Perspectives on the Future of Mobility and Autonomous Driving

by Bill Russo

I recently attended the Consumer Electronics Show in Las Vegas, where traditional automakers, suppliers and several technology firms were showcasing their vision of the future of mobility.  Of particular interest were the many demonstrations and announcements related to autonomous vehicles.  Early forms of this technology are finding their way into commercial applications in the form of “assisted driving” features which incorporate cameras and radar/lidar to provide the car an extra set of eyes to sense its surroundings and inform the driver of risks.  Rapid advancement of technologies needed to fully automate the driving process is also evident, indicating that robotic forms of transportation will be possible within at least 2 industry product cycles (5-10 years).

The following is a Q&A which offers a perspective on the future of mobility and the design and function of autonomous vehicles.

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  1. The Autonomous Driving (AD) era will allow for an entirely new driving experience for drivers and passengers.  How much of an impact will AD technology have on the comfort and convenience of driving?

Autonomous Driving will completely redefine the comfort and convenience of transportation.  In our current paradigm, comfort is designed around the driver and occupants in an externally focused manner:  with eyes to the road.  The space around the front seat occupants – both driver and passenger – is oriented to the information needed to manually drive the car to its destination. Autonomous vehicles will experience fewer accidents, over 95% of which are attributable to human error.  Cars can therefore be lighter, with less structure without compromising occupant safety.  Traffic jams will be less common since autonomous vehicles will be able to leverage vehicle-to infrastructure and vehicle-to-vehicle connectivity in order to avoid congestion and smooth the flow of traffic.

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  1. When you look back at the public’s embrace of big technology shifts – trains or commercial aviation for instance – to what extent was that shift motivated by the convenience of the new mode of transportation?

Convenience always shapes our choices when it comes to transportation.  Human beings are inherently explorers and some of history’s greatest inventions – wheels, bicycles, steamships, trains, cars, and airplanes – have allowed us to be mobile over greater and greater distances.  Over time, each of these inventions added more and more convenience-oriented features to make the experience of mobility more “painless”.  Mobility devices are themselves a convenience which allow us to get where we want to be without walking.  All forms of public and privately-owned transportation are solving this basic problem of minimizing our travel time.  Each solution became commercially viable by offering a benefit versus other forms of transportation that some people were willing to pay to either use or own.  For example, trains reduce travel time across a country from months to days, and commercial aviation reduced this to hours.  We can now circle the world by jet in a little more than a day, a journey the first explorers could not complete in several years, if they lived to tell the tale.   In recent history, owing to the invention of the internal combustion engine powered car (Carl Benz in 1886), and the moving assembly line (Henry Ford in 1908) the car became the primary means for the average person to satisfy their daily commuting needs.  In the increasingly urbanized world of the 21st century, we will experience the next evolution in convenient human mobility:  personalized, autonomous mobility on-demand.

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  1. What are some ways in which the Advanced Driver Assistance Systems (ADAS) technology already in the market, like cruise control, is increasing comfort and convenience for drivers and passengers?

Such technologies act as “support” systems for drivers which allow more tasks to be “delegated” to the car.  For example,  cruise control allows a driver to focus less on maintaining a constant speed and thereby improves the driving experience.  Routine or mundane tasks like parking or adjusting speeds while driving on highways are already becoming mainstream.  Lane departure warning, parking assistance, and cruise control are features that allow the driver to focus less on routine tasks and focus on the actual experience of driving.  Over time, the number of tasks that can be handled by the “smart car” will increase in order to reduce “pain points” of driving and making the overall experience more convenient, safer and therefore more enjoyable for the occupant.

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  1. In addition to the advantages of existing ADAS and autonomous driving technologies, what are consumers most focused on when it comes to comfort and convenience of fully autonomous vehicles?

With Autonomous driving, a new paradigm can be established to re-focus the passenger on how to productively use their transportation time.  Observing the outside of the car moves from a requirement to a choice – especially for the user of a mobility service.  Space that is allocated to providing driver information can be repurposed from a driver-passenger perspective to a “connected user” perspective.  Beyond mobility, a fully autonomous vehicle’s key benefit will be the experience it gives to the user, and the primary benefit which comes from delegating the task of driving to the car is PRODUCTIVE TIME.  As such, while the purpose of the car as a transportation device has not changed, the very concept of how to treat and offer convenience-oriented features to the occupant is different:  the autonomous vehicle is built with a “user-centric” mindset, as opposed to a “driver-centric” mindset.

