Tech Brew Ride Home - Tue. 09/05 – China’s Chip End Run

Episode Date: September 5, 2023

Some more controversies surrounding Elon Musk and X. China looks like it is managing its chip situation better than the US might have hoped. Is Spotify’s podcasting bet officially a failure? Is Apple’s Lionel Messi bet already a winner? And will getting rid of Books 3 only help the AI incumbents? Sponsors: DraftKings.com code techmeme Kolide.com/ride Links: Elon Musk to sue ADL for accusing him, X of antisemitism (TechCrunch) Huawei Teardown Shows Chip Breakthrough in Blow to US Sanctions (Bloomberg) Meta Reportedly Partnering With LG For 2025 Quest Pro Successor (UploadVR) Exclusive: Arm signs up big tech firms for IPO at $50 billion-$55 billion valuation (Reuters) Spotify’s $1 Billion Podcast Bet Turns Into a Serial Drama (WSJ) Messi Drives Jump in Apple TV+ and MLS Subscriptions (WSJ) The Battle Over Books3 Could Change AI Forever (Wired) 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 TechMame right home for Tuesday, September 5th, 2023. I'm Brian McCullough today. Some more controversies surrounding Elon Musk and X. China looks like it's managing its chip situation better than the U.S. might have hoped. Is Spotify's podcasting bet officially a failure? Is Apple's Lionel Messi bet already a winner?

And will getting rid of Books 3 only help the AI incumbents? Here's what you miss today in the world of tech. Elon Musk is threatening to file a defamation suit against the anti-defamation. League for, quote, falsely accusing X and himself of being what he said is anti-Semitic. He also blames the ADL for X's U.S. ad sales drop. Quoting TechCrunch, in the newest uproar you might have missed. Elon Musk says X, formerly Twitter, will file a defamation lawsuit against the Anti-Defamation League.

Musk accused the ADL, an organization that works to combat anti-Semitism, extremism, and bigotry of falsely accusing him and X of being anti-Semitic. quote, to clear our platform's name on the matter of anti-Semitism, it looks like we have no choice but to file a defamation lawsuit against the anti-deformation league. Oh, the irony, tweeted the billionaire celebrity on Monday. Musk also blamed the ADL for X's falling U.S. advertising revenue, quote, our U.S. advertising revenue is still down 60 percent, primarily due to pressure on advertisers by at ADL. That's what advertisers tell us, so they almost succeeded in killing X slash Twitter, end quote. Musk started off this latest tirade by claiming to be pro-free speech, but, quote, against

anti-Semitism of any kind, end quote. The tweets come as Musk has been called out for liking posts with the hashtag ban the ADL, which was trending on X last week. The trending hashtag and Musk's engagement with it began hours after the ADL said it had a productive conversation with ex-CEO Linda Yakorino about fighting hate speech on the platform. Quote, since the acquisition, the ad-DL has been trying to kill this platform by falsely accusing it and me and of being anti-Semitic, tweeted Musk on Monday. If this continues, we will have no choice but to file a defamation suit against ironically the Anti-Defamation League, end quote. So you know how the U.S. is trying to block China from getting its hands on the latest and greatest in technology, especially when it comes

to chips? Well, a teardown of the recent Huawei Mate 60 Pro smartphone shows that phone is using a new Kieran 9,000 S chip that was fabricated in China by SMIC using a 7-nanometer process, meaning China seems to be hustling well enough to stay at least within shouting distance of the cutting edge on its own, despite U.S. efforts. Quoting Bloomberg. The processor is the first to utilize SMIC's most advanced 7-nanometer technology and suggests the Chinese government is making some headway in attempts to build a domestic chip ecosystem, according to the research firm Tech Insights.

Much remains unknown about SMIC and Huawei's progress, including whether they can make chips in volume or at reasonable cost. But the Mate 60 Silicon raises questions about the efficacy of a U.S.-led global campaign to prevent China's access to cutting-edge technology, driven by fears it could be used to boost Chinese military capabilities. With its export controls last year, the U.S. administration tried to draw a line at preventing China from getting access to 14 nanometer chips or about eight years behind the most advanced technology. The U.S. had also blacklisted both Huawei and SMIC. Now China has demonstrated it can produce at least limited quantities of chips five years behind the cutting edge, inching closer to its objective of self-sufficiency in the

critical area of semiconductors. It's a pretty important statement for China, Tech Insights Vice Chair Dan Hutchison said SMIC's technology advances are on an accelerated trajectory and appear to have addressed yield-impacting issues in their 7-nanometer technology, end quote. According to a Korean media report, META, has partnered with LG, to launch a new Quest Pro device somewhere in 2025 to compete with Apple's Vision Pro, most likely. Meta also plans a sub-200 headset in 2024, though some doubts about that remain. Quoting Upload VR. LG Electronics will reportedly handle production using LG Displays, LG Energy Batteries, and other components from LG Inotech.

