Tech Brew Ride Home - Wed. 04/17 - Qualcomm Makes Apple Cry Uncle

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 Tech meme right home for Wednesday, April 17th, 2019. I'm Brian McCullough today. There's no other way to describe it. Qualcomm got Apple to surrender. Are things back on for an Apple car, though? Microsoft has a new hub and a new Xbox 1S, and why Hulu might have an advantage. The other streaming players don't. Here's what you miss today in the world of tech. So much happened in the hour early. so around me pressing publish on yesterday's episode that I could probably have done two additional

Starting point is 00:01:09 episodes just about what happened then. So this is going to be a jam-packed show today. We'd better get right to it. Peace in our time. Qualcomm and Apple have settled all worldwide litigation between the two companies, right as the U.S. trial was scheduled to begin this week. Quoting CNBC, The settlement includes a payment from Apple to Qualcomm, as well as a chipset supply agreement, suggesting that Apple will buy Qualcomm chips for future iPhones. The companies did not say how much the payment will be. Qualcomm's stock rose more than 20% after the news broke, boosting its market cap by about $14.5 billion to more than $84 billion. It's Qualcomm's best day since 1999, end quote. I'm going to cut straight to the commentary chase here.

Starting point is 00:02:02 Remember those rumors that Intel was struggling to supply Apple with 5G modems for the 2020 iPhones that are expected to be the first with 5G capabilities? Remember, we asked if Intel couldn't come through with those modems, who could Apple turn to? There weren't a lot of good options. But Qualcomm makes what are widely considered to be the best 5G modems. So everyone reading the T leaves seems to agree. capitulated, calculating that a 5G iPhone was more important than absolutely anything else. Oh, and it also saved Apple executives from having to take the stand at any trial and possibly embarrassing quotes and videos and things like that.

Starting point is 00:02:49 Further credence to this theory that Apple was basically boxed in here came right away when Intel announced last night that it is exiting the 5G smartphone modem business completely. saying, quote, it has become apparent that there is no clear path to profitability and positive returns, end quote. So which came first? Intel being unable to deliver 5G modems or Intel abandoning 5G modems because Apple is settling with Qualcomm, thus opening the door for Qualcomm to be its 5G modem supplier. Ben Thompson thinks it's probably the latter that is the most likely. Apple left Intel, not the other way around. And actually, Ben's analysis is quite interesting. Ben has said for a while now that he thought Apple was in the right in this

Starting point is 00:03:37 lawsuit against Qualcomm, but as Ben and any good poker player would tell you in high-stakes legal showdowns, it's not always about who is right and who is wrong, it's also about who has leverage over whom. Quoting Ben, to be sure, Apple is not an early adopter. The original iPhone didn't even have 3G, and the iPhone 5's LTE support was a couple years behind its earliest rivals. At the same time, 5G phones have already launched, which means that 2020 is right about the time that Apple would be expected to adopt the wireless standard. Perhaps more pertinently, the iPhone is in a far more precarious spot than it was in 2009 or 2012. Back then, the iPhone was guaranteed growth, whatever standard Apple supported. Today, Apple is hoping to, at best, hold its ground in terms of

Starting point is 00:04:25 revenue, much less unit sales. And to that end, how long can a company charging more than a thousand for its flagship phone not support the latest wireless standard, end quote. Ben concludes by saying that Apple miscalculated badly here. Qualcomm had all the leverage because ultimately they had a thing Apple couldn't live without. Over at semi-accurate.com, Charlie Demerian said essentially the same thing. Quote, Apple was screwed and would have lost the iPhone market if they waited any longer. Qualcomm had Apple over a barrel and just had to wait. the longer Apple postured and threatened, the stronger Qualcomm's position got, and likely the bigger the check Apple had to write was, end quote.

Starting point is 00:05:08 Now, lots of people have noted the terms of the settlement seem to be that Qualcomm has won back Apple's business for its modem chips for six to eight years. But there are rumors hot and heavy that Apple has been hiring chip engineers like crazy. I think we're basically guaranteed to have Apple produced modems inside iPhones in, I don't know, Oh, six to eight years maybe. So interesting times. It's rare that Apple has to back down to anyone. But Qualcomm legit stared them down and won. Again, sometimes all that matters is leverage.

