WEBVTT - The Impact of Decoupling on Technology 0:00:00.160 --> 0:00:04.200 This is Bloomberg Business Week with Carol Masser and Bloomberg 0:00:04.280 --> 0:00:09.119 Quick Takes Tim Stinovic from Bloomberg Radio. So late last month, 0:00:09.160 --> 0:00:12.559 Bin put out it's Technology Report one. It's ninety two 0:00:12.600 --> 0:00:16.120 pages of the new Technology Economy. There's a lot going on, 0:00:16.160 --> 0:00:20.600 everything from big tech, m and A venture capital, software, hybrid, cloud, 0:00:20.600 --> 0:00:24.400 talent wars, chip shortages, supply chains. These are two things 0:00:24.400 --> 0:00:27.760 that we talked about with Michael Dell a Dell just yesterday. Uh. 0:00:27.880 --> 0:00:30.600 And layering over at all Tim, is the U S 0:00:30.640 --> 0:00:33.280 and China to coupling. We talked about that with Eric 0:00:33.280 --> 0:00:36.680 Shatzker based on his conversation with Ken Griffin over at Citadel. Yeah, 0:00:36.720 --> 0:00:39.479 he's he said that, and he reminded us that Griffin 0:00:39.600 --> 0:00:43.320 warrened that the U S should not decouple from China. Right, exactly, 0:00:43.360 --> 0:00:46.240 pretty adamant about it. So let's see what Anne Hecker 0:00:46.280 --> 0:00:48.560 has to say. She's head of America's Technology and Cloud 0:00:48.560 --> 0:00:52.360 Services practice, uh, and also ahead of the Semiconductor group 0:00:52.520 --> 0:00:55.240 based in Silicon Valley. She is on the phone and 0:00:55.280 --> 0:00:58.720 this is over at Bain on the phone in Palo Alto, California. 0:00:58.800 --> 0:01:01.320 And Uh, Tim and I been looking forward to this conversation. 0:01:01.400 --> 0:01:04.800 Welcome to Bloomberg. Thank you. Hey. Tell us a little 0:01:04.800 --> 0:01:07.720 bit about when you guys put together a report, Uh, 0:01:07.760 --> 0:01:09.640 you probably get a lot of information, a lot of 0:01:09.680 --> 0:01:12.880 research that's done. Is there something though, that just rose 0:01:12.920 --> 0:01:15.800 to the top, like this is going to be at 0:01:15.800 --> 0:01:18.920 the top of everyone's mind when it comes to anything 0:01:18.920 --> 0:01:22.760 and everything in the technology space. Yeah, that's a great question. 0:01:22.880 --> 0:01:25.720 And as we looked at our Technology report this year, 0:01:26.080 --> 0:01:28.280 what we really did was take up fact based view 0:01:28.440 --> 0:01:30.679 to look at all of the different trends which we've 0:01:30.720 --> 0:01:34.240 been following for years, and really trying to understand what 0:01:34.319 --> 0:01:37.119 was the impact of COVID nineteen in the global pandemic 0:01:37.440 --> 0:01:40.280 that we've all been experiencing. And one thing that we 0:01:40.319 --> 0:01:42.960 found was it really was an acceleration of a lot 0:01:43.000 --> 0:01:45.920 of the technology trends that we've been following. And a 0:01:45.920 --> 0:01:48.200 lot of that's based on not only the research we 0:01:48.240 --> 0:01:50.800 did for this report, but over the past eighteen months, 0:01:50.800 --> 0:01:54.640 we've been talking to our CEO COMPS clients, talking with 0:01:54.680 --> 0:01:57.680 a lot of ce i os to understand how are 0:01:57.720 --> 0:02:01.320 they seeing different technology trends as it played out during 0:02:01.360 --> 0:02:04.040 the pandemic kind of quarter over quarter, and what we 0:02:04.080 --> 0:02:06.120 saw was really an acceleration of a lot of trends 0:02:06.200 --> 0:02:12.040 like cloud based infrastructure, based security, AI as a service offering, 0:02:12.639 --> 0:02:15.360 and then you know accelerations of some like PC and 0:02:15.400 --> 0:02:18.880 hardware sales as a service UM for remote work is 0:02:18.919 --> 0:02:21.760 everyone transition to work from home and school from home. 0:02:22.000 --> 0:02:24.320 It's really just an acceleration across the board and a 0:02:24.320 --> 0:02:27.359 lot of the different textrins we've been following for years. Well, 0:02:27.360 --> 0:02:30.200 how much of that was pulled forward for you know, 0:02:30.520 --> 0:02:32.840 because of the pandemic into what extent is they're sort 0:02:32.880 --> 0:02:36.960 of going to be a pause in because people did 0:02:37.000 --> 0:02:42.360 a lot of those upgrades. That's a great question, and 0:02:42.440 --> 0:02:45.920 it probably varies a little bit by sector within technology. 0:02:46.320 --> 0:02:47.840 I think some of the big ones where we saw 0:02:47.880 --> 0:02:51.400 a lot of growth. So again, cloud based security moving 0:02:51.440 --> 0:02:54.840 towards the cloud based infrastructure was a trend that we've 0:02:54.880 --> 0:02:57.680 been watching for years, and if anything, this just accelerated 0:02:57.680 --> 0:02:59.840 it and we think it will continue to accelerate. So 0:03:00.280 --> 0:03:02.920 it pulls it forward some of the adoption UM. But 0:03:03.000 --> 0:03:05.760 now I think just the use of those new technology 0:03:05.800 --> 0:03:08.880 trends will continue to expand as as adoptions has just 0:03:08.919 --> 0:03:12.399 spread across many different in markets and use cases. Hey, 0:03:12.440 --> 0:03:14.480 and I think there are oh, go ahead for forgive bab, 0:03:14.520 --> 0:03:17.040 please finish. And then I think there are areas where 0:03:17.040 --> 0:03:19.600 we're looking at closely around you know, um, some of 0:03:19.600 --> 0:03:22.320 the things you think of, like PCs or peripherals that 0:03:22.360 --> 0:03:24.600 people bought a lot of to to enable you to 0:03:24.639 --> 0:03:27.400 work in school from home. Now we have those. Are 0:03:27.400 --> 0:03:29.800 you going to see that same spike? Those sales have 0:03:29.840 --> 0:03:32.920 actually held up better than expected. Um, but those are 0:03:32.960 --> 0:03:35.360 ones that might come back down socially on the peripheral set. 0:03:35.720 --> 0:03:38.880 So what's interesting too is, you know, we talk a 0:03:38.920 --> 0:03:41.840 lot about the decoupling of US and China, and we 0:03:41.880 --> 0:03:44.720 mentioned on the introduction to this um our air Shafts 0:03:44.720 --> 0:03:47.360 are caught up with the chief investment officer of its Soros, 0:03:47.360 --> 0:03:48.600 who said, you know, now is not the time to 0:03:48.600 --> 0:03:51.040 be investing in Chinese companies. On the other hand, he 0:03:51.080 --> 0:03:54.360 also talked with Citadels Ken Griffin, who said, you know, 0:03:54.440 --> 0:03:58.040 we should not be decoupling the United States from China, 0:03:58.120 --> 0:04:02.680 that we should be having that relationship. We know just 0:04:03.080 --> 0:04:05.400 a little bit earlier today, President Biden city plans to 0:04:05.400 --> 0:04:08.920 meet virtually with President g before the end of the year. 0:04:09.400 --> 0:04:13.400 We know tensions between the two largest economies have been 0:04:13.520 --> 0:04:17.320 rising once again, and are you anticipating there you are 0:04:17.360 --> 0:04:20.000 in Silicon Valley, what are the conversations that you have 0:04:20.560 --> 0:04:23.640 with people from different parts of the tech community. Are 0:04:23.680 --> 0:04:28.480 we going to have kind of two separate huge Chinese 0:04:28.880 --> 0:04:33.680 um not Chinese, two huge tech movements those aligned with 0:04:33.800 --> 0:04:37.560 China or China just on its own developing technology, and 0:04:37.600 --> 0:04:40.760 then kind of the western world, the