Tech Brew Ride Home - Mon. 09/23 – Qualcomm To Buy Intel?

Episode Date: September 23, 2024

Qualcomm as a white knight to save Intel? A huge bitcoin heist gets busted for the usual reasons. What if the US bans imports of all cars from China? And why can’t US car makers keep up when it comes, simply, to software? Sponsors: Timeline.com/ride Links: Qualcomm Approached Intel About a Takeover in Recent Days (WSJ) Intel Gets Multibillion-Dollar Apollo Offer as Qualcomm Circles (Bloomberg) Chip Giants TSMC and Samsung Discuss Building Middle Eastern Megafactories (WSJ) Suspects behind $230 million cryptocurrency theft arrested in Miami (BleepingComputer) US proposes banning Chinese software and components in vehicles (FT) Israel’s Pager Attacks Have Changed the World (NYTimes) Toyota and VW fall further behind in the software race (FT) Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the Tech meme right home for Monday, September 23rd, 2024. I'm Brian McCullough today. Qualcomm as a white night to save Intel. A huge Bitcoin heist gets busted for the usual reasons. What if the U.S. bans imports of all cars from China and why can't U.S. carmakers keep up when it comes simply to software? Here's what you missed today in the world of tech. sources say Qualcomm made a takeover approach to Intel in recent days, but a deal is far from certain. For among other reasons, Intel's market cap is around $93 billion, and Qualcomm's is only around $188 billion.

So quite a big bite to bite off even without regulatory stuff, though I wonder if the regulatory stuff might not be as big an issue as you would think, because Qualcomm is a U.S. company, and I would imagine the U.S. government would want to keep Intel healthy and alive, quoting the journal. Qualcomm is a leading supplier of chips for smartphones, including ones that manage communications between phones and cell towers. It is one of the most critical suppliers for Apple's iPhones, among a range of other devices. A deal would significantly broaden Qualcomm's horizons, complementing its mobile phone chip business with chips from Intel that are ubiquitous in personal computers and servers. Qualcomm and Intel have also sought to profit from the artificial intelligence boom with the advent of AI features and phones and computers,

although both have been overshadowed by AI chip giant invidia. Both Intel and Qualcomm have become U.S. national champions of sorts. As chipmaking gets increasingly politicized, Intel is in line to get up to $8.5 billion of potential grants for factories in the U.S. as Chief Executive Pat Gelsinger tries to build up a business-making chips on contract for outsiders. Qualcomm, led by Chief Executive Cristiano Amman, has engaged with Intel to potentially make its chips in Intel's factories. but Qualcomm halted the effort amid technical missteps the journal reported last year, end quote.

Then this morning there was this. Sources also say Apollo global management has offered to make an equity-like investment of as much as $5 billion in Intel, quoting Bloomberg. Intel executives have been weighing Apollo's proposal, the people said. The size of Apollo's potential investment could change or discussions could fall apart, they said. Intel and Apollo already have a relationship, Santa Clara, California, based, Intel agreed in June to sell a stake in a joint venture that controls a plant in Ireland for $11 billion to Apollo, bringing in more external funding for a massive expansion of its factory network. Apollo also has other experience in the chipmaking space. Last year, the New York-based firm

agreed to lead a $900 million investment in Western Digital buying convertible preferred stock, end quote. Sources are telling the journal that TSMC and Samsung executives have visited the UAE and are considering building UAE-funded chip factories there. TSM denies any new international expansion. Quote, discussions are still in the early phases and face technical and other hurdles that mean they might not pan out. Under initial terms being discussed, the projects would be funded by the UAE with a central role for Abu Dhabi-based sovereign development vehicle Mubadala, which is eager to develop a domestic tech industry. The broader goal would be to increase global chip

production and help bring chip prices down without hurting chip makers' profitability, some of the people said. A Mubidala spokesman said, MGX, a state-backed company that is spearheading some of Abu Dhabi's most prominent AI investments, had made semiconductor manufacturing a pillar of its strategy and was, quote, in regular dialogue with partners around the world, although there are no specific plans currently for a facility in the UAE. The discussions with TSM and Samsung reflect both the UAE's growing tech ambitions and a global push to fund expanded chip production in large part to satisfy the needs of the AI boom. Costs have ballooned in recent years to the point that a single cutting-edge ship factory can require $20 billion. Projects on the scale being discussed in the

