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In Nevada desert, a technology firm aims to be a government

Associated Press

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In Nevada desert, a technology firm aims to be a government

In the Nevada desert, a cryptocurrency magnate hopes to turn dreams of a futuristic “smart city” into reality. To do that, he’s asking the state to let companies like his form local governments on land they own, which would grant them power over everything from schools to law enforcement.

Jeffrey Berns, CEO of Nevada-based Blockchains LLC, envisions a city where people not only purchase goods and services with digital currency but also log their entire online footprint — financial statements, medical records and personal data — on blockchain. Blockchain is a digital ledger known mostly for recording cryptocurrency transactions but also has been adopted by some local governments for everything from documenting marriage licenses to facilitating elections.

The company wants to break ground by 2022 in rural Storey County, 12 miles (19 kilometers) east of Reno. It’s proposing to build 15,000 homes and 33 million square feet (3 million square meters) of commercial and industrial space within 75 years. Berns, whose idea is the basis for draft legislation that some lawmakers saw behind closed doors last week, said traditional government doesn’t offer enough flexibility to create a community where people can invent new uses for this technology.

“There’s got to be a place somewhere on this planet where people are willing to just start from scratch and say, ‘We’re not going to do things this way just because it’s the way we’ve done it,’” Berns said.

He wants Nevada to change its laws to allow “innovation zones,” where companies would have powers like those of a county government, including creating court systems, imposing taxes and building infrastructure while making land and water management decisions.

The prospect has been met with intrigue and skepticism from Nevada lawmakers, though the legislation has yet to be formally filed or discussed in public hearings. Most in the Democratic-controlled Legislature are eager to diversify Nevada’s tourism-dependent economy, but many fear backlash against business incentives as they struggle to fund health care and education.

This proposal differs from the big tax rebates they have grown wary of offering, like the $1.3 billion given to Tesla to build its northern Nevada battery factory or the billions New York and Virginia offered Amazon to build new corporate headquarters.

But it raises deeper issues about increasing tech companies’ grip on everyday life at a time when antitrust regulators and Democrats in Congress allege tech giants like Facebook and Google are controlling markets and endangering people’s privacy.

Blockchains LLC and so-called innovation zones were a key part of Gov. Steve Sisolak’s January State of the State address, when he outlined plans to rebuild a more diversified economy after the coronavirus pandemic.

Sisolak, whose campaign and affiliated political action committee received a combined $60,000 from the company, said the proposal would transform Nevada into “the epicenter of this emerging industry and create the high-paying jobs and revenue that go with it.”

The governor’s office declined to comment further on innovation zones. But with Sisolak’s backing, the idea could garner serious consideration in the Legislature.

“I don’t know enough yet to say whether I’m comfortable with this as the next step or not. But, look, it’s a big idea and Nevada has been built on big ideas, so let’s hear it out,” said state Sen. Ben Kieckhefer, a Republican who sponsored blockchain-related legislation in 2017 and 2019.

If lawmakers back the proposal, technology companies with 50,000 acres of land (200 square kilometers) that promise a $1 billion investment could create zones governed by three people like county commissioners. The draft legislation says two of them initially would be from the company itself.

In Storey County, which is home to Tesla’s factory, officials are waiting for more information before offering opinions but say questions still need to be answered.

Commissioner Lance Gilman, who owns the Mustang Ranch brothel and bought most of the county’s land to turn it into an industrial park decades ago, has supported luring technology companies to the area and growing its population. But Gilman, who worked in marketing for Blockchains LLC from 2018 to 2019, said there are many unknowns about ceding control to a new jurisdiction that falls within county borders.

”(The bill) wants the host county to let it form, become successful, not pay them very much money, and eventually let them take over the whole county and all the operations, if it becomes successful,” Gilman said. “If it doesn’t become successful, who becomes responsible for all the stuff that was built in the meantime?”

The county’s master plan doesn’t permit residential development in the Tahoe-Reno Industrial Center, where most of Blockchain LLC’s property lies, but it allows for 3,500 homes in Painted Rock, a subsection of the company’s 67,000 acres (271 square kilometers).

Berns said officials told him in an informal discussion two years ago that they weren’t interested in zoning for more homes, a meeting that former County Manager Pat Whitten confirmed. Berns understands that elected leaders in Storey County may not want an experimental city in their backyard but believes the idea should be a state decision because of its potential to “singularly define Nevada going forward.”

“We bought 70,000 acres of land in the county. What did they think we were going to do?” he said.

The former consumer protection attorney said the idea was born from how he sees government as an unnecessary middleman between people and ideas.

