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China’s digital health care start-ups get a boost from the coronavirus, Beijing and investors

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BEIJING — The coronavirus pandemic is proving to be the accelerator that China’s health care technology start-ups needed.

In a country of 1.4 billion, many people who used to travel and wait for hours to see doctors are turning more to online products, companies say. The government is rolling out needed policy support for internet-based health care. And investors are pouring in money. 

Before the coronavirus outbreak, much of the health-tech investment in China was focused on scientific research for medical treatments, said Kitty Lee, Singapore-based partner and head of the Asia Pacific health and life sciences practice at Oliver Wyman.

Going forward, she expects the portion of investment focused on consumer health care and infrastructure will grow more rapidly than biotech.

In the second quarter, global health-care funding to private companies reached a quarterly record of $18.1 billion, according to CB Insights. Health-care funding in Asia nearly doubled from the prior quarter to $5 billion, and deals to China-based start-ups recovered to pre-coronavirus levels, the analysis found.

“The entire Chinese health industry has really only begun to be cultivated after the passing of the (coronavirus) epidemic,” JD Health CEO Xin Lijun said in an interview last week, according to a CNBC translation of his Mandarin-language remarks.

The company is a subsidiary of Chinese e-commerce giant JD.com and is set to receive an investment of more than $830 million this quarter from Hillhouse Capital.

During the worst of the outbreak in China, JD Health offered free online consultations, drawing roughly 150,000 patients or more a day, who then realized they didn’t necessarily have to go to a physical hospital, Xin said. He now claims that in less than three years, his health tech company has the highest income among its peers in China.

Covid-19 first emerged late last year in the Chinese city of Wuhan. The disease began to spread within the country in January and February, before hitting the rest of the world in a global pandemic that has infected more than 27.6 million people and killed more than 900,000 people. In an effort to curb the outbreak, authorities have restricted social gatherings, forcing people to turn more to online platforms.

In the first six months of the year, visits to health care institutions in China dropped 21.6% from a year ago, according to data released Aug. 21 by the National Health Commission. Visits were still down 9.7% year-on-year in June to 630 million, the commission said.

On the other hand, Tencent-backed WeDoctor said that during the coronavirus outbreak, customer orders for online consultations increased 3.6 times from a year ago. More than 50,000 doctors joined the platform for a total of about 250,000 physicians, according to WeDoctor.

More high-level support

The Chinese government has also stepped up efforts to back the health tech industry’s development. Notably in July, 13 major national departments and ministries jointly announced support for developing online medical services, as part of a broader plan to promote consumption and employment. On Wednesday, a meeting of the country’s top executive body, the State Council, again noted the need to expand internet-based health clinics.

“Really after the serious stage of the pandemic …, the central government and the local government they delivered a lot of different policies to help the internet hospitals,” Tang Bochen, vice president at Qi’e XingRen, also known as Tencent Trusted Doctor, said in a phone interview on Sunday. “What I saw was almost every city, their public hospitals are now building up an internet hospital system to help their patients (move) from offline to online.” 

The company operates an online consultation platform as well as offline clinics. Tang said about 450,000 physicians with 20 million patients are already part of XingRen’s network, and that more than 30 of the 135 clinics have already received licenses to work with the government’s social insurance program. He said the company aims to build user traffic through general patient care, and rely more on specialist clinics such as dental and eye care to generate profit.

Major corporations have also been pushing into the emerging industry.

Ping An Good Doctor, a Hong Kong-listed subsidiary of the insurance giant Ping An, reported 26.7% year-on-year growth in average daily online consultations to 831,000 in the first half of the year, with revenue from online medical services doubling to 694.9 million yuan ($101.56 million). Registered users grew by more than 56 million in 12 months to 346.2 million.

Hong Kong-listed Alibaba Health says that through the Alipay app it has more than 15,000 contracted medical institutions, including nearly 400 Class III hospitals in 17 provinces, that are connected to medical insurance payment services. The company said in the first quarter, the net total of frequent active users of Alipay’s health-care channel exceeded 390 million.

“Telehealth or internet hospital or however you want to call it in China, it’s here to stay,” said He Wang, senior health care analyst at CB Insights. He expects at least roughly a quarter of health care services spending can be digitalized.

“A key indicator in telehealth’s momentum in China is integration with basic medical health insurance program,” Wang said. “You’re seeing insurance companies and hospitals and governments all form telehealth platforms themselves. I think it’s increasingly a crowded space. The platform players, like JD Health, Ping An, WeDoctor are probably the ones that are going to continue to play.”

But whether JD’s Xin or other industry players CNBC interviewed for this article, they generally agreed that online health in China is still in the very early stages of development.

“I think this health care market is very large. It is very far from a time of splitting the cake. (Right now) it is all about making the cake larger,” said New York-listed 111 co-founder and Executive Chairman Gang Yu, according to a CNBC translation of his Mandarin-language remarks. 