UAE involve complexes that could contain numerous factories and cost over $100 billion in aggregate. Abu Dhabi has one of the world's largest pools of sovereign wealth, and Mubadala said its portfolio of investments was valued at about $300 billion as of last year. Government officials and industry executives say substantial technical and political hurdles remain. One concern is that chip manufacturing requires large amounts of super clean water for uses, such as rinsing the silicon wafers that microscopic circuits are etched onto. Much of the UAE's water is produced through desalinization and would require substantial purification. There are also concerns about the availability of engineering talent to staff major new factories far from the company's home bases

in a country without much of an existing chip-making supply chain. end quote. The FBI has arrested and charged two people in Miami over a conspiracy to steal and launder more than 4,100 Bitcoin worth more than $230 million. Zach XBT says the criminals targeted a Genesis creditor, allegedly, quoting bleeping computer. The two defendants, 20-year-old Malone Lamb, aka Graevees, aka Anne Hathaway, and aka Dollar-Sign, dollar sign, dollar sign, and 21-year-old Gene Deal Serrano, aka Box, Versace God, and At Skidstar were arrested Wednesday night by FBI agents and appeared in court on Thursday. During a successful attack on August 18th, they stole more than 4,100 Bitcoin from a Washington, D.C. victim worth more than $230 million

at the time. According to court documents, Lam, Serrano, and others allegedly gained unauthorized access to the victim's cryptocurrency accounts, transferring funds into crypto wallets under their control, before laundering the stolen assets. They reportedly laundered the stolen cryptocurrency via a combination of crypto-mixers and exchanges using peal chains and pass through wallets and virtual private networks to hide their identities and locations throughout the scheme.

The stolen cryptocurrency was then used to finance lavish lifestyles with the defendants allegedly spending on international travel, luxury cars, high-end watches, designer handbags, and nightclub outings in Los Angeles and Miami. Crypto fraud investigator Zach XBT, who assisted the official investigators, identified a third alleged conspirator known by the alias Wiz. As he revealed, the group targeted a creditor of cryptocurrency exchange genesis using spoofed phone numbers and impersonating Google and Gemini

customer support to compromise accounts. While posing as a Gemini support representative, they claimed the account had been compromised and deceived the victim into resetting two-factor authentication and sharing their screen via the AnyDesk Remote Desktop application to access private keys from Bitcoin Core and Steel Funds. Quote, an initial tracing showed $243 million split multiple ways between each party before funds quickly peeled off to more than 15 exchanges immediately swapping back and forth between Bitcoin, Lightcoin, Ethereum, and Monaro. Zach XBT said, the follow-up investigation found that a cluster of Ethereum addresses linked to Serrano and Wiz received over $41 million from two exchanges in recent weeks. Despite efforts to cover their tracks,

investigators traced the laundered funds after they were used to buy luxury cars, watches, and jewelry. The funds were quickly laundered through multiple cryptocurrency exchanges, with transactions bouncing between Bitcoin, Litecoin Ethereum, and the privacy-focused coin Manero. Zach XBT revealed that Wiz was caught after exposing his real name during a screen sharing session, as shown by a recording he shared. Additionally, while most funds were converted to Monaro for added anonymity, Wiz and Serrano reportedly made critical errors linking their laundered funds to the original stolen amounts. The FBI arrested Lam and Serrano after tracking their lavish spending and social media posts from friends revealed their locations in Los Angeles and Miami, end quote.

The U.S. Commerce Department has proposed banning Chinese software and hardware for internet-connected vehicles, thereby effectively banning Chinese vehicles in the U.S. altogether. quoting the FT. The rule follows concerns from the Biden administration about Chinese companies collecting data on American drivers and infrastructure as well as the potential for foreign adversaries to remotely manipulate connected cars on U.S. roads. It is the latest step in a wider U.S. effort to crack down on Chinese vehicles, software, and components. Already this year, the U.S. sharply raised tariffs on Chinese imports, including a 100% tariff on Chinese electric vehicles. The rule would allow companies to pursue some exceptions to the ban if they could show they are taking mitigation measures, such as auditing or site checking, but officials said the rule would

essentially ban Chinese vehicles. Our assumption as of now is that Chinese vehicles will fall within the prohibition, a senior official said. The rule would also ban Russian software and hardware. Biden in February ordered an investigation into whether Chinese-connected vehicles pose a security risk to Americans. There are few Chinese or Russian cars on the road in the U.S. currently, and the rule is designed to neutralize the national security threat they could pose in the future. said, we're issuing a proposed rule to address these new national security threats before suppliers, automakers, and car components linked to China or Russia become commonplace and widespread in the U.S. Automotive sector, Commerce Secretary Gina Raimondo said. She pointed to Europe as a, quote,

cautionary tale where Chinese cars have quickly flooded the market. We know the Chinese playbook. They subsidize, so we're not going to wait until our roads are filled with cars, and the risk is extremely significant, she said, end quote. Yeah, but there are two and angles to this that are interesting. First, the government, if they do this, gets to do a bit of protectionism to protect U.S. automakers from being undercut on price, as just mentioned, which I believe we've also been talking about, especially those Chinese EVs. They're like insanely cheap compared to U.S. automaker prices. But also, one of the things behind all of this from day one has always been the idea that if you don't control your supply chain, you open yourself up to potential sabotage

in a time of war. And frankly, not even just sabotage. I mean, people are like, what, if China invades Taiwan. It's left back doors in tons of infrastructure and suddenly the lights go out and none of the gas pumps anywhere in North America work. Well, yeah, there's that. But look at these recent pager and walkie-talkie explosions in the Middle East. We're talking about more than sabotage there. There was an op-ed in the New York Times this weekend from Bruce Schneier, who I believe we've quoted from in the past. And his literal headline was, Israel's pager attacks have changed the world. quoting just a bit from that piece. The bottom line, our supply chains are vulnerable, which means that we are vulnerable.