US and others 0:04:40.960 --> 0:04:44.960 moving ahead on technology. Yeah, it's it's a great question 0:04:45.000 --> 0:04:46.680 and one that we have spent a lot of time 0:04:46.720 --> 0:04:49.960 thinking about for quite a few years now around just 0:04:50.440 --> 0:04:53.520 the relationship between US and China and how does it evolve, 0:04:53.920 --> 0:04:56.840 And it really has accelerated, I think over the last 0:04:56.839 --> 0:04:59.040 couple of years. So when we think of this and 0:04:59.120 --> 0:05:01.480 the coupling, even you know, two or three years ago, 0:05:01.560 --> 0:05:04.320 we used to lay out three scenarios that you know, 0:05:04.360 --> 0:05:06.320 we used to be in a world is more globalization, 0:05:06.640 --> 0:05:09.280 and then we moved to one of globalization, which is 0:05:09.279 --> 0:05:11.839 a term I think the economist coined where there would 0:05:11.880 --> 0:05:14.480 still be global trade, but there'll be more tariffs, more 0:05:14.520 --> 0:05:17.800 sanctions that would flow some things down. And then the 0:05:17.920 --> 0:05:20.360 third would be do we moved into a more decoupled world? 0:05:20.360 --> 0:05:23.120 Where you really do start to see the development of 0:05:23.200 --> 0:05:26.919 independent economies and supply cheese that really just have fewer 0:05:26.960 --> 0:05:31.080 linkages across those And we used to debate up how 0:05:31.120 --> 0:05:34.039 fast would you be moving towards that more decoupled scenario, 0:05:34.440 --> 0:05:38.120 And I think we've moved faster than anyone expected. UM, 0:05:38.160 --> 0:05:39.880 I don't think it's going to be linear. I think 0:05:39.880 --> 0:05:42.080 will probably move some to the left sum to the 0:05:42.160 --> 0:05:44.320 right over time. But a few data points that have 0:05:44.400 --> 0:05:46.880 really I think show this is if you look at 0:05:46.920 --> 0:05:50.880 foreign direct investments UM tech related foreign direct investment has 0:05:50.920 --> 0:05:57.600 dropped from and if you click under that, Chinese investment 0:05:57.600 --> 0:05:59.760 in the US bell off very quickly kind of around 0:05:59.800 --> 0:06:03.479 to seventeen and the US has been a more strait decline. Hey, 0:06:03.520 --> 0:06:05.040 and hang on a second, because we've got to do 0:06:05.040 --> 0:06:06.520 a little bit of news. But we'll come back and uh, 0:06:06.800 --> 0:06:10.680 continue our conversation. And Hecker ahead of BAN America's Technology 0:06:10.680 --> 0:06:12.720 and Cloud Services Practice. Will get back to her in 0:06:12.760 --> 0:06:15.200 just a moment right here on Bloomberg. I want to 0:06:15.200 --> 0:06:17.120 get back to our conversation still with us is and 0:06:17.320 --> 0:06:21.760 Hecker she's head of Ban's America's Technology and Cloud Services Practice. Uh, 0:06:21.800 --> 0:06:24.080 and UH she's still with us on the phone in 0:06:24.120 --> 0:06:27.599 Palo Alto, California. And you know what's great about talking 0:06:27.640 --> 0:06:30.280 with folks like you. You guys talk with a lot 0:06:30.279 --> 0:06:32.360 of different companies. A lot of them are your clients. 0:06:32.400 --> 0:06:35.240 You do the research to try and figure out, you know, 0:06:35.279 --> 0:06:38.440 what's coming uh And and then I think about our 0:06:38.440 --> 0:06:41.120 audience who's listening to it, their investors, They're trying to 0:06:41.160 --> 0:06:43.400 figure out what are the next next waves. We love 0:06:43.440 --> 0:06:47.360 talking with the CEOs. Who are the disruptors, the innovators 0:06:47.520 --> 0:06:50.280 or the investors in the disruptors and the innovators. Who 0:06:50.360 --> 0:06:53.279 do you think are ultimately