Headlines in Tech 27 Jul – 3 Aug 2022

Headlines in Tech News of the week

US Congress passes $280bn Chips and Science Act

…this will comprise:

• $52bn in subsidies for US chip manufacturing and R&D [+further tax credits]
• More than $100bn for technology and sciences investments

The aim is to make the US more competitive against China, and shore up critical supply chains for semiconductors. Some critics wonder why so much cash is being given away to big corporates (and not necessarily US ones only – Intel of course will be up for a chunk but also No1 semi maker TSMC and Samsung are building factories in the US). However, building a chip making business is prohibitively expensive [~$10bn] and companies would not want to risk not being able to sell the end products once the factory is operational. There is also every possibility that Taiwan/ China / South Korea are so ahead in its game that it will not be possible or take years to catch up on the technology.

The Act contains qualified “guardrails” that any recipient of funds must not for 10 years make significant transactions with China or other countries of concern involving semiconductor manufacturing capacity. This is a problem for TSMC and Samsung:

• TSMC already has a plant making 16nm chips in China. It is a difficult call to force TSMC to choose between China and the US for geopolitical reasons.
• Korean chip makers such as Samsung and SK Hynix are reported to be re-thinking about their investments into China. They have no choice but to choose the US over China given that they are dependent on US equipment and technology to make advanced chips.

In addition to the above, the lack of appropriate talent in the US is a serious issue. Top engineering talents in the US tend to go into more programming, data analytics and cryptography type disciplines. Furthermore, the Act does not deal with germanium and gallium required to make chips, which are mostly imported, significantly, from China.

Nat King Cole’s There May be Trouble Ahead rings in my head.

Apps

India bans a popular combat game BGMI

…reasons are not entirely known, but India has in the past banned over 300 China-linked apps as a result of geopolitical tensions between the two states. The South Korean app maker has cut ties with publishing partner Chinese tech giant Tencent, which was also a major investor in the business.

Artificial Intelligence

Alphabet’s DeepMind, in partnership with EMBL’s European Bioinformatics Institute (EMBL-EBI), publishes the predicted structures of nearly all catalogued proteins known to science

…this is the work of AlphaFold, DeepMind’s AI system which predicts the 3D structure of a protein, which was open sourced about one year ago. The predicted structure can be searched like doing a Google search. DeepMind is a Google company after all.

How many protein structure does the database hold? 200 million +

Implications: Massive reduction in the time to make drug discoveries – drugs are most effective when it can for example, fit around a protein that is causing the problem. Therefore, understanding the target protein will help achieve formulating the drug that can supress it.

Limitations: There are all predicted structures, so testing does need to be done to actually verify the structure. Viruses are excluded from the open source database to prevent access by bad actors.

What next for DeepMind?: Says DeepMind it will “partner… with new sister Alphabet company Isomorphic Labs to reimagine the entire drug discovery process from first principles with an AI-first approach; establishing a wet lab at the renowned Francis Crick Institute to strengthen the connection between AI and experimental techniques to advance understanding of biology, including protein design and genomics; and expanding our AI for Science team to accelerate further progress on our fundamental biology research and apply AI to other fascinating and important scientific challenges, such as climate science, quantum chemistry, and fusion”.

BigTech/ Data / Platforms

Freedom of Speech

Californian School Board members violated First Amendment (free expression) by blocking certain public persons from commenting on public Facebook pages

…so the Ninth Circuit held, holding that the school board members were public officials using their public social media pages to inform constituents about goings-on at the School District and the Board. The plaintiffs were said by the defendants to have posted repeated and lengthy criticisms in the comments section. They deleted/hid those comments and eventually blocked them altogether. The defendants were found to have violated the First Amendment, the Court relying on case law which found that in a designated public forum, “the government may impose reasonable restrictions on the time, place, or manner of protected speech, provided the restrictions” are “narrowly tailored to serve a significant governmental interest” and “leave open ample alternative channels for communication of the information.”