The company works with local pharmacies to sell medicine, and also has an online consultation program. Since the coronavirus outbreak, the proportion of its users age 40 or older has increased to more than half, the company said. In August, the company said it received a capital injection of 419.82 million yuan ($61.36 million), ahead of plans for another listing on China’s Star board. Net revenue surged 93.5% in the second quarter from a year ago to 1.62 billion yuan ($236.77 million), and net losses narrowed. 

“Profitability long-term is still a question long-term for every single one of these telehealth companies,” CB’s Wang said. “How you turn government support into cash flow is still on the table. It’s not solved yet internationally.”

The extent to which health tech can transform such a traditional industry also remains to be seen. While online consultations can give doctors a flexible source of income, they cannot replace a physical check-up.

“The medical industry remains relatively closed, with highly uneven resource allocation, and a virus-induced internet-based transformation cannot occur overnight,” Yipin Ng, founding partner of Shanghai-based Yunqi Partners and a former partner at GGV Capital, said in a Chinese-language statement, according to a CNBC translation. “Data islands and short-term shortage of quality medical resources remain a long-term problem for China’s medical industry, and will continue to bring entrepreneurial opportunities for specific sub-sectors and improving efficiency.”

The roughly six-year-old firm has invested in Intco Medical Technology, whose shares are up 650% so far this year. Yunqi’s more recent investments include V Daifu, which develops software for medical clinics, and Doctopia, which focuses on health tech for mothers with young children. 

— CNBC’s Iris Wang contributed to this report.

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Apple confirms problem, will fix for free

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A man shows AirPods Pro at an Apple store on East Nanjing Road on October 30, 2019 in Shanghai, China. Apple’s new AirPods Pro with active noise cancellation are on sale on October 30 in China.

Wang Gang | VCG | Getty Images

Apple said on Friday that it’s replacing AirPods Pro headphones that have sound problems.

These problems include a static or crackling sound that increases in loud environments and issues with active noise cancellation.

Apple said AirPod Pros made after October 2020 don’t have the issue.

Owners who experience problems can contact Apple online or make an appointment at an Apple store to get their AirPods Pro replaced for free. Only devices that are confirmed to have the issue will be replaced.

The replacement only applies to the buds, not the charging case. Apple’s not offering a similar program for other AirPod models.

Crackling problems with AirPod Pros were reported by users earlier this year. In May, Apple issued support documents on its website with troubleshooting advice for the issue. It was replacing those units under warranty.

Apple’s AirPods are a popular line of wireless headphones. Apple doesn’t break out revenue from AirPods, but it reported $7.8 billion in other products revenue in the quarter ending in September, which includes AirPods along with other headphones and the Apple Watch.


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DHS Buying Cellphone Geolocation Data To Track People

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The Department of Homeland Security is purchasing consumer cellphone data that allows authorities to track immigrants trying to cross the southern border, which privacy advocates say could lead to a vast “surveillance partnership” between the government and private corporations.

In an internal memo obtained by BuzzFeed News, the DHS’s top attorney, Chad Mizelle, outlined how ICE officials can look up locations and track cellphone data activity to make decisions on enforcement.

Mizelle also believes the agency can use the data without obtaining a warrant or violating the Fourth Amendment, which protects the public against unreasonable searches and seizures. That logic could lay the groundwork for the government to use the same data to track everyday Americans, raising red flags among privacy advocates.

“This raises concerns about dragnet collection of Americans’ highly private location information that reveal where we sleep at night, where we go to the doctor, who we spend time with, and every other aspect of our lives,” said Nathan Freed Wessler, an attorney with the ACLU who specializes in privacy issues. “Police should be going to judges to get location information from these commercial entities.”

The memo offers a window into the use of new forms of technology to help ICE and Customs and Border Protection advance their enforcement aims at the border and beyond. But the use of the data has long been controversial, and its deployment within DHS has caused alarm.

Adam Schwartz, a senior staff attorney for the Electronic Frontier Foundation, told BuzzFeed News the memo is “deeply disturbing.”

“It’s essentially a secret effort by members of the government to justify the construction of this terrible surveillance partnership between the government and these corporations,” he said.

When DHS buys geolocation data, investigators only know that phones and devices visited certain places — meaning, they don’t automatically know the identities of people who visited those locations. Investigators have to match a person’s visited locations with, say, property records and other data sets in order to determine who a person is. But this also means that, technically, moment-by-moment location tracking could happen to anyone, not just people under investigation by DHS. In particular, lawyers, activists, nonprofit workers, and other essential workers could get swept up into investigations that start with geolocation data.

DHS officials said they do not comment on alleged leaked documents.

