Amazon’s HQ2 Search Has Catalyzed An Important Thought Process

In the end, Amazon’s announcement of Queens and Crystal City as the two new HQ locations was anti-climactic. In part because of the decision to split HQ2 after a year of breathless media coverage, and in part because many believe that the D.C. area choice was already a foregone conclusion given Jeff Bezos’ already substantial ties to the region. Cynics believe that the choice was typically Amazonian – where the company could get the best deal, rather than it necessarily being the best location for the company or, heaven forbid, embracing something slightly more altruistic by helping an up-and-coming tech city like Pittsburgh or Atlanta move to the top tier.

More importantly, this highly public process prompted a year-long thought process of how cities must compete for business and talent in the 21st century economy. The Bay area and Seattle are already overheated, and the infrastructure (affordable housing, transport) to support much more is inadequate. In my hometown of Boston, which was one of the finalists, there was a collective feeling of relief at having not been selected, given already sky-high housing prices, clogged roads, and an overburdened public transport system. And it is both sad and a poor reflection on our current leadership when it takes the prospects of an Olympics or major new corporate headquarters to catalyze the type of strategic thinking and investment for any city that wants to be competitive in the 21st century economy.

In my view, there are five key elements necessary to be in the game:

  • Talent. Both extant and potential via a good educational system and strong universities.
  • Diversity of economy. You don’t want to be too dependent on any one industry or economic sector. Pittsburgh is a great example. Whereas the collapse of the steel industry nearly killed Pittsburgh 1.0, Pittsburgh 2.0 has a much greater diversity of vibrant industries, fueled by a unique level of cooperation among its private, public, and educational sectors.
  • Infrastructure. An adequate road system and a viable public transportation system. It’s becoming clear that 21st century workers don’t want to spend their lives sitting in cars. For certain types of employers/employees, proximity of a decent airport is also a factor.
  • Affordable Housing & Livability. If you’re earning $100,000 and can’t afford a pleasant one-or two- bedroom apartment/condo in the city or a modest home in a close-in suburb, it’s a problem. There’s also the slightly more amorphous concept of ‘livability’, such as a city’s walkability, and the presence/proximity of culture and other amenities. Something I’ve always thought is important is ‘what’s a tank away’?, in other words are there nice places you can easily get to for a day trip or a weekend (beach, mountains, etc.).
  • Progressive Local Leadership. Given the dysfunction on the national level and lack of strategic, long-term investment in education and infrastructure, cities and states with strong local leadership are breaking through. Examples: Nashville, Tulsa, and Los Angeles.

Now, let’s take a look at a few of the cities that were not only finalists in the Amazon hunt, but would be viable contenders at least for the ‘next Amazon’. How do they stack up on the above criteria?

Boston. Educational institutions, diversity of economy, livability, and talent are its strengths. But the city’s housing prices have become Bay-area-esque, and its infrastructure is overburdened and crumbling, with no long-term plan in place. It’s like a city that’s over-touristed and is saying, ‘no more’.

Dallas. Yes, it’s economy is on fire, but my sense is that this is a place that people move to once their career is established rather than being a preferred location for younger talent. And while it’s affordable compared to a lot of other cities, Dallas lacks top tier educational institutions that are feeders to tech companies, and remains too auto-centric, despite some recent investments in public transport.

Austin. This city has a lot of the right ingredients in place and has attracted a lot of tech companies already. A much younger, more vibrant feel than Dallas, in part because of the giant University of Texas at Austin. But growth has outpaced infrastructure investment, with sprawl and traffic impacting the quality of life factors that made this city attractive after Dell helped put it on the map.

Atlanta. Has many of the same attributes and challenges as Dallas, but is a notch above in terms of top tier educational institutions. I think traffic/sprawl/infrastructure challenges are what kept it out of the running for Amazon.

Pittsburgh. Here’s a city that has done and is doing a lot of things right to become a 2.0 version of itself. A quite livable place. Not yet a major league city on a global scale, and needs to substantially invest in its transport infrastructure if current growth trajectory continues.

Nashville. Has a lot of the same ingredients as Pittsburgh, and has used its assets to become a major healthcare/tech center. A progressive mayor has courted companies and made the right investments and strategic decisions to make the city much more livable (new park & bike trails, better roads/transport, tons of new housing).

Los Angeles. The highly progressive mayor Eric Garcetti is making huge investments in infrastructure and affordable housing and doing real things to address the homeless issue, tackle inequality, and diversify the economy. This fascinating, diverse place has the potential to be a revitalized global city for the 21st Century…or it could get crushed under the weight of its size and years of under-investment.

