WEBVTT - Apple and Amazon Coming in Hot 0:00:02.240 --> 0:00:05.600 From the heart of where innovation, money and power collive 0:00:06.360 --> 0:00:10.879 in Silicon Valley and beyond. This is Bloomberg Technology with 0:00:10.960 --> 0:00:27.240 Emily Jay. Hi'm Emily Chin in San Francisco, And this 0:00:27.360 --> 0:00:29.600 is Bloomberg Technology. Coming up in the next hour. A 0:00:29.720 --> 0:00:33.360 record June quarter for Apple, beating on revenue despite headwinds 0:00:33.400 --> 0:00:37.040 from a strengthening dollar, China lockdowns, and an expected slowdown 0:00:37.440 --> 0:00:41.520 in consumer spending. The iPhone also topping estimates, but supply 0:00:41.640 --> 0:00:44.920 constraints hitting the Mac and the iPad. I spoke to 0:00:44.960 --> 0:00:47.640 Apple CEO Tim Cook and will tell you what he 0:00:47.720 --> 0:00:51.960 had to say. Plus Amazon surging in late trading after 0:00:52.000 --> 0:00:54.520 providing a strong outlook for the third quarter, a much 0:00:54.560 --> 0:00:58.560 different forecast than other retailers, net sales jumping in the 0:00:58.640 --> 0:01:01.040 second quarter, in part thanks to I'm day shoppers will 0:01:01.080 --> 0:01:04.640 dig into the data, and the largest chipmaker from mobile 0:01:04.640 --> 0:01:07.520 devices is warning of a slowdown and spending. We will 0:01:07.560 --> 0:01:11.080 ask Qualcomps CEO Christiano Alman about the company's weaker than 0:01:11.120 --> 0:01:15.000 expected forecast, the chips act and China. He's my guest 0:01:15.160 --> 0:01:17.320 later this hour. All of that in a moment, but 0:01:17.360 --> 0:01:19.240 first I want to get a look at Apple now. 0:01:19.400 --> 0:01:22.200 For that We've got Julias with US principle analyst at 0:01:22.240 --> 0:01:24.240 Forrester or Research, and Julie I did just get off 0:01:24.240 --> 0:01:27.679 the phone with Tim Cook and we walked through the results. 0:01:27.680 --> 0:01:29.680 I mean, clearly, we're seeing a record June quarter in 0:01:29.760 --> 0:01:32.960 terms of revenue. iPhone particularly strong. He said, iPad demand 0:01:33.400 --> 0:01:36.280 also very strong, but that the iPad and mac were 0:01:36.280 --> 0:01:40.400 held back by supply constraints. It also sounds like the 0:01:40.440 --> 0:01:44.240 macroeconomic environment is impacting wearables, which would make sense given 0:01:44.280 --> 0:01:46.839 its you know, more discretionary items. And when it comes 0:01:46.840 --> 0:01:49.480 to services, he talked about digital ad spend and we're 0:01:49.480 --> 0:01:53.040 seeing the macro environment. They're seeing the macro economic environment 0:01:53.320 --> 0:01:57.040 have an impact there. What are your headline takeaways? Yeah, 0:01:57.120 --> 0:01:59.080 so I think the first one is is you know 0:01:59.080 --> 0:02:02.320 the good news. So, like many other companies, Apple faces 0:02:02.320 --> 0:02:05.120 the same headwinds that you already mentioned the recession. It's inflation, 0:02:05.200 --> 0:02:08.080 it's uncertainty, is the supply chain and so forth. I 0:02:08.080 --> 0:02:10.520 think Apple benefits though in a few ways. The first 0:02:10.520 --> 0:02:13.959 one is about two thirds of its sales come from smartphones. Uh, 0:02:14.040 --> 0:02:16.400 Folks consider that to be a necessary device, and they 0:02:16.480 --> 0:02:18.880 upgrade that far more frequently than they do a PC 0:02:19.120 --> 0:02:21.079 or a tablet or the other devices that they own. 0:02:21.680 --> 0:02:23.480 And the second thing that you already mentioned, or you 0:02:23.520 --> 0:02:25.400 and Emily, Emily, you and Ed mentioned that I think 0:02:25.480 --> 0:02:28.400 is really important is Apple does have a more fluent 0:02:28.680 --> 0:02:31.639 customer base. We need to look in the United States. Uh, 0:02:31.720 --> 0:02:34.520 the iPhone owner has a household income that on average 0:02:34.560 --> 0:02:37.520 is eighteen thousand dollars higher than an Android owner. Thirty 0:02:38.120 --> 0:02:40.880 of their households have an income of more than a 0:02:40.960 --> 0:02:43.040 hundred grands, and there are three times it's likely to 0:02:43.120 --> 0:02:46.040 have an income of more than three thousand dollars a year. 0:02:46.320 --> 0:02:49.520 