Starting point is 00:05:43 But then again, quoting Owen Williams, this only buys Qualcomm time, but may end up helping lengthen its lead again as well. There's no more intel barking at the door and Apple can go back to using reliable modems again. It's a win-win. For now, But I doubt Apple is the only phone maker investing heavily in breaking away from the company.

Starting point is 00:06:04 The damage is done, end quote. Another bit of Apple news, but only briefly because it's only rumors. And again, with this story, I just, I don't know anymore. Sources are telling Reuters that Apple is developing its own in-house LiDar sensors and has held talks with four possible LiDar suppliers to evaluate their tech for use in self-driving cars. quote, Apple is seeking LiDAR units that would be smaller, cheaper, and more easily mass-produced than current technology, three people said. The iPhone maker is setting a high bar with demands for a, quote, revolutionary design. One of the people familiar with the talk said, the people declined to name the companies Apple has approached.

Starting point is 00:06:47 The sensor effort means Apple wants to develop the entire chain of hardware to guide autonomous vehicles and has joined automakers and investors in the race to find winning technologies, end quote. So again, how many times are we going to have to go back and forth in our thinking on this? Is Project Titan for real or not? Like, for real, for real, or even just for real, or even just real? It's all still so maddeningly unclear at this point. But at least at this moment, the pendulum has swung back in the direction of for real, for real. sources are telling the Wall Street Journal that Department of Justice staff members have told T-Mobile and Sprint that their planned merger is unlikely to be approved as currently structured. In a meeting earlier this month, Justice Department staff members laid out their concerns with the all-stock deal and question the company's arguments that the combination would produce important efficiencies for the merged firm, the people said. reservations voiced by Justice Department staff lawyers aren't necessarily the last word on a merger, as department leadership will also have an opportunity to weigh in and make the final decision, end quote.

Starting point is 00:08:04 Not so fast, says T-Mobile CEO John Legerre. He tweeted, quote, The premise of this story as summarized in the first paragraph is simply untrue. Out of respect for the process, we have no further comment. This continues to be our policy since we announced our merger last year, end quote. And Sprint Executive Chairman Marcello, Calerese. tweeted something similar. I remember being so excited about this when it was announced last year, and it's finally here. Microsoft Today announced version 2 of its Surface Hub,

Starting point is 00:08:37 and I got to say it still looks like a damned sexy device. Dubbed the Surface Hub 2, it is 60% slimmer than the original Surface Hub, 40% lighter with a 50-inch 3840 by 2560 display, and it's shipping in June for $9,000. Also, yesterday, Microsoft announced the Xbox 1S all-digital edition, a disc-free Xbox 1S, launching May 7th for $249 with a 1-terabyte hard drive and three games included. Pre-orders are open now, quoting from CNET. Microsoft also said it plans to keep the price of its disc-less Xbox at $50 below that of its

Starting point is 00:09:18 disc-using cousin, the Xbox 1S, which isn't going away. It unveiled the discless device as part of a company live stream Tuesday called Inside Xbox, during which it also announced a new Xbox GamePass Ultimate subscription service for $15 a month. Quote, it's about offering choice, Jeff Gattis, Microsoft's general manager of platform and devices marketing for Xbox said in an interview, I don't see the disc going away, end quote. Well, I don't know. Tell that to the folks developing whatever that streaming gaming service is at Google. Earning season is ramping right back up. Last night, Netflix reported Q1 revenue of $4.52 billion, which was up 22% year over year. That beat estimates. Net subscriptions grew 9.6 million, a record, up 16% year over year.

Starting point is 00:10:12 But there were only 1.74 million new subscribers in the U.S. as opposed to 7.86 million new subscribers internationally. The notes of caution were, firstly, that anemic U.S. subscribers. number, Netflix is probably very much at saturation in North America. Netflix says it only expects to add 300,000 new subscribers in the U.S. next quarter. 80% of Netflix growth is now coming from overseas where it should pass 100 million subscribers sometime this year. It has around 58 million subscribers in the U.S. And also, Netflix offered week Q2 guidance, earnings per share of only 55 cents compared to the 99 cents per share. Analysts were expecting. But what continues to be interesting is that Netflix is continuing to break its longstanding

Starting point is 00:11:01 tradition and actually share viewership numbers of certain bits of content for the first time. For example, that Firefest documentary that y'all probably watched, Netflix said it has been watched by 20 million households. Our Planet, that nature documentary with David Attenborough, on pace for more than 25 million household views in its first month, Triple Frontier. movie with Ben Affleck has been watched by more than 52 million member households in its first four weeks. As context, last Sunday's Game of Thrones, basically the cultural supernova of the minute, it was watched by a record 17.4 million viewers, but again, that's even less than the Fire Festival documentary. Again, there is one audience that Netflix is targeting by releasing these numbers.

