1 00:00:02,920 --> 00:00:08,240 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,400 --> 00:00:13,800 Speaker 2: This is Bloomberg day Break Weekend, our global look at 3 00:00:13,800 --> 00:00:15,760 Speaker 2: the top stories in the coming week from our day 4 00:00:15,800 --> 00:00:18,639 Speaker 2: Break anchors all around the world. Straight Ahead on the program, 5 00:00:18,640 --> 00:00:20,920 Speaker 2: a look at next week's BED meeting and what stubbornly 6 00:00:21,000 --> 00:00:25,280 Speaker 2: high inflation may mean for interest rates going forward. Also 7 00:00:25,400 --> 00:00:28,720 Speaker 2: earnings from a US tech giant. I'm Tom Busby in 8 00:00:28,800 --> 00:00:29,280 Speaker 2: New York. 9 00:00:29,560 --> 00:00:30,840 Speaker 3: I'm Stephen Carolyn London. 10 00:00:30,880 --> 00:00:33,239 Speaker 4: The question of autonomous weapons and how they should be 11 00:00:33,280 --> 00:00:36,840 Speaker 4: regulated is up for discussion at a global conference in Vienna. 12 00:00:36,920 --> 00:00:39,680 Speaker 5: I'm dead Prisoner, looking at whether the market for memory 13 00:00:39,800 --> 00:00:42,720 Speaker 5: chips is turning as we look ahead to earnings from Samsung. 14 00:00:43,960 --> 00:00:47,239 Speaker 6: That's all straight ahead on Bloomberg day Break Weekend on 15 00:00:47,400 --> 00:00:50,479 Speaker 6: Bloomberg Eleve Them three Own, New York, Bloomberg ninety nine 16 00:00:50,520 --> 00:00:53,920 Speaker 6: to one, Washington, DC, Bloomberg one O six one, Boston, 17 00:00:53,960 --> 00:00:58,800 Speaker 6: Bloomberg nine sixty, San Francisco, DAB Digital Radio, London, Sirius 18 00:00:58,920 --> 00:01:02,160 Speaker 6: XM one nineteen and around the world on Bloomberg Radio 19 00:01:02,240 --> 00:01:04,560 Speaker 6: dot Com and via the Bloomberg Business App. 20 00:01:08,480 --> 00:01:09,039 Speaker 3: Good day to you. 21 00:01:09,120 --> 00:01:11,320 Speaker 2: I'm Tom Busby, and we begin today's program with the 22 00:01:11,360 --> 00:01:15,520 Speaker 2: Federal Reserve policymakers meet this coming Tuesday and Wednesday to 23 00:01:15,600 --> 00:01:19,520 Speaker 2: decide on monetary policy. But after some rather disturbing data 24 00:01:19,560 --> 00:01:22,920 Speaker 2: on inflation, could there really be interest rate cuts in 25 00:01:22,959 --> 00:01:25,720 Speaker 2: the near future and for more? Were joined by Michael McKee, 26 00:01:25,840 --> 00:01:30,440 Speaker 2: Bloomberg International Economics and Policy correspondent, Well, Michael, after the 27 00:01:30,440 --> 00:01:33,800 Speaker 2: Fed's preferred measure of underlying inflation rose by just a 28 00:01:33,800 --> 00:01:36,559 Speaker 2: little more than forecast in March, what do you expect 29 00:01:36,560 --> 00:01:39,240 Speaker 2: to hear from the Federal Open Market Committee this Wednesday? 30 00:01:39,400 --> 00:01:43,000 Speaker 2: And will it change their dot plot any There's. 31 00:01:42,840 --> 00:01:43,960 Speaker 3: No change in the dot plot. 32 00:01:43,959 --> 00:01:46,720 Speaker 7: That dot plot won't be revised until June, so we 33 00:01:46,720 --> 00:01:49,560 Speaker 7: don't have to worry about that. No new economic forecasts, 34 00:01:50,080 --> 00:01:53,120 Speaker 7: and no change in the Fed's attitude at this point. 35 00:01:53,120 --> 00:01:57,279 Speaker 7: We saw the last couple of months before this coming 36 00:01:57,360 --> 00:02:00,520 Speaker 7: meeting a lot of FED officials starting to say, well, 37 00:02:00,560 --> 00:02:03,640 Speaker 7: maybe we're in no hurry to cut interest rates, and 38 00:02:03,760 --> 00:02:06,840 Speaker 7: the data only reinforce that. So I think at this 39 00:02:07,040 --> 00:02:11,919 Speaker 7: point that you're going to hear Jaypoal push back on 40 00:02:12,000 --> 00:02:15,000 Speaker 7: the idea of rate cuts anytime soon. He won't put 41 00:02:15,040 --> 00:02:18,040 Speaker 7: a time frame on it because they really don't know 42 00:02:18,240 --> 00:02:21,440 Speaker 7: what's going to happen with the inflation. So I think 43 00:02:21,480 --> 00:02:23,360 Speaker 7: what we're going to end up with is sort of 44 00:02:23,360 --> 00:02:26,560 Speaker 7: status quo anti after the meeting, where the Fed is 45 00:02:26,600 --> 00:02:31,200 Speaker 7: on hold and markets can price in November or December 46 00:02:31,240 --> 00:02:35,560 Speaker 7: if they want, and nobody will really care because everybody 47 00:02:35,560 --> 00:02:38,320 Speaker 7: will figure it'll change a lot between now and then 48 00:02:38,360 --> 00:02:39,400 Speaker 7: and we'll see what happens. 49 00:02:39,480 --> 00:02:41,679 Speaker 2: But higher for longer. That's going to be the watch 50 00:02:42,040 --> 00:02:43,839 Speaker 2: through the spring, through the summer into the fall. 51 00:02:43,880 --> 00:02:46,040 Speaker 7: Yeah, we need a new watch word, because it's not higher, 52 00:02:46,160 --> 00:02:48,919 Speaker 7: it's high, it's you know, it's leave it where it is. 53 00:02:49,080 --> 00:02:53,600 Speaker 7: There's no sentiment at all for raising interest rates at 54 00:02:53,600 --> 00:02:56,840 Speaker 7: this point. The Fed thinks that interest rates are high enough, 55 00:02:56,919 --> 00:02:59,880 Speaker 7: especially real rates being like two and a half percent, 56 00:03:00,120 --> 00:03:04,560 Speaker 7: that that will have an effect. It will push down 57 00:03:04,600 --> 00:03:07,560 Speaker 7: on inflation over time. It's just a question of how 58 00:03:07,600 --> 00:03:09,960 Speaker 7: long that time period is now. 59 00:03:10,000 --> 00:03:14,200 Speaker 2: Previously, the Fed projected hinted allegations of as many as 60 00:03:14,200 --> 00:03:17,040 Speaker 2: three rate cuts this year. I think we can safely 61 00:03:17,080 --> 00:03:18,919 Speaker 2: say that maybe out the window right now. 62 00:03:18,760 --> 00:03:21,760 Speaker 7: That's probably out the window right now. I think it's 63 00:03:21,800 --> 00:03:23,720 Speaker 7: fair to say that if there were a dot plot, 64 00:03:23,800 --> 00:03:27,960 Speaker 7: it would be showing two or fewer rate cuts this year. 65 00:03:28,280 --> 00:03:31,480 Speaker 7: But again I go back to the markets are always 66 00:03:31,600 --> 00:03:34,160 Speaker 7: trying to figure out what the FED is going to do, 67 00:03:34,320 --> 00:03:37,800 Speaker 7: and investors are taking options on what the Fed might 68 00:03:37,880 --> 00:03:41,600 Speaker 7: do because they want to be there if the story 69 00:03:41,720 --> 00:03:44,040 Speaker 7: changes and they want to make money on it. So 70 00:03:44,360 --> 00:03:47,440 Speaker 7: we get these narratives of the market saying two rate 71 00:03:47,480 --> 00:03:49,840 Speaker 7: cuts or three rate cuts or no rate cuts or whatever. 72 00:03:50,120 --> 00:03:52,160 Speaker 7: And Fed officials are at a point now where they 73 00:03:52,240 --> 00:03:54,800 Speaker 7: just do not know what's going to happen with inflation. 74 00:03:55,040 --> 00:03:58,120 Speaker 7: It's hard to predict given the things that are moving, 75 00:03:58,200 --> 00:04:03,320 Speaker 7: given the issues that we're seeing. So they're just going 76 00:04:03,360 --> 00:04:07,160 Speaker 7: to take it month by month, and they're not really 77 00:04:07,160 --> 00:04:10,440 Speaker 7: going to give you a good firm answer on what's 78 00:04:10,480 --> 00:04:12,400 Speaker 7: going to happen, and they're not going to say whether 79 00:04:12,480 --> 00:04:13,600 Speaker 7: markets are right or wrong. 80 00:04:13,880 --> 00:04:16,240 Speaker 2: Yeah, and there's a lot of meetings. Well, we have 81 00:04:16,279 --> 00:04:19,159 Speaker 2: May first, we'll have a decision. That's that's this coming week, 82 00:04:19,520 --> 00:04:22,680 Speaker 2: a June meeting, of July meeting, a September meeting. Interesting 83 00:04:22,720 --> 00:04:25,560 Speaker 2: timing on the November meeting, and two days after the election, 84 00:04:25,880 --> 00:04:28,120 Speaker 2: two days after a little delay there, right. 85 00:04:28,200 --> 00:04:33,039 Speaker 7: Well, the loser is of the election is going to say, well, 86 00:04:33,080 --> 00:04:35,680 Speaker 7: the FED should have and why did they wait until 87 00:04:36,080 --> 00:04:36,720 Speaker 7: I lost? 88 00:04:37,080 --> 00:04:39,960 Speaker 2: Yeah, Yeah, it's all the Fed's fault. Well, let's talk 89 00:04:40,000 --> 00:04:44,279 Speaker 2: about there are still also good news in the economy. 