“For us to be able to take risks and be limber, nimble and figure things out like you do when you’re designing new products, that’s not how government works. So why not let us just create a government that lets us do those things?” Berns said.

CARSON CITY, Nev. (AP) — By SAM METZ

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Biden tells execs US needs to invest, lead in computer chips

Associated Press

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Biden tells execs US needs to invest, lead in computer chips

President Joe Biden used a virtual meeting with corporate leaders about a global shortage of semiconductors to push Monday for his $2.3 trillion infrastructure plan, telling them that the U.S. should be the world’s computer chip leader.

“We need to build the infrastructure of today, not repair the one of yesterday,” he told the group of 19 executives from the technology, chip and automotive industries. “China and the rest of the world is not waiting and there’s no reason why Americans should wait.”

He said the country hasn’t made big investments to stay ahead of global competitors, and it needs to step up its game.

Biden made an appearance at the meeting between administration officials and company leaders held to discuss developing a stronger U.S. computer chip supply chain. The meeting came as the global chip shortage continued to plague a wide array of industries.

CEOs of AT&T, Dell, Ford, General Motors, Stellantis (formerly Fiat Chrysler), Intel, Northrop Grumman, and others were scheduled to attend.

But industry experts say there’s little they can do to stem the shortage, which has delayed a new iPhone and forced automakers to temporarily shut factories because they’re running short of the multiple computers needed to run engines, transmissions, brakes and other essential features.

Instead, Biden brought up developing a U.S. chip supply chain since most are made in Asia and shipped to the U.S. In February he ordered a review of the supply chain and pledged to work with international partners to ensure stable supplies.

Wedbush analyst Daniel Ives said there’s little that can be done immediately to end the current problem. “This could change things over the next three to five years, but for right now, there’s no structural changes that could alleviate the shortage,” he said.

The shortage already has made it harder for schools to buy enough laptops for students forced to learn from home, delayed the release of popular products and created mad scrambles to find the latest video game consoles.

But things have worsened in recent weeks, particularly in the auto industry, where factories are shutting down because there aren’t enough chips to finish building vehicles that are becoming rolling computers.

The coronavirus pandemic touched off a cascade of events that led to the problems. Chip factories had to shut down early last year, particularly overseas where most processors are made. By the time they reopened, they had a backlog that was worsened by unforeseen demand. Personal computer demand, for instance, spiked as government lockdowns forced millions of office employees and students to work or attend class remotely.

High demand for consumer electronics squeezed the auto industry. Chip makers compounded the pressure by rejiggering factory lines to better serve the consumer-electronics market, which generates far more revenue for them than autos.

After eight weeks of pandemic-induced shutdown in the spring, automakers started reopening factories earlier than expected. But they found out that chip makers weren’t able to flip a switch quickly and make the more robust processors needed for cars. Industry executives say the shortage should start to end by the third quarter of this year.

It’s merely a symptom of a larger problem of the U.S. relying too much on Asia for critical parts such as semiconductors, said Ives said, who called the meeting long overdue. “I think now it’s just exposing the structural issues as well as some of the potential national security issues the U.S. faces, given our reliance on Asia,” he said.

The U.S. has only 12% of the world’s semiconductor factory capacity, down from 37% in 1990, according to the Semiconductor Industry Association.

Not surprisingly, the major players in the chip industry welcomed the opportunity to gain even more support from the Biden administration to help subsidize the efforts to expand the supply and distribution of processors likely to play an integral role in the economy for decades to come.

“We appreciate the White House meeting with industry leaders about the importance of ensuring a strong and resilient semiconductor supply chain,” said the semiconductor association, a trade group whose board of directors includes three CEOs who participated in Monday’s discussions.

The association’s other members include three major chip players outside the U.S., Samsung, Taiwan Semiconductor Manufacturing Co. and NXP, who sent executives to the meeting.

Intel CEO Pat Gelsinger warned a future shortage of chips “could have a devastating economic impact, or worse, compromise our national defense.”

The trade group representing Ford, General Motors and Stellantis thanked the administration for pressing chip makers to fill automakers’ orders. “It is imperative that all efforts are made to ensure our auto industry remains indispensable to the U.S. economy and American jobs,” Matt Blunt, president of the American Automotive Policy Council, said in a statement.

The shortage comes just as the auto industry is accelerating plans to shift away from internal combustion vehicles, shifting more toward those powered by batteries.

As part of his $2.3 trillion infrastructure plan, Biden wants to spend $174 billion over eight years on electric vehicles. That figure includes incentives for consumers, grants to build 500,000 charging stations, and money to develop U.S. supply chains for parts and minerals needed to make batteries. Biden also wants Congress to put $50 billion into semiconductor manufacturing and research.


