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HSBC reports fourth-quarter, full-year 2017 earnings

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HSBC’s fortune turned around in 2017 with an increase in the year’s profit.

The bank, largest in Europe by assets, said Tuesday its full-year profit before tax rose 10.9 percent to $20.99 billion after adjusting for foreign currency translation and one-off items. That’s beating the estimated $19.59 billion by Reuters and reversing the decline seen one year ago in 2016.

The bank’s adjusted revenue for 2017 was $51.5 billion, up 5 percent from the previous year.

Analysts had expected higher interest rates to boost HSBC’s lending profitability, resulting in the improved financial performance.

“I think they will have another, not a record, but better-than-expected earnings,” Dickie Wong, executive director of Kingston Securities, told CNBC ahead of the release of the financial report.

The bank’s Hong Kong-listed shares, a heavyweight on the Hang Seng Index, traded 1.26 percent higher at 11 a.m. HK/SIN.

Wong added that HSBC is “in a better shape” compared to other international banks, and investors would be looking for another round of share purchases, though not at the levels previously seen. The bank has bought back $5.5 billion worth of shares from investors since August 2016.

Stuart Gulliver, instrumental in turning around HSBC, will step down as the bank’s chief executive after Tuesday. He will be replaced by HSBC veteran John Flint, who most recently served as the bank’s head of retail banking and wealth management.

HSBC’s latest earnings statement cemented its ability to pick itself up after the global financial crisis. In addition to shifting its focus to Asia, the bank also scaled back some of its operations, including selling its Brazilian business.

“These results and the achievements of the last couple of years give us a great platform to build on,” said Flint in a release that accompanied the earnings announcement.

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Apple insistence on secrecy bites Hyundai

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Steve Proehl | Corbis Unreleased | Getty Images

Hyundai confirmed in a short statement last week it was in early talks with Apple about cars. Almost immediately, the Korean auto giant started to backtrack, releasing a subsequent statement that removed all mention of Apple.

Hyundai’s retreat is almost certainly the latest fallout from Apple’s insistence on secrecy and discretion from its suppliers or potential partners. Companies who deal with Apple are held to strict nondisclosure agreements, even if they are public companies and Apple is a major customer.

While nondisclosure agreements are common in high tech, people who work with Apple say it takes confidential information more seriously than competitors. Apple tells partners they can’t mention Apple in public or to the media, according to people familiar with the matter who didn’t want to be identified to avoid risking their relationship with Apple. One person who has worked with Apple described its secrecy requirements as a lot of hoops to jump through.

In at least one case, Apple has threatened to penalize suppliers $50 million for each individual leak, according to a contract that became public as part of a bankruptcy proceeding by supplier GT Advanced Technologies.

Some companies can engage in limited discussions of their business with Apple, especially if Apple has publicly talked about the relationship and approves. One example is Corning, which supplies glass for iPhones. Apple has paid the company at least $450 million since 2017 and has highlighted it in its own press releases as an example of an American manufacturing company it supports.

But its CEO said earlier this year he wasn’t comfortable talking about the relationship until Corning’s new stronger glass was mentioned during the recent iPhone 12 launch livestream.

“I have to tell you that it feels not quite right to use Apple’s name out loud. I still don’t think I’ve ever done that. Inside the company, we have a codename for Apple, we never even say ‘Apple’ inside the company,” Corning CEO Wendell Weeks said on an earnings call in October. “So, if you could see me, I sound like I’m turning a little pink and I am having an anxiety attack, if I read their name out loud.”

Why Apple loves secrecy

Apple’s obsession with secrecy is one of its defining aspects — some Silicon Valley insiders jokingly dub it the “Fruit Company.” In 2011, Apple even sold a shirt at its campus gift shop that said “I visited the Apple campus. But that’s all I’m allowed to say.”

Apple’s secrecy can be tied to its founder, Steve Jobs, who insisted on it. Jobs was a master marketer who perfected the product launch as spectacle, often relying on surprises to keep the show going when discussing new products.

Today, Apple still relies on “surprise and delight” during product launches, which remain a key marketing strategy — Apple held three separate launch livestreams this fall to release new Apple Watches, iPhones and Mac laptops. All three presentations drew millions of viewers, who tuned into YouTube to hear directly from Apple executives about its new products.