based on the latest tech 0:06:53.320 --> 0:06:55.600 report that you guys put out, who are the winners 0:06:55.680 --> 0:07:01.760 and losers? Yeah, that's a great question when we look 0:07:01.800 --> 0:07:04.360 at it. Um part of the report we looked at 0:07:04.400 --> 0:07:08.240 was just how much technology has really um broadened in 0:07:08.320 --> 0:07:11.640 its impact across all industry. So sometimes we look at, 0:07:11.640 --> 0:07:14.040 you know, the tech companies, but we also looked in 0:07:14.120 --> 0:07:18.280 this report about how companies outside of traditional tech channels, 0:07:18.320 --> 0:07:22.880 so your retail companies, financial service, healthcare, consumer products, and 0:07:22.920 --> 0:07:26.720 the research there we showed that companies across all industries 0:07:26.760 --> 0:07:30.280 that take a more tech driven strategy or have a 0:07:30.360 --> 0:07:34.440 lot of um tech as an underpinning in their business 0:07:34.440 --> 0:07:38.320 model are actually outperforming others in their own industry. So, 0:07:38.360 --> 0:07:41.800 while we can think of technology companies as a vertical 0:07:41.840 --> 0:07:46.520 in and of itself the enabling aspect of technology and 0:07:46.520 --> 0:07:51.080 embracing that across all different industries, companies that have successfully 0:07:51.120 --> 0:07:54.480 done that are outperforming their peers that haven't done that yet. 0:07:54.720 --> 0:07:56.680 And can you give us just for the sake of 0:07:56.760 --> 0:07:59.800 case study or or or so so people understand examples, 0:08:00.200 --> 0:08:03.440 can you share historical examples where one company has embraced 0:08:03.440 --> 0:08:05.600 that type of shift and one hasn't and we've seen 0:08:05.640 --> 0:08:09.160 our performance. Well, sure, so you can see some of 0:08:09.200 --> 0:08:11.720 some of the examples would be would be on your 0:08:11.760 --> 0:08:14.680 listeners are very aware of like companies like an Amazon 0:08:14.800 --> 0:08:17.560 or an Ali Baba kind in the consumer space that 0:08:17.600 --> 0:08:19.120 it really just are kind of what we would call 0:08:19.200 --> 0:08:22.760 born check right that they were born with the technology underpinning. 0:08:23.160 --> 0:08:25.080 And then I think you can see some examples in 0:08:25.080 --> 0:08:28.880 industrials and financial services where more traditional companies have really 0:08:28.920 --> 0:08:32.200 embraced technology, either whether it be payments or how do 0:08:32.240 --> 0:08:35.760 they think about telehealth, where they've now added new lines 0:08:35.800 --> 0:08:38.840 of business or new ways of delivering their goods to 0:08:38.880 --> 0:08:42.079 the consumers that they've kind of embedded technology into their 0:08:42.080 --> 0:08:44.040 delivery even if they weren't kind of a born in 0:08:44.080 --> 0:08:48.360 the cloud type company. Well I do. It is really 0:08:48.360 --> 0:08:50.800 such an interesting time, and I guess we just keep wondering, 0:08:51.320 --> 0:08:53.480 you know, what is the next big thing in terms 0:08:53.520 --> 0:08:57.559 of our world and what happens? Um if there is 0:08:57.600 --> 0:08:59.560 a decoupling, I'm want to go back to that because 0:08:59.600 --> 0:09:03.240 that's where we started. If we have that decoupling, uh, 0:09:03.280 --> 0:09:05.280 And it does seem like we're moving towards that because 0:09:05.280 --> 0:09:08.120 we are already seeing just a strained relationship. But we've 0:09:08.120 --> 0:09:12.360 been there before re China before. If we are in 0:09:12.480 --> 0:09:14.800 terms of the tech world, it just means kind of 0:09:14.840 --> 0:09:18.480 too tech development verticals. That's