Speaker 1: From the heart of where innovation, money and power collive
Speaker 1: in Silicon Valley and beyond. This is Bloomberg Technology with
Speaker 1: Emily Jay. Hi'm Emily Chin in San Francisco, And this
Speaker 1: is Bloomberg Technology. Coming up in the next hour. A
Speaker 1: record June quarter for Apple, beating on revenue despite headwinds
Speaker 1: from a strengthening dollar, China lockdowns, and an expected slowdown
Speaker 1: in consumer spending. The iPhone also topping estimates, but supply
Speaker 1: constraints hitting the Mac and the iPad. I spoke to
Speaker 1: Apple CEO Tim Cook and will tell you what he
Speaker 1: had to say. Plus Amazon surging in late trading after
Speaker 1: providing a strong outlook for the third quarter, a much
Speaker 1: different forecast than other retailers, net sales jumping in the
Speaker 1: second quarter, in part thanks to I'm day shoppers will
Speaker 1: dig into the data, and the largest chipmaker from mobile
Speaker 1: devices is warning of a slowdown and spending. We will
Speaker 1: ask Qualcomps CEO Christiano Alman about the company's weaker than
Speaker 1: expected forecast, the chips act and China. He's my guest
Speaker 1: later this hour. All of that in a moment, but
Speaker 1: first I want to get a look at Apple now.
Speaker 1: For that We've got Julias with US principle analyst at
Speaker 1: Forrester or Research, and Julie I did just get off
Speaker 1: the phone with Tim Cook and we walked through the results.
Speaker 1: I mean, clearly, we're seeing a record June quarter in
Speaker 1: terms of revenue. iPhone particularly strong. He said, iPad demand
Speaker 1: also very strong, but that the iPad and mac were
Speaker 1: held back by supply constraints. It also sounds like the
Speaker 1: macroeconomic environment is impacting wearables, which would make sense given
Speaker 1: its you know, more discretionary items. And when it comes
Speaker 1: to services, he talked about digital ad spend and we're
Speaker 1: seeing the macro environment. They're seeing the macro economic environment
Speaker 1: have an impact there. What are your headline takeaways? Yeah,
Speaker 1: so I think the first one is is you know
Speaker 1: the good news. So, like many other companies, Apple faces
Speaker 1: the same headwinds that you already mentioned the recession. It's inflation,
Speaker 1: it's uncertainty, is the supply chain and so forth. I
Speaker 1: think Apple benefits though in a few ways. The first
Speaker 1: one is about two thirds of its sales come from smartphones. Uh,
Speaker 1: Folks consider that to be a necessary device, and they
Speaker 1: upgrade that far more frequently than they do a PC
Speaker 1: or a tablet or the other devices that they own.
Speaker 1: And the second thing that you already mentioned, or you
Speaker 1: and Emily, Emily, you and Ed mentioned that I think
Speaker 1: is really important is Apple does have a more fluent
Speaker 1: customer base. We need to look in the United States. Uh,
Speaker 1: the iPhone owner has a household income that on average
Speaker 1: is eighteen thousand dollars higher than an Android owner. Thirty
Speaker 1: of their households have an income of more than a
Speaker 1: hundred grands, and there are three times it's likely to
Speaker 1: have an income of more than three thousand dollars a year.
Speaker 1: So Apple does benefit from having a more fluent customer
Speaker 1: base in the United States and abroad. Now, this was
Speaker 1: interesting from Tim Cook. He said they expect revenue to
Speaker 1: accelerate in the September corner dis bite, seeing some softness
Speaker 1: in some areas. He said they do believe there were
Speaker 1: some macroeconomic headwins that affected the business in the June
Speaker 1: quarter that I already discussed, but sounded optimistic despite some
Speaker 1: of the softness that we've seen. You know, I was
Speaker 1: trying to get him to give me a real take
Speaker 1: on whether or not we're going into a recession, and
Speaker 1: you know, always has a tint to to try to
Speaker 1: sound like an economist. But what's your takeaway from that?
Speaker 1: So if I were Tim Cook, I would also be optimistic.
Speaker 1: I think if we look specifically at the US market,
Speaker 1: which also has a lot of parallels globally, almost sixty
Speaker 1: of US consumers own an Apple device, so they're likely
Speaker 1: to buy a second, They're likely to buy into some
Speaker 1: of the streaming services, use Apple Pay, and use some
Speaker 1: of the in the category that's growing the fastest for Apple. Uh.
Speaker 1: The second thing that we know that is about eighteen
Speaker 1: or nineteen percent of consumers only own Apple devices and
Speaker 1: are very locked into that ecosystem. So while generally all
Speaker 1: companies are facing some headwinds, Apples looking and has a
Speaker 1: customer base that's uh, you know, it should help them,
Speaker 1: you know, sail through here a little bit easier than
Speaker 1: some of their competitors. Now. Supply was in another point
Speaker 1: of optimism in this discussion. When you look at the numbers.
Speaker 1: Of course, we remember last quarter Apple said that they
Speaker 1: would expect four to eight billion dollars. You could potentially,
Speaker 1: you know, just shave that off the top due to
Speaker 1: supply constraints. He said, it actually ended up being lower
Speaker 1: than the lower end of that range, and he also
Speaker 1: said they saw quote significant improvement in the month of
Speaker 1: June in China on the supply side and the demand side.