90 00:04:44,279 --> 00:04:46,440 Speaker 2: The economy is still strong, There is still strength, the 91 00:04:46,520 --> 00:04:50,200 Speaker 2: labor to market market, still resilient, consumer spending a ton 92 00:04:50,240 --> 00:04:53,680 Speaker 2: of money. So what's the fundamental cause of all this 93 00:04:53,960 --> 00:04:55,200 Speaker 2: stubbornly high inflation. 94 00:04:57,520 --> 00:04:59,920 Speaker 7: The fundamental cause appears to be that we just got 95 00:05:00,080 --> 00:05:05,200 Speaker 7: into a situation of higher inflation and for a lot 96 00:05:05,240 --> 00:05:09,600 Speaker 7: of reasons. Companies couldn't raise prices for years and years 97 00:05:09,600 --> 00:05:14,599 Speaker 7: and years, and now they can, and they're trying to 98 00:05:14,640 --> 00:05:18,760 Speaker 7: make up for the fact that they couldn't raise prices 99 00:05:18,760 --> 00:05:22,359 Speaker 7: for so long, raise their margins, pay for some of 100 00:05:22,400 --> 00:05:25,240 Speaker 7: the additional stuff that they're going to have to buy, 101 00:05:25,320 --> 00:05:27,440 Speaker 7: or the additional wages they're going to have to pay, 102 00:05:27,920 --> 00:05:32,160 Speaker 7: and it's it's gradually getting squeezed out of the economy. 103 00:05:32,200 --> 00:05:34,360 Speaker 7: Although for the last three months, what we're seeing is 104 00:05:34,600 --> 00:05:40,400 Speaker 7: it's sort of just paused. It's just stopped. So when 105 00:05:40,480 --> 00:05:44,600 Speaker 7: does it reaccelerate higher or lower, we don't know. 106 00:05:44,920 --> 00:05:47,279 Speaker 2: And the inflation rate that we saw this was just 107 00:05:47,360 --> 00:05:50,480 Speaker 2: last week. The PCE for March two point seven percent. 108 00:05:50,600 --> 00:05:52,919 Speaker 3: Right year of a year. It's not bad. 109 00:05:53,440 --> 00:05:55,440 Speaker 2: I mean, it's not the two percent goal, but it 110 00:05:55,560 --> 00:05:58,240 Speaker 2: really and it didn't affect, you know, the markets all 111 00:05:58,279 --> 00:06:00,359 Speaker 2: that much you would expect if it was came in 112 00:06:00,400 --> 00:06:04,040 Speaker 2: a little higher than expected and certainly higher than it 113 00:06:04,080 --> 00:06:07,560 Speaker 2: was a year ago. But is that a new normal? 114 00:06:07,720 --> 00:06:09,239 Speaker 2: Maybe a two point seven? 115 00:06:10,920 --> 00:06:13,160 Speaker 7: It could be at least something we have to get 116 00:06:13,240 --> 00:06:17,120 Speaker 7: used to for a while because we're not going to 117 00:06:17,160 --> 00:06:22,560 Speaker 7: see any major changes anytime soon. The base effects, the 118 00:06:22,560 --> 00:06:26,559 Speaker 7: fact that inflation was lower last year at this time 119 00:06:26,800 --> 00:06:30,240 Speaker 7: means we won't get as much of a benefit on 120 00:06:30,320 --> 00:06:32,479 Speaker 7: the year over year numbers. They are going to stay higher, 121 00:06:32,800 --> 00:06:35,599 Speaker 7: and so people will look at that and think this 122 00:06:35,640 --> 00:06:39,159 Speaker 7: is a problem. Also, the annualized rate of where we 123 00:06:39,200 --> 00:06:41,880 Speaker 7: are now, if you're looking at the last three months 124 00:06:41,880 --> 00:06:44,239 Speaker 7: and you look at it at an annual rate, you're 125 00:06:44,640 --> 00:06:47,760 Speaker 7: up in the threes three point nine or something like that. 126 00:06:47,920 --> 00:06:54,000 Speaker 7: So the trend is not your friend. Is the story here? 127 00:06:54,040 --> 00:06:56,720 Speaker 7: And even if we don't see a big breakout in inflation, 128 00:06:57,080 --> 00:06:59,440 Speaker 7: it doesn't look like we're going to see it come 129 00:06:59,520 --> 00:07:02,200 Speaker 7: down soon. So then the question becomes how. 130 00:07:02,080 --> 00:07:03,240 Speaker 3: Do people adapt to that? 131 00:07:03,680 --> 00:07:08,480 Speaker 7: Do they start to feel this is a normal price level, 132 00:07:08,960 --> 00:07:11,720 Speaker 7: even if the inflation rate has come down but not 133 00:07:11,800 --> 00:07:14,880 Speaker 7: all the way to where it was, or do they 134 00:07:15,080 --> 00:07:20,040 Speaker 7: still stay angry about it and complain about prices going up. 135 00:07:20,320 --> 00:07:24,160 Speaker 2: Well, we shall see May first this Wednesday, the decision 136 00:07:24,200 --> 00:07:27,280 Speaker 2: from the Fed. Our thanks to Michael McKee, Bloomberg International 137 00:07:27,320 --> 00:07:30,720 Speaker 2: Economics and Policy correspondent, And we turn now to more 138 00:07:30,880 --> 00:07:34,320 Speaker 2: big tech earnings as Apple reports at second quarter results 139 00:07:34,320 --> 00:07:36,600 Speaker 2: this coming Thursday, and for more on what to look for, 140 00:07:36,760 --> 00:07:41,720 Speaker 2: we're joined by Anna rag Rana, Bloomberg Intelligence Senior Technology Analyst. 141 00:07:42,360 --> 00:07:45,720 Speaker 2: Now Honor Rock. A lot of headwinds facing Cooper Tino lately, 142 00:07:45,800 --> 00:07:48,400 Speaker 2: but let's start with what you're expecting to hear in 143 00:07:48,440 --> 00:07:49,920 Speaker 2: Apple's Q two report. 144 00:07:50,400 --> 00:07:53,160 Speaker 8: Yeah, the expectations are pretty low. And you know, in 145 00:07:53,240 --> 00:07:55,800 Speaker 8: all fairness, things have been tough for them and we 146 00:07:55,840 --> 00:07:58,400 Speaker 8: don't see that changing at least in the next you know, 147 00:07:58,480 --> 00:08:01,880 Speaker 8: six or twelve months, only because China has been weak 148 00:08:01,920 --> 00:08:04,960 Speaker 8: and there are no signs that that's improving. 149 00:08:05,000 --> 00:08:08,280 Speaker 2: Frankly, Now, China, there were reports that iPhone shipments in 150 00:08:08,320 --> 00:08:11,320 Speaker 2: the first three months of this year tumbled nineteen percent. 151 00:08:11,800 --> 00:08:15,640 Speaker 2: That's devastating. I mean, it's the second biggest market bare yeah. 152 00:08:15,760 --> 00:08:18,560 Speaker 8: Yeah, they're a local brand called Wahweh, which is doing 153 00:08:18,680 --> 00:08:21,600 Speaker 8: very well, and partially they're doing well because they came 154 00:08:21,600 --> 00:08:23,800 Speaker 8: out with a new phone after a few years of 155 00:08:24,280 --> 00:08:26,920 Speaker 8: being really absent in the market. So people who you know, 156 00:08:26,960 --> 00:08:30,200 Speaker 8: I would say, wanted a new phone are probably choosing 157 00:08:30,240 --> 00:08:33,400 Speaker 8: something more local, something that they are used to, And 158 00:08:34,000 --> 00:08:36,160 Speaker 8: you know that's really hurting Apple because it is a 159 00:08:36,240 --> 00:08:39,560 Speaker 8: high end brand, but you know it is it is 160 00:08:39,600 --> 00:08:42,560 Speaker 8: not I would say doing as well as it was 161 00:08:42,600 --> 00:08:43,440 Speaker 8: a few years ago. 162 00:08:43,679 --> 00:08:46,800 Speaker 2: Well, the iPhone definitely the cash cow, but there's also iPads, 163 00:08:46,960 --> 00:08:51,560 Speaker 2: max services like Apple Music, Apple TV plus what's new 164 00:08:51,600 --> 00:08:55,320 Speaker 2: and what will investors be looking for in those revenue streams? 