Privacy

Google decides to delay abandoning Third Party Cookies by one year to end of 2024

…its decision follows feedback from industry for more time to assess the Privacy Sandbox, which is designed to enable advertisers to carry out measurements and ad tracking without collecting huge amounts of user data. It is essentially carried out by aggregating data about conversion (into clicks, purchases) and attribution (from which ad placed on which website). Public testing starts now.

The main purpose of a cookie is to identify users and possibly prepare customized Web pages or to save information – so that when you visit the web site for the second time, it knows your preferences, or that item you didn’t purchase is left in the trolley – in case you do want to buy this time. German publishers and marketing agencies, and others have complained to the EU commission that abolishment of third party cookies mean that third parties cannot use data to carry out targeted advertising whilst enabling Google to continue using first party data (eg. by people carrying out searches on Google search engine).

Furthermore the publishers complain that Google’s proposal will block users who want third-party cookies (for more personalised web browsing experience). Google could of course expect to get more ad dollars if the advertisers are correct that that they are more effectively able to target ads to potential customers using cookies. The great majority of Google’s income, be it via Search, Gmail, Maps, YouTube, Ad Networks (~80%) is ad revenue.

Competition

French iOS app developers sue Apple in the US (Northern District of California) for anti-competitive distribution of apps, including excessive commission on in-app purchases

…the named plaintiffs in the proposed [corporate] class action (for the benefit of French businesses) are Société du Figaro, which develops the Figaro news app; L’Équipe 24/24, which develops the L’Équipe sports news and streaming app, and Le Geste, an association of French content providers.

The key complaints are:

Monopolising the App Store and loss of control

• Wilful monopolisation: Apps can be downloaded only on Apple’s App Store, and Apple mandates the use of its own app purchasing services. Developers cannot not tell end-users within its app that they could acquire and pay for content outside the app, nor can they provide a link within their app to the place where they could procure the content, creating lock-in.

• Apple says it’s in the interest of security, which implies that no other company could possibly provide sufficient security yet, there are alternative app distribution channels for MacOS. No reason it can’t be replicated for iOS.
  • Like for the MacOS, Apple can automatically scan apps and notarize them as safe before apps are distributed
  • Apple can alternatively vet app stores [ie: companies behind the app stores] rather than check the features of each app.

• Switching costs between developing for iOS and Android are high. For example, app developers must learn the discrete programming languages peculiar to each ecosystem.

Developers’ lack of control over its users

• Developers lose control of maintaining relationship with its customers, as they become Apple’s customers not the Developers’. Developers can no longer help the customer who’s buying the product with the following requests: Refunds, credit card changes, discounts, trial extensions, hardship exceptions, comps, partial payments, non-profit discounts, educational discounts, downtime credits, tax exceptions [referring to comments of a CEO of a developer who is not the plaintiff].

• The implementation of App Tracking Transparency (ATT) means that the developers have no access to data concerning user behaviour, which prevents developers from being able to carry out targeted advertising, whilst leaving Apple to continue to target ads [the user interface prompt for opting out of third party tracking is different to that for Apple’s own apps, where the prompt emphasises the benefits for users if they were to allow to track their activity].

• Developers would then have to advertise on Apple’s App Stores – this inflates the prices of advertising on Apple’s App Store. As noted by FOSS Patents, this point was picked up in the Epic v Apple case

Unfair pricing and financial arrangements

• Web-apps are not a true alternative means to native apps, which are more versatile and quick

• Up to 30% commission on the sale of paid apps + USD $99 (or equivalent) annual developer fee are exorbitant.

• Apple dictates minimum and greater price points, such that iOS developers cannot offer paid products at less than USD $.99 or at price points ending in anything other than USD $.99. – developers cannot price at lower and different price points in order to maximize volumes.

• Developers are locked in to Apple payout policies, which means developers must endure the six-plus-weeks’ delays in funds distribution that are built into Apple’s system [ie: Apple can sit on a pile of cash that is owed to the developers, and earn interest on them – Amazon is known to do this at least in the past, with respect to payment to third party sellers on their platform ].

