Posts Tagged ‘technology’

Deepfake Videos Are Ruining Lives. Is Democracy Next?

October 15, 2018

Moving Upstream explores the dark side of sophisticated video fakery

Image result for u.s. capital, photos


Seeing isn’t believing anymore. Deep-learning computer applications can now generate fake video and audio recordings that look strikingly real.

In a recent video published by researchers to show how the technology works, an actor sits in front of a camera moving his face. The computer then generates the same expressions in real time on an existing video of Barack Obama. When the actor shakes his head, the former president shakes his head as well. When he speaks, Mr. Obama speaks as well.

“This is a big deal,” Hany Farid, computer science professor at Dartmouth College, told The Wall Street Journal. “You can literally put into a person’s mouth anything you want.”

Prof. Christian Theobalt, part of a team working on the technology at the Max-Planck-Institute for Informatics in Germany, said he is motivated by the creative possibilities that it holds for the future.

He said researchers have developed forensic methods to detect fakes.

But Prof. Farid says researchers who push computer-generated technology need to think about the consequences these computer-generated fakes could have for society. He believes forensic experts are being outpaced by the development of fakes and that there is no method yet that can detect them all.

“How are we going to believe anything anymore that we see? And so to me that’s a real threat to our democracy,” Mr. Farid said.

In the video above, WSJ’s Jason Bellini explores this world of realistic video fakes. He gets deepfaked himself, and thanks to a deep-learning application, he can now dance like Bruno Mars. He also learns of the dark side of this technology, through one victim whose life has been deeply affected by deepfakes, and why others believe they could even lead to war.

See videos:


Millions of Californians’ jobs could be affected by automation — “If we don’t do anything, then it will turn into an apocalypse.”

October 15, 2018

The decisions made by the state’s next governor will affect generations to come. Read what Californians think should take priority and tell us what you think here.

Looking at a map of California on a projector screen, Johannes Moenius, an economics professor at the University of Redlands, hovered his mouse over the Inland Empire, which glowed with a splotch of red pixels.

The colored dots signified how susceptible an area would be to job losses caused by automation. And the alarm-bell red that covered Riverside, San Bernardino and Ontario signaled high risk — roughly 63% of tasks performed by workers in the area could be automated in the future.

Los Angeles Times
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To Moenius, the rise of robots in warehouses, factories and fast-food restaurants presents danger for places like the Inland Empire, where most residents work in logistics and the service industry and just 21% of adults have a four-year degree. As technology transforms the nature of work in California, how do people most at risk find their way to new jobs?

“We’re facing a major challenge,” Moenius said. “If we don’t do anything, then it will turn into an apocalypse.”

Whether confronting an increasingly automated labor market or grappling with how the gig economy is reshaping the relationship between companies and their workers, California’s next governor will have to address the changing nature of work.

That could mean rethinking how to educate Californians, remaking labor laws or considering major social safety net proposals such as a universal basic income. State government might not be able to control change sweeping the workplace, but it will have to deal with the fallout.

Which jobs are most susceptible to automation?

According to a study done by the Institute of Spatial Economic Analysis, the jobs most susceptible to automation across the state include bookkeepers, accountants and cashiers. More specialized jobs, such as doctors, therapists and social workers are less susceptible.

Image result for Robots, building cars, photos
Robots building cars

Most at-risk jobs

  • Bookkeeping, accounting and auditing clerks
  • Cashiers
  • Secretaries and administrative assistants
  • Office clerks, general
  • Accountants and auditors

Least at-risk jobs

  • Lodging managers
  • Psychologists, all other
  • Dietitians and nutritionists
  • Sales engineers
  • First-line supervisors of police and detectives

Note: Secretary and administrative assistant category does not include legal, medical and executive secretaries.Sources: Institute for Spatial Economic Analysis (ISEA), Frey and Osborne (2017), Bureau of Labor Statistics

The coming years “will make or break California,” said Eloy Ortiz Oakley, chancellor of the state’s community college system.

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“If we don’t find a way to provide the skills and education and training necessary for the majority of Californians,” he said, “there’s going to be a lot more have-nots than we have today.”

A murky future

California’s economy is booming. Its 4.2% unemployment rate is a record low. But experts warn the state’s labor market is particularly vulnerable to disruption from widespread automation.

“We are seeing a pretty high percentage of our workforce in relatively low-paying, low-skilled jobs,” said Somjita Mitra, director of the Institute of Applied Economics at the Los Angeles County Economic Development Corp.

In the post-Great Recession landscape, the prospect of getting a well-paying job with just a high school degree is dim.

“The challenge in the economy right now is that the kind of jobs that are being created are either at the lowest wages or the very highest wages,” Oakley said.

The rise of automation has sparked considerable angst among American workers. A 2017 Pew poll found that 72% of adults said they were worried about a future where robots and computers can perform human jobs.

Americans unlikely to think their own job is at risk of automation

Percentage of U.S. adults who think certain professions will be replaced by robots or computers in their lifetimes:

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But there’s no consensus on what the future will look like.One 2013 study,which Moenius used to build his analysis, estimated that 47% of American jobs were at risk of being automated. A 2016 paperpegged that figure at a much lower 9%.

A study in 2017posited that between 23% and 44% of work hours in the United States will be automated by 2030 — particularly in jobs with a high degree of repetition such as machinists, office support and retail sales. But that study also said jobs would be added in the future, especially among care providers such as surgeons and nurses, and construction workers.

Artificial intelligence — computers performing tasks typically done by humans — takes many forms. Computer vision, which allows machines to glean information from what they see, can be used in agriculture to give crops water and pesticides based on a plant’s needs.

Left: An automated transplanting system places romaine lettuce pods into the soil in Salinas, Calif. in 2017. (Gary Coronado / Los Angeles Times) Right: Pilot models of Uber’s self-driving car are displayed at the Uber Advanced Technologies Center in 2016 in Pittsburgh. (Angelo Merendino / AFP / Getty Images)

Virtual assistants such as Siri or Alexa are being used in hotels, standing in forconcierges or front desk assistants. Self-driving vehicles could upend the country’s transportation and logistics sectors, but it’s not clear how quickly those cars and trucks will be widely deployed.

“Depending on who you talk to, that’s a couple of years away or 30 years away,” said Stephen Baiter, executive director of the Oakland Workforce Development Board.

It’s one thing for a technological breakthrough to be invented, and it’s another to see businesses adopt that technology on a large scale. Experts predict the impact on jobs will not be a sudden thunderclap — more like a rolling wave.

The level of upheaval could vary by region. Moenius’ research found the Bay Area — home to Silicon Valley and highly educated workers — faces relatively low risk of job loss. The threat is higher in Fresno and Orange County.

But the swath most susceptible to automation in California spans Riverside, San Bernardino and Ontario. According to Moenius, it is the fourth most vulnerable metropolitan area in the nation, just behind other service-industry-heavy cities such as Las Vegas.

By industry, for industry

During World War II, the Inland Empire city of Fontana was home to Kaiser Steel, the Pacific Coast’s first steel mill, and was a crucial cog in the state’s vast shipbuilding industry.

But the steel jobs had withered by the 1980s — Fontana, like the rest of the region, became a bedroom community outside of Los Angeles. It clawed its way back from the Great Recession due in large part to warehouse and logistic jobs, and the service industry.


Now, on the campus of California Steel Industries Inc., the successor to Kaiser Steel, the Inland Empire is trying to reinvent itself again.