165 00:08:55,720 --> 00:08:57,760 Speaker 8: Yeah, I think you know, almost all of them will 166 00:08:57,800 --> 00:09:00,000 Speaker 8: pretty much be in line with what the company said 167 00:09:00,040 --> 00:09:03,600 Speaker 8: would happen in the last quarter. So no major surprises 168 00:09:03,640 --> 00:09:05,520 Speaker 8: and iPads right now, because the next one is going 169 00:09:05,520 --> 00:09:09,320 Speaker 8: to be launched next month. No same thing for the 170 00:09:09,360 --> 00:09:12,880 Speaker 8: Mac and the back pro. The services business is the 171 00:09:12,880 --> 00:09:14,680 Speaker 8: only one that I would say is going to have 172 00:09:14,720 --> 00:09:17,360 Speaker 8: a good growth rate, somewhere in the ten to twelve 173 00:09:17,440 --> 00:09:20,800 Speaker 8: percent range. They have been doing well there because you know, 174 00:09:20,840 --> 00:09:23,960 Speaker 8: once you have the device, you're going to go and 175 00:09:24,000 --> 00:09:28,480 Speaker 8: buy more things in terms of games and applications, and 176 00:09:28,840 --> 00:09:31,920 Speaker 8: you know, more iCloud storage. So all sorts of things 177 00:09:31,920 --> 00:09:34,319 Speaker 8: do add up into it. You know, you break your phone, 178 00:09:34,360 --> 00:09:37,480 Speaker 8: the Apple care goes into it, so that all those 179 00:09:37,520 --> 00:09:40,120 Speaker 8: things bundle up and that's doing better. But you know, 180 00:09:40,200 --> 00:09:43,560 Speaker 8: services alone cannot just sustain Apple's growth. It has to 181 00:09:43,600 --> 00:09:46,600 Speaker 8: be the iPhone. So the biggest thing for us is 182 00:09:46,679 --> 00:09:49,680 Speaker 8: going to be what comments do they make about China 183 00:09:50,160 --> 00:09:52,839 Speaker 8: and do they really show us any hope of a 184 00:09:52,960 --> 00:09:53,839 Speaker 8: recovery over there? 185 00:09:54,160 --> 00:09:57,240 Speaker 2: How about its AI ambitions? Is there a perception on 186 00:09:57,280 --> 00:09:59,640 Speaker 2: Wall Street Apple maybe a little behind some of the 187 00:09:59,679 --> 00:10:00,920 Speaker 2: other T giants. 188 00:10:01,400 --> 00:10:05,240 Speaker 8: Oh you're too kind by staying a little uh far 189 00:10:05,280 --> 00:10:08,000 Speaker 8: behind and in that particular case, and I think I 190 00:10:08,040 --> 00:10:10,680 Speaker 8: think they've realized it. And you know, we we saw 191 00:10:10,760 --> 00:10:13,040 Speaker 8: Mark German telling us that they shut down the car 192 00:10:13,080 --> 00:10:16,320 Speaker 8: division and are putting all the engineers back in the 193 00:10:16,360 --> 00:10:19,800 Speaker 8: AI you know framework at this point. So they have 194 00:10:19,840 --> 00:10:22,640 Speaker 8: an event coming in June called the WWDC or the 195 00:10:22,640 --> 00:10:26,240 Speaker 8: Worldwide Developers Conference, where they have promised to showcase a 196 00:10:26,280 --> 00:10:28,960 Speaker 8: lot of their new AI features. I think it's going 197 00:10:29,040 --> 00:10:31,440 Speaker 8: to be still too early for them to come up 198 00:10:31,480 --> 00:10:35,120 Speaker 8: with something really a killer app like Opening I. I 199 00:10:35,160 --> 00:10:37,720 Speaker 8: think that's going to take a little bit longer, perhaps 200 00:10:37,760 --> 00:10:40,760 Speaker 8: another year to get get really squared away. If they 201 00:10:40,800 --> 00:10:43,040 Speaker 8: were investing crazy amount of money right now. 202 00:10:43,600 --> 00:10:44,719 Speaker 9: What could happen though? 203 00:10:44,760 --> 00:10:48,240 Speaker 8: And that's another rumor that we heard thanks to Mark German, 204 00:10:48,920 --> 00:10:51,280 Speaker 8: that they may do a deal with Google to license 205 00:10:51,400 --> 00:10:53,680 Speaker 8: their model to put them on the you know, the 206 00:10:53,720 --> 00:10:57,800 Speaker 8: iOS operating system. Now, if that happens, I think that 207 00:10:57,920 --> 00:11:01,440 Speaker 8: could be the catalyst investor may be looking for, because 208 00:11:02,320 --> 00:11:05,880 Speaker 8: while Apple may be behind in some of that GENEI capabilities, 209 00:11:06,120 --> 00:11:09,479 Speaker 8: Google's been doing well over there, and I think licensing 210 00:11:09,520 --> 00:11:13,840 Speaker 8: that intellectual property from Google may may help Apple's ambition. 211 00:11:14,080 --> 00:11:17,319 Speaker 2: No, that would be something very new for Apple dealing 212 00:11:17,360 --> 00:11:19,320 Speaker 2: with Google then, but. 213 00:11:19,559 --> 00:11:23,160 Speaker 8: They do that on the search side, remember they you know, 214 00:11:23,240 --> 00:11:26,000 Speaker 8: that's the default search, So they actually have a partnership 215 00:11:26,280 --> 00:11:29,319 Speaker 8: and Google pays a lot of money to Apple for 216 00:11:29,320 --> 00:11:30,320 Speaker 8: for those rights. 217 00:11:30,480 --> 00:11:33,440 Speaker 2: Hey, let's talk about the vision pro the mixed reality 218 00:11:33,480 --> 00:11:37,040 Speaker 2: headset thirty five hundred bucks. Has this been a real 219 00:11:37,080 --> 00:11:39,040 Speaker 2: swing and a miss for Apple? I mean reports say 220 00:11:39,040 --> 00:11:41,760 Speaker 2: demand is so low that it's slash introduction. 221 00:11:42,240 --> 00:11:44,880 Speaker 8: Yeah, But to be very honest, I saw that report. Also, 222 00:11:45,000 --> 00:11:47,400 Speaker 8: when we had first looked at this thing, we were 223 00:11:47,440 --> 00:11:50,079 Speaker 8: already at that number of four hundred to five hundred 224 00:11:50,120 --> 00:11:52,600 Speaker 8: thousand units or somewhere in that range. This is not 225 00:11:52,720 --> 00:11:54,640 Speaker 8: a killer app. Think of this as this is an 226 00:11:54,640 --> 00:11:59,880 Speaker 8: investment in what could be someday a bigger opportunity in 227 00:12:00,080 --> 00:12:02,640 Speaker 8: terms of a new kind of operating system to do things. 228 00:12:03,080 --> 00:12:07,560 Speaker 8: It's never going to be another iPhone, but it has 229 00:12:07,600 --> 00:12:10,720 Speaker 8: a new category, it could have new apps, so you know, 230 00:12:10,760 --> 00:12:13,360 Speaker 8: it's it's a good R and D experiment. I think, 231 00:12:13,640 --> 00:12:15,640 Speaker 8: you know, some people will own it right now at 232 00:12:15,640 --> 00:12:17,960 Speaker 8: thirty five hundred. I think a lot more people will 233 00:12:17,960 --> 00:12:20,440 Speaker 8: own it at two thousand dollars someday when it you know, 234 00:12:20,480 --> 00:12:22,960 Speaker 8: when the lower model comes out and the price goes 235 00:12:23,040 --> 00:12:25,960 Speaker 8: down and people build applications on it. So it's a 236 00:12:26,000 --> 00:12:28,440 Speaker 8: long term bet, but it's not going to move the 237 00:12:28,480 --> 00:12:32,079 Speaker 8: needle for you and me financially. If you're looking at 238 00:12:32,120 --> 00:12:35,480 Speaker 8: from Apple's you know overall revenue base well. 239 00:12:35,400 --> 00:12:37,880 Speaker 2: Apple Q two earnings out this Thursday. In our thanks 240 00:12:37,880 --> 00:12:42,920 Speaker 2: to Ana rag Rana, Bloomberg Intelligence senior technology analyst, coming 241 00:12:43,000 --> 00:12:45,120 Speaker 2: up on Bloomberg Day Break weekend to look ahead to 242 00:12:45,160 --> 00:12:48,559 Speaker 2: a global conference in Vienna, where the question of autonomous 243 00:12:48,600 --> 00:12:51,480 Speaker 2: weapons and how they should be regulated will be up 244 00:12:51,480 --> 00:13:05,520 Speaker 2: for discussion. I'm Tom Busby and this is Bloomberg. This 245 00:13:05,640 --> 00:13:07,960 Speaker 2: is Bloomberg day Break weekend, our global look ahead at 246 00:13:07,960 --> 00:13:10,360 Speaker 2: the top stories for investors in the coming week. I'm 247 00:13:10,400 --> 00:13:13,280 Speaker 2: Tom Busby in New York. Up later in our program 248 00:13:13,320 --> 00:13:15,960 Speaker 2: will look ahead to earnings from Samsong in the state 249 00:13:16,000 --> 00:13:19,280 Speaker 2: of the chip industry. But first, UK Prime Minister Rishi 250 00:13:19,320 --> 00:13:22,760 Speaker 2: Sunak says he's committed to spending two point five percent 251 00:13:22,760 --> 00:13:26,880 Speaker 2: of his country's GDP on the military by twenty thirty. 252 00:13:27,240 --> 00:13:29,960 Speaker 2: France and Germany have also begun efforts to ramp up 253 00:13:30,000 --> 00:13:32,720 Speaker 2: their own military spending and on the agenda at this 254 00:13:32,800 --> 00:13:36,880 Speaker 2: week twenty twenty four Vienna Conference on Autonomous Weapons Systems, Leaders, 255 00:13:36,880 --> 00:13:39,520 Speaker 2: we're going to peek at the latest technological developments in 256 00:13:39,640 --> 00:13:44,080 Speaker 2: military weaponry which could change modern warfare forever and for more. 257 00:13:44,160 --> 00:13:46,480 Speaker 2: Let's go to London and bring in Bloomberg Daybreak. Europe 258 00:13:46,480 --> 00:13:48,280 Speaker 2: bankor Stephen Carroll. 