Microsoft debates what to do with AI Lab in China

When Microsoft opened an advanced research lab in Beijing in 1998, it was a time of optimism about technology and China.

The company hired hundreds of researchers for the lab, which pioneered Microsoft’s work in speech, image and facial recognition and the kind of artificial intelligence that later gave rise to online chatbots like ChatGPT. The Beijing operation eventually became one of the most important AI laboratories in the world. Bill Gates, co-founder of Microsoft, called it’s an opportunity to tap into China’s “deep pool of intellectual talent.”

But as tensions have risen between the United States and China over which nation will lead the world’s technological future, Microsoft’s top leaders — including Satya Nadella, the CEO, and Brad Smith, the president — have debated what they have to do with the esteemed laboratory of technology. at least in the past year, four current and former Microsoft employees said.

The company has faced questions from U.S. officials about whether maintaining an 800-person advanced technologies laboratory in China is sustainable, the people said. Microsoft said it had set guardrails in the lab, barring researchers from politically sensitive work.

The company, based in Redmond, Washington, said it had also opened a lab outpost in Vancouver, British Columbia, and would move some researchers from China to the site. The outpost is a backup if more researchers need to move, two people said. The idea of ​​closing or relocating the lab has been floated, but Microsoft leaders are in favor of continuing it in China, four people said.

“We are as committed as ever to this team’s world-class laboratory and research,” Peter Lee, who leads Microsoft Research, a network of eight labs around the world, said in a statement. Using the lab’s formal name, he added: “There has been no discussion or advocacy to close Microsoft Research Asia, and we look forward to continuing our research agenda.”

The debate at Microsoft is striking because the company – alongside Apple and Tesla – is one of the few major American technology companies that maintains a foothold in China. As China nurtured a domestic technology industry and geopolitical tensions with the United States increased, American companies such as Google reduced their presence there. Facebook and other American social media sites like X have been blocked in China for years.

LinkedIn, which Microsoft owns, shuttered its professional social network in China in 2021, citing increasing compliance requirements. But Microsoft has kept its Bing search engine as the only foreign search engine in China even though it is heavily censored, offering its Windows operating system, cloud computing and applications for business customers there.

Microsoft has been debating the future of the laboratory for years, according to five people with knowledge of the situation. It has become a target of national security concerns amid the rise of AI and increasing aggression between the United States and China. The hypothetical risks are that China could hack or otherwise infiltrate the lab, or that its researchers could leave Microsoft to join Chinese companies that work closely with the government, the people said.

The Biden administration privately asked Microsoft about the lab as it moved over the past two years to ban new U.S. investments in companies building sensitive technologies in China that Beijing could use to strengthen its military, two people familiar with the matter said. conversations. (The proposed rules, issued in August, have not yet been finalized.)

Senators asked Mr. Smith at a meeting about Microsoft’s ties to China subcommittee hearing on AI in September. He said the country was responsible for 1.5 percent of Microsoft’s revenue, which reached $212 billion last fiscal year.

Microsoft faces “a tricky balance,” said Chris Miller, the author of “Chip War,” a book that traces the geopolitical history of technology. “They need to consider where the trust of the political system is going.”

The White House declined to comment.

Microsoft’s Beijing laboratory came into existence when Mr. Gates appointed Kai-Fu Lee, a Taiwan-born AI researcher, to build the operation. (Dr. Lee later left to work at Google and now runs a venture capital firm.)

Researchers in the lab, many of whom were at the top of their fields, investigated technologies such as speech recognition, computer vision and natural language understanding, which are cornerstones in the development of artificial intelligence. Some of the lab’s researchers left for key positions at Chinese tech giants such as Alibaba, Baidu and Tencent or helped found start-ups such as Megvii, a facial recognition company that has helped build a major national surveillance system in the country.

In 2018, Microsoft said it did invested more than 1 billion dollars in research and development in China over the past decade. The technical talent and invention of the Beijing laboratory form the basis of an important internal argument in support of this.

But the lab’s success and prestige also attracted attention in Washington, where the White House has increasingly restricted China’s access to crucial technologies, citing national security.

Microsoft leaders have discussed how to manage the tensions. Mr. Gates, who still maintains regular contact with business leaders and supports global engagement, has long supported the Beijing lab, people with knowledge of the matter said. He traveled to China in June and met President Xi Jinping, who told him he was “the first American friend I have met this year.”

Microsoft’s technology and research leaders, including Peter Lee and Kevin Scott, its chief technology officer, also support the lab, arguing that it has produced crucial technological breakthroughs, two people said. Mr. Smith also supports the laboratory.

“The lesson of history is that countries succeed when they learn from the world,” Smith said in a statement. “Guardrails and controls are critical, while engagement remains critical.”

In recent years, Microsoft has limited which projects its researchers in China can work on, people with knowledge of the matter said. Last fall, researchers in China were barred from being part of the small teams at Microsoft that had early access to GPT-4, the advanced AI system developed by Microsoft’s partner OpenAI, they said.

The lab also has restrictions on work related to quantum computing, facial recognition and synthetic media, Microsoft said. The company also blocks hiring or working with students and researchers from universities affiliated with the Chinese military, the company said.

(The New York Times last month sued OpenAI and Microsoft for copyright infringement over the training of their AI systems.)

At the lab’s Vancouver outpost, researchers will have open access to critical technologies, including computing power and OpenAI systems, needed for cutting-edge research, according to two people with knowledge of the lab.

Kate Conger contributed reporting from San Francisco.