Starting point is 00:11:53 Hollywood Hey Hollywood superstar Want the stuff that you make To be seen by basically everybody Make it for us In fact it wouldn't surprise me at all If Netflix very much evolves its messaging To hammer this home

Starting point is 00:12:07 You think the universe of options And the movement towards cord cutting Has eviscerated the monoculture No Quite the opposite We've rebuilt the monoculture It's over here Inside our Netflix app

Starting point is 00:12:23 We spoke about Hulu just yesterday and kind of sort of wondered, whither Hulu amid the streaming wars? Are they just going to be a pawn kicked back and forth between the major players because even their erstwhile owners have their own horses in the race now? Well, in the New York Times, Edmund Lee argues that Hulu actually has a unique advantage. Ads. Comparing Hulu to its competitors, Lee says, quote, Hulu, on the other hand, has three products that may be.

Starting point is 00:12:56 better reflect what the future of streaming will look like. It has a live TV service that replicates a small cable bundle at $45 a month, a video on demand service that sells for $12 a month without ads, this one acts most like Netflix, and a streaming service with advertising that costs $6 a month. The last one is Hulu's most lucrative business and points to future profits. Even though it charges $6, the service generates more than $15 in revenue per subscriber each month because of the high-cost advertising sold against those customers, according to two people familiar with the business. That would explain why Hulu lowered the price of the ads-based service by $2 this year, and it might also explain NBC Universal's interest in starting its own

Starting point is 00:13:41 ad-based streaming network by 2020, end quote. Lee points out that at least so far, streaming services aren't a zero-sum game. Lots of people pay for both Netflix and Hulu. Now, for how long that is true remains to be seen. Would you be willing to subscribe to five or six different services at a time? But Hulu, by some measures, is actually a super strong player here. Remember, Netflix has that 58 million in paying subscribers in the U.S. Hulu has 25 million. And remember what I just told you about Netflix's growth slowing, at least in the U.S. Hulu grew by 47 percent in the U.S. last year. Netflix only grew by 12 percent. And with those ads, it can seemingly make more money per subscriber. You pay and you watch ads, at least for that one tier.

Starting point is 00:14:32 Again, though, what does that remind you of? Oh yeah, cable TV. Something, something, destroying the cable bundle just to reconstruct it. Finally today, caveat, caveat, this is super early, but Samsung has been sending out review units of the Galaxy Fold to tech journalists, as one does. But guess what? A lot of those same journalists are reporting that the review units that they've gotten are breaking after only about a day or two of use. Steve Kovatchez did. Mark German's did. Deeter Bones did. The reported issues are varied. German's unit is totally borked. Half of the screen is blank. Steve Kovatch's is glitching out. Click the link in the show notes to videos and pictures of all of this. Deeter Bones' device developed a bulge in the crease. The bulge

Starting point is 00:15:30 slightly distorted the screen at first, and Deeter could feel the bulge with his finger. Annoying, but it didn't break the unit. Until it did. Whatever the bulge was, eventually pressed so hard against the screen that it broke it. Quote, whatever happened, it certainly wasn't because I have treated this phone badly. I've done normal phone stuff, like opening and closing the hinge, and putting it in my pocket. We did stick a tiny piece of molding clay on the back of the phone yesterday to prop it up for a video shoot, which is something we do in every phone video shoot. So perhaps a tiny piece of that snuck into the gap on the back of the hinge and then around or through its cogs

Starting point is 00:16:09 until it lodged in between the screen and the hinge. It would be sort of like Charlie Chaplin getting caught in the gears in modern times, end quote. So again, three incidents do not make a scandal, but come. But sending review units to tech journalists that can't hold up under two days of routine use, that does not bode well, does it? That's all for today. I've been your host, Brian McCullough. Follow me on Twitter at Brian MCC.

Starting point is 00:16:41 The podcast subreddit is our slash ride home. And check out our new podcast, the primary ride home if you're into politics. Talk to you tomorrow.

Tech Brew Ride Home - Wed. 04/17 - Qualcomm Makes Apple Cry Uncle

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