I should also mention three Canadian cities that are already seriously on the map:

Toronto. Now North America’s third largest city, Toronto (and the tech epicenter of nearby Waterloo) was a contender for Amazon HQ. And not just because of the idea of ‘Trump Snub’ that the media loved writing about. This city is culturally and economically diverse, has strong educational institutions, and is very livable. It does suffer from U.S.-like problems of traffic and sprawl and inadequate rapid transit outside the city core. And housing prices are among the highest in North America. But you will be hearing more about Toronto in the coming years.

Vancouver. Incredible quality of life, if you can get past the Seattle-esque six months of gloominess. This will be a major 21st century city, given its setting, strong educational institutions, and diversity. The huge run up in real estate prices (mainly due to foreign investment) and lack of good rapid transit are challenges…that are actually being addressed. V

Montreal. This city has all the right ingredients: already a tech and creative hub, strong educational institutions and tons of talent, still relatively affordable, and a high quality of life. Montreal is also making a significant investment in improving its roads and expanding its transport system. Its brutal winters are a factor for some, and still restrictive language laws keep some companies (and people) away.

And finally, here’s a few more from among the major North America cities:

Getting to the Next Stage: Minneapolis-St. Paul, Portland (OR), Phoenix, Detroit, Philadelphia.

Not Progressing/Worry Button: Chicago, Miami, Orlando, Charlotte, Baltimore…and San Francisco.

Cities shouldn’t be overdoing the post-mortem about why they didn’t get Amazon HQ2. Instead, they should be thinking about what’s needed for them to land the ‘next HQ’.

Samsung’s Flexible Display Smartphone Gamble

I attended last week’s Samsung Developer conference in San Francisco and saw them introduce the first flexible smartphone from a major player. If you follow my columns here on Techpinions, you know that I have been writing about flexible displays since I saw the first ones from BOE displayed at the Society of Displays (SID) conference in L.A. last May.

That design caused quite a stir at this show and proved that, at least in concept, display vendors like BOE could create a display that folds and, in turn, helps smartphone vendors create the equivalent of a smartphone/tablet like device for the first time. While Samsung did not show their flexible display publicly at SID, they were showing it to vendors in private suites and declaring that they too would supply folding displays for use in these multi-mode devices.

Although Samsung had publicly shared they were doing a flexible phone for months, last week’s developer conference was the devices coming out party. This new smartphone and tablet device is slated to ship before next summer, and it is estimated that it could be priced as high as $1700 in the US. Samsung expects to make about a million of these devices in its first year, and I suspect they will have a pretty big marketing campaign behind it when it officially launches.

While I applaud Samsung’s innovations with this new design, I am concerned that this is a big gamble for them in the short term. At the moment, I have seen no credible research that shows that consumers want a device like this. And with a 1 million run and potential pricing as high as $1700, only industry competitors and early adopters will buy them in this first iteration of a folding smartphone.

One significant risk for them is that this phone could serve as a way to verify the market for not only themselves but also competitors. At the very least it will test the waters for consumer interest. At worst, if they are successful and draw real interest, you can bet Apple, Huawei, and other top-level smartphone makers will follow suit. Apple has a history of letting others create a new product category and watch it develop and if it shows promise, they apply their design genius and tie it to their ecosystem of hardware mfg and supply chain management as well as their apps and services and even though a latecomer, Apple is known to quickly surpass the competition and become the volume leader with their own flexible smartphone/tablet product in the future.

But the thing that I am deeply concerned about with this Samsung Flexible device is that in its first generation, the product is not good and has serious flaws. That is the type of thing that will impact its acceptance, and if it delivers a mediocre to poor experience, it could poison the market for a device like this for years.

One fundamental flaw may be in their use of a plastic cover. Plastic is known to scratch and is more breakable then something like Corning’s Gorilla Glass that has proven to be an excellent cover for smartphones today. Samsung says they invented a new polymer for use in their cover for this device but gave little details on how scratch resistant and unbreakable it will be.

Another big hurdle for its success is software. The current mobile software would not work on a folding screen that stretches to as much as 9 inches when unfolded and would need serious support from software developers to work correctly. Samsung made this clear at their developer’s conference and planned to introduce an API for developers so they can modify software for a flexible device. I talked to a couple of developers who were impressed with the design of this flexible device but were not convinced it would be worth creating software for it unless they saw it selling in the multi-millions. Call it the proverbial Chicken and Egg problem magnified.

One last thing that concerns me is that ODM’s I talk to say that manufacturing flexible displays in volume is not easy. Yield rates are low now and it is not clear when they can perfect this type of display. Also, creating the flexible mechanics around this design is a not easy task either. There is a serious issue related to things like its bendable framework as well as creating the type of mobile motherboard design inside so that it too can flex thousands of times with complicated electronics on board.

