Tech Brew Ride Home - Tue. 09/17 – Intel Has A Plan

Starting point is 00:00:00 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 TechMeme right home for Tuesday, September 17th, 2020. I'm Brian McCullough today. Intel announces a bunch of ways it's hoping to turn its business around sooner rather than later. Is OpenAI about to have its chatbots query you? The whole TikTok divestment case is coming to a head right now. And speaking of turnarounds, darn it if Netflix didn't pull its turnaround off perfectly. Hollywood, not so much. Here's what you missed today in the world of tech. Well, it looks like that board meeting last week resulted in a plan. Intel says, it's going to create a separate entity for its Foundry business, a structure that could help it raise outside funding. Intel's stock was up more than 7% in pre-market trading this morning,

Starting point is 00:01:17 quoting CNBC. As part of CEO Pat Gelsinger's effort to turn around the struggling chipmaker, Intel said in a memo to employees that it will also sell off part of its stake in Altera. Gelsinger said the restructuring would allow the foundry business to, quote, evaluate independent sources of funding and comes days after Intel's board met to assess the direction and future of the company. business, which Intel plans to use to manufacture chips for other customers, has been a big drag on its bottom line, with the company spending roughly $25 billion on it in each of the last two years. Beyond just considering outside funding, Intel is weighing whether to spin off the foundry business entirely, possibly into a separate publicly traded company, according to a person with knowledge

Starting point is 00:01:56 of the matter who declined to be named in order to discuss confidential information. With a standalone operating board and a cleaner corporate structure, the mechanics of a separation become far easier than trying to turn a fully integrated unit into a separate company. Intel will also pause its fabrication efforts in Poland and Germany by approximately two years based on anticipated market demand, Gelsinger said, and pull back on its plans for its Malaysian factory, but U.S. manufacturing projects will remain unaffected, the company said, end quote. More news. The U.S. awarded Intel up to an additional $3 billion under the Chips and Science Act for the secure enclave program to expand the supply of microelectronics for the Department of Defense. And Intel and AWS plan to co-invest

Starting point is 00:02:40 in making a new AI chip on Intel's 18A via a, quote, multi-year, multi-billion dollar framework, quoting Bloomberg. Today's announcement is big, Gelsinger said in an interview, this is a very discerning customer who has very sophisticated design capabilities. The news was part of a flurry of announcements that followed a pivotal board meeting last week. Intel is also postponing new factories in Germany and Poland, but remains committed to its U.S. expansion in Arizona, New Mexico, Oregon, and Ohio. Intel also is looking to speed up efforts to execute the $10 billion in cost savings and focus its products better on AI computing in area where rival Nvidia has excelled. It's also looking to pair its real estate globally by

Starting point is 00:03:21 about two-thirds by the end of the year. Amazon Web Services is the largest provider of cloud computing, and it could help build confidence that Intel can compete with the likes of Foundry Leader Taiwan Semiconductor. AWS has used Intel processors over the years, but has been shifting more toward in-house designs, the very products that Intel may now help manufacture. Microsoft, another major cloud computing provider, announced plans in February to use Intel for some of its in-house chips as well. We still have things to learn about becoming a foundry, Gelsinger said in the interview, I need lots of customers, end quote. Escelor, Luxottica, and Meta have agreed a 10-year deal to continue developing smart eyewear

Starting point is 00:04:06 after creating two generations of Rayban glasses since 2019. Quoting Reuters, the incredible work we've done with Meta still in its early stages has already proven to be an important milestone in our journey to making glasses the gateway to the connected world. Esselor Luxottica CEO Francesco Maleri said in the press release, there was no reference to the possibility of meta buying a stake in the eyewear maker. In July, the head of Esselor Luxottica said the tech giant had informed him that it might invest in the company. Previously, the Wall Street Journal reported that the two companies had discussed meta taking a 5% stake in the Franco-Italian group, end quote. OpenAI has confirmed fixing

Starting point is 00:04:51 an issue where it appeared as though chat GPT was starting new conversations with users, after users reported chat GPT reaching out to them proactively. Even though OpenAI says this was a bug, it might point to something coming soon. Quoting futurism, over the weekend, a redditor going by the name Sentu Bill posted a peculiar screenshot that appeared to show OpenAIs ChatGPT reaching out proactively instead of responding to a prompt. How was your first week at high school that Chatbot asked in the screenshot seemingly unprompted? Did you settle in well? Did you just message me first? Sentu Bill answered. Yes, I did. ChatGPT replied. I just wanted to check in and see how things went with your first week of high school. If you'd rather initiate the conversation yourself, just let me know.

