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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence Podcast. Catch us Live weekdays at ten am

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Speaker 1: Eastern on Apple Car playing Android Otto with the Bloomberg

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Speaker 1: Business app. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: Let's continue the conversation with Uber and Live to get

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Speaker 2: the read on what's going on here, Man Deep saying

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Speaker 2: Lubering Intelligence. Senior tech industry analyst joins us. Now Mande

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Speaker 2: for Uber, was it they're investing in other stuff that's

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Speaker 2: why they're disappointing Or is it Paul's fault because he

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Speaker 2: compareson shops between Lived and Uber.

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Speaker 3: I think Uber does have a stickier business model now

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Speaker 3: in the sense that people are more used to taking

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Speaker 3: Uber simply because it's become part of their habits, so

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Speaker 3: that price compares and narrative is sort of fading, although

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Speaker 3: it's still i would say, used by a few subscribers.

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Speaker 3: The overarching question is how big is this market in

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Speaker 3: terms of the writer base. So what you're seeing with

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Speaker 3: both Uber and Lyft is a flat lineling or flat

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Speaker 3: lining of you know, the new customer ads, and that

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Speaker 3: is a bigger problem because then the market suddenly feels saturated.

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Speaker 3: How do you grow revenue? Do you boost right frequency

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Speaker 3: or you layer in some other service? And I think

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Speaker 3: the answer isn't that obvious because to an extent, there

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Speaker 3: is a discretionary part to both their business models. Like

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Speaker 3: if I choose to take public transportation instead of Uber,

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Speaker 3: I could do that and it's just still a nice

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Speaker 3: to have in.

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Speaker 4: A lot of the rides that people take.

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Speaker 5: So that's the aspect.

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Speaker 3: I think that's what's driving the guidance and the tapering

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Speaker 3: of bookings growth. And I think investors are reality.

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Speaker 5: This is a global I think about areas for growth.

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Speaker 6: I would agree if I would guess the US market

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Speaker 6: is added close to saturation. I don't know, everybody's been

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Speaker 6: using Uber for years now, so you cant and lift

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Speaker 6: the card right string. But you know they get almost

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Speaker 6: half of the revenue.

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Speaker 7: Outside of the US.

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Speaker 5: Yeah, so what's the call there.

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Speaker 3: Well, so again you have to compare it to what

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Speaker 3: will drive the next leg of growth, And to my mind,

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Speaker 3: their take rates aren't going to expand, so take rates

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Speaker 3: are coming under pressure.

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Speaker 4: In the US.

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Speaker 3: There are specific cities that are saying you should give

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Speaker 3: higher wages to the workers, So that debate will always

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Speaker 3: be with these companies. You can never get your way

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Speaker 3: out of, you know, no matter how fast you grow.

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Speaker 3: And Uber announced a buy back last quarter, but I

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Speaker 3: think that's where the regulatory pressure is unlikely to abate.

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Speaker 3: And to my mind, you know, these companies, even though

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Speaker 3: they have an established business model, that right frequency element

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Speaker 3: is huge and I just find it hard if Tesla

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Speaker 3: is going to come up with robotaxis, that's going to impact.

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Speaker 4: The take rates for Uber and Lyft.

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Speaker 3: I mean, imagine Tesla adding a new tab within their

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Speaker 3: app for ride sharing. That's I think it's a big risk.

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Speaker 8: I mean, clearly they're really going to do that.

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Speaker 3: Elon Musk has said there will be a robotaxi launch

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Speaker 3: on August seventh.

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Speaker 5: I bet you will not get so.

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Speaker 8: Maybe not today, but your point is over time and the.

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Speaker 3: Market will obviously look way ahead of that. And I'm

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Speaker 3: more concerned about the take rates. Right now, Uber's take

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Speaker 3: rates are close to forty percent for certain type of rides,

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Speaker 3: even though the blended take rate is close to thirty.

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Speaker 3: But forty percent take rate, I mean, imagine what would

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Speaker 3: happen to that take rate if robotaxis come in the equation,

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Speaker 3: it will be a lot lower than forty percent, for sure.

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Speaker 2: But also I guess that but if you do with

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Speaker 2: the ROBOTAXI thing like, can't Uber then get their own

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Speaker 2: robotaxis and invest or does that? Just arow and then

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Speaker 2: their take rates one hundred percent.

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Speaker 3: So Uber has a partnership with Wevemo because Vemo doesn't

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Speaker 3: want to deploy on their own network and being the

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Speaker 3: business of maintaining the cars, so they want to use

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Speaker 3: Uber's network. But test I mean, they want to do

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Speaker 3: everything by themselves, so right now they haven't announced any partnership.

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Speaker 4: I think it's.

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Speaker 3: There's all the more reason for Lift to partner with

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Speaker 3: a Tesla simply because they're the smaller player and this

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Speaker 3: kind of gives them an opportunity to catch up, which

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Speaker 3: is what Uber seems to be doing with the instacart

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Speaker 3: partnership is how can I make my network bigger, even

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Speaker 3: if that means partnering with your competitor. And I do

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Speaker 3: think it's going to impact their delivery bookings in the

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Speaker 3: near term, but still they want to grow their network.

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Speaker 5: All right.

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Speaker 6: Lift head numbers last night a little better than expected.

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Speaker 5: How do you differentiate the call between Reddit.

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Speaker 3: Yeah, I don't take an it's a question of lift

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Speaker 3: gaining market share from Uber in anyway. This was more

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Speaker 3: of a case of expectations being really low and they

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Speaker 3: came out and showed, Okay, we are showing some cost discipline.

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Speaker 4: We're not losing any more.

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Speaker 3: Market share, which was the case for the past three quarters,

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Speaker 3: and the stocks seems to have reacted ten percent.

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Speaker 2: So to your point, Paul, the opposite of what happened

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Speaker 2: with Reddit, good IR department.

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Speaker 4: Yeah. Yeah.

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Speaker 8: For example, we.

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Speaker 2: Were talking earlier with Reddit being hit or Shopify, I

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Speaker 2: should say Shopify that the IR department just didn't manage expectations.

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Speaker 8: What's up with Reddit? What do you make of them numbers?

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Speaker 5: Wait, first of all, what is Reddit? I'm not read

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Speaker 5: in on this Reddit thing. I missing you.

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Speaker 3: Think of them as another social media platform, even though

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Speaker 3: social media definition continues to broaden. But they're a platform

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Speaker 3: where users spend twenty to twenty five minutes of their

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Speaker 3: time every day, and their daily active users seems to

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Speaker 3: be that's a lot okay in the social media sphere.

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Speaker 3: And look, their sequential daily active user growth was nine million,

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Speaker 3: so they added almost nine million new users. That's a

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Speaker 3: big number and their relevance in large anglid models. That's

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Speaker 3: the biggest driver. Every company that has their foundational large

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Speaker 3: anglid model needs Reddit data to train their model on.

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Speaker 2: So that was the whole pitch in the IPO that

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Speaker 2: it was like, people are going to pay Reddit to

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Speaker 2: get their user's posts because it helps their language model, right, yes,

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Speaker 2: are they making money from that and how much?

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Speaker 3: Yesterday they called out the incremental traffic they're getting from

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Speaker 3: Google because of that. So a lot of the Google

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Speaker 3: large acrid model results linked to Reddit posts, so they

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Speaker 3: get those automatic clicks because the large acrid model generates

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Speaker 3: a response that has a blue link to a Reddit post.

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Speaker 3: So clearly that traffic, incremental traffic has been a big

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Speaker 3: boost for Reddit, and now they are trying to monetize

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Speaker 3: it through ads. But their ad systems aren't as sophisticated

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Speaker 3: as your Meta and some of the other social media players,

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Speaker 3: so that will take them a while to catch up

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Speaker 3: in terms of building their ads.

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Speaker 5: So the Reddit story is just an advertising story.

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Speaker 3: Advertising, it's the same old, same old same and data licensing.

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Speaker 6: Yeah, data, I'm not sure I'm buying that, but the

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Speaker 6: IPO bought it. I mean thirty four bucks and start

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Speaker 6: looking at the lone.

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Speaker 3: Compared to a meta, this company has got a lot

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Speaker 3: of runway to add users, to add data licensing. Why

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Speaker 3: won't you buy a social media story at an earlier

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Speaker 3: stage as opposed to a mature stage.

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Speaker 1: Yep?

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Speaker 5: So where is this? All right? San Francisco?

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Speaker 1: All right?

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Speaker 5: Another good San Francisco story?

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Speaker 7: Who's this guy? Steve Hoffman the founder?

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Speaker 5: Is he a player?

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Speaker 3: I mean, look, the company has been around for eighteen

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Speaker 3: plus years, so that's right, that's.

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Speaker 5: Right, that's right.

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Speaker 8: Big on it, John Tucker, he's all over.

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Speaker 5: He's hit Yep, he's hit me.

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Speaker 8: On social media.

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Speaker 2: You're not even on the instant message on the Bloomberg's.

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Speaker 4: Dangerous to put my thoughts out there.

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Speaker 2: I have sent you just like the link of the

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Speaker 2: met Gala outfits, and he still won't look at it. Mandy,

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Speaker 2: thanks a lot, We appreciate you, and we deep seeing

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Speaker 2: a Bloomberg Intelligence senior tech industry analyst joining us.