259 00:13:48,320 --> 00:13:52,320 Speaker 4: Tom After decades of scaling back, Russia's invasion of Ukraine 260 00:13:52,320 --> 00:13:56,640 Speaker 4: prompted a rethink of defense budgets across Europe. Germany has 261 00:13:56,679 --> 00:14:00,280 Speaker 4: started acalarrating military spending, including creating a one hundred undred 262 00:14:00,360 --> 00:14:04,400 Speaker 4: billion euro rearmament fund. France two is stepping up spending 263 00:14:04,400 --> 00:14:07,040 Speaker 4: on weapons. Here in the UK, the Prime Minister has 264 00:14:07,040 --> 00:14:09,400 Speaker 4: promised to increase defense spending to two and a half 265 00:14:09,480 --> 00:14:12,679 Speaker 4: percent of GDP by twenty thirty, although that would be 266 00:14:12,760 --> 00:14:15,240 Speaker 4: after an election that's set for later this year. We 267 00:14:15,280 --> 00:14:17,760 Speaker 4: spoke to a UK Politek's reporter James Wilcock about the 268 00:14:17,760 --> 00:14:19,480 Speaker 4: pledge on Bloomberg Radio this week. 269 00:14:19,720 --> 00:14:20,560 Speaker 3: Well, he would. 270 00:14:20,400 --> 00:14:23,280 Speaker 10: Say that we live in a more uncertain world Steven. 271 00:14:23,360 --> 00:14:26,120 Speaker 10: It's also very, very very popular with his back benches. 272 00:14:26,160 --> 00:14:27,480 Speaker 10: Some of them have even pushed for it to goes 273 00:14:27,520 --> 00:14:29,200 Speaker 10: high as three percent in the past, and that's the 274 00:14:29,240 --> 00:14:31,760 Speaker 10: Defense Secretary, Ben Wallat's former Defense acually I actually say 275 00:14:32,560 --> 00:14:35,320 Speaker 10: so it is a popular policy with the backbenchers. It's 276 00:14:35,400 --> 00:14:36,960 Speaker 10: like to play well with the public as well. It's 277 00:14:37,000 --> 00:14:39,640 Speaker 10: also something that Boris Johnson promised as Prime Minister back 278 00:14:39,640 --> 00:14:41,520 Speaker 10: in twenty twenty two. So it is worth saying that 279 00:14:41,520 --> 00:14:44,160 Speaker 10: this bid has now been refreshed, so it sort of 280 00:14:44,200 --> 00:14:46,680 Speaker 10: plays to all of his bases in the sense, not 281 00:14:46,760 --> 00:14:48,080 Speaker 10: to get away from the fact that it is a 282 00:14:48,160 --> 00:14:49,120 Speaker 10: large sum of money. 283 00:14:49,520 --> 00:14:52,360 Speaker 1: Yes, I'm two and a half percent of GDP of 284 00:14:52,440 --> 00:14:55,080 Speaker 1: the target. I mean, the new element is putting the 285 00:14:55,160 --> 00:14:58,520 Speaker 1: time frame around it, right, delivering that by twenty thirty 286 00:14:58,560 --> 00:15:01,680 Speaker 1: it would seem. But of course there's a general election 287 00:15:02,080 --> 00:15:03,840 Speaker 1: coming up, so how does that work? 288 00:15:04,520 --> 00:15:07,160 Speaker 10: Quite I mean, and this is part of what is 289 00:15:07,160 --> 00:15:11,240 Speaker 10: increasing these some quite cynical politicking by the Conservative Party 290 00:15:11,720 --> 00:15:14,560 Speaker 10: where they promise spending commitment increases that will then have 291 00:15:14,640 --> 00:15:17,200 Speaker 10: to be delivered after the next election. The big spike 292 00:15:17,240 --> 00:15:19,480 Speaker 10: in this kind of money will come in twenty twenty eight, 293 00:15:20,000 --> 00:15:24,160 Speaker 10: and so Labor for its parts, have said that in 294 00:15:24,200 --> 00:15:26,520 Speaker 10: the next year if they were to being government, would 295 00:15:26,520 --> 00:15:29,080 Speaker 10: have to institute a review into the military spending. That 296 00:15:29,120 --> 00:15:30,920 Speaker 10: would happen in the next year. So there is no 297 00:15:30,920 --> 00:15:33,800 Speaker 10: commitment here to continue this beyond the next government if 298 00:15:33,800 --> 00:15:35,240 Speaker 10: the next government work to be Labor. And it was 299 00:15:35,320 --> 00:15:38,400 Speaker 10: quite fascinating at the press conference which is announce this. 300 00:15:38,480 --> 00:15:41,440 Speaker 10: He was next to the Native Secretary General Jen Stoltenberg. 301 00:15:41,840 --> 00:15:45,280 Speaker 10: Journalist tried to ask YenS if he'd had spoken to Labor, 302 00:15:45,640 --> 00:15:47,560 Speaker 10: so like intervened and said, you know, YenS wouldn't be 303 00:15:47,560 --> 00:15:50,880 Speaker 10: answering questions on that because that's dragging him into domestic politics. 304 00:15:50,960 --> 00:15:54,200 Speaker 10: So it's a fascinating move by the Prime Minister to 305 00:15:54,200 --> 00:15:58,000 Speaker 10: sort of look strong on the world stage whilst also 306 00:15:58,040 --> 00:16:00,760 Speaker 10: trying to put labor into a spending commitment in hot water. 307 00:16:01,160 --> 00:16:04,720 Speaker 10: So worth saying though that in this reporting, Sunak says 308 00:16:04,960 --> 00:16:07,880 Speaker 10: this spending pledge, which he tops up to being seventy 309 00:16:07,920 --> 00:16:11,680 Speaker 10: five billion over the next six years, is already fully costed, 310 00:16:11,720 --> 00:16:13,720 Speaker 10: so it would not involve any spending cuts or any 311 00:16:13,760 --> 00:16:17,600 Speaker 10: tax rises. He says it would be partly down to 312 00:16:17,680 --> 00:16:20,520 Speaker 10: savings of nearly three billion pounds by cutting the civil service. 313 00:16:20,600 --> 00:16:22,479 Speaker 3: The entire civil service paybill. 314 00:16:22,160 --> 00:16:25,800 Speaker 10: Is ten billions, so there are some fascinating sums here 315 00:16:25,880 --> 00:16:28,960 Speaker 10: that civil servants and policy wonks are still yet still 316 00:16:28,960 --> 00:16:30,920 Speaker 10: properly take a look at that. 317 00:16:31,000 --> 00:16:34,720 Speaker 4: Was Benberg Radio's UK politics reporter James Woolcock. Now, where 318 00:16:34,840 --> 00:16:37,120 Speaker 4: all of this extra money will be spent is a 319 00:16:37,160 --> 00:16:39,360 Speaker 4: topic that's going to be discussed at an event in 320 00:16:39,400 --> 00:16:42,920 Speaker 4: the Austrian capital Vienna in the coming days. The Conference 321 00:16:43,040 --> 00:16:46,840 Speaker 4: on Autonomous Weapons Systems will be tackling how developments and 322 00:16:46,920 --> 00:16:51,560 Speaker 4: artificial intelligence are revolutionizing how wars are fought. Our reporter 323 00:16:51,600 --> 00:16:53,920 Speaker 4: at Jonathan Tarne will be there, and I've been speaking 324 00:16:53,960 --> 00:16:56,480 Speaker 4: to him about these issues and started by asking him 325 00:16:56,640 --> 00:16:59,960 Speaker 4: exactly what sort of technology is covered by the term 326 00:17:00,280 --> 00:17:01,600 Speaker 4: autonomous weapons. 327 00:17:02,000 --> 00:17:05,120 Speaker 11: Virtually every day there's a new deal that's announced that 328 00:17:05,640 --> 00:17:09,359 Speaker 11: involves autonomy and weapons systems. We saw the European Commission 329 00:17:09,359 --> 00:17:14,199 Speaker 11: give Fails the Defense Maker contract that will you know, 330 00:17:14,200 --> 00:17:19,440 Speaker 11: basically identify potential battlefield targets that will be uploaded into 331 00:17:19,440 --> 00:17:22,960 Speaker 11: a database so that you know, future weapon systems can 332 00:17:23,000 --> 00:17:28,120 Speaker 11: work with drones and artillery to more quickly kill battlefield targets. Obviously, 333 00:17:28,119 --> 00:17:31,320 Speaker 11: in the Ukraine War we've seen some application of that 334 00:17:31,440 --> 00:17:36,720 Speaker 11: concept already, drones reducing the amount of time that artillery 335 00:17:36,800 --> 00:17:41,000 Speaker 11: needs to identify as target and fire. We've also seen 336 00:17:41,880 --> 00:17:47,480 Speaker 11: in the Gaza conflict the use of artificial intelligence under 337 00:17:47,520 --> 00:17:51,480 Speaker 11: the so called Lavender program to identify potential targets. So 338 00:17:51,920 --> 00:17:54,879 Speaker 11: this is a very rapidly developing war space. 339 00:17:55,280 --> 00:17:58,639 Speaker 3: Tell Us about who's going to be attending this conference. 340 00:17:58,640 --> 00:18:02,600 Speaker 11: I would categorize them as the rule takers rather than 341 00:18:02,640 --> 00:18:07,800 Speaker 11: the rule makers. Generally, these are going to be largely delegations, 342 00:18:07,840 --> 00:18:11,600 Speaker 11: high level delegations from the Global South, some European countries 343 00:18:11,760 --> 00:18:14,280 Speaker 11: on a foreign minister level. But these are not going 344 00:18:14,320 --> 00:18:17,639 Speaker 11: to be the countries that are necessarily making the weapons systems. 