Speaker 1: He specifically talked about strong demand around the June eighteenth holiday,
Speaker 1: the big shopping holiday UH in China. Said they're seeing
Speaker 1: strong results there um and they're about to start a
Speaker 1: big promotion in China of fairly rare sales promotion where
Speaker 1: a series of Apple devices will be discounted for a
Speaker 1: few days, and he said that had nothing to do
Speaker 1: UH with clearing inventory. What does that signal to you
Speaker 1: about the state of play in China, Well, it's he said,
Speaker 1: not a specialist on the Chinese market, but it does,
Speaker 1: you know, indicate I think it's also it looks like
Speaker 1: they're willing to invest a bit. You know, China is
Speaker 1: a ton is a gigantic market, and Apple has always
Speaker 1: been like compared to the Chinese incumbents, it's been a
Speaker 1: relatively small player players. So I think it's worthwhile for
Speaker 1: Apple to invest there and try to grow that base
Speaker 1: because one of the things that we know about people
Speaker 1: with Apple products, if you can get them to buy one,
Speaker 1: their more likely to buy two or three, and then
Speaker 1: they're more likely to buy into the services. So I
Speaker 1: think I do think it's an important market for Apple
Speaker 1: to invest in and try to gain some ground, especially
Speaker 1: starting with smartphones in that market. Now, a key question
Speaker 1: has been how are they going to invest if indeed
Speaker 1: we are looking at a recession ahead. Our Markerment has
Speaker 1: reported that Apple plans to slow hiring, slow spending in
Speaker 1: some areas across some teams next year, which is a
Speaker 1: little less drastic than we've seen, you know, certainly lapps,
Speaker 1: we've seen hiring freezes at other big tech companies. Cooke says,
Speaker 1: we believe in investing through downturns. We've always done that
Speaker 1: and found that's made us stronger. On the other side, obviously,
Speaker 1: we're being deliberate in our decisions of where to invest.
Speaker 1: What do you make of that word deliberate? So if
Speaker 1: I were to try to guess what Tim Cook is thinking,
Speaker 1: and if I were to say deliberate, I would either
Speaker 1: be focused on things that consumers notice, which is the hardware,
Speaker 1: right consumer. There's a lot of upgrades and a lot
Speaker 1: of things that every company is doing involving artificial intelligence,
Speaker 1: anticipating what I need, getting better at like loyalty and
Speaker 1: security and things like that. I think some of those
Speaker 1: things consumers are less likely to notice. UM. So if
Speaker 1: I were him, I be investing in the hardware side,
Speaker 1: because that's what really pops for consumers. Uh. And then
Speaker 1: there's some other things that simply have a long lead time,
Speaker 1: you know, whether it's things like augmented reality or the metaverse,
Speaker 1: or like payments. There's a lot of things that if
Speaker 1: you know, if you pause now, it has a longer
Speaker 1: you know, it has a bigger impact further down the road.
Speaker 1: So I would be focused on, you know, continuing to
Speaker 1: work on those things where there's still like a lot
Speaker 1: of you know, a lot of ways to go. UM.
Speaker 1: Take for example, payments. Um, they've almost albo the number
Speaker 1: of people using Apple Pay in the United States and
Speaker 1: UK in the past two years during the pandemic. Nothing
Speaker 1: to expect but upside in some of those categories like that.
Speaker 1: So I wouldn't want to slow down, you know, the
Speaker 1: number of places Apple Pay is accepted, for example. He
Speaker 1: did actually also emphasize the number of people you know,
Speaker 1: new rising numbers of people using Apple services, rising numbers
Speaker 1: of of people switching to the Apple platform, The iOS
Speaker 1: platform and singled out the fact that a lot of
Speaker 1: these people are totally new to the Apple platform, totally
Speaker 1: new to iOS. So we're listening into the Apple earnings call.
Speaker 1: We'll let you know if Tim Cook has any additional
Speaker 1: things of interest to say, Julia, ask Force or research
Speaker 1: principal analysts. Always great to have your instant reaction here
Speaker 1: on the show. Thank you. Let's now get a deeper
Speaker 1: look at Amazon results also in strong and beating analyst estimates.
Speaker 1: I want to bring in Tom Forte, managing director at
Speaker 1: DA Davidson, who is a by rating on both Apple
Speaker 1: and Amazon. So Tom, I think let's look at the
Speaker 1: top line here in that you know, the sales and
Speaker 1: sales forecast better than expected. This after we've seen pretty
Speaker 1: dismal results from Walmart, for example. Why is Amazon somehow
Speaker 1: bucking the trend? I think for Amazon, it greatly benefit
Speaker 1: in the second quarter from strong cloud computing sales and
Speaker 1: strong advertising sales. Then when you think about the outlook
Speaker 1: for the third quarter. Having Prime Day this year in
Speaker 1: the third quarter versus the second quarter last year was
Speaker 1: clearly a needle mover. They had talked when they reported
Speaker 1: the prior quarter that Prime had about a four d
Speaker 1: basis point impact on their sales growth. So I think
Speaker 1: it's a combination of June quarter, cloud computing, and advertising,
Speaker 1: a September reporter Prime Day, which is booing the sales
Speaker 1: for Amazon. So when you take out Prime Day, how
Speaker 1: well well positioned is Amazon really? And I know we've
Speaker 1: got another one coming up later this year. But if
Speaker 1: we think solely about the health of consumers in an
Speaker 1: inflationary environment where they're paying more for gas and groceries,
Speaker 1: how does Amazon fair? So Amazon is actually not not
Speaker 1: well suited for inflation. So when you think about Amazon
Speaker 1: of the unit sale or third party, so generally speaking,
Speaker 1: that means those products are being sold by someone other
Speaker 1: than Amazon, and then they're less likely to raise price
Speaker 1: given that they're not going to want to lose the
Speaker 1: buybox to another competitor trying to sell on Amazon. And yes,
Speaker 1: they have whole foods, and yes they sell some food
Speaker 1: or less discretionary products on Amazon, But generally speaking, inflation
Speaker 1: has been tough for Amazon to a tough challenge for Amazon.