So Apple does benefit from having a more fluent customer 0:02:49.560 --> 0:02:53.560 base in the United States and abroad. Now, this was 0:02:53.639 --> 0:02:57.120 interesting from Tim Cook. He said they expect revenue to 0:02:57.280 --> 0:03:02.160 accelerate in the September corner dis bite, seeing some softness 0:03:02.200 --> 0:03:05.360 in some areas. He said they do believe there were 0:03:05.400 --> 0:03:08.000 some macroeconomic headwins that affected the business in the June 0:03:08.080 --> 0:03:12.680 quarter that I already discussed, but sounded optimistic despite some 0:03:12.720 --> 0:03:15.640 of the softness that we've seen. You know, I was 0:03:15.639 --> 0:03:17.160 trying to get him to give me a real take 0:03:17.200 --> 0:03:19.320 on whether or not we're going into a recession, and 0:03:19.440 --> 0:03:21.760 you know, always has a tint to to try to 0:03:21.800 --> 0:03:24.520 sound like an economist. But what's your takeaway from that? 0:03:25.600 --> 0:03:28.320 So if I were Tim Cook, I would also be optimistic. 0:03:28.360 --> 0:03:30.600 I think if we look specifically at the US market, 0:03:30.600 --> 0:03:33.720 which also has a lot of parallels globally, almost sixty 0:03:34.120 --> 0:03:36.520 of US consumers own an Apple device, so they're likely 0:03:36.560 --> 0:03:38.480 to buy a second, They're likely to buy into some 0:03:38.520 --> 0:03:41.400 of the streaming services, use Apple Pay, and use some 0:03:41.440 --> 0:03:44.520 of the in the category that's growing the fastest for Apple. Uh. 0:03:44.560 --> 0:03:46.320 The second thing that we know that is about eighteen 0:03:46.400 --> 0:03:49.520 or nineteen percent of consumers only own Apple devices and 0:03:49.520 --> 0:03:53.960 are very locked into that ecosystem. So while generally all 0:03:53.960 --> 0:03:57.400 companies are facing some headwinds, Apples looking and has a 0:03:57.480 --> 0:04:00.800 customer base that's uh, you know, it should help them, 0:04:00.840 --> 0:04:03.080 you know, sail through here a little bit easier than 0:04:03.080 --> 0:04:07.800 some of their competitors. Now. Supply was in another point 0:04:07.920 --> 0:04:11.400 of optimism in this discussion. When you look at the numbers. 0:04:11.400 --> 0:04:13.720 Of course, we remember last quarter Apple said that they 0:04:13.800 --> 0:04:17.479 would expect four to eight billion dollars. You could potentially, 0:04:17.600 --> 0:04:19.160 you know, just shave that off the top due to 0:04:19.200 --> 0:04:21.839 supply constraints. He said, it actually ended up being lower 0:04:21.839 --> 0:04:25.080 than the lower end of that range, and he also 0:04:25.120 --> 0:04:28.840 said they saw quote significant improvement in the month of 0:04:28.920 --> 0:04:31.559 June in China on the supply side and the demand side. 0:04:31.560 --> 0:04:35.680 He specifically talked about strong demand around the June eighteenth holiday, 0:04:35.720 --> 0:04:38.680 the big shopping holiday UH in China. Said they're seeing 0:04:38.720 --> 0:04:41.760 strong results there um and they're about to start a 0:04:41.760 --> 0:04:45.440 big promotion in China of fairly rare sales promotion where 0:04:45.520 --> 0:04:49.120 a series of Apple devices will be discounted for a 0:04:49.160 --> 0:04:51.080 few days, and he said that had nothing to do 0:04:51.640 --> 0:04:54.760 UH with clearing inventory. What does that signal to you 0:04:54.839 --> 0:04:59.760 about the state of play in China, Well, it's he said, 0:05:00.000 --> 0:05:02.120 not a specialist on the Chinese market, but it does, 0:05:02.200 --> 0:05:03.800 you know, indicate I think it's also it looks like 0:05:03.800 --> 0:05:06.080 they're willing to invest a bit. You know, China is 0:05:06.240 --> 0:05:09.080 a ton is a gigantic market, and Apple has always 0:05:09.080 --> 0:05:13.120 been like compared to the Chinese incumbents, it's been a 0:05:13.200 --> 0:05:16.080 relatively small player players. So I think it's worthwhile for 0:05:16.080 --> 0:05:18.080 Apple to invest there and try to grow that base 0:05:18.600 --> 0:05:20.240 because one of the things that we know about people 0:05:20.240 --> 0:05:22.040 with Apple products, if you can get them to buy one, 0:05:22.080 --> 0:05:24.280 