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Speaker 8: There.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast live weekdays at

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Speaker 1: ten am Eastern on Apple car Play and Android Auto

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Speaker 1: with the Bloomberg Business app. You can also listen live

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Speaker 1: on Amazon Alexa from our flagship New York station. Just

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Speaker 1: say Alexa playing Bloomberg eleven thirty.

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Speaker 2: Let's hear on that Apple story for a moment. So

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Speaker 2: Apple stock is down by about three tens one percent

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Speaker 2: as John Tucker was reporting, the Chinese iPhone shipments jumped

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Speaker 2: about twelve percent in March after Apple and it's retailers

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Speaker 2: slashed prices. This is according to official data.

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Speaker 8: So what does that? What does that mean? What do

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Speaker 8: price cuts actually look like?

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Speaker 2: Joining us now is anarag Rana Bloomberg Intelligence technology analysts

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Speaker 2: on Apple's China iPhone shipments? What kind of price cuts?

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Speaker 2: I read the headline quickly and I thought it was

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Speaker 2: twelve percent price cuts? What kind of price cuts are

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Speaker 2: we looking for?

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Speaker 4: See again, this is very old. Also showed why the

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Speaker 4: people are getting so excited about it.

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Speaker 9: I mean, they already reported the quarter in April, and

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Speaker 9: you know, I mean a few days ago, and you

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Speaker 9: know Tim Cook said that they grew their sales in China.

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Speaker 9: So I'm not so sure why people getting so excited

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Speaker 9: about March. The big thing is there's an event coming

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Speaker 9: in June. The big version would be whether Apple's going

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Speaker 9: to repeat the price cuts in June or not because

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Speaker 9: right now everything hangs out and what will happen in

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Speaker 9: the second quarter because the guidance though it's good, but

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Speaker 9: if you back into it, iPhone stalls will still be

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Speaker 9: down in the second quarter.

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Speaker 6: For Apple, Anra, can we step back and can you

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Speaker 6: help us just kind of frame out the competitive landscape

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Speaker 6: for the phone business in China. What was it like

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Speaker 6: for Apple several years ago and what is it now?

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Speaker 9: So you know, Apple has been gaining share over the

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Speaker 9: last several years steadily, and it is extremely important for

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Speaker 9: Apple to do well in China because that is the

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Speaker 9: growth engine. That is only place where they're going to

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Speaker 9: you know, show a decent amount of actual number of

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Speaker 9: units growth. However, what happened was Huawei, which is this

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Speaker 9: is a local brand, had not released a big phone

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Speaker 9: for years because of certain restrictions and other things, and

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Speaker 9: they released a big five V phone for the first

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Speaker 9: time after a long you could say break. What happened

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Speaker 9: with that is who had those phones early on went

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Speaker 9: in you know quite a bit of them, increased the

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Speaker 9: sales of that particular brand, while Apple continue to struggle

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Speaker 9: at that time for that particular period only because you know,

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Speaker 9: eight there was a lot of discussion about not you know,

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Speaker 9: government officials not using Apple phones want to use something local.

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Speaker 4: As well as consumer weakness.

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Speaker 9: Apple for the first time, I would say, a few

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Speaker 9: months ago, you know, did unusual price cuts and which

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Speaker 9: is what we are hearing, you know, led to the

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Speaker 9: unit ship increase.

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Speaker 4: The big question or the big debate for all of.

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Speaker 9: Us, including you know, what we have discussed with you

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Speaker 9: as well, is whether this is a cyclical problem for

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Speaker 9: Apple in China or whether there's a structural problem of

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Speaker 9: people not buying iPhones.

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Speaker 4: We think it's a cyclical issue.

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Speaker 9: Over time, it's going to play out because you know,

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Speaker 9: you have ups and downs in unit shipments and if

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Speaker 9: Apple is going to be as great have been investing

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Speaker 9: in China adding more factories over there. You know, I

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Speaker 9: don't see a reason why the Chinese government is going

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Speaker 9: to be against them.

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Speaker 4: But on the other side of the equation, if.

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Speaker 9: The US government is very strict with you know, Huawei

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Speaker 9: and other local brands, you know they're going.

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Speaker 4: To go after Apple.

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Speaker 9: So there is a lot hanging on on Apple at

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Speaker 9: this point when it comes to the phone market.

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Speaker 2: What did you make of the iPad announcement yesterday? I

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Speaker 2: got to say, it was like the least covered Apple

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Speaker 2: event I think I've ever seen. So they have AI

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Speaker 2: focused pro model. So that was where really sted it

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Speaker 2: out to me, and I kind of want to know,

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Speaker 2: did you like it? Would you think of it? And

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Speaker 2: is there a template now that we're going to use

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Speaker 2: from the iPad to then what an AI phone maybe

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Speaker 2: looks like.

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Speaker 9: That's a brilliant question because I really was thinking on

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Speaker 9: the same lines yesterday that, Ah, this is an interesting

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Speaker 9: because if they had chip.

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Speaker 10: Ready for the for the iPad, maybe they're working hard

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Speaker 10: to do something similar for the phone because that's what's

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Speaker 10: going to drive growth for them now as well as

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Speaker 10: the product existence concerned.

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Speaker 4: I was blown away. It was beauty for I'm actually

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Speaker 4: they're going to have.

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Speaker 9: It in my local store on Wednesday, and I'm going

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Speaker 9: to go test it out and see how it plays.

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Speaker 11: Now.

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Speaker 9: The thing that's relevant is Apple iPad really got a

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Speaker 9: boost in FY twenty, right around the pandemic. That year,

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Speaker 9: I iPad sales grew up thirty four percent, with a

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Speaker 9: you know, high watermark of thirty one billion dollars that year.

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Speaker 9: Since then, the sales have been declining only because you

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Speaker 9: have this massive pull forward in demand because of the

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Speaker 9: pandemic app iPad refresh rate or you know, typically you know,

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Speaker 9: the years it takes for one to replace it or

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Speaker 9: it goes bad is about five years. So we are

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Speaker 9: really not expecting mathematically this release to do a fair

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Speaker 9: amount of stuff in terms of revenue for this year.

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Speaker 9: For next year, we are expecting that to have a

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Speaker 9: double digit growth rate for iPad for FI twenty five.

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Speaker 4: So that's really the iPad story.

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Speaker 9: But I think the read through is if they have

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Speaker 9: an AI chip that's doing you know, it's performing so well.

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Speaker 9: If that, if something similar to that comes to the phone,

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Speaker 9: I think it could be a game changer.

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Speaker 8: Okay, all right on Rock.

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Speaker 6: I think I'm going out to San Francisco next month

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Speaker 6: for this developer conference.

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Speaker 7: I think that's the place to be.

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Speaker 6: Am I if I go out there, am I going

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Speaker 6: to see an AI oh wow moment from Apple?

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Speaker 7: Do you think?

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Speaker 4: I think?

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Speaker 9: I personally think if it is just left for Apple,

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Speaker 9: it's not kind of to it only because they just

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Speaker 9: started pushing a lot of R and D into this

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Speaker 9: over the last six to twelve months. But if they

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Speaker 9: announced the deal with Google that they're going to license

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Speaker 9: some of the Google's product to run on the iOS.

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Speaker 4: I think that could make a difference.

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Speaker 9: Now, remember they already have a very strong partnership with

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Speaker 9: Google on the search side, and I'm hoping for you know,

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Speaker 9: both the company's sake because you know, we heard, we

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Speaker 9: have heard, like all the trouble that Google has to

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Speaker 9: you know, overpower it, all the discussions around search and stuff.

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Speaker 9: If they do a partnership with Apple, it's going to

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Speaker 9: help both the companies. And it's really going to help

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Speaker 9: Apple in order to get a small language model onto

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Speaker 9: the phone that can help me with you know, a

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Speaker 9: lot of the AI related queries. Now, assuming the you know,

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Speaker 9: the hardware is there to support it, I think it

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Speaker 9: helps out both the companies.

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Speaker 2: For let you go, you mentioned that you said the

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Speaker 2: iPad was amazing and YadA YadA, you're gonna go to

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Speaker 2: the store and look at it really like it was

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Speaker 2: that it was that cool, like like like Paul and

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Speaker 2: I need to care it was.

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Speaker 9: I mean, it is it is something that you know,

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Speaker 9: I don't carry a laptop nowadays.

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Speaker 4: I mean it's certainly the phone that you deal with.

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Speaker 9: But if you do want a device that is extremely thin,

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Speaker 9: extremely light, and it can take care of all your

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Speaker 9: computing needs. I mean, why not, you know, make the leap,

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Speaker 9: then get rid of the laptop altogether. Because remember the

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Speaker 9: iPad was always supposed to be a replacement for the.

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Speaker 4: For for for the laptop, but it never has you know, occurred.

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Speaker 9: A lot of people use it to watch moviesm and

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Speaker 9: that's where it ends usually. But you know, but but

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Speaker 9: I but but I think I'm gonna try to make

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Speaker 9: that lead now interesting?

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Speaker 8: Well that actually, I mean, so I don't have a computer.

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Speaker 8: Did you know this about me?

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Speaker 7: I don't have one other?

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Speaker 2: Okay, okay, because you have your phone, yep. But if

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Speaker 2: you could do it on the iPad or the bigger screen,

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Speaker 2: I work.

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Speaker 6: But I use it less and less and less and

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Speaker 6: less because I use the phone more and more and more.

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Speaker 8: That's even to work and do all those things.

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Speaker 7: Yes, the whole thing on the phone.

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Speaker 8: Interesting. Well, yeah, go ahead, an rock.

