Tech Brew Ride Home - Mon. 12/10 - iPhone Sales Banned in China

Episode Date: December 10, 2018

iPhone sales blocked in China, Apple’s getting into the A&R business, pump the breaks on the e-scooter hype, and forget the notch, 2019 might be the year of the hole punch.Sponsors:DataDogHQ.com/ridehomeTiny.websiteLinks:China bans many iPhone models in Qualcomm patent dispute (Axios)Can the U.S. Stop China From Controlling the Next Internet Age? (NYTimes)Huawei CFO Arrested, Australia’s Awful Law (Stratechery)Apple acquired Platoon, a platform for musicians to create and distribute work (TechCrunch)Investor Frenzy for Scooter Startups Cools (WSJ)Your Apps Know Where You Were Last Night, and They’re Not Keeping It Secret (NYTimes)Samsung’s A8s is its first phone with an Infinity-O hole-punch display (The Verge) 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 ride home for Monday, December 10th, 2018. I'm Brian McCullough. Today, iPhone sales are blocked in China.

Apple's getting into the A&R business. Maybe we should pump the brakes on the e-scooter hype. And forget the notch, 2019 might be the year of the hole punch. Here's what you miss today in the world of tech. A Chinese court has granted Qualcomm an injunction against Apple and is banning the import and sale of tech. all iPhones in China models 6-S through

10. The court cited infringement of two Qualcomm patents, one related to application management on smartphones and the other relating to photo management on smartphones. Apple stock opened down 2% this morning on

the news and this afternoon Apple of course announced it was appealing the ruling. So you're probably aware Qualcomm and Apple have a whole slew of lawsuits litigation issues on patents, on contractual disputes, all sorts of things. There's that big lawsuit in a San Diego court that we thought might get settled between the two companies and then wasn't going to be settled, and then the date for that trial was set for April.

This story was broken this morning by Inafreid in Axios, and you know how they have those little be-smart graphs in their stories? Well, here's the be-smart graph for this one, quote. Companies will often change their software in such cases where possible to avoid infringement rather than halt sales of a key product, end quote. So Apple could do a quick fix here, possibly, to avoid being shut out of China. But there are other factors to consider here. Note that this injunction blocks the sale of iPhones in China but not the manufacturer of iPhones, which would be a body blow. but here's my own be smart on this. In the end

might this just be the thing that brings Apple and Qualcomm together to finally settle all their various disputes? Timely bit of leverage for Qualcomm, if you ask me. Slightly related story here. Over the weekend, the fallout continued from that arrest of Meng Wan-Zum of Huawei by Canada at the behest of the U.S.

Ms. Wang appeared in court over the weekend and is due back in court today for a further bail hearing. Kara Swisher's weekend New York Times column addressed this issue, and she quoted anonymous U.S. tech executives who voiced fears of possible retaliation by China, especially retaliatory arrests of U.S. executives. Quote, it's worrisome because it's an escalation we did not need, one executive said, referring to the already tense trade talks between the two countries.

What China will do, given all the existing tensions, is anyone's guess, end quote. Ben Thompson addressed this as well in his Monday newsletter. He too cited the possibility of retaliatory arrests or something more. Quote, nearly every single U.S. tech company has some sort of China dependency, particularly in the supply chain. The most exposed of all, though, is Apple, thanks not only to its massive manufacturing operation, but also because China is such a successful consumer market for the company. Could China potentially retaliate for Meng's arrest by arresting?

a U.S. Technology Executive, could it impose onerous red tape on manufacturing operations? Could China interfere in Apple's consumer business, end quote. Well, note that even though this was possibly completely unrelated, as we just heard, that sort of disruption to Apple's consumer business in China just happened. Continuing Thompson, quote, what is critical to understand is that it doesn't matter that there isn't an Iran sanctioned like Causes Beli. A reason could be drummed up if need be.