Others

• Sheer number of apps [currently 1.8 million] – all only available from a single App Store means innovative apps are difficult to be discovered  

• Abuse of monopsony [buy-side power] as the sole seller of iOS apps and in-app products – forcing developers to take 70% on the dollar for their paid products by way of subtracting its supracompetitive default 30% commission

The plaintiffs ask monetary relief and cessation of all anticompetitive conduct.

Platform

Uber records positive cash flow for the first time – how did it do it?

…the day the investors were waiting for. They have been investing, providing incentives to expand the business. Now they are dominant, they are in a good position to be able to exploit the platform (ie: to achieve the much wanted network effects) and client base they have managed to build. In short, their success is down to aggressive investment into the platform and gaining user base, synergistic side businesses and technology:

• Optimised pricing + reduction in incentives [increasing in price in such a way to maximise profits without losing users – no doubt lots of data analytics went into this]
• Driver routing algorithms

Food and grocery delivery + freight shipping businesses

Connectivity

Qualcomm signs a 7 year licensing deal with Samsung covering 6G

…this is a major win for Qualcomm and Samsung. Samsung, of course is one of the two premium handset makers alongside Apple, but time has moved on and connectivity goes beyond handsets these days – it’s PCs, tablets, extended reality, and more. Otherwise they may not have agreed to a deal which spans 7 years – up to 2030; a relatively lengthy agreement. The deal encompasses 6G patents which is the year when the 6G standards will be set. Note that Qualcomm labels the deal as a strategic partnership– ie: it is no ordinary patent licensing deal. 

From Samsung’s point of view, perhaps tying up with Qualcomm was one way of catching up with its great rival Apple – it has been reported that it is losing the technical edge in Smartphone Application Processors (the computer that runs the operating software, apps, processing commands, graphics, memory management etc) and D-Ram (dynamic random access memory), which was once Samsung’s key strengths. Qualcomm has the largest share of Smartphone Application Processors (such as the Snapdragon), nearing 40%.

Qualcomm CEO Cristiano Amon explains that the deal is important in two regards:

• It would form a good benchmark for renewal for 6G licences in a market where Galaxy or iPhone are the only premium handset choices.
• Enables Qualcomm to enjoy increased earnings, because it supplies the Snapdragon platform to Samsung, which has more processing content (efficient processing of AI, graphics, images) than just the 5G modems (which is only about connectivity).  

Pressure is surely on for Apple, which has been locking horns with Qualcomm. It is no secret that Apple wants to lessen its dependence on Qualcomm if it can, and do everything in-house, hence its move to develop its own chips last October. It will have to do so quickly, before the current licensing agreement expires in the next few years.

Separately, Amon also observed that Qualcomm appears to be somewhat shielded from macroeconomic headwinds (ie: increased inflation and interest rates and so decreased consumer spending) because it has deliberately chosen to focus on premium handset market. In the IoT sector too, its enterprise and industrial IoT demands have kept pace as a result of businesses having undergone digital transformation.

Take home point is that business’ focus on high profit premium generally is likely to continue across the board – for example, Mercedes is focussing on more profitable higher-end cars, enabling it to shrug off recession prospects, Volkswagen sees its luxury brand Bentley’s profits soar with average selling price at €200k, Ferrari has forecasted an increase in profits as more customers are paying for bespoke features such as paint and wheels.

Copyright

Facebook applies to get copyright claim for making available embedding technology dismissed in the US

…the actual motion to dismiss is not a big deal, but the issue might be quite interesting.

Technology in question: The “embed” feature gives users and third parties a technological tool to easily make Facebook posts appear on another webpage. An image is embedded by hyperlinking a user’s browser to a server connected to the Internet. “Embedding” is fundamentally a method of pointing a user’s browser to an address where particular content may be found.