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Speaker 6: Can you tell me what Shopify is and why the

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Speaker 6: stock are down twenty percent today?

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Speaker 4: Shopify is one of the most innovative companies that's out there.

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Speaker 9: In fact, I would you know, I equate their founder

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Speaker 9: to be one of the smartest people that I have seen,

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Speaker 9: you know, from our generation.

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Speaker 4: Very equivalent to when I asked, yeah.

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Speaker 9: Equivalent to what Steve Jobs was on, you know, let's

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Speaker 9: say fifteen years ago. So yeah, it is as a

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Speaker 9: remarkable company. The starts down today because the guidance is

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Speaker 9: a bit light. So I'm sure all the heydphones are

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Speaker 9: getting out of this thing. But this is a company.

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Speaker 9: I think it's going to be there for a very

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Speaker 9: long period of time. But I have liked this company

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Speaker 9: for you know, I think six seven years. It's just

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Speaker 9: a phenomenal story.

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Speaker 5: And the software I don't use it, So explain to

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Speaker 5: me what they do.

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Speaker 9: Yeah, so they allow merchants to get onto line and

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Speaker 9: start you know, stores immediately.

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Speaker 4: It's it's it's just like you can.

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Speaker 9: You can you know if if you are an entrepreneur,

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Speaker 9: if you are a millennial, you know, if you are

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Speaker 9: you know, if you are one of the influencers, you're

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Speaker 9: going to be using their software to sell sell their products.

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Speaker 9: I mean, this is a this is the next gen

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Speaker 9: company for in what I call digital commerce software. So

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Speaker 9: in principle they help people get online and sell products.

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Speaker 9: It's they sell the software, they sell the platform.

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Speaker 4: I mean it is it is for the people.

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Speaker 2: Frankly so I don't go and shop there, but any

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Speaker 2: website that I may go to helps me.

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Speaker 8: Yes, that's what's helping me do that.

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Speaker 4: Yeah, it is.

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Speaker 9: If you see one of the coolest websites on your phone,

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Speaker 9: on your web on the browser, it's most likely being driven.

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Speaker 4: By something that Shopify, that's built on Shopify. So is it.

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Speaker 2: So if I'm shopping on Instagram, though, and then I

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Speaker 2: go to a website from Instagram, is that still Shopify?

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Speaker 4: Yes?

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Speaker 9: So Shopify is one of the very few companies that

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Speaker 9: can integrate with any digital channel. You can shop through

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Speaker 9: your you know, Instagram, through any of the other social

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Speaker 9: media platforms, you know, if you If I'm a merchant

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Speaker 9: and I want to sell a product, I can go

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Speaker 9: onto the shop of Ice platform, create my own websites,

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Speaker 9: billing system, front end system, back end system, payment systems.

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Speaker 4: They take care of everything on the back end. All

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Speaker 4: you have to do is have a good product to sell.

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Speaker 6: All right, Very cool, explain it now, I understand. All right,

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Speaker 6: And this seems like, again I'm going to reiterate, just

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Speaker 6: a bad job of investor relations managing expectations.

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Speaker 5: It seems like a rag.

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Speaker 6: Rana technology analyst at Bloomberg Intelligence, big fan of Shopify,

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Speaker 6: who knew? Joining us from that technology capital that is

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Speaker 6: known as Chicago, Illinois?

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Speaker 5: Who knew about that?

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Affo card playing Android

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Speaker 1: Oro with the Bloomberg Business app. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 2: So one other story we want to focus on here

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Speaker 2: is Tikno So, China based a byte Dance made it

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Speaker 2: clear that it will not comply with a new US

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Speaker 2: law requiring it to sell its popular TikTok video sharing app,

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Speaker 2: and that sets up, guess what it's all for the

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Speaker 2: lawyers and the judges, a prolonged court battle that basically

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Speaker 2: is going to pit free speech rights against national security interests.

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Speaker 2: And the rumor is that it could wind up at

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Speaker 2: the Supreme Court. So we want to get more data

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Speaker 2: on this. Matthew Shettenhelm is Bloomberg Intelligence media litigation analyst.

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Speaker 2: I just think the fact that we have a media

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Speaker 2: litigation analyst I know says a lot about where we

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Speaker 2: are in m and A and in big tech growth,

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Speaker 2: et cetera.

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Speaker 8: Matthew, what do you make. But first of all, walk

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Speaker 8: us through what this lawsuit is.

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Speaker 12: Yeah, so this is the First Amendment lawsuit that we

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Speaker 12: expected TikTok to bring, basically saying that Congress's action violates

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Speaker 12: its First Amendment rights, that it, like any other platform,

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Speaker 12: think about The New Times or any other media outlet,

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Speaker 12: if Congress were to effectively ban it, that it violates

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Speaker 12: the First Amendment to do so unless Congress can pass

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Speaker 12: a pretty tough test. And so I think this is

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Speaker 12: a pretty substantial First Amendment case because we've rarely seen

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Speaker 12: Congress take such drastic action with respect to such a

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Speaker 12: major media platform.

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Speaker 5: You know what we hired, Matt. He was just a kid,

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Speaker 5: gray hair. I know, I don't know what happened exactly.

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Speaker 6: As a grizzled veteran there, Matt. I know it's important

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Speaker 6: which court these things go to. So tell us where

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Speaker 6: you think this case will be litigated initially and kind

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Speaker 6: of how that might play.

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Speaker 12: Yeah, So this one's pretty easy to figure that out

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Speaker 12: because Congress limited where the companies can sue, and they

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Speaker 12: said any suit can only be filed at the DC

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Speaker 12: Circuit here here in Washington, which is sometimes referred to

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Speaker 12: as the second most important court in the United States

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Speaker 12: below below the U. S. Supreme Court. This is a

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Speaker 12: court that that takes most of its cases actually involved

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Speaker 12: challenges to US government action, usually agencies, the the alphabet

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Speaker 12: soup of agencies, the FCC, the the f A A, the.

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Speaker 11: E p A.

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Speaker 12: But here it's it's Congress actually taking the action. So

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Speaker 12: so this is a pretty experienced court. This won't allow

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Speaker 12: a single judge to go out and sort of make

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Speaker 12: a name for himself with an opinion. This will be

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Speaker 12: a three judge panel of very experienced judges, and then

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Speaker 12: the only appeal option would be to the Supreme Court

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Speaker 12: after that.

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Speaker 2: Does it violate the First Amendment free speech rights?

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Speaker 12: So I think it's it's a strong argument that that

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Speaker 12: TikTok presents. This is not an easy case on on

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Speaker 12: either side. What what the court is going to look

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Speaker 12: at is whether there's an important interest that Congress was

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Speaker 12: trying to serve and whether it tried to address that

445
00:21:09,800 --> 00:21:14,320
Speaker 12: interest in an appropriate and narrow way. Did it burden

446
00:21:14,480 --> 00:21:17,479
Speaker 12: more speech than is necessary to go after the interest.

447
00:21:17,920 --> 00:21:20,720
Speaker 12: And one of the things that the government has going

448
00:21:20,880 --> 00:21:24,040
Speaker 12: for it here is that this is a national security question.

449
00:21:24,800 --> 00:21:27,280
Speaker 12: I think if if if this were just an agency,

450
00:21:28,520 --> 00:21:31,480
Speaker 12: you know, trying to do this. I think that the

451
00:21:31,560 --> 00:21:34,320
Speaker 12: DC Circuit would would have issues with the state of

452
00:21:34,400 --> 00:21:38,320
Speaker 12: the record here and and and require it to do more.

453
00:21:38,359 --> 00:21:41,680
Speaker 12: There's very little evidence in the legislative record about what

454
00:21:42,040 --> 00:21:46,560
Speaker 12: exactly is the risk and what exactly why Congress needed

455
00:21:46,680 --> 00:21:50,080
Speaker 12: to pursue this avenue versus another avenue. If an agency

456
00:21:50,119 --> 00:21:52,240
Speaker 12: did this, a court would would have issues with it.

457
00:21:52,560 --> 00:21:56,800
Speaker 12: But this is Congress. This is our biggest policy making body,

458
00:21:57,240 --> 00:22:00,240
Speaker 12: and it's on national security, something these judges really know

459
00:22:00,359 --> 00:22:03,360
Speaker 12: nothing about, and they're going to be be very careful

460
00:22:03,480 --> 00:22:06,160
Speaker 12: about interfering. So at the end of the day, it's

461
00:22:06,200 --> 00:22:09,159
Speaker 12: a close call, but I give the United States a

462
00:22:09,240 --> 00:22:13,400
Speaker 12: slight edge because of that deference on national security questions

463
00:22:13,440 --> 00:22:15,400
Speaker 12: where judges just aren't expert.

464
00:22:16,160 --> 00:22:19,160
Speaker 6: So let's just assume that maybe the second this DC

465
00:22:19,560 --> 00:22:24,600
Speaker 6: District rules in favor of Congress, Tiktak presumably would then

466
00:22:24,680 --> 00:22:26,320
Speaker 6: take it to the Supreme Court. Do you think the

467
00:22:26,359 --> 00:22:28,600
Speaker 6: Supreme Court would hear such a case.