Apple considers details about unreleased products to be a “one of its greatest assets.” In Apple’s business conduct policy from October, it says employees should be “very selective” when disclosing Apple business information to vendors or suppliers, and they should only do so after a nondisclosure agreement is in place. The handbook also says suppliers should follow Apple principles such as confidentiality.

“When there is a business need to share confidential information with a supplier, vendor, or other third party, never volunteer more than what is necessary to address the business at hand,” according to the policy. “Any confidential information shared outside Apple should be covered by a non disclosure/confidentiality agreement.”

Double-edged sword

Even with layers of NDAs and a limited ability to publicize a customer win, many suppliers jump at the opportunity to sell to Apple.

Cirrus Logic, a maker of audio chips, said in an SEC filing in March that Apple accounted for 81% of its total sales in fiscal 2020, which were $1.28 billion.

Still, Cirrus executives rarely say Apple’s name, and for years they avoided it entirely. In 2017, an investor presentation included a slide with a variety of logos of their customers. Apple’s logo was nowhere to be found. Instead, the Cirrus slide included a picture of a brown box with the words “#1 CUSTOMER.” Recent investor slide decks simply say that Cirrus Logic supplies the top seven smartphone makers.

“Before we begin the Q&A, I’d also like to note that while we understand this intense interest related to our largest customer, in accordance with our policy, we do not discuss specifics about our business relationship,” Cirrus Logic President John Forsyth said on a conference call with analysts in November, as the company regularly says before discussing its own earnings. A Cirrus spokesperson provided the same statement in response to a question for this article.

Other public companies also use euphemisms when they have to discuss the iPhone maker’s business. Last June, Broadcom CEO Hock Tan tipped that the iPhone 12 would be released later than usual when discussing its wireless revenue projections. However, he didn’t mention Apple — he spoke about “our large North American mobile phone customer,” even after a previous deal with Apple was big enough to merit an SEC filing, albeit with scant details.

In 2014, bankruptcy proceedings gave a peek into how Apple requires secrecy for its suppliers. In 2013, GT Advanced Technologies entered into a deal with Apple to provide raw sapphire balls to make scratch-resistant iPhone screens. GT was unable to manufacture the sapphire in its Apple-owned facility in Arizona, and declared bankruptcy, leaving Apple as a major creditor. 

During bankruptcy proceedings, GT presented a contract labeled confidential that said GT would have to pay Apple $50 million per leak. The contract mentioned three separate confidentiality contracts to which the sapphire maker had agreed. GT also said the terms of its confidentiality agreements were required to be secret.

Another contract said any publicity involving Apple would require written approval. 

Apple settled with GT shortly after the $50 million penalty for leaks was revealed. One condition of the settlement was that GT would keep a “description of its relationship with Apple” private. 

Apple declined to comment for this story.

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Huawei, AI firms filed to patent tech that could identify Uighurs, report says

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Surveillance cameras are mounted on a post at Tiananmen Square as snow falls in Beijing, China, on Thursday, Feb. 14, 2019.

Qilai Shen | Bloomberg | Getty Images

GUANGZHOU, China — A new report reveals patent applications belonging to Huawei and a group of China-based artificial intelligence companies for systems that can detect people who are part of a Muslim minority group.

The ethnic Uighurs, who live mostly in China’s west, have been identified by the United Nations, United States, United Kingdom and others as a repressed group. Authorities allegedly use widespread surveillance technology to monitor the region’s Uighur population. The Chinese government denies mistreating Uighurs and says those camps are vocational training centers.

IPVM, a U.S.-based research firm that analyzes video surveillance technology, looked at patents in China related to systems that could be used to identify Uighurs’ faces. IPVM jointly published its research with the BBC.

One of the patents — jointly submitted in 2018 by Huawei and the Chinese Academy of Sciences, a government research agency — says the algorithms for the patented technology can be used to identify the attributes of a pedestrian, for example. One attribute that can be recognized is “race.” Uighurs are referenced as one “race” that can be detected by Huawei’s system.

That patent is for an “object attribute recognition method, device, computing equipment and system,” according to a translation of the filing from IPVM and verified by CNBC.

Huawei told CNBC it is “taking proactive steps” to amend its patent application.