their more likely to buy two or three, and then 0:05:24.279 --> 0:05:26.200 they're more likely to buy into the services. So I 0:05:26.240 --> 0:05:28.279 think I do think it's an important market for Apple 0:05:28.320 --> 0:05:31.400 to invest in and try to gain some ground, especially 0:05:31.400 --> 0:05:34.320 starting with smartphones in that market. Now, a key question 0:05:34.360 --> 0:05:37.520 has been how are they going to invest if indeed 0:05:37.600 --> 0:05:42.160 we are looking at a recession ahead. Our Markerment has 0:05:42.200 --> 0:05:46.240 reported that Apple plans to slow hiring, slow spending in 0:05:46.440 --> 0:05:50.080 some areas across some teams next year, which is a 0:05:50.080 --> 0:05:53.920 little less drastic than we've seen, you know, certainly lapps, 0:05:53.920 --> 0:05:58.119 we've seen hiring freezes at other big tech companies. Cooke says, 0:05:58.520 --> 0:06:01.480 we believe in investing through downturns. We've always done that 0:06:01.520 --> 0:06:04.520 and found that's made us stronger. On the other side, obviously, 0:06:04.640 --> 0:06:08.360 we're being deliberate in our decisions of where to invest. 0:06:08.400 --> 0:06:12.400 What do you make of that word deliberate? So if 0:06:12.440 --> 0:06:14.840 I were to try to guess what Tim Cook is thinking, 0:06:14.880 --> 0:06:17.320 and if I were to say deliberate, I would either 0:06:17.360 --> 0:06:20.719 be focused on things that consumers notice, which is the hardware, 0:06:20.920 --> 0:06:23.240 right consumer. There's a lot of upgrades and a lot 0:06:23.240 --> 0:06:26.840 of things that every company is doing involving artificial intelligence, 0:06:26.880 --> 0:06:30.240 anticipating what I need, getting better at like loyalty and 0:06:30.279 --> 0:06:31.960 security and things like that. I think some of those 0:06:31.960 --> 0:06:34.880 things consumers are less likely to notice. UM. So if 0:06:34.880 --> 0:06:36.680 I were him, I be investing in the hardware side, 0:06:36.680 --> 0:06:39.400 because that's what really pops for consumers. Uh. And then 0:06:39.400 --> 0:06:41.440 there's some other things that simply have a long lead time, 0:06:41.480 --> 0:06:44.480 you know, whether it's things like augmented reality or the metaverse, 0:06:44.680 --> 0:06:47.080 or like payments. There's a lot of things that if 0:06:47.080 --> 0:06:49.240 you know, if you pause now, it has a longer 0:06:49.279 --> 0:06:51.400 you know, it has a bigger impact further down the road. 0:06:51.800 --> 0:06:53.839 So I would be focused on, you know, continuing to 0:06:53.880 --> 0:06:55.640 work on those things where there's still like a lot 0:06:55.720 --> 0:06:57.920 of you know, a lot of ways to go. UM. 0:06:57.960 --> 0:07:00.560 Take for example, payments. Um, they've almost albo the number 0:07:00.560 --> 0:07:02.400 of people using Apple Pay in the United States and 0:07:02.520 --> 0:07:05.440 UK in the past two years during the pandemic. Nothing 0:07:05.480 --> 0:07:08.160 to expect but upside in some of those categories like that. 0:07:08.560 --> 0:07:10.200 So I wouldn't want to slow down, you know, the 0:07:10.280 --> 0:07:13.840 number of places Apple Pay is accepted, for example. He 0:07:13.960 --> 0:07:18.440 did actually also emphasize the number of people you know, 0:07:18.680 --> 0:07:22.200 new rising numbers of people using Apple services, rising numbers 0:07:22.200 --> 0:07:25.640 of of people switching to the Apple platform, The iOS 0:07:25.920 --> 0:07:28.840 platform and singled out the fact that a lot of 0:07:28.920 --> 0:07:32.640 these people are totally new to the Apple platform, totally 0:07:32.680 --> 0:07:36.120 new to iOS. So we're listening into the Apple earnings call. 0:07:36.200 --> 0:07:38.680 We'll let you know if Tim Cook has any additional 0:07:38.720 --> 0:07:41.400 things of interest to say, Julia, ask Force or research 0:07:41.440 --> 0:07:44.600 principal analysts. Always great to have your instant reaction here 0:07:44.640 --> 0:07:55.760 on the show. Thank you. Let's now get a deeper 0:07:55.760 --> 0:07:59.520 look at Amazon results also in strong and beating analyst estimates. 