The Chaffey College Industrial Technical Learning Center, or InTech, is touted as the first public-private partnership in the state community college system. Originally envisioned as a place where companies could train their workers for more advanced jobs, the program now primarily serves participants who are unemployed or underemployed in other fields.

Training programs range from basic construction to more advanced skills like computer numerical control, which enables automated operation of machines. The center is run by the local community college, but participants don’t earn college credits. Instead, they receive certifications that are offered based on input from local industry partners.

“Everything we do is designed by industry, for industry,” said Sandra Sisco, the center’s director.

For employers who need workers trained in HVAC repair, InTech teaches that. For companies that need employees skilled in additive manufacturing, or 3-D printing, InTech teaches that too.

Joanna Farias, 23, an instructor at InTech Center, works on a 3-D printer. (Irfan Khan / Los Angeles Times)

Joanna Farias, 23, attended InTech two years ago for an electrical boot-camp class. Now, in addition to her aerospace engineering studies at Cal Poly Pomona and her internship at NASA’s Jet Propulsion Laboratory, she’s returned to teach 2-D and 3-D design. And she won’t rule out returning as a student to pick up a new skill.

“You have to keep coming back to centers like these to get training and get updated,” she said.

Training centers and community colleges are likely to be the front-line defense against a changing labor landscape.

Since 2014, the community college system has received more than $240 million per year for career and technical education to prepare students for jobs. Last year saw the creation of an online-only community college, geared toward working adults who want to learn new skills.

The proposal received pushback from educators at traditional schools.

“Generally speaking, our academic institutions feel reluctant to place a high value on employability. Traditionally, our attitude has been: We prepare students to be better citizens, deeper thinkers,” said Oakley, the community college chancellor.

“That’s all very true,” he added. “But we have also become a proxy for employability so we have to realize much more acutely the importance of job preparation in our curriculum.”

Much of the attention has centered on a gulf in the labor market. Companies continue to seek workers with college degrees. But in California, 8 million workers between the ages of 24 and 62 ended their studies in high school. To close that gap, some advocate more emphasis on certificates and other types of credentials that show off a worker’s specific skills.

“We should focus on what an employee can do, not just their background or pedigree or educational attainment,” said David Marsh, who manages the Rework America Task Force at the Markle Foundation.

Others fear that deemphasizing degrees could exacerbate inequality.

“You end up stratifying your workforce,” said Lande Ajose, executive director of California Competes, a higher-education advocacy group. “You end up with people who have wealth or privilege who continue to get four-year degrees, and everyone else ends up with some kind of degree that is less than that.”

What do you do with that existing workforce where the occupations that are in demand are changing all around them? — Kish Rajan, former leader of the Governor’s Office of Business and Economic Development.

Education is usually seen as a young person’s issue. But in a recent facilities maintenance class at InTech, the students ranged from early 20s to mid-50s, underscoring how mid-career workers also need places to learn.

“It’s a really vexing problem — what do you do with that existing workforce where the occupations that are in demand are changing all around them?” said Kish Rajan, former leader of the Governor’s Office of Business and Economic Development. “They’re going to need new training, new skill-set development to be competitive.”

Left: Steve Nagy, 50, center, an industrial electrical instructor, keeps any eye as students Alvin Counts, 42, left, and Edgardo Aguirre, 22, troubleshoot an electrical problem at Industrial Electrical Laboratory at InTech Center. Right: Eric Garcia, 32, also works on an electrical problem at the laboratory. (Irfan Khan / Los Angeles Times)

Chris McGarry, chief administrative officer of the Save Mart grocery company, said his business has never seen technology as a means to “strip out labor.”

But he does envision redeploying those who work at cash registers and in stockrooms, where technology can help trim costs, to positions that interact with customers, which he sees as a necessity to compete with e-retailers like Amazon.

For the United Food and Commercial Workers Union, which represents grocery clerks, that means figuring out a pathway to move cashiers to other parts of the store, such as the butcher counter and prepared food section. The union is looking to apprenticeships, which have long been favored by construction and firefighters unions, as a training pipeline; a new law will expand apprenticeship to nontraditional fields such as healthcare, retail and cannabis.

California has had some success in creating new work opportunities through its Employment Training Panel, which gives companies funding to train workers in more advanced skills. Businesses only get paid if workers are employed for at least three months after training, among other performance requirements. The program, which awarded some $100 million in contracts this year, is funded through a special tax on employers that’s remained at the same rate since 1983.

“We have more demand than we have funding,” said Stewart Knox, the panel’s executive director.

There’s no shortage of policy proposals to promote lifelong learning. Some suggest a state tax credit for companies that invest in worker training. Others would lift the age limit on CalGrants, the state’s financial aid program, so adults older than 27 can qualify for assistance.

“What’s keeping somebody from [going back to school]? Perhaps it’s child care. What about infrastructure, like high-speed internet at the house?” Mitra asked. “What are the ancillary support services we can provide to our residents and our workforce?”

‘What can we do to restore the balance of power?’

The future of work is not just a matter for the classroom. The next governor will inherit a debate playing out in courtrooms and legislative chambers: How do we define the relationship between employers and workers?

The California Supreme Court sent businesses into a frenzy earlier this year when it handed down a decision in a class action against Dynamex, a courier service, which made it harder for companies to classify their workers as independent contractors instead of employees.

The fight over worker classification isn’t new. Companies have increasingly relied on independent contractors in nearly every job sector — in trucking, beauty salons and medical practices, to name a few. The move represents major savings for employers because independent contractors are not entitled to minimum wage, overtime or employer-provided benefits. A 2017 study found that around 8.5% of California workers were employed as an independent contractor for their main job.

Even though the number of Californians working full time for on-demand platforms such as Uber or TaskRabbit is exceedingly small — the UC Berkeley study estimated they comprise just 0.5% of the workforce overall — the gig economy’s high-profile emergence has inarguably shaped the debate.

Many Lyft drivers are doubling their efforts as Uber drivers while they drop off riders in front of Terminal 1 at Los Angeles International Airport. (Mark Boster / Los Angeles Times)

Business groups sought to block the ruling and appealed unsuccessfully to the Legislature in the summer to help blunt the court’s action. Now, they say employers are being battered by lawsuits or threats of litigation. A study commissioned by the California Chamber of Commerce said the cost to employers of classifying a worker as an employee instead of a contractor will go up as much as 44%.

“There’s uncertainty as to who this applies to,” said Jennifer Barrera, a lobbyist with the chamber. “There’s overall concern and confusion out there as a result of this decision.”

Businesses are certain to turn to the next governor to buffer the impacts of the decision, either through exempting certain industries or reviving a dormant state commission to regulate wages, hours and working conditions.

Gig-economy workers in California are more likely to experience wage theft, discrimination and other negative work experiences

Percentage who say that they or someone in their household have experienced the following in the last year:

Source: Public Religion Research Institute

Labor unions will seek to keep the court ruling intact: More people classified as employees means more opportunities for unions to organize. But advocates also say they’re fighting against an erosion in the social safety net spurred by the rise of contractors. With fewer employees, companies have fewer obligations to pay into unemployment insurance or contribute to Social Security and Medicare taxes.


“There’s a massive amount of investment in the social infrastructure that is lost on the independent contractor side,” said Derecka Mehrens, executive director of Working Partnerships USA, a labor-affiliated advocacy group.

The anxiety over automation colors this debate, even if it is not explicitly connected to worker classification.

“All the [research] work we’ve done on automation just points to further erosion in job quality and potentially more independent contractor jobs,” said Doug Bloch, political director of the Teamsters Joint Council in northern and central California.

