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Data Sheet—Fear and Loathing in Las Vegas, China Edition

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Was it only last year that wags at the annual gadget-fest in Las Vegas joked that what CES really stands for is the “Chinese Electronics Show”? This year, Chinese companies at the sprawling event are lying low. Hong Kong’s South China Morning Post reports that the number of Chinese vendors registered to exhibit this week at CES totaled 1,211, a 20% decline from the 1,551 Chinese vendors who signed up in 2018.

Chinese companies still account for more than a quarter of the conference’s exhibitors, and are outnumbered only by firms from the United States. CES organizers said the smaller number of Chinese firms participating this year reflects a decision to allocate more space to larger vendors, not a Chinese retreat. Many of the big Chinese tech firms—including Alibaba, Baidu, DJI, JD.com, and Lenovo—increased their presence at this year’s show. Even so, in the global tech press, the general consensus is that Chinese exhibits are not only fewer in number but feel far less exuberant this year than last.

China’s subdued presence at CES has been widely ascribed to the U.S.-China trade war. Huawei Technologies, whose CEO delivered a rousing CES keynote last year, has a large booth at this year’s show. But this year, with its chief financial officer Meng Wanzhou detained in Vancouver and awaiting extradition to the U.S. on charges of financial fraud, the world’s largest telecoms manufacturer kept senior executives at home. Other notable Vegas no-shows include ZTE, which was almost tipped into bankruptcy last year by U.S. penalties for its lax compliance with export sanctions against Iran, and Xiaomi, whose stock price has plunged far below last year’s IPO.

Concerns about friction between the U.S and China cast a pall over Apple too last week as CEO Tim Cook blamed a sluggish Chinese economy and “rising trade tensions with the United States” for a sharp downward revision in the company’s first quarter profit estimate. But Cook’s assertion drew immediate criticism from analysts and customers in China who argued that Apple’s real problem is that its new phones are overpriced and haven’t kept pace with the innovations offered by domestic competitors. Many have noted that Apple has lagged Chinese rivals like Huawei, Xiaomi, Oppo, and Vivo in rolling out high-performance cameras, dual SIM card capability, and other features.

In Shanghai, meanwhile, Elon Musk defied the China gloom by breaking ground on a new, $5 billion Gigafactory on the outskirts of that city. Musk says Tesla expects to complete construction of the factory in summer, begin producing Model 3 vehicles for the China market by year-end, and shift to “high volume production” of as many as 500,000 vehicles per year by 2020. The factory is a huge coup for Musk. Producing vehicles in China will spare Tesla the expense of import tariffs and shipping to a crucial market; China is, by far, the world’s largest market for electric vehicles. Tesla is the first U.S. auto manufacturer to take advantage of a new change in Chinese investment rules allowing foreign carmakers to have full ownership of Chinese plants, meaning the company won’t have to share profits and technology with a local partner.

And yet, like Apple, Tesla will face stiff competition from nimble domestic players including BYD, NIO, Xpeng, and Geely. Winning in China will require every ounce of Musk’s entrepreneurial genius.

Clay Chandler
@claychandler
clay.chandler@timeinc.com

NEWSWORTHY

Lagging indicator. It’s been a tough year so far for Apple, but shed no tears for CEO Tim Cook. Thanks to the boffo performance of the company in its prior fiscal year, Cook’s pay rose 22% to almost $16 million. Bloomberg points out that he also got $121 million from vesting a portion of a 2011 10-year stock grant. Cook was out earning his keep on Tuesday, telling CNBC’s Jim Cramer that everything’s fine. “When I look at the long-term health of the company, it has never been better,” Cook said. “The product pipeline has never been better. The ecosystem has never been stronger. The services are on a tear.”

Isn’t it ironic? On the subject of tech giant CEOs, Facebook’s Mark Zuckerberg revealed his annual personal improvement goal: promoting conversations about how technology is affecting society. “Every few weeks I’ll talk with leaders, experts, and people in our community from different fields and I’ll try different formats to keep it interesting,” Zuck writes. “These will all be public, either on my Facebook or Instagram pages or on other media.”