how it plays at And 0:09:18.640 --> 0:09:20.240 that's okay because there's still a lot of money to 0:09:20.280 --> 0:09:24.360 go around and still big markets to play in. That's 0:09:24.360 --> 0:09:27.200 where this a whole coupling gets very challenging because if 0:09:27.240 --> 0:09:30.240 you actually look at the technology value chain, UM, no 0:09:30.360 --> 0:09:32.360 one country can do it alone. Right now, we are 0:09:32.400 --> 0:09:35.880 still a very global supply chain and there's um it's 0:09:35.920 --> 0:09:38.680 a very unique value chain and that it's very segmented 0:09:39.040 --> 0:09:42.600 and highly specialized. So each country has areas where they're 0:09:42.679 --> 0:09:45.840 quite strong, and then also key competencies or parts of 0:09:45.840 --> 0:09:49.840 the value chain that they're missing. So, for example, um 0:09:50.240 --> 0:09:54.640 China really needs semiconductor capital equipment that's nasfully in the 0:09:54.760 --> 0:09:57.280 U S or Europe. They need access to leading edge 0:09:57.360 --> 0:10:01.959 manufacturing process technology for semiconductors, which is strong in the US, Korea, 0:10:02.080 --> 0:10:06.960 and Taiwan. The US really is needs ode in capacity 0:10:07.160 --> 0:10:10.560 um PCB capacity, which is very heavily in China right now. 0:10:11.040 --> 0:10:14.480 The US also needs more leading edge silicon capacity, which 0:10:14.520 --> 0:10:16.199 again you know the US has some, but a lot 0:10:16.200 --> 0:10:18.320 of it's in Taiwan, a lot of it's in Korea. 0:10:19.080 --> 0:10:20.960 And then if you keep going down the value chain, 0:10:21.200 --> 0:10:24.679 there's different areas where different countries have quite a bit, 0:10:24.920 --> 0:10:27.480 but everyone is still very dependent on each other, which 0:10:27.520 --> 0:10:29.720 is what one thing that just makes the coupling so 0:10:29.800 --> 0:10:32.960 tricky is it's very hard to do right now. So 0:10:33.040 --> 0:10:36.320 I think companies and countries are starting to take steps 0:10:36.400 --> 0:10:39.120 and starting to make investments to try to make their 0:10:39.120 --> 0:10:42.839 own supply chains more resilient to these risks. But it's 0:10:42.840 --> 0:10:45.080 impossible right now for any one country to do it 0:10:45.080 --> 0:10:47.040 all on their own. All right, We're gonna have to 0:10:47.040 --> 0:10:48.760 stop on that note, Hey, and thank you, and Heck 0:10:48.760 --> 0:10:52.400 our head of Beans America's technology and cloud services practices, 0:10:52.920 --> 0:10:56.120 joining us on the phone from Palo Alto, California, you know, 0:10:56.120 --> 0:10:57.840 to we talked about it and beyond the bail some 0:10:57.840 --> 0:11:00.560 of the big macro stories you and I. I mean, 0:11:00.679 --> 0:11:03.199 energy is definitely going through some changes as we move 0:11:03.240 --> 0:11:07.040 away from carbon too much more alternative energy supply chains 0:11:07.120 --> 0:11:11.240 are we you know, significantly changing the equation in terms 0:11:11.280 --> 0:11:14.160 of how companies manage them. Do we see big changes 0:11:14.240 --> 0:11:17.400 following what happens what happened with COVID and what happened 0:11:17.400 --> 0:11:21.079 with the supply chain crunch with some companies building facilities 0:11:21.120 --> 0:11:23.120 here in the US. But it's a year's long process. 0:11:23.240 --> 0:11:25.080 It's a long process, and that's why maybe to some 0:11:25.120 --> 0:11:27.760 extent you're seeing that discomfort in the markets and dislocation 0:11:27.840 --> 0:11:30.040 because it does take a while to do some of this. 0:11:30.679 --> 0:11:33.120 Uh So, we will certainly stay up to date on it.