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Foxconn pulls back on its $10 billion factory commitment – TechCrunch

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Well that didn’t last long.

In 2017, Foxconn announced the largest investment of a foreign company in the United States when it selected Mount Pleasant, Wisconsin for a new manufacturing facility. Buttressed by huge economic development grants from Wisconsin, an endorsement from President Trump, and Foxconn CEO Terry Gou’s vision of a maker America, the plant was designed to turn a small town and its environs into the futuristic “Wisconn Valley.”

Now, those dreams are coming apart faster than you can say “Made in America.”

In an interview with Reuters, a special assistant to Gou says that those plans are being remarkably scaled back. Originally designed to be an advanced LCD factory, the new Foxconn facility will instead be a much more modest (but still needed!) research center for engineers.

It’s a huge loss for Wisconsin, but the greater shock may be just how obvious all of this was. I wrote about the boondoggle just a few weeks ago, as had Bruce Murphy at The Verge a few weeks before that. Sruthi Pinnamaneni produced an excellent podcast on Reply All about how much the economic development of Mount Pleasant tore the small town asunder.

The story in short: the economics of the factory never made sense, and economics was always going to win over the hopes and dreams of politicians like Wisconsin governor Scott Walker, who championed the deal. Despite bells and whistles, televisions are a commodity product (unlike, say, airfoils), and thus the cost structure is much more compatible with efficient Asian supply chains than with American expensive labor.

Yet, that wasn’t the only part of the project that never made any sense. Foxconn was building in what was essentially the middle of nowhere, without the sort of dense ecosystem of suppliers and sub-suppliers required for making a major factory hum. (Plus, as a native of Minnesota, I can also attest that Wisconsin is a pile of garbage).

Those suppliers are everything for manufacturers. Just this past weekend, Jack Nicas at the New York Times observed that Apple’s advanced manufacturing facility in Austin, Texas struggled to find the right parts it needed to assemble its top-of-the-line computer, the Mac Pro:

But when Apple began making the $3,000 computer in Austin, Tex., it struggled to find enough screws, according to three people who worked on the project and spoke on the condition of anonymity because of confidentiality agreements.

In China, Apple relied on factories that can produce vast quantities of custom screws on short notice. In Texas, where they say everything is bigger, it turned out the screw suppliers were not.

There are of course huge manufacturing ecosystems in the United States — everything from cars in Detroit, to planes in Washington, to advanced medical devices in several major bio-hubs. But consumer electronics is one that has for the most part been lost to Singapore, Taiwan, Korea, and of course, China.

Geopolitically, Foxconn’s factory made a modicum of sense. With the increasing protectionism emanating from Western capitals, Foxconn could have used some geographical diversity in the event of a tariff fight. The company is Taiwanese, but manufacturers many of its products on the mainland.

And of course, a research center is still an enormous gain for a region of Wisconsin that could absolutely use high-income, professional jobs. Maybe the process of rolling out a next-generation manufacturing ecosystem will take more time than originally anticipated, but nothing is stopping further expansion in the future.

Yet, one can’t help but gaze at the remarkable naïveté of Wisconsin politicians who offered billions only to find that even massive subsidies aren’t enough. It’s a competitive world out there, and the United States has little experience in these fights.

India may put friction on foreign firms to protect domestic startups

Indian Prime Minister Narendra Modi. (MONEY SHARMA/AFP/Getty Images)

One of the major battles for tech supremacy is over the future of the Indian IT market, which is rapidly bringing more than a billion people onto the internet and giving them robust software services. I’ve talked a bit about data sovereignty, which mandates that Indian data be stored in Indian data centers by Indian companies, pushing out foreign companies like Amazon, Google, and Alibaba.

Now, it looks like India is taking a page from the Asian tiger-school of development, and is going to increasingly favor domestic firms over foreign ones in key industries. Newley Purnell and Rajesh Roy report in the WSJ:

The secretary of India’s Telecommunications Department, Aruna Sundararajan, last week told a gathering of Indian startups in a closed-door meeting in the tech hub of Bangalore that the government will introduce a “national champion” policy “very soon” to encourage the rise of Indian companies, according to a person familiar with the matter. She said Indian policy makers had noted the success of China’s internet giants, Alibaba Group Holding Ltd. and Tencent Holdings Ltd. , the person said. She didn’t immediately respond to a request for more details on the program or its timing.