WASHINGTON (AP) — By TOM KRISHER and ALEXANDRA JAFFE

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Chinese regulator orders Ant Group to conduct major overhaul

Associated Press

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Chinese regulator orders Ant Group to conduct major overhaul

Chinese regulators have ordered Ant Group, a financial affiliate of e-commerce giant Alibaba Group Holding, to become a financial holding company to ease financial oversight amid stepped up scrutiny of technology firms.

In a meeting Monday, the central bank and other financial regulators also ordered Ant to cease anti-competitive behavior in its payments business and improve its risk management and corporate governance, according to a statement on the website of the People’s Bank of China.

The guidance follows a decision by regulators last November to suspend a planned $34.5 billion initial public offering just days before Ant’s trading debut. Officials cited changes in the regulatory environment.

Ant Group is the world’s largest financial technology company. It was valued at $150 billion after a 2018 fundraising round, and its valuation later rose to $280 billion ahead of its now ill-fated IPO.

The regulators told Ant to rectify unfair competition in its payments business and reduce the balance of its Yu’ebao money-market fund — which at one point was the largest in the world. It also was ordered to break its information monopoly and to minimize the collection and use of personal data and to stop any illegal credit, insurance and wealth-management activities.

In a statement on its official WeChat social media account, Ant said, “Under the guidance of financial regulators, Ant Group will spare no effort in implementing the rectification plan, ensuring that the operation and growth of our financial-related businesses are fully compliant.”

Ant is one of two leading companies in the online payments business in China, the other being rival Tencent. The company says more than 1 billion people use its Alipay service, which offers a slew of functions including bill payments, purchases online and offline and money transfers.

In January, China proposed draft rules to curb monopolies in the online payments market. Any non-bank company with half of the market in online transactions or two companies with a combined two-thirds market share could be subject to antitrust probes.

As of the first quarter of 2020, Tencent and Ant Group had a combined market share of more than 90%, with Ant taking 55.4% of the market and Tencent 38.8%, according to data from market research firm iResearch.

The new guidelines for Ant’s overhaul come days after Alibaba was fined $2.8 billion following an antitrust probe into the company founded by billionaire Jack Ma.

Alibaba’s stock price rose 6.5% in Hong Kong on Monday.


HONG KONG (AP) — By ZEN SOO

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Alibaba fined $2.8 billion on competition charge in China

Associated Press

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Alibaba

Alibaba Group, the world’s biggest e-commerce company, was fined 18.3 billion yuan ($2.8 billion) by Chinese regulators on Saturday for anti-competitive tactics, as the ruling Communist Party tightens control over fast-growing tech industries.

Party leaders worry about the dominance of China’s biggest internet companies, which are expanding into finance, health services and other sensitive areas. The party says anti-monopoly enforcement, especially in tech, is a priority this year.

Alibaba was fined for “abusing its dominant position” to limit competition by retailers that use its platforms and hindering “free circulation” of goods, the State Administration for Market Regulation announced. It said the fine was equal to 4% of its total 2019 sales of 455.712 billion yuan ($69.5 billion).

“Alibaba accepts the penalty with sincerity and will ensure its compliance with determination,” the company said in a statement. It promised to “operate in accordance with the law with utmost diligence.”

The move is a new setback for Alibaba and its billionaire founder, Jack Ma, following a November decision by regulators to suspend the stock market debut of Ant Group, a finance platform spun off from the e-commerce giant. It would have been the world’s biggest initial public stock offering last year.

Ma, one of China’s richest and most prominent entrepreneurs, disappeared temporarily from public view after criticizing regulators in a November speech. That was followed days later by the Ant Group suspension, though finance specialists said regulators already had been worried Ant lacked adequate financial risk controls.

Alibaba, launched in 1999, operates retail, business-to-business and consumer-to-consumer platforms. It has expanded at a breakneck pace into financial services, film production and other fields.

The government issued anti-monopoly guidelines in February aimed at preventing anti-competitive practices such as exclusive agreements with merchants and use of subsidies to squeeze out competitors.

The next month, 12 companies including Tencent Holdings, which operates games and the popular WeChat messaging service, were fined 500,000 ($77,000) each on charges of failing to disclose previous acquisitions and other deals.

Regulators said in December they were looking into possibly anti-competitive tactics by Alibaba including a policy dubbed “choose one of two,” which requires business partners to avoid dealing with its competitors.

Also in December, regulators announced executives of Alibaba, its main competitor, JD.com, and four other internet companies were summoned to a meeting and warned not to use their market dominance to keep out new competitors.


BEIJING (AP) — By JOE McDONALD

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