345 00:18:18,119 --> 00:18:20,800 Speaker 11: These are the countries that have a huge interest in 346 00:18:20,880 --> 00:18:25,760 Speaker 11: regulating the autonomous weapons systems because they conceivably could be 347 00:18:25,800 --> 00:18:27,639 Speaker 11: on the other end, and they want to have a 348 00:18:28,320 --> 00:18:31,800 Speaker 11: rule book in order before they're before these systems widely proliferate. 349 00:18:32,040 --> 00:18:35,320 Speaker 4: Because of course, this is an issue that poses major 350 00:18:35,440 --> 00:18:39,760 Speaker 4: ethical questions for those that are in this industry. What's 351 00:18:39,960 --> 00:18:43,000 Speaker 4: being thought around the impact that the proliferation of these 352 00:18:43,240 --> 00:18:45,280 Speaker 4: kinds of weapons could have on conflict? 353 00:18:45,640 --> 00:18:48,840 Speaker 11: Yeah, absolutely, you know, aside from the ethical issue of 354 00:18:49,160 --> 00:18:53,199 Speaker 11: you know, reducing individual human lives to data in a 355 00:18:53,720 --> 00:18:59,639 Speaker 11: potential autonomous weapons system, you know, you're seeing people trying 356 00:18:59,640 --> 00:19:04,280 Speaker 11: to frame within established humanitarian law. So I mean, you know, 357 00:19:04,400 --> 00:19:10,200 Speaker 11: humanitarian law does exist on the books. It requires distinction, proportionality, 358 00:19:10,200 --> 00:19:16,720 Speaker 11: and precaution when militaries engage each other with civilians oftentimes 359 00:19:16,800 --> 00:19:20,880 Speaker 11: in between. And so people are trying to step inside 360 00:19:20,920 --> 00:19:25,960 Speaker 11: the technological development and the engineering development and trying to 361 00:19:26,000 --> 00:19:30,199 Speaker 11: apply some of the ethical norms that have been established 362 00:19:30,640 --> 00:19:34,119 Speaker 11: in the wake of the Last World War and try 363 00:19:34,160 --> 00:19:39,080 Speaker 11: to bring some responsibility to bear to the developers, the engineers, 364 00:19:39,240 --> 00:19:43,920 Speaker 11: the algorithm makers, and as well as the militaries who 365 00:19:44,160 --> 00:19:46,520 Speaker 11: are going to have to develop rules of engagement when 366 00:19:46,600 --> 00:19:47,560 Speaker 11: using this technology. 367 00:19:47,880 --> 00:19:50,840 Speaker 4: When we talk about the sort of the development of 368 00:19:50,920 --> 00:19:54,879 Speaker 4: this technology, where are we seeing the bulk of the 369 00:19:55,359 --> 00:19:58,120 Speaker 4: development happening which parts of the world. 370 00:19:58,480 --> 00:20:02,400 Speaker 11: Well, I mean it's the It closely tracks general military 371 00:20:02,400 --> 00:20:04,280 Speaker 11: expenditures as well as arms exports. 372 00:20:04,320 --> 00:20:06,040 Speaker 9: So you're talking about the big three. 373 00:20:06,040 --> 00:20:10,119 Speaker 11: US, China, and Russia in terms of development and where 374 00:20:10,160 --> 00:20:12,879 Speaker 11: we're focusing. It really depends on who you talk to. Obviously, 375 00:20:12,920 --> 00:20:14,919 Speaker 11: if you speak to the companies, they're going to tell 376 00:20:14,960 --> 00:20:20,320 Speaker 11: you that we're talking about narrow versus general autonomous system 377 00:20:20,359 --> 00:20:24,320 Speaker 11: development that is narrow, which is where we are currently 378 00:20:24,800 --> 00:20:30,760 Speaker 11: with autonomous systems, drones, satellites identifying potential targets that will 379 00:20:30,760 --> 00:20:32,879 Speaker 11: help a human make a decision, but whether it's to 380 00:20:32,960 --> 00:20:37,280 Speaker 11: engage versus eventually conceivably and this is kind of the 381 00:20:37,320 --> 00:20:40,119 Speaker 11: sky net what has been here too for science fiction, 382 00:20:40,720 --> 00:20:46,800 Speaker 11: generalized artificial intelligence that can target and engage by itself. 383 00:20:47,040 --> 00:20:49,600 Speaker 11: If you ask military people, they're going to come out 384 00:20:49,600 --> 00:20:53,959 Speaker 11: with a different set of answers about where we are 385 00:20:53,960 --> 00:20:56,840 Speaker 11: in the development arc, and I think rules of engagement 386 00:20:57,119 --> 00:21:00,720 Speaker 11: speak prominently there. I mean, do we you use this 387 00:21:00,960 --> 00:21:06,399 Speaker 11: in an urban battle landscape populated by civilians and then 388 00:21:06,680 --> 00:21:10,359 Speaker 11: you move down the spectrum to the general public represented 389 00:21:10,400 --> 00:21:13,959 Speaker 11: by officials and diplomats, and you know, that is what 390 00:21:14,080 --> 00:21:18,400 Speaker 11: next week's conference is mostly about speaking too, and that 391 00:21:18,600 --> 00:21:22,000 Speaker 11: is where there's a rising call for regulation. 392 00:21:22,680 --> 00:21:26,399 Speaker 4: Is there any hope of progress being made on that issue? 393 00:21:26,480 --> 00:21:29,159 Speaker 4: Because as you say, there an ativy outline, there are 394 00:21:29,160 --> 00:21:32,080 Speaker 4: so many elements to this that would need to be 395 00:21:32,359 --> 00:21:35,719 Speaker 4: thought about and discussed. What is the hope that there 396 00:21:36,160 --> 00:21:40,080 Speaker 4: might actually be some consensus on what can be regulated? 397 00:21:40,560 --> 00:21:41,960 Speaker 9: Yeah, I mean the short answer is no. 398 00:21:42,400 --> 00:21:46,000 Speaker 11: The reason this is taking place in Vienna is because 399 00:21:46,119 --> 00:21:49,919 Speaker 11: Vienna is home to arguably the most successful arms control 400 00:21:50,760 --> 00:21:54,119 Speaker 11: convention in history. That's Nuclear Non Proliferation Treaty one hundred 401 00:21:54,119 --> 00:21:57,800 Speaker 11: and ninety three parties signed that. You know, it's subsequently 402 00:21:58,240 --> 00:22:03,080 Speaker 11: helped to bring into force the Treaty against the Nuclear Weapons. 403 00:22:03,720 --> 00:22:07,040 Speaker 11: But the point here is that we're really at the 404 00:22:07,040 --> 00:22:10,440 Speaker 11: beginning in these and if there was any treaty or 405 00:22:11,600 --> 00:22:14,240 Speaker 11: tangible set of rules, that will take years to negotiate, 406 00:22:14,840 --> 00:22:18,600 Speaker 11: and there's a lot of skepticism that negotiation can keep 407 00:22:18,640 --> 00:22:22,199 Speaker 11: pace with the rate of technological change, and there are 408 00:22:22,240 --> 00:22:27,159 Speaker 11: just some very fundamental questions such as monitoring and verification. 409 00:22:27,480 --> 00:22:30,399 Speaker 11: I mean, with something like the NPT, which has very 410 00:22:30,440 --> 00:22:36,160 Speaker 11: successfully prevented nuclear weapons from proliferating. You have physical inspectors 411 00:22:36,200 --> 00:22:40,639 Speaker 11: going around the world and measuring grand levels of enriched 412 00:22:40,760 --> 00:22:46,520 Speaker 11: uranium or plutonium, and there's a material regime in place. 413 00:22:47,359 --> 00:22:52,200 Speaker 11: Much more complicated in the digital realm, where you're conceivably 414 00:22:53,119 --> 00:22:58,800 Speaker 11: programming and developing algorithms that frankly break the space. 415 00:22:58,560 --> 00:22:59,800 Speaker 9: And time continuum. You know, we. 416 00:22:59,720 --> 00:23:03,680 Speaker 11: Were like used to as human beings hitting each other 417 00:23:03,760 --> 00:23:05,800 Speaker 11: over the head with the rock, and then that developed 418 00:23:05,800 --> 00:23:12,439 Speaker 11: into projectiles, long bows or guns. But this sense of 419 00:23:13,680 --> 00:23:18,640 Speaker 11: immediacy and the process of killing one another is stretching 420 00:23:19,160 --> 00:23:24,120 Speaker 11: into days and weeks or months with autonomous systems where 421 00:23:24,600 --> 00:23:27,919 Speaker 11: items can be programmed to kill at a distance and 422 00:23:28,960 --> 00:23:29,760 Speaker 11: great time length. 