The idea of national champions is simple. Unlike the innovation world of Silicon Valley, there are obvious sectors in an economy that need to be fulfilled. Food and clothes have to be sold, deliveries made, all kinds of industrial goods need to be built. Rather than creating a competitive market that requires high levels of duplicate capital investment, the government can designate a few companies to take the lead in each market to ensure that they can invest for growth rather than in, say, marketing costs.

If done well, such policies can rapidly industrialize a country’s economic base. When done poorly, the lack of competition can create lethargy among entrepreneurs, who have already won their markets without even trying.

The linchpin is whether the government pushes companies to excel and sets aggressive growth targets. In Korea and China, the central governments actively monitored corporate growth during their catch-up years, and transferred businesses to new entrepreneurs if business leaders failed to perform. Can India push its companies as hard without market forces?

As the technology industry matures in the West, entrepreneurs will look for overseas as their future growth hubs. The challenge is whether they will be let in at all.

Video game geopolitics

Nexon’s MapleStory2 game is one of its most profitable (Screenshot from Nexon) .

Korea and Japan are two of the epicenters of the video game industry, and now one of its top companies is on the auction block, raising tough questions about media ownership.

Nexon founder Kim Jung Ju announced a few weeks ago that he was intending to sell all of his controlling $9 billion stake in the leading video game company. The company has since executed something of a multi-stage auction process to determine who should buy those shares. One leading candidate we’ve learned is Kakao, the leading internet portal and chatting app in Korea.

The other leading candidate is China-based Tencent, which owns exclusive distribution rights in China of some of Nexon’s most important titles.

Tencent has been increasingly under the sway of China’s government, which froze video game licensing last year as it worked to increase content regulation over the industry. Now the question is whether it will be politically palatable to sell a leading star of Korea’s video game industry to its economic rival.

From the Financial Times:

Mr Wi added that Nexon would be an attractive target for Tencent, which pays about Won1tn in annual royalties to the South Korean game developer. But selling the company to Tencent would be “politically burdensome” for Mr Kim, given unfavourable public opinion in South Korea towards such a sale, he cautioned.

“Political risks are high for the deal. Being criticised for selling the company to a foreign rival, especially a Chinese one, would be the last thing that Mr Kim wants,” said Mr Wi.

Such concerns around Chinese media ownership have become acute throughout the world, but we haven’t seen these concerns as much in the video game industry. Clearly, times have changed.

TechCrunch is experimenting with new content forms. This is a rough draft of something new – provide your feedback directly to the author (Danny at danny@techcrunch.com) if you like or hate something here.

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This newsletter is written with the assistance of Arman Tabatabai from New York

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Patent detects in-game “collusion” by tracking “external connections”

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Enlarge / Call it a hunch, but something tells me these two players are working together…

Do you ever feel like your opponents in a free-for-all online game are trying to get you, specifically? It might not just be paranoia; it might be collusion among your opponents. And in a newly published patent, Electronic Arts details some potential tools and data points—both inside and outside the game—that it could use to detect and root out this unfair practice.

EA’s simply titled “Detecting Collusion in Online Games” patent, published earlier this month, defines collusion as when two or more players/groups that are “intended to be opponents” instead “contribute to a common cause” to “gain an unfair advantage” over others. In battle royale shooter, for instance, a small group of players communicating outside the game could stay together and gain a decided firepower advantage against their single opponents.

Many of the patent’s potential methods for discovering this kind of collusion use simple and obvious in-game data. If two or more ostensibly opposed players or teams show abnormal amounts of “time spent in proximity… without engagement,” for instance, there’s a good chance they’re working together. Even if those players show some cursory opposition at points, metrics like damage per second can be compared with the average to see if this is just opposition “for appearance sake.”