Speaker 1: Is Amazon in a better position though, obviously because they've
Speaker 1: got aws and the cloud computing units, something that Walmart
Speaker 1: and Target don't have. The answer is absolutely so. If
Speaker 1: you look at Amazon and again going back to their
Speaker 1: third party unit sales, I think that they're relative profitability
Speaker 1: is clearly the highest on cloud computing and very strong
Speaker 1: and advertising, and then much higher on the third party
Speaker 1: retail sales than when Amazon is the seller of record.
Speaker 1: So when you compare them versus Walmart and target, cloud
Speaker 1: computing helps, but it also helps to have a large
Speaker 1: percentage of their sales from the third parties rather than
Speaker 1: from Amazon. Let's talk about, though, some of the challenges
Speaker 1: that Amazon's has had coming out of you know, a
Speaker 1: couple of years of pandemic spending where even they have
Speaker 1: said they grew too fast, they built out warehouse capacity
Speaker 1: too quickly, and they haven't been able to fill that space.
Speaker 1: How much of a headwind is that going to continue
Speaker 1: to be? It is a headwind. I think the data
Speaker 1: suggested they had about a hundred thousand less employees between
Speaker 1: the March quarter and the June quarter. So Amazon has
Speaker 1: been a little more nimble and adjusting either head counts
Speaker 1: or future square footage than I expected when it came
Speaker 1: to there for filment centers and their employees at the
Speaker 1: fulfillment center level. But I do think if you look
Speaker 1: at Amazon through the lens of Shopify, a Shopify also
Speaker 1: felt like it was overstaffed for current e commerce demand
Speaker 1: and had a ten percent reduction of force. So I
Speaker 1: think of Amazon, I think of Shopify as two examples
Speaker 1: of e commerce companies that are acknowledging that right now
Speaker 1: they've got too much capacity and their headcounts probably too high. Yeah,
Speaker 1: certainly big news about shopifyes layoffs. I want to talk
Speaker 1: to you a little bit about my call with Apple
Speaker 1: CEO Tim Cooke. You cover Apple as well. The highlights.
Speaker 1: He said they continue to expect revenue to accelerate in
Speaker 1: the September quarter, despite seeing some softness in some areas.
Speaker 1: He also said they saw significant improvement in the month
Speaker 1: of June in supply and demand UH in China, and
Speaker 1: this I thought was particularly interesting. When it came to
Speaker 1: spending and and hiring plans, which Bloomberg has reported on,
Speaker 1: they planned to slow hiring and spending in some areas
Speaker 1: next year. He said they believe in investing through downturns,
Speaker 1: but will continue to be quote deliberate about their decisions
Speaker 1: of where to invest. What's your takeaway from all of that?
Speaker 1: So I think for Apple, the question has been for
Speaker 1: a while how serious are they about getting into electronic
Speaker 1: vehicles and what do they want to do in the metaverse.
Speaker 1: So when I interpret your comments from Tim Cook on
Speaker 1: deliberate investment spend, I'm thinking about the future product roadmap.
Speaker 1: To what extent do they intend to get into electronic vehicles,
Speaker 1: aut meted reality, virtual reality. We know their natural investment
Speaker 1: cycle for the next generation iPhone and other devices, but
Speaker 1: to what extent do they want to expand into new
Speaker 1: categories and how will that dictate their investment spend. What
Speaker 1: do you think the answer to that question is, I mean,
Speaker 1: do they lean into cars and the metaverse or not
Speaker 1: right now given the economics circumstances. My expectation for both
Speaker 1: over the long term is certainly yes. So if you
Speaker 1: look at Apple's history, they're not the first entrant often
Speaker 1: into a new category, smartphones being the best example, But
Speaker 1: there are often the second entrant in a later significant entrant.
Speaker 1: So if you compare Tesla versus Apple, I'm of the
Speaker 1: belief that longer term they will have a car, it
Speaker 1: will be more than just Apple play within the car
Speaker 1: for metaverse. I clearly think they're going to have some
Speaker 1: sort of headset or other device. Otherwise they're leaving it
Speaker 1: wide open for Facebook slash Meta to disrupt them, which
Speaker 1: I think would be a big mistake. Alright, Tom Forte
Speaker 1: d A. Davidson. Always good to have you on the show. Tom,
Speaker 1: thanks for weighing, and alright, coming up a closer look
Speaker 1: at the investment climate in China right now. So many
Speaker 1: factors that play in a big call between President Biden
Speaker 1: and President si Jing Ping will dig in next, Mrs Bloomberg.
Speaker 1: President Biden and Chinese President Shi Jingping held a two
Speaker 1: hour call Thursday, talking about a range of issues from
Speaker 1: Taiwan to the war in Ukraine. Biden reiterated support for
Speaker 1: the One China policy and both agreed to more talks
Speaker 1: about energy and food. President Biden is trying to find
Speaker 1: new ways to work with China, as well as strategies
Speaker 1: to contain the country's global influence. AIDS were directed to
Speaker 1: plan and in person meeting between the two leaders. Amy
Speaker 1: Seliko is a principle at albright Stone Bridge Group and
Speaker 1: joins us now to discuss So, Amy, what are your
Speaker 1: takeaways from the headlines out of this call? It sounds
Speaker 1: like tensions were calmed rather than inflamed. I think that's right, Emily.