Both issues at their core are about the role of workers, Bloch said: “What can the next governor do to promote that [role] so workers have more power?”

‘Human beings need work’

The prospect of radical changes to work — a new robot-driven industrial revolution — has led to equally sweeping solutions being bandied about. Among the boldest is universal basic income.

The concept, a fixed income for every adult with no strings attached, has been pitched as an answer to an automated future. Stockton’s millennial mayor, Michael Tubbs, earned a flurry of headlines this year when he planned a pilot program to give $500 a month to a select group of residents.

Stockton Mayor Michael Tubbs, left, and Los Angeles Mayor Eric Garcetti cozy up after a news conference outside L.A. City Hall in May. (Al Seib / Los Angeles Times)

The proposal has been especially embraced in Silicon Valley tech circles, reflecting uneasiness overhow their innovations may affect workers.

“There’s a surprising amount of circumspection, at the very least,” said Brian Brennan, senior vice president with the Silicon Valley Leadership Group.

The proposal inspires fierce critiques over its anticipated costs and manages to unite frequent foes in opposition.

What we need is a just vision … not a bunch of these techno-narcissists lecturing us about how society is supposed to be constructed. — Barry Broad, who lobbies for a number of labor unions.

“We could not be in more opposition,” said Rob Lapsley, who heads the California Business Roundtable. He touted policies such as tax credits for the working poor, “rather than diversions like universal basic income that remove the personal value and financial incentive for work.”

Barry Broad, who lobbies for a number of labor unions, is similarly dismissive.

“In the labor movement, we believe very fundamentally that human beings need work,” Broad said. “What we need is a just vision for that society, not a bunch of these techno-narcissists lecturing us about how society is supposed to be constructed.”

Still, the universal basic income debate is indicative of the big-picture deliberations over the future of work that await the next governor.

Should government undertake a massive new safety net program to guard against job displacement? What about using regulation to ensure humans stay relevant in light of new technology?

The Teamsters have used their lobbying power to carve out roles for themselves in a changing world. In San Francisco, they secured a city ordinance that encourages companies operating delivery robots to use union labor.

As commercial truck companies explore “platooning,” in which a convoy is controlled by the truck in the lead, the Teamsters pushed a law to ensure that a company testing that technology in California has a commercially licensed driver in each truck. Government intervention has been a key part of the union’s strategy to keep workers employed.

Trucks equipped with an Otto kit have been test-driven with autonomous technology up and down Interstate 280 and U.S. 101. (Tony Avelar / Associated Press)

“It’s when the government either regulates or uses the threat of regulation that the employers will come to the table,” Bloch said.

Others say the state of the economy — near-full employment is making it hard for companies to fill positions with qualified workers — means businesses will be more open to new approaches to tackle workforce needs. That could mean benefits that workers could take from job to job or imposing a shorter workweek that would allow people to share jobs while taking home full-time pay and benefits.

“There is this opportunity with employers to start having the conversation about unique and creative ways to solve their labor market problems that at the same time creates economic mobility and security for … workers,” said Tim Rainey, executive director of the California Workforce Investment Board.

The policy solutions differ, but the refrain from labor, business and educators is remarkably similar: What the next governor does will play a major role in determining just how scary the future of work will be.

“This is one of the biggest wealth opportunities we have in history, one of the biggest opportunities to alleviate us from burdensome work,” Moenius said.

But, he added, “the opportunity will only unfold if we pave the way for it today.”


Credits: Design and development by Priya Krishnakumar

Chinese official finds Trump ‘very confusing’; says US warships at China’s doorstep building tension

October 14, 2018

President Trump’s inner circle is “very confusing” for foreign diplomatic officials in Washington to navigate, China’s U.S. ambassador Cui Tiankai told “Fox News Sunday” in an exclusive wide-ranging interview.

Tiankai added that U.S. warships are “on the offensive” near China, days after a U.S. destroyer nearly collided with a Chinese military vessel in the South China Sea. The Pentagon said the Chinese ship came within 45 yards of the U.S. destroyer, in an intentionally “unsafe” maneuver.

Tiankai’s comments come as Chinese President Xi Jinping and Trump prepare for a possible meeting at the G20 summit in Buenos Aires, Argentina, next month, amid a rapidly escalating trade conflict between the two nations that some have called a new cold war.

Asked by host Chris Wallace whether Trump listens primarily to hardliners like trade director Peter Navarro — who has characterized China as the economic “parasite of the world” — or moderates like chief economic adviser Larry Kudlow and Treasury Secretary Steven Mnuchin, Tiankai responded simply, “You tell me.”

The envoy added that other ambassadors seemingly have the same issue. President Trump has repeatedly said he tries to avoid “telegraphing” his moves to foreign adversaries.

“Honestly, I’ve been talking to ambassadors of other countries in Washington, D.C., and this is also part of their problem,” Tiankai said. “They don’t know who is the final decision-maker. Of course, presumably, the president will take the final decision, but who is playing what role? Sometimes it could be very confusing.”

Trump, citing widespread intellectual property theft in China that cuts into the profits of U.S. companies doing business there, placed tariffs on approximately $200 billion of Chinese imports in September, following his imposition of significant tariffs on nearly $35 billion in Chinese goods in July. China quickly retaliated with $60 billion in tariffs of its own.

The White House has bipartisan support for hitting back at Chinese intellectual property theft. In an interview in June, Senate Minority Leader Chuck Schumer, D-N.Y., ordinarily a fierce Trump critic, agreed with the administration’s China policy and said that the country “takes total advantage” of the U.S.

“Not only do they steal our intellectual property, they keep our good companies out, and say the only way you’re going to be able to sell your American products in China … is if you come to China, make them there, and give us the techniques and intellectual property,” Schumer said.

And the president has insisted his tariffs are already having a major impact.

“Their economy has gone down very substantially, and I have a lot more to do if I want to do it,” Trump told “Fox & Friends” last week. “They lived too well for too long and, frankly, I guess they think the Americans are stupid people. Americans are not stupid people. We were led badly when it came to trade.”


But in his interview with Fox News, Tiankai denied that China permits or engages in widespread intellectual property theft, and said even the suggestion was an affront to the country’s population.

“I think all of these accusations about how China has developed are groundless and not fair to the Chinese people,” he told Wallace. “You see, China has 1.4 billion people. It would be hard to imagine that one-fifth of the global population could develop and prosper not by relying mainly on their own efforts, but by stealing or forcing some transfer of technology from others — that’s impossible.”

“It’s important to notice who started this trade war. We never want to have a trade war.”

— China’s U.S. ambassador Cui Tiankai

He added: “It’s important to notice who started this trade war. We never want to have a trade war, but if somebody started a trade war against us, we have to respond and defend our own interests.”

Concerns have been raised that China, the largest foreign holder of U.S. Treasurys, might start dumping its holdings as a way to pressure the United States in the trade dispute. But Mnuchin said this possibility didn’t concern him because it would be contrary to Beijing’s economic interests to start dumping its Treasury holdings, and would be “very costly” to China.

Top U.S. officials have warned that the ongoing conflict with China extends beyond trade. In Senate testimony on Wednesday, FBI Director Christopher Wray said that “China, in many ways, represents the broadest, most complicated, most long-term counterintelligence threat we face.”

He added that “Russia is … fighting to stay relevant after the fall of the Soviet Union,” while “China is fighting tomorrow’s fight…and it affects every sector of our economy.”