These sorts of things are political decisions subject to nearly unknowable tensions and negotiations within the Chinese government itself, which, although not democratic, is still sensitive to popular sentiment. To be clear, I don't expect anything significant to happen to Apple or anyone else. At the same time, it would seem increasingly foolhardy

to not start hedging bets, particularly in the supply chain. hedging, though, costs money, which means it is increasingly hard to see the ongoing tensions between China and the United States not having an impact on tech companies. Either they are taking on too much risk or they are paying to hedge it, end quote. Well, funny enough, guess what, just this morning, GoPro announced that it will be moving production of its U.S.-bound cameras out of China by the summer of 2019 due to fears of future tariffs and shall we say political uncertainties just like this. One more slightly related story, if only because it relates again to Apple. Over the weekend, it was reported that Apple had acquired Platoon,

a UK-based startup that uses analytics to source talent, like musician and writers, to produce, distribute, and sell their work. So think of Platoon as the modern-day equivalent of a record company's A&R operation. Spotify, of course, has been making moves to bypass record labels and work directly with artists to sign them, perhaps exclusively, to the Spotify platform. So there's no reason that Apple Music can't do the same. But in a way, this is also all about having that back catalog, that library under your wing owned by you. Think Netflix's obsession with producing and therefore owning in perpetuity all of its own content.

quoting Ingrid London of TechCrunch, Apple can find a route to becoming upcoming artist's digital home, potentially exclusively, but potentially across a number of platforms by giving them a range of tools to create and distribute their work. That provides Apple more access to a catalog of original content and maybe even a cut when it's licensed and listened to somewhere else, giving Apple a potential hit one way or the other, end quote. Well, you knew it wasn't just Facebook and Cambridge Analytica, but if you needed a reminder, the New York Times has a piece up this morning that reminds all of us how very many smartphone apps share your precise location data with third parties. And seemingly they're doing this on the up and up.

Quote, at least 75 companies receive anonymous precise location data from apps whose users enable location services to get local news and weather or other information the Times found. Several of those businesses claimed to track up to 200 million mobile devices in the United States, about half those in use last year. The database reviewed by the Times, a sample of information gathered in 2017 and held by one company, reveals people's travels in startling detail, accurate to within a few yards, and in some cases updated more than 14,000 times a day. These companies sell, use, or analyze the data to cater to advertisers,

retail outlets, and even hedge funds, seeking insights into consumer behavior. It's a hot market with sales of location targeted advertising reaching an estimated $21 billion this year. IBM has gotten into the industry with its purchase of the Weather Channel's app. The Social Network 4Square remade itself as a location marketing company. Prominent investors in location startups include Goldman Sachs and Peter Thiel, the PayPal co-founder, end quote. The people buying this data, of course, say they're only looking at patterns, not looking at you directly. Assuming everyone is playing on the level, data collected is not tied to your name or phone number, but to a unique ID. Think about web cookies on your browser, but for the real world.

And who's buying this stuff, as we said, everyone from your run-of-the-mill advertisers to hedge funds who want to track real-world foot traffic into retailers they might want to invest in. However, if there's one thing all of the scandals of the last year should have taught us, it's that given enough data points, someone enterprising enough to connect the dots can probably figure out who you are. The Times tested 20 apps,

including the Weatherbug app on iOS, which the Times says shared location data with companies, and what happens if that data is not protected or someone gets a little too aggressive about shopping it around? Well, as several experts in the piece pointed out, There are basically no consequences to that right now, except for bad PR. Because, well, you agreed to the terms of service when you use that app, and there are no laws on the book to punish people for screw-ups or bad behavior.

So the next time someone asks you, what would common sense simple regulation of tech and data excess look like? Just point this out to them. Here's a simple fix. actual penalties for data loss, data breach, and data sales promiscuity on mobile apps. I think I need a record scratch sound effect for this next segment. That sound you hear is the brakes being pulled on the e-scooter hype. Sources are telling the Wall Street Journal that e-scooter company Bird is trying to raise money

at its current $2 billion valuation and that Lyme is doing the same at a round. a $2 to $3 billion valuation. Both would represent valuations significantly below the company's initial asks. Lyme apparently originally was passing the hat at a $4 billion valuation before inching that back down to $2 to $3 billion. So that's a far cry from earlier this year when these companies' funding rounds jumped billions of dollars in a matter of weeks. If you'll remember, there have also recently been rumors that both companies were in

negotiations with Uber to be acquired. So what's going on here? Well, according to the journal piece, it's not exactly just constrained supply of e-scooters. Well, it's kind of that, but let me explain. The piece actually had a number that we had heard rumored before, but never confirmed. According to the journal earlier this year, some scooter players were reporting revenue of more than $20 a day for each scooter they had on the streets. So the math on that is pretty fantastic. If your average scooter costs $500 a pop to purchase, you only have to put them in circulation for about a month before you break even on that purchase price. And if a scooter could last three, six, twelve months out in the wild, yeah, that's some pretty good