An autonomous car, especially one used in longer-distance (>10km) commuting distances will need to be able to transform travel time into productive time through convenient services which may include infotainment (watching news/video, gaming), online communication (social networking, e-mail, conference calls), or online-to-offline services (discounts or promotions based on mobility patterns).  In the world of personalized, autonomous mobility on-demand, the car essentially becomes a connected rolling space that transports us between the places we live, work, and play.

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  1. What Autonomous Driving feature will consumers be most surprised by and also what core functionally will they gravitate to most?

For people born in the late 20th century, it will be difficult to reimagine this new form of mobility.  Most of us from this period see a car through a nostalgic lens:  our most prized possession outside of our home, and the one that we can take with us to showcase our lifestyle and aspirations.  For many, this will never change.

However, mobility is being revolutionized by digital technology.  The rapid emergence of ride-hailing services such as Uber, Lyft, Ola, and Didi Chuxing are transforming the car into a transportation service device.  It is in this mode that we can see a great fit for autonomous forms of mobility – as the operators of such services will benefit from not having to incur the cost of a driver, along with the lower maintenance and repair cost of autonomous vehicles.  Users of such services expect to be driven and are not seeking the driving experience in any case.

The most surprising aspect of this type of vehicle will be that it affords its users the opportunity to turn inward and use their time productively.  Future cars used for short commuting will be smaller and occupy less physical space:  they simply pick people up and drop them off and do this with minimal “extras”.  These will be summoned by an app on a mobile device.  Longer commuting will be done in autonomous vehicles which have spaces designed to address the productivity needs of the occupants:  with connectivity and consumption of content at the core.  Such cars may be booked or offered through a “subscription model” to give the users some flexibility in the service offering.  The shift in this paradigm will surprise people the most since these vehicles will be designed from a pure passenger experience perspective which will include how to entertain or delight the user during the journey.

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  1. Self-parking, one of the earlier semiautonomous features, is now found on many mainstream models and widely used by drivers. Do you think the public will adopt more complex autonomous features or a fully autonomous vehicle in the same manner?

The commercialization path for more complex and fully autonomous driving will be very different than what we seen so far.  In the current owner/driver-centric business paradigm, new features have to be sold to customers who accept the value proposition of the technology and are willing to pay for it.  Early-stage technologies typically come with a heavy price premium and are typically introduced to “premium” brands where customers are less price sensitive.  However, barring regulatory intervention, this will likely limit adoption of technologies including electric and autonomous vehicles as there are cheaper alternatives (conventional engines and human drivers).

The game-changer for both electric and autonomous vehicles comes from the convergence of On-Demand Mobility (ODM) with electric and autonomous vehicles.  ODM players, such as Uber and Lyft are highly investing in autonomous vehicles as a means of lowering their operating costs and unlocking the potential to participate in the Digital ecosystem through offering the users of its services access to content and O2O services.  This will create a new pathway to commercializing and scaling up the autonomous driving technology in a way that has not been seen before:  as we have seen with other “smart devices”, hardware innovation is backed by the digital ecosystem and thereby eventually becomes mainstream for everyone.

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  1. Since road conditions vary globally, will perceptions of comfort and convenience vary by country? For example, will it permeate places like Amsterdam where many travel by bicycle or public transportation already?

Comfort and convenience are solutions to mobility “pain points”, and the degree to which people experience these pain points varies greatly based on where we live.

Mobility pain is much higher in densely populated urban cities like New York, London, Paris, New Delhi, Mexico City and virtually all major cities in China.  The driving experience in highly urbanized countries like China can be horrific.  Cities like Beijing experience gridlock conditions at several times during a day, and suffer from severe environmental impact from the tailpipe and other emissions.  Electric and autonomous mobility on demand would be a welcome solution to address these mobility pain points.