468
00:22:29,240 --> 00:22:32,440
Speaker 12: Yeah, so every Supreme Court case is discretionary. They could

469
00:22:32,560 --> 00:22:36,480
Speaker 12: say no, you know, I think more likely if the

470
00:22:36,560 --> 00:22:40,040
Speaker 12: scenario were flipped, I think the Supreme Court would take

471
00:22:40,080 --> 00:22:44,359
Speaker 12: it that if the DC Circuit rules initially in TikTok's favor,

472
00:22:44,960 --> 00:22:48,160
Speaker 12: I think the United States would would almost certainly get

473
00:22:48,320 --> 00:22:51,119
Speaker 12: a second chance at the Supreme Court. And that's one

474
00:22:51,119 --> 00:22:53,679
Speaker 12: of the reasons why I like the United States chances

475
00:22:53,760 --> 00:22:56,480
Speaker 12: here is that I see even if it doesn't go

476
00:22:56,640 --> 00:22:59,520
Speaker 12: well for the United States at the DC Circuit, I

477
00:22:59,600 --> 00:23:02,560
Speaker 12: think it it might go better at the Supreme Court.

478
00:23:02,640 --> 00:23:03,800
Speaker 5: It gets two shots at it.

479
00:23:04,960 --> 00:23:08,159
Speaker 12: If the DC Circuit rules for the United States, I

480
00:23:08,200 --> 00:23:10,200
Speaker 12: could say this, I could see the Supreme Court saying,

481
00:23:10,280 --> 00:23:12,399
Speaker 12: you know what, the DC Circuit got it right. We

482
00:23:12,440 --> 00:23:14,640
Speaker 12: don't need to take it up and say the same thing.

483
00:23:15,320 --> 00:23:17,440
Speaker 12: So you know, it's definitely going to be on the

484
00:23:17,480 --> 00:23:20,240
Speaker 12: Supreme Court's radar, assuming the timing fits. That's going to

485
00:23:20,280 --> 00:23:22,239
Speaker 12: be the first question is how do you squeeze all

486
00:23:22,280 --> 00:23:27,000
Speaker 12: this in on Congress's timeline by January nineteenth, we're supposed

487
00:23:27,000 --> 00:23:30,359
Speaker 12: to have a divestiture. The courts usually take much longer

488
00:23:30,440 --> 00:23:30,639
Speaker 12: than that.

489
00:23:31,680 --> 00:23:35,120
Speaker 2: If Minutian gets together as buddies, or if somebody else

490
00:23:35,200 --> 00:23:39,000
Speaker 2: comes in and wants to buy it, how does that complicate.

491
00:23:39,080 --> 00:23:39,800
Speaker 8: The court case.

492
00:23:41,200 --> 00:23:44,879
Speaker 12: Yeah, so that's a great question because for all of

493
00:23:45,000 --> 00:23:49,560
Speaker 12: this to happen on such a short timeline is almost impossible.

494
00:23:50,359 --> 00:23:53,800
Speaker 12: And so, you know, I think the court case is

495
00:23:53,880 --> 00:23:55,840
Speaker 12: going to press ahead, and one of the first things

496
00:23:55,880 --> 00:23:58,960
Speaker 12: we're going to see is a filing from TikTok giving

497
00:23:59,040 --> 00:24:01,560
Speaker 12: us its strategy the timing. Is it going to ask

498
00:24:01,680 --> 00:24:04,040
Speaker 12: the court to expedite this case. Is it going to

499
00:24:04,119 --> 00:24:07,680
Speaker 12: ask the court to pause Congress's deadlines to give more

500
00:24:07,760 --> 00:24:10,960
Speaker 12: time for for those sorts of negotiations.

501
00:24:11,640 --> 00:24:12,400
Speaker 5: We don't know yet.

502
00:24:12,480 --> 00:24:13,040
Speaker 8: That should come.

503
00:24:13,240 --> 00:24:15,359
Speaker 12: I think in the next couple of days. You know,

504
00:24:15,600 --> 00:24:20,000
Speaker 12: some some look at the strategy there, but it's definitely

505
00:24:20,160 --> 00:24:25,000
Speaker 12: difficult to see how you squeeze both a potential divestiture

506
00:24:25,320 --> 00:24:27,679
Speaker 12: and litigation in at the same time. I think they

507
00:24:27,720 --> 00:24:30,000
Speaker 12: have to be going at the same time on two tracks.

508
00:24:30,840 --> 00:24:33,679
Speaker 5: Who argues this case on behalf of the US government?

509
00:24:33,840 --> 00:24:37,640
Speaker 12: Good question, Yeah, I would I would think it's it's

510
00:24:37,800 --> 00:24:42,080
Speaker 12: pretty high level attorneys in the Attorney's General Office, you know,

511
00:24:42,160 --> 00:24:46,359
Speaker 12: and so so the potentially the Solicitor General of the

512
00:24:46,480 --> 00:24:50,000
Speaker 12: United States if this goes to the US Supreme Court. Uh,

513
00:24:51,800 --> 00:24:55,920
Speaker 12: this suit named Merrick Garland, the Attorney General, as the defendant,

514
00:24:56,080 --> 00:24:59,120
Speaker 12: so I would think he would he would name one

515
00:24:59,160 --> 00:25:02,920
Speaker 12: of his top attorneys to represent him and the United

516
00:25:02,960 --> 00:25:03,840
Speaker 12: States in this case.

517
00:25:04,400 --> 00:25:07,440
Speaker 5: All right, presumably we have some good attorneys working for

518
00:25:07,560 --> 00:25:08,280
Speaker 5: us in the government.

519
00:25:08,280 --> 00:25:09,080
Speaker 7: I would like to think.

520
00:25:09,400 --> 00:25:11,720
Speaker 8: I think this is a David So David Weston is

521
00:25:12,000 --> 00:25:12,879
Speaker 8: a recovering lawyer.

522
00:25:13,560 --> 00:25:16,399
Speaker 2: He's anti trust but still and years and years and

523
00:25:16,760 --> 00:25:18,399
Speaker 2: years ago, he was like, you know what, anything is

524
00:25:18,480 --> 00:25:18,879
Speaker 2: just good.

525
00:25:18,760 --> 00:25:22,160
Speaker 8: For lawyers, good for all of this just puts lawyers more.

526
00:25:22,320 --> 00:25:24,480
Speaker 7: Job because they built by the hour, by the minute.

527
00:25:24,520 --> 00:25:26,040
Speaker 7: Matt Shuttingham, thank you so much.

528
00:25:26,080 --> 00:25:27,800
Speaker 6: We appreciate it. He doesn't build by the hour. We

529
00:25:27,840 --> 00:25:30,480
Speaker 6: get him on a straight retainer. Come on to Bloomberg

530
00:25:30,480 --> 00:25:34,440
Speaker 6: Intelligence radio show, Matt Sheltenhelm Middy media litigation analysts for

531
00:25:34,440 --> 00:25:36,840
Speaker 6: Bloomberg Intelligence. He's down in DC where all this A

532
00:25:36,920 --> 00:25:39,240
Speaker 6: lot of this stuff happens, you know, all these agencies

533
00:25:39,600 --> 00:25:42,359
Speaker 6: in the litigation arising there. So again, TikTok important. I mean,

534
00:25:42,359 --> 00:25:44,200
Speaker 6: I don't know how many gajillions of people are on tiktech,

535
00:25:44,280 --> 00:25:46,639
Speaker 6: but a lot. It's important for the kids and support

536
00:25:46,640 --> 00:25:48,600
Speaker 6: for John Tucker. He's got a huge presence. He's in

537
00:25:48,920 --> 00:25:52,480
Speaker 6: I think he's an influencer, is what they call. So

538
00:25:52,600 --> 00:25:55,560
Speaker 6: he's paying close attention to this litigation.

539
00:25:57,119 --> 00:26:00,639
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Don't catch us

540
00:26:00,720 --> 00:26:04,000
Speaker 1: live weekdays at ten am Eastern on applecar Play and

541
00:26:04,119 --> 00:26:07,000
Speaker 1: Android Auto with the Bloomberg Business app. You can also

542
00:26:07,119 --> 00:26:10,600
Speaker 1: listen live on Amazon Alexa from our flagship New York station.

543
00:26:11,000 --> 00:26:13,640
Speaker 1: Just say Alexa play Bloomberg eleven.

544
00:26:13,480 --> 00:26:17,320
Speaker 2: Thirty and I'm Alex Steel alongside Paul Sweeney. This is

545
00:26:17,359 --> 00:26:20,080
Speaker 2: Bloomberg Intelligence Radio. We cover all the top news for

546
00:26:20,160 --> 00:26:22,160
Speaker 2: you in the financial and business world. Where are great

547
00:26:22,200 --> 00:26:25,440
Speaker 2: analysts that cover all the industries worldwide, one hundred and

548
00:26:25,640 --> 00:26:28,880
Speaker 2: thirty industries in two thousand plus companies. Let's get more

549
00:26:28,920 --> 00:26:31,399
Speaker 2: on this Intel thing. So apparently the withdrawal of the

550
00:26:31,480 --> 00:26:35,200
Speaker 2: license affects US sales of chips for using Huawei phones

551
00:26:35,240 --> 00:26:39,000
Speaker 2: and laptops. That's according to people familiar with the matter. Now,

552
00:26:39,040 --> 00:26:43,040
Speaker 2: the overall decision may not affect a significant volume of chips,

553
00:26:43,119 --> 00:26:46,800
Speaker 2: but it's really about the US government's determination to curtail

554
00:26:46,920 --> 00:26:51,360
Speaker 2: China's access to a huge swath of the semiconductor technology.

555
00:26:51,520 --> 00:26:53,760
Speaker 8: That's why Intel stock is down almost three percent.