Starting point is 00:05:35 The bizarre exchange, which went viral over the weekend, would suggest that Open AI is working on a new feature that allows its chatbots to reach out to users instead of the other way around, a potentially effective way to gin-up engagement. Others speculated that the feature could also be related to OpenAI's brand new O1 preview and O1 Mini AI models, which the company hyped up as having a human-like ability to reason that can tackle complex tasks and harder problems. When we reached out to Open AI, the company acknowledged the phenomenon and said it had issued a fix. We addressed an issue where it appeared as though chat GPT was starting new conversations, it said. This issue occurred when the model was trying to respond to a message that didn't send properly and appeared blank. As a result, it either gave a generic response or drew on chat GPT's memory, end quote. Somehow I miss this, that whole divestment case where the U.S. once TikTok to shed Chinese ownership actually began yesterday, quoting the verge.

Starting point is 00:06:37 The Court of Appeals for the District of Columbia heard oral arguments for 10. TikTok v. Garland, TikTok's First Amendment challenge to legislation that it claims amounts to a ban. It's a fight not just about free speech, but whether the Department of Justice can make a case using classified material that its opponent can't review or argue against. The government argues TikTok is a clear national security threat, but says that revealing why would be a threat too. In filings first submitted on July 28, the government laid out its defense, making a series of declarations about TikTok's risks. The claims relied on dozens of pages of redacted classified material. The DOJ insisted it wasn't, quote, trying to litigate in secret, but citing national security concerns, it asked to file the classified material ex parte, meaning only one side and the panel of judges would be able to see it.

Starting point is 00:07:24 We obviously don't know exactly what's in these documents, but the partially redacted filings give us some hints. They focus largely on the potential that the Chinese government could compel Bightance to hand over the data of U.S. users, or that it could coerce the company into using TikTok's out. algorithm to push specific content onto U.S. users. The government argues that the national security risk posed by TikTok are so significant that they override First Amendment claims. The DOJ said Congress decided to ban TikTok based on, quote, extensive information, including substantial classified information on the national security risk of allowing TikTok to remain operational in the U.S. One of the documents is a declaration from Casey Blackburn, an assistant director of national intelligence.

Starting point is 00:08:04 Blackburn writes that there is no information that the Chinese government has used TikTok for, quote, maligned foreign influence targeting U.S. persons or the collection of sensitive data of U.S. persons, but he says there is a risk of it happening in the future. Another declaration comes from Kevin Vondran, an assistant director of the FBI's counterintelligence division. Vorn Dran details the possibility that TikTok may be a hybrid commercial threat, a business whose legitimate activity serves as a backdoor through which foreign governments can access U.S. data. infrastructure and technologies. He states that the Chinese government uses, quote, pre-positioning tactics as part of a broader geopolitical and long-term strategy to undermine U.S. national security. These efforts, the government claims, span several years of planning and implementation. In other words, the government is arguing that even if China hasn't yet surveilled TikTok's U.S. users, it could. It takes particular issue with TikTok's ability to access users' contacts,

Starting point is 00:08:59 location, and other data that it says could potentially let the Chinese government track Americans. The DOJ notes that researchers can easily identify individuals using anonymized data bundles, making anonymized data anything but, end quote. Now, quoting the New York Times on what went down yesterday, the hearing before the U.S. Court of Appeals for the District of Columbia Circuit lasted roughly two hours. Three judges asked probing questions of both TikTok and the government about an April law that forces bite-dance the app's owner to sell TikTok to a non-Chinese company before January 19th or face a ban in the United States. The lawyers have asked, the judges to deliver a decision in the case before December 6th, and legal experts anticipate

Starting point is 00:09:38 the losing party will appeal to the Supreme Court. Two of the judges expressed some skepticism around TikTok's arguments that Congress lacks the authority to pass such a law, and its defense that it was being unfairly singled out. Naomi Rao, one of the judges, said the company's legal position relied on, quote, a very strange framework for thinking about congressional authority. Douglas Ginsburg, another judge in the case, said it's a rather blinkered view that this statute view just singles out one company. Some of the judges signaled they were weighing whether TikTok's foreign ownership meant the company had fewer free speech protections than an American social media platform would have. Judge Rao also asked whether TikTok's American subsidiary

Starting point is 00:10:18 would have First Amendment protections because it is based in the United States. Jeffrey Fisher, a lawyer arguing on behalf of the content creators, said that a ban of the app in the United States also risk violating the constitutional rights of American users. The speech on TikTok is not Chinese speech, he said, it is American speech. Mr. Fisher suggested that banning TikTok because its owner was Chinese would be like banning the seminal text, Democracy in America, because its author, Alexis de Tocqueville, was French. Judge Rao was not swayed, quote, we're not talking about banning Tocqueville in the United States, she said, end quote. Finally today, remember two years ago when Netflix seemed like the sick man of Silicon Valley, its stock had crashed, they reached for a whole

