China’s Efforts to Poach Top Tech Engineers Have the West on Edge

Summary

WSJ Tech News Briefing: China’s Efforts to Poach Top Tech Engineers Have the West on Edge

Release Date: December 3, 2024

Host: Danny Lewis
Produced by: Julie Chang and Catherine Millsop
Podcast: WSJ Tech News Briefing
Episode Title: China’s Efforts to Poach Top Tech Engineers Have the West on Edge

---

Introduction

In this episode of the WSJ Tech News Briefing, host Danny Lewis delves into two major topics shaping the tech landscape: Coca Cola's innovative use of artificial intelligence (AI) in their latest holiday advertisements and China's aggressive strategies to recruit top tech engineers from Western nations. These discussions highlight significant shifts in advertising methodologies and global tech competition.

---

Coca Cola’s AI-Generated Holiday Advertisements

Timestamp: [00:34]

Overview: Coca Cola has unveiled its annual holiday advertisements, featuring traditional festive elements like polar bears, Christmas trees, and the iconic Coca Cola trucks. However, this year marks a departure as these ads were entirely generated using AI technology.

Design and Reception: At first glance, the ads maintain Coca Cola's familiar aesthetic, but subtle imperfections hint at their AI origins. Reporter Katie Dayton explains:

“They look a bit like the Coca Cola holiday ads that we know and love. They have the lit-up trucks, they have the polar bears. But there's something about the edges... that shiny glossiness... and some of the proportions are a little bit off.”
— Katie Dayton [02:13]

These characteristics fall into the concept known as the "uncanny valley," where AI-generated visuals appear almost, but not entirely, lifelike, eliciting a sense of unease.

Creation Process: Contrary to the misconception that AI can instantly produce high-quality content, Dayton clarifies that Coca Cola's AI-driven ads involved months of development:

“They still took many, many months... using pretty high-powered technology to create the visuals and then editing to some degree afterwards.”
— Katie Dayton [03:14]

Cost Implications: AI-generated advertisements offer significant cost savings compared to traditional methods. Dayton highlights:

“AI ads do save companies a lot of money. To shoot this in real life, you would have had to... scout locations, pay to clear roads, actors, lighting... you can do that in a computer now.”
— Katie Dayton [04:03]

This shift poses a challenge for advertising agencies, as traditional billing models based on labor and resources become less applicable.

Coca Cola’s Strategy and Personalization: Coca Cola emphasizes the flexibility and personalization afforded by AI:

“When this goes out around the world, they can personalize very easily parts of this ad... if you're watching it in India, for instance, you might get a sign on a billboard that the trucks are driving past that says, oh, we're passing Bangalore.”
— Katie Dayton [04:50]

By tailoring ads to specific regions, Coca Cola aims to increase consumer engagement and response rates.

Consumer Perception: Despite some professionals critiquing the AI-generated elements, Dayton notes that consumer feedback is largely indifferent to the AI involvement:

“In the testing, they asked people to watch it and give their emotional response. Only one person out of thousands even commented on it looking like it was made with AI.”
— Katie Dayton [02:13]

This suggests that consumers may not distinguish between AI-generated and traditionally created animations, raising questions about the necessity of AI in certain creative processes.

---

China’s Efforts to Poach Top Tech Engineers

Timestamp: [06:23]

Overview: As Western governments tighten restrictions on China's access to sensitive technologies, Chinese companies escalate efforts to recruit top engineers from key tech hubs such as Taiwan, Europe, and Silicon Valley. This strategy aims to bridge the technological gap caused by export controls, particularly in areas like advanced semiconductors and AI.

Recruitment Tactics: WSJ China Tech Reporter and Editor Lisa Lin discusses the methods employed by Chinese firms:

“Many Chinese companies have hidden their identity behind a recruiter. The only company that really actually openly names itself is Huawei.”
— Lisa Lin [06:58]

Recruiters often initiate contact through platforms like LinkedIn or email and subsequently transition conversations to WeChat, a dominant Chinese messaging app:

“The most telling sign is that once the recruiter makes the outreach through LinkedIn or email, the next step is always to migrate the conversation to WeChat.”
— Lisa Lin [07:37]

Targeted Companies: Chinese firms are particularly focused on TSMC (Taiwan Semiconductor Manufacturing Company) and ASML (a Dutch chip tool maker). ASML is crucial due to its monopoly on advanced lithography equipment, essential for cutting-edge chip production:

“ASML is currently the only company in the world that can produce the most advanced cutting-edge lithography equipment... that's China's Achilles heel.”
— Lisa Lin [08:15]

Regional Impact and Regulations: The recruitment surge predominantly affects regions strong in chip manufacturing:

“The regions... include Taiwan, South Korea, parts of Europe, America.”
— Lisa Lin [08:15]

While Taiwan has implemented strict penalties against economic espionage and unauthorized knowledge transfers, other regions like South Korea and Germany are still debating regulatory measures without concrete actions yet:

“Taiwan... imposed stiffer penalties... maximum penalty would be a long jail term and a fine of about $3 million.”
— Lisa Lin [11:08]

Risks for U.S. Entities: For U.S. companies and engineers, working with Chinese firms poses significant reputational and legal risks:

“When you go and work for a Chinese company, you're essentially crossing to another side... it is actually illegal to be going off and helping China with such know-how.”
— Lisa Lin [12:05]

These risks are compounded by ongoing efforts to develop domestic semiconductor industries, where attracting and retaining top talent is crucial for maintaining competitiveness.

Chinese Government’s Stance: In response to allegations of talent poaching, the Chinese Ministry of Foreign Affairs denies awareness of such activities and asserts that interactions with foreign talent are standard and lawful:

“China's interaction with foreign talent is no different from other nations... they really respect intellectual property rules and any reports of alleged intellectual property stealing are baseless.”
— Lisa Lin [09:08]

However, specific companies like Huawei have remained silent on these allegations.

---

Conclusion

This episode of WSJ Tech News Briefing underscores pivotal developments in both advertising technology and global tech competition. Coca Cola's venture into AI-generated advertisements exemplifies the transformative potential and cost-efficiency of AI in creative industries, while China's intensified efforts to recruit top tech engineers highlight the ongoing geopolitical battle for technological supremacy. As these trends evolve, their implications will resonate across industries and international relations, shaping the future of technology and global business dynamics.

---

Notable Quotes:

• “Only one person out of thousands even commented on it looking like it was made with AI.”
  — Katie Dayton [02:13]

• “When you go and work for a Chinese company, you're essentially crossing to another side.”
  — Lisa Lin [12:05]

• “AI ads do save companies a lot of money... you can do that in a computer now.”
  — Katie Dayton [04:03]

• “ASML is currently the only company in the world that can produce the most advanced cutting-edge lithography equipment.”
  — Lisa Lin [08:15]

---

This comprehensive summary captures the essence of the episode, providing insights into Coca Cola's innovative advertising approach and the broader implications of China's recruitment strategies in the tech sector. By incorporating key quotes with precise timestamps, the summary offers a detailed and engaging overview for listeners and non-listeners alike.

Transcript

[Merrill Representative]

You want a straightforward path to your goals. But at Merrill, we know things may get in the way or new opportunities can put you at a crossroads with the bull at your back.

[Coca Cola Marketing Expert]

I found a better route.

[Merrill Representative]

You get a personalized plan, turn left and a clear path forward. Go to ML.combullish to learn more. Merrill, a bank of America company. What would you like the power to do?

[Merrill Compliance Officer]

Investing involves risk Merrill Lynch Pierce Veteran Smith Inc. Registered Broker Dealer Registered Investment Advisor Member SIPC A wholly owned subsidiary of bank of America Corp.

[Danny Lewis]

Welcome to Tech News briefing. It's Tuesday, December 3rd. I'm Danny Lewis for the Wall Street Journal. Coca Cola's latest annual holiday ads are decked with festive Christmas trees and cuddly polar bears. But the commercials were made with generative artificial intelligence. Just ahead, we'll hear why Coca Cola made this bet and how it's affecting the advertising industry. And then Western governments have been making it harder for China to get a hold of sensitive like AI and advanced semiconductor chips. And one way that China has responded is by trying to hire top engineers from tech hubs like Taiwan, parts of Europe and California's Silicon Valley. Our China tech reporter and editor, Liisa Lin joins us to explain this latest front in the battle for tech supremacy. But first, Coca Cola has released its annual holiday ads. At first glance, they've got all the usual trappings. Big trucks with the Coke logo on the side, reindeer and polar bears and Christmas trees all lit up. But there's something different about them. They're a little too glossy in some places and smeary in others. And if you look closely, some objects, like the Coca Cola delivery trucks, are a bit wobbly because the ads were generated by artificial intelligence. WSJ reporter Katie Dayton covers marketing and the advertising business. Katie, some marketing professionals and others mock these ads because they appear AI generated. What do they look like, the ads?