423 00:23:30,800 --> 00:23:35,160 Speaker 3: I mean, given the absolute enormity of these dilemmas, how 424 00:23:35,160 --> 00:23:37,520 Speaker 3: are the industry playing this in the meantime. 425 00:23:37,600 --> 00:23:40,360 Speaker 9: Well, the industry is very excited because it means more. 426 00:23:41,880 --> 00:23:47,320 Speaker 11: Contracts, and we've seen the markets reaction to the AI 427 00:23:47,440 --> 00:23:51,199 Speaker 11: hype in recent weeks and months, and so you know, 428 00:23:51,280 --> 00:23:54,240 Speaker 11: this is a way for the military not only to 429 00:23:54,280 --> 00:23:59,159 Speaker 11: plug into the AI buzz, but also they're riding a 430 00:23:59,200 --> 00:24:05,600 Speaker 11: wave of increased militarism at present. We see nations increasing 431 00:24:05,640 --> 00:24:11,000 Speaker 11: defense budgets, We see the outbreak of war on multiple 432 00:24:11,000 --> 00:24:13,840 Speaker 11: fronts and multiple theaters around the world, and so you know, 433 00:24:14,240 --> 00:24:18,760 Speaker 11: clearly the defense industry stands to benefit from this, and 434 00:24:18,880 --> 00:24:22,919 Speaker 11: there's a number of arguments that they make, and some 435 00:24:23,000 --> 00:24:26,680 Speaker 11: of them may well turn out to be accurate, that 436 00:24:26,880 --> 00:24:32,480 Speaker 11: this will help to reduce casualties and help decision making 437 00:24:32,600 --> 00:24:36,640 Speaker 11: so that civilians are not caught in the crossfire. Nevertheless, 438 00:24:38,119 --> 00:24:41,080 Speaker 11: there's legitimate concern by a number of countries that will 439 00:24:41,080 --> 00:24:44,520 Speaker 11: be attending the Vienna meeting next week to make sure 440 00:24:44,520 --> 00:24:47,200 Speaker 11: that rules are enforced. Just as rules of war are 441 00:24:47,359 --> 00:24:52,600 Speaker 11: enforced with older technologies, they want to ensure that rules 442 00:24:53,160 --> 00:24:56,119 Speaker 11: are enforced with digital technologies. 443 00:24:56,800 --> 00:25:00,680 Speaker 4: Thanks to our apporter in Vienna, Jonathan Cherone Stephen Carol 444 00:25:00,720 --> 00:25:03,120 Speaker 4: in London, you can catch us every weekday morning here 445 00:25:03,119 --> 00:25:05,520 Speaker 4: for Bloomberg Daybreak. You're it be getting out six am 446 00:25:05,560 --> 00:25:08,000 Speaker 4: in London and one am on Wall Strace. 447 00:25:08,119 --> 00:25:11,239 Speaker 2: Tom Well, thank you, Stephen, coming up on Bloomberg day 448 00:25:11,280 --> 00:25:14,000 Speaker 2: Break weekend and look ahead to Samsung earnings and the 449 00:25:14,080 --> 00:25:17,680 Speaker 2: state of the computer chip industry. I'm Tom Busby, and 450 00:25:17,760 --> 00:25:35,320 Speaker 2: this is Bloomberg. I'm Tom Busby in New York with 451 00:25:35,359 --> 00:25:37,639 Speaker 2: your global look ahead at the top stories for investors 452 00:25:37,720 --> 00:25:39,840 Speaker 2: in the coming week. When it comes to tech earnings 453 00:25:39,880 --> 00:25:42,920 Speaker 2: these days, the focus is on artificial intelligence, and that's 454 00:25:43,000 --> 00:25:46,399 Speaker 2: especially true for chip makers. Their products are used in 455 00:25:46,440 --> 00:25:49,960 Speaker 2: a variety of applications, from smartphones to data centers and more. 456 00:25:50,000 --> 00:25:53,000 Speaker 2: And one of the biggest AI chip makers, South Korea, Samsung, 457 00:25:53,560 --> 00:25:56,440 Speaker 2: is out with its latest earnings this week. Daybreak Asia 458 00:25:56,520 --> 00:25:58,880 Speaker 2: co host Brian Curtis and Doug Krisner join us now 459 00:25:59,160 --> 00:25:59,880 Speaker 2: for a preview. 460 00:26:00,280 --> 00:26:02,600 Speaker 12: Tom. The chip makers are at the heart of the 461 00:26:02,680 --> 00:26:06,240 Speaker 12: AI revolution. As we've seen, much of the focus has 462 00:26:06,280 --> 00:26:09,880 Speaker 12: been on AI data centers and accelerators made by Nvidia, 463 00:26:10,400 --> 00:26:13,720 Speaker 12: but high bandwidth memory chips are equally critical, and we'll 464 00:26:13,720 --> 00:26:16,359 Speaker 12: talk more about that. They've been called the backbone of 465 00:26:16,400 --> 00:26:21,680 Speaker 12: both artificial intelligence and machine learning. Here's Bloomberg Semiconductor reporter Ian. 466 00:26:21,600 --> 00:26:25,240 Speaker 13: King, and this is really an essential part of these 467 00:26:25,359 --> 00:26:29,880 Speaker 13: large AI training models, the speed at which the process 468 00:26:29,920 --> 00:26:33,160 Speaker 13: that can get into memory, grab the information and get 469 00:26:33,160 --> 00:26:34,960 Speaker 13: back out and get back on with what it's doing. 470 00:26:35,000 --> 00:26:38,920 Speaker 13: Has a huge impact on how quickly you can train AI. 471 00:26:39,040 --> 00:26:42,280 Speaker 13: So that's a really good opportunity for some song, for 472 00:26:42,520 --> 00:26:43,560 Speaker 13: Micron and for. 473 00:26:43,560 --> 00:26:46,480 Speaker 5: Heinix, that is Bloomberg C and King. Now, just last week, 474 00:26:46,600 --> 00:26:50,960 Speaker 5: South Korea's sk Heinix said sales related to AI more 475 00:26:51,000 --> 00:26:54,119 Speaker 5: than doubled in the latest quarter. Sk Heinex is the 476 00:26:54,119 --> 00:26:57,399 Speaker 5: world's number two maker of memory chips. In the week ahead, 477 00:26:57,440 --> 00:27:01,440 Speaker 5: we'll hear from number one Samsung once again, Bloomberg C 478 00:27:01,560 --> 00:27:01,920 Speaker 5: and King. 479 00:27:02,119 --> 00:27:05,480 Speaker 13: The traditional volume, which memory is all about volume really 480 00:27:05,480 --> 00:27:09,800 Speaker 13: comes from smartphones and comes from PCs. Those markets aren't 481 00:27:09,920 --> 00:27:13,160 Speaker 13: getting any worse, but it's way too early to say 482 00:27:13,200 --> 00:27:15,600 Speaker 13: that they're in growth mode again. What people are really 483 00:27:15,640 --> 00:27:19,600 Speaker 13: focused on is the data center and AI market and 484 00:27:19,720 --> 00:27:22,560 Speaker 13: how that is going to have an impact on memory. 485 00:27:22,880 --> 00:27:24,800 Speaker 13: Twenty twenty four is going to be a good year 486 00:27:24,840 --> 00:27:28,359 Speaker 13: for these companies. Everybody's forecasts a double digit revenue growth 487 00:27:28,400 --> 00:27:30,480 Speaker 13: after a pretty disastrous year last year. 488 00:27:31,119 --> 00:27:35,000 Speaker 12: Bloombergs Ian King for a closer look at semiconductor markets 489 00:27:35,040 --> 00:27:37,960 Speaker 12: and to help preview the Samsung earnings. We're joined by 490 00:27:38,040 --> 00:27:41,360 Speaker 12: Bloomberg's Glad Savov, our tech editor in Hong Kong, and 491 00:27:41,440 --> 00:27:45,679 Speaker 12: Youlam Lee, Bloomberg, senior tech editor based in Seoul. ELM, 492 00:27:45,840 --> 00:27:48,000 Speaker 12: let me go to you first. So we already had 493 00:27:48,040 --> 00:27:52,160 Speaker 12: the preliminary results from Samsung sales and profit higher than expected, 494 00:27:52,240 --> 00:27:55,320 Speaker 12: so we kind of know what to expect, and analysts 495 00:27:55,680 --> 00:27:59,600 Speaker 12: are projecting net income up fourfold from a year ago. 496 00:28:00,000 --> 00:28:03,240 Speaker 12: It seems an astonishing number. Will will that be more 497 00:28:03,280 --> 00:28:06,879 Speaker 12: because of semiconductors or smartphones or both? 498 00:28:07,200 --> 00:28:12,120 Speaker 14: That's right, there are something is a very complex company 499 00:28:12,200 --> 00:28:18,520 Speaker 14: with different type of businesses. Obviously, semiconductor unit is such 500 00:28:18,560 --> 00:28:24,320 Speaker 14: an important pivotal unit for the company that is expected 501 00:28:24,359 --> 00:28:30,080 Speaker 14: to rebound in the first quarter, as well as smartphone unit. 502 00:28:30,760 --> 00:28:39,080 Speaker 14: Smartphone obviously they have introduced you know, the S twenty 503 00:28:39,120 --> 00:28:44,040 Speaker 14: four new AI phone in the first quarter, so that 504 00:28:44,360 --> 00:28:49,160 Speaker 14: is really boosting their shipments and revenue during the quarter. 