Vice President Pence, meanwhile, has accused China of trying to interfere with U.S. elections, including by targeting tariffs toward industries that support Trump and even spreading propaganda in U.S. media outlets.

In response, Tiankai effectively called the U.S. the aggressor in several spheres of influence.

“You see, Chinese media, they are just learning from America media to use all these means, to buy commercial pages from newspapers, to make their views known or to cover what is happening here,” Tiankai said. “This is normal practice for all the media.”


The envoy also said that Chinese warships, which harassed and nearly collided with a U.S. destroyer recently in the disputed South China Sea, had responded appropriately to an intervention on their “doorstep.” Beijing has built up military fortifications on two contested Chinese man-made islands there despite pledging not to do so.

“Where the incident took place, you were right to say it was in South China Sea. So it’s at China’s doorstep,” Tiankai told Wallace. “It’s not Chinese warships that are going to the coast of California, or to the Gulf of Mexico. It’s so close to the Chinese islands and it’s so close to the Chinese coast. So who is on the offensive? Who is on the defensive? This is very clear.”

Tiankai said, however, that China would continue to “faithfully” implement sanctions against its longtime ally, North Korea, in order to restore stability to the region. He  said a “coordinated, phased, and step-by-step approach” to North Korean denuclearization is the best approach, mirroring the position of that country’s leader, Kim Jong Un.

“How can you convince him to give up all the nuclear weapons without any hope that the U.S. would be following a more friendly policy towards him?” Tiankai asked.

Secretary of State Mike Pompeo was in Beijing last week, where top Chinese officials vowed to take “all necessary measures” to safeguard their country. They have since said that high-level communications continue between the two countries.

Still, there were signs tensions between China and the U.S. have eased somewhat in recent days. Global stock market indexes bounced back sharply Friday after their recent plunges, on word of the possible presidential meeting.

And reports have emerged that Mnuchin has advised against labeling China a currency manipulator — a status that could trigger penalties. The Chinese currency has been falling in value against the dollar in recent months, raising concerns that Beijing is devaluing its currency to make Chinese goods more competitive against U.S. products.

Mnuchin did not say this weekend what the forthcoming Treasury report, set to come out next week, will conclude about China’s currency practices. In the past, Treasury has placed China on a watch-list but found that Beijing did not meet the threshold to be labeled a currency manipulator.

The Treasury secretary met Thursday with Yi Gang, head of China’s central bank. “I expressed my concerns about the weakness of the currency.” Mnuchin said.

Tiankai told Wallace that China, despite its ongoing spat with the U.S. on a variety of fronts, remains optimistic about November’s planned meeting between Trump and Jinping. Kudlow, the chief White House economic adviser, said on “Fox News Sunday” that the one-on-one between the two leaders will “probably” happen.

“There’s a good mutual understanding and good working relationship between the two,” Tiankai said. “I hope and I’m sure this will continue.”

Fox News’ Samuel Chamberlain and The Associated Press contributed to this report.

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John Bolton Warns Chinese Military to Halt Dangerous Naval Encounters

October 14, 2018

White House National Security Adviser John Bolton bluntly warned China this week that the U.S. military will not ignore threatening naval actions near U.S. warships in international waters.

Doubling down on the Trump administration’s tough policies toward China, Bolton also renewed criticism of Beijing for meddling in U.S. elections and stealing American technology.

By Bill Gertz

Image result for John Bolton, Photos

Commenting on the harassment of the guided missile destroyer USS Decatur by Chinese warship that nearly caused a collision in the South China Sea recently, Bolton said the threatening maneuver was unacceptable.

Navy commanders have rules of engagement that allow them to defend their ships, he said.

“The commanders have the authority we need,” Bolton said in an interview with radio commentator Hugh Hewitt.

“We will not tolerate threats to American service members. We’re determined to keep international sea lanes open. This is something the Chinese need to understand. Their behavior has been unnecessarily provocative for far too long.”

The Navy said the Decatur was harassed by a Chinese Luyang-class destroyer on Sept. 30 near one of the Spratly islands. The Chinese ship conducted a series of aggressive maneuvers and sailed within 45 yards of the destroyer, forcing it to change course to avoid a collision.

Navy surveillance photo of the encounter

Navy surveillance photo of the encounter

In the South China Sea, China has built up some 3,200 acres of disputed islands and has begun deploying advanced missiles on the islands.

China claims the entire sea, which is used for an estimated $5 trillion annually in shipping trade, is Chinese territory.

The United States insists the waters are international waters. The U.N. Permanent Court of Arbitration rejected Chinese claims to own the sea through a vaguely defined “nine-dash line” extending through most of the waterway.

Bolton was asked if the United States should urge regional allies such as Philippines and Japan to counter the Chinese island-building and militarization by building their own armed islands.

“I think we’ve got to do more first to establish for the Chinese that we do not acknowledge the legitimacy of any of this,” Bolton said.

“The ship near collision you mentioned is an example of how dangerous Chinese behavior is,” he added. “We have now got more participation by allies, the British, the Australians, and others, are sailing with us through the South China Sea. We’re going to do a lot more on that.”

Bolton also said regional allies also could begin to mine undersea energy resources in the South China Sea “with or without Chinese cooperation.”

“They need to know they have not achieved a fait accompli here. This is not a Chinese province and will not be,” Bolton said.

Bolton said the Chinese were able to get away with aggressive actions against Navy vessels and aircraft during the administration of President Barack Obama.

Chinese threatening behavior is a result of the Obama administration ignoring or mishandling the confrontation.

“The pressure’s now on President Trump,” Bolton said. “He’s responded in a way that has the Chinese confused. They’ve never seen an American president this tough before. I think their behavior needs to be adjusted in the trade area, in the international, military, and political areas, in a whole range of areas.”

Bolton said he is hopeful Xi Jinping will be willing to “talk turkey” in addressing the problems during the upcoming meeting of the G20 group of nations meeting in Argentina set for next month.

“But the president feels very strongly that China’s taken advantage of the international order for far too long, not enough Americans have stood up to it. Now’s the time to do it,” he said.

On Chinese theft of American technology and intellectual property, Bolton said the United States has been “taken to the cleaners for decades” by Beijing.

“Ever since China came into the World Trade Organization, they have pursued a mercantilist economic policy in what should be a free trade environment,” he said. “And they’ve gone well beyond that. They’ve violated rule after rule after rule.”

Those who argued Chinese admission to the World Trade Organization would pressure China into observing international rules and norms of behavior were wrong, he noted.

“They’ve done the opposite. They’ve gotten worse. They steal our intellectual property so they’re able to compete with us without the investment that’s required in research and development. They force technology transfers from American and European companies,” Bolton said.

The Chinese have misused their access to the international system to build up their economy and then used their economic power to build up their military forces.

On the issue of whether Russia or China poses the most significant strategic challenge to the United States, Bolton said: “I think we do see China as the major issue of this century.”

Trump, based on his business experience, is challenging China on economic ground and Bolton said blocking Chinese theft and acquisition of U.S. know-how would substantially reduce Beijing’s military capabilities.

Asked if Google and Facebook should be cooperating with the Chinese in developing information controls, Bolton said Vice President Mike Pence last week urged American tech companies not to cooperate with Chinese repression.

“I would say to shareholders of these companies that portray themselves as the open internet, transparent future, really? You want to make money off of repression? If I were a shareholder, I’d want to know what the answer of our corporate leadership was,” Bolton said.

The Trump administration is tightening export controls in terms of restricting technology with dual civilian-military uses, and also doing more to prevent technology theft through cyber attacks.