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  1. From a societal perspective, how will AD technology change the way individuals get to and from their various destinations?

Adoption of autonomous driving technology will improve flow of traffic, reduce accidents and improve the quality of life in an increasingly urbanized world.  Scaling up this technology through the convergence of ODM with electric and autonomous vehicles in these cities will accelerate a transition from a transportation model where we own an under-utilized asset that is used 1-2 hours per day to a model where autonomous cars, directed by a smart-city transportation grid, are deployed on demand to where they are needed.  This is a far more efficient system where we will witness a shift from ownership of hardware toward paying for the utility that is derived from the hardware.

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  1. When it comes to commuting, how will AD technology ease the problem of extensive traffic jams in cities like Beijing or Los Angeles?

Autonomous vehicles deployed by on-demand mobility services fleets will be able to communicate with each other, and will be directed to and from users and their destinations by a Smart City transportation network.  These cars will be highly utilized assets, which minimizes the amount of city space which needs to be allocated for parking lots for cars which sit idle for more than 22 hours a day.  Cars can be routed around the traffic, minimizing the traffic jams that define the life of residents of cities like Los Angeles and Shanghai.  Smart, connected, and autonomous mobility devices backed by advanced algorithms used to govern the mobility patterns will improve the livability of cities in an increasingly urbanized world.

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  1. Besides the impact AD will have on productivity, how else will it improve lives for people outside of transportation?

Autonomous driving will have a tremendous impact on our environmental footprint.  The technologies required to power and govern a network of personalized, electric and autonomous mobility on demand (A-MOD) have the potential to transform the lives of people all over the world.  For example, these increasingly electric-powered vehicles will be also be part of the energy storage grid, we could very well moderate energy consumption and potentially shrink our carbon footprint.  Transportation innovation has reshaped the history of mankind, and the transportation revolution of the next decade will set the course and has the potential to improve the lives of all generations to follow.

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Bill Russo is the Managing Director and Automotive Practice Leader at Gao Feng Advisory Company, based in Shanghai.  He has 30 years of automotive industry experience and has lives and worked in China since 2004.  He was formerly the leader of Chrysler Group’s business in North East Asia.

Faraday Future Faces Crucial Test With New Electric Car

The Wall Street Journal, January 3, 2017

Electric carmaker Faraday Futures demonstrated its prototype all-electric FF 91 vehicle at CES 2017 on Tuesday. The four-door car can go from zero to 60 miles an hour in 2.39 seconds, executives say.

LAS VEGAS—Time is running out for Faraday Future’s ambitious plan to crack the U.S. auto industry and take on Tesla Motors Inc.

The startup faced a critical test here on Tuesday when it revealed an all-electric car that it says will be ready for production in 2018 and will cast aside doubts about its future.

Faraday made a splash at the CES technology conference last year with futuristic car designs and plans to build a $1 billion factory in Nevada. The buzz soon turned to skepticism amid a steady drip of news about suppliers demanding payments, Faraday executives leaving and its main investor bleeding cash.

At a media event on Tuesday ahead of this week’s CES 2017 conference, the Los Angeles-area company showed a four-door, sports-utility-like vehicle called the FF 91 that executives claim can go from zero to 60 miles an hour in 2.39 seconds, faster than the Tesla Model S.

Faraday’s car has cushy back seats that can recline like a La-Z-Boy chair and an interior cabin loaded with large video screens that can be updated with next-generation gadgets. Faraday hasn’t disclosed a starting price.

“I’m hoping…to convince people that we’re real,” said Nick Sampson, Faraday’s senior vice president of engineering and research and development. “We are doing a real product, it’s not just a vaporware, Batmobile to create attention.”

Mr. Sampson said the company plans to roll out the FF 91 in 2018, but he wouldn’t discuss Faraday’s financial status.

That question arose in November when Faraday’s main investor, Chinese billionaire Jia Yueting, disclosed a cash crunch at LeEco Holdings. Mr. Jia, founder of LeEco, told employees the company had expanded too quickly as part of a multibillion-dollar spending spree to build a conglomerate ranging from smartphones to electric cars and a film studio.