The new Samsung foldable smartphone/tablet has potential, but there are many obstacles on its way to success. Samsung is known for creating quality products, so I do not doubt that when they ship this first device, it will be a relatively stable product. I hope for them and the industry that what is delivered is good enough to spur further exploration of this design. I do think it is a game changer and could spur a lot of smartphone refreshes in the next decade. But if this first version underperforms, it could deal a setback to these type of combo devices for some time, even if there is serious interest in this type of smartphone and tablet design.

Dolby Brings a New Dimension to Home Entertainment

Consumers are very familiar with the Dolby brand. Whether you often visit a Dolby Cinema or you have a TV or computer that supports Dolby Atmos and Dolby Vision you know Dolby delivers one of the best entertainment experiences that allow you to lose yourself in the content you are consuming.

At a time when delivering an experience has more and more to do with the combination of hardware, software and AI, Dolby brings to market its first consumer device: a set of wireless headphones called Dolby Dimension.

Making Hardware Does not Make You a Hardware Maker

It is always easy when a brand brings to market a product in a category they had not been present before to think of it as “entering the market.” Of course, technically this is what they are doing. But there are different reasons why a brand decides to get into a new space. Potential revenue is mostly at the core of such a move, but even then how that revenue is generated differs. Sometimes revenue comes directly from the new product. Other times, the revenue upside comes from how the product is able to boost brand perception in areas the name was already present.

When Dolby spoke to me about Dolby Dimension, I thought about how well it fits their history and DNA as well as delivering on a market need. To understand why Dolby is taking this step one should take a quick look at how home entertainment is changing.

In a recent study across 2044 consumers by the Hollywood Reporter it is clear that in the US, binge-watching is becoming the norm and not just for millennials. While 76% of TV watchers aged 18 to 29 said, they preferred bingeing, older age brackets are not far behind with 65% of viewers ages 30 to 44, and 50% of 44 to 54 who prefer binging. And it is not just about how many people binge-watch it is also how often they do so. Across the national sample of the October study, 15% say that they binge-watch on a daily basis. Another 28% say they binge several times per week.

Many will argue that the wireless headphones market is already super competitive and that Bose fully controls the high-end of the market, so Dolby should have thought about it twice before entering this space. But see, this is where the “entering this space” debate starts. From how I look at it, Dolby was looking to expand the way their technology and experience can be experienced. This took the form of a set of headphones that bring value to a specific set of consumers who appreciate high-quality sound, spend hours watching content on whatever screen is most convenient in their home and see the $599 price tag as an investment in a superior experience that allows them to binge smarter.

It is when you look at the technology packed inside Dolby Dimension and the specific use cases that Dolby has in mind that you understand why this is not a simple branding exercise. The initial limited availability to the US market and distribution focused on dolby.com confirm to me that Dolby is not interested in a broader consumer hardware play, which I am sure will leave hardware partners to exhale a sigh of relief.

Not Just Another Set of Wireless Headphones

Most wireless headphones are designed today for users on the go. They help you being immersed in your content or your work by isolating you from the world around you thanks to noise canceling.

There are some models in the market, the latest one being the Surface Headphones, that allow you to adjust your voice canceling feature to let some of the world in if you need to. This is however done manually.

Dolby Dimension is designed with home use in mind which means that a few things are different. First, the new Dolby LifeMix technology allows you to dynamically adjust how much of the outside world you can let it. Settings, activated through touch controls, will enable you to find what Dolby calls the “perfect blend” between your entertainment and your world as well as entirely shutting down the outside world through Active Noise Cancelling. If you, like me, binge-watch in bed at night you might appreciate being able to choose between being fully immersed in your content when your other half falls asleep before you and snoring gets in the way. Other times, you might want to be able to hear your daughter giggling away next door because she decided to ignore your multiple lights off requests!

Over the days I had to play with Dolby Dimension what most impressed is how it really gives you the feeling of sitting in a theatre. This is especially striking when you are watching content on a small screen like a phone or a tablet. The sound, which of course Dolby will tell you is half the experience, really brings that little screen to life letting you enjoy content at its best. I felt so immersed in what I was watching that I am pretty sure I got to experience the kind of “mom’s voice canceling” my kid has naturally built into her when she is watching any of the Avengers movies, or she is gaming!

There are a few more details that highlight what Dolby had in mind with these headphones. Dolby Dimension can be paired with up to eight devices, and you can quickly toggle between your favorite three with dedicated hardware keys on the right ear cup. When you pick your device, hitting the key associated to it will take you straight to your entertainment app of choice like Netflix or Hulu, not just your device.