556
00:26:54,080 --> 00:26:56,680
Speaker 2: Michael Shepherd is Bloomberg News a senior editor, and he's

557
00:26:56,720 --> 00:26:58,920
Speaker 2: standing by to help us break all of this down,

558
00:27:00,160 --> 00:27:03,920
Speaker 2: walk us through the revenue pain that Intel sees from this,

559
00:27:04,040 --> 00:27:06,159
Speaker 2: and the intricacy is of what kind of chips they

560
00:27:06,240 --> 00:27:07,280
Speaker 2: can and cannot sell.

561
00:27:08,359 --> 00:27:11,920
Speaker 11: Well, that's a great question, Alex. And for Intel, the

562
00:27:12,000 --> 00:27:16,520
Speaker 11: company is under some pressure to produce on the turnaround

563
00:27:16,560 --> 00:27:20,280
Speaker 11: that pet Gelsinger has outlined to try to get the

564
00:27:20,400 --> 00:27:24,280
Speaker 11: company back into the vanguard of manufacturing, but here in

565
00:27:24,359 --> 00:27:28,639
Speaker 11: the US in particular, So analysts are out there looking

566
00:27:28,760 --> 00:27:34,320
Speaker 11: for any sign of potential trouble for Intel as it

567
00:27:34,640 --> 00:27:38,440
Speaker 11: tries to execute this plan. And here, even though we're

568
00:27:38,480 --> 00:27:43,320
Speaker 11: not seeing a significant market for Intel with Huahwei, nonetheless

569
00:27:43,480 --> 00:27:45,960
Speaker 11: any sign of trouble is something that they have to

570
00:27:46,000 --> 00:27:46,880
Speaker 11: take into account.

571
00:27:47,600 --> 00:27:50,560
Speaker 6: So, you know, for I guess the bigger picture here

572
00:27:50,960 --> 00:27:54,360
Speaker 6: as you step back, it just feels like this technology

573
00:27:54,560 --> 00:27:58,720
Speaker 6: cold war between China and the West, China and the

574
00:27:58,880 --> 00:28:03,000
Speaker 6: US is intensifying. Is that the feeling in Washington is

575
00:28:03,040 --> 00:28:04,439
Speaker 6: that where Washington really wants to take this.

576
00:28:05,400 --> 00:28:07,160
Speaker 11: But Paul, I'm glad you brought it up that way

577
00:28:07,240 --> 00:28:09,800
Speaker 11: in those terms, because we really are seeing much more

578
00:28:09,840 --> 00:28:13,200
Speaker 11: of a frost when it comes to technology settling in

579
00:28:13,960 --> 00:28:18,960
Speaker 11: the US. Has been making clear we heard Commerce Secretary

580
00:28:19,040 --> 00:28:22,560
Speaker 11: Gina Raymonder just a few weeks ago say technological security

581
00:28:22,680 --> 00:28:26,359
Speaker 11: is national security, and they are drawing a line when

582
00:28:26,400 --> 00:28:31,200
Speaker 11: it comes to the more sophisticated and more advanced technology,

583
00:28:31,440 --> 00:28:34,280
Speaker 11: especially when it comes to computer chips. The US is

584
00:28:34,320 --> 00:28:37,720
Speaker 11: a leading innovator, if not a leading producer, of some

585
00:28:37,880 --> 00:28:41,560
Speaker 11: of the most advanced and tiniest semiconductors that are out

586
00:28:41,600 --> 00:28:45,800
Speaker 11: there powering technology everywhere. And one of the emerging fronts is,

587
00:28:45,880 --> 00:28:50,040
Speaker 11: of course, artificial intelligence. And we spoke yesterday to House

588
00:28:50,400 --> 00:28:53,400
Speaker 11: Foreign Affairs Committee Chairman Michael McCall, who's been pushing for

589
00:28:53,480 --> 00:28:56,600
Speaker 11: these WAWEE restrictions, and he said, the idea of the

590
00:28:56,680 --> 00:29:02,160
Speaker 11: export controls that we've reported on yesterday was to keep

591
00:29:02,320 --> 00:29:05,240
Speaker 11: the most advanced AI tech out of China's hands.

592
00:29:06,080 --> 00:29:08,320
Speaker 2: What about tech that's already in their hands that then

593
00:29:08,440 --> 00:29:11,840
Speaker 2: China can adapt themselves. Wasn't there like a Huawei phone

594
00:29:12,560 --> 00:29:15,360
Speaker 2: that really scratched everyone's head on like how what kind

595
00:29:15,400 --> 00:29:16,720
Speaker 2: of chips they actually used?

596
00:29:16,720 --> 00:29:18,440
Speaker 8: I mean, how do you restrict that kind of stuff?

597
00:29:19,400 --> 00:29:22,840
Speaker 11: Well, the US is actually investigating what happened with the

598
00:29:22,920 --> 00:29:27,000
Speaker 11: May ninety This device was unveiled as Gina Raimondo was

599
00:29:27,160 --> 00:29:31,720
Speaker 11: visiting China, and it was taken as a you know,

600
00:29:32,800 --> 00:29:36,840
Speaker 11: something that was aimed directly at her during her visit

601
00:29:37,280 --> 00:29:39,840
Speaker 11: to say that, look, you're trying to put these restrictions

602
00:29:39,920 --> 00:29:43,320
Speaker 11: in place, we will show you. Now. The US has

603
00:29:43,640 --> 00:29:48,040
Speaker 11: launched an investigation into how Huawei was able to develop

604
00:29:48,120 --> 00:29:50,760
Speaker 11: it and whether there are other companies that are forming

605
00:29:50,840 --> 00:29:54,880
Speaker 11: this shadow network of suppliers to Huawei, in other words,

606
00:29:54,960 --> 00:29:58,960
Speaker 11: creating proxies that allow the device maker to obtain the

607
00:29:59,040 --> 00:30:00,400
Speaker 11: chips at an otherwise can't.

608
00:30:02,040 --> 00:30:04,920
Speaker 6: So what's the response been from China? What can we

609
00:30:05,040 --> 00:30:06,719
Speaker 6: It's just gonna be a tit for tat type of thing.

610
00:30:06,840 --> 00:30:08,719
Speaker 6: So I'm Tim Cook, I'm paying attention here.

611
00:30:09,720 --> 00:30:15,520
Speaker 11: Well, American technology executives should be watching this space. China

612
00:30:15,680 --> 00:30:20,240
Speaker 11: overnight responded, calling the moves economic coercion and a violation

613
00:30:20,360 --> 00:30:23,840
Speaker 11: of what it sees as World Trade Organization rules, and

614
00:30:23,960 --> 00:30:26,920
Speaker 11: they may very well decide to proceed with the case.

615
00:30:27,640 --> 00:30:29,840
Speaker 11: At the same time, the US is trying to draw

616
00:30:29,880 --> 00:30:33,600
Speaker 11: a line around the whole question of national security, and

617
00:30:33,760 --> 00:30:35,640
Speaker 11: that is going to be something that we see as

618
00:30:35,880 --> 00:30:39,320
Speaker 11: a tension point between the two countries. The US is

619
00:30:39,360 --> 00:30:42,120
Speaker 11: made clear that it wants to do business with China,

620
00:30:42,520 --> 00:30:46,120
Speaker 11: but just not that far. It is only willing to

621
00:30:46,240 --> 00:30:50,680
Speaker 11: go so far when it comes to trade in more

622
00:30:50,840 --> 00:30:55,479
Speaker 11: advanced technologies. It wants to preserve the American edge here

623
00:30:55,520 --> 00:30:55,840
Speaker 11: at home.

624
00:30:56,480 --> 00:30:58,600
Speaker 8: How hard is it for Intel to make up that

625
00:30:58,680 --> 00:30:59,680
Speaker 8: revenue elsewhere?

626
00:31:00,680 --> 00:31:03,280
Speaker 11: You know, it's a good question. It's unclear exactly how

627
00:31:03,480 --> 00:31:07,680
Speaker 11: much they would be losing here. It was only a

628
00:31:07,920 --> 00:31:11,800
Speaker 11: slight drop. If you read between the lines on it.

629
00:31:12,200 --> 00:31:15,240
Speaker 11: You know they're now seeing something more to the midpoint

630
00:31:15,760 --> 00:31:19,560
Speaker 11: of their guidance, but it is still within the revenue

631
00:31:19,600 --> 00:31:22,200
Speaker 11: that they have projected between twelve and a half billion

632
00:31:22,400 --> 00:31:23,760
Speaker 11: and thirteen and a half billion.

633
00:31:24,640 --> 00:31:28,960
Speaker 6: You know, Michael, we've all grown up with Intel, and

634
00:31:29,240 --> 00:31:31,400
Speaker 6: you know, kind of I guess we now consider kind

635
00:31:31,400 --> 00:31:35,400
Speaker 6: of the older generation of Silicon Valley of technology. It

636
00:31:35,480 --> 00:31:38,400
Speaker 6: appears that they just have not been able to catch

637
00:31:38,480 --> 00:31:41,880
Speaker 6: that AI wave, at least from investors perspective, in any way,

638
00:31:41,960 --> 00:31:45,640
Speaker 6: shape or form. Is there any optimism that maybe they

639
00:31:45,760 --> 00:31:49,600
Speaker 6: can infect pivot their company to go to where the

640
00:31:49,680 --> 00:31:51,560
Speaker 6: puck is going, which is for AI.