LeEco’s precarious cash situation has had “some impact” on Faraday, Mr. Sampson said, but he stressed the companies are separately run.

In late December, Mr. Sampson spent more than three hours showing reporters around the company’s headquarters, a former Nissan Motors Co. facility in Gardena, Calif. The former Tesla executive led a tour through various departments, including aerodynamics, body engineering and manufacturing, as many executives presented using large LeEco TVs and talked optimistically about being ready to begin production.

Notably absent was Marco Mattiacci, global chief brand and commercial officer, whose name was printed on the agenda. He quit a few days later, according to people familiar with the matter.

Mr. Mattiacci formerly headed Ferrari in North America and was one of eight senior executives who left in the past year, according to one of the people.

Some of Faraday’s Western executives, hired from high-profile auto makers, have disagreed with their Chinese counterparts over the direction of Faraday, according to people familiar with the matter.

Underscoring how important Faraday views the CES reveal, a giant TV screen in the company’s lobby near the boardroom displays a clock counting down the hours until the event. “While getting a PR event right would be a step in the right direction, it’s still not clear whether they can raise the funds needed to finish the journey,” Bill Russo, an automotive consultant for Gao Feng Advisory Co. in Shanghai, said.

Faraday joins a crowded field of startups that aim to follow the same path as Tesla. Silicon Valley automotive startup Lucid Motors last month revealed the production version of its electric sedan that will cost about $160,000 for early versions, with the expected starting price to drop to around $65,000.

The sales pitch for the Lucid car is similar to Faraday’s: promises of sports-car-like abilities, luxurious interiors and eventual self-driving capabilities. The companies also share Mr. Jia as an investor, though he isn’t a majority shareholder in Lucid.

During the recent Faraday tour, an executive demonstrated the car’s self-parking feature. While reporters were allowed rides in prototypes to demonstrate acceleration and handling, they weren’t given up-close demonstrations of the autonomous feature.

Instead, they watched from across the parking lot as the vehicle’s operator kept his left hand hanging out the window as the car approached an open spot and backed into it. Asked if reporters could see up-close how it worked, a spokesman said, “Maybe later.”

At the event Tuesday, after showing a video of the self-parking, Mr. Jia surprised the audience by popping out of the car after driving on stage.

He pushed a button to activate the self-parking feature. But it didn’t work.

“It’s a little bit lazy tonight,” Mr. Sampson said.

Moments later they tried it again with success. The company then said it will begin taking $5,000 deposits.

Write to Tim Higgins at Tim.Higgins@WSJ.com

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Trump Attacks BMW and Mercedes, but Auto Industry Is a Complex Target

The New York Times, January 16, 2017

A BMW at the New York International Auto Show in 2016. After praising German manufacturing prowess in an interview with Bild, President-elect Donald J. Trump threatened to impose a 35 percent tariff on every car that BMW imported to the United States.

BEIJING — In his latest criticism of what he sees as unfair trade, Donald J. Trump has taken aim at German cars. Why, the president-elect asked a German newspaper, do so many well-heeled drivers in New York drive a Mercedes-Benz, while Germans buy so few Chevrolets?

Mr. Trump’s question could set the stage for action by his incoming administration against the likes of Mercedes-Benz and BMW, which he criticized for its plans to build a new plant in Mexico. But the president-elect’s musing shows an incomplete understanding of how globalized the auto industry has become since Ronald Reagan went after Toyota and Honda in the 1980s.

That Mercedes-Benz in New York, for example, may have been made in Tuscaloosa, Ala., depending on the model. BMW has a plant in South Carolina that exports 70 percent of the vehicles made there, it says. And Germans might not buy many Chevrolets, which are no longer sold in Germany, but they buy plenty of Opels, which, like Chevy, is owned by General Motors.

Mr. Trump has criticized other companies and industries for moving production out of the United States at the expense of American jobs, such as appliance makers and pharmaceutical companies. But the vehicle industry in general — and particularly foreign automakers, his new target — illustrate how difficult it can be to parse American from international when criticizing global trade.

