature of the stock rally has left investors increasingly worried that a market whose gains have been heavily dependent on technology stocks could reverse sharply in the second half of the year.

“A lot of the investing public is piling into the same things,” said Jim Paulsen, chief market strategist at Leuthold Group, who added that the S&P 500 would be mostly flat this year without technology companies. “There’s a lot of sheep following one another.”

Investors remained steadfast in holding the shares of technology-driven companies over much of the second quarter. That reflects bets firms such as Amazon.com Inc., AMZN 2.47%Netflix Inc., NFLX 1.29% Facebook

Inc. FB 0.20% and Twitter Inc. TWTR 2.49% will continue growing, even as many

believe stock gains will slow as monetary policy tightens and the boost from the tax-overhaul fades. In fact, technology stocks remain among the best-performing sectors in the S&P 500 even after recently tumbling on fears that the White House could move to curb foreign investment in technology firms and sliding at the start of the quarter on worries the sector could get hit by tighter regulations.

The five largest publicly traded companies in the world by market capitalization are now all tech-related, a stark change from 2009, when firms such as General Electric Co. and Exxon Mobil Corp. dominated the list. Nearly half of global fund managers now say betting on the FAANG names—Facebook, Amazon, Apple Inc., AAPL 0.73% Netflix and Alphabet Inc.GOOGL 0.88% —and their Chinese equivalents ranks as the most crowded trade in the market, according to a June survey from Bank of America Merrill Lynch. That marked the highest share of investors since 2015 to agree that one trade was becoming too popular.

Tech’s growing dominance has skewed the broader S&P 500 away from so-called defensive stocks—sectors such as utilities, consumer staples and health care—that investors have traditionally gravitated toward during bouts of market volatility. That has left some analysts worried investors in index-tracking funds could be dangerously exposed to a pullback.

The degree of defensiveness within the S&P 500, which Leuthold Group calculated by using the percentage of the index’s market capitalization comprised of defensive sectors, has fallen nearly 60% from 1991 through early June, according to the group’s data. That has increased the weighting of highflying growth stocks within the S&P 500, reducing its overall effectiveness as a diversified portfolio for investors who opt to passively track the broad index, Mr. Paulsen said.

The S&P 500 is “not the same index it was when your father bought it,” he added.

Some investors have begun viewing technology stocks as a safety play, betting that companies that have produced double-digit percentage gains this year will be able to continue growing earnings even under more restrictive global trade conditions. While the broader stock market tends to take a hit following the announcement of a trade action, technology stocks are among the best-performing stocks in the 30 days after a trade action is announced, implemented or ended, according to BofA Merrill Lynch data going back to 1995.

To many investors, the technology sector’s track record of earnings growth supersedes risks like trade tensions and the possibility of tighter regulations. Amazon’s quarterly profit topped $1 billion for the first time in the most recent quarter, while Facebook’s earnings soared even after its user-data crisis and Microsoft MSFT 1.12% posted double-digit growth in profit and revenue.

“Long term, it looks like a legit growth story,” said Paul Christopher, head of global market strategy for Wells Fargo Investment Institute.

Yet some analysts worry that, with uncertainty swirling over whether the U.S. will ratchet up trade tensions with China, the European Union and others, investors have mispriced the risk that the sector faces.

Winning StreakThe tech-heavy Nasdaq Composite hasoutperformed the S&P 500 every quartersince the end of 2016.Quarterly performanceSource: FactSetNote: Data for 2Q 2018 is through Thursday.
%Nasdaq CompositeS&P 5002015’16’17’18-10-5051015

Technology companies in the S&P 500 have the highest share of overseas revenue of the broad index’s 11 sectors, with a foreign-exposure level of about 59%, according to FactSet and BofA Merrill Lynch data. That is greater than the broader S&P 500, which gets about one-third of its revenue from overseas and indirect exposure via commodities, the bank added.

That makes the sector particularly vulnerable to restrictions on trade and investment. The Nasdaq on Monday posted its biggest one-day decline since April after reports suggested the Trump administration was planning to curb foreign investment in U.S. technology firms. The tech sector’s high exposure to foreign revenue also exposes it to swings in the foreign-exchange market: Should the recent rebound in the U.S. dollar continue, that could hurt multinationals whose goods will become more expensive to foreign buyers, and overseas revenue will be worth less when converted back into dollars.