What’s the issue: Plaintiff Logan is a Facebook account holder who asserts that Meta has infringed his copyright in several photographs which have been “unlawfully embedded from his 3rd party hosts and his Facebook account page”. The plaintiff said that the photographs which are hosted on Facebook’s server, are triggered to be displayed on a third-party webpage … To embed a photo or video, the web designer adds an “embed” code to the HTML instructions from a public Facebook account. This code directs the browser to the Facebook’s server to retrieve the photo or video. Meta’s servers respond by transmitting the image.

Facebook’s defence:

• In order to open an account and upload content on Facebook, the user has to agree its terms in which the user grants Meta a nonexclusive license to publicly reproduce and display the uploaded content. Therefore there can be no copyright infringement.  
• The embedded Facebook photograph is never hosted on or transmitted through the third-party servers; it is hosted only on Facebook’s servers. Therefore there is no direct infringement carried out by the third party, and so there should be no case of copyright infringement. [In the EU, Article 3 of the InfoSoc Directive gives copyright owners the exclusive right to communicate protected works to the public. In general, it is not an infringement of a copyright to hyperlink to original content which was made freely available lawfully – but the test is rather nuanced and can depend on the circumstances of the publication].

Crypto

Apple and Google asked by Senate Banking Committee about what it’s doing to keep scammy crypto apps off its App Stores

…Pressure is on for Apple and Google to respond with a substantive response, as they have cited security and privacy as the main reasons for not allowing other App Stores on their Operating Systems (iOS and Android) [see also the French companies’ complaint against Apple, above].

Cybersecurity

UK’s Financial Reporting Council (FRC) says that Digital Security Disclosure needs to improve

…the Council said ” Every company is now digital, so providing useful, relevant and focused disclosure on digital security is critical. Investors need transparency in this area, and this report provides a key resource for companies looking to achieve this”. The FRC Lab report provides details about how to optimise disclosure for investors [which would include shareholders]. It would also be useful for companies in the event of data breach. Proper implementation of measures would help minimise risk and potential penalties if thought had been put into strategy and governance. I heard somewhere that tech oriented students would do particularly well in the future to specialise in cybersecurity. Unfortunately, it does seem to be an area where there is no scope of abating.

US Comptroller of Currency discusses the risk of evolving cybersecurity threats to the Financial Sector

…but, as the FRC says in the newspiece above, the warning ought to apply to all businesses. Of course, highly sensitive and critical areas such as finance, health and security would need to be particularly vigilant.

It warned that basic cybersecurity controls can significantly contribute to enhancing the resilience of systems and operations against cyber threats. In particular the majority of cybersecurity breaches have been by failure to have effective controls in the following three areas:

• strong authentication;

• effective systems configuration and patch management; and • cyber response and resilience capabilities.

EVs

EV maker Nikola to buy its battery supplier Romeo Power

…both business’ shares have been significantly knocked down as a result of supply chain issues. EV maker Nikola aims to purchase its battery supplier to cut down on manufacturing and operating costs. This makes sense when batteries are a critical component of an EV, taking up about a third of the total value of the car itself. Moreover, as Romeo’s biggest customer Nikola presumably knows Romeo well, or well enough, and Nikola will acquire know-how on critical EV batteries. The most successful EV company, Tesla is also planning to produce its own EV batteries to increase profit margins, and develop better battery technology for its own cars.

Nissan to offer customers to rent its car for several years in a bid to retain second hand car batteries for recycling

…this is due to the fragility in supplies of minerals and materials from Ukraine and Russia that are critical for EV manufacture. A significant 80% of second hand Nissan EVs (the Leaf) are exported to Russia and New Zealand. Japan wishes to retain them so they may be refurbished for re-use as an EV or for solar power storage. Other companies such as Ford and Volvo, have a recycling venture which include EV batteries but also other goods such as laptops, power tools and e-bikes.

Japanese automakers Mitsubishi and Toyota to invest $2.5billion to produce EVs in Indonesia over the next 5 years

…perhaps the plan is to diversify from China, with its strict covid policies / geopolitical tensions / regulatory concerns / increasing labour cost. Recently, the second largest EV battery maker LG Energy Solution have decided to build mining-to manufacturing supply chain for batteries in Indonesia which is the largest producer of Nickel. The largest EV battery maker CATL (China) also has a deal to produce batteries there. It would make sense to produce EVs where batteries are also manufactured as well.