“Huawei opposes discrimination of all types, including the use of technology to carry out ethnic discrimination. Identifying individuals’ race was never part of the research and development project. It should never have become part of the application and we are taking proactive steps to amend it,” a spokesperson for the company told CNBC by email.

“We are continuously working to ensure new and evolving technology is developed and applied with the utmost care and integrity.”

The Chinese Academy of Sciences did not respond to a request for comment. The Chinese embassy in Washington told CNBC in December that U.S. politicians create “disinformation” about the Uighurs in order to “contain China’s development.”

A United Nations report in 2018 described concerns that more than a million Uighurs and other minorities were being “held in so-called counter-extremism centers” in the Xinjiang region. Another two million had been forced into “so-called ‘re-education camps’ for political and cultural indoctrination” in Xinjiang, the report said.

Many of these camps operate based on what Amnesty International describes as a “highly restrictive and discriminatory” law that China claims is designed to combat extremism.

Last June, the UN again raised concerns about “the collective repression of the population,” highlighting the religious and ethnic minorities in Xinjiang and Tibet in its report.

Megvii cites patent ‘misunderstanding’

Another patent highlighted by IPVM was filed by Chinese AI giant Megvii in 2019. It outlines an image recognition system that can help label images of people in a database.

One of the classifications it can recognize is ethnicity. Megvii’s system can be used to identify and label images of Uighurs, the patent states.

A Megvii spokesperson said the language in its patent is “open to misunderstanding.”

“The patent application pertains to portrait retrieval and technology to re-label images that have been labeled incorrectly in existing databases. All images and underlying databases are provided and held by third parties,” a Megvii spokesperson told CNBC over WeChat.

The company said its technology “is not a facial recognition solution, nor in any way represents an intention to develop ethnic identification solutions. Megvii has not developed and will not develop or sell racial or ethnic labelling solutions.”

However, the patent refers explicitly to classifying images of people “according to Han, Uighur, non-Han, non-Uighur” ethnicity, according to a CNBC translation of the document. The Han people are the ethnic majority in China.

“Megvii acknowledges that in the past, we have focused on our commercial development and lacked appropriate control of our marketing, sales, and operations materials. We are undertaking measures to correct the situation,” the company said.

It’s not the first time Huawei and Megvii have been linked to technology that can allegedly be used to identify Uighurs. Last month, IPVM claimed the two companies tested a facial recognition system that could be used to detect Uighurs and send alerts to authorities.

Huawei said at the time that the technology was “simply a test and it has not seen real-world application.” Megvii said at the time that its “solutions are not designed or customized to target or label ethnic groups.”

In 2019, the U.S. Commerce Department put Megvii on a U.S. blacklist known as the Entity List. American firms are restricted from exporting to companies on the list.

The U.S. government alleged at the time that the company and other entities added to the list “have been implicated in human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention, and high-technology surveillance against Uighurs, Kazakhs, and other members of Muslim minority groups” in China’s Xinjiang region.

Uighur reference called ‘regrettable’

SenseTime, another AI company in China, filed a patent in 2019 for an image database search system that was described as a way to retrieve images in a database using certain attributes.

The patent describes how a user could use the word “Uighur” as a search attribute.

SenseTime called that reference to Uighurs “regrettable” and told CNBC via email that it had developed a code of ethics around artificial intelligence since the patent application was filed.

“This particular AI research … includes facial recognition of all ethnicities without prejudice. The reference to Uyghurs is regrettable and is one of the examples within the application intended to illustrate the attributes the algorithm recognizes,” a spokesperson told CNBC.

“It was neither designed nor intended in any way to discriminate, which is against our values. We will update the patent at the next available opportunity. Meanwhile, the application also pre-dates the AI Code of Ethics, which we developed later in 2019,” the company said.

‘Race, ethnicity’ uses

Separate from the patent filings from AI firms, IPVM also revealed patents filed by Alibaba and Baidu that make reference to ethnicity.

A patent first applied for by Chinese e-commerce giant Alibaba in 2016 was for an “image set generation method, device and image recognition module” that includes “race, ethnicity” as possible “applications,” CNBC confirmed.

Uighurs were not mentioned in the filing.