[Katie Dayton]

They look a bit like the Coca Cola holiday ads that we know and love. They have the lit up trucks, they have the polar bears. But there's something about the edges to all of this that has that kind of glossiness, that shininess. And some people have pointed out that some of the proportion portions are a little bit off. It's just that uncanny valley that AI visuals tend to produce. One company I spoke to, System 1, said that in the testing, they asked people to watch it and give their emotional response. And he said only one person out of thousands even commented on it looking like it was made with AI. And that kind of begs the question of do consumers even care if they can tell it is AI. And maybe they can't tell a lot of the time what the difference is between an animated polar bear that someone's animated through a computer already, and one that's been animated by an AI.

[Danny Lewis]

Okay, so they were made with AI, but how exactly were these ads made?

[Katie Dayton]

So Coca Cola hired a couple of ad agencies with the brief of reinventing the famous holiday truck ads for the modern day. And both of these companies came up with this idea that they will be using AI technology to do that. So, I mean, it took a long time from what they told us. You know, it wasn't a case of just dropping in some prompts into ChatGPT and spitting it out. They still took many, many months. And, you know, spent a lot of time creating these by using technology, like pretty high powered technology to create the visuals and then editing to some degree afterwards.

[Danny Lewis]

And the cost of making the ads with AI versus, you know, going with more traditional animation was part of this. Right? I mean, did they actually save money on these ads?

[Katie Dayton]

They wouldn't tell us exactly how much they spent on them. I mean, for them, the cost was more because they could just recycle the same ads that they use a lot in the holidays. Right. They didn't need to create this. But generally speaking, you can say AI ads do save companies a lot of money. I mean, to shoot this in real life, you would have had to have the location scouted, you would have had to pay to clear out a road. You would have had to have actors lighting all the production that you would need to film a Hollywood movie. You can do that in a computer now. And that's really going to upend the way actually advertising agencies make money now because they're not really sure what to charge for if they're not charging for the time of all these people.

[Danny Lewis]

How has Coca Cola responded?

[Katie Dayton]

Coca Cola has been pretty open about discussing what they've done here. They're very happy to say that you might not see this in the YouTube video, but when this goes out around the world, they can personalize very easily parts of this ad. So if you're watching it in India, for instance, you know, you might get a sign on a billboard that the trucks are driving past that says, oh, we're going past Bangalore or something like that. They can make these very quick changes. And there's a tenant in advertising that the more personalized you can make make an ad, the bigger the response you're going to get from consumers.

[Danny Lewis]

That was WSJ reporter Katie Dayton. Coming up, China's efforts to recruit tech engineers from Western countries has officials in the US And Europe worried about losing top talent and trade secrets. After the break, we'll hear what they're trying to do about it. Stay with us.

[Merrill Representative]

Say this is your financial life. Over time, things can get more complex. With a personalized plan, Merrill can help you navigate it all. Learn [e-mail] Bullish Merrill, a bank of America company. What would you like the power to.

[Merrill Compliance Officer]

Do Investing involves risk Merrill Lynch, Pierce Vener and Smith Inc. Registered Broker Dealer Registered Investment Advisor Member sipc, a wholly subsidiary of bank of America Corp.

[Danny Lewis]

As Western governments make it harder for China to access sensitive technologies, a trend expected to continue under the administration of President elect Donald Trump, many Chinese companies are trying to get ahead by luring away top engineers in high tech areas such as advanced semiconductors and AI. Chinese firms are focusing on several tech hubs, including Taiwan, parts of Europe and Silicon Valley. Lisa lin is the WSJ's China Tech reporter and editor. She spoke with my colleague Julie Chang about her reporting.

[Lisa Lin]

Liza, what are some Chinese companies allegedly doing and how do we know this?

[Coca Cola Marketing Expert]

The phenomenon itself is pretty widespread, but many Chinese companies have hidden their identity behind a recruiter. The only company that really actually openly names itself is Huawei. Huawei. For some reason, always when they do the first approach to the talent, they actually tend to say that they're from Huawei and ask if the talent would like to join. My guess is they feel that they have name recognition that the other Chinese companies don't. Or maybe because they have the reputation of being able to pay these generous salaries that you typically associate with China talent poaching. Somehow Huawei just always tends to be very upfront.

[Lisa Lin]

How do we know about the other companies that are also doing this kind of poaching?

