1
00:00:02,400 --> 00:00:05,000
Speaker 1: Good morning. I'm deg Krisner. Here are the stories we're

2
00:00:05,040 --> 00:00:09,160
Speaker 1: following today, and the US announcing a new maritime task

3
00:00:09,240 --> 00:00:12,640
Speaker 1: force to protect commercial vessels in the Red Sea. Let's

4
00:00:12,640 --> 00:00:14,200
Speaker 1: get to Ed Baxter in the Bloomberg News.

5
00:00:14,200 --> 00:00:16,720
Speaker 2: Rem Metti, all right, thank you, Douglas. Threat comes from

6
00:00:16,720 --> 00:00:19,480
Speaker 2: attacks by Houthi rebels, and in a statement, Secretary of

7
00:00:19,480 --> 00:00:22,640
Speaker 2: Defense Lloyd Austin says the reckless attacks threatened the free

8
00:00:22,800 --> 00:00:26,439
Speaker 2: flow of commerce. He says, an international challenge. Meanwhile, he's

9
00:00:26,440 --> 00:00:29,480
Speaker 2: met with it's Raeli Prime Minister I beg your pardon,

10
00:00:29,520 --> 00:00:32,360
Speaker 2: Defense Minister Jove Galant to try to map out a

11
00:00:32,400 --> 00:00:35,479
Speaker 2: plan whereby Hamas can be controlled and the killing in

12
00:00:35,600 --> 00:00:36,720
Speaker 2: Gaza stopped.

13
00:00:36,920 --> 00:00:39,760
Speaker 3: We're working to ensure that this conflict does not escalate

14
00:00:39,840 --> 00:00:44,360
Speaker 3: beyond Gaza. But as we are driving to stabilize the region,

15
00:00:45,520 --> 00:00:51,360
Speaker 3: Iran is raising tensions by continuing to support terrorist groups

16
00:00:51,400 --> 00:00:52,160
Speaker 3: and militias.

17
00:00:52,280 --> 00:00:55,560
Speaker 2: Now, Glan says, though Israel's goal is very clear.

18
00:00:55,400 --> 00:00:58,920
Speaker 4: We must take a stint. The world he's watching us

19
00:00:58,960 --> 00:01:05,720
Speaker 4: now include our enemies Hamas, Isbalah and thewon. The image

20
00:01:05,920 --> 00:01:10,400
Speaker 4: they see today is powerful as we stand here united.

21
00:01:10,680 --> 00:01:13,080
Speaker 2: Now, Galan says, a threat from Iran and the terrorists

22
00:01:13,080 --> 00:01:15,320
Speaker 2: can only happen if Hamas has wiped out me And

23
00:01:15,400 --> 00:01:17,560
Speaker 2: while Austin did say today that Israel has every right

24
00:01:17,600 --> 00:01:20,399
Speaker 2: to defend itself, so a bit of softening the Biden

25
00:01:20,400 --> 00:01:23,720
Speaker 2: and position of cautioning about civilian deaths in Gaza as well,

26
00:01:23,760 --> 00:01:26,880
Speaker 2: he said the US will not dictate the war's timeline.

27
00:01:26,880 --> 00:01:29,880
Speaker 2: But then the US has put Israeli defense forces under

28
00:01:29,880 --> 00:01:32,920
Speaker 2: criticism again, this time forth the sniper deaths of two

29
00:01:33,000 --> 00:01:35,479
Speaker 2: women at a church in Gaza over the weekend. White

30
00:01:35,480 --> 00:01:38,640
Speaker 2: House National Security Spokesman John Kirby says the news is

31
00:01:38,760 --> 00:01:39,400
Speaker 2: very disturbing.

32
00:01:39,440 --> 00:01:40,760
Speaker 1: We are deeply concerned about it.

33
00:01:40,760 --> 00:01:45,600
Speaker 5: We have raised specific concerns about about it with Israeli counterparts,

34
00:01:45,640 --> 00:01:48,240
Speaker 5: and you know, and we'll continue to do so.