On Chinese election meddling, Bolton said the problem is serious.

“We are very worried about the question of Chinese interference not just in individual elections, but more broadly trying to influence the American political discussion with an influence campaign that I think could well be unprecedented,” he said.

Echoing declassified intelligence made public during a speech by Pence, Bolton said the Beijing influence operations must be stopped.

“I think the United States needs to stand up, frankly, to any foreign government that thinks it’s going to interfere in our politics,” he said. “We are a self-governing people. We will govern ourselves. We don’t need international institutions to tell us how to do it. And we particularly don’t need foreigners trying to exert undue influence over us.”

On the disappearance of Saudi Arabian journalist Jamal Khashoggi, Bolton said he has spoken with Saudi officials and “we just don’t know what the facts are.”

“The United States does not have information it’s not revealing,” he said. “If we had information, we’d know better exactly how to handle this. We’ve made it clear we want to know what the facts are. We’re going to continue to do that.”

Bolton criticized the Obama administration for its so-called strategic patience policy toward North Korea that allowed Pyongyang to develop nuclear weapons and long-range missiles to deliver them.

The past policy was “a synonym for doing nothing about North Korea.”

“I think the combination of the potential use of military force against North Korea and the maximum pressure campaign that the president waged on the economic front is what has brought Kim Jong Un to the table,” he said, adding that Trump could meet Kim Jong Un for a second time in the next couple of months.

Prospect of Trump-Xi talks raises hope for thaw in trade war

October 13, 2018

With China and the United States opening the door to a meeting next month between Presidents Xi Jinping and Donald Trump, hopes are rising for a potential easing of tensions in the trade war between the world’s two largest economies.

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Worries about the increased tariffs the two sides have imposed on each other’s goods contributed to a dizzying bout of volatility in financial markets this week. The higher tariffs raise costs for companies in both countries, and economists say that if they remain in place indefinitely, they could depress economic growth.

A Xi-Trump meeting, if it happens, would take place during a summit of leaders of the Group of 20 biggest global economies in Argentina in late November.

“I don’t think any decision has been made in regards to a meeting,” Treasury Secretary Steven Mnuchin told reporters Saturday in Bali, Indonesia, where he’s attending global finance meetings.

Still, Larry Kudlow, Trump’s top economic adviser, said in Washington on Friday that preparations for the talks were under way.

“It looks like there will be a meeting in Buenos Aires at the G-20,” Kudlow said in an interview with CNBC. “We are looking at it. The Chinese are looking at it. Preparations are being made. I can’t say 100 percent certainty, but there is no question everybody is looking at it.”

Kudlow said that so far, the administration viewed China’s negotiating offers as “rather unsatisfactory” but that “maybe talks between the two heads of state will bear fruit.”

Asked if China would need to make specific concessions for such a meeting to take place, Mnuchin said, “To the extent that we can make progress toward a meeting I would encourage that and that’s something we’re having discussions about, but for the moment there’s no preconditions. The president will decide on that.”

The trade feud has been fueled by US accusations that China engages in cyber-theft and coerces foreign companies into handing over technology in return for access to the Chinese market, as well as by Trump’s anger over China’s trade surplus with the US It is far from clear that the US might be preparing to consider lifting penalty tariffs on about $250 billion of Chinese products.

Mnuchin repeated the Trump administration’s determination to achieve a more balanced trading relationship that does not require foreign companies to form joint ventures to transfer technology to gain market access.

Lu Kang, a spokesman for China’s Foreign Ministry, offered no specifics Friday but said, “I have also seen the relevant reports.”

The Wall Street Journal and the Washington Post have cited officials as saying Trump has decided to proceed with a meeting with Xi.

Global indexes bounced back sharply Friday after their recent plunges, on word of the possible presidential meeting, along with strong Chinese export data. Japan’s Nikkei 225 index gained 0.5 percent to 22,694.66 after a nearly 4 percent loss on Thursday.

Hong Kong’s Hang Seng surged 2.1 percent to 25,801.49. The Shanghai Composite index advanced 0.9 percent to 2,606.91. Shares recovered in Taiwan and rose throughout Southeast Asia.

On Wall Street, the Dow Jones Industrial Average jumped 305 points, or 1.2 percent, in late-morning trading, and the Nasdaq composite surged 138 points, or 1.9 percent. Later, both stock indexes gave up much of their gains.

Friday’s volatility followed a swoon over the previous two days that erased 1,300 points from the Dow and dragged the S&P 500 down more than 5 percent.

Reports that Mnuchin has advised against labeling China a currency manipulator — a status that could trigger penalties — were also seen as easing tensions. The Chinese currency has been falling in value against the dollar in recent months, raising concerns that Beijing is devaluing its currency to make Chinese goods more competitive against US products.

In his comments in Bali, Mnuchin did not say what the forthcoming Treasury report, set to come out next week, will conclude about China’s currency practices. In the past, Treasury has placed China on a watch-list but found that Beijing did not meet the threshold to be labeled a currency manipulator.

Mnuchin met Thursday with Yi Gang, head of China’s central bank.

“I expressed my concerns about the weakness of the currency.” Mnuchin said.

He said that in the discussions he had with the Chinese, they had made clear that they didn’t see a further weakening of the Chinese yuan as being in their interests.

Concerns have been raised that China, the largest foreign holder of US Treasurys, might start dumping its holdings as a way to pressure the United States in the trade dispute. But Mnuchin said this possibility didn’t concern him because it would be contrary to Beijing’s economic interests to start dumping its Treasury holdings.

“That would be very costly for them,” Mnuchin said.

China’s surplus with the United States widened to a record $34.1 billion in September as exports to the American market rose 13 percent from a year earlier to $46.7 billion, down slightly from August’s 13.4 percent growth. Imports of American goods increased 9 percent to $12.6 billion, down from August’s 11.1 percent growth.

Beijing’s exports to the United States have at least temporarily defied forecasts they would weaken after being hit by punitive US tariffs of up to 25 percent.

September marked the second straight record Chinese monthly trade surplus with the United States. Export numbers have been buoyed by producers rushing to fill orders before American tariffs rose. But they also benefit from “robust US demand” and a weaker Chinese currency, which makes their goods cheaper abroad, Louis Kuijs of Oxford Economics said in a report.

The Chinese yuan has lost nearly 10 percent of its value against the dollar this year. That prompted suggestions Beijing might weaken the exchange rate to help exporters. But that might hurt China’s economy by encouraging an outflow of capital. The central bank has tightened controls on currency trading to prevent further declines.

The Associated Press

Free Our Internet: Google Does Not ‘Worry About Legislation’ Because They ‘Bought’ Congress

October 12, 2018
LONDON, ENGLAND - AUGUST 09: In this photo illustration, The Google logo is projected onto a man on August 09, 2017 in London, England. Founded in 1995 by Sergey Brin and Larry Page, Google now makes hundreds of products used by billions of people across the globe, from YouTube and …

Danger to American Democracy via censorship: Large technology companies’ procurement of political influence via lobbying efforts in Washington, DC

Christie-Lee McNally, executive director of Free Our Internet, warned of large technology companies’ procurement of political influence via lobbying efforts in Washington, DC. She offered her remarks in a Thursday interview with Breitbart News Editor-in-Chief Alex Marlow on SiriusXM’s Breitbart News Daily.

Free Our Internet is a non-profit organization describing itself as an opponent of the “tech-left” and its political censorship of “conservative speech online.”