The agency is aware of potential legal vulnerabilities under the Fourth Amendment. Mizelle states in his memo that there are ways for CBP and ICE to “minimize the risk” of possible constitutional violations, pointing out that they could limit their searches to defined periods, require supervisors to sign off on lengthy searches, only use the data when more “traditional” techniques fail, and limit the tracking of one device to when there is “individualized suspicion” or relevance to a “law enforcement investigation.”

CBP has so far refused to explain this legal argument to Congress, despite the fact that senators such as Democrat Ron Wyden have demanded the information.

A CBP spokesperson said in a statement that the agency “has acquired limited access to commercial telemetry data through the procurement of a limited number of licenses to a vendor provided interface.”

The spokesperson said the access to the information “does not include cellular phone tower data, is not ingested in bulk, and does not include the individual user’s identity. Rather, CBP officers, agents, and analysts are provided with access to the vendor’s interface on a case-by-case basis, and are only able to view a limited sample of anonymized data consistent with existing border security or law enforcement operations.”

The official added that the data is used “in furtherance of CBP’s responsibility to enforce U.S. law at the border and in accordance with relevant legal, policy, and privacy requirements.”

The Wall Street Journal previously reported on the DHS’s purchase of the data for ICE and CBP. Federal spending databases show that ICE and CBP have bought licenses from Venntel, a company that collects and sells mobile device data. In 2019, DHS bought more than $1 million worth of software, which included Venntel licenses for CBP’s Targeting and Analysis Systems Program Directorate. TASPD is an intelligence-focused CBP program that involves monitoring certain individuals and cargo. Separately, this year CBP bought $475,944 worth of software, which also included Venntel licenses.

The House Committee on Oversight and Reform is currently investigating Venntel for selling data to government agencies.

Venntel did not respond to multiple requests for comment.

The document says that ICE and CBP purchased people’s mobile data from a data broker, although the document does not identify which one. All of the data is stored in an indexed, searchable database accessible through a “web portal.”

ICE and CBP buy advertising identifier data, or “AdID,” which typically includes information about where a person is located, what device they’re using, what language they use, which websites they’re visiting, and which websites they buy things from. All of this information isn’t linked to a person’s name, but to a randomly generated string of characters.

Both Apple and Android phones require app developers who are engaging in targeted advertising to assign people individualized AdIDs. People have to go into their phone settings in order to restrict advertisers’ access to their AdIDs.

The document states that the DHS purchased AdID data that is anonymized and only shows “timestamped signal location(s) within a specific time period” — or where one device has been, and when. This in and of itself doesn’t tell ICE and CBP who a person is. But the document notes that it’s possible to “combine” the data “with other information and analysis to identify an individual user.”

In other words, the DHS agencies can cross-reference where a device has been with property ownership records. This way, officers can find a person’s identity based on the location of their home.

The geolocation data associated with a person’s AdID is extremely sensitive. In the document’s own words, it can be used “to track the movements of a mobile device over an extended period of time.” Officers with this data can see where a person lives, their commute to work, which friends they visit, any religious locations they might frequent, and which protests they attend.

Privacy experts have argued that geolocation data is inherently identifiable and impossible to be truly anonymous, even if it’s linked to a string of numbers rather than a person’s name.

“This description puts the lie to the assertion of some of these companies that all they are gathering is anonymized information about phone users,” said Wessler, the ACLU privacy expert. “This agency is contemplating using this data to track and identify and locate particular people.”

Schwartz added that partnerships between governments and private entities are a “growing menace to privacy in the world.”

“The government has vast surveillance powers, private corporations have vast surveillance powers, and when the two are combined, the whole is greater than the sum of the parts,” he said. “This is an area that all members of the public should be concerned about, and our elected officials, and really need to shut this down.”

Typically, an app will assign a person one AdID. But according to the memo, the data broker “aggregates geolocation data obtained by a wide variety of apps,” meaning ICE and CBP may have multiple data sets about the same person if that person uses more than one app that engages in targeted advertising. But ICE and CBP don’t know which apps the information comes from.

Mizelle said ICE officials could use the data to their benefit in deciding when to conduct immigration enforcement, specifically to “identify hot spots of illicit activity and combine this data with other data (such as weather conditions) to identify trends and make more predictive resources and targeting decisions regarding immigration enforcement.”

Mizelle wrote the memo to “analyze” law enforcement use of geolocation data and detail the potential legal problems that could arise under the Fourth Amendment or the Privacy Act. The tracking data has been profiled in the New York Times, which found dozens of companies that sell the consumer data to advertisers to target advertisements.

In a landmark 2018 Supreme Court opinion, Carpenter v. United States, law enforcement officers were ordered to get criminal warrants to obtain geolocation data in most cases directly from the cellphone carriers.

