Tech Brew Ride Home - Tue. 10/08 – Epic’s Win V. Google

Episode Date: October 8, 2024

Crack… at least for the Google Play store. Two AI scientists have won the Nobel Prize for physics?! Samsung is in a similar boat to Intel, just not quite as severely. And an unfortunate reminder that government mandated back doors are bad doors. Sponsors: Dell.com/deals Links: Google must crack open Android for third-party stores, rules Epic judge (The Verge) Apple Potentially Facing Worst Leak Since iPhone 4 Was Left in a Bar (MacRumors) ‘Godfather of AI’ Geoffrey Hinton Among Nobel Prize Winners (Bloomberg) Samsung Electronics apologises for disappointing profit as it struggles in AI chips (Reuters) The 30-year-old internet backdoor law that came back to bite (TechCrunch) 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 Tuesday, October 8th, 2024. I'm Brian McCullough today. Crack! At least for the Google Play Store. Two AI scientists have won the Nobel Prize for Physics, question mark, exclamation point. Samsung is in a similar boat to Intel, just not quite as severely. And an unfortunate reminder that government-mandated back doors are always bad doors.

Here's what you miss today in the world of tech. Will we look back on this as the beginning of whatever is going to happen to Google? In the final ruling of Epic v. Google, a US judge has ordered Google to open the Play Store to rivals starting November 1st for three years. Also, they have to distribute third-party stores within play, allow access to everything in the Play Store, two third-party stores, and more. Quoting the Verge. These were Epic's biggest asks, and they might change the Android app marketplace forever if they aren't immediately paused or blocked on appeal. And they're not all that Epic has won today.

Starting November 1st, 2024 and ending November 1, 2027, Google must also stop requiring Google Play billing for apps distributed on the Google Play Store. The jury found that Google had illegally tied its payment system to its app store. Let Android developers tell users about other ways to pay from with the Play Store. Let Android developers link to ways to download their apps outside of the Play Store. Let Android developers set their own prices for apps irrespective of Playbilling. Google also can't. Share app revenue quote with any person or entity that distributes Android apps or plans to launch an app store or app platform. Offer developers money or perks to launch their apps on the Play Store exclusively or first.

Offer developers money or perks not to launch their apps on rival stores. offer device makers or carriers, money, or perks to pre-install the place store, offer device makers or carriers, money, or perks not to pre-install rival stores. In Epic versus Google, Epic successfully argued that Google had created such a substantial array of deals with developers, carriers, and device makers that it was nigh impossible for rival stores to spring up. By blocking those sorts of deals and proactively helping rival app stores, it's possible some real competition to Google's monopoly could now arrive. Google will still have some control over safety and security as it opens up the Google Play Store to rival stores.

The injunction says that Google can, quote, take responsible measures that are, quote, strictly necessary and narrowly tailored and are, quote, comparable to how it currently polices the Google Play Store. Google will be able to charge a fee for that policing, too. Epic has repeatedly argued that Google should not be able to deter third-party app stores through policing, so it's likely Epic and Google will keep budding heads over this. Judge Donato is giving Google eight months from now to come up with a system with a three-person technical committee jointly chosen by Epic and Google reviewing any disputes. That system will also come with a way for developers to opt out of being listed in rival Android app stores. Epic didn't quite get everything it asked for. It wanted the judge to crack open Google Play for six years, not three, also allow users to sideload apps with a single tap and for Google to Google to Google. Why not six years? Quote, the provisions are designed to level the playing field for the entry and growth of rivals without burdening Google excessively, writes Donato in his order.

As competition comes into play and the network effects that Google Play unfairly enjoys are abated, Google should not be unduly constrained as a competitor, end quote. Amazon, of all companies, convinced Judge Donato that Google's rivals need a helping hand. quote, even a corporate behemoth like Amazon could not compete with the Google Play Store due to network effects, writes Donato, citing a key piece of evidence from the trial. An internal Google presentation that suggested Amazon would struggle with the chicken and egg problem of attracting both users and apps. To date, the Amazon App Store has not become a substantial competitor. But with access to the Google Play catalog of apps, Donato argues, rival app stores will now have, quote, a fighting chance of getting off the ground, end quote. Google says it will

will appeal the verdict as, quote, Apple and Android clearly compete, and the ruling will cause, quote, unintended consequences for U.S. consumers. Some analysis here from Gene Munster on Twitter. He's not just an Apple analyst, y'all. Quote, three takeaways from Google losing their case against Epic Games. Number one, I estimate the Play Store accounts for around $6 billion in operating income annually around 8% of operating income. This announcement has the potential to reduce that by around $1 to $2 billion because it's just U.S. and they won't lose all of the income. In other words, this is a 1 to 2% hit to operating income as reflected in shares of Google down 2%. Number two, after a year passes, the comps will be reset and the Play Store will likely start to grow again.