35
00:01:48,600 --> 00:01:51,080
Speaker 2: Kirby says the US and its allies have encouraged the

36
00:01:51,120 --> 00:01:55,440
Speaker 2: IDF to be more careful in their tactical operations, and

37
00:01:55,560 --> 00:01:57,800
Speaker 2: he says we're deeply concerned about it. We have raised

38
00:01:57,800 --> 00:02:01,880
Speaker 2: specific concerns about it with Israeli counterparts, so will continue

39
00:02:01,920 --> 00:02:04,120
Speaker 2: to do so. And we'll have more by the way

40
00:02:04,160 --> 00:02:06,520
Speaker 2: on the Red Sea shipping lanes in just a few

41
00:02:06,600 --> 00:02:09,520
Speaker 2: minutes here on daybreak, Asia funding well still stuck. In

42
00:02:09,560 --> 00:02:12,480
Speaker 2: the US Senate, two sides say some progress, but Bloomberg

43
00:02:12,520 --> 00:02:15,440
Speaker 2: Selena Motion says looking more and more like.

44
00:02:15,520 --> 00:02:18,080
Speaker 6: Next year, it seems like they are going to go home.

45
00:02:18,200 --> 00:02:20,840
Speaker 6: I think the key problem here is that everyone is

46
00:02:20,840 --> 00:02:23,400
Speaker 6: trying to put a different shade of lipstick on this pig.

47
00:02:23,840 --> 00:02:27,040
Speaker 6: Democrats are worried that if they make too many concessions

48
00:02:27,040 --> 00:02:30,400
Speaker 6: to Republicans' demands on border security, there's going to be

49
00:02:30,400 --> 00:02:32,920
Speaker 6: some progressives on the Democratic Party in their way, that

50
00:02:33,160 --> 00:02:35,320
Speaker 6: side of the part of the party that is not

51
00:02:35,360 --> 00:02:37,200
Speaker 6: going to be able to stomach a yes vote. And

52
00:02:37,200 --> 00:02:40,760
Speaker 6: there's a similar dynamic playing out on the Republican side.

53
00:02:40,960 --> 00:02:43,600
Speaker 2: And the Pentagon is saying that seemingly money for buying

54
00:02:43,600 --> 00:02:45,720
Speaker 2: more munitions for Ukraine runs out the end of the

55
00:02:45,760 --> 00:02:49,200
Speaker 2: calendar year. It's clear now that North Korea fired two

56
00:02:49,200 --> 00:02:53,000
Speaker 2: missiles over the weekend, one an intercontinental ballistic missile that

57
00:02:53,080 --> 00:02:56,399
Speaker 2: says can reach all portions of the United States. US

58
00:02:56,400 --> 00:03:01,120
Speaker 2: State Department spokesman Matthew Miller says the US is deeply concerned.

59
00:03:00,720 --> 00:03:04,320
Speaker 7: They pose a threat to the DPRK's neighbors and undermined

60
00:03:04,360 --> 00:03:08,280
Speaker 7: regional security. We urge all countries to condemn these violations

61
00:03:08,280 --> 00:03:11,600
Speaker 7: and to fully implement relevant UN Security Council resolutions which

62
00:03:11,639 --> 00:03:15,240
Speaker 7: are in place to impede the DPRK's unlawful WMD and

63
00:03:15,240 --> 00:03:16,639
Speaker 7: ballistic missile program.

64
00:03:16,400 --> 00:03:18,800
Speaker 2: And he asks for other countries to join in the condemnation.

65
00:03:19,400 --> 00:03:22,200
Speaker 2: Southwest Airlines being fined one hundred and forty million dollars

66
00:03:22,200 --> 00:03:25,760
Speaker 2: for last year's holiday meltdown, where nearly seventeen thousand flights

67
00:03:25,760 --> 00:03:29,680
Speaker 2: were canceled. Department of Transportation Secretary pe Buddhachic says the

68
00:03:29,720 --> 00:03:31,200
Speaker 2: message should resonate.

69
00:03:31,400 --> 00:03:35,560
Speaker 8: This record penalty is holding Southwest accountable for their failures,

70
00:03:36,000 --> 00:03:38,800
Speaker 8: and it is sending a message to the entire industry

71
00:03:39,120 --> 00:03:42,920
Speaker 8: with a new standard, a new level of accountability.

