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Security: Europe’s pushback against Chinese tech has only just begun

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Hacking scheme to steal university research for military applications traced back to China
Prominent names feature on the hacking list.

Amid growing international suspicion about China’s tech companies, a new report suggests the Chinese government could be behind the theft of corporate secrets from chip-making equipment business ASML. 

According to Dutch newspaper Financieele Dagblad, technology stolen by employees at ASML in California was shared with XTAL, a company with links to the Chinese state.

ASML has a dominant position in selling circuitry technology used in making processors. Customers include leading chipmakers such as Intel, Samsung, TSMC, and GlobalFoundries.

SEE: Cybersecurity in an IoT and mobile world (ZDNet special report) | Download the report as a PDF (TechRepublic)

Following the report, ASML, which is headquartered in Veldhoven in the Netherlands, downplayed what boss Peter Wennink disparagingly described as a “conspiracy theory”.

“The facts of the matter are that we were robbed by a handful of our own employees based in Silicon Valley, who had broken the law to enrich themselves,” Wennink said in the statement about the California incident, which resulted in a November 2018 court case in the US.

“Some of the individuals happened to be Chinese nationals, but individuals from other nations were also involved. We resent any suggestion that this event should have any implication for ASML conducting business in China.”

Last year, ASML did about €1.7bn ($1.9bn) of business in China and expected to do about the same this year. That is a significant part of the company’s business, which reported net sales of €10.9bn in 2018.

Despite the denials from ASML, this case is bound to fuel growing suspicions in Europe about Chinese intentions.

“This is not the only such incident,” confirms Jonathan Holslag, a professor of international politics at Brussels University, who has written several books about China.

“In general, it’s taken European countries a lot of time to get to grips with the magnitude of the Chinese industrial espionage problem. They’ve been more inclined to brush it aside and prioritize business opportunities,” he tells ZDNet.

Recently several European leaders, including Dutch prime minister Mark Rutte and French president Emmanuel Macron, have called for a more realistic, and less naive, relationship with China.

In Germany, members of the business community who first saw the Chinese market as a grand opportunity have returned home with bitter complaints about unfair treatment and difficult conditions. Angst about the 2016 Chinese takeover of German robotics company, Kuka, has not abated either.

In March, Brussels finalized a new EU investment-screening framework, an area where European states have been behind other countries. The framework, which entered into force in April, screens potential external investors for risks to security or public order, especially if there is involvement with critical infrastructure or other sensitive projects.

As the Mercator Institute for China Studies, or MERICS, in Berlin noted in a March 2019 paper: “While non-discrimination toward the nationality of an investor is a core principle … of the new regulation, some of its provisions overlap with core characteristics of Chinese investment in Europe to date.”

For one thing, “the new rules call for heightened scrutiny of investments by directly or indirectly state-controlled entities”, the institute’s analysts point out.

However, as Holslag also tells ZDNet, the new European rules cannot be a cure-all because there is still a lack of intelligence about Chinese companies, which often arrive in a sector or a company as minority shareholders, or working through intermediaries.

“It’s one thing to claim companies need to be screened but that requires a lot of resources,” the China expert explains. Those costs can be problematic, especially for smaller European countries, he adds.

Doubtless this issue is part of the reason why some analysts have expressed concern about a Chinese charm offensive in smaller eastern European states. After last week’s EU-Beijing summit in Brussels, Chinese premier Li Keqiang went to Croatia for the first time to meet eastern European business people and politicians there.

A leaked draft of potential legislation from Germany’s Ministry of the Interior, seen by local journalists at the end of March, appears to suggest that the Germans want better intelligence gathering.

Germany has already been warned by the US that if it uses Chinese telecoms equipment manufacturer Huawei, in the new, high-speed, 5G network, the US will restrict intelligence sharing.

Although Huawei has continuously denied it, the suspicion that the company might use its componentry to spy on users, or be forced to give up data by the Chinese government, isn’t going away.

Germany had already increased security specifications for manufacturers tendering on its 5G project and the Interior Ministry’s 90-page draft bill goes further. It suggests that any company providing “core componentry for critical infrastructure” in Germany will need to sign a “declaration of trustworthiness”, after which its equipment will also undergo a more thorough security check.

Despite the optimistic verdict on last week’s EU-China summit in Brussels, where the Chinese promised to be better business partners, long-time China watchers, Kristin Shi-Kupfer and Mareike Ohlberg, the Berlin-based authors of an April study, ‘China’s digital rise. Challenges for Europe‘, are unsure it will change the current, distrustful mood in the tech sector.

“A pushback against China’s digitization and technology may only just have begun,” they conclude. 