Number three, Apple likely won their case against Epic and Google lost because of the proprietary nature of iOS, which gives Apple a stronger case that they are providing value to developers in the form of distribution, security, and curation. As investors and in Google, this ruling doesn't change Deepwater's view on the stock. Google is on a great spot long term. The ruling will have little effect on the distribution of Android, and the Play Store is too small to matter. What matters is Google has a pole position in the AI race, concern that the search business will be displaced by AI diminishes month over month, as consumers become more familiar with the company's generative search results. In the end,

search, Google Cloud, and YouTube all stand to materially benefit from the paradigm shift over the next five to ten years. Additionally, shares of Google trade at 19 times next year's earnings, which is below the Mag 7 Comp Group average of around 34X, end quote. Two Russian YouTube channels posted videos of an alleged new 14-inch M4 MacBook Pro base model, which is notable because this could be the worst Apple product leak since the iPhone 4, quoting Mac rumors. The latest video of what could be a next-generation MacBook Pro was shared on YouTube shorts today by Russian channel Romance v768. Just one day after another Russian channel shared a similar video.

The clip shows a box for a 14-inch MacBook Pro that is apparently configured with an M4 chip with a 10-core CPU and a 10-core GPU, 16 gigabytes of RAM, 512 gigabytes of storage, three Thunderbolt 4 ports, and a space-black finish. According to the About This Mac Software menu shown in the video, the MacBook Pro in the video is allegedly an unreleased November 2024 model. given this MacBook Pro has the standard M4 chip instead of a higher-end M4 Pro or M4 Max chip, the leaked unit could be the next entry-level 14-inch MacBook Pro. If so, that means the minimum amount of RAM for the MacBook Pro lineup would be doubled from 8 gigabytes to 16, as previously rumored.

A third Thunderbolt 4 port would also be an upgrade for the base model, as the current entry-level 14-inch MacBook Pro is equipped with only two Thunderbolt 3 ports. Last, space-black would be a new color option for the entry-level 14-inch MacBook Pro, as the base model is currently, only offered in space gray and silver. All other specifications listed on the box are familiar, including the display size and resolution, and other ports like MagSafe 3, HDMI, and an SD card slot. In addition, the 14-inch MacBook Pro does not appear to have any noticeable design changes.

The source of these leaks is unclear. Last week, Shrimp Apple Pro claimed that at least one of the unannounced 14-inch MacBook Pro units was apparently being offered for sale in a private Facebook group, In a follow-up post on Exx on Sunday, the leaker claimed that he saw someone online who is apparently advertising 200 of the unannounced 14-inch MacBook Pro units for sale, leading him to believe this leak originates from a warehouse. It is unclear if these details are accurate, but this whole situation is clearly very sketchy, end quote. The Royal Swedish Academy of Sciences awarded the Nobel Prize in Physics to John Hopfield and Jeffrey Hinton for foundational discoveries in machine learning, which, if you're at a lot of science, asking, since when does computer science count for physics? Yeah, lots of people online are upset about that. Quoting Bloomberg, Hinton will share the $11 million, Krona, or $1.1 million award with fellow

scientist John J. Hopfield, the Royal Swedish Academy of Sciences in Stockholm said in a statement Tuesday. Their work began in the 1980s, setting the stage for the current boom in artificial intelligence that was enabled by an explosion of computing power and massive troves of training data. However, Hinton has in recent years warned about AI becoming too powerful. Hopfield created an associative memory that can store and reconstruct images and other types of patterns in data. The Royal Swedish Academy of Sciences said, Hinton is known in AI circles as one of the godfathers of the technology due in large part to his early research into neural networks,

a kind of machine learning software that is loosely mimicking the way human brains work. In 1983, he co-invented Boltzman-Metworks. machines, one of the first types of neural networks to use statistical probabilities, and later co-authored a seminal paper demonstrating that a technique for updating the strength of the connections within a neural network could imbue this software with remarkable learning capabilities. I'm flabbergasted. I had no idea this would happen. I am very surprised. Hinton 76, told journalists gathered in Stockholm by phone, asked on Tuesday about any regrets regarding his work, Hinton said, quote, in the same circumstances I would do the same again, but I am worried that the

overall consequence of this might be systems more intelligent than us that eventually take control, end quote. Neural networks that mimic the brain's ability to process data will be, quote, wonderful in many respects in areas like health care, he said, but cautioned that there were a, number of bad possible consequences, particularly the threat of these things getting out of control, end quote. This isn't quite Intel level of bad, but chalk up Samsung as another company that is maybe falling behind in the AI race. Quoting Reuters, Samsung Electronics warned its third quarter profit would come in below market expectations and apologized for the disappointing performance, with the tech giant lagging its rivals and

supplying high-end chips to Nvidia in the booming AI market. The rare apology illustrates the challenges facing the company, which has been the world's biggest memory chipmaker for three decades, but is battling growing competition in both conventional and advanced chips. Samsung said its AI chip business with an unidentified major customer was hit by a delay, while Chinese chip rivals increase supplies of conventional chips contributing to the decline in its semiconductor earnings. Samsung's late response to the AI chip market increases its reliance on traditional lower margin chips, making it more vulnerable to competition from China and slowing demand for smartphones and PCs, analysts say.