Battery life reflects a best-sound approach by delivering up to 10 hours with LifeMix and Virtualization turned on and up to 15 hours with low power mode. So whether you, like 28% of the study sample, binge-watch two to three episode per session or like another 21% you watch four episodes at once you will be left with plenty of power. While we might be tempted to think about a long flight or a day at the office, this is not what Dolby Dimension was designed for and to be honest if those are your primary use cases Dolby Dimension is not really for you.

Headphones are Key to the Experience

It is fascinating how over the past year, or so, headphones have become a talking point in tech. I think the last time that was the case was when Bluetooth was introduced and we got excited about being able to have a conversation on the phone without holding the phone.

When we are discussing the lack of the audio jack from our devices or which digital assistant is supported (assistant that you can summon with Dolby Dimension) we are pointing to the fact that headphones have become an essential part of our experience. Considering how much time we spend in front of one screen or another, both at home or on the go, being able to enjoy both visual and audio content is growing in importance. As intelligence gets embedded in more and more devices and smaller and smaller devices benefit from higher processing power, headphones can become a device in their own right rather than being viewed merely as an accessory.

While I don’t believe Dolby is interested in becoming a consumer hardware company, I am convinced they will continue to innovate and look at how consumers habits are changing when it comes to consuming content. As we move from physical screens to augmented reality experiences and eventually virtual ones, Dolby might continue to take us on a sensory journey through technology and if needed hardware.

Tech’s Post Silicon Valley Future

For a long time, it was believed that Silicon Valley was unduplicatable. Mahy believed Silicon Valley could only exist here in California, in its unique little bubble in the Bay Area. For a long time, it did seem that this was true. I’ve spoken with countless State and City officials in many other states all looking to find the secret of the valley that could help their city or town change its economic fortunes for the better. Silicon Valley is finally getting bigger than Silicon Valley. This is partially a function of this pocket of the world running out of space and becoming too expensive not just to start a company but even run a company. A more important fundamental point is that technology itself, all the core things that were said to exist in Silicon Valley is penetrating every industry. We are on the cusp of an inflection point where there is no longer a designation of technology industry, but every industry is a technology industry. With that in mind, it is worth knowing what truly makes Silicon Valley unique.

A Wealth of Experience
Most people think the uniqueness of Silicon Valley is its culture where a focus on innovation and pushing the envelope. While it is true, there is a unique culture in the Valley that is not the hardest part to duplicate elsewhere. Another line of thinking is access to capital. It is true most the biggest VC firms in the world are all in the Valley, they don’t just invest in valley companies, and there is growing presence of top-tier investors in a growing number of cities. The most salient angle, I’ve always agreed with was a willingness to take risks that exist in the valley. This certainly was true historically, but younger entrepreneurs around the country seem much more willing to take risks than previous generations and therefore a culture of risk is a short-term advantage of the valley.

The Valley’s biggest differentiator, in my opinion having grown up here, started companies here, and spent my career here, is a wealth of experience. For now, Silicon Valley has a wealth of access to business leaders, investors, mentors, etc., who have been around the block so many times that their experience and knowledge becomes invaluable. This is the one thing no other area in the world has. But, I think it is clear, even this is a short-term advantage of Silicon Valley.

National Expansion of Corporate Headquarters
To pursue a diversity of talent, companies are expanding their corporate presence to locations outside of Silicon Valley. One of the more notable recent examples is Amazon deciding to build their additional headquarter hubs in New York and Virginia. Having a company like Amazon build not just a satellite office but a new hub is key in growing and developing talent and helping an area gain invaluable experience that will benefit the local business scene.

As we look at the pockets of tech talent emerging across the country, it seems like areas outside the valley are starting to develop specific expertise, talent, and experience. For example, New York is becoming a hub for FinTech (or financial tech) services. Which makes sense given the financial and banking epicenter New York has always been. Similarly, in Los Angeles, we see tech startups emerge with a more specific focus on media and entertainment.

As new areas emerge as tech epicenters, it is logical they will each have their unique expertise and talent pool. This will be a boon for local economies but may also spark another key ingredient for local economies success.

Educational Focus
One of the key parts of the Valley’s success is Stanford, and Berekely to a degree. Stanford’s business school remains one of the most attractive places for an aspiring entrepreneur or aspiring business leader. This has everything to do with its location close to such pervasive startup culture, but also because of the business leaders who teach classes as guest professors or lecturers. It is one thing other schools are challenged to compete with because most the top VCs, entrepreneurs, and more, all live in the Valley which makes it easy for them to get over to Stanford and teach classes or programs.

The local educational ecosystem is a huge part of the Valley’s success as it breeds future business leaders and they, more often than not, stay local to start their companies. This is the one thing that other economies need to duplicate where the local colleges and business schools attract new talent, develop relevant curriculum, and incentivize students to stay local to start their companies.