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Toyota lowers production goals by 15 percent for November

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The global chip shortage is impacting automakers significantly. This week, Toyota announced that it plans to cut its global production output by 15 percent in November. The reduced production is laid directly at the feet of the shortage of microprocessors needed to build modern vehicles.

Despite chopping production in November, Toyota says it is still sticking to its planned production goals for the entirety of 2021. The company has said that it plans to ramp up production in December. Toyota is the largest automaker in Japan and also builds some of its vehicles in the US.

Toyota was also forced to reduce production in September and October due to the chip shortage and other issues caused by the coronavirus pandemic. For the year through March 31, Toyota reduced its production goals to 9 million vehicles representing a reduction of 300,000 units. In addition, the pandemic has significantly impacted components required to build its vehicles sourced from Malaysia and Vietnam.

Toyota says that a decline in COVID-19 infection rates in southeast Asia will allow chip manufacturers to increase output for the remainder of the year. Toyota wasn’t as impacted as some automakers by the chip shortage and pandemic because it had a stockpile of components allowing it to continue manufacturing operations.

The automaker has asked its component suppliers in southeast Asia to boost its allotment of chips and other components in December to allow it to ramp production significantly and meet its goals. Toyota spokesperson has stated that the total loss production for the automaker between September and November will be as high as 910,000 vehicles. In North America specifically, the reduced production in November will mean between 45,000 and 55,000 fewer vehicles produced.

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Porsche deliveries climb significantly despite chip shortage

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The global chip shortage impacts most automakers and has resulted in reduced shipments and production stoppages. While most automakers are seeing their deliveries decline, Porsche has seen deliveries increased by 13 percent in the first three quarters between January and September 2021. Porsche says it has delivered 217,198 vehicles around the globe.

The automaker notes that demand for its vehicles rose across all sales regions, but increased demand was particularly strong in the US. While deliveries have increased for Porsche, the automaker still says the coronavirus situation is dynamic, and it is facing challenges in procuring semiconductors. The most popular model for Porsche is the Cayenne, with deliveries of 62,451 units.

Porsche’s second most popular model was the Macan delivering 61,944 units, working out to a 12 percent increase in deliveries for that model. Its third most popular model may be a surprise to some. The electric Taycan sports car delivered 28,640 units to customers. 2021 is only the second year that model has been available, and it’s already surpassed deliveries of the iconic 911. So far, the 911 has delivered 27,972 units in the first three quarters of the year, which represents a 10 percent increase.

Porsche says the 718 Boxster and the 718 Cayman delivered 15,916 units. The four-door Porsche Panamera remains popular, delivering 20,275 units. In the US, Porsche says it delivered 51,615 vehicles in the first nine months of 2021. Those numbers represent a 30 percent increase compared to deliveries made during 2020. Across the entirety of the American continent, Porsche delivered 63,025 vehicles for a 29 percent increase compared to last year.

Interestingly, the largest single market for Porsche is China, with 69,789 vehicles delivered, representing an 11 percent gain compared to 2020. In addition, Porsche delivered 56,332 vehicles across Europe.

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AAA study finds vehicle safety systems are negatively impacted by rain

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Researchers from AAA have published a new study looking at how moderate to heavy rain affects the ability of modern vehicle safety systems to function. AAA conducted testing in a closed course environment simulating rainfall and discovered that test vehicles equipped with automatic emergency braking they were traveling at 35 mph collided with stopped vehicles 33 percent of the time during rain. Other vehicle safety features were also impacted during rain.

Other tested features include lane keeping assist, which allowed the vehicle to depart their lane 69 percent of the time during grade. AAA says that vehicle safety systems called advanced driver assistance systems are typically tested in ideal conditions. AAA believes testing standards need to be changed to incorporate real-world conditions that drivers would typically encounter.

Safety systems rely on cameras and sensors to visualize markings on the road, cars, pedestrians, and other obstacles. AAA’s Greg Brannon says people don’t always drive around in perfect sunny weather and test methods need to be changed to take real-world conditions into account. AAA says its research found rain had the biggest effect on vehicle safety systems.

However, they also stimulated other environmental conditions, including bug impacts and dirt. The results found that driving in simulated moderate to heavy rain impacted both safety systems. Automatic emergency braking engaged while approaching a stopped vehicle in the lane ahead at 25 mph but resulted in collision 17 percent of the time.

When speeds were increased to 35 mph, collisions occurred 33 percent of the time. Overall, during testing, lane keeping assist veered outside of lane markers 69 percent of the time. Researchers said that when testing systems with a simulated dirty window stamped with a concentration of bugs, dirt, and water, only minor differences in performance were noted. However, cameras can be influenced by a dirty windshield, and AAA says it’s important that drivers keep the windshield clean.

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