Feed them on your dreams. The country of Finland wants to make sure it stays relevant as technology advances. So a recent initiative is aiming to teach 1% of the population, or about 55,000 people, the basics of artificial intelligence in a free course. The idea is not create more coders, but to help people in different fields realize how they could apply A.I. in their fields.

But does it have an Infinite Improbability Drive? Most of the new products unveiled at CES are for consumers, but IBM is showing off its new quantum computer dubbed The Q System One. The finicky calculator, which should be able to crunch massive amounts of data, has to be kept in a super-chilled container and encased in half-inch-thick borosilicate glass. It also looks super cool.

Please, sir, may I have some more? It was the previous CEO of Verizon who bought what was left of AOL and Yahoo and combined them into Oath. Current CEO Hans Vestberg has been slowly moving away from the bet on digital advertising. On Tuesday, ahead of a speech at CES, Vestberg told Axios that the units will “need to survive on their merits” and won’t get access to the carrier’s extensive data about its phone customers.

Pretty soon you’re gonna suffer from fistaphobia. Speaking of data the carriers collect, are you worried about marketers tracking your location via smartphone? That’s not the half of it. A reporter for Motherboard paid a “bounty hunter” a few hundred dollars for real-time location tracking of his phone with data that originated from carriers T-Mobile, AT&T, and Sprint. The data is apparently sold through legitimate data partners of the networks, who say the practice violates their terms of service.

Unskippable. As cord-cutting continues apace, Internet video service Hulu says it grew almost 50% last year to 25 million subscribers. Ad revenue hit $1.5 billion, though the private company is believed to operate deeply in the red.

FOOD FOR THOUGHT

A few years ago, a survey by Princeton Professor Alan Krueger and Harvard Professor Lawrence Katz made headlines with its claim that 5% of workers were in more independent and non-traditional jobs like Uber drivers and Airbnb hosts, representing the future of work. But more detailed surveys of the workforce have since revealed that the so-called gig economy is much smaller, probably less than 2% of workers. The Wall Street Journal‘s Josh Zumbrun explains how the two economists got things so wrong.

“After sifting through the new evidence,” Mr. Krueger said, “Larry Katz and I now conclude that there was a modest rise in the share of the workforce in nontraditional jobs over the last decade—probably on the order of one to 2 percentage points, instead of the five percentage point rise we originally reported.”

IN CASE YOU MISSED IT

Here’s How a Second Grader Got to Draw Today’s Google Doodle By Chris Morris

It’s Like 23andMe…for Your Cat: A Look at CES’s Strangest New Product By Brittany Shoot

CES 2019: Fashion Brand Kate Spade Is Latest With Google-Based Smartwatch By Aaron Pressman

CES 2019: All the TV Brands Getting Support for Apple’s AirPlay 2 By Emily Price

AT&T Is Preparing for a ‘Significant’ Round of Layoffs, Report Says By Kevin Kelleher

Chip Wars 2019: What Nvidia, AMD, Intel and Qualcomm Announced at CES By Aaron Pressman

Regulatory Findings Reveal Larry Ellison Has a $1 Billion Stake in Tesla By Brittany Shoot

BEFORE YOU GO

This is an odd one and it comes courtesy of blogger Jason Kottke. Bird watcher Nicholas Lund has found an entirely new and untrammeled locale to practice his hobby: inside the video game Red Dead Redemption 2. He’s even posted a “field list” on the Audubon Society’s web site listing the almost 60 birds he saw in the game, everything from the Yellow-Billed Loon to a Great Horned Owl. “My mom always used to tell me to stop playing video games and go outside, but this is the first game that made me want to,” Lund writes.

This edition of Data Sheet was curated by Aaron Pressman. Find past issues, and sign up for other Fortune newsletters.