Speaker 1: The important thing was having the call U. The US
Speaker 1: channel relationship is so contentious. Tensions are running so high
Speaker 1: that there are few memor burs of the two governments
Speaker 1: who can talk and put um have frank conversation, raise
Speaker 1: issues in a constructive way. The two presidents can. They
Speaker 1: have a longstanding relationship, and unfortunately the state of the
Speaker 1: relationship in some ways rests on them continuing as they
Speaker 1: did today for the fifth time since President Biden has
Speaker 1: been in office, just to level set the relationship frankly
Speaker 1: exchange views on areas where they fundamentally disagree, and are
Speaker 1: continuing to work at cross purposes, but always raising the
Speaker 1: very important point that confrontation should not veer into the
Speaker 1: military zone. Competition is fine, Disagreements are fine and can
Speaker 1: be managed as long as they don't actually explode over
Speaker 1: a crisis like on Taiwan. Well, now you have how
Speaker 1: Speaker Nancy Pelosi seemingly determined to visit taiw On, and
Speaker 1: obviously the Chinese government has strongly expressed their disapproval of
Speaker 1: this visit. I mean, is this a good idea? What
Speaker 1: are the consequences going to be if she indeed goes
Speaker 1: through with this trip. Well, it's not unprecedented that the
Speaker 1: Speaker of the House visits Taiwan. That happened twenty five
Speaker 1: years ago, mintoln Grit did so. But of course the U. S.
Speaker 1: China relationship was in a very different place twenty five
Speaker 1: years ago, and so that's right. The timing of the
Speaker 1: visit is particularly challenging because here in Washington, we continue
Speaker 1: to to ramp up areas of competition with China. We
Speaker 1: continue to complain about bad Chinese behavior, including more and
Speaker 1: more aggressive and assertive actions visa VI Taiwan, and so
Speaker 1: in Beijing there's a view that this visit is a
Speaker 1: provocation to demonstrate more official support for the government. And
Speaker 1: of course it's three months before China is having a
Speaker 1: major leadership meeting, and so what continues to be stressed
Speaker 1: is that, exactly as you said, Emily, the timing is
Speaker 1: bad for Speaker Pelosi to be going. Right now, that
Speaker 1: doesn't mean she won't go, It doesn't mean it's going
Speaker 1: to lead to a disaster. But indeed, the Chinese government
Speaker 1: has been vociferous in saying there could be consequences for
Speaker 1: her taking that action. At the same time, you've got
Speaker 1: this two billion dollar manufacturing bill that would bring chip
Speaker 1: production to the United States and a broader d globalization
Speaker 1: trend that I'm sure China can't be happy with. How
Speaker 1: does that play into this Well, in fact, the Omnibus
Speaker 1: China Bill was stopped in Congress, and so the bill
Speaker 1: that you just mentioned, the Chips plus Science Bill, is
Speaker 1: only one small part of that larger China bill, and
Speaker 1: so UM that the ELM and sept the bill of course,
Speaker 1: reinforcing and invigorating the ability of the United States and
Speaker 1: manufactured semi conductor chips conduct R and D here in
Speaker 1: the United States through funding from the government, are all
Speaker 1: meant to enhance competitiveness with China, but they're not. And
Speaker 1: what's not in the bill are some of those provisions
Speaker 1: that we're going to seek to earlier. UM have the
Speaker 1: delisting of Chinese companies from American stock exchanges if China
Speaker 1: didn't comply with these audit rules that they've been dragging
Speaker 1: their feet on, and a potential outbound investment screening process.
Speaker 1: So this bill is actually very targeted just on American
Speaker 1: competition with China and not on constraining American engagement with China.
Speaker 1: I think the Chinese government, although they wouldn't want to
Speaker 1: say it this way, is probably a little relieved. This
Speaker 1: is what was passed by the House today after the
Speaker 1: Senate vote. Interesting last quite question. Obviously we're seeing now
Speaker 1: ali about a move to this Hong Kong listing. SEC
Speaker 1: chair Gary Gensler says a U S China deal needs
Speaker 1: to happen, so more of these deal listings don't happen.
Speaker 1: Is a deal and a possibility, It's absolutely a possibility.
Speaker 1: The two sides continue to work very much at it.
Speaker 1: I think there's certainly posturing by both the SEC and
Speaker 1: and the Chinese c s r C on what they want.
Speaker 1: The Chinese wants some exceptions from across the board requirements
Speaker 1: that all Chinese listed companies face audit inspections by the US.
Speaker 1: The US is holding firms saying you've had that exception
Speaker 1: for much too long. We want you to comply. I
Speaker 1: think the talk about it not happening is a little
Speaker 1: bit too quick. There's still hope there, all right, Amy
Speaker 1: selco albright Stone Bridge. Always good to have you here, Amy,
Speaker 1: thank you for joining us. Welcome back to Bloomer Technology
Speaker 1: and Emily Chang in San Francisco on Capitol Hill. The
Speaker 1: House just passed a bill that includes fifty two billion
Speaker 1: dollars for US chip manufacturers. It's already past the Senate
Speaker 1: and now the bill goes to the White House from
Speaker 1: President Biden to sign into law. This is a major
Speaker 1: legislative victory for President Biden after the US chip industry
Speaker 1: has steadily lost ground to overseas rivals and of course
Speaker 1: China in recent years. I want to bring in callcom
Speaker 1: CEO Christiano Alman for more on this and the company's
Speaker 1: earnings results. Christiano, great to have you back with us.
Speaker 1: We're gonna talk about earnings, but I have to ask
Speaker 1: you about the Chips Act and just how transformational you
Speaker 1: think this could potentially be to the industry. Look, this
Speaker 1: is great news for the United States of my conductor
Speaker 1: industry as well as the globals of my conductor industry.