72
00:03:42,240 --> 00:03:45,480
Speaker 2: And he says should be made a universal punishment. Global

73
00:03:45,560 --> 00:03:47,560
Speaker 2: news twenty four hours a day, whenever you want it

74
00:03:47,600 --> 00:03:50,800
Speaker 2: with Bloomberg News Now in San Francisco. I'm Ed Baxter,

75
00:03:50,840 --> 00:03:51,640
Speaker 2: this says Bloomberg.

76
00:03:51,880 --> 00:03:53,800
Speaker 1: Let's get to the business news flow now, and we'll

77
00:03:53,840 --> 00:03:56,640
Speaker 1: begin with the Bank of Japan. The boj later today

78
00:03:56,960 --> 00:04:01,040
Speaker 1: is widely expected to keep its policy intact. Nearly all

79
00:04:01,120 --> 00:04:05,040
Speaker 1: fifty two economists surveyed by Bloomberger are forecasting no change

80
00:04:05,080 --> 00:04:08,880
Speaker 1: in either the boj's short term rate, which to remind you,

81
00:04:08,960 --> 00:04:12,000
Speaker 1: is at a negative ten basis points, or in the

82
00:04:12,120 --> 00:04:16,160
Speaker 1: yield curve control program. Here's Bloomberg's Taro Komura.

83
00:04:16,440 --> 00:04:21,560
Speaker 5: The market suspects another surprise this month, particularly after last

84
00:04:21,640 --> 00:04:28,120
Speaker 5: year's decembercrudas YCC surprise. That's understandable, But the governor changed

85
00:04:28,520 --> 00:04:33,679
Speaker 5: and with US communication, although he had to tweak YCC

86
00:04:33,800 --> 00:04:36,800
Speaker 5: a little bit in July in October, but I think

87
00:04:36,800 --> 00:04:39,920
Speaker 5: his baseline is he don't want to make a huge

88
00:04:40,400 --> 00:04:43,080
Speaker 5: surprise and shock to the financial market.

89
00:04:43,240 --> 00:04:46,800
Speaker 1: That is Bloomberg's Taro Komora. Now, recently some BOJ officials

90
00:04:46,800 --> 00:04:50,440
Speaker 1: have commented on some exit scenarios, and maybe the market

91
00:04:50,440 --> 00:04:54,240
Speaker 1: looked at that as sign of imminent change. However, Bloomberg

92
00:04:54,279 --> 00:04:56,960
Speaker 1: Economics sees the messaging as part of a long process

93
00:04:57,000 --> 00:05:02,000
Speaker 1: of laying the groundwork for a smooth transition time next year. Stateside,

94
00:05:02,000 --> 00:05:05,560
Speaker 1: more Fed officials are pushing back against expectations of rate

95
00:05:05,640 --> 00:05:08,680
Speaker 1: cuts early next year. Today, the head of the Chicago Fed,

96
00:05:08,720 --> 00:05:12,839
Speaker 1: Austin Goolsby, told CNBC he was surprised by the market's

97
00:05:12,839 --> 00:05:16,200
Speaker 1: reaction to last week's quarterly update from the FED.

98
00:05:16,920 --> 00:05:21,880
Speaker 9: I was confused a bit with the was the market

99
00:05:22,360 --> 00:05:26,040
Speaker 9: just imputing here's what we want them to be saying?

100
00:05:26,360 --> 00:05:29,440
Speaker 9: I thought there was seem to be some confusion about

101
00:05:29,480 --> 00:05:34,400
Speaker 9: how the FOMC even works. We don't debate specific policies

102
00:05:34,720 --> 00:05:37,080
Speaker 9: speculatively about the future.

103
00:05:37,240 --> 00:05:41,120
Speaker 1: Chicago Fedbank President Austin Goulesby there separately today the head

104
00:05:41,120 --> 00:05:44,200
Speaker 1: of the Cleveland Fed, Loretta Mester, along with her San

105
00:05:44,200 --> 00:05:49,200
Speaker 1: Francisco counterpart Mary Daily, we're suggesting expectations for rate cuts

106
00:05:49,400 --> 00:05:53,360
Speaker 1: in early twenty twenty four were simply premature. Apple will

107
00:05:53,400 --> 00:05:56,200
Speaker 1: stop selling the latest versions of its smart watch here

108
00:05:56,200 --> 00:05:58,359
Speaker 1: in the US. This move comes in response to a