Starting point is 00:11:06 bunch of break glass in case of emergency levers. They swore they would never, ever pull, adding ads, cracking down on password sharing, going into gaming. Well, as the Financial Times notes, remarkably, they've kind of pulled it all off. And meanwhile, Hollywood is reeling. Quote, since launching its password crackdown in May 2020, Netflix has added 45 million paying subscribers. Its share price has risen more than 300% from its post-correction low, recently setting new all-time highs. Such a rebound was hardly assured in 2022, but since then, Netflix has launched an ads business from scratch, invested in its nascent video games division, and expanded its live experiences around popular shows such as Bridgerton, Squid Game, and Stranger Things. It has even

Starting point is 00:11:50 started dipping into live sport. It's just been incredible execution, says Jessica Reef Ehrlich, a veteran media analyst at Bank of America. She notes that the new initiatives were all started while Netflix was navigating a major management change. Reed Hastings, retired as chief executive in 2023 and was replaced by a protege Greg Peters, who shares the role with Ted Sarandos. This must be the smoothest transition of any management team ever, Erlick adds. There hasn't even been a blip. While Netflix regained much of its swagger, the traditional Hollywood groups have been mired in a funk. The Netflix correction marked the end of investor patience for streaming losses, and Disney is the only one of the legacy entertainment groups

Starting point is 00:12:29 currently making any money in that business after turning profitable this summer. The movie industry is weathering another difficult year, prompting concerns about whether the box office will ever sell as many tickets as it did before the pandemic. Cable television wants a prodigious cash flow generator is in a deep decline, and many doubt that streaming will ever replace its money-making power. These problems have washed over Hollywood's creative community in the form of job cuts and reduced production budgets, while the rebound that many had hoped for after last year's strikes by actors and screenwriters has not materialized. A longtime TV writer and producer confirms the grim mood.

Starting point is 00:13:04 is not a writer in this town who thinks their career is going well, he says. Everybody is up against it right now because the jobs are just not there. Some in Hollywood are angry at Netflix for radically changing the economics of the entertainment business. The disdain for Netflix is beyond anything I've ever seen, says a Hollywood veteran who has held top positions at major entertainment companies. They have eliminated the back-end financial profit participation of every artist in the world. They dominate and control everything and no one's even close. He adds, the city is bleeding right now, bleeding. Hastings may have sounded like he was riffing when he made his announcements about password

Starting point is 00:13:38 sharing and selling advertising, but in reality, he and other senior managers had been discussing the ideas for years, current and former employees say. To get them up and running, Hastings turned to Peters, then chief operating officer. There was skepticism about the password crackdown as Peters began launching controlled tests in markets such as Chile, Costa Rica, and Peru in early 2023. Some analysts thought the initiative would end up losing customers for Netflix. Instead, it proved to be a boon that turbocharged Netflix growth for more than a year, with total subscribers reaching 238 million in the most recent quarter, up 16% from a year earlier. Nearly five years after the launch of Disney Plus ignited the streaming wars,

Starting point is 00:14:16 Netflix remains on top in terms of both subscribers and time spent on the service. In July, it captured about 8.4% of U.S. screen time, while its nearest Hollywood rival Disney had 4.8% between Disney Plus and Hulu. Streamers run by the other Hollywood studios, Warner Brothers Discovery's Max, Comcast, Peacock, and Paramount Plus, all had less than 2% of viewing hours. In Hollywood and on Wall Street, there is an expectation that weaker streamers will either combine or shut down within the next 18 to 24 months. Yet even if there is a shakeout, there will still be an intense fight for eyeballs in the broader streaming audience. The lesson Netflix took away from The Strike Experience, third point analyst Jamie Lumley adds, is that it does not have to produce as much new programming as it had been. That gives them flexibility to take some bigger swings on different

Starting point is 00:15:03 kinds of content, he says. Company officials say they will increase content spending from $17 billion in the future, but haven't given a time frame. It has become known for popular low-cost fare, like its unscripted programming, mainly reality shows such as Love is Blind, selling sunset and is it cake, and experiments with live streaming, which debuted with a glitchy stand-up routine by comedian Chris Rock and March. Analysts see live streaming as a gateway to real-time professional sporting events and other programming that could increase audience engagement. Netflix's live event capability will face its biggest test on Christmas Day when it will stream an NFL game. The move has prompted speculation that it may seek to join Amazon and Apple in the race for sports rights,

Starting point is 00:15:44 though Sarandos insists he is not interested in paying for full-season rights in which most of the financial benefit goes to the other partner. Perhaps the most interesting move by Sarandos since the Netflix correction has been a $5 billion 10-year deal with World Wrestling Entertainment's weekly raw program, in the U.S. It is the group's biggest foray into streaming live events and could form a framework for Netflix if it ever enters into a deal with a professional sporting league. Wrestling historically has a very engaged fan base, and this is weekly content, Lumley says.

Starting point is 00:16:13 This kind of recurring programming means Netflix does not have as much pressure to, quote, keep their foot on the gas in the traditional production engine, he adds, end quote. Nothing more for you today. Talk to you tomorrow.

Tech Brew Ride Home - Tue. 09/17 – Intel Has A Plan

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