Ultimately, all these parts are interlocked as the underlying building blocks for new pockets of business and tech economies to flourish. While it won’t happen overnight, it feels like the trend is to build new tech epicenters in other states and that the success of other areas to have their own unique high-tech ecosystems. Build tech jobs, have successes of those companies in either IPO or acquisition, and keep those experienced leaders local to pour back into the local ecosystem.

It won’t happen everywhere, but the recipe that allowed the Valley to flourish seems like it is starting to show up in other places. They may not all look alike, and that is a good thing, but the trend seems clear, and it is a positive story for the US economy and many local cities and states.

Chiplets to Drive the Future of Semis

A classic way for engineers to solve a particularly vexing technical problem is to move things in a completely different direction—typically by “thinking outside the box.” Such is the case with challenges facing the semiconductor industry. With the laws of physics quickly closing in on them, the traditional brute force means of maintaining Moore’s Law, by shrinking the size of transistors, is quickly coming to an end. Whether things stall at the current 7nm (nanometer) size, drop down to 5nm, or at best, reach 4nm, the reality of a nearly insurmountable wall is fast approaching today’s leading vendors.

As a result, semiconductor companies are having to develop different ways to keep the essential performance progress they need moving in a positive direction. One of the most compelling ideas, chiplets, isn’t a terribly new one, but it’s being deployed in interesting new ways. Chiplets are key IP blocks taken from a more complete chip design that are broken out on their own and then connected together with clever new packaging and interconnect technologies. Basically, it’s a new version of an SoC (system on chip), which combined various pieces of independent silicon onto a multi-chip module (MCM) to provide a complete solution.

So, for example, a modern CPU typically includes the main compute engine, a memory controller for connecting to main system memory, an I/O hub for talking to other peripherals, and several other different elements. In the world of chiplets, some of these elements can be broken back out into separate parts (essentially reversing the integration trend that has fueled semiconductor advances for such a long time), optimized for their own best performance (and for their own best manufacturing node size), and then connected back together in Lego block-type fashion.

While that may seem a bit counter-intuitive compared to typical semiconductor industry trends, chiplet designs help address several issues that have arisen as a result of traditional advances. First, while integration of multiple components into a single chip arguably makes things simpler, the truth is that today’s chips have become both enormously complex and quite large as a result. Ensuring high-quality, defect-free manufacturing of these large, complex chips—especially while you’re trying to reduce transistor size at the same time—has proven to be an overwhelming challenge. That’s one of the key reasons why we’ve seen delays or even cancellations of moves to current 10nm and 7nm production from many major chip foundries.

Second, it turns out not every type of chip element actually benefits from smaller sizes. The basic argument for shrinking transistors is to reduce costs, reduce power consumption, and improve performance. With elements like the analog circuitry in I/O components, however, it turns out there’s a point of diminishing returns where smaller transistors are actually more expensive and don’t get the performance benefits you might expect from smaller production geometries. As a result, it just doesn’t make sense to try and move current monolithic chip designs to these smaller sizes.

Finally, some of the more interesting advancements in the semiconductor world are now occurring in interconnect and packaging technologies. From the 3D stacking of components being used to increase the capacity of flash memory chips, to the high-speed interfaces being developed to enable both high-speed on-chip and chip-to-chip communications, the need to keep all the critical components of a chip design at the same process level are simply going away. Instead, companies are focusing on creating clever new ways to interconnect IP blocks/components in order to achieve the performance enhancements they used to only be able to get through traditional Moore’s Law transistor shrinks.

AMD, for example, has made its Infinity Fabric interconnect technology a critical part of its Zen CPU designs, and at last week’s 7nm event, the company highlighted how they’ve extended it to their new data center-focused CPUs and new GPUs now as well. The next generation Epyc server CPU, codenamed “Rome,” scheduled for release in 2019, leverages up to 8 separate Zen2-based CPU chiplets interconnected over their latest generation Infinity Fabric to provide 64 cores in a single SoC. The result, they claim, is performance in a single socket server that can beat Intel’s current best two-socket server CPU configuration.

In addition, AMD highlighted how its new 7nm data center-focused Radeon Instinct GPU designs can now also be connected over Infinity Fabric both for GPU-to-GPU connections as well as for faster CPU-to-GPU connections (similar to Nvidia’s existing NVLink protocol), which could prove to be very important for advanced workloads like AI training, supercomputing, and more.

Interestingly, AMD and Intel worked together on a combined CPU/GPU part earlier this year that leveraged a slightly different interconnect technology but allowed them to put an Intel CPU together with a discrete AMD Radeon GPU (for high-powered PCs like the Dell XPS15 and HP 15” Spectre X360) onto a single chip.