505 00:28:50,000 --> 00:28:57,440 Speaker 14: Their division together is with home appliances and together they 506 00:28:57,480 --> 00:29:01,400 Speaker 14: account for you know, majority of the maybe forty percent 507 00:29:01,600 --> 00:29:07,080 Speaker 14: of the revenue. So we expect both the semiconductor unit 508 00:29:07,160 --> 00:29:11,120 Speaker 14: as well as the semiconductor and Home applians unit to 509 00:29:11,200 --> 00:29:12,800 Speaker 14: do well in the first quarter. 510 00:29:13,160 --> 00:29:17,720 Speaker 5: Vlad, when we consider chips used in AI. Fast speed 511 00:29:17,800 --> 00:29:21,560 Speaker 5: comes to mind, reduced power consumption comes to mind. I'm 512 00:29:21,560 --> 00:29:25,479 Speaker 5: wondering when you compare the chips manufactured by Samsung and 513 00:29:25,520 --> 00:29:28,960 Speaker 5: you compare them, Let's say to sk Heinex, how do 514 00:29:29,080 --> 00:29:30,560 Speaker 5: they stack up one against the other. 515 00:29:30,680 --> 00:29:32,760 Speaker 15: Well, that's the interesting thing, and I mean Julien can 516 00:29:32,800 --> 00:29:36,040 Speaker 15: speak more to that, but really Heinis for the first 517 00:29:36,040 --> 00:29:39,320 Speaker 15: time in their relationship Samsung, Heine's being very close to 518 00:29:39,360 --> 00:29:43,160 Speaker 15: America competitors, has the lead. Heinis took that lead. It 519 00:29:43,240 --> 00:29:46,680 Speaker 15: invested very early into HBM as a category, and it 520 00:29:46,720 --> 00:29:48,880 Speaker 15: has the lead in having the better technology. It has 521 00:29:48,920 --> 00:29:52,800 Speaker 15: the lead in having Nvidia as its customer, and Vidia 522 00:29:52,840 --> 00:29:56,080 Speaker 15: trusted Heinex and its technology first. Now, the thing that's 523 00:29:56,160 --> 00:29:57,880 Speaker 15: happening and the thing that's going to happen over the 524 00:29:57,960 --> 00:30:01,000 Speaker 15: next few months, is Samsung is catching up. It says 525 00:30:01,080 --> 00:30:04,240 Speaker 15: that it has a more advanced version of HBM. It's 526 00:30:04,280 --> 00:30:06,480 Speaker 15: moving fast. It has the bigger resources. And one of 527 00:30:06,520 --> 00:30:08,800 Speaker 15: the interesting things that we saw in the wake of 528 00:30:08,840 --> 00:30:13,200 Speaker 15: Heinex's earnings, which were really impressive, was share price actually dropped. 529 00:30:13,480 --> 00:30:16,880 Speaker 15: And part of the reason for that was because investors 530 00:30:16,880 --> 00:30:20,600 Speaker 15: and analysts we're looking at Heinex. Henix has to increase capacity, 531 00:30:21,560 --> 00:30:23,600 Speaker 15: so it has to increase spending. Every bit of growth 532 00:30:23,680 --> 00:30:26,680 Speaker 15: for Heinex in terms of its productivity and in terms 533 00:30:26,720 --> 00:30:28,760 Speaker 15: of its sales is going to come at the cost 534 00:30:28,880 --> 00:30:29,800 Speaker 15: of more capex. 535 00:30:29,960 --> 00:30:33,320 Speaker 12: So a lot. We have heard some different comments from 536 00:30:33,520 --> 00:30:36,360 Speaker 12: the companies that we've heard from so far. We had 537 00:30:36,480 --> 00:30:39,840 Speaker 12: very strong numbers from Texas Instruments looking more at the 538 00:30:39,880 --> 00:30:44,680 Speaker 12: automotive and industrial sectors, and then you already highlighted sk 539 00:30:44,840 --> 00:30:49,600 Speaker 12: Heinex and TSMC actually raised a few questions about smartphones 540 00:30:49,640 --> 00:30:54,040 Speaker 12: and PCs and ASML's numbers were kind of scarily bad. 541 00:30:54,920 --> 00:30:58,520 Speaker 12: Should we be positive about the overall semiconductor industry here 542 00:30:58,720 --> 00:31:00,920 Speaker 12: or should we be somewhat cautious? 543 00:31:01,160 --> 00:31:01,320 Speaker 9: Oh? 544 00:31:01,360 --> 00:31:05,600 Speaker 15: I believe so again. AI is such a massive trend. 545 00:31:06,280 --> 00:31:09,320 Speaker 15: This past week, Metas earnings gave a warning sign to 546 00:31:09,560 --> 00:31:11,560 Speaker 15: a bunch of people in the US, and I came 547 00:31:11,560 --> 00:31:14,640 Speaker 15: on radio and I said, do mistake Meta for being 548 00:31:14,680 --> 00:31:17,520 Speaker 15: a representative for the entire industry. And what happened immediately 549 00:31:17,560 --> 00:31:20,840 Speaker 15: the next day, Microsoft and Google boths of past expectations, 550 00:31:21,080 --> 00:31:24,000 Speaker 15: largely driven by the cloud businesses, the ones that provide 551 00:31:24,000 --> 00:31:29,240 Speaker 15: those AI services that infrastructure the facility for companies, startups, 552 00:31:29,240 --> 00:31:32,320 Speaker 15: et cetera to train the AI models. The demand is 553 00:31:32,360 --> 00:31:36,640 Speaker 15: their Heinix, TSMC, Samsung, all the component suppliers and video 554 00:31:36,680 --> 00:31:38,680 Speaker 15: as well. They had gone to sell as many chips 555 00:31:38,680 --> 00:31:40,600 Speaker 15: as they can make. That is the thing that we've seen, 556 00:31:40,720 --> 00:31:44,880 Speaker 15: especially with Heinis. We've had Tom Kang in South Korea saying, 557 00:31:45,240 --> 00:31:47,000 Speaker 15: if Henis wants to sell more chips, it needs to 558 00:31:47,000 --> 00:31:47,920 Speaker 15: build more factories. 559 00:31:48,040 --> 00:31:50,920 Speaker 5: You limb when you think about artificial intelligence, so much 560 00:31:50,920 --> 00:31:53,880 Speaker 5: of the focus has been on these data centers, but 561 00:31:53,960 --> 00:31:56,880 Speaker 5: I'm wondering when it comes to the individual devices, the 562 00:31:56,960 --> 00:32:02,200 Speaker 5: smartphones in particular, how sophisticated it has Samsung become in 563 00:32:02,640 --> 00:32:06,240 Speaker 5: building smartphones that can handle a lot of the AI 564 00:32:06,400 --> 00:32:10,120 Speaker 5: technology that we're looking forward to applying to various aspects 565 00:32:10,160 --> 00:32:10,520 Speaker 5: of life. 566 00:32:10,600 --> 00:32:11,560 Speaker 9: Yeah. Sure. So. 567 00:32:11,760 --> 00:32:14,520 Speaker 14: One one of the areas that some song is really 568 00:32:14,560 --> 00:32:21,440 Speaker 14: pollish this R is the rise of on device AI applications. 569 00:32:21,560 --> 00:32:24,720 Speaker 14: So in other words, traditionally, if you want to have 570 00:32:25,160 --> 00:32:28,640 Speaker 14: applications such you have to go through you know, Cloud 571 00:32:28,840 --> 00:32:34,320 Speaker 14: or some such. But companies like Samsung and Google and 572 00:32:34,760 --> 00:32:39,040 Speaker 14: trying to build you know, a on device basically you 573 00:32:39,080 --> 00:32:42,360 Speaker 14: know applications that you don't have to go through a 574 00:32:42,440 --> 00:32:46,440 Speaker 14: cloud that is going to be helpful to you know, 575 00:32:46,520 --> 00:32:51,520 Speaker 14: for security reasons. So they are really betting the chips. 576 00:32:51,560 --> 00:32:56,240 Speaker 14: You know, they are expecting stronger robust demand for chips 577 00:32:56,280 --> 00:32:58,320 Speaker 14: that are going to be used on devices this year 578 00:32:58,560 --> 00:33:01,320 Speaker 14: as more companies really move into this space. 579 00:33:01,200 --> 00:33:05,520 Speaker 12: And VLADI in terms of monetizing AI for companies out 580 00:33:05,560 --> 00:33:09,200 Speaker 12: there in the industry, are we about ready to switch 581 00:33:09,280 --> 00:33:11,400 Speaker 12: or is it too early to start talking about the 582 00:33:11,440 --> 00:33:14,920 Speaker 12: Microsoft's and Googles and companies that are either in the 583 00:33:15,040 --> 00:33:19,080 Speaker 12: enterprise or in the consumer sector and seeing some real 584 00:33:19,160 --> 00:33:20,280 Speaker 12: monetization there. 585 00:33:21,360 --> 00:33:24,560 Speaker 15: Well, I won't answer the question. I will let the 586 00:33:24,600 --> 00:33:27,560 Speaker 15: CIOs of a bunch of tech companies answering the question. 