0:07:59.520 --> 0:08:01.760 I want to bring in Tom Forte, managing director at 0:08:01.840 --> 0:08:04.280 DA Davidson, who is a by rating on both Apple 0:08:04.800 --> 0:08:07.560 and Amazon. So Tom, I think let's look at the 0:08:07.560 --> 0:08:09.920 top line here in that you know, the sales and 0:08:10.240 --> 0:08:13.880 sales forecast better than expected. This after we've seen pretty 0:08:13.880 --> 0:08:18.160 dismal results from Walmart, for example. Why is Amazon somehow 0:08:18.160 --> 0:08:22.080 bucking the trend? I think for Amazon, it greatly benefit 0:08:22.120 --> 0:08:25.280 in the second quarter from strong cloud computing sales and 0:08:25.360 --> 0:08:28.400 strong advertising sales. Then when you think about the outlook 0:08:28.400 --> 0:08:31.080 for the third quarter. Having Prime Day this year in 0:08:31.120 --> 0:08:34.240 the third quarter versus the second quarter last year was 0:08:34.280 --> 0:08:36.960 clearly a needle mover. They had talked when they reported 0:08:37.000 --> 0:08:40.400 the prior quarter that Prime had about a four d 0:08:40.520 --> 0:08:43.000 basis point impact on their sales growth. So I think 0:08:43.000 --> 0:08:46.640 it's a combination of June quarter, cloud computing, and advertising, 0:08:47.040 --> 0:08:50.520 a September reporter Prime Day, which is booing the sales 0:08:50.559 --> 0:08:53.760 for Amazon. So when you take out Prime Day, how 0:08:53.840 --> 0:08:56.600 well well positioned is Amazon really? And I know we've 0:08:56.600 --> 0:08:59.080 got another one coming up later this year. But if 0:08:59.120 --> 0:09:02.560 we think solely about the health of consumers in an 0:09:02.559 --> 0:09:06.440 inflationary environment where they're paying more for gas and groceries, 0:09:06.520 --> 0:09:10.280 how does Amazon fair? So Amazon is actually not not 0:09:10.440 --> 0:09:13.400 well suited for inflation. So when you think about Amazon 0:09:14.480 --> 0:09:17.680 of the unit sale or third party, so generally speaking, 0:09:18.040 --> 0:09:20.520 that means those products are being sold by someone other 0:09:20.559 --> 0:09:23.880 than Amazon, and then they're less likely to raise price 0:09:25.120 --> 0:09:27.040 given that they're not going to want to lose the 0:09:27.080 --> 0:09:31.280 buybox to another competitor trying to sell on Amazon. And yes, 0:09:31.320 --> 0:09:33.680 they have whole foods, and yes they sell some food 0:09:34.160 --> 0:09:38.240 or less discretionary products on Amazon, But generally speaking, inflation 0:09:38.280 --> 0:09:41.720 has been tough for Amazon to a tough challenge for Amazon. 0:09:43.720 --> 0:09:46.800 Is Amazon in a better position though, obviously because they've 0:09:46.840 --> 0:09:50.200 got aws and the cloud computing units, something that Walmart 0:09:50.240 --> 0:09:54.040 and Target don't have. The answer is absolutely so. If 0:09:54.040 --> 0:09:56.719 you look at Amazon and again going back to their 0:09:56.720 --> 0:10:01.439 third party unit sales, I think that they're relative profitability 0:10:01.920 --> 0:10:04.640 is clearly the highest on cloud computing and very strong 0:10:04.679 --> 0:10:08.600 and advertising, and then much higher on the third party 0:10:08.640 --> 0:10:11.200 retail sales than when Amazon is the seller of record. 0:10:11.559 --> 0:10:14.440 So when you compare them versus Walmart and target, cloud 0:10:14.480 --> 0:10:16.840 computing helps, but it also helps to have a large 0:10:16.840 --> 0:10:19.920 percentage of their sales from the third parties rather than 0:10:19.960 --> 0:10:26.920 from Amazon. Let's talk about, though, some of the challenges 0:10:26.960 --> 0:10:30.120 that Amazon's has had coming out of you know, a 0:10:30.120 --> 0:10:33.360 couple of years of pandemic spending where even they have 0:10:33.440 --> 0:10:36.600 said they grew too fast, they built out warehouse capacity 0:10:36.679 --> 0:10:40.120 too quickly, and they haven't been able to fill that space. 