Speaker 1: We need more chip manufacturing. We understand the chips are important,
Speaker 1: actually an essential technology now for our addition to economy,
Speaker 1: and a company like Welcome, which is the largest fabulous
Speaker 1: semiconductor company, we need more manufacturing of chips. So exactly,
Speaker 1: we're very happy about that and UH. We are the
Speaker 1: number one customers a company like Samsung, UH foundry in Korea,
Speaker 1: one of the top two customers off t SMC. They
Speaker 1: aren't one to be an Apple in Taiwan, and they
Speaker 1: have more manufacturing capacity in different geographies with even more
Speaker 1: suppliers such as Intel. That's great news for the industry.
Speaker 1: So we're very excited about that, even though we're not
Speaker 1: a recompend officiary off the funds, but it creates more
Speaker 1: capacity UH and supply for chips with this head off
Speaker 1: supply disruptions like those we've seen with COVID. I think
Speaker 1: the way to think about this because this is not
Speaker 1: gonna This is not going to have any short term impact.
Speaker 1: This is about building a more resilient and geographically diverse
Speaker 1: supply chain for semiconductors. So over time, I think we're
Speaker 1: going to build the infrastructure in place that will allow
Speaker 1: us to continue to grow as an industry and have
Speaker 1: a more resilient supply chain. So let's talk about your results.
Speaker 1: Be on earnings, but the guidance came in a little light.
Speaker 1: You talked about a challenging macro environment. You said the
Speaker 1: smartphone market will be smaller than forecast. UM let's talk
Speaker 1: about that word challenging. Just how challenging do you do
Speaker 1: you expect the macro environment to continue to be. I'll
Speaker 1: talk about that, but I'm also going to talk about
Speaker 1: what's good. Um. We you know, we have micro economic headwinds,
Speaker 1: so if you look at what we did in the quarter,
Speaker 1: it was really a beat top in bottom. But we
Speaker 1: more cautious about what is the future outlook and when
Speaker 1: we guide Q four in line with everybody else because
Speaker 1: of the micro economic headwinds, we know that they can
Speaker 1: have an impact consumer spending. So we're calling that the
Speaker 1: mobile market. It's going to be, you know, smaller. It's
Speaker 1: a market that is mature, a grow single digits. It's
Speaker 1: going to be smaller as we look at the consumer
Speaker 1: spending uh softness. But the good thing about the results
Speaker 1: is we saw the record out too an IoT, which
Speaker 1: is the diversification strategy of qualcom working. We guided for
Speaker 1: the next quarterer sequence of growth in outo an IoT,
Speaker 1: which we expect to be new records. And we're somewhat
Speaker 1: insulated from what happened in the market that we're because
Speaker 1: we're concentrated more in premiument high tears and that proven
Speaker 1: to be resilient, and I think that's probably outline in
Speaker 1: Apple results as well. Well. That's my next question because
Speaker 1: you know, you you talked about how the smartphone market
Speaker 1: is going to be smaller than forecast, but that the
Speaker 1: high end is holding up. Does that mean iPhone that
Speaker 1: you know, it is the iPhone that is carrying a
Speaker 1: lot of the growth right now. Uh, it's across all
Speaker 1: premium devices from iPhone to also Galaxy series from Samsung.
Speaker 1: The premium device says from Vivo, Opo, Shell, Me one Plus, etcetera.
Speaker 1: What is really happening is we have a mature smartphone
Speaker 1: user base in people when they think about buying their
Speaker 1: next device, they want a better device. So what we
Speaker 1: have seen towards several quarters in the year is the
Speaker 1: mix continue to improve and our strategy to really focus
Speaker 1: on share of wallet and permanent high tears really working
Speaker 1: out as as we see you know, the improvement and
Speaker 1: the resilience of the premutier and that leads to the
Speaker 1: great I think announcement we have in the quarter, which
Speaker 1: is our Samson agreement and happy to talk about that.
Speaker 1: Actually for me, that was the key highlights of the Cualco. Course,
Speaker 1: let's let's talk about that you extended this big licensing
Speaker 1: agreement with Samsung, and you know there has been concerned
Speaker 1: that Samsung is making more of its own ships. What
Speaker 1: does this mean for Qualcomm's market share and why why
Speaker 1: are they betting on you for so many more years?
Speaker 1: I mean, this is quite a long agreement. This disagreement
Speaker 1: actually put a lot of things to rest and let
Speaker 1: me unpack that for you. The first one, it is
Speaker 1: an extension, very simple extension or existing uh pattern license
Speaker 1: agreement with Sandsung for our licensing business. Uh is extends
Speaker 1: all the way to two thousand thirty on the same
Speaker 1: royalty terms and actually include six G So I cannot
Speaker 1: think of anything else that will give that much indication
Speaker 1: of stability in our licensing business, and it is a
Speaker 1: great benchmark for renewals. The second part of the announcement
Speaker 1: of exactly the most exciting one. We talks about the
Speaker 1: growth opportunities and really is a multi ear agreement that
Speaker 1: we are going to be powering the Galaxy product lines
Speaker 1: of Sands and globally. Let me walk you to this.
Speaker 1: Galaxys twenty one our share versus their in house solution
Speaker 1: was in the order Galaxys twenty two. We climb up
Speaker 1: to about the upcoming products which will be impacted by
Speaker 1: this agreement. Uh, you see that share of qualk and
Speaker 1: going uh increasing more than sevent where we're going to
Speaker 1: be powering their solutions globally, and that's very exciting. So
Speaker 1: if you have any questions about concern about the Qualcom
Speaker 1: partnership with Samsung as related that they're using the internal solution,
Speaker 1: I think disagreement put that to the rest. Is a
Speaker 1: multi ear agreement. Very excited about that, and we'll continue
Speaker 1: to validate our strategy to be focused on premium and
Speaker 1: high tier. Okay, let's talk a little bit about supply.