641
00:31:52,840 --> 00:31:56,480
Speaker 11: Well, Paul, we all remember the Intel inside jingle from

642
00:31:56,520 --> 00:31:59,360
Speaker 11: those ads years ago, and that is something that Pat

643
00:31:59,440 --> 00:32:03,880
Speaker 11: Gelson is really trying to recapture and he is seizing

644
00:32:04,040 --> 00:32:09,280
Speaker 11: upon the Biden Administration's Chips Act. All those investments. We're

645
00:32:09,320 --> 00:32:13,680
Speaker 11: seeing the company launch plants in Arizona and in Ohio.

646
00:32:13,840 --> 00:32:17,360
Speaker 11: We just profiled the construction of this new facility in

647
00:32:17,480 --> 00:32:21,360
Speaker 11: Ohio was really impressive. Look inside what they are trying

648
00:32:21,440 --> 00:32:24,040
Speaker 11: to build there. It's ambitious, but it will take some

649
00:32:24,240 --> 00:32:28,040
Speaker 11: time too. These plants can't be built overnight, and it

650
00:32:28,200 --> 00:32:29,880
Speaker 11: is a race against the clock when it comes.

651
00:32:29,760 --> 00:32:31,680
Speaker 8: To ai well, and also is a question.

652
00:32:31,800 --> 00:32:34,200
Speaker 2: I mean a lot of the stuff if you announce

653
00:32:34,240 --> 00:32:36,560
Speaker 2: it doesn't mean it actually happens. Things get pushed back

654
00:32:36,720 --> 00:32:38,720
Speaker 2: or paired back. You're going to start off with, say

655
00:32:39,160 --> 00:32:41,000
Speaker 2: a plant that's going to do X amount and then

656
00:32:41,040 --> 00:32:45,040
Speaker 2: you reduce it to M amount or are we expecting

657
00:32:45,040 --> 00:32:47,160
Speaker 2: anything along those lines from Intel? I think there was

658
00:32:47,200 --> 00:32:51,200
Speaker 2: a great chart on Bloomberg today that showed where chips

659
00:32:51,240 --> 00:32:55,720
Speaker 2: come from now and it was an amazing circle charts,

660
00:32:55,720 --> 00:32:58,960
Speaker 2: circle chart they called circle charts pie chart, Oh my goodness,

661
00:32:59,040 --> 00:33:03,000
Speaker 2: pie chart that showed a Taiwan and Korea and then

662
00:33:03,080 --> 00:33:05,800
Speaker 2: how in like nine years, eight years, and just the

663
00:33:05,920 --> 00:33:09,719
Speaker 2: diversification was tremendous and the majority of that coming from

664
00:33:09,800 --> 00:33:10,240
Speaker 2: the US.

665
00:33:11,480 --> 00:33:14,480
Speaker 11: Well, what the US is really hoping to do through

666
00:33:14,560 --> 00:33:18,479
Speaker 11: the Chips Act is to get twenty percent of production

667
00:33:18,600 --> 00:33:24,280
Speaker 11: of advanced semiconductors done domestically. Currently that figure is zero,

668
00:33:24,760 --> 00:33:27,320
Speaker 11: so that and they would like to achieve this goal

669
00:33:27,440 --> 00:33:30,800
Speaker 11: by twenty thirty. That is a really ambitious target and

670
00:33:30,960 --> 00:33:34,360
Speaker 11: they're pushing all out to see if they can achieve it.

671
00:33:34,720 --> 00:33:37,600
Speaker 11: But the European Union also has a similar goal of

672
00:33:37,760 --> 00:33:43,000
Speaker 11: trying to amp up its own percentage of advanced semiconductor production.

673
00:33:43,680 --> 00:33:46,280
Speaker 11: And the idea also is as a hedge in the

674
00:33:46,360 --> 00:33:49,600
Speaker 11: event that China decides to actually make some move against

675
00:33:49,640 --> 00:33:53,440
Speaker 11: Taiwan militarily. The US wants to be sure that it

676
00:33:53,560 --> 00:33:56,680
Speaker 11: can produce chips in the event of a severe supply

677
00:33:56,840 --> 00:33:59,320
Speaker 11: chain disruption akin to the one that we saw during

678
00:33:59,360 --> 00:33:59,920
Speaker 11: the pandemic.

679
00:34:00,440 --> 00:34:02,040
Speaker 7: Yeah, I mean that drove home kind of.

680
00:34:03,080 --> 00:34:04,640
Speaker 6: I think kind of just brought to the forefront this

681
00:34:04,680 --> 00:34:07,840
Speaker 6: whole you know, reshoring or friend shoring for a lot

682
00:34:07,920 --> 00:34:09,720
Speaker 6: of different industries, including technology.

683
00:34:09,760 --> 00:34:11,680
Speaker 5: Michael Sheppard, thanks so much for joining us there.

684
00:34:11,719 --> 00:34:15,279
Speaker 6: Michael Sheppard, he's a senior editor for Bloomberg News, joining

685
00:34:15,360 --> 00:34:17,719
Speaker 6: us from Washington, DC. And I remember that you know,

686
00:34:17,920 --> 00:34:19,239
Speaker 6: I guess we all remember that kind of in the

687
00:34:19,280 --> 00:34:21,960
Speaker 6: beginning of the pandemic, when the global economy really shut down.

688
00:34:22,000 --> 00:34:25,160
Speaker 5: You're like, oh, we a lot. We import a lot

689
00:34:25,200 --> 00:34:26,120
Speaker 5: of stuff, a lot of.

690
00:34:26,120 --> 00:34:28,719
Speaker 6: Important stuff, and from some places that may or may

691
00:34:28,800 --> 00:34:33,440
Speaker 6: not be that dependent, I guess are dependable, and therefore

692
00:34:33,480 --> 00:34:35,799
Speaker 6: that whole reshoring friend shoring, and I guess Mexico has

693
00:34:35,800 --> 00:34:37,840
Speaker 6: been one of the real beneficiaries of that.

694
00:34:38,440 --> 00:34:38,680
Speaker 8: Yeah.

695
00:34:39,120 --> 00:34:42,000
Speaker 2: Absolutely, And that's what was so staggering about this pie chart,

696
00:34:42,680 --> 00:34:45,800
Speaker 2: just to show how bifurcated it actually is now in

697
00:34:45,920 --> 00:34:48,680
Speaker 2: terms of how much market share Korea and Taiwan have

698
00:34:49,120 --> 00:34:51,080
Speaker 2: and then how much money apparently will be poured in

699
00:34:51,239 --> 00:34:54,160
Speaker 2: even like Europe is going to gain some share, nothing

700
00:34:54,239 --> 00:34:58,480
Speaker 2: like the US, but nonetheless, I mean the first mover advantage, right, Like,

701
00:34:58,680 --> 00:35:00,160
Speaker 2: if you put a lot of money into some thing

702
00:35:00,200 --> 00:35:01,719
Speaker 2: and you build something, now, are you going to go

703
00:35:01,760 --> 00:35:04,120
Speaker 2: then build a second plan in Europe? Or is it

704
00:35:04,239 --> 00:35:06,400
Speaker 2: kind of a one and done kind of thing when

705
00:35:06,440 --> 00:35:09,239
Speaker 2: you're looking at billions and billions and billions dollars worth

706
00:35:09,520 --> 00:35:10,680
Speaker 2: of investments.

707
00:35:10,320 --> 00:35:14,839
Speaker 6: And Michael's referencing a piece of work done by Bloomberg News,

708
00:35:14,920 --> 00:35:16,399
Speaker 6: the Big Take story of a week or two ago

709
00:35:16,480 --> 00:35:19,359
Speaker 6: about that Ohio plant. Yes, and how big that's going

710
00:35:19,440 --> 00:35:23,280
Speaker 6: to be in the investment there. So that's a huge investment.

711
00:35:23,320 --> 00:35:26,080
Speaker 6: But as Michael is suggesting, if your intel, the payoff's

712
00:35:26,080 --> 00:35:26,720
Speaker 6: going to be a while.

713
00:35:26,640 --> 00:35:27,319
Speaker 8: It's going to be a while.

714
00:35:27,320 --> 00:35:29,000
Speaker 2: And that makes it hard for an investor too, because

715
00:35:29,040 --> 00:35:32,400
Speaker 2: you're still in a cyclical business with structural change. And

716
00:35:32,480 --> 00:35:34,040
Speaker 2: I keep going back to that this is a brook

717
00:35:34,040 --> 00:35:36,359
Speaker 2: Settle and special Bloomberg opinion and check her out there.

718
00:35:36,400 --> 00:35:39,439
Speaker 2: But and how you invest then for something along those lines,

719
00:35:39,480 --> 00:35:41,839
Speaker 2: and what your timeline has to be like when you're

720
00:35:41,880 --> 00:35:45,239
Speaker 2: looking at something along a cyclical versus structural world.

721
00:35:47,960 --> 00:35:51,799
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

722
00:35:51,920 --> 00:35:55,440
Speaker 1: weekdays at ten am Eastern on applecar Play and Android

723
00:35:55,480 --> 00:35:58,600
Speaker 1: Auto with the Bloomberg Business. You can also listen live

724
00:35:58,719 --> 00:36:01,880
Speaker 1: on Amazon Alexa for our flagship New York station, Just

725
00:36:01,960 --> 00:36:04,560
Speaker 1: Say Alexa, playing Bloomberg eleven.

