Is Zoom crazy to count on Chinese R&D? – TechNode

Every crisis has both winners and losers. With the world in lockdown and unprecedented numbers of employees working from home, Zoom was clearly a winner. The video-conferencing software’s user base swelled from a daily maximum of approximately 10 million pre-Covid, to over 200 million by the end of March 2020. Its share price soared 215% over the same period.

But last week, the company’s fortunes took a turn for the worse as security researchers at Citizen Lab identified serious issues with the product’s security protocols, exacerbated by its reliance on China for product development. Since then, Taiwan banned Zoom for official use, various US school districts banned its use for online classes, and many companies now opt for a different video-conferencing tool. US intelligence officials also voiced concern over espionage, which has already risen during the Covid-19 outbreak (particularly from China), taking advantage of Zoom’s security weaknesses. 

This article first appeared in Distilled, TechNode’s weekly newsletter with analysis on the latest China tech happenings, on April 13. Don’t miss the next one. Start your free trial now.

Capucine Cogné graduated as a Shwarzman Scholar at Tsinghua University in 2019. Her thesis used French MNCs as a case study for why multinational companies establish R&D institutes in China.

I found Zoom’s R&D pretty interesting myself. When I researched China R&D for a master’s thesis, I rarely saw US startups—much less internet startups—using it. It was mostly MNCs. But Zoom has had at least part of its product development team based in China since it was founded in 2011.

Bottom line: Zoom’s Chinese R&D is one of many security concerns, but Zoom’s users should be more concerned about known software vulnerabilities. At the same time, the bad press surrounding Zoom’s Chinese R&D operations could lead other multinational companies to rethink locating R&D in China. China R&D is no longer a great way to save money, so it’s most commonly used only when it presents other major advantages.

Chinese body, US head: Zoom is an unusual beast. While headquartered in San Jose, its product development is “largely based in China,” according to recent corporate filings.


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