Speaker 1: I just got off the phone with Apple CEO Tim Cook,
Speaker 1: who said they've seen quote significant improvement on the supply
Speaker 1: and the demand side in China. What are you seeing
Speaker 1: in the supply chain? Is it going to get better,
Speaker 1: is it going to get worse? And how much longer
Speaker 1: our supply issues going to be with us? Look, I
Speaker 1: we were one of the few companies to call the
Speaker 1: supply shortage early on, and we took action early on.
Speaker 1: We also said that we expect to supply them and
Speaker 1: to normalize in the second half of twenty two. If
Speaker 1: you go back several quarters and look some of my
Speaker 1: comments and exactly what's happening, we're seeing exactly the same
Speaker 1: thing as we had indicated. We see now much more
Speaker 1: balance demanded supply equation. Uh. There are still pockets of
Speaker 1: short dishes in some areas, but they are small and
Speaker 1: the bigger thing and uh, we are uh seen as
Speaker 1: we guide with Costa the next quarter on the mobile market,
Speaker 1: the impact of microconomics into China lockdown, but we all know,
Speaker 1: I think those lockdowns they come and they go, and
Speaker 1: we expect the China market to bounce back. So very consistent. Uh,
Speaker 1: and uh, it's you know, we're being prudent, but it is.
Speaker 1: It is very likely a situation that we continue to
Speaker 1: see growth and with that we actually guided twenty four
Speaker 1: percent year over year growth in Q four. Now we've
Speaker 1: heard from a number of different CEOs fairly dire predictions
Speaker 1: about the future of the economy. You know, Elon Musk
Speaker 1: has said he has a super bad feeling about the economy.
Speaker 1: Jamie Diamond says he's preparing for an act, not a hurricane.
Speaker 1: You've got the World Bank slashing their global growth forecasts
Speaker 1: what's your take on the economy? How concerned are you are?
Speaker 1: Are you are? Is Qualcom preparing for a recession? Look,
Speaker 1: it's very difficult to predict, and I have been very
Speaker 1: focused on the things that we can't control. But what
Speaker 1: you actually see us doing is really focus on what's
Speaker 1: important for Qualco in the long term. And I can
Speaker 1: actually unpack that in justice quarter alone and how we
Speaker 1: guided you for the Sensung agreement. It's about bringing long
Speaker 1: term stability to our position the prim inteer in the market.
Speaker 1: The market is going to go up and down, uh
Speaker 1: as we have a mature phone market, but Qualcom is
Speaker 1: growing structurally. That's why we're gonna end up the year
Speaker 1: with almost fifty year of the year growth in in
Speaker 1: the phone market. But the most important thing is how
Speaker 1: we've been very active diversifying the company without an IoT,
Speaker 1: And what we said in the quarter is we have
Speaker 1: record auto an IoT growth with sequential growth projections for
Speaker 1: the next quarter. And we're seeing that the enterprise and
Speaker 1: industrial segment has been very resilient. So why you have
Speaker 1: economic headweights that provide softened in consumer spending, the industrial
Speaker 1: and enterprise is strong. You've seen that for other companies
Speaker 1: that are being focused also on the enterprise, like Microsoft,
Speaker 1: and the reality is digital transformation off the edge. It's
Speaker 1: somewhat recession proof, but we will see. So here's the question.
Speaker 1: I mean, you're pushing into cars, you're pushing into networks,
Speaker 1: you're pushing into computers. But will you be able to
Speaker 1: grow those businesses fast enough to whether what could be
Speaker 1: a serious near term economic downturn. We we we kind
Speaker 1: of size from what we saw in uh In in
Speaker 1: the coming quarter. We did size. We call about twenty
Speaker 1: cents of EPs could be the size of the macro
Speaker 1: economic headwinds on consumer. But even with that, we're projecting
Speaker 1: growth of and I think that's because Broken has a
Speaker 1: number of drivers of growth, which is driven by secular transformation.
Speaker 1: As device has become connected, they become more intelligent, and
Speaker 1: it's happening, you know, in a number of different verticals
Speaker 1: of the industry. And we continue, we expect that to continue,
Speaker 1: even though as we navigates to those challenging times. All right,
Speaker 1: call come seeing you Christian lemen. Always good to have
Speaker 1: you here. Thanks for sharing your view of the future
Speaker 1: with us, Appreciate it. All right, Coming up, Al Salvador's
Speaker 1: big bet on bitcoin as the crypto world is going
Speaker 1: through a winter. What's that that bet worth? Now we'll
Speaker 1: discuss assist blue Mark and it's time now for our
Speaker 1: crypto report, and I want to turn to El Salvador.