“As with GPS information, the timestamped data provides an intimate window into a person’s life, revealing not only his particular movements, but through them his ‘familial, political, professional, religious, and sexual associations,’” Chief Justice John Roberts said in delivering the majority opinion. “These location records hold for many Americans the ‘privacies of life.’”

Mizelle, however, writes in his memo that this Supreme Court ruling doesn’t apply to ICE and CBP because the agencies purchase data that is commercially available, meaning it technically does not require obtaining a warrant.

The data broker, according to the memo, told DHS that it doesn’t “independently verify” that each piece of AdID data comes from an application with a valid “terms of service agreement.” DHS says that the data broker obtains guarantees that the AdID data was lawfully obtained.

Wessler, from the ACLU, believes this admission is concerning.

“It shows a lack of due diligence by the government to ensure that all that people have actually consented to this collection of sensitive location information and there are plenty of examples of apps secretly collecting location information of people,” he said.

But Mizelle argues in his memo that “under existing precedent, there is no reasonable expectation of privacy in geolocation data from a mobile electronic device associated with AdID data that has been provided to a third party with the user’s consent.”

“As such, the government’s acquisition of that information is not a ‘search’ under the Fourth Amendment,” he added.

Schwartz said that argument falls short because there is no meaningful consent when a person downloads a game to their phone, and this data eventually winds up in the hands of DHS investigators.

“This person who downloaded the video game — did they have any knowledge that any of this was gonna happen?” Schwartz said. “No. They were presented with dense legalese, and they pressed a button. It seems irrational to conclude that the technology user, who did nothing besides download a video game, consented to this kind of surveillance of their movements.”


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Not working on border wall

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Thomas Kurian, CEO of Alphabet’s Google Cloud, speaks at the Google Cloud Next conference in San Francisco on April 9, 2019.

Michael Short | Bloomberg | Getty Images

Google Cloud CEO Thomas Kurian told employees Friday that it received confirmation from the U.S. Customs and Border Patrol that its technology won’t be used for immigration enforcement at the border, including for a “virtual wall.”

Kurian spoke to employees in a Friday all-hands meeting for the Cloud group known as The Weather Report, where he addressed a question from employees about a recent government contract reported by The Intercept. The report said that Google’s AI technology might be used in conjunction with technology from start-up Anduril, which is working on technology for a “virtual wall” at the U.S. border with Mexico.

Kurian strongly denied that aspect of the report.

“As we have stated in the past, we are not working on any projects associated with immigration enforcement at the southern border,” Kurian told employees Friday, according to a transcript of the meeting from a participant. Google confirmed the accuracy of the transcript, but declined further comment.

“While the statement of work includes a lengthy list of programs the agency may be testing, we have spoken directly with Customs and Border Patrol and they have confirmed that they are not testing our products for those purposes.”

Google employees have been outspoken about existing and potential government contracts — especially those of Trump-led immigration agencies and those with potential uses of war. Last year, Google employees signed a petition asking company leaders to declare they won’t work with U.S. immigration and border control agencies, citing mistreatment of asylum seekers and refugees.

And in 2018, Google ended a government contract dubbed Project Maven — which helped the government analyze and interpret drone videos via artificial intelligence — after several thousand employees signed a petition and dozens resigned. That also led to the company establishing what it calls “AI Principles” for both Google and its Google Cloud unit.

Employees aired their most recent concerns amid the August cloud proposal with the U.S. Customs and Border Patrol that states the Google Cloud Platform could contribute its artificial intelligence technology such as machine learning and natural language processing. The “statement of work” document showed the technology could be used in coordination with other agencies, including with drone camera company Anduril, which has a project for a “virtual border wall.”

In addition to Kurian’s statements, a person close to the project said the company is not working with Anduril and never had plans to.

Kurian told employees Friday the Border Patrol’s potential testing may include dozens of congruent companies and that would be likely applied for functions like document scanning and that any “custom” work would need to be finalized alongside its “AI principles.”

“The testing that they are doing might include systems to help with customer fraud, to detect drug trafficking, and scanning and translating travel documents,” Kurian continued in the live-streamed meeting. “As with any project, the use of our services will be in accordance with our terms of service and acceptable use policy, and any custom work would have to go through our AI principles review.”

Anduril was founded by Palmer Luckey, who also co-founded virtual reality company Oculus, which Facebook acquired in 2014. Luckey says Facebook fired him in 2017 for what he once described to CNBC as “no reason at all,” amid controversy surrounding his political contributions and financial support of far-right groups and internet trolls.

Google’s cloud business is an increasing area of focus for Google and parent company Alphabet. During its Q3 earnings report yesterday, Alphabet CEO Sundar Pichai said it would begin reporting Google Cloud’s operating income starting next quarter.

“With the segmentation, you will additionally see information about the scale of our investment, which will help gauge the progress we are making on the multi-year path ahead to create sustainable value,” Pichai said


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