109
00:05:58,400 --> 00:06:03,200
Speaker 1: patent dispute with the medical tech firm Massimo. Massimo says

110
00:06:03,360 --> 00:06:07,599
Speaker 1: it had invented this blood oxygen sensor, which is a

111
00:06:07,640 --> 00:06:10,200
Speaker 1: feature added to the Apple Watch models. That was done

112
00:06:10,240 --> 00:06:13,080
Speaker 1: back in twenty twenty Now, back in October, the US

113
00:06:13,120 --> 00:06:17,840
Speaker 1: International Trade Commission ruled that Apple violated Massimo's patents and

114
00:06:17,920 --> 00:06:22,000
Speaker 1: would need to halt sales of those infringing devices. Now,

115
00:06:22,040 --> 00:06:24,960
Speaker 1: a presidential review of that order is now underway. It

116
00:06:25,040 --> 00:06:28,920
Speaker 1: will not end until December the twenty fifth. We heard

117
00:06:28,960 --> 00:06:33,120
Speaker 1: earlier from Dan Ives, Managing director at Webbbush Securities. He

118
00:06:33,240 --> 00:06:36,400
Speaker 1: doesn't think smart watch sales will be impacted in the

119
00:06:36,440 --> 00:06:36,960
Speaker 1: long run.

120
00:06:37,200 --> 00:06:40,360
Speaker 6: There have been some issues on the Apple watch side

121
00:06:40,560 --> 00:06:42,840
Speaker 6: and a lot of the really around models in terms

122
00:06:42,880 --> 00:06:44,240
Speaker 6: of what they're trying to drive.

123
00:06:44,920 --> 00:06:47,880
Speaker 7: I view this is just a small bump of the room.

124
00:06:47,880 --> 00:06:51,320
Speaker 10: But I actually think watch sales is howidays season are

125
00:06:51,360 --> 00:06:52,560
Speaker 10: going to be up double digits.

126
00:06:53,320 --> 00:06:56,080
Speaker 11: I view this is sort of noise relative to the

127
00:06:56,120 --> 00:06:57,480
Speaker 11: broader story.

128
00:06:57,160 --> 00:07:01,080
Speaker 1: That is Dan Ives, Managing director at Weggbush Secure. US

129
00:07:01,120 --> 00:07:04,720
Speaker 1: Steel has agreed to be acquired by Japan's Nipon Steel.

130
00:07:04,960 --> 00:07:08,960
Speaker 1: Price tag here is fourteen point one billion. That is equity.

131
00:07:09,400 --> 00:07:12,160
Speaker 1: There is some debt involved. I think the total number

132
00:07:12,200 --> 00:07:15,440
Speaker 1: is closer to fourteen point nine. This deal, by the way,

133
00:07:15,480 --> 00:07:18,640
Speaker 1: would create the world's second largest steel company and the

134
00:07:18,680 --> 00:07:21,760
Speaker 1: biggest outside of China, and it comes after US Steel

135
00:07:21,840 --> 00:07:26,040
Speaker 1: rejected an offer from rival Cleveland Cliffs. That offer was

136
00:07:26,160 --> 00:07:29,560
Speaker 1: merely seven and a quarter billion made back in August.

137
00:07:29,560 --> 00:07:31,280
Speaker 1: Here is Bloomberg's brook Sutherland.

138
00:07:31,600 --> 00:07:34,560
Speaker 10: It is certainly a very robust premium. I mean, I

139
00:07:34,560 --> 00:07:37,840
Speaker 10: think that underscores the value of these assets, especially in

140
00:07:37,880 --> 00:07:41,680
Speaker 10: the context of the sheer amount of investment we're seeing

141
00:07:41,680 --> 00:07:45,200
Speaker 10: in the US in infrastructure and also in factory construction.

142
00:07:45,400 --> 00:07:48,240
Speaker 10: You need steel to make all of those things. US

143
00:07:48,280 --> 00:07:52,720
Speaker 10: Steel has also been pivoting toward greener production strategies. All

144
00:07:52,760 --> 00:07:55,280
Speaker 10: of that is very valuable, and these are scarce assets.

