How Alphabet plans for China comeback
BEIJING — Google has faced sharp criticism, including from its own employees, for its efforts to rebuild an internet search presence in China after quitting the country eight years ago over censorship issues.
But for Google’s corporate parent, Alphabet, the opportunities in the world’s largest internet market may be too good to resist. And the full scope of the company’s interest in China now appears to be broader than just internet search.
The latest hint came from Waymo, the driverless-car company that was spun out of Google in 2016. Chinese media noticed this week that the business had quietly registered a Shanghai subsidiary in May, suggesting that it wants a piece of an industry that the Chinese government has prioritized.
Waymo’s move follows other recent steps Google has taken in China, including opening a research center and promoting its software tools to developers.
In artificial intelligence and other areas in which Alphabet is seeking to advance the technological frontier, China today is more than just the planet’s biggest audience of internet users. It is an ecosystem of sophisticated potential business partners, untapped talent and techhungry customers where the world of tomorrow is being created.
Other U.S. tech giants have made their peace in various ways with Beijing’s strictures and conditions for operating in the country. Unlike Google, Apple runs its own app store in China, heeding government directives about the kinds of apps that Chinese users can access. Microsoft and Amazon offer cloud computing services, working with local partners and following strict controls on how customers’ data is stored.
Alphabet’s investments in future technologies make it particularly important for the company to get a foot into China early. Driverless cars have prompted regulatory and political debate, which means starting sooner could help reduce Chinese authorities’ concerns. More time in China for Waymo also means more experience on Chinese roads for its cars and more data collected on the country’s driving environment.
“I think they’ve realized that developing in the United States won’t produce a car that will work in China,” said Gansha Wu, the chief executive and co-founder of Uisee, an autonomous vehicle startup in Beijing. “The road conditions are totally different.”
A Google spokeswoman said the company did not have a comment for this article.
For Alphabet, any play at significant expansion in China would bring unique challenges.
Its major moneymaking activities, such as search and video, run up against the Communist Party’s controls on information in a way that online shopping, for instance, does not.
Google would have to overcome a lack of name recognition among young Chinese. And it would face a tough fight against homegrown incumbents with Silicon Valley-like money to burn — including in areas like selfdriving cars, in which Alphabet is arguably the global leader.
Waymo’s company registration in China still puts it a long way from having wheels on the road. Its Shanghai subsidiary has an initial capitalization of about $500,000. A visit Friday to the address listed on its registration filing turned up only a cramped, unmarked office, empty but for some simple furniture.
Even with more investment, Waymo’s place in the Chinese market is hardly assured.
Baidu, maker of the country’s leading search engine, has made its autonomous-vehicle software available to dozens of local and foreign companies. SAIC Motor, China’s largest carmaker, is working with e-commerce titan Alibaba. BMW and Daimler have received permission in China to test their own self-driving vehicles.
That might leave only China’s newer, smaller automakers for Waymo should it someday seek a local partner for building intelligent cars, said Yale Zhang, managing director at Automotive Foresight, a consultancy in Shanghai.
“That’s their chance,” Zhang said.
A Waymo spokeswoman confirmed that the company had set up and staffed a legal entity in China, but declined to comment on further plans.
Mountain View’s Alphabet began taking baby steps to expand in China well before word got out this month about Google’s work on a censored search engine, codenamed Dragonfly. This year, Google released a file-management app for Chinese users and a game on the popular social media tool WeChat. It recently opened a research center devoted to artificial intelligence and has invested in local companies, including the retailer JD.com.
Google never quit China entirely after shuttering its search engine here in 2010, citing censorship requirements and hacking attacks. But Beijing’s online controls have tightened in recent years, sometimes ensnaring even domestically run social media outlets. Last month, Facebook won approval to open a subsidiary in the eastern province of Zhejiang — only to see that approval quickly withdrawn.
If Google wanted to serve Chinese search users, it would face a formidable rival. For most Chinese, Baidu, which has a market capitalization of more than $70 billion, is about as synonymous with search as Google is for people elsewhere.