Semiconductor IP creator Arm has been enabling an architecture for chiplet-like mobile SoC designs with its CCI (Cache Coherent Interconnect) technology for several years now. In fact, companies like Apple and Qualcomm use that type of technology for their A-Series and Snapdragon series chips, respectively.

Intel, for its part, is also planning to leverage chiplet technology for future designs. Though specific details are still to come, the company has discussed not just CPU-to-CPU connections, but also being able to integrate high-speed links with other chip IP blocks, such as Nervana AI accelerators, FPGAs and more.

In fact, the whole future of semiconductor design could be revolutionized by standardized, high-speed interconnections among various different chip components (each of which may be produced with different transistor sizes). Imagine, for example, the possibility of more specialized accelerators being developed by small innovative semiconductor companies for a variety of different applications and then integrated into final system designs that incorporate the main CPUs or GPUs from larger players, like Intel, AMD, or Nvidia.

Unfortunately, right now, a single industry standard for chiplet interconnect doesn’t exist—in the near term we may see individual companies choose to license their specific implementations to specific partners—but there’s likely to be pressure to create that standard in the future. There are several tech standards for chip-related interconnect, including CCIX (Cache Coherent Interconnect for Accelerators), which builds on the PCIe 4.0 standard, and the system-level Gen-Z standard, but nothing that all the critical players in the semiconductor ecosystem have completely embraced. In addition, standards need to be developed as to how different chiplets can be pieced together and manufactured in a consistent way.

Exactly how the advancements in chiplets and associated technologies relate to the ability to maintain traditional Moore’s law metrics isn’t entirely clear right now, but what is clear is that the semiconductor industry isn’t letting potential roadblocks stop it from making important new advances that will keep the tech industry evolving for some time to come.

Podcast: Samsung Developer Conference, AMD 7nm, Google Policies

This week’s Tech.pinions podcast features Carolina Milanesi and Bob O’Donnell discussing Samsung’s Developer Conference and the announcements around their Bixby assistant platform and Infinity Flex foldable smartphone display, AMD’s unveiling of their 7nm Epyc CPU and Instinct GPU for the cloud and datacenter market, and Google’s recent internal policy changes on harassment and other issues.

If you happen to use a podcast aggregator or want to add it to iTunes manually the feed to our podcast is: techpinions.com/feed/podcast

News that Caught My Eye: Week of November 9, 2018

One big eye catcher this week…

Samsung’s Developer Conference

Key news from SDC18 included:

  • New mobile experiences with Infinity Flex Display & One UI: The Infinity Flex Display builds on Samsung’s legacy of category-defining form factor and display innovation, paving the way for a breakthrough foldable smartphone form factor. One UI is Samsung’s new smartphone interface, featuring a clean, minimal design that makes it more convenient for one-handed use.
  • The new Bixby Developer Studio and Bixby Capsules:  Bixby is evolving into a scalable AI platform to support diverse products and services. The company unveiled new ways for developers to easily bring voice to their services.
  • Works with SmartThings certification program: A re-designed suite of tools that make it faster and easier for developers to connect their devices and services to the SmartThings platform.

Via Samsung 

  • I have been attending Samsung’s Developer Conference for many years now. It started in a hotel in San Francisco and moved to the Moscone Center only a couple of years ago.
  • In comparison to Apple, Google and Microsoft, SDC certainly it still feels like a much smaller affair, but I felt this year Samsung did not just talk the talk. There were a series of announcements that will make a concrete difference to their developer base.
  • With Google taking care of the core engagement with developers, Samsung can focus on what they believe would give them a differentiated edge over their competitors but also what makes them less reliant on Google from an ecosystem perspective.
  • In the past differentiation was more about the look at feel of the device, but with AI a new phase started where differentiation will be driven by an intelligent personalization of both software and services.

One UI

  • This is the evolution of TouchWiz, which became Samsung Experience and now One UI. TouchWiz basically was a skin that Samsung put on its devices to differentiate it from stock Android devices and other players. Over the years the differences between what was stock and what Samsung diminished making switching vendors within Android less daunting for users.
  • I found myself arguing with fellow analyst Bob O’Donnell whether or not I would call One UI a skin mostly because it seems to be very Google-like, with rounded corners for everything from dialogs to icons, and a bigger focus on stark contrasts and color.
  • Samsung will offer an open beta testing program for this Pie-based One UI for the Galaxy S9, S9+, and Note9 starting in November for customers in the US, Korea, and Germany, with other countries to follow later.
  • As far as I can remember, this is the first time that Samsung offers a beta trial which is another sign of how the company is changing under DJ Koh’s leadership.
  • The primary focus of the One UI is to declutter user experience and let you focus on what you are doing at the moment. It also tries to make the task easier for you by bringing text boxes where you type closer to your thumb for one-hand operation on larger screens.
  • It will be interesting to see how One UI will work on the new foldable screen that can run three separate apps simultaneously.