Speaker 1: The country's finance minister defended its strategy to adopt bitcoin
Speaker 1: as legal's tender and even doubled down on its plans
Speaker 1: to build a bitcoin city, as critics are urging the
Speaker 1: country to ditch this whole experiment. With the main cryptocurrency
Speaker 1: suffering badly through a bear market. Let's break it all
Speaker 1: down now with Bloomberg's Michael McDonald, who has been following
Speaker 1: El Salvador's bitcoin bat very closely, and our own crypto contributor, UM, Michael,
Speaker 1: how's it going in El Salvador. Obviously there's a crypto
Speaker 1: winter going on, but don't think winter is ever too
Speaker 1: bad in El Salvador. Is there bitcoin bet paying off? Yeah? So,
Speaker 1: I think the crypto winter has sort of cooled enthusiasm
Speaker 1: a little bit on the ground in El Salvador, at
Speaker 1: least among your average Salvadorian. UM. You know, the price
Speaker 1: when they adopted Bitcoin is Legal tender last year was
Speaker 1: near record highs around sixty thousand, it's now trading in
Speaker 1: around twenty thousands. Think that's discouraged a lot of people
Speaker 1: from from using it and from investing in it, and
Speaker 1: it's also hurt the government's finances. The government has bought
Speaker 1: about a hundred million dollars worth of bitcoin over the
Speaker 1: past eight ten months. At today's prices, those are worth
Speaker 1: about fifty million dollars, so you see a decline of
Speaker 1: about on their on their bitcoin holdings. Um. There are
Speaker 1: some signs that some businesses are accepting it as a currency,
Speaker 1: although the vast majority of them seem not to be
Speaker 1: at this point. Um. And among those that do accept
Speaker 1: it as a currency, it's a very small percentage of
Speaker 1: their sales that are actually in bitcoin. CHINALI, what about
Speaker 1: here in the United States. I know that there are
Speaker 1: some bitcoin a t M s here and there. You
Speaker 1: might find them in a bodega in New York City,
Speaker 1: for example, But are people actually using them? It's a
Speaker 1: great question, Emily, because, for example, the other day I
Speaker 1: had a conversation with Mariel Rubini, who was of course
Speaker 1: known as macro economists and who works a lot on
Speaker 1: emerging markets as well as the US economy, and the
Speaker 1: question here was why do you need bitcoin? Remember the
Speaker 1: bitcoin scrypto skeptic, sorry, And why do you need bitcoin
Speaker 1: when you just have fintech? I think it's a great question,
Speaker 1: especially when you have the US government really cracking down
Speaker 1: on bitcoin on whether it's a secure in other tokens,
Speaker 1: whether it's a security, or whether it's a currency or
Speaker 1: a commodity. And you look at what happened in Al
Speaker 1: Salvador and the idea of using it as legal tender
Speaker 1: really starts to define it as a currency in some ways.
Speaker 1: So the question then becomes are other networks like the
Speaker 1: Lightning network taking off in a bigger way as companies
Speaker 1: start to use it. More to Michael's point, whether you're
Speaker 1: in Al Salvador or you're in the United States, that
Speaker 1: price fluctuation has been really scary. Now there's another aspect here.
Speaker 1: This all comes as other currencies like the dollar are rallying,
Speaker 1: putting other emerging markets in you know what my sources
Speaker 1: call severe stress people who bank a lot of countries
Speaker 1: in the world. And so if that is already an issue,
Speaker 1: not Bitcoin under pressure, but other currencies, then you have
Speaker 1: a dual issue here for a country like El Salvador. Interesting, Michael,
Speaker 1: what is El Salvador's government? Why are they doubling down
Speaker 1: even though the price is under so much pressure? UM,
Speaker 1: you know, why are they touting this success? Yeah? I
Speaker 1: think you know, from our interview yesterday with the finance minister,
Speaker 1: I think he really sees it as a new technology
Speaker 1: that has potential in the future. UM. And I also think,
Speaker 1: you know, one of the things that he told us
Speaker 1: what it was that it has brought in some levels
Speaker 1: of tourism, some levels of foreign investment. Some of that
Speaker 1: has come in via cryptocurrency exchanges, UH, cryptocurrency, digital wallets,
Speaker 1: different companies that provide different types of cryptocurrency UH, infrastructure. UM.
Speaker 1: And you know, El Salvador is also a country that
Speaker 1: relies extremely heavily on remittances sent home from migrants that
Speaker 1: lived mostly in the United States. UM. Those migrants send
Speaker 1: home money, usually via money Gram or Western Union or
Speaker 1: some of these traditional sources of of money transfer services U.
Speaker 1: And so I think the government is is trying to
Speaker 1: save Salvadorians fees on these transfers through bitcoin and through
Speaker 1: things like Lightning Network, which tends to be a little
Speaker 1: bit cheaper than using the actual block chain on chain transactions. UM.
Speaker 1: But we're starting to see some of these more traditional
Speaker 1: companies actually come up with ways to try and compete
Speaker 1: with that. Money Gram announced for a a project with
Speaker 1: usd stable Coin to try and transfer money faster via
Speaker 1: Moneygram's network from the US to El Salvador. Um. So
Speaker 1: it is true. I mean if you use something like
Speaker 1: landing and network, you can't you probably can save money
Speaker 1: on this. The thing is now these more traditional networks
Speaker 1: are are starting to come up with ways to compete
Speaker 1: with that and and make it cheap and fast as well.
Speaker 1: And you think about so many the people might go
Speaker 1: who want this to work in All Salvador because it
Speaker 1: shows you that bitcoin has another use case and payments,
Speaker 1: and it can become more uh seamless over time in
Speaker 1: terms of transactions and payments. I think back to this
Speaker 1: University of Chicago white paper on just how many Al
Speaker 1: Salvadorians don't even have uh mobile to use this as
Speaker 1: a means of payment. How much is there still friction
Speaker 1: and how is that keeping or helping other nations go
Speaker 1: by the way, what El Salvador has done, like the
Speaker 1: Central African Republic, which is also adopting it in a
Speaker 1: bigger way. Yeah, you know, I think one of the problems,
Speaker 1: you know, when you're in San Salvador and in some
Speaker 1: of the big cities, I mean, it is fairly feasible
Speaker 1: to use this technology. Most people have smartphones and most
Speaker 1: companies have means of accepting electronic payments. The problem is
Speaker 1: when you get outside of San Salvador into some of
Speaker 1: these really rural areas um and and to sort of
Speaker 1: really poor areas where people are working on farms and
Speaker 1: working as fishermen, they don't always have the technology to
Speaker 1: be able to adapt to adopt this kind of thing.