Anyone, any country, any group, any individual that interacts with a high-tech supply chain can potentially subvert the equipment passing through it. It could be subverted to eavesdrop. It could be subverted to degrade or fail on command, and although it's harder, it can be subverted to kill. It's not obvious how to defend against these and similar attacks. Our high-tech supply chains are complex and international. It didn't raise any red flags to Hezbollah that the group's pagers came from a Hungary-based company that sourced them from Taiwan because that sort of thing is perfectly normal.

Most of the electronics Americans buy come from overseas, including our iPhones, whose parts come from dozens of countries before being pieced together primarily in China. That's a hard problem to fix. We can't imagine Washington passing a law requiring iPhones to be made entirely in the United States. Labor costs are too high and our country doesn't have the domestic capacity to make these things. our supply chains are deeply inexorably international, and changing that would require bringing global economies back to the 1980s. So what happens now, as for Hezbollah, its leaders and operatives will no longer be able to trust equipment connected to a network, very likely one of the primary goals of the attacks, and the world will have to wait and see if there are any long-term effects of this attack or how the group will respond. But now that the line has been crossed, other countries will almost certainly start to consider this sort of tactic as within bounds.

It could be deployed against the military during a war or against civilians in the run-up to a war, and developed countries like the United States will be especially vulnerable simply because of the sheer number of vulnerable devices we have, end quote. Essentially, everything is smart now. Almost every product, say maybe breakfast cereal and maybe even give that time, but in a universe where everything is smart, everything is potentially vulnerable. We've never faced a world where warfare means everything is weapon. even the stuff you carry in your pocket. Also from the FT, and obviously related to that previous segment, there's also a piece up looking at how legacy carmakers in the U.S. are struggling to

keep pace as the focus shifts from, you know, making engines to computing. Only Ford, GM, and BMW are listed in Gartner's digital performance top 10. All other automakers have fallen out of the top 10. Quote, It's a tough transition for sure that required both a shift of mindset as well as a shift in technology said Anders Bell, the chief engineering and technology officer of Volvo Cars, and the Gilly-owned Swedish group launched its new electric sport utility vehicle earlier this month. Bell, a former Tesla engineer, said the flagship EV was just, quote, the start of our software-defined vehicle, referring to a term coined by Elon Musk's car group in 2012.

The long-awaited EX-90 is equipped with advanced software. and Nvidia chips that allow its car to become better and safer over time. However, delays and glitches Volvo-faced in developing a centralized computing system meant that there was a glaring absence of important features, available in many existing EVs such as Apple CarPlay and Smart Charging, which will be added in future software updates like a smartphone. But issues Volvo faced in developing its new car are a window into the uphill battle that legacy carmakers face as they seek to cut costs and generate more revenue

by building cars where software is central to the driving experience. At the start of the year, France's Renault canceled plans to list shares in its new EV and software business amid slowing growth in battery-run car sales worldwide, but the Ampere unit remains on track to launch its first software-defined vehicle, which its chief executive Luca DeMaio, has described as a mobile phone on wheels in 26. It also aims to generate 40% of the profit generated by the car over its lifecycle from software by 2030 compared with the current 10%. Carmakers have traditionally relied on in-house engineers for technology and software development. However, they are now being forced to look outside to seek talent from startups as well as big tech groups such as Apple and Google, causing culture clashes and internal tensions. In June, Volkswagen turned to a $5 billion software tie-up with U.S. electric vehicle startup Rivian, following budget overruns and setbacks at the German carmakers in-house software developer,

Kariad, which led to delays in the rollout of new models. Toyota has also struggled with its internal software unit Woven, where net losses have totaled $888 million in the past two years, people close to the company said. The subsidiary is developing Toyota's software to make vehicles smarter, but there has been a major management reshuffle with former Google Executive James Cuffner, resigning as Woven's CEO last year to become the group's senior fellow. Toyota said it was still on track to release its new software, Arian, next year, and attributed some of the losses to one-off factors. Toyota has to crack this, said McCrory auto analyst James Hong. If it doesn't, then it and other companies in the Toyota family, including Subaru, Mazda, and Suzuki, risk losing market share and could find themselves forced to rely on big tech companies like Apple and Google for software that will be key to their cars. Beyond improving basic functions of the vehicles, carmakers

have been drawn to the potential of software to deliver more revenues through a collection of user data and offerings of subscription services that come with a monthly fee for insurance, servicing, and repairs. The monetization aspect is particularly appealing for companies grappling with higher development costs and lower margins for EVs. Digital services currently generate only about $300 million or 3% of automaker revenues globally, according to Accenture. However, the consultancy projects that this could expand to $3.5 trillion by 2040, accounting for nearly 40% of the revenue generated by the automotive industry, end quote. Nothing more for you today. Talk to you tomorrow.