Infinity Flex Display

  • Talking of foldable. Samsung launched the new Infinity Flex Display. This was, in my view, the most misunderstood part of the event with many reporters covering it as if it were an actual phone.
  • Samsung said on stage that the phone was disguised in a wrapper of sort and maybe it was and maybe it was not. I have no reasons to believe what we saw was the final design.
  • While some were talking about disappointment driven by the fact that the screen folded inwards rather than outwards it seemed to me that the practicality of that design was  put aside for the wow effect.
  • I am not saying that over time we might not have a screen that folds outwards but there is quite a bit that needs to be solved before we get there. First how you can disable half of the screen when it folds as one so that you do not activate the back of the screen as you hold it. Second would be power consumption as you would power the entire screen even when you only use half. Folding outwards would be much easier if you had two separate screens that are separated by an ever so slim hinge.
  • Rushing to determine how successful the phone that was not announced will be is quite hard when you do not have one critical data point: price. I cannot think that any device built on an Infinity Flex Display will be anything but expensive and given flagship products are already around $1000 you can see how, at least at first, these devices will be positioned as premium.
  • Another interesting commonality of some of the articles I read had was the search for a use case. I am not sure I would think about it any differently than the many use cases that drove our average phone size up over the years. Video, gaming, increased productivity are all to benefit from some extra screen.
  • The point the foldable design solves is reducing the overall size of the device but also creating the ability to maintain a known user experience when all you need is the screen size of a current phone.

Bixby

  • If the Infinity Flex Display was the most misunderstood announcement, Bixby was the least loved one.
  • Samsung announced Bixby Capsules and Bixby Developer Studio. The easiest way to think of the first is to think of Alexa’s skills, while the second is a set of tools that uses AI to help developers add a voice first interactions for their apps and services
  • The reason why many are skeptical is that Bixby has had little uptake so far which is fair.
  • That said, I guess I look at this in a pragmatic way which is that Bixby is part of a larger AI play that Samsung cannot just ignore and embrace Google for or any hope of differentiation vanishes.
  • I know that if you look at it from a consumer perspective you can say that users want to use Google Assistant so Samsung should not bother spending money on Bixby. But every interaction you have with Bixby brings valuable data to Samsung.
  • I would argue that Samsung is only now setting things in place for Bixby’s success from a broader language availability to developer tools, and most importantly their own understanding of what role Bixby will play in the Samsung’s ecosystem.
  • Opening up the SDK, delivering tools that aim to limit the work to “port” what a developer might have created for another digital assistant as well as the creation of a market place are all key steps. Steps that might lead a developer to try and take advantage of the large installed base of devices Samsung has across the home, not just phones.

Gaming

  • Finally gaming. What started with a Fornite exclusive on the Galaxy Note 9 developed into a strategy to make Galaxy devices the best mobile gaming experience on Android.
  • In a very smart move, Samsung had Microsoft on stage talking about Microsoft Project xCloud which is their new gaming streaming service.
  • Samsung and Microsoft are good partners on a series of different offerings that go across phones and PCs. It makes sense that Microsoft looks at the vendor that owns the most valuable Android users as a way to tighten the link between phones and Microsoft’s products that being Xbox or Windows 10 PCs.
  • Samsung is expanding developer support for gaming so they can take full advantage of the hardware. Think about S Pen, for instance.
  • Another reason for Samsung to double down on gaming now is of course the role that Samsung plays in the 5G roll out. While all the vendors and carriers involved are excited about the arrival of 5G consumers are still trying to figure out why they will need a 5G phone. Starting with gaming is not a bad way to convince them to trade up!

Despite the Rise of Voice, Screens Still Matter

Over the last few years, a great deal of discussion has focused on the importance of voice as the next big interface. The explosive growth of smart assistants, in everything from speakers to thermostats to kitchen appliances, bolsters the argument that voice is going to play a big roll in how we interact with technology going forward. But throughout the last few weeks, I’ve been struck by just how much attention good old-fashioned screens have been getting in new product announcements. From Apple’s recent launch of new, larger-screened iPhones, iPads, and Apple Watches, to new smart assistants with screens, to Samsung’s teasing debut of its first foldable smartphone, the fact is screens still matter a great deal.