Dropping items that another team or player consistently picks up is another potential sign of collusion, as is the same player or players showing up on opposing teams consistently in match after match. Colluding players may also tend to finish in similar ranked positions during their matches, especially “once the unfair advantage provided by colluding is nullified” as some of the colluding players are eliminated.

Big Brother is watching (for collusion)

Beyond easy-to-detect in-game data, though, EA’s patent details other signs of collusion that can be gleaned from things like “social relationships and communications” and “third-party system connections and interactions” outside the game. That kind of data ranges from simple relationships like a “friends list” provided by the gaming platform to completely external relationships like “social media connection data.”

The patent mentions “a cross team shared community metric” that counts “the number of group or community memberships… where players from both teams are members.” Things like “the number of posts by a player in a particular community” shared with another player could also signify potential collusion.

Just some of the internal and external factors that EAs patented method could use to detect collusion among players.
Enlarge / Just some of the internal and external factors that EAs patented method could use to detect collusion among players.

Even “the content of extra-game communication” could be fed into the algorithm, according to the patent, such as “messages to a forum which players from both teams are participating.” A “machine learning algorithm” could be used to glean any collusion-related context from this kind of out-of-game communication, or a simple keyword search could be used, according to the patent.

To be clear, the patent is upfront in saying that any player data used in any of these detection algorithms “would be in compliance with privacy policies that respect players’ privacy, and in accordance with player privacy settings or preferences.” That said, there’s something a little Big Brother-y about the prospect of a publisher like EA scanning your Twitter posts and Reddit community memberships to see if you’re trying to coordinate cheating in their online game.

Then again, in a world where players will go to extreme lengths to hide their cheating using external devices, maybe this kind of external social graph analysis is needed to root out some of the worst colluders (or at least some of the least-careful ones).
In any case, having a patented design doesn’t mean EA is (or ever will) use this kind of system in the wild. For now, it’s just an interesting look at how one company is thinking about potential ways to detect the human side of online cheating as well as the technical side.

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Report: FTC “likely” to file suit to block Microsoft/Activision merger

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Enlarge / Just a few of the Activision franchises that will become Microsoft properties if and when the acquisition is finalized.

Microsoft / Activision

The Federal Trade Commission will “likely” move to file an antitrust lawsuit against Microsoft and Activision Blizzard to block the companies’ planned $69 billion merger deal. That’s according to a new Politico report citing “three [unnamed] people with knowledge of the matter.”

While Politico writes that a lawsuit is still “not guaranteed,” it adds that FTC staffers “are skeptical of the companies’ arguments” that the deal will not be anticompetitive. The sources also confirmed that “much of the heavy lifting is complete” in the commission’s investigation, and that a suit could be filed as early as next month.

Sony, the main opponent of Microsoft’s proposed purchase, has argued publicly that an existing contractual three-year guarantee to keep Activision’s best-selling Call of Duty franchise on PlayStation is “inadequate on many levels.” In response, Microsoft Head of Xbox Phil Spencer has publicly promised to continue shipping Call of Duty games on PlayStation “as long as there’s a PlayStation out there to ship to.” It’s not clear if the companies have memorialized that offer as a legal agreement, though; The New York Times reported this week that Microsoft had offered a “10-year deal to keep Call of Duty on PlayStation.”

Numerous statements from Microsoft executives, including Spencer, have suggested the company is less interested in bolstering its position in the “console wars” and more interested in boosting its mobile, cloud gaming, and Game Pass subscription offerings. Beyond Call of Duty, Politico reports that the FTC is concerned over how Microsoft “could leverage future, unannounced titles to boost its gaming business.”

Microsoft “is prepared to address the concerns of regulators, including the FTC, and Sony to ensure the deal closes with confidence,” spokesperson David Cuddy told Politico. “We’ll still trail Sony and Tencent in the market after the deal closes, and together Activision and Xbox will benefit gamers and developers and make the industry more competitive.”

Plenty of speed bumps remain

The reports of a potential FTC lawsuit add to a growing list of troubling signals about the proposed purchase from various international governments. Earlier this month, the European Commission said it was moving on to an “in-depth investigation” of the deal. In the UK, a similar “Phase 2” investigation by the country’s Competition and Markets Authority has scheduled hearing for next month.