McNally said:

They control over 90 percent of the internet, so they don’t need to capitulate to us, they don’t need to capitulate to the Senate [or] the president. They don’t need to capitulate … because they’ve bought them all. The amount they pay in lobbyists — if you look at FEC reports and how much they pay in lobbyists [and in] Washington, DC, they don’t have to worry about legislation.

“Clearly they lied last month when they went up there,” said McNally of Twitter and Facebook executives’ denial of political censorship across their digital platforms during testimony before congressional committees.

Photo credit: Leon Neal/Getty Images


Open Secrets itemized Google’s lobbying spending via the technology company’s FEC filings, with its most recent data coming from 2014.

The top recipient of Google’s lobbying spending in 2014 was the Podesta Group, founded by Clinton loyalist and founder of the Center for American Progress and its subsidiary ThinkProgress.

A January-published TIME report noted Google’s lobbying efforts:

When it comes to corporate lobbying efforts, Google outspent other major technology firms last year by millions of dollars, and took the top spot among companies more broadly.

Google (now part of parent company Alphabet) spent over $18 million lobbying politicians in 2017, according to federal disclosure records. According to the Center for Responsive Politics, this is the first time a technology company has spent the most on lobbying costs in at least two decades. Google did not return TIME’s request for comment about its lobbying activities.

McNally praised Breitbart News coverage of threats to free speech and expression posed by the growing power of technology companies under left-wing management. She highlighted Breitbart News’s recent publication of a leaked 84-page document detailing some of Google’s political censorship efforts.

“I want to thank you guys for getting this document and informing people of what we have been screaming for a couple of years, now,” said McNally. “[People have been saying], ‘You guys are crazy. This is not happening.’ We watched the hearings and we talked about back in April and May and we were told, ‘This is just a conspiracy,’ and all of what we have been saying is now in our hands, proof that what we’ve been saying is true.”

McNally described Google’s political censorship as a threat to the First Amendment, “It terrifies me even more … that what we’ve been saying is absolutely happening. The scariest part of the document is [Google declaring it opts for] ‘European tradition’ rather than ‘American tradition.’ That means they want to undermine not only the First Amendment but our Constitution.”

Image result for U.S. Constitution, pictures

McNally cast Google’s compliance with the Chinese state’s political censorship demands as unscrupulous profiteering.

“It’s all come down to the almighty dollar for [Google], and it’s come down to control,” stated McNally. “When they started out and it was all about American tradition and values.”

Google’s criticisms of America ring hollow as it complies with China’s authoritarian state, assessed McNally.

“I don’t understand how, with the whole China situation … I don’t know how you can be a good censor when it comes to [the] Chinese regime and those types of governments,” remarked McNally. “This is a company whose motto, years ago, was ‘Don’t Be Evil,’ and now they are willing to bend over backwards for a government that does the types of things that they do to their people. They’re willing to censor and basically make a completely alternate internet for that particular government.”

McNally went on:

What’s ironic is how they’ll do that while, at the same time, talk about how awful America is, how awful our president is, how we’re suppressing women [and] minorities. America is the bad actor here, but they’re willing to go into China and set up a completely separate internet to suppress the Chinese people so that they will only see what the Chinese government wants them to see.

A September-published report revealed Google’s development of a search engine for China — named “Dragonfly” — complete with the Chinese state’s censorship demands.

Marlow described the threat to free speech and expression posed by large technology firms as “100 times the threat” posed by left-wing news media outlets such as CNN.

US arrests alleged Chinese spy over theft of aviation secrets — China’s economic and military espionage

October 11, 2018

The U.S. Justice Department said on Wednesday it had arrested and indicted a spy for China’s Ministry of State Security on charges of economic espionage and attempting to steal trade secrets from several U.S. aviation and aerospace companies.

Chinese operative Yanjun Xu was detained in Belgium in April after a Federal Bureau of Investigation probe and extradited to the United States on Tuesday.

The Washington Post reported he was lured to Belgium by U.S. agents.

© Yasuyoshi Chiba / AFP | Men work with a jet engine at General Electric (GE) Celma, GE’s aviation engine overhaul facility in Petropolis, Rio de Janeiro, Brazil on June 8, 2016.

The FBI called it an unprecedented extradition and said the indictment showed the direct oversight of China‘s government in economic espionage against the United States.

The charges come as Washington increases pressure on Beijing over its trade policies and alleged theft of U.S. intellectual property.

Cybersecurity experts said the arrest was another sign of the escalating trade tensions between the two countries, adding they had seen increasing espionage by Beijing for business advantage.

“China is actively engaging in targeted and persistent intrusion attempts against multiple sectors of the economy, including biotech, defense, mining, pharmaceutical, professional services, transportation and more,” said CrowdStrike Chief Technology Officer Dmitri Alperovitch.

Image result for china, stealth fighter, photos

China’s J-20 stealth fighter

A U.S. Department of Justice statement said Xu, a deputy division director for the State Security Department of China’s Jiangsu province, targeted several U.S. aerospace companies, including GE Aviation, a subsidiary of General Electric Co.

It described another unnamed firm as “one of the world’s largest aerospace firms, and a leading manufacturer of commercial jetliners and defense, space and security systems,” and a third as a leader in unmanned aerial vehicle technology.

GE Aviation has supplied engines for large Boeing Co and Airbus SE aircraft, and is working on a new generation of engines for commercial planes and heavy-lift military helicopters.

The indictment against Xu said he targeted aviation firms since around December 2013. It also said he made contact with experts working for the firms and recruited them to travel to China, often for the initial purpose of delivering a university presentation and paying their costs and a stipend.

“This unprecedented extradition of a Chinese intelligence officer exposes the Chinese government’s direct oversight of economic espionage against the United States,” the statement quoted Bill Priestap, the FBI’s assistant director for counterintelligence, as saying.

John Demers, the assistant U.S. attorney general for national security, said the case was not an isolated incident.

“It is part of an overall economic policy of developing China at American expense,” he said. “We cannot tolerate a nation stealing our firepower and the fruits of our brainpower.”

The Chinese Embassy and Xu’s lawyers did not immediately respond to requests for comment.

The maximum penalty for conspiracy and attempt to commit economic espionage is 15 years, while that for conspiracy and attempt to steal trade secrets is 10 years.

The Ministry of State Security is China’s intelligence and security agency and is responsible for counterintelligence, foreign intelligence and political security.

Cybersecurity experts said former U.S. President Barack Obama and Chinese President Xi Jinping had reached an understanding in 2015 on cyber espionage, but the agreement appeared be withering away.

Chris Painter, the former U.S. State Department official who negotiated the agreement, said in a Twitter post it was “not surprising that now the relationship has deteriorated, so has the agreement.”

Late last month, the Department of Justice reported the arrest of a Chinese citizen in Chicago on charges he covertly worked for a high-ranking Chinese intelligence official to help try to recruit engineers and scientists, including some who worked as U.S. defense contractors.

NBC News on Tuesday quoted U.S. officials as saying a professor at a top cancer research center in Houston facing child pornography charges was also under scrutiny for alleged economic espionage for China.



In this undated photo released by China's Xinhua News Agency, made available on Sunday, Nov. 25, 2012, a carrier-borne J-15 fighter jet takes off from China's first aircraft carrier, the Liaoning. China has successfully landed a fighter jet on its first aircraft carrier, which entered service two months ago, the country's official news agency confirmed Sunday. The Liaoning aircraft carrier underscores China's ambitions to be a leading Asian naval power, but it is not expected to carry a full complement of planes or be ready for combat for some time.