BMW and Mercedes-Benz — as well as the Japanese carmakers Honda, Nissan and Toyota — employ thousands of factory workers in Alabama, South Carolina, Texas and other states. G.M. gets more than a quarter of its auto-related sales outside North America, while Ford gets a third. Chrysler was bought by Fiat of Italy. Cars of all types increasingly have Chinese parts.

Nevertheless, Mr. Trump has been making a series of ever-broader demands that the auto industry manufacture in the United States to sell in the United States.

The president-elect’s latest comments came on Sunday in excerpts from an interview with the German tabloid newspaper Bild. After praising German manufacturing prowess, Mr. Trump threatened to impose a 35 percent tariff — he called it a “tax” — on every car that BMW imported to the United States. BMW should build the factory in the United States, Mr. Trump said, where it would benefit from his plans to slash corporate taxes.

Car exports are the lifeblood of the German economy, and the United States is one of the most important markets. New trade barriers would be a serious threat to German growth and could sour relations with one of the United States’ most important allies.

“We take his comments seriously,” Matthias Wissmann, president of the German Association of the Auto Industry, said in a statement. “Restrictions in the Nafta zone would put a real damper on the economy.”

In a post on Twitter on Sunday, Mr. Trump laid out his expectations for the auto industry: “Car companies and others, if they want to do business in our country, have to start making things here again. WIN!”

The main question lies in what Mr. Trump and his trade advisers decide to do once in office, auto industry officials and trade experts said. Measures to force manufacturers to shift assembly to United States factories and to use more American-made parts could drive up prices for American car buyers and make American vehicles less competitive in world markets.

“The people who lose are the core Trump supporters, who end up buying more expensive products,” said Bill Russo, a former chief executive of Chrysler China who is now the managing director for the automotive industry at Gao Feng Advisory Company, a Chinese consulting firm.

The German carmakers are hoping that, once Mr. Trump takes office, they will be able to convince him that tariffs on vehicle imports would hurt the American economy and get him to modify his views.

“We should seek a dialogue with Trump,” Clemens Fuest, president of the Ifo Institute, a research organization in Munich, said in an email. But Mr. Fuest also expressed concern that differences over trade could escalate.

“There is a danger that his policy fails and that he subsequently starts looking for scapegoats,” Mr. Fuest said. “One such scapegoat could be the German economy.”

In some respects, Mr. Trump has a point. The United States has been more open to imports than other large automotive markets, with the result that cars shipped in from abroad represent a considerably larger share of the American market than of markets elsewhere.

European governments have effectively limited imports by putting pressure on vehicle manufacturers not to close high-cost factories or to lay off workers. The Chinese government requires foreign automakers to partner with local manufacturers and sometimes requires them to transfer technology to Chinese companies.

Still, tailoring measures against the auto industry to create jobs in the United States could be difficult. For example, BMW’s Mexico plant would produce 3 Series sedans, which are currently made only in Germany and China. Most likely, the plant in Mexico would take jobs from the factories in Germany and China and create demand for components imported from the United States.

BMW is “very much at home in the U.S.A.,” Glenn Schmidt, a BMW spokesman, said in an email. Mercedes-Benz declined to comment.

The BMW factory site in San Luis Potosí, Mexico, is already swarming with construction workers rushing to make a 2019 deadline to begin production. There is little chance BMW will change its plans and move the assembly lines to the United States.

Mr. Trump’s comments hark back to the 1980s, when the Reagan administration criticized Japan for what it called unfair trade policies in the auto business. That compelled the Japanese government to set annual limits on the number of cars shipped to the United States.

Although President George Bush allowed Japan to drop the limits soon after taking office in 1989, the fights of the 1980s taught the global industry a valuable lesson: Made in America can be a good thing. Japanese and European automakers built assembly plants in the United States, taking the edge off political battles while creating tens of thousands of jobs in the country. Building plants in the United States helped in other areas as well, such as improving the foreign automakers’ logistics and moderating the impact from turbulence in currency markets.

BMW’s largest factory anywhere in the world is in Spartanburg, S.C. It employs nearly 9,000 people and exports 70 percent of the vehicles it makes, BMW says. Daimler makes Mercedes-Benz S.U.V.s and C-Class cars in Tuscaloosa, Ala., and it is building a new factory in Charleston, S.C., to manufacture Sprinter vans, creating more than 1,000 jobs.

