Chinese smartphone maker Honor says AI’s power is ‘worthless’ without data privacy

The transforming power of artificial intelligence is of no value unless user data is protected, George Zhao, CEO of Chinese smartphone company Honor, told CNBC in an exclusive interview. His comments come as Apple this month announced it will start rolling out personalized AI tools on certain devices in the U.S. this fall. “We say user data doesn’t leave [the device],” Zhao said. “This is a principle we adhere to.” Honor CEO George Zhao (L) and GSMA CEO John Hoffman on stage at Shanghai Mobile World Congress during an awards ceremony on June 27, 2024.

HANGZHOU, China — The transforming power of artificial intelligence is of no value unless user data is protected, CEO of Chinese smartphone company Honor, George Zhao, told CNBC in an exclusive interview on Thursday.

His comments come as Apple this month announced it will start rolling out personalized AI tools on certain devices in the U.S. this fall.

Honor already integrates some AI functions, such as enabling users to open text messages and other notifications just by looking at them, or eliminating copy-paste steps by directly linking Yelp-like apps to navigation or ride-hailing apps.

This week at Mobile World Congress in Shanghai, Honor unveiled new AI tools for detecting the use of deepfakes in videos, and for simulating lenses that can decrease myopia during long hours of screen usage.

Zhao emphasized that Honor’s approach is to keep AI operations involving personal data limited to the smartphone. It’s also known as on-device AI, and stands in contrast with AI tools that tap cloud computing to operate.

“Without data security and user privacy protection, AI will become worthless,” Zhao said in Mandarin, translated by CNBC. “This has always been one of our value propositions.”

“We say user data doesn’t leave [the device],” Zhao said. “This is a principle we adhere to.”

Apple Intelligence, the iPhone company’s AI product, claims that it uses on-device processing and draws on “server-based models” for more complex requests. Apple said its new “Private Cloud Compute” never stores user data.

Honor says its on-device AI is self-developed, and the company is working with Baidu and Google Cloud for some other AI features.

“Overall, my view is that AI’s development to date has two directions,” Zhao said. “Network

CNBC

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T+1 to increase costs and volumes in ETF securities lending

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Exchange traded fund providers face additional costs in their securities lending activity due to the US moving its settlement cycle to T+1 at the same time as industry observers expect stock lending to increase.

The US, Canada and Mexico moved to a shortened settlement cycle at the end of May for US equities and corporate bonds from two business days after the trade date, referred to in the industry as T+2, to one day, or T+1.

The move has significant implications for the industry because many of the largest ETF issuers, representing 80 per cent of global ETF assets, engage in securities lending programmes to earn additional revenue on behalf of their ETFs, according to Brown Brothers Harriman.

However, the International Securities Lending Association said the difference in settlement cycles between the US and Europe creates a “misalignment” that will lead to extra costs in the ETF securities lending market.

This article was previously published by Ignites Europe, a title owned by the FT Group.

Tony Holland, regulatory and markets consultant at Isla, said the US move to T+1 created a “funding gap from misalignment” for ETFs engaging in securities lending.

“How can you pay for something on T+1 if you are not receiving the cash proceeds from the investor until T+2?” said Holland.

He said it was not clear “if a fund will go overdrawn to pay for the US security”, whether the authorised participant would “swallow” the funding cost, whether the cost will be passed back to the ETF creator, or whether the cost will be passed to the end fund investor once they settle on T+2.

ETFs may have to “move more levers to get into a position to raise the cash financing to pay for the US security on T+1, he added.

Others agreed that the move to T+1 would trigger more activity in the securities lending market.

Matthew Chessum, director, securities finance at S&P Global Market Intelligence, said: “We are expecting to see an increase in volumes as a result of this change.

“Securities lending will be required to assist in providing liquidity to asset owners, who need to cover short positions that are expected to be generated by a mismatch in either settlement dates or [foreign exchange]