726
00:36:04,320 --> 00:36:08,520
Speaker 2: Thirty and Alex Steel alongside Paul Sweeney. This is Bloomberg

727
00:36:08,560 --> 00:36:11,120
Speaker 2: Intelligence Radio. We bring you all the top news from

728
00:36:11,120 --> 00:36:14,360
Speaker 2: Bloomberg News but also the analysis from Bloomberg Intelligence. They

729
00:36:14,400 --> 00:36:17,200
Speaker 2: cover about one hundred and thirty companies excuse me, industries

730
00:36:17,239 --> 00:36:21,160
Speaker 2: and two thousand companies worldwide. We also keep you updating

731
00:36:21,200 --> 00:36:23,640
Speaker 2: all the great enterprise reporting that we do here at Bloomberg,

732
00:36:23,680 --> 00:36:26,520
Speaker 2: and this one ties nicely into some earnings that we're seeing.

733
00:36:26,600 --> 00:36:30,879
Speaker 2: So affirm that stock is off by over seven percent. Now,

734
00:36:31,160 --> 00:36:33,680
Speaker 2: this is a buy now, pay later company, which, from

735
00:36:33,719 --> 00:36:35,719
Speaker 2: what I hear is literally what it is, you buy

736
00:36:35,840 --> 00:36:38,440
Speaker 2: now and you pay later. Their forecast revenue for the

737
00:36:38,480 --> 00:36:41,960
Speaker 2: fourth quarter did beat average analyst estimates. Third quarter was

738
00:36:42,000 --> 00:36:44,200
Speaker 2: also strong, yet the stock is down. The macro read,

739
00:36:44,239 --> 00:36:46,279
Speaker 2: of course, is when these guys do well, what does

740
00:36:46,320 --> 00:36:49,560
Speaker 2: that say about the underlying economy? Now, luckily, the Big

741
00:36:49,680 --> 00:36:52,040
Speaker 2: Take addresses some of this. The Big Take is an

742
00:36:52,080 --> 00:36:54,719
Speaker 2: in depth story that we cover every day on Bloomberg

743
00:36:54,760 --> 00:36:57,520
Speaker 2: and joining us to discuss it. It's Paige Smith, consumer

744
00:36:57,600 --> 00:37:01,399
Speaker 2: finance reporter, and also Paulina Chro she joins us. They're

745
00:37:01,440 --> 00:37:05,959
Speaker 2: both joining us in the studio. This is about phantom debt,

746
00:37:06,360 --> 00:37:08,919
Speaker 2: and the quote is Americans are racking up phantom debt

747
00:37:08,960 --> 00:37:11,840
Speaker 2: that Wall Street can't track. Presumably you guys did this

748
00:37:11,920 --> 00:37:14,200
Speaker 2: because of Firmer's reporting, and that's part of the phantom debt.

749
00:37:14,239 --> 00:37:14,359
Speaker 13: Right.

750
00:37:14,440 --> 00:37:16,800
Speaker 8: The buy now pay later, Paulina, what did you discover

751
00:37:17,120 --> 00:37:17,840
Speaker 8: in this reporting?

752
00:37:18,760 --> 00:37:20,960
Speaker 13: So, you know, at first we were looking at how

753
00:37:20,960 --> 00:37:24,640
Speaker 13: American households are already carrying about seventeen point five trillion

754
00:37:24,680 --> 00:37:28,360
Speaker 13: dollars in debt, and sometime last year an economist at

755
00:37:28,400 --> 00:37:31,840
Speaker 13: Walls Fargo pointed to the fact that there's about forty

756
00:37:32,000 --> 00:37:34,480
Speaker 13: six billion dollars worth of phantom debt lurking in the

757
00:37:34,600 --> 00:37:38,600
Speaker 13: economy with buy now pay leader services, and we just

758
00:37:38,880 --> 00:37:42,840
Speaker 13: wanted to note that that's a conservative estimate. Basically, our

759
00:37:42,880 --> 00:37:46,239
Speaker 13: reporting looked at how no one really knows exactly how

760
00:37:46,360 --> 00:37:49,120
Speaker 13: much buy now pay leader debt is out there because,

761
00:37:50,080 --> 00:37:52,560
Speaker 13: you know, due to some regulatory loopholes, a lot of

762
00:37:52,640 --> 00:37:56,200
Speaker 13: these providers are not furnishing data to credit bureaus. So

763
00:37:56,520 --> 00:37:59,920
Speaker 13: while economists and Wall Street traders are making you know,

764
00:38:00,120 --> 00:38:03,480
Speaker 13: projections on the economic outlooks based on you know, how

765
00:38:03,640 --> 00:38:06,759
Speaker 13: the consumer is doing, we don't really know. We don't

766
00:38:06,800 --> 00:38:07,920
Speaker 13: really have the full picture.

767
00:38:08,640 --> 00:38:10,759
Speaker 6: So, Paige, I mean, how big is this that there?

768
00:38:10,760 --> 00:38:12,279
Speaker 6: I mean, when I was growing up, we called this

769
00:38:12,320 --> 00:38:14,919
Speaker 6: stuff layaway. Now it's pay pay out, buy or whatever,

770
00:38:14,960 --> 00:38:17,640
Speaker 6: it's buy now, pay pay later. Is it a big market?

771
00:38:17,680 --> 00:38:19,160
Speaker 6: Do we think it's a lot out there are people

772
00:38:19,239 --> 00:38:19,800
Speaker 6: doing this stuff.

773
00:38:20,080 --> 00:38:22,200
Speaker 14: Yeah, So just just to go back to one thing

774
00:38:22,280 --> 00:38:24,680
Speaker 14: that Pauline is said. Actually, so to be clear, it's

775
00:38:24,760 --> 00:38:28,840
Speaker 14: not lenders that kind of exist in credit card lenders,

776
00:38:28,880 --> 00:38:31,640
Speaker 14: auto lenders, et cetera. They're not required to actually report

777
00:38:31,680 --> 00:38:34,839
Speaker 14: this data to credit years, but they are. It's kind

778
00:38:34,840 --> 00:38:37,000
Speaker 14: of like an ecosystem, right, Like, you want to know

779
00:38:37,120 --> 00:38:39,680
Speaker 14: what consumer debt is out there. I want to know

780
00:38:39,719 --> 00:38:41,880
Speaker 14: what consumer debt is out there. Let's provide as much

781
00:38:41,960 --> 00:38:44,719
Speaker 14: data as possible to the credit uros. But I think

782
00:38:44,800 --> 00:38:47,560
Speaker 14: that's a good question because we really don't know how

783
00:38:47,640 --> 00:38:51,239
Speaker 14: much consumer debt is out there, in particular the buy now,

784
00:38:51,320 --> 00:38:53,759
Speaker 14: pay later debt. And that's kind of why this Well

785
00:38:54,000 --> 00:38:58,640
Speaker 14: Wells Fargo analyst Tim Quinlan kind of you know, penned

786
00:38:58,760 --> 00:39:02,000
Speaker 14: this or this phantom debt.

787
00:39:02,360 --> 00:39:03,959
Speaker 8: How does it work?

788
00:39:04,320 --> 00:39:07,400
Speaker 2: So does it like okay, by now pay later? Is

789
00:39:07,480 --> 00:39:09,840
Speaker 2: it zero percent interest? Do I have to pay a

790
00:39:09,960 --> 00:39:11,120
Speaker 2: minimum every month?

791
00:39:11,200 --> 00:39:11,239
Speaker 11: Like?

792
00:39:11,320 --> 00:39:13,080
Speaker 8: How does that work? And how is it different or

793
00:39:13,120 --> 00:39:14,520
Speaker 8: similar to credit cards? For example?

794
00:39:14,560 --> 00:39:18,399
Speaker 13: Paulina, So, typically, you know, a buy now pay lead

795
00:39:18,520 --> 00:39:22,720
Speaker 13: option will show up in most online checkouts. It offers

796
00:39:22,880 --> 00:39:26,759
Speaker 13: you know, most customers allows them to split up their

797
00:39:27,280 --> 00:39:31,560
Speaker 13: purchase into four installment payments over the course of six weeks,

798
00:39:31,840 --> 00:39:34,560
Speaker 13: so the first payment is due write at checkout, and

799
00:39:34,680 --> 00:39:38,000
Speaker 13: then the next three or do every two weeks after that.

800
00:39:38,360 --> 00:39:41,439
Speaker 13: And they usually offer this with a pretty quick credit

801
00:39:41,520 --> 00:39:45,920
Speaker 13: approval and they offer zero interest rates. So where consumers

802
00:39:46,080 --> 00:39:49,759
Speaker 13: start to kind of fall into trouble with buy now

803
00:39:49,840 --> 00:39:53,480
Speaker 13: pay Leader services is one, you know, if you do

804
00:39:53,760 --> 00:39:56,920
Speaker 13: fall behind on a payment, there are late fees associated

805
00:39:57,000 --> 00:39:57,160
Speaker 13: with that.

806
00:39:58,040 --> 00:39:58,840
Speaker 8: And it's not just that.