0:10:40.520 --> 0:10:42.679 How much of a headwind is that going to continue 0:10:42.720 --> 0:10:45.880 to be? It is a headwind. I think the data 0:10:45.920 --> 0:10:49.840 suggested they had about a hundred thousand less employees between 0:10:49.880 --> 0:10:52.760 the March quarter and the June quarter. So Amazon has 0:10:52.760 --> 0:10:55.960 been a little more nimble and adjusting either head counts 0:10:56.240 --> 0:10:59.480 or future square footage than I expected when it came 0:10:59.520 --> 0:11:01.920 to there for filment centers and their employees at the 0:11:01.920 --> 0:11:04.720 fulfillment center level. But I do think if you look 0:11:04.720 --> 0:11:08.640 at Amazon through the lens of Shopify, a Shopify also 0:11:08.679 --> 0:11:12.360 felt like it was overstaffed for current e commerce demand 0:11:12.720 --> 0:11:15.280 and had a ten percent reduction of force. So I 0:11:15.280 --> 0:11:18.280 think of Amazon, I think of Shopify as two examples 0:11:18.320 --> 0:11:21.040 of e commerce companies that are acknowledging that right now 0:11:21.120 --> 0:11:26.800 they've got too much capacity and their headcounts probably too high. Yeah, 0:11:26.960 --> 0:11:30.839 certainly big news about shopifyes layoffs. I want to talk 0:11:30.880 --> 0:11:32.400 to you a little bit about my call with Apple 0:11:32.480 --> 0:11:35.720 CEO Tim Cooke. You cover Apple as well. The highlights. 0:11:35.720 --> 0:11:39.200 He said they continue to expect revenue to accelerate in 0:11:39.360 --> 0:11:43.520 the September quarter, despite seeing some softness in some areas. 0:11:43.559 --> 0:11:46.600 He also said they saw significant improvement in the month 0:11:46.600 --> 0:11:50.560 of June in supply and demand UH in China, and 0:11:50.720 --> 0:11:53.120 this I thought was particularly interesting. When it came to 0:11:53.360 --> 0:11:56.800 spending and and hiring plans, which Bloomberg has reported on, 0:11:56.880 --> 0:11:59.439 they planned to slow hiring and spending in some areas 0:12:00.200 --> 0:12:04.480 next year. He said they believe in investing through downturns, 0:12:04.520 --> 0:12:09.640 but will continue to be quote deliberate about their decisions 0:12:09.720 --> 0:12:12.599 of where to invest. What's your takeaway from all of that? 0:12:13.280 --> 0:12:17.480 So I think for Apple, the question has been for 0:12:17.520 --> 0:12:21.439 a while how serious are they about getting into electronic 0:12:21.559 --> 0:12:24.880 vehicles and what do they want to do in the metaverse. 0:12:25.480 --> 0:12:28.840 So when I interpret your comments from Tim Cook on 0:12:29.000 --> 0:12:33.439 deliberate investment spend, I'm thinking about the future product roadmap. 0:12:33.880 --> 0:12:37.600 To what extent do they intend to get into electronic vehicles, 0:12:38.040 --> 0:12:41.560 aut meted reality, virtual reality. We know their natural investment 0:12:41.600 --> 0:12:46.000 cycle for the next generation iPhone and other devices, but 0:12:46.080 --> 0:12:48.280 to what extent do they want to expand into new 0:12:48.320 --> 0:12:52.480 categories and how will that dictate their investment spend. What 0:12:52.559 --> 0:12:54.800 do you think the answer to that question is, I mean, 0:12:54.840 --> 0:12:58.000 do they lean into cars and the metaverse or not 0:12:58.640 --> 0:13:02.960 right now given the economics circumstances. My expectation for both 0:13:03.160 --> 0:13:06.400 over the long term is certainly yes. So if you 0:13:06.440 --> 0:13:10.240 look at Apple's history, they're not the first entrant often 0:13:10.320 --> 0:13:14.640 into a new category, smartphones being the best example, But 0:13:14.760 --> 0:13:18.840 there are often the second entrant in a later significant entrant. 0:13:19.160 --> 0:13:22.160 So if you compare Tesla versus Apple, I'm of the 0:13:22.200 --> 0:13:25.280 belief that longer term they will have a car, it 0:13:25.320 --> 0:13:27.440 will be more than just Apple play within the car 0:13:28.000 --> 0:13:30.160 for metaverse. I clearly think they're going to have some 0:13:30.200 --> 0:13:33.880 sort of headset or other device. Otherwise they're leaving it 0:13:33.920 --> 0:13:37.360 wide open for Facebook slash Meta to disrupt them, which 0:13:37.360 --> 0:13:40.800 I think would be a big mistake. Alright, Tom Forte 0:13:40.920 --> 0:13:43.160 d A. Davidson. Always good to have you on the show. Tom, 0:13:43.200 --> 0:13:46.760 thanks for weighing, and alright, coming up a closer look 0:13:46.800 --> 0:13:50.040 at the investment climate in China right now. So many 0:13:50.080 --> 0:13:53.200 factors that play in a big call between President Biden 0:13:53.480 --> 0:13:57.679 and President si Jing Ping will dig in next, Mrs Bloomberg. 