145
00:07:55,320 --> 00:07:59,520
Speaker 10: There's not that many big steel companies left to purchase

146
00:07:59,520 --> 00:08:01,840
Speaker 10: and for night On, the ability to gain a really

147
00:08:01,880 --> 00:08:04,840
Speaker 10: strong foothold in the US, I think is what's really

148
00:08:04,960 --> 00:08:06,080
Speaker 10: driving this premium here.

149
00:08:06,120 --> 00:08:09,360
Speaker 1: That is Bloomberg's brook Sutherland, by the way, Nippon. Still,

150
00:08:09,480 --> 00:08:12,840
Speaker 1: this is going to require some shareholder approval from US

151
00:08:12,840 --> 00:08:16,960
Speaker 1: Steel shareholders, and it will near need to clear regulators,

152
00:08:17,000 --> 00:08:19,760
Speaker 1: including the Committee on Foreign Investment here in the US

153
00:08:19,840 --> 00:08:22,600
Speaker 1: or Sciphius shares in US Steel. Today we're up by

154
00:08:22,600 --> 00:08:25,640
Speaker 1: more than twenty six percent. Shipping in the Red Sea

155
00:08:25,720 --> 00:08:28,120
Speaker 1: is grinding to a halt, and some oil tankers are

156
00:08:28,160 --> 00:08:32,240
Speaker 1: now idling. Others are re routing around the southern tip

157
00:08:32,360 --> 00:08:36,120
Speaker 1: of Africa. This comes as violence link to the Israel

158
00:08:36,160 --> 00:08:40,280
Speaker 1: Hamas war threatens to undermine the global economy. Here's Bloomberg's

159
00:08:40,320 --> 00:08:41,360
Speaker 1: Jennifer Welsh.

160
00:08:41,440 --> 00:08:43,840
Speaker 12: It's definitely going to increase some time for shipments as

161
00:08:43,880 --> 00:08:46,560
Speaker 12: well as shipping rates, and it's about a forty percent

162
00:08:46,640 --> 00:08:50,320
Speaker 12: increase to go around the southern tip of Africa versus

163
00:08:50,320 --> 00:08:52,480
Speaker 12: going through the Red Sea through the Suez Canal. So

164
00:08:52,520 --> 00:08:54,960
Speaker 12: I think that's definitely a concern for the New Yar term.

165
00:08:55,440 --> 00:08:57,960
Speaker 1: That is a Bloomberg's Jennifer Welsh, by the way, BP

166
00:08:58,160 --> 00:09:00,719
Speaker 1: said it will pause all shipments through the Red Sea,

167
00:09:01,480 --> 00:09:03,839
Speaker 1: and we'll have more on that coming up here on

168
00:09:04,120 --> 00:09:07,200
Speaker 1: Daybreak Asia. Right now from the Bloomberg terminal, Hunter Biden

169
00:09:07,240 --> 00:09:11,400
Speaker 1: will be arraigned January eleventh in that tax case. The

170
00:09:11,480 --> 00:09:15,200
Speaker 1: arraignment will happen in Los Angeles. Joining us now is

171
00:09:15,280 --> 00:09:19,200
Speaker 1: Gene Munster, managing partner at deep Water Asset Management for

172
00:09:19,280 --> 00:09:22,360
Speaker 1: the latest news on Apple. Gene, pleasure to have you

173
00:09:22,400 --> 00:09:25,360
Speaker 1: on the program. So with the company saying today that

174
00:09:25,400 --> 00:09:28,080
Speaker 1: it's going to halt US sales of smart watches after

175
00:09:28,120 --> 00:09:31,600
Speaker 1: this patent dispute and the loss that it's suffered as

176
00:09:31,640 --> 00:09:34,719
Speaker 1: a result of that dispute, put that in context to me,

177
00:09:34,840 --> 00:09:36,480
Speaker 1: how significant is this for Apple?

178
00:09:37,840 --> 00:09:40,720
Speaker 11: So they don't break out watches a percentage of revenue,

179
00:09:40,760 --> 00:09:43,280
Speaker 11: but we backed into it. This is something that we've

180
00:09:43,320 --> 00:09:46,520
Speaker 11: been modeling for the past seven years, and it's about

181
00:09:46,559 --> 00:09:49,840
Speaker 11: five percent of their total revenue comes from watch. It's

182
00:09:49,880 --> 00:09:53,360
Speaker 11: growing at call it ten to fifteen percent year every year,

183
00:09:53,840 --> 00:09:56,280
Speaker 11: which is much faster than the iPhone, which is basically

184
00:09:56,400 --> 00:10:01,120
Speaker 11: flatish year on year. So it's an important measureable five percent.