See also:

Chinese Navy Short on Carrier-Based Fighters


China ‘nearing mass production’ of J-20 stealth fighter after engine problems ironed out

The People’s Liberation Army J-20

China Put Hacked Software Inside Computers for Sale to The U.S. — Plus Hardware Implants

October 10, 2018

New Evidence of Hacked Supermicro Hardware Found in U.S. Telecom

The discovery shows that China continues to sabotage critical technology components bound for America.

 Updated on 
What Is Known So Far About China’s Cyber Attack on the U.S.

A major U.S. telecommunications company discovered manipulated hardware from Super Micro Computer Inc. in its network and removed it in August, fresh evidence of tampering in China of critical technology components bound for the U.S., according to a security expert working for the telecom company.

The security expert, Yossi Appleboum, provided documents, analysis and other evidence of the discovery following the publication of an investigative report in Bloomberg Businessweek that detailed how China’s intelligence services had ordered subcontractors to plant malicious chips in Supermicro server motherboards over a two-year period ending in 2015.

Image result for Yossi Appleboum, photos
Yossi Applebaum (Inset)

Appleboum previously worked in the technology unit of the Israeli Army Intelligence Corps and is now co-chief executive officer of Sepio Systems in Gaithersburg, Maryland. His firm specializes in hardware security and was hired to scan several large data centers belonging to the telecommunications company. Bloomberg is not identifying the company due to Appleboum’s nondisclosure agreement with the client. Unusual communications from a Supermicro server and a subsequent physical inspection revealed an implant built into the server’s Ethernet connector, a component that’s used to attach network cables to the computer, Appleboum said.

The executive said he has seen similar manipulations of different vendors’ computer hardware made by contractors in China, not just products from Supermicro. “Supermicro is a victim — so is everyone else,” he said. Appleboum said his concern is that there are countless points in the supply chain in China where manipulations can be introduced, and deducing them can in many cases be impossible. “That’s the problem with the Chinese supply chain,” he said.

Supermicro, based in San Jose, California, gave this statement: “The security of our customers and the integrity of our products are core to our business and our company values. We take care to secure the integrity of our products throughout the manufacturing process, and supply chain security is an important topic of discussion for our industry. We still have no knowledge of any unauthorized components and have not been informed by any customer that such components have been found. We are dismayed that Bloomberg would give us only limited information, no documentation, and half a day to respond to these new allegations.”

Bloomberg News first contacted Supermicro for comment on this story on Monday at 9:23 a.m. Eastern time and gave the company 24 hours to respond.

Supermicro said after the earlier story that it “strongly refutes” reports that servers it sold to customers contained malicious microchips. China’s embassy in Washington did not return a request for comment Monday. In response to the earlier Bloomberg Businessweek investigation, China’s Ministry of Foreign Affairs didn’t directly address questions about the manipulation of Supermicro servers but said supply chain security is “an issue of common concern, and China is also a victim.”

Supermicro shares plunged 41 percent last Thursday, the most since it became a public company in 2007, following the Bloomberg Businessweek revelations about the hacked servers. They fell as much as 27 percent on Tuesday after the latest story.

The more recent manipulation is different from the one described in the Bloomberg Businessweek report last week, but it shares key characteristics: They’re both designed to give attackers invisible access to data on a computer network in which the server is installed; and the alterations were found to have been made at the factory as the motherboard was being produced by a Supermicro subcontractor in China.

Based on his inspection of the device, Appleboum determined that the telecom company’s server was modified at the factory where it was manufactured. He said that he was told by Western intelligence contacts that the device was made at a Supermicro subcontractor factory in Guangzhou, a port city in southeastern China. Guangzhou is 90 miles upstream from Shenzhen, dubbed the `Silicon Valley of Hardware,’ and home to giants such as Tencent Holdings Ltd. and Huawei Technologies Co. Ltd.

The tampered hardware was found in a facility that had large numbers of Supermicro servers, and the telecommunication company’s technicians couldn’t answer what kind of data was pulsing through the infected one, said Appleboum, who accompanied them for a visual inspection of the machine. It’s not clear if the telecommunications company contacted the FBI about the discovery. An FBI spokeswoman declined to comment on whether it was aware of the finding.

AT&T Inc. spokesman Fletcher Cook said, “These devices are not part of our network, and we are not affected.” A Verizon Communications Inc. spokesman said “we’re not affected.”

“Sprint does not have Supermicro equipment deployed in our network,” said Lisa Belot, a Sprint spokeswoman. T-Mobile U.S. Inc. didn’t respond to requests for comment.

Sepio Systems’ board includes Chairman Tamir Pardo, former director of the Israeli Mossad, the national defense agency of Israel, and its advisory board includes Robert Bigman, former chief information security officer of the U.S. Central Intelligence Agency.

U.S. communications networks are an important target of foreign intelligence agencies, because data from millions of mobile phones, computers, and other devices pass through their systems. Hardware implants are key tools used to create covert openings into those networks, perform reconnaissance and hunt for corporate intellectual property or government secrets.

The manipulation of the Ethernet connector appeared to be similar to a method also used by the U.S. National Security Agency, details of which were leaked in 2013. In e-mails, Appleboum and his team refer to the implant as their “old friend,” because he said they had previously seen several variations in investigations of hardware made by other companies manufacturing in China.

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National Security Agency

In Bloomberg Businessweek’s report, one official said investigators found that the Chinese infiltration through Supermicro reached almost 30 companies, including Inc. and Apple Inc. Both Amazon and Apple also disputed the findings. The U.S. Department of Homeland Security said it has “no reason to doubt” the companies’ denials of Bloomberg Businessweek’s reporting.

People familiar with the federal investigation into the 2014-2015 attacks say that it is being led by the FBI’s cyber and counterintelligence teams, and that DHS may not have been involved. Counterintelligence investigations are among the FBI’s most closely held and few officials and agencies outside of those units are briefed on the existence of those investigations.

Appleboum said that he’s consulted with intelligence agencies outside the U.S. that have told him they’ve been tracking the manipulation of Supermicro hardware, and the hardware of other companies, for some time.

Image result for Norwegian National Security Authority, photos

In response to the Bloomberg Businessweek story, the Norwegian National Security Authority said last week that it had been “aware of an issue” connected to Supermicro products since June.  It couldn’t confirm the details of Bloomberg’s reporting, a statement from the authority said, but it has recently been in dialogue with partners over the issue.

Hardware manipulation is extremely difficult to detect, which is why intelligence agencies invest billions of dollars in such sabotage. The U.S. is known to have extensive programs to seed technology heading to foreign countries with spy implants, based on revelations from former CIA employee Edward Snowden. But China appears to be aggressively deploying its own versions, which take advantage of the grip the country has over global technology manufacturing.

Three security experts who have analyzed foreign hardware implants for the U.S. Department of Defense confirmed that the way Sepio’s software detected the implant is sound. One of the few ways to identify suspicious hardware is by looking at the lowest levels of network traffic. Those include not only normal network transmissions, but also analog signals — such as power consumption — that can indicate the presence of a covert piece of hardware.

In the case of the telecommunications company, Sepio’s technology detected that the tampered Supermicro server actually appeared on the network as two devices in one. The legitimate server was communicating one way, and the implant another, but all the traffic appeared to be coming from the same trusted server, which allowed it to pass through security filters.

Appleboum said one key sign of the implant is that the manipulated Ethernet connector has metal sides instead of the usual plastic ones. The metal is necessary to diffuse heat from the chip hidden inside, which acts like a mini computer. “The module looks really innocent, high quality and ‘original’ but it was added as part of a supply chain attack,” he said.