0:14:07.440 --> 0:14:10.600 President Biden and Chinese President Shi Jingping held a two 0:14:10.760 --> 0:14:13.840 hour call Thursday, talking about a range of issues from 0:14:13.920 --> 0:14:17.520 Taiwan to the war in Ukraine. Biden reiterated support for 0:14:17.520 --> 0:14:20.640 the One China policy and both agreed to more talks 0:14:20.640 --> 0:14:23.800 about energy and food. President Biden is trying to find 0:14:23.800 --> 0:14:26.080 new ways to work with China, as well as strategies 0:14:26.120 --> 0:14:29.680 to contain the country's global influence. AIDS were directed to 0:14:29.760 --> 0:14:32.880 plan and in person meeting between the two leaders. Amy 0:14:32.920 --> 0:14:35.600 Seliko is a principle at albright Stone Bridge Group and 0:14:35.640 --> 0:14:39.120 joins us now to discuss So, Amy, what are your 0:14:39.200 --> 0:14:42.880 takeaways from the headlines out of this call? It sounds 0:14:42.920 --> 0:14:49.080 like tensions were calmed rather than inflamed. I think that's right, Emily. 0:14:49.320 --> 0:14:53.000 The important thing was having the call U. The US 0:14:53.080 --> 0:14:58.080 channel relationship is so contentious. Tensions are running so high 0:14:58.600 --> 0:15:01.560 that there are few memor burs of the two governments 0:15:01.600 --> 0:15:06.440 who can talk and put um have frank conversation, raise 0:15:06.640 --> 0:15:10.920 issues in a constructive way. The two presidents can. They 0:15:10.920 --> 0:15:16.240 have a longstanding relationship, and unfortunately the state of the 0:15:16.320 --> 0:15:20.480 relationship in some ways rests on them continuing as they 0:15:20.520 --> 0:15:24.080 did today for the fifth time since President Biden has 0:15:24.120 --> 0:15:28.600 been in office, just to level set the relationship frankly 0:15:28.640 --> 0:15:32.520 exchange views on areas where they fundamentally disagree, and are 0:15:32.520 --> 0:15:36.600 continuing to work at cross purposes, but always raising the 0:15:36.760 --> 0:15:41.760 very important point that confrontation should not veer into the 0:15:41.800 --> 0:15:47.360 military zone. Competition is fine, Disagreements are fine and can 0:15:47.400 --> 0:15:51.800 be managed as long as they don't actually explode over 0:15:51.840 --> 0:15:56.040 a crisis like on Taiwan. Well, now you have how 0:15:56.080 --> 0:16:00.240 Speaker Nancy Pelosi seemingly determined to visit taiw On, and 0:16:00.240 --> 0:16:06.360 obviously the Chinese government has strongly expressed their disapproval of 0:16:06.440 --> 0:16:09.520 this visit. I mean, is this a good idea? What 0:16:09.600 --> 0:16:12.080 are the consequences going to be if she indeed goes 0:16:12.080 --> 0:16:16.440 through with this trip. Well, it's not unprecedented that the 0:16:16.480 --> 0:16:20.000 Speaker of the House visits Taiwan. That happened twenty five 0:16:20.080 --> 0:16:23.360 years ago, mintoln Grit did so. But of course the U. S. 0:16:23.440 --> 0:16:26.920 China relationship was in a very different place twenty five 0:16:27.000 --> 0:16:30.240 years ago, and so that's right. The timing of the 0:16:30.360 --> 0:16:37.160 visit is particularly challenging because here in Washington, we continue 0:16:37.320 --> 0:16:41.280 to to ramp up areas of competition with China. We 0:16:41.440 --> 0:16:45.920 continue to complain about bad Chinese behavior, including more and 0:16:46.000 --> 0:16:50.440 more aggressive and assertive actions visa VI Taiwan, and so 0:16:50.600 --> 0:16:54.680 in Beijing there's a view that this visit is a 0:16:54.800 --> 0:16:59.600 provocation to demonstrate more official support for the government. And 0:16:59.640 --> 0:17:02.680 of course it's three months before China is having a 0:17:02.720 --> 0:17:06.640 major leadership meeting, and so what continues to be stressed 0:17:06.760 --> 0:17:09.960 is that, exactly as you said, Emily, the timing is 0:17:10.040 --> 0:17:13.760 bad for Speaker Pelosi to be going. Right now, that 0:17:13.800 --> 0:17:16.879 doesn't mean she won't go, It doesn't mean it's going 0:17:16.960 --> 0:17:20.560 