185
00:10:01,240 --> 00:10:04,440
Speaker 11: It's growing at a good clip relative to the rest

186
00:10:04,480 --> 00:10:07,920
Speaker 11: of their businesses, and most importantly, his watch is kind

187
00:10:07,960 --> 00:10:13,560
Speaker 11: of central to Apple's health and wellness initiatives. This device Apple,

188
00:10:13,600 --> 00:10:16,839
Speaker 11: as many of your listeners know, they've talked about health

189
00:10:16,880 --> 00:10:19,760
Speaker 11: and wellness as being this signature topic that they want

190
00:10:19,800 --> 00:10:23,880
Speaker 11: to be known for over time, and innovating around the

191
00:10:23,920 --> 00:10:26,520
Speaker 11: watch like this oxygen sensor is an important part of

192
00:10:26,520 --> 00:10:27,640
Speaker 11: that story.

193
00:10:27,720 --> 00:10:29,640
Speaker 1: What's the work around here? Is there a way that

194
00:10:29,720 --> 00:10:34,199
Speaker 1: Apple can reintroduce the oxygen sensor under different circumstances?

195
00:10:35,720 --> 00:10:39,160
Speaker 11: Potentially? I think that the more likely workaround is that

196
00:10:39,200 --> 00:10:43,160
Speaker 11: they just simply get some direction from President Biden and

197
00:10:43,200 --> 00:10:46,480
Speaker 11: that essentially he says that we made a mistake and

198
00:10:46,559 --> 00:10:48,880
Speaker 11: we're going to let Apple continue to do business. I

199
00:10:48,880 --> 00:10:51,480
Speaker 11: think that's why Apple is playing the cards that they're

200
00:10:51,480 --> 00:10:54,400
Speaker 11: playing right now. They're expecting this reversal from the Biden administration.

201
00:10:55,000 --> 00:10:58,920
Speaker 11: If that doesn't happen. They can re engineer it. That's

202
00:10:59,600 --> 00:11:02,480
Speaker 11: on the more difficult side of the scale. The less

203
00:11:02,520 --> 00:11:05,559
Speaker 11: difficult side is to just pay the royalty, and they've

204
00:11:05,880 --> 00:11:08,040
Speaker 11: so far said they don't want to pay that royalty.

205
00:11:08,400 --> 00:11:11,240
Speaker 11: There is a precedent for them paying patent. There's many

206
00:11:11,280 --> 00:11:12,960
Speaker 11: of them we don't hear about. Some of them do

207
00:11:13,040 --> 00:11:15,280
Speaker 11: come to trial back in two thousand and seven, so

208
00:11:15,280 --> 00:11:17,840
Speaker 11: you got to go back, call it sixteen years. But

209
00:11:17,960 --> 00:11:21,080
Speaker 11: there's a company called Burst dot com that had some

210
00:11:22,120 --> 00:11:26,839
Speaker 11: intellectual property around the iPod and they had to pay Apple,

211
00:11:26,840 --> 00:11:29,560
Speaker 11: paying them out ten million dollar one time licensing fee

212
00:11:29,600 --> 00:11:32,360
Speaker 11: for that. So if you market cap adjust that, that's

213
00:11:32,400 --> 00:11:34,840
Speaker 11: a four hundred billion dollar payout today. Apple is not

214
00:11:34,880 --> 00:11:36,840
Speaker 11: going to pay out four hundred million dollars for this

215
00:11:37,000 --> 00:11:39,920
Speaker 11: oxygen sensor. I think they ultimately find a way to

216
00:11:39,960 --> 00:11:44,400
Speaker 11: pay out probably single millions of dollars and move on.