807
00:39:59,239 --> 00:40:02,360
Speaker 13: One of the concerns that the Consumer Financial Protection Bureau

808
00:40:02,440 --> 00:40:06,160
Speaker 13: sited was this issue of loan stacking. So a consumer

809
00:40:06,239 --> 00:40:08,680
Speaker 13: could take out a buy Now Pay Later loan on

810
00:40:08,920 --> 00:40:12,400
Speaker 13: a Tuesday of one week and a Wednesday of you know,

811
00:40:12,600 --> 00:40:15,879
Speaker 13: the next week, and those payments will just happen two

812
00:40:16,000 --> 00:40:17,840
Speaker 13: weeks from that time of purchase, and it can be

813
00:40:17,920 --> 00:40:21,000
Speaker 13: really difficult for consumers to keep track of, you know,

814
00:40:21,360 --> 00:40:24,719
Speaker 13: when those payments come do how much they actually owe

815
00:40:24,800 --> 00:40:28,640
Speaker 13: across you know, one or sometimes several different buy now

816
00:40:28,719 --> 00:40:30,160
Speaker 13: pay Leader service providers.

817
00:40:30,280 --> 00:40:33,280
Speaker 6: I'm looking at your store here at a gentleman Fabricio Lopez,

818
00:40:34,160 --> 00:40:37,000
Speaker 6: he found out the hard way that paying on time

819
00:40:37,120 --> 00:40:39,560
Speaker 6: won't help them build up their credit score. But on

820
00:40:39,600 --> 00:40:42,120
Speaker 6: the other hand, the downside is that they fall behind.

821
00:40:42,200 --> 00:40:44,480
Speaker 6: Not only they get charge late fees, but they'll also

822
00:40:44,600 --> 00:40:46,680
Speaker 6: get you know, the loan turned over to debt collectors.

823
00:40:46,680 --> 00:40:48,680
Speaker 5: So are we seeing more of that?

824
00:40:48,880 --> 00:40:51,360
Speaker 7: I guess I would say it is.

825
00:40:51,640 --> 00:40:54,359
Speaker 14: It's just again, it's to go back to the main point,

826
00:40:54,640 --> 00:40:57,800
Speaker 14: it's challenging to quantify how much of this debt is

827
00:40:57,840 --> 00:41:00,800
Speaker 14: out there on top of expensive payment it's that consumers

828
00:41:00,920 --> 00:41:03,640
Speaker 14: already have to grapple with like rent and gas.

829
00:41:03,480 --> 00:41:05,080
Speaker 8: And sort of you name it.

830
00:41:05,200 --> 00:41:08,320
Speaker 14: But yes, essentially a lot of these companies kind of

831
00:41:08,360 --> 00:41:11,799
Speaker 14: market themselves as being able to build credit or help

832
00:41:11,880 --> 00:41:14,839
Speaker 14: consumers to build credit, when in fact the downsides are

833
00:41:14,840 --> 00:41:18,120
Speaker 14: still there, which is if you miss those payments, you know,

834
00:41:18,600 --> 00:41:21,960
Speaker 14: those are charged off and then it's turned over to

835
00:41:22,640 --> 00:41:25,279
Speaker 14: collectors and you do see a ding on your credit score.

836
00:41:25,400 --> 00:41:27,719
Speaker 14: But there's a little upside in that when if you

837
00:41:27,800 --> 00:41:30,359
Speaker 14: are making your payments on time, like a credit card,

838
00:41:30,640 --> 00:41:33,040
Speaker 14: you see that reflected in your credit Europe, do.

839
00:41:33,080 --> 00:41:35,640
Speaker 2: We know like how much they're spending, like what the

840
00:41:35,719 --> 00:41:38,080
Speaker 2: biggest proportion of money is being spent on buy now,

841
00:41:38,160 --> 00:41:40,799
Speaker 2: paid later, and what they're buying, so.

842
00:41:41,200 --> 00:41:43,680
Speaker 13: You know obviously buy now, pay later services kind of

843
00:41:44,480 --> 00:41:47,359
Speaker 13: you know, rose to popularity in the pandemic when people

844
00:41:47,400 --> 00:41:51,200
Speaker 13: were using it to fund you know, buying a new

845
00:41:51,239 --> 00:41:56,320
Speaker 13: wardrobe or new electronics. But increasingly, as inflation has continued

846
00:41:56,320 --> 00:41:59,279
Speaker 13: to squeeze American consumers, we're starting to see them use

847
00:41:59,360 --> 00:42:02,600
Speaker 13: them for necess cities like groceries. We actually talked to

848
00:42:02,680 --> 00:42:06,480
Speaker 13: a consumer who used Klarna to split up his grocery payments,

849
00:42:06,600 --> 00:42:09,680
Speaker 13: and when he lost his job unexpectedly, he couldn't pay

850
00:42:10,239 --> 00:42:11,440
Speaker 13: pay back, pay those back?

851
00:42:11,600 --> 00:42:13,680
Speaker 6: Are there any regulators? Are the regulars looking at this?

852
00:42:13,719 --> 00:42:16,480
Speaker 6: I don't know who the regulators would be the anywhere

853
00:42:16,480 --> 00:42:17,360
Speaker 6: along the banking I.

854
00:42:17,400 --> 00:42:18,120
Speaker 7: See fdi C.

855
00:42:18,360 --> 00:42:22,759
Speaker 13: Yeah, well, the Consumer of Financial Protection Bureau to use

856
00:42:22,800 --> 00:42:25,920
Speaker 13: GO said that they would issue guidance on whether the

857
00:42:26,000 --> 00:42:29,960
Speaker 13: industry would be regulated, as Credit and Paid reported about

858
00:42:30,040 --> 00:42:34,000
Speaker 13: the occ also warning banks that this was a potential risk.

859
00:42:34,920 --> 00:42:38,480
Speaker 13: But so far we have not seen any clear regulation

860
00:42:38,719 --> 00:42:39,320
Speaker 13: on the industry.

861
00:42:40,120 --> 00:42:42,640
Speaker 14: Yeah, no substantive new regulation to be clear out of

862
00:42:42,640 --> 00:42:46,200
Speaker 14: the CFPB, but it's been hinted and it's on the

863
00:42:46,200 --> 00:42:47,080
Speaker 14: horizon potentially.

864
00:42:47,840 --> 00:42:49,160
Speaker 8: All right, thank you guys.

865
00:42:49,400 --> 00:42:52,560
Speaker 5: I mean again, when I furnished the Jersey Shore estate.

866
00:42:53,080 --> 00:42:54,480
Speaker 6: I went out, I was gonna just throt on the

867
00:42:54,520 --> 00:42:57,240
Speaker 6: credit card, and he said, how'd you feel about twelve

868
00:42:57,280 --> 00:42:58,920
Speaker 6: months interest for your boom hit?

869
00:42:59,000 --> 00:43:01,319
Speaker 5: That definitely payments. That was cool.

870
00:43:01,480 --> 00:43:03,359
Speaker 8: That makes up for your sis.

871
00:43:03,480 --> 00:43:06,000
Speaker 7: Yes, yes, oh definitely that evens the books there right there?

872
00:43:06,080 --> 00:43:08,239
Speaker 5: All right, Page Smith, thanks so much for joining us here.

873
00:43:08,239 --> 00:43:11,680
Speaker 6: Page Smith, consumer financial reporter for Bloomberg News, and Paula

874
00:43:11,719 --> 00:43:15,320
Speaker 6: Coccetto personal fanc reporter Bloombergers, both here on Bloomberg Interactive

875
00:43:15,320 --> 00:43:15,920
Speaker 6: Broker studio.

876
00:43:16,080 --> 00:43:18,160
Speaker 7: Not mailing me in like some people.

877
00:43:18,280 --> 00:43:21,080
Speaker 6: Actually, today has been a day like its surveillance we've had.

878
00:43:21,280 --> 00:43:23,000
Speaker 6: We had like six or seven people in the studio,

879
00:43:23,280 --> 00:43:24,560
Speaker 6: including mister Clariday.

880
00:43:24,640 --> 00:43:26,279
Speaker 2: So Paul likes to throw a lot of shade at

881
00:43:26,280 --> 00:43:28,319
Speaker 2: people who don't come in the office. Yes, mostly because

882
00:43:28,320 --> 00:43:30,600
Speaker 2: I don't think he necessarily wants to be in the office.

883
00:43:30,760 --> 00:43:33,080
Speaker 7: No, but I'm here everybody's day, every day.

884
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Speaker 8: Ragged himself in.

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00:43:33,880 --> 00:43:34,120
Speaker 4: All right.

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00:43:34,280 --> 00:43:37,239
Speaker 6: It's great reporting. You can find that stuff. The big

887
00:43:37,360 --> 00:43:39,879
Speaker 6: take stories are great stuff. You can read the story

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00:43:39,960 --> 00:43:43,840
Speaker 6: on the Bloomberg terminal and at Bloomberg dot com. Slash

889
00:43:44,040 --> 00:43:46,200
Speaker 6: a big take every day. Bloomberg News comes out with

890
00:43:46,239 --> 00:43:50,719
Speaker 6: these really deeply sourced and well written stories on some

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00:43:50,840 --> 00:43:54,480
Speaker 6: really compelling issues, including kind of this shadow debt out there.

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00:43:54,840 --> 00:43:59,360
Speaker 1: This is the Bloomberg Intelligence Podcast. I'll ailable on apples, spotipy,

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00:43:59,560 --> 00:44:03,240
Speaker 1: and where else you get your podcasts. Listen live each weekday,

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00:44:03,360 --> 00:44:06,320
Speaker 1: ten am to noon Eastern on Bloomberg dot com, the

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00:44:06,440 --> 00:44:09,840
Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You

896
00:44:09,920 --> 00:44:13,080
Speaker 1: can also watch us live every weekday on YouTube and

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00:44:13,280 --> 00:44:14,840
Speaker 1: always on the Bloomberg terminal