The U.S.-China tech dispute breeds suspicion in Silicon Valley

2020-01-24 04:47:01

The first time 35-year-old Zhang Lelin, a software engineer from China, felt uncomfortable in Silicon Valley was last year when he heard that a “huge team” of FBI agents had raided the home of one of his Chinese neighbors.

The target, Zhang Xiaolang, was charged with stealing trade secrets when he left Apple to join a Chinese electric car start-up and is now awaiting trial. Zhang Lelin, who works at Amazon, says the drama had been “like a movie” and wonders if it was engineered to “send out a message” to other Chinese tech workers.

His worries have been compounded not only by other high-profile cases of alleged Chinese intellectual-property theft, but by the increasingly antagonistic relationship between Washington and Beijing. The darkening climate has rattled Chinese companies, investors and — most of all — employees in Silicon Valley.

“For years, Silicon Valley ran on three main currencies: code, connections and cash. Chinese engineers churned out plenty of the first, and Chinese venture capitalists brought an infusion of the third, making the valley a relatively easy place for them to blend in,” says Matt Sheehan, author of The Transpacific Experiment, a book on Chinese and Californian collaboration.

Events of the past two years have changed the equation. “First, [the trade war] put a stop to venture capital flows, then it began complicating things for the big companies, and now it’s filtered all the way down to individual researchers,” says Sheehan.

This is not the first time that the U.S. government’s fears over technology have placed undue suspicion on immigrants with a Chinese connection. In 1999, Taiwanese-American scientist Wen Ho Lee, who worked in the Los Alamos nuclear bomb-design laboratory, was arrested on suspicion of spying for Beijing and placed in solitary confinement for nine months. The charges could not be proven because they were largely based on his friendliness with Chinese scientists.

But the climate of suspicion has ramped up considerably in recent years, fueled by trade war tensions, the controversy over telecom-equipment supplier Huawei, and a string of cases involving Chinese nationals being accused in the U.S. of stealing trade secrets.

One proposal from the Commerce Department is particularly chilling for Chinese nationals in the valley, since many believe it could lay the legal basis for U.S. tech companies to segregate them or even fire them. The Commerce Department has said it wants to expand existing export controls on so-called “dual-use technologies,” which have both civilian and military applications, to what it calls “emerging” and “foundational” technologies. The agency is now looking into categories such as artificial intelligence and microprocessor chips.

Since U.S. rules consider even conversations about technology between Americans and foreign nationals as “deemed exports,” tech companies may have to apply for licenses for their foreign workers from countries outside of NATO. Chinese nationals are classed as the most sensitive, alongside Russians and Iranians.

In 2018, Commerce more than halved the number of Chinese nationals it granted export licenses to, awarding only 350 compared with 771 the previous year — the biggest proportional decrease of any country.

As a result, several Silicon Valley companies’ trade compliance and HR teams are already laying out plans for segregating their Chinese-national employees from the rest of their researchers, according to Dan Wang, analyst at Gavekal Dragonomics in Beijing.

Kevin Wolf, an export controls lawyer and the assistant commerce secretary during the Obama administration, however, thinks such concerns are premature, “because the new controls are likely to be narrowly tailored to address specific national security threats, as required by the export control statute.”

Libo Weng, an engineer at a semiconductor company in California, says it is already becoming more difficult for Chinese engineers to progress at work.

“From conversations with colleagues and friends, I think employers are more careful about letting Chinese engineers rise into positions where they can come into contact with core technologies — AI, chips — in which the U.S. is more advanced than other countries. It was not as severe as this before Trump came into power,” says Weng.

Chinese nationals and first-generation immigrant families make up a significant portion of Silicon Valley. According to census data, 17% of the population speaks a form of Chinese at home in the Silicon Valley counties of Santa Clara and San Mateo. The valley’s longstanding ethnic diversity and the reliance of its tech companies on Chinese workers mean that it’s still welcoming to Chinese talent.

But few Chinese engineers have made it to the very top of U.S. tech companies, and the tensions between the U.S. and China have prompted many to examine where they stand in their workplace. In particular, Chinese engineers complain that the precarious nature of their work visas means they feel the need to cling to their employers, regardless of unfair or poor treatment.

Under the H-1B visa program for talented workers, which sustains most foreign nationals at tech companies, an employee is given just 60 days after being fired to find a new job, apply for and receive a new H-1B visa — after which they have to leave the country. Many feel the window is impossibly tight.

Employees at Amazon, Google and PayPal all cited heightened visa insecurity as the main pressure point facing Chinese staff. In 2018, the approval rates for H-1B visas started to fall, reaching 75.4% in the last quarter of the year, compared with 94.5% in the same quarter in 2015.