Even as investors say technology firms as a whole appear to be on more stable footing than they were at the height of the dot-com era in 2000, many remain cautious, citing the tendency for the stock market to contract when it is led by just a handful of outperformers.

“Whenever the market narrows like this and everyone wants to own the same stocks like the [FAANG] stocks, there is a feeding frenzy that can go on for a while,” said Mike Balkin, a portfolio manager at William Blair. “When it ends, it usually doesn’t end well.”

Write to Akane Otani at akane.otani@wsj.com and Michael Wursthorn at Michael.Wursthorn@wsj.com

California Passes Sweeping Data-Privacy Bill

June 29, 2018

By passing bill, legislature headed off a more restrictive ballot initiative that recently qualified to appear before voters in November

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California lawmakers gave consumers unprecedented protections for their data and imposed tough restrictions on the tech industry, potentially establishing a privacy template for the rest of the nation.

The law, which was rushed through the legislature this week and signed by Gov. Jerry Brown on Thursday, broadens the definition of what constitutes personal information and gives California consumers the right to prohibit the sale of personal data to third parties and opt out of sharing it altogether. The bill applies to internet giants such as Facebook Inc. and Alphabet Inc.’s Google but also will affect businesses of any size that collect data on their customers.

Ashkan Soltani, a digital researcher and former chief technologist for the Federal Trade Commission, said the regulations are the first of their kind in the U.S.

While the law only applies to consumers in California, tech companies will likely shift their policies to conform to the new law given the complexity of carving out conflicting standards. It may also spur Congress to consider federal legislation, coming after multiple hearings in which legislators peppered industry executives with questions about whether they were taking data privacy seriously enough.

The bill doesn’t go into effect until 2020 and could still be amended. It is almost certain that major tech firms will lobby heavily to get certain concessions, and an industry group said Thursday that it would push for changes.

By passing the bill, the legislature headed off a more restrictive ballot initiative that recently qualified to appear before California voters in November. The ballot initiative was strongly opposed by most of the tech industry, which broadly viewed the legislation as the lesser of two evils.

At a press briefing on Thursday, Facebook Chief Operating Officer Sheryl Sandberg said the company supported the bill.

GDPR: What Is It and How Might It Affect You?

The European Union’s General Data Protection Regulation on data privacy will come into force on May 25, 2018. This video explains how it could affect you, even if you don’t live in the EU.

Alastair MacTaggart, a San Francisco real-estate developer who spearheaded the ballot initiative, said the passage of a data-privacy law in Silicon Valley’s home state bodes well for privacy advocates around the U.S. “If it happened here, it will happen in the rest of the country,” Mr. MacTaggart said at a press conference at the Capitol building in Sacramento following the governor’s signing. He said he would withdraw the ballot initiative.

“My hope is other states will follow, ensuring privacy and safeguarding personal information in a way the federal government has so far been unwilling to do,” said state Sen. Bill Dodd (D., Napa), who co-authored the law.

The law that was passed has some similarities with Europe’s General Data Protection Regulation law, which went into effect last month.

One difference is that the California measure includes more provisions allowing consumers to opt out of data sharing as opposed to forcing them to opt in before continuing to use online sites. However, the California bill places the onus on consumers to request disclosure or opt out, while the European law requires businesses to be more active about providing disclosures to consumers, said Quyen Truong, an attorney at Stroock & Stroock & Lavan LLP.

The California law also protects consumers from companies charging consumers a premium if they don’t share their data. Additionally, the law prohibits a business from selling the personal data of anybody under the age of 16 unless that child agrees; parental permission is still required for children under 13 years. It gives consumers the right to have their personal data deleted; the right to know the commercial purpose for collecting their data; and the categories of sources from which the data are collected.

The legislation grants the state attorney general the authority to fine companies that don’t secure consumers’ sensitive information from cyberthreats.

In a statement, Robert Callahan, vice president of state government affairs for the internet Association, an industry group that includes Google, Facebook and Amazon, said, “It is critical going forward that policymakers work to correct the inevitable, negative policy and compliance ramifications this last-minute deal will create for California’s consumers and businesses alike.”

Appeared in the June 29, 2018, print edition as ‘California Passes Privacy Template.’