CloudMinds faces many hurdles in exporting US tech to China

TOKYO / NEW YORK: SoftBank-backed startup CloudMinds is facing hurdles to export US technology to China. The provider of cloud-based systems for robots has been blocked from sharing US-origin technology with its China business, documents showed.

The matter illustrates how increased US government restrictions are creating new headaches for tech companies and their shareholders.

The US Commerce Department sent a letter in July informing CloudMinds it could not transfer technology or technical information - even software bugs - from its US unit to its offices in Beijing without licences, according to a company training video and internal communications reviewed by Reuters. The start-up in the cloud-based systems for robots learnt of the sweeping restrictions - reported here for the first time - just as it was wooing ultimately unconvinced investors for a proposed US initial public offering (IPO).

No licences have been issued, said a person with knowledge of the matter, declining to be identified because the information is not public.

“CloudMinds could not even export office furniture or iPhones from the US to China at this time without a licence,” said Washington attorney Douglas Jacobson, an export controls and sanctions expert, after Reuters detailed its findings.

The development highlights risks that an ongoing technology war between the United States and China pose for investors such as Japan’s SoftBank Group Corp as well as its $100 billion Vision Fund, which is already reeling from two quarters of loss as portfolio company valuations fall.

SoftBank’s numerous China-linked investments include Bytedance - operator of social media app TikTok - which has drawn scrutiny for the safety of the personal data it handles, and artificial intelligence firm SenseTime, which the U.S. added to its trade blacklist in October.

The letter sent to CloudMinds - founded by a former research whiz at state-owned telco China Mobile Ltd - also demonstrates how the US is responding to what it sees as aggressive efforts to obtain US technology by any means.

The restrictions dictated by the Commerce Department’s Bureau of Industry and Security (BIS) encompass an array of goods and can even forbid Chinese nationals working for the company in the United States from accessing US-origin technology.

In general, such sanctions are based on national security or foreign policy concerns.

The Commerce Department has the authority to require export licences if it “believes that the item is intended in whole or in part for military end use in China,” said Kevin Wolf, a Washington-based lawyer and former Commerce Department official.

CloudMinds “is fully committed to export control compliance and is taking appropriate steps to ensure compliance with BIS requirements,” it said in a statement.

A Commerce Department spokesman said he could neither confirm nor deny any letter was sent.

CloudMinds is largely run by Chief Executive Bill Huang, his wife Minnie and their family, said three people with knowledge of the company. It operates a cloud-based service to run robots such as a version of Pepper, a humanoid robot capable of simple communication built by the firm’s largest investor with a 35% stake, SoftBank.

Reuters