High margin chips used in AI servers are driving a recovery in the chip market after a post-pandemic downturn last year. Still, Samsung has lagged SK Hynix in some. supplying high bandwidth memory or HBM chips to AI leader NVIDIA. Samsung's share price already down more than 20% so far this year fell 1.3% underperforming a 0.4% fall in the benchmark K-O-S-PI index. Samsung's contract chip manufacturing business, which designs and produces custom-made chips for other companies, likely continued to lose money in the third quarter as it is struggling to compete with Leader TSM, end quote. About that. According to Trendforce, TSM's global Foundry revenue share will hit around 64% this year, up from 51% in 2019,

while Samsung's share is set to drop to around 10% down from 16% in 2019. Finally, today, I believe we have spoken before about the China-linked Salt Typhoon Hacking Group and how they may be possibly might have broken into U.S. Internet service providers in recent months, including Verizon, AT&T, and Lumen, so the big ones. but how were they able to do that is what I want to discuss now, quoting TechCrunch. News broke this weekend that China-backed hackers have compromised the wiretap systems of several U.S. telecom and internet providers likely in an effort to gather intelligence on Americans. The wiretap systems, as mandated under a 30-year-old U.S. federal law, are some of the most

sensitive in a telecom or internet providers network, typically granting a select few employees nearly unfettered access to information about their customers, including their internet traffic and browsing histories. But for the technologists who have for years sounded the alarm about the security risks of legally required backdoors, news of the compromises are the told-you-so moment they hoped would never come, but knew one day would. I think it absolutely was inevitable. Matt Blaze, a professor at Georgetown law and expert on secure systems, told TechRunch regarding the latest compromises of telecom and internet providers. The Wall Street Journal first reported Friday that a Chinese government hacking group dubbed Salt Typhoon broke into three of the largest

U.S. Internet providers, including AT&T, Lumen, formerly CenturyLink, and Verizon to access systems they use for facilitating customer data to law enforcement and governments. The hacks reportedly may have resulted in the, quote, vast collection of internet traffic from the telecom and internet giants. CNN and the Washington Post also confirmed the intrusions and that the U.S. government's investigation is in its early stages. The goals of the Chinese campaign are not yet fully known, but the Wall Street Journal cited national security sources who consider the breach, quote, potentially catastrophic. Salt Typhoon, the hackers in question, is one of several related Chinese-backed hacking units thought to be laying the groundwork for destructive cyber attacks in the

event of an anticipated future conflict between China and the United States, potentially over Taiwan. Blaze told TechCrunch that the Chinese intrusions into U.S. wiretap systems are the latest example of malicious abuse of a backdoor ostensibly meant for lawful and legal purposes. The security community has long advocated against backdoors, arguing that it is technologically impossible to have a secure backdoor that cannot also be exploited or abused by malicious actors. The law says your telecom must make your calls wire-tappable, unless it encrypts them, creating a system that was always a target for bad actors, said Raina Pfeffercorn, a Stanford academic and encryption policy expert in a thread on blue sky.

This hack exposes the lie that the U.S. government needs to be able to read every message you send and listen to every call you make for your own protection. This system is jeopardizing you, not protecting you. The only solution is more encryption, said Feffercorn. The 30-year-old law that set the stage for recent backdoor abuse is the communications assistance for Law Enforcement Act, or Kalea, which became law in 1994 at a time when cell phones were a rarity and the internet was still in its infancy. Kalea requires that any communications providers, such as a phone company or internet provider must provide the government all necessary assistance to access a customer's information when presented with a lawful order. In other words, if there is a means to access a customer's

data, the phone companies and internet providers must provide it. Wiretapping became big business in the post-2000 era following the September 11th attacks in 2001. The subsequent introduction of post-911 laws such as the Patriot Act vastly expanded U.S. surveillance and intelligence gathering, including on Americans. Kalea and other surveillance laws around the time gave rise to an entire industry of third-party wiretapping companies that helped phone and internet companies comply with the law by wiretapping on their behalf. And it's not just the United States that has an appetite for backdoors. Around the world, there remains an ongoing and persistent effort by governments to push legislation that undermines skirts or otherwise

compromises encryption. Across the European Union, member states are working to legally require messaging apps to scan their citizens' private communications for suspected child abuse material. Security experts maintain that there is no technology capable of achieving what the laws would demand without risking nefarious abuse by malicious actors. Signal, the end-to-end encrypted messaging app has been one of the most vocal critics of encryption backdoors and cited the recent breach at U.S. Internet providers by the Chinese as a reason why the European proposals pose a serious cybersecurity threat. There's no way to build a backdoor that only the good guys can use, said Signal President Meredith Whitaker, writing on Mastodon, end quote. Nothing more for you today, but heads up. Tomorrow, I've got a big announcement at the end of the show. Listen for that. Talk to you then.