While Musk’s Neuralink drills into skulls, China’s BrainCo bets the future of brain tech is wearable

Elon Musk’s Neuralink, which uses implants in people’s heads to compensate for disabilities, has become the poster child for so-called brain-computer interfaces (BCI). But some companies are betting that mass-market neural tech won’t require opening the skull at all.

BCI works by processing brain signals and translating them into commands, allowing external devices to be controlled by thought.

Funding for startups in the field is a fraction of the capital flowing into artificial intelligence. But interest in the nascent field is rising as companies notch up milestones, such as enabling people with degenerative conditions including amyotrophic lateral sclerosis (ALS) to type or play video games using brain signals.

AI is a catalyst, boosting signal-processing capabilities. Some in the industry envision a further leap one day: using the mind to control or connect with AI and robots.

The technology is raising the stakes in the U.S.-China rivalry. The Chinese government included BCI as a strategic “future industry” in its latest Five-Year Plan. Regulators recently approved what officials call the world’s first minimally invasive BCI device for commercial use, developed by Neuracle Medical Technology to regain some hand function after spinal cord injuries.

While companies including China’s StairMed and NeuroXess push ahead with implants, the non-invasive field is gaining momentum – from the Sam Altman-backed Merge Labs to China’s Gestala, both pursuing ultrasound-based approaches.

BrainCo, one of the so-called “six little dragons” of tech startups in the eastern city of Hangzhou, makes prosthetics and wearable devices using BCI technology.

Rui Ma, founder of the Tech Buzz China media and research platform, said that while today’s proven BCI applications can dramatically improve the quality of life for severely impaired patients, the far bigger market likely lies in augmenting human capabilities.

But she added: “I don’t think anyone is remotely close to realizing that ... . Augmentation is like sci-fi at this point.”

A brain-tech roadmap

Founded in 2015 and born out of the Harvard Innovation Labs, BrainCo has planted its flag on the non-invasive side.

The implanted and non-invasive approaches are different paths to different problems, BrainCo partner and senior vice president Nyx He told CNBC in a recent interview. Some conditions can only be addressed by going into the brain, she said, but BrainCo believes many others – particularly where drugs fall short – can be served by non-invasive methods that are easier for people to accept and access, at lower risk and cost.

The company’s bionic hands, approved by the U.S. Food and Drug Administration, read an amputee’s neural and muscular electrical signals and translate intended movements into finger motions. Its wearables include a sleep aid that BrainCo says uses low-intensity electrical pulses to stimulate neurochemicals associated with stress relief.

BrainCo has raised 2 billion yuan ($280 million) in a funding round co-led by IDG Capital and Walden International, the venture firm founded by Intel CEO Lip-Bu Tan.

In Beijing, seven ministries jointly issued an implementation plan for the BCI industry in August last year, targeting key technological breakthroughs by 2027. In June, the provincial government of Anhui published an action plan to fast-track BCI development across research, production and industrialization.

Some startups in China, facing pressure from state-linked or risk-averse backers to show revenue, have turned to selling equipment or consumer-grade products, said Tech Buzz China’s Ma, while U.S. investors prefer the “world-changing bet.”

For now, China’s BCI market is taking off first in non-invasive rehabilitation technologies, Jefferies said, which face lower regulatory and clinical barriers.

“China has now incorporated BCI into its industrial policy apparatus,” said Paul Triolo, a partner at consultancy DGA-Albright Stonebridge Group. “Beijing thinks in terms of not just one breakthrough technology, but the whole supply chain.”

The country’s focus is also broader, he said, from stroke rehabilitation to prosthetics to cognitive assessment.

That coordination extends to hospitals and universities. Shanghai has paired BCI startups with Huashan Hospital, broadening access to patients and neurosurgeons. China’s health authorities also created a separate insurance category for BCI last year, which experts say could help to scale up the technology.

Like AI and semiconductors before it, BCI – with its sensitivities around intimate personal data and privacy – could become a geopolitical flashpoint as it matures. Performance-enhancing uses also raise ethical considerations.

BrainCo’s He said the company doesn’t collect customer data, which is stored on users’ devices, not transmitted to the cloud and erased after each use. Information such as concentration scores could also be saved locally on focus-training devices, He said.

Asked about tensions between the world’s two tech powers, she brushed the politics aside.

He said the company’s goal is to deliver solutions to those in need, whether in China or the U.S. “I don’t think I’ll stop at borders for that.”