217
00:11:44,960 --> 00:11:47,480
Speaker 1: Jeane, Let's move on from the Apple watch and talk

218
00:11:47,520 --> 00:11:49,760
Speaker 1: a little bit about the iPhone because over the weekend

219
00:11:49,760 --> 00:11:52,960
Speaker 1: we had indications that more agencies in China and government

220
00:11:53,000 --> 00:11:56,840
Speaker 1: backed firms in China have ordered staff to simply stop

221
00:11:56,880 --> 00:12:00,920
Speaker 1: bringing iPhones and other foreign devices to work. This is

222
00:12:00,960 --> 00:12:03,439
Speaker 1: not the first time that Apple has been confronted with

223
00:12:03,559 --> 00:12:06,360
Speaker 1: kind of similar restrictions in China. This is a big

224
00:12:06,400 --> 00:12:09,560
Speaker 1: market for this company. But I saw some data from

225
00:12:09,640 --> 00:12:15,760
Speaker 1: IDC China's premium smartphone market. Apple share of that smartphone market,

226
00:12:15,800 --> 00:12:18,840
Speaker 1: I think is now fifty four percent. That's in October reading.

227
00:12:19,080 --> 00:12:22,480
Speaker 1: A year ago, Apple had about eighty percent of that

228
00:12:22,600 --> 00:12:25,160
Speaker 1: market in China. So this is a very very different

229
00:12:25,160 --> 00:12:27,480
Speaker 1: world for Apple right now. What does it mean for

230
00:12:27,520 --> 00:12:29,199
Speaker 1: the company longer term?

231
00:12:29,880 --> 00:12:32,080
Speaker 11: It's just harder to grow in China and China, as

232
00:12:32,120 --> 00:12:35,000
Speaker 11: you said, it's important. It's twenty percent of revenue, and

233
00:12:35,280 --> 00:12:38,680
Speaker 11: iPhone is of that twenty percent it's going to. iPhone

234
00:12:38,840 --> 00:12:42,280
Speaker 11: is about twelve percent. Of iPhone in China is about

235
00:12:42,280 --> 00:12:45,160
Speaker 11: twelve percent of Apple's overall revenue. So it matters when

236
00:12:45,200 --> 00:12:49,880
Speaker 11: you see that share drop. The China business has a surprised.

237
00:12:49,880 --> 00:12:52,480
Speaker 11: It's still been in decline, but has been declining less

238
00:12:52,480 --> 00:12:55,120
Speaker 11: than people thought. But it doesn't change the a topic,

239
00:12:55,160 --> 00:12:57,080
Speaker 11: and the a topic is Apple has to find other

240
00:12:57,160 --> 00:13:00,120
Speaker 11: ways to diversify outside of China. They've talked a lot

241
00:13:00,120 --> 00:13:02,400
Speaker 11: about India. India has a lot of people, but the

242
00:13:02,720 --> 00:13:06,000
Speaker 11: per capita income is about one fifth per person in

243
00:13:06,000 --> 00:13:09,480
Speaker 11: India versus China, and so I think that the answer

244
00:13:09,600 --> 00:13:13,360
Speaker 11: is that they need to prepare for essentially, I'll call

245
00:13:13,360 --> 00:13:15,880
Speaker 11: it a post China world, whether it's on the demand

246
00:13:15,960 --> 00:13:20,880
Speaker 11: side and separately on the manufacturing side. That's a little

247
00:13:20,920 --> 00:13:22,600
Speaker 11: bit dramatic to call it that way, because they'll still

248
00:13:22,600 --> 00:13:25,600
Speaker 11: always be doing business in China, always still be manufacturing,

249
00:13:25,600 --> 00:13:28,400
Speaker 11: but I think that will become a much smaller part

250
00:13:28,400 --> 00:13:29,839
Speaker 11: of their business in the next five years.

251
00:13:29,880 --> 00:13:32,560
Speaker 1: Well, we know the company is already intending to manufacture

252
00:13:32,720 --> 00:13:35,880
Speaker 1: some iPhones for the market in India, because I think

253
00:13:35,920 --> 00:13:39,040
Speaker 1: the government has pretty tight regulations when it comes to

254
00:13:39,600 --> 00:13:42,280
Speaker 1: selling devices in the country, A certain percentage of that

255
00:13:42,320 --> 00:13:46,800
Speaker 1: manufacturing has to happen domestically. If you were giving Apple

256
00:13:46,880 --> 00:13:50,280
Speaker 1: guidance on how to approach the market in India, what

257
00:13:50,320 --> 00:13:50,800
Speaker 1: would it be.