587 00:33:27,600 --> 00:33:31,280 Speaker 15: And NOBO did a survey of the CIOs chief information 588 00:33:31,360 --> 00:33:37,040 Speaker 15: officers of global firms, and the major takeaways were Number one, 589 00:33:37,200 --> 00:33:40,240 Speaker 15: they also were the companies is unprepared to capitalize on AI. 590 00:33:40,800 --> 00:33:41,320 Speaker 3: Number two. 591 00:33:41,800 --> 00:33:45,080 Speaker 15: A good two percent of them said that they won't 592 00:33:45,080 --> 00:33:47,000 Speaker 15: be able to show return and investment on AI for 593 00:33:47,040 --> 00:33:49,480 Speaker 15: the next two years. So that really gives you a 594 00:33:49,520 --> 00:33:52,000 Speaker 15: sense of the timeline that we're working on here. And 595 00:33:52,040 --> 00:33:54,920 Speaker 15: then you also have to bear in mind AI has 596 00:33:54,960 --> 00:33:57,280 Speaker 15: been around for a long time, but just kind of 597 00:33:57,320 --> 00:33:59,480 Speaker 15: working behind the scenes. What are you talking about, like 598 00:33:59,520 --> 00:34:02,520 Speaker 15: AI in small phone cameras or AI to detect and 599 00:34:02,560 --> 00:34:05,200 Speaker 15: categorize the photos that you take with those cameras. It's 600 00:34:05,200 --> 00:34:08,920 Speaker 15: been around, and what we're seeing is it's much more 601 00:34:08,920 --> 00:34:13,200 Speaker 15: of a smooth transition than you might imagine. So AI 602 00:34:13,320 --> 00:34:16,680 Speaker 15: today in monetization terms, it's happening, but it's subtle. You 603 00:34:16,680 --> 00:34:19,680 Speaker 15: can't really tell. Tencent, for example, says AI is doing 604 00:34:20,280 --> 00:34:25,400 Speaker 15: a helpful job in improving its ad targeting meta likewise 605 00:34:25,600 --> 00:34:28,600 Speaker 15: Google likewise, But again that's kind of under the hood, 606 00:34:28,680 --> 00:34:31,640 Speaker 15: behind the scenes. The impactful AI the stuff that people 607 00:34:31,680 --> 00:34:34,640 Speaker 15: pay subscription fees for, that's years down the line. 608 00:34:34,640 --> 00:34:37,360 Speaker 5: Honestly, I want to bring in the China chips story 609 00:34:37,520 --> 00:34:40,640 Speaker 5: into the equation here. We know that the US export 610 00:34:40,680 --> 00:34:44,480 Speaker 5: controls are in place, obviously limiting China's access to certain 611 00:34:45,000 --> 00:34:49,000 Speaker 5: chip making technology. Earlier, Brian and I spoke with Robert Lee, 612 00:34:49,040 --> 00:34:52,319 Speaker 5: the senior tech analyst over at Bloomberg Intelligence. He's based 613 00:34:52,360 --> 00:34:56,200 Speaker 5: in Hong Kong, and the question was on China's chip 614 00:34:56,239 --> 00:34:59,160 Speaker 5: industry and how it's developing, and whether or not a 615 00:34:59,239 --> 00:35:03,480 Speaker 5: company like Samsung or even sk Heinez should be concerned. 616 00:35:03,680 --> 00:35:06,040 Speaker 16: It's probably a little bit early days for Samson and 617 00:35:06,080 --> 00:35:08,440 Speaker 16: others to worry about the threat from the Chinese. But 618 00:35:08,640 --> 00:35:10,719 Speaker 16: at the end of the day, the weight of the 619 00:35:10,760 --> 00:35:15,360 Speaker 16: state is backing Huawei and SMIC and SMIC being the 620 00:35:15,480 --> 00:35:18,600 Speaker 16: Chinese equivalent of TEARSMC. So you've got you know, you've 621 00:35:18,600 --> 00:35:21,080 Speaker 16: got a lot of national pride, a lot of strategic 622 00:35:21,160 --> 00:35:24,160 Speaker 16: national long term objectives, and a lot of money flowing 623 00:35:24,160 --> 00:35:25,239 Speaker 16: into that sector. 624 00:35:25,440 --> 00:35:28,520 Speaker 5: That is rapidly of Bloomberg Intelligence. So if we can 625 00:35:28,560 --> 00:35:31,800 Speaker 5: agree that there is some sort of race happening. Broadly 626 00:35:31,880 --> 00:35:35,680 Speaker 5: speaking about what's going on in the semiconductor industry, you lim, 627 00:35:35,760 --> 00:35:38,960 Speaker 5: I'm wondering when it comes to a company like Samsung, 628 00:35:39,080 --> 00:35:42,120 Speaker 5: how much are they devoting to research and development to 629 00:35:42,239 --> 00:35:45,720 Speaker 5: trying to find the next generation of memory chips. 630 00:35:46,320 --> 00:35:50,200 Speaker 14: It's tremendous, that's all they're really betting on right now. 631 00:35:50,520 --> 00:35:53,560 Speaker 14: When the smartphone came along, you know, the world changed. 632 00:35:54,080 --> 00:35:57,640 Speaker 14: They see the same moment, so they want to capitalize. 633 00:35:57,680 --> 00:35:59,320 Speaker 14: They want to secure the leadership. 634 00:35:59,560 --> 00:36:02,360 Speaker 5: LA based in Hong Kong. But for the purposes of 635 00:36:02,719 --> 00:36:05,840 Speaker 5: our visit today, you're in Tokyo and our studios there 636 00:36:05,880 --> 00:36:08,319 Speaker 5: and give me a sense of what's happening right now 637 00:36:08,360 --> 00:36:12,720 Speaker 5: in Japan with the semiconductor industry and how it's growing. 638 00:36:12,960 --> 00:36:15,359 Speaker 15: Just like saith Korea, just like Taiwan, Japan has made 639 00:36:15,400 --> 00:36:19,319 Speaker 15: semiconductors and national priority. And one very interesting example, we 640 00:36:19,320 --> 00:36:23,200 Speaker 15: were talking to a chip making startup in the US 641 00:36:23,320 --> 00:36:26,640 Speaker 15: and one thing that they said was Japan is making 642 00:36:26,640 --> 00:36:30,719 Speaker 15: a push to bring Japanese semiconductor designers and engineers back 643 00:36:30,760 --> 00:36:33,640 Speaker 15: to the country. They want to get their own national 644 00:36:33,719 --> 00:36:37,120 Speaker 15: talent back to the country. They have a startup called 645 00:36:37,280 --> 00:36:41,760 Speaker 15: Rapidus Corp. Which is aiming to do two nanometer highly 646 00:36:41,760 --> 00:36:45,160 Speaker 15: advanced I mean it's not available today chip making by 647 00:36:45,200 --> 00:36:47,319 Speaker 15: twenty twenty seven. It's a very aggressive thing to go 648 00:36:47,400 --> 00:36:50,800 Speaker 15: from zero to super advanced chip making by twenty twenty seven. 649 00:36:51,000 --> 00:36:53,600 Speaker 15: But that's back by many of the biggest companies in 650 00:36:53,640 --> 00:36:58,040 Speaker 15: the country, Sony and many others. And when you bring 651 00:36:58,080 --> 00:37:00,440 Speaker 15: in all that expertise that Japan already had, as it 652 00:37:00,520 --> 00:37:04,520 Speaker 15: is already the source for many of the key materials, components, 653 00:37:04,600 --> 00:37:07,839 Speaker 15: equipment for chip making, if you do all of that, 654 00:37:07,880 --> 00:37:10,040 Speaker 15: if you bring in the expertise, and Japan is also 655 00:37:10,280 --> 00:37:14,280 Speaker 15: investing and subsidizing TSMC setting up at least one factory 656 00:37:14,400 --> 00:37:17,080 Speaker 15: to maybe even three or four, depending on how that 657 00:37:17,200 --> 00:37:20,720 Speaker 15: negotiation goes. It wants to do just like the US. 658 00:37:20,800 --> 00:37:23,080 Speaker 15: It wants to bring in the expertise that he lacks, 659 00:37:23,120 --> 00:37:24,960 Speaker 15: and he wants to lean into the expertise that he 660 00:37:24,960 --> 00:37:25,640 Speaker 15: already has. 661 00:37:25,840 --> 00:37:28,880 Speaker 12: Vlad, thank you very much, and Eulam thank you as well. 662 00:37:29,160 --> 00:37:32,720 Speaker 12: Bloomberg's Lad Savov, tech editor in Hong Kong, and ulm Lee, 663 00:37:32,760 --> 00:37:36,880 Speaker 12: Bloomberg Senior Tech editor based in Seoul. I'm Brian Curtis 664 00:37:36,880 --> 00:37:39,479 Speaker 12: in Hong Kong, along with Doug Krisner. You can catch 665 00:37:39,560 --> 00:37:42,279 Speaker 12: us every weekday here for Bloomberg day Break Age the 666 00:37:42,360 --> 00:37:45,400 Speaker 12: beginning at eight am in Hong Kong and eight pm 667 00:37:45,400 --> 00:37:46,320 Speaker 12: on Wall Street. 668 00:37:46,360 --> 00:37:49,200 Speaker 2: Tom our thanks to Brian and Doug. And that does 669 00:37:49,280 --> 00:37:51,640 Speaker 2: it for this edition of Bloomberg day Break Weekend. Join 670 00:37:51,719 --> 00:37:53,960 Speaker 2: us again Monday morning at five am Wall Street time 671 00:37:54,000 --> 00:37:56,680 Speaker 2: for the latest on markets overseas and the news you 672 00:37:56,800 --> 00:37:57,879 Speaker 2: need to start your day. 673 00:37:58,280 --> 00:37:59,960 Speaker 3: I'm Tom Busby. Stay with us. 674 00:38:00,040 --> 00:38:03,080 Speaker 2: Top stories and global business headlines are coming up right now.