At the same time, processing time has taken longer as more applicants are sent through a second “request for evidence” stage. Five years ago, Zhang Lelin’s renewals took less than a month, but now they take two, he says, blaming the delay on his previous work on AI and computer chips.

He says one of his friends was stuck in China for seven months waiting for a visa renewal. “We all have the same background, so this kind of thing is random and could fall on your head any time,” he says.

These tensions have taken their toll. In September, a 38-year-old Chinese engineer for Facebook, Qin Chen, committed suicide by jumping from a building at Facebook’s Menlo Park headquarters. A week later, hundreds of engineers — mostly Chinese — from companies across the valley gathered on the campus to chant: “Chinese lives matter, Zuckerberg!”

Some spoke of the need for a better work environment, and others highlighted the fragility of Qin’s immigration status. Despite apparently living in the U.S. for eight years, he did not have a green card and his entire family depended on his work visa.

Facebook said at the time that it was providing mental health and suicide prevention support to employees, and also added that bullying was not tolerated at the company.

Other Chinese engineers complain that Silicon Valley has an ethnic glass ceiling, and interviewees, many of whom are naturalized American citizens, compared their status with the relative success of Indians in large tech companies.

“In the U.S. many Indian managers have become big companies’ CEOs, but in many ways there’s still a bottleneck for Chinese people,” said Hans Tung, managing partner of GGV Capital, at a recent conference in Beijing. Turning to Eric Yuan, the founder of Zoom, he asked: “What do you think can be done?”

Yuan is Silicon Valley’s best-known Chinese immigrant success story. His video conference app Zoom, which listed last April, is valued at almost $21 billion. Yuan responded that many Indian engineers were not only proficient at technical work, but also at understanding business models and management.

“It’s Chinese culture: It emphasizes obedience and modesty, not confidence,” says Sophie Xu, a PayPal employee who left China for Canada and then the U.S. 17 years ago. “There’s no wild ambition, we love book smarts.”

At an evening discussion organized by the Silicon Valley Innovation Entrepreneurship Forum, which hosts some of the biggest gatherings of Chinese tech talent in the area, a panel of high fliers dispensed advice on how to organize one’s time and succeed at work.

“These are the rules of the game in the U.S.,” says Zhang Yue, a Google engineer who also organizes a Chinese new year’s gala and a local athletics club.

“Unlike a Chinese company, you don’t need to stay in the office until after your manager leaves — what matters is you get it done. And saying what you’ve done can be even more important than doing it,” says Zhang.

Chinese companies and the government are keen to take advantage of the worsening climate to lure talent home.

“The long-term impact of the trade war will make it easier for China to attract talent back,” says Tim Li, who has spent the past five years recruiting people from Silicon Valley to return to China, so-called “sea turtles.”

“There are also pull factors from China,” he adds, referring to China’s domestic tech boom. Li recently posted an advertisement for his services under a LinkedIn post by a Silicon Valley returnee to Beijing that had gone viral.

The post was titled, “To those Silicon Valley people who want to return [to China], but don’t dare.” It argued that working for a mature U.S. firm meant a comfortable lifestyle with limited opportunities for advancement, while returning to China meant a more cut-throat working environment, but one where people could have a greater impact.

“The U.S. has displayed strong anxiety and discomfort over China’s rise. ... China’s internet industry will surpass the U.S.’ on many fronts,” the post said. “If the long-term trend is like this, I think you should join the wave and take advantage of it.” The author, Wei Xu, recently left Facebook for a Beijing-based start-up.

Some, however, are more cautious. Zhang Lelin fears that Chinese engineers jumping from U.S. to Chinese firms might trigger suspicions within their company or the FBI over IP theft. “That makes me hesitate when considering a Chinese firm,” he says.

China’s government-sponsored talent recruitment agencies have also spotted the repatriation opportunity. But they are also more cautious in operating in the U.S. now because they fear increased scrutiny from the U.S. government, according to one former recruiter.

Instead, adds Li, China’s private sector is moving quickly. “The semiconductor industry here is shrinking, whereas in China it’s expanding — there are lots of laid-off workers to be picked up,” he says.

Zhang Lelin says Chinese employees working at U.S. tech companies are “cannon fodder”: “We get hurt by the U.S.-China dispute, but we don’t decide the outcome.”

He reflects on how, during World War II, the U.S. government forcefully relocated more than 120,000 Japanese-Americans to internment camps, a decision that had little to do with national security.

The first such camp was built in Manzanar, Calif., a few hundred miles from where most tech companies are now based. For most workers in the valley, that dark chapter of U.S. history is in the past. But for some, it is not quite as far removed as it once seemed. “Look at history,” says Zhang Lelin.