258
00:13:52,640 --> 00:13:55,440
Speaker 11: I think they're taking the right approach. They're slowly starting

259
00:13:55,440 --> 00:13:57,800
Speaker 11: to build their brand. They've got a couple stores, but

260
00:13:57,880 --> 00:13:59,920
Speaker 11: I would take it. I guess my advice would be

261
00:14:00,120 --> 00:14:03,560
Speaker 11: to be more aggressive. India is a tough nut to

262
00:14:03,640 --> 00:14:06,520
Speaker 11: crack for the reasons that you talked about, but they

263
00:14:06,559 --> 00:14:10,440
Speaker 11: do want Western investment and they do. Apple is a

264
00:14:10,480 --> 00:14:14,040
Speaker 11: well regarded brand, and so my advice would just be

265
00:14:14,360 --> 00:14:17,600
Speaker 11: go a lot faster. It's to try to shift off

266
00:14:17,600 --> 00:14:19,880
Speaker 11: from more than half of your revenue being manufactured in

267
00:14:19,960 --> 00:14:23,560
Speaker 11: China to manufacturing more of it India. You just need

268
00:14:23,600 --> 00:14:27,120
Speaker 11: to go fast because it's such a great amount of

269
00:14:27,280 --> 00:14:31,760
Speaker 11: production and revenue to move over. So that's the one piece,

270
00:14:31,800 --> 00:14:34,400
Speaker 11: and then separately is just to be more aggressive. They're

271
00:14:34,440 --> 00:14:36,840
Speaker 11: good at doing this in China, but at making small

272
00:14:36,840 --> 00:14:39,840
Speaker 11: tweaks the phone that optimize for the country to localize

273
00:14:39,880 --> 00:14:41,560
Speaker 11: the phone, and I think they can do more there,

274
00:14:42,000 --> 00:14:44,480
Speaker 11: which will be positive for demand for iPhone in India.

275
00:14:44,560 --> 00:14:47,760
Speaker 1: Speaking of positivity, are you positive on Apple very quickly?

276
00:14:47,840 --> 00:14:49,000
Speaker 1: Gane for twenty twenty four?

277
00:14:49,880 --> 00:14:53,480
Speaker 11: Absolutely, just stand by for Vision Pro. It's going to

278
00:14:53,520 --> 00:14:56,320
Speaker 11: come out early next year. Spatial computing is going to

279
00:14:56,320 --> 00:14:59,000
Speaker 11: be a big deal and Apple's going to benefit from it.

280
00:15:00,000 --> 00:15:02,400
Speaker 1: This is Bloomberg day Break Asia, your morning brief on

281
00:15:02,440 --> 00:15:05,600
Speaker 1: the stories making news from Hong Kong to Singapore and

282
00:15:05,680 --> 00:15:08,680
Speaker 1: Wall Street. Look for us on your podcast feed every

283
00:15:08,760 --> 00:15:12,920
Speaker 1: day on Apple, Spotify and anywhere else you get your podcast.

284
00:15:13,280 --> 00:15:16,080
Speaker 1: You can also listen live each day on Bloomberg eleven

285
00:15:16,120 --> 00:15:18,560
Speaker 1: three to oh in New York, Bloomberg ninety nine to

286
00:15:18,600 --> 00:15:21,640
Speaker 1: one in Washington, Bloomberg one oh six to one in Boston,

287
00:15:21,800 --> 00:15:25,320
Speaker 1: and Bloomberg nine sixty in San Francisco. Our flagship New

288
00:15:25,360 --> 00:15:28,960
Speaker 1: York station is also available on your Amazon Alexa devices.

289
00:15:29,480 --> 00:15:33,600
Speaker 1: Just say Alexa Play Bloomberg eleven thirty plus. Listen coast

290
00:15:33,600 --> 00:15:37,000
Speaker 1: to coast on the Bloomberg Business app, the iHeartRadio app,

291
00:15:37,240 --> 00:15:40,360
Speaker 1: and on Bloomberg dot Com. I'm Doug Chrisner. Join us

292
00:15:40,400 --> 00:15:42,520
Speaker 1: again tomorrow for all the news you need to start

293
00:15:42,560 --> 00:15:50,880
Speaker 1: your day right here on Bloomberg day Break Asia