The first product from the partnership is reportedly slated for 2025, price at around $2,000. The report says the industry estimates the headset could be named Quest 4 Pro, but this is unlikely. Analysts and reports often get the name of future products wrong while still accurately describing the device. For example, several sources suggested Quest Pro would be named Quest 2 Pro, and that Apple Vision Pro would be called Apple Reality Pro. Given Meta's current naming scheme and repeated description of Pro as a separate product line, the more likely product name would be Quest Pro 2. This wouldn't be the first time META has partnered with an experienced consumer electronics company for a VR headset.

Oculus Go was manufactured by Jaume and Oculus Rift S was manufactured and co-designed by Lenovo. In both cases, the headset were the partner company's logo on the side as well as the Oculus branding on the front. How LG's branding will appear on the reported 2025 headset is not yet known.

The report also claims the cheap headset meta-reportedly plans to release in 2024, not with LG, will be priced under $200, though this seems difficult to believe given that the three-year-old Quest 2 is currently priced at $300. unquote. The ARM IPO is coming down the pike. SoftBank has priced arms shares at a range of $47 to $51, aiming to raise up to $4.87 billion by selling $95 million for an implied

valuation of slightly more than $52 billion that would by far make Arm the biggest tech IPO of the year. And remember, this is a hugely strategic IPO for the tech industry beyond even the implication that tech IPOs are possible again. Quoting Reuters, customers of Arm Holdings Limited, including Apple, NVIDIA, Alphabet, and advanced microdevices as well as Intel and Samsung have agreed to invest in the chip designer's initial public offering, according to people familiar with the matter. Apple, NVIDIA, and the other strategic investors have agreed to invest between $25 and $100 million each in the Blockbuster IPO, the source is said. Arm and SoftBank have set aside 10% of the shares to be sold

in the IPO for its clients, Reuters has previously reported. Amazon, which had previously held talks to invest in the IPO, has decided not to participate, one of the sources said, requesting anonymity as the discussions are confidential. A scramble among arms clients, comprising the world's technology companies, to snap up shares in the IPO, is testing the semiconductor designer's adherence to not picking sides in the chip industry. The interest is fueled by a desire by companies to expand their commercial relationship with Arm and make sure rivals do not gain an edge, Reuters has previously reported. While an investment in the IPO would not come with a seat on arms board or ability to dictate strategy, it could strengthen ties with each

participating company and make it harder for a competitor to acquire arm later, end quote. The Wall Street Journal has a piece up making what I would say is the definitive case about a topic we've touched on for a while now, i.e., maybe Spotify's greater than $1 billion bet on building a podcast empire has not paid off. This piece suggests that most of Spotify's podcasting shows are not profitable. There are continuing debates over which shows should be exclusive and which should not. And a lot of the original shows that Spotify has commissioned are being cut. Quote, podcast revenue in the U.S. is expected to reach $2.3 billion this year, a 25% increase from 2022, according to the Interactive Advertising Bureau

and Industry Group, and is expected to more than double by 2025. That represents, though, a tiny slice of the $200 billion digital ad market. Spotify spent its way to the top of an industry that turned out to be less lucrative than it appeared when it began its podcast quest in 2018. The pool of podcast listeners is growing, but the flood of shows on various streaming platforms makes it tough to break new hits. Facing competition across genres and formats, Spotify found that exclusive podcasts generally don't draw subscribers away from rivals. Podcasts costs at the company rose 29 million euro in the first half of this year. The company, which has 22 million paid subscribers to its premium service in June, said it has more than 100 million

podcast listeners on its platform 10 times what it had in 2019. Spotify said it is on track to make its podcast business profitable in 2024. Chief Executive Daniel Eck has said he wants Spotify to be the world's largest audio company spanning audiobooks, education, sports, and news. Podcasts are only the first step towards Spotify's goal of evolving from a music streaming company to an audio giant, generating $100 billion in revenue by 20. 30. Spotify reported 11.7 billion euros in revenue in 2022. While the company probably overpaid for some content, X said the investments helped Spotify achieve its goal of becoming the top podcast platform. The company expects podcast ad revenue to grow 30% this year ahead of Spotify's overall revenue

growth executives have told staff in recent months. But the company has at times struggled to sell ads even for popular podcasts such as Science Verses, which discusses fads and pop culture, said people familiar with the matter. Spotify is advertising overall in the most recent quarter made up 13% of revenue, which the company wants to push to 20%. Company leaders have told their staff to be more selective about original shows. Executives have said in meetings that deals for new podcasts should consider costs, how quickly a show can gain listeners, its likely audience size, how much of the company can charge for ads and opportunities for ancillary revenue, such as merchandise sales and live tours, end quote. But here's a content bet that seems to be

paying off, according to Antenna, MLS season pass on Apple TV Plus had 110,000 U.S. signups on July 1st, the day of Leonel Messi's first MLS match. That's up from 6,143 signups on July 20th. July overall was Apple TV Plus's best sign up month in 2023, quoting the journal. While Messi also has a large following internationally, including his home country of Argentina, overseas subscribers aren't captured in antenna's data. Messy's draw for MLS season pass and Apple TV Plus is a sign of how rights and distribution partnerships with major sports leagues can have knock-on effects and benefits for streaming platforms.