“Racial or ethnic discrimination or profiling in any form violates our policies and values. We never intended our technology to be used for and will not permit it to be used for targeting specific ethnic groups,” an Alibaba spokesperson told CNBC, without addressing the reference to “race, ethnicity” that the company used in the patent.

Chinese search giant Baidu filed a patent in 2018 for an image recognition system. Ethnicity is one of the attributes its proposed system can recognize.

The company did not single out Uighurs or other specific ethnic groups in its patent. A Baidu spokesperson told CNBC that the patent’s reference to ethnicity was an attempt at a technical explanation of its technology, and the company drew a distinction between its proposed systems and existing systems.

“Baidu has never developed or permitted its technology to profile any ethnic group. Our existing facial recognition offering is not capable of detecting ethnicity as an attribute,” Baidu said in a statement via WeChat.

“When filing for a patent, the document notes are meant as an example of a technical explanation, in this case describing what the attribute recognition model is rather than representing the expected implementation of the invention,” Baidu said.

“We do not and will not permit our technology to be used to identify or target specific ethnic groups,” the company said.

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Workforce diversity goals will help bring balance to platform

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A Twitter logo is seen on a computer screen in this photo illustration on October 30, 2017.

NurPhoto | Getty Images

As social media comes under increasing scrutiny, Twitter’s efforts to cultivate a diverse and balanced platform will come as much from its employment agenda as its user policy, the company’s Asia-Pacific head told CNBC.

Maya Hari, Twitter’s vice president for APAC, said the company has “work to do” amid ongoing concerns that social media is damaging public discourse. But she insisted that its ambitious diversity goals would help bring a greater balance of voices to the site.

Hari’s comments were made prior to last week’s storming of the U.S. Capitol and Twitter’s subsequent move to permanently suspend President Donald Trump’s account over fears of “further incitement of violence.”

If we want to build a platform as Twitter that has a place and a voice for every person on this planet, we have to be able to represent those kinds of voices inside the company.

Maya Hari

vice president (APAC), Twitter

“The health of the conversation, the ability to have every voice represented, has been a big priority and a strategy for us for years,” Hari said.

“If we want to build a platform as Twitter that has a place and a voice for every person on this planet, we have to be able to represent those kinds of voices inside the company as well,” she continued.

Establishing a ‘diverse slate’

Currently, women account for 42% of Twitter’s global workforce — a figure the company hopes to raise to 50% by 2025. By then, it aims for at least 25% of its U.S. operations to be from underrepresented minorities.

Hari said the Asia-Pacific business does not have specific targets for minority representation due to the varied ethnic make up of each country. Instead, managers have been asked to build a “diverse slate” of employees.

Maya Hari, Twitter’s vice president for Asia Pacific.

Twitter

“As we go outside of the U.S., that reality changes market to market depending on the constitution locally,” said Hari.

Growth markets, such as those in Southeast Asia, offer a particular opportunity to implement those hiring policies. That, in turn, will enable employees to “bring more voices from Southeast Asia and represent them” through community projects.

Representing the community

Twitter is currently working with youth gamers in Japan, women in India and indigenous communities in Australia, for instance, to bring better representation to the social media site, Hari noted.

“Impact for us is not only to think about how do we get the right representation inside the company, but also to get the right representation externally on the platform,” she said.

The events of last week and evidence that social platforms were used to orchestrate the attack have once again sparked the debate around regulation of the industry and its role in encouraging extremism.

We have expressed our desire to be the best tech company, as an aspiration for us to be the most diverse, the most inclusive tech company we can be.

Maya Hari

vice president (APAC), Twitter

On Wednesday, following the Capitol riots, Twitter suspended more than 70,000 accounts associated content related to the far-right QAnon conspiracy theory.

In comments prior to the unrest, Hari said Twitter was using a combination of “product, people and policy” to ensure that it was amplifying positive conversations and catching toxic ones that need to be looked at.

Currently, 50% of questionable content is caught proactively through a combination of “technology and human intervention,” while the rest were reported by users, the company said.

The company has also introduced a series of new capabilities, such as prompts to check whether users have read an article before sharing it.

“We have expressed our desire to be the best tech company, as an aspiration for us to be the most diverse, the most inclusive tech company we can be,” said Hari.



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