to lead to a disaster. But indeed, the Chinese government 0:17:20.600 --> 0:17:24.879 has been vociferous in saying there could be consequences for 0:17:24.960 --> 0:17:28.240 her taking that action. At the same time, you've got 0:17:28.280 --> 0:17:32.960 this two billion dollar manufacturing bill that would bring chip 0:17:33.320 --> 0:17:37.640 production to the United States and a broader d globalization 0:17:37.720 --> 0:17:41.840 trend that I'm sure China can't be happy with. How 0:17:41.880 --> 0:17:46.400 does that play into this Well, in fact, the Omnibus 0:17:46.880 --> 0:17:50.720 China Bill was stopped in Congress, and so the bill 0:17:50.800 --> 0:17:54.080 that you just mentioned, the Chips plus Science Bill, is 0:17:54.160 --> 0:17:58.000 only one small part of that larger China bill, and 0:17:58.119 --> 0:18:01.240 so UM that the ELM and sept the bill of course, 0:18:01.280 --> 0:18:04.840 reinforcing and invigorating the ability of the United States and 0:18:04.880 --> 0:18:08.399 manufactured semi conductor chips conduct R and D here in 0:18:08.440 --> 0:18:11.600 the United States through funding from the government, are all 0:18:11.720 --> 0:18:15.920 meant to enhance competitiveness with China, but they're not. And 0:18:16.040 --> 0:18:18.640 what's not in the bill are some of those provisions 0:18:18.680 --> 0:18:23.240 that we're going to seek to earlier. UM have the 0:18:23.359 --> 0:18:28.600 delisting of Chinese companies from American stock exchanges if China 0:18:28.640 --> 0:18:31.879 didn't comply with these audit rules that they've been dragging 0:18:31.920 --> 0:18:36.960 their feet on, and a potential outbound investment screening process. 0:18:37.000 --> 0:18:41.240 So this bill is actually very targeted just on American 0:18:41.280 --> 0:18:46.320 competition with China and not on constraining American engagement with China. 0:18:46.600 --> 0:18:49.199 I think the Chinese government, although they wouldn't want to 0:18:49.240 --> 0:18:52.080 say it this way, is probably a little relieved. This 0:18:52.160 --> 0:18:55.199 is what was passed by the House today after the 0:18:55.280 --> 0:18:59.479 Senate vote. Interesting last quite question. Obviously we're seeing now 0:18:59.520 --> 0:19:02.480 ali about a move to this Hong Kong listing. SEC 0:19:02.680 --> 0:19:05.760 chair Gary Gensler says a U S China deal needs 0:19:05.800 --> 0:19:08.760 to happen, so more of these deal listings don't happen. 0:19:09.160 --> 0:19:15.120 Is a deal and a possibility, It's absolutely a possibility. 0:19:15.200 --> 0:19:17.560 The two sides continue to work very much at it. 0:19:17.600 --> 0:19:22.000 I think there's certainly posturing by both the SEC and 0:19:22.000 --> 0:19:25.720 and the Chinese c s r C on what they want. 0:19:26.119 --> 0:19:30.679 The Chinese wants some exceptions from across the board requirements 0:19:30.720 --> 0:19:35.800 that all Chinese listed companies face audit inspections by the US. 0:19:35.920 --> 0:19:38.720 The US is holding firms saying you've had that exception 0:19:39.160 --> 0:19:43.040 for much too long. We want you to comply. I 0:19:43.080 --> 0:19:46.440 think the talk about it not happening is a little 0:19:46.440 --> 0:19:50.440 bit too quick. There's still hope there, all right, Amy 0:19:50.480 --> 0:19:53.040 selco albright Stone Bridge. Always good to have you here, Amy, 0:19:53.119 --> 0:20:04.680 thank you for joining us. Welcome back to Bloomer Technology 0:20:04.680 --> 0:20:06.960 and Emily Chang in San Francisco on Capitol Hill. The 0:20:07.000 --> 0:20:10.280 House just passed a bill that includes fifty two billion 0:20:10.359 --> 0:20:14.639 dollars for US chip manufacturers. It's already past the Senate 0:20:14.640 --> 0:20:16.320 and now the bill goes to the White House from 0:20:16.320 --> 0:20:19.679 President Biden to sign into law. This is a major 0:20:19.880 --> 0:20:23.120 legislative victory for President Biden after the US chip industry 0:20:23.119 --> 0:20:26.480 has steadily lost ground to overseas rivals and of course 0:20:26.560 --> 0:20:29.240 China in recent years. I want to bring in callcom 0:20:29.359 --> 0:20:32.520 CEO Christiano Alman for more on this and the company's 0:20:32.560 --> 0:20:34.720 earnings results. Christiano, great to have you back with us. 0:20:34.720 --> 0:20:36.760 We're gonna talk about earnings, but I have to ask 0:20:36.760 --> 0:20:40.640 you about the Chips Act and just how transformational you 0:20:40.720 --> 0:20:45.920 think this could potentially be to the industry. Look, this 0:20:46.000 --> 0:20:48.160 is great news for the United States of my conductor 0:20:48.200 --> 0:20:51.840 industry as well as the globals of my conductor industry. 