math. But quoting the journal, the economics, though, have proved tougher than expected, people familiar with the company said. One issue is scooters not designed for heavy use are breaking down quickly. In some markets, scooters last about two months, investors said, often less time than it takes to recoup the purchase cost. Another is vandalism, glorified on social media through video clips of people knocking over rows of scooters or throwing them off parking garages. Scoot Networks, a small San Francisco operator of electric Vespa-like scooters,

this summer won the right to launch a fleet of as many as 650, scooters there. It hoped to capitalize on the launch of Bird and Lime in the city months earlier. But within two weeks of its October launch, more than 200 scooters out of the original 650 had been stolen or vandalized beyond repair, Chief Executive Michael Keating said. That was far more than he had estimated when he got into this business. Quote, part of our assumption was that if the theft rate is really, really high and the vandalism rate is really, really high, there is no way these other companies would be in business, he said. That ended up being an underestimate, end quote.

There's another detail here as well. Sources at multiple companies tell the journal that writers per scooter per day has actually been dropping lately. So the cost of operating the vehicles is turning out to be worse than anticipated because of vandalism. Also, they break down often, and also usage is starting to dip. but does any of the companies in question have the market power to leverage, say, improved design by commissioning custom designs that might improve durability? Maybe that's behind the Uber acquisition rumors leverage. I mean, did you read about that company 9Bot in the long reads on Friday, basically the only game in town for scooter manufacturer at scale?

In terms of vandalism and theft, I mean, there's a reason why. the city bikes here in New York City are built like a Buick from the 1950s and weigh basically a metric ton. But also, in terms of the dipping usage numbers, note this tweet from the great Bill Gurley, quote, One more issue that falls into the obvious in hindsight category, the scooter business is remarkably seasonal. Looking at third-party credit card data, overall U.S. weekly sales are down 35 to 40 percent for both companies in a few weeks. Austin down 60% plus colder Portland and St. Louis, 78 to 90% down.

Finally today, as Renee Ritchie said on Twitter, 2018 was the year of the notch. 2019 might just be the year of the whole. We haven't spoken about this yet, but in order to get rid of the notch at the top of the modern latest smartphones, various companies are experimenting, with various designs, specifically Samsung, which has half ovals on some designs, and also

what amounts to a hole punch in the screen that makes room for cameras and sensors. Samsung calls the whole punch design the Infinity O. This morning, Samsung announced the first phone that will make use of the Infinity O display, the forthcoming Samsung A8S. So you can click through on the last link in the show notes to get a sense of this looking at the pictures, but just imagine a tiny hole punch. sitting in the top left-hand side of the phone's display. The hole doesn't even come close to the bezel.

There's still a tiny bit of actual screen real estate around it. I don't know, kind of makes more sense to me than the notch. I mean, both designs are distracting in a way, but this kind of feels less so on the top left-hand side where you can pretty much keep it out of the way of a lot of things. The new A8S is otherwise a pretty much, is otherwise a pretty standard mid-range phone, quoting from the Verge Snapdragon 710 with options for either 6-gibite or 8 gigabytes of RAM,

and 128 gigabytes of onboard storage with up to 512 gigabytes of expansion via microSD. On the back, it's got the same triple camera array as the Galaxy A7, while the front side selfie camera contained within the cutout has a 24 megapixel sensor, end quote. Pre-orders for this new A8S begin on, December 21st. Samsung's 2019 S10 flagship phone is rumored to also be getting this same

hole punch design, as will Huawei's forthcoming Nova 4 and Vue 20. Though notably that last one, the Vue 20, might also sport a 48 megapixel camera. So hole punches vying with notches,

48 megapixel cameras coming, 5G coming, for all my talk of cell phones being feature complete at this point, 2019 might actually shape up to be one of the most interesting cell phone years in quite a while. So I decided to come back from Miami after all. The weather this weekend wasn't actually that nice, but the baptism was lovely, and my niece, of course, is very lovely.

I'm going to be in Boston this weekend for a book signing and whatnot. I don't expect the weather to be fantastic there either. when I have the actual times and details I'll share them with you and the offer does still stand any ride home listeners make yourselves known at the book signing maybe we need to develop a secret handshake

or something like that anyway talk to you tomorrow