Live sports are a major driver of subscriptions and engagement across streaming services, but companies from Apple to Alphabet's Google to Warner Brothers Discovery are still figuring out how much to charge consumers to watch games. We are beating our expectation in terms of subscribers and the fact that Messi went to enter Miami helped us out a bit there. Apple's CEO Tim Cook said on the company's August earnings call. Apple last year signed a deal with MLS worth at least $2.5 billion that gave the iPhone maker the right to exclusively stream all MLS matches globally. When it announced the 10-year deal, some industry experts wondered whether the partnership would help attract subscribers given Apple TV

Plus's limited subscription base compared with the hundreds of millions of subscribers at Netflix. Apple sells MLS season pass for $12.99 a month or $39 per season to people who also also subscribe to Apple TV Plus and $1499 a month or $49 per season to those who don't. MLS season ticket holders, a core group of soccer devotees, were given free subscriptions to MLS season pass for this year. Nearly half of those who paid for MLS season pass from February through July were existing Apple TV Plus subscribers, according to Antenna, an indication that the deal is resonating with current customers of the tech giant. 15% of those who signed up for MLS season pass during that period also signed up for Apple TV

Plus. For streamers, live sports can also help reduce churn, even when they are add-on services, such as with MLS season past. Jonathan Carson, chief executive of Antenna, said, people who sign up for sports services tend to be more loyal than others, he said. Viewers who sign up for a streaming service to binge watch a show tend to do so quickly and then cancel, but sports seasons stretch on for months, which gives the streamer time to show them other programming, Carson said, end quote. Finally today, you remember how we've discussed authors suing the makers of large language models claiming their books were used to train the LLMs? That's because there's this corpus of book data floating around on the internet called Books 3. Copyright activists are trying to get

books three taken down to stop it from being abused or used in these training sessions. But Wired makes the case that the law of unintended consequences is in play here because taking down book three may only benefit the big companies that have already been using that AI training data set. Quote, this is a view shared by many copyright lawyers. If you're open AI or meta, you have the resources to litigate this until the end of time, said Kieran McCarthy, a lawyer specializing in data scraping issues. A small organization is not going to have the resources to do that.

So this lack of clarity in the law right now is benefiting the biggest players, end quote. One thing everyone wired spoke to could agree upon, all this increased scrutiny on datasets has made AI's big players shy away from transparency. That could have a knock-on effect. Meta is a prime example. It openly shared the data sets used to train the first version of its chat GPT competitor, Lama, including Books 3. Now it's tight-lipped about what it used for newer versions. It behooves these companies to be opaque about their sources, McCarthy says. Knowing they're likely to face lawsuits if they fess up to using copyrighted material and their data training sets is a powerful deterrent. This

This in turn will make it harder for writers to know when their copyright is potentially infringed. Right now, it's up to AI companies whether or not to disclose where their training sets come from. Without that information, it's impossible for people to prove that their data was used, let alone ask for it to be removed. While the European Parliament has passed a draft law of AI regulations that would require increased data transparency, those regulations are not yet in effect, and other regions lag far behind. This fight cuts to the heart of often vicious disagreements about what role AI should have in our world. Copyright law exists to balance the rights granted to creators with the collective right to access information, at least in theory. The battle over Books 3 is about what this balance should look like in the age of AI.

The heart of this fight boils down to whether we accept that generative AI training on copyrighted material is an inevitability. This is the stance Stephen King recently took after finding out that his work is in Books 3. Quote, would I forbid the teaching, if that is the word of my stories to computers? Not even if I could. I might as well be King Canute. forbidding the tide to come in, or a Luddite trying to stop industrial progress by hammering a steam loom to pieces, he wrote. In the meantime, there are already stopgap efforts to persuade generative AI groups to respect the wishes of people who wish to keep their work out of data sets. Spawning, a startup devoted to this type of tool, has a search engine called Have I Been Trained, that currently allows people to check if their visual work has been used in AI training datasets. It is planning to add support for video, audio, and text next year.

It also offers an API that helps companies honor opt-out. So far, Stability AI is one of the major players to adopt it, although spawning CEO Jordan Mayer is optimistic that companies like OpenAI and Meta might one day get on board, end quote. You might have heard about the troubles at Burning Man this past weekend. Our own Chris Messina was there this week. I haven't actually spoken to Chris yet. I think he's back, but I don't know yet. Maybe we'll have to do a quick emergency bonus episode on one topic on surviving Burning Man in 2020. If it turns out, Chris has some stories to tell.

Talk to you tomorrow.