The goal of hardware implants is to establish a covert staging area within sensitive networks, and that’s what Appleboum and his team concluded in this case. They decided it represented a serious security breach, along with multiple rogue electronics also detected on the network, and alerted the client’s security team in August, which then removed them for analysis. Once the implant was identified and the server removed, Sepio’s team was not able to perform further analysis on the chip.

The threat from hardware implants “is very real,” said Sean Kanuck, who until 2016 was the top cyber official inside the Office of the Director of National Intelligence. He’s now director of future conflict and cyber security for the International Institute for Strategic Studies in Washington. Hardware implants can give attackers power that software attacks don’t.

“Manufacturers that overlook this concern are ignoring a potentially serious problem,” Kanuck said. “Capable cyber actors — like the Chinese intelligence and security services — can access the IT supply chain at multiple points to create advanced and persistent subversions.”

One of the keys to any successful hardware attack is altering components that have an ample power supply to them, a daunting challenge the deeper into a motherboard you go. That’s why peripherals such as keyboards and mice are also perennial favorites for intelligence agencies to target, Appleboum said.

In the wake of Bloomberg’s reporting on the attack against Supermicro products, security experts say that teams around the world, from large banks and cloud computing providers to small research labs and startups, are analyzing their servers and other hardware for modifications, a stark change from normal practices. Their findings won’t necessarily be made public, since hardware manipulation is typically designed to access government and corporate secrets, rather than consumer data.

National security experts say a key problem is that, in a cybersecurity industry approaching $100 billion in revenue annually, very little of that has been spent on inspecting hardware for tampering. That’s allowed intelligence agencies around the world to work relatively unimpeded, with China holding a key advantage.

“For China, these efforts are all-encompassing,” said Tony Lawrence, CEO of VOR Technology, a Columbia, Maryland-based contractor to the intelligence community. “There is no way for us to identify the gravity or the size of these exploits — we don’t know until we find some. It could be all over the place — it could be anything coming out of China. The unknown is what gets you and that’s where we are now. We don’t know the level of exploits within our own systems.”

— With assistance by Scott Moritz, and Gwen Ackerman


Stop buying computer hardware from China

October 10, 2018

In light of escalating evidence that China continues to bug computer software destined for America, U.S. companies should diversify away from the Chinese market.

The threat is both significant and under-appreciated. As Bloomberg reported on Tuesday, a security firm working for a major U.S. telecommunications company has found “malicious chips” in hardware the company purchased from Super Micro Computers Inc. Super Micro Computers built the hardware in China where, according to Bloomberg, Chinese intelligence services ordered Super Micro subcontractors to plant the malware in their products.

This news should anger but not surprise you.

By Tom Rogan
The Washington Examiner

Supermicro computersBy planting hardware inside computers, the Chinese give themselves the means to target some future interest that has the misfortune of using its bugged hardware.

(Chris Stowers/Bloomberg)

The Chinese government has long operated an incredibly aggressive and scaled effort to steal U.S. information of value. Sometimes that’s the personal information of government workers, sometimes it’s the communications of U.S. leaders, sometimes it’s intellectual property, and sometimes that information is unknown even to the Chinese when they first pursue it. After all, by planting hardware inside computers, the Chinese give themselves the means to target some future interest that has the misfortune of using its bugged hardware. Still, the simple point here is that China has absolutely no regard for things that American citizens or American companies want to keep secret. That disdain for privacy is motivated not by immorality, but simply by China’s much broader effort to displace the U.S.-led international order with one of its own making.

Of course, it is nonsensical for Americans to continue dancing to the Chinese tune by purchasing its hardware or software. And fortunately, because Chinese hardware tends to be of low value and cost, there are alternative suppliers that U.S. companies could rely upon without major long-term cost increases. Moving to those suppliers makes long-term cost sense for a simple reason: it prevents information from being stolen and used against its users at some future point.

But we must wake up. The Chinese threat is vested in a long-term strategic effort and no amount of complaining is going to make it go away. We must thus build up our defenses and respond with greater attention to the threat we face.

China: U.S. Treasury Spells Out New Rules on Foreign Deals Involving U.S. Technology

October 10, 2018

Regulations provide first window into Trump administration’s interpretation of new Cfius law targeting Chinese investment

Treasury’s new rules are more expansive than some had advocated and are likely to bring an unprecedented number of transactions under Cfius review.
Treasury’s new rules are more expansive than some had advocated and are likely to bring an unprecedented number of transactions under Cfius review. Photo: paul j. richards/Agence France-Presse/Getty Images

Treasury officials Wednesday issued new rules requiring all foreign investors in certain deals involving critical U.S. technology to submit to national security reviews or face fines as high as the value of their proposed transactions.

The new regulations, which implement a recently passed law to tighten foreign investment reviews, are more expansive than some had advocated and are likely to bring an unprecedented number of transactions into the purview of the Committee on Foreign Investment in the U.S., known as Cfius.

The Treasury-led interagency committee will now require foreign investors to alert it to all deals giving them access to critical technology across 27 industries—including semiconductors, telecommunications and defense—that the committee believes could threaten U.S. national security and technological superiority, according to Cfius officials.

Previously, Cfius focused more narrowly on deals where foreigners took controlling stakes in U.S. businesses, and filing for reviews was optional. Investors were historically incentivized to file and seek Cfius approval because, if they didn’t, the committee might choose to review their deal anyway and recommend the president block or unwind it, creating substantial risk.

In recent years, however, lawmakers and officials came to believe that many deals involving important U.S. technology were flying under the committee’s radar, creating national security risks. They have been particularly concerned about a spate of Chinese technology deals in Silicon Valley.

The new rules expand Cfius’s current mandate to noncontrolling U.S. business investments giving foreign persons access to material nonpublic technical information, membership or observer rights on the board of directors of that business, or any involvement—-other than through the voting of shares—in making major decisions for that business regarding critical technology, Treasury officials said. “Critical technology” refers to items on U.S. export controls lists, which are also being updated.

In August, President Trump signed the Cfius measure into law as part of a broader annual defense-authorization bill. Led by Sen. John Cornyn (R., Texas) and Rep. Robert Pittenger (R., N.C.), the Cfius initiative received broad, bipartisan support, but some businesses and free marketeers in Congress worked to keep the measure’s scope as narrow as possible because they worried it could unnecessarily stifle foreign investment, which the U.S. has long welcomed as a source of economic growth and jobs.

Lawyers representing deal makers before Cfius have said that, while the measure’s passage represented a sharply different approach to foreign investment, the true scope of the new rules and how they would practically affect businesses would be revealed only in the lengthy regulation-writing process left to the executive branch.

For example, the legislation specified that investors would now also be required to file abbreviated notices for reviews of noncontrolling investments if the deals were backed by foreign governments and involved critical technology, but it left the committee discretion to determine what other types of transactions deal makers would have to submit for Cfius review, according to an initial assessment of the measure by law firm Covington & Burling LLP.

The new, temporary regulations take effect in a month and will be superseded by permanent regulations some 15 months later. Under the new regime, even nongovernment-backed foreign investors involved in such technology deals would have to file.

And the pilot regulations don’t specify Chinese and Russian investors as priorities for review, as House Financial Services Chairman Jeb Hensarling (R., Texas) and ranking member Maxine Waters (D., Ca.,), whose committee has jurisdiction over Cfius, had asked in a September letter to the Treasury that sought favorable treatment for allies.

Write to Kate O’Keeffe at