0:20:52.920 --> 0:20:57.120 We need more chip manufacturing. We understand the chips are important, 0:20:57.200 --> 0:21:01.879 actually an essential technology now for our addition to economy, 0:21:02.040 --> 0:21:05.040 and a company like Welcome, which is the largest fabulous 0:21:05.240 --> 0:21:09.600 semiconductor company, we need more manufacturing of chips. So exactly, 0:21:09.640 --> 0:21:11.919 we're very happy about that and UH. We are the 0:21:12.000 --> 0:21:17.080 number one customers a company like Samsung, UH foundry in Korea, 0:21:17.680 --> 0:21:20.639 one of the top two customers off t SMC. They 0:21:20.680 --> 0:21:22.479 aren't one to be an Apple in Taiwan, and they 0:21:22.560 --> 0:21:27.320 have more manufacturing capacity in different geographies with even more 0:21:27.359 --> 0:21:30.800 suppliers such as Intel. That's great news for the industry. 0:21:30.800 --> 0:21:32.760 So we're very excited about that, even though we're not 0:21:32.800 --> 0:21:36.520 a recompend officiary off the funds, but it creates more 0:21:36.560 --> 0:21:41.280 capacity UH and supply for chips with this head off 0:21:41.320 --> 0:21:47.200 supply disruptions like those we've seen with COVID. I think 0:21:47.240 --> 0:21:49.280 the way to think about this because this is not 0:21:49.400 --> 0:21:52.080 gonna This is not going to have any short term impact. 0:21:52.720 --> 0:21:57.520 This is about building a more resilient and geographically diverse 0:21:57.840 --> 0:22:01.480 supply chain for semiconductors. So over time, I think we're 0:22:01.480 --> 0:22:06.080 going to build the infrastructure in place that will allow 0:22:06.200 --> 0:22:08.560 us to continue to grow as an industry and have 0:22:08.600 --> 0:22:12.920 a more resilient supply chain. So let's talk about your results. 0:22:13.440 --> 0:22:17.359 Be on earnings, but the guidance came in a little light. 0:22:17.600 --> 0:22:20.879 You talked about a challenging macro environment. You said the 0:22:20.920 --> 0:22:25.800 smartphone market will be smaller than forecast. UM let's talk 0:22:25.840 --> 0:22:29.480 about that word challenging. Just how challenging do you do 0:22:29.520 --> 0:22:32.880 you expect the macro environment to continue to be. I'll 0:22:32.920 --> 0:22:34.520 talk about that, but I'm also going to talk about 0:22:34.560 --> 0:22:38.879 what's good. Um. We you know, we have micro economic headwinds, 0:22:38.920 --> 0:22:40.800 so if you look at what we did in the quarter, 0:22:41.000 --> 0:22:44.760 it was really a beat top in bottom. But we 0:22:45.280 --> 0:22:49.359 more cautious about what is the future outlook and when 0:22:49.480 --> 0:22:52.240 we guide Q four in line with everybody else because 0:22:52.240 --> 0:22:55.080 of the micro economic headwinds, we know that they can 0:22:55.160 --> 0:22:58.280 have an impact consumer spending. So we're calling that the 0:22:58.359 --> 0:23:01.960 mobile market. It's going to be, you know, smaller. It's 0:23:01.960 --> 0:23:04.840 a market that is mature, a grow single digits. It's 0:23:04.840 --> 0:23:07.600 going to be smaller as we look at the consumer 0:23:07.680 --> 0:23:11.879 spending uh softness. But the good thing about the results 0:23:12.040 --> 0:23:16.120 is we saw the record out too an IoT, which 0:23:16.160 --> 0:23:20.280 is the diversification strategy of qualcom working. We guided for 0:23:20.359 --> 0:23:23.359 the next quarterer sequence of growth in outo an IoT, 0:23:23.480 --> 0:23:27.400 which we expect to be new records. And we're somewhat 0:23:27.440 --> 0:23:31.040 insulated from what happened in the market that we're because 0:23:31.080 --> 0:23:33.920 we're concentrated more in premiument high tears and that proven 0:23:34.000 --> 0:23:37.119