Green Technology

Microsoft develops hydrogen fuel cell to cut down on carbon emissions from its data centres

…Microsoft is committed to eliminate diesel usage as a part of its pledge to become an impressive carbon negative by 2030.

Metaverse

Unilever promotes its brands in the Metaverse

…in different ways.

• Deodorant brand Rexona sponsors the first ever Metaverse marathon on Decentraland. The first-ever adaptive wearables were introduced, including wheelchairs and running blades to enable a wider range of people to be represented.
• Oral care brand CloseUp enables any couple to mint an NFT marriage certificate and immortalise their love on blockchain, at the City Hall of Love in Decentraland.
• Ice cream brand Magnum has a been showcased in the Magnum Pleasure Museum, a virtual exhibition on Decentraland.

Hair care brand SunSilk features as Sunsilk city on the popular gaming platform Roblox, a space for girls to feel safe, and play games, engage in training programmes.

Delving Deeper

Top Indian tech company Reliance Jio bids heavy on 5G Spectrum

…This Indian company is definitely worth noting. We aren’t as familiar with Indian companies as we are with Chinese companies, but India is clearly a force to be reckoned with. Offering up ~$20billion, Jio has outbid the next highest bidder Airtel (run by Mittal – which owns part of UK satellite company OneWeb (soon to be merged into Eutel) – as reported last week) by over three times, and Vodafone Idea (UK company Vodafone’s Indian venture). Jio’s major rival conglomerate, the Adani Group are not intending to serve consumer mobile services, and focusing on logistics / power / manufacturing, industry command and control centres / data centres.

Who is the founder? Mukesh Ambani

What’s its business? National network provider, has nearly 40% market share

Notable stakeholders: Google (Jio’s budget smartphone uses the Android OS – note Google’s CEO Sundar Pichai is also of Indian origin), Facebook and US Private Equity companies, Saudi’s investment fund.

A bit more about 5G

Clearly, Jio considers 5G as a key future growth area, representing a major transformation in all areas of industry.

It has significant advantages over pre-existing wireless communication protocols such as LTE and WiFi. It has 3 major capabilities:

• It is reliable: ULL, or ultra low latency – think: Autonomous Vehicles and navigating cars in moving traffic on a ms level
• HHHigh throughput: eMBB enhanced Mobile Broadband – think: downloading a feature movie in an instant
• Provides resources to a number of devices: mMTC massive Machine Type Communications: for intermittent transmission of moderate amounts of data at lower data rates. It allows sensors and IoT devices to operate with a long battery life. Useful for smart city deployments.

But not all uses will require all three characteristics. The use cases will dictate which spectrum band [which is scarce – hence the competitive bidding] will be used:

• Millimetre wave spectrum(over 24GHz): Very high throughput (gigabit/second) over short distances
• Mid-band spectrum (1-6GHz): It has a relatively high throughput (300-600 megabit/second) over much longer distances
• Low-band spectrum (below 1GHz): lower speeds, generally for IoT applications.

There are two key technical aspects that help drive the hallmark capabilities of 5G:

• Multi-Access Computing (MEC): This is a cloud environment located close to where the processing and output delivery need to take place. This enables high throughput, ultra low latency connectivity, needed for applications such as autonomous driving.

• Network slicing: Most 5G radio sits on top of the existing 4G network infrastructure (Non Standalone), but once 5G core network (ie: Standalone 5G)  is deployed, network slicing can be carried out. This will enable a single device (eg. connected car) to utilise the spectrum in a dynamic and optimised manner according to the predictive requirements of the quality of service
  • use for navigating traffic [high quality of service] vs in-car entertainment [medium quality of service] vs upgrading software [low quality of service]
  • high traffic flow v low traffic flow
  • manoeuvres in the surrounding cars on a high way vs city roads.