Daimler, which also builds Freightliner trucks in the United States, has 22 factories or research and development centers in the United States that employ 22,000 people.

Even Volkswagen has not given up on the United States despite an emissions scandal that has led to $20 billion in civil settlements and criminal penalties. The carmaker, which has long produced cars in Mexico, is expanding a factory in Chattanooga, Tenn., to manufacture a new full-size S.U.V.

G.M. and Ford, meanwhile, saw big opportunities in places like China, where rapid economic development meant more people could afford cars.

A tough stance on autos from Mr. Trump may not have the same impact as that of President Reagan. Since the 1980s, automakers have made fewer of their own parts, buying them instead from hundreds of parts suppliers based all over the globe. That means an American car assembled in the United States could still have large chunks that are manufactured abroad.

Chinese manufacturers dominate the market for replacement parts in the United States, often undercutting prices for parts from the automakers by half or more. Tariffs on Chinese parts would end up being paid by Americans who took their cars in for repairs.

“U.S. consumers are paying a good price for their aftermarket parts,” because of Chinese providers, said Yale Zhang, the managing director of Automotive Foresight, a Shanghai-based consulting firm.

Global automakers’ assembly plants have been rapidly shifting orders from parts factories in the Midwest to plants in China in the last few years. But that trend could stop or reverse if Mr. Trump imposes sizable tariffs on those imports, Mr. Zhang said.

For any move Mr. Trump makes, the devil is in the details. Options include tariffs on imported cars and possibly car parts. He could also prompt a rewrite of the American tax code so that imports — but not exports — are taxed, a move known as border adjustment.

The architect of the Reagan administration’s restrictions on Japanese car imports and of a Reagan-era law that temporarily reduced taxes on exporters was Robert E. Lighthizer. Mr. Lighthizer was deputy United States trade representative at the time. He is now Mr. Trump’s choice to become the United States’ top trade negotiator.

China pushes for homegrown driverless cars

The Detroit News, January 7, 2017

Baidu Inc. and state-owned Beijing Automotive Group Co.’s collaboration on telematics and autonomous driving is almost ready for its coming-out moment, as industry and government join hands for a self-driving vehicle push within China.

A BAIC-built model equipped with Baidu tech will debut in April at the Shanghai auto show, BAIC Chairman Xu Heyi said in interview Friday at the trade show CES 2017 in Las Vegas. The two companies also plan to conduct road testing of a car that will be autonomous in limited environments by the end of this year.

China has set a goal for 10 percent to 20 percent of vehicles to be highly autonomous by 2025 in the world’s biggest auto market, and for 10 percent of cars to be fully self-driving in 2030. State broadcaster China Central Television began airing a five-part series this month on one of its prime time programs to highlight the country’s efforts in autonomous vehicles and related technology.

“It’s a smart move for both to team up,”said Bill Russo, managing director of Gao Feng Advisory Co. “BAIC can bring manufacturing and Baidu can bring technology capability to solve mobility problems.”

The cooperation with BAIC is Baidu’s most comprehensive, though the internet giant also is working with other automakers on joint development of self-driving cars, Baidu President Zhang Yaqin said Friday. The Beijing-based company is close to setting up a new research center near Seattle that will focus on artificial intelligence and cloud computing and security, he said.

Baidu formed a self-driving car team in Silicon Valley in April that it said would employ more than 100 researchers and engineers by the end of last year. It’s partnered with chip maker Nvidia Corp., has been testing its autonomous vehicles in eastern Chinese cities including Wuhu and Shanghai and earned a permit from California to test in the state last year.

BAIC, owned by the local government of Beijing, has made progress of its own. The automaker whose joint-venture partners include Daimler AG and Hyundai Motor Co. in April let customers ride in self-driving cars on a test track.

China is seeking to shed its image as a cheap manufacturer of products with little value-added content. The government is pushing its technology and manufacturing industries to create more sophisticated products and services in line with the global trend toward digitization and internet connectivity.

To contact Bloomberg News staff for this story: Tian Ying in Beijing at ytian@bloomberg.net.

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