Those international investigations are expected to wrap up in March, ensuring the proposed deal won’t close before then and giving the FTC some time before it would have to file suit. Any such lawsuit would need to be approved by a majority of the four current FTC commissioners and would likely start in the FTC’s administrative court. And whatever the outcome, legal maneuvering in the case could easily delay the planned merger past a July 2023 contractual deadline, at which point both companies would have to renegotiate or abandon the deal.

An FTC lawsuit in this matter would also be a the strongest sign yet of a robust antitrust enforcement regime under FTC chair Lina Kahn, a big tech skeptic who was named to the post in June. Back in July, Kahn announced an antitrust lawsuit against Meta (formerly Facebook) and its proposed $400 million purchase of Within, makers of VR fitness app Supernatural.

Three months after Microsoft’s proposed purchase was announced in January, a group of four US Senators wrote an open letter strongly urging the FTC to take a close look at the deal. Last month, merger news site Dealreporter said FTC staff had expressed “significant concerns” about the deal. And this week, the New York Times cited “two people” in reporting that the FTC had reached out to other companies for sworn statements laying out their concerns about the deal, a possible sign of lawsuit preparations.

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Crypto and NFTs aren’t welcome in Grand Theft Auto Online

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Enlarge / Cold hard (virtual) cash only in GTA Online, please.

Cryptocurrencies and NFTs have been formally disallowed from Grand Theft Auto Online‘s popular role-playing (RP) servers. That’s according to a new set of guidelines posted on Rockstar’s support site last Friday.

In the note, the game’s publisher says its new RP server rules are aligned with Rockstar’s existing rules for single-player mods. Both sets of rules prohibit content that uses third-party intellectual property, interferes with official multiplayer services, or makes new “games, stories, missions or maps” for the game. This means RP servers based on re-creating Super Mario Kart in the Grand Theft Auto world, for instance, could face “priority in enforcement actions” from Rockstar.

But the new RP guidelines surpass the existing single-player mod guidelines in barring “commercial exploitation.” That’s a wide-ranging term that Rockstar says specifically includes selling loot boxes, virtual currencies, corporate sponsorships, or any integrations of cryptocurrencies of “crypto assets (e.g. ‘NFTs’).”

It’s all been done before

The new guidelines seem to directly respond to “The Trenches,” a role-playing community launched in September by OTF Gaming and rapper Lil Durk. That server advertised integration with both “endemic and non-endemics brands in the gaming space” and a “Trenches Pass” NFT drop to access specific on-server content.

“We’ve been asked to cease all operations of Trenches,” OTF Gaming said in a statement on social media. “We have no choice but to comply with their demands, as we intend to do right by Take-Two and Rockstar. We will be working with them to find an amicable solution to this matter.”

If this situation sounds familiar, it might be because developer Mojang similarly barred NFT integration from its online servers in July. At the time, Minecraft-based crypto project NFT Worlds said it was hoping to work with Mojang to “find an alternative outcome that’s beneficial to the Minecraft player base.”

Days later, though, NFT Worlds said it gave up on that and began work on a new game that will be “based on many of the core mechanics of Minecraft” but which will be “completely untethered from the policy enforcement Microsoft and Mojang have over Minecraft.”

In Minecraft‘s case, Mojang said that the “scarcity and exclusion” inherent to NFTs “does not align with Minecraft values of creative inclusion and playing together.” That reasoning applies less to GTA Online, though, a game that rakes in hundreds of millions of dollars annually by selling in-game currency and exclusive items for use by players.

If anything, things like NFTs and loot boxes could be seen as competition for GTA Online‘s official monetization efforts. With that competition cut off, though, Rockstar sounds eager to allow RP servers to continue to operate within reason.

“Rockstar Games has always believed in reasonable fan creativity and wants creators to showcase their passion for our games,” the company writes. “Third-party ‘Roleplay’ servers are an extension of the rich array of community-created experiences within Grand Theft Auto that we hope will continue to thrive in a safe and friendly way for many years to come.”

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