[Coca Cola Marketing Expert]

Yeah, we tend to know that they're from a Chinese company because the recruiter will say that they're actually working on behalf of a Chinese company. And very often the recruiter tends to be ethnically Chinese. The most telling sign is that once the recruiter makes the outreach through LinkedIn or email, the next step is always to migrate the conversation to an app, a Chinese app called WeChat, which is a chat messenger in China that's hugely popular.

[Lisa Lin]

And which non Chinese companies are the Chinese companies looking to recruit from?

[Coca Cola Marketing Expert]

Yeah, so there are two big fish in the pond. The first is tsmc. TSMC is the world's largest contract chip manufacturer. It's also making the most advanced chips for players like Nvidia. The other Big fish is asml. ASML is a Dutch chip tool maker. They make lithography equipment and it's a very critical part of the chip making process. The reason why ASML is targeted is because ASML is currently the only company in the world that can produce the most advanced cutting edge lithography equipment. And lithography is an area that most analysts widely agree on that that's China's Achilles heel when it comes to constructing its own domestic self sufficient chip industry.

[Lisa Lin]

And what have the Chinese companies or the government said about the alleged poaching?

[Coca Cola Marketing Expert]

The Chinese Ministry of Foreign affairs, they said that they're not aware of the examples of talent poaching that we pulled out in our story. And they've also added that China's interaction with foreign talent is no different from other nations. The other thing they've added is they've said that they really respect intellectual property rules and any reports of alleged intellectual property stealing are baseless. Huawei has not responded for any requests for comment.

[Lisa Lin]

We should note that ASML has said they have had no indication of unusual recruitment activity towards its employees and that the attrition rate is very low. TSMC declined to comment. Lisa, tell us more about the regions being impacted. Are there rules on working for competitors, particularly Chinese ones?

[Coca Cola Marketing Expert]

The regions that have been the most impacted, that have received the most Chinese outreach tend to be the regions that are very strong in chip making and that would make it Taiwan, South Korea, parts of Europe, America. In terms of rules, this is a tricky one. Talent recruitment in itself isn't inherently illegal. Talent recruitment is really kind of part of the job industry. However, it does start to pose a problem when you have a country such as China who's subject to export controls by the US and its allies. So they cannot actually get their hands on emerging technology. So what they're trying to do if they can't buy technology, is trying to make their own and they need talent to do so. Even though we don't have outdated figures, the shortfall of talent was, at least in the semiconductor space, put in the range of 200,000 people as of last year by its chip Industry Association. So China needs this talent. The other reason why countries tend to be up in arms about it is because many countries now want to develop their own domestic semiconductor industry and their own competitive domestic semiconductor industry. And by losing talent, it takes away some of the itch and the competitiveness that you have.

[Lisa Lin]

And how are certain regions cracking down on recruiting efforts?

[Coca Cola Marketing Expert]

Right now we are at the point where only in Taiwan, it is illegal. So what Taiwan did in 2022 was they imposed stiffer penalties on individuals or companies that were conducting economic espionage and on individuals that were transferring know how in areas that Taiwan deemed as critical to their competitiveness and to the national security. So if you were in Taiwan and you were engaging in such activity, then the maximum penalty would be a long jail term and a fine of about $3 million. In countries such as South Korea and Germany, lawmakers are worried about the issue and they're debating how to solve it. But at this point, we haven't seen any concrete action yet.

[Lisa Lin]

What's at risk for U.S. companies and for U.S. workers poached by China?

[Coca Cola Marketing Expert]

The most immediate risk is reputational. A lot of people that I interview talk about how when you go and work for a Chinese company, you're essentially crossing to another side. And in some cases it is if you're engaged in very high end chip product, it is actually illegal to be going off and helping China with such know how.

[Danny Lewis]

That was WSJ China tech reporter and editor Lisa Lin speaking with our producer Julie Chang. And that's it for Tech News Briefing. Today's show was produced by Julie Chang with supervising producer Catherine Millsop. I'm Danny Lewis for the Wall Street Journal. We'll be back this afternoon with TNB Tech Minute. Thanks for listening.

[Merrill Representative]

You want a straightforward path to your goals, but at Merrill, we know things may get in the way or new opportunities can put you at a crossroads. With the bull at your back, you get a personalized plan, turn left and a clear path forward. Go to ML.combullish to learn more. Merrill, a Bank of America company what would you like the power to do?

[Merrill Compliance Officer]

Investing involves risk Merrill Lynch Pierce Veneran Smith Inc. Registered broker Dealer Registered investment advisor Member sipc a wholly owned subsidiary of bank of America Corp.