Speaker 1: So I mean in those areas, cash is still king, um,
Speaker 1: So there is, you know, and there is a big
Speaker 1: learning curve with this kind of technology. It is it's
Speaker 1: very new to a lot of people, even in the
Speaker 1: developed world. So when you bring it to a country
Speaker 1: like El Salvador, which is still developing, uh, in a
Speaker 1: lot of areas, there's the learning curve is even steeper. Alright,
Speaker 1: So fascinating. Michael McDonald, who covers El Salvador and the
Speaker 1: big crypto bet there thank you. Along with our own Shias.
Speaker 1: It was another big day of earnings with both Apple
Speaker 1: and Amazon reporting quarterly results are both coming in strong.
Speaker 1: Let's wrap it all up with our lad law. There
Speaker 1: must be sigh of relief tech investors today. You know,
Speaker 1: that's definitely the consensus from the early cell side notes
Speaker 1: that were getting that. You know, you were bracing for
Speaker 1: something wrong to go wrong with Apple, and it was
Speaker 1: a mixed bag, right, good iPhone performance, Paul mac wearable
Speaker 1: services performance. But what's so interesting is Apple suspended guidance
Speaker 1: and yet you spoke to Tim Cook, and I don't
Speaker 1: know what Apple's definition of guidances, but he gave some
Speaker 1: really clear indications of how things are going in China.
Speaker 1: Things are getting better. June was good, the supply chain
Speaker 1: is improving. Revenue growth will accelerate into the September cord
Speaker 1: of fiscal fourth So that sounds to me like things
Speaker 1: are really improving and investors like what they see based
Speaker 1: on the after hours reaction. Right. He also said they
Speaker 1: expect revenue to accelerate in the coming quarter, even though
Speaker 1: we're seeing these macroeconomic headwinds. As you said, I fone trunk.
Speaker 1: He also said, I had demand was really strong, but
Speaker 1: that was impacted along with the mac by supply constraints.
Speaker 1: In the quarter, though supply constraints are significantly improving, and
Speaker 1: they're being prudent, right, you know, he basically said that
Speaker 1: we're in a recessionary environment, We're going to continue to
Speaker 1: invest in the future bets And it seems like he's
Speaker 1: talking about augmented reality, maybe electric vehicles. We don't really
Speaker 1: know that side of the story. But also be disciplined, right,
Speaker 1: and it kind of backs up Mark German's reporting on
Speaker 1: the slowdown and hiring. He used the word deliberate. That's
Speaker 1: deliberate about spending. Yeah, what about Amazon. Amazon, you know,
Speaker 1: by all accounts smashed it. You know, everyone's so focused
Speaker 1: on Prime because of what Walmart and Targets told us,
Speaker 1: and you know, primed a felt outside of the courter
Speaker 1: they just reported. But subscriptions are up. People were paying
Speaker 1: even though prices were higher on subscriptions. But forget about
Speaker 1: Prime and remember the cloud. It's all about a WS
Speaker 1: And I think we have this chart that just tells
Speaker 1: the story that no matter what the world looks like,
Speaker 1: AWS continues to be a juggernaut. It beats on the
Speaker 1: top line, it continues to support operating income. The worry
Speaker 1: for AWS was that a lot of its customers are
Speaker 1: tech startups, and yet look how well it's performing. So
Speaker 1: Andy Jesse seems to be putting a lot of eggs
Speaker 1: into that AWS basket and moving the company from its
Speaker 1: dependence on prime. Huge bouncing Amazon shares after hours, I mean,
Speaker 1: how are we expecting the investors to react to this
Speaker 1: when the Friday Friday is going to be a big day,
Speaker 1: not just because of the market cap of Amazon, it
Speaker 1: has a big waiting on the major indicase, but I
Speaker 1: think there is a sigh of relief of the staying
Speaker 1: power of these companies and frankly that there's faith that
Speaker 1: managements can get us through worsening economic conditions, and they
Speaker 1: like this is the kind like Breadstone put it the
Speaker 1: start of Andy Jesse's big turnaround. So we'll see. So
Speaker 1: what are the earnings to come that we're going to
Speaker 1: be keeping an eye on. Yeah, I think you know,
Speaker 1: now we moved to the software providers. You know, we've
Speaker 1: had the big mega caps, we've had all the consumer
Speaker 1: facing companies. What about all these pandemic era darlings, the
Speaker 1: software names where everyone piled into one and where perhaps
Speaker 1: corporate spendings being pulled um and you know, the Chips
Speaker 1: story is just getting started. We've had Quitcom, we've had Intel.
Speaker 1: What about the rest of the sector, Because it's been
Speaker 1: a muddy week, right, we'll be watching. Okay, thanks for
Speaker 1: breaking that all down for us. That doesn't For this
Speaker 1: edition of Bloomberg Technology, we've got the CEO of Intel,
Speaker 1: pat Girl Singer Friday to talk about earnings and also
Speaker 1: the Chips act. Stay tuned for that on Bloomberg Television,
Speaker 1: and of course check out our podcast wherever you get
Speaker 1: your podcasts. I'm Emily checking in San Francisco. This is
Speaker 1: Bloomberg