Bigger is Better
I’ve been living with Apple’s new Series 4 watch and the iPhone XS Max and have been struck by just how impactful the new, larger screens has been to how I use the devices. On the watch, I’m using the Infograph watch face that puts a huge amount of information on screen. While I look forward to Apple adding more customizable complications to that watch face (I’d like to have access to messages there), the information density is amazing, making it possible for me to easily access most of the apps I use daily right on the home screen. And the larger screen has led to another usage change: I find myself consuming more content on the watch. No, I’m not going to read a 2000-word news story there, but the larger size makes it comfortable enough to read messages, short emails, and news alerts right on the watch instead of shifting over to the phone.

The huge screen on the iPhone XS Max has led to an evolution in my usage of that device, too. It’s large enough that I find myself perfectly content to consume more content on it than any phone before it. Traditionally, when I get home, I move from the phone to the tablet, but with this phone, I will often make it well into the evening before I think to make the switch. Which begged the question: With the iPhone getting bigger, what happens to the iPad?

Apple answered that question last week with the launch of its new 11-inch and 12.9-inch iPad Pros. The 11-inch product effectively offers extra screen real estate in a form factor that’s roughly the same size as the previous 10.5-inch product. The real show stopper, however, is the 12.9-inch product. The previous version of this larger iPad was so big it felt a bit unwieldy in hand, but this new product feels dramatically more comfortable to hold and use. While the starting price of $999 will be tough for many to swallow, I expect that big, beautiful screen to drive many to buy this product.

Voice Plus Display is Smarter
One of the most interesting product trends of late has been the move by vendors to add screens to smart assistant products. Amazon did it first with the Echo Play, and the company has continued to iterate in the space with a second generation of that product, as well as the smaller Echo Spot. Google and its partners have recently entered the space, too. I’ve been using Lenovo’s Smart Display with Google Assistant, and I’ve been massively impressed with the product. I’ve written before about how Amazon Echos have taken over our house (six units and counting). But after I installed the Lenovo product in my office, I find myself going to it to ask questions more and more often. I am consistently struck by how much more useful a smart assistant can be with a screen attached. From showing photos, time, and temperature in default mode, to displaying the results of questions asked (in addition to announcing them), to letting me initiate a task by voice but complete it via the touch screen, the simple fact is the whole experience with the smart assistant is smarter with a display.

Dual Screens and Foldable Screens
So, the bottom line here is that even as voice becomes more prevalent, for now, and likely well into the future, screens will continue to play an important role in how we interact with technology. Which is why so many companies are feverishly working to bring to market new dual-screen notebook and foldable screen smartphone products.

I’ve been skeptical about the use cases for products like these. And when Samsung showed off this week its prototype foldable phone, my first response was: What problem is this solving? Followed by: Who wants a double-wide phone screen? While I’m not convinced that the first generation of these products will drive a ton of utility for most people, and the software challenges around the impact to user interface will be harder to address then most people realize, the fact is they could solve a problem: People’s desire for ever bigger screens.

The first generation of these products are important and necessary steps the industry must undertake. I’ve been following the display industry for many years, and while there have been many, many prototypes, the real learning happens when real products ship. So while I likely won’t be standing in any lines to buy the first dual screen or foldable device, I am very interested in the next-generation of form factors and use cases that will spring from what they learn.

At the end of the day, it’s all about offering even more screen real estate in existing or smaller form factors. While voice continues to improve as a mode of interfacing with technology, it still has a long way to go. In the near term, that means companies will continue to find ways to bring larger physical displays to products. Eventually, we’ll get to a point where the only way to offer a bigger screen will be in a pair of augmented reality glasses, where the entire world in front of you is the screen.

Thoughts on Factfulness by Hans Rosling

It’s been years since I’ve written a book report, maybe decades, but I’ve just completed a book that I want to tell you about. The book, “Factfulness” by Hans Rosling, is one of the most inciteful, irreverent, and fascinating books I’ve read in years. I discovered it by way of a post from Bill Gates, saying it was one of the most important books he ever read.

What initially appealed to me was its premise that things are really much better in the world today than we think. That’s something many of us would like to believe, especially during these turbulent political times, but probably are skeptical, as I was.

The book explains that we get things wrong for many reasons, including what makes the news, how we react to it, as well as relying on old beliefs. We learn pretty quickly how different the world really is.

It shows how we’ve rarely questioned or revisited our beliefs, even though much of the world has been transformed in recent decades. The book opens our eyes and provides reasons why we need to think in different ways.

It provides us example after example of how we are misled and confused about the state of the world and presents factual data that corrects our errors. The book is filled with graphs, charts and tables that add much to the author’s assertions and are often eye-openers.

What was most enjoyable was Rosling’s self-deprecating humor and unusual insights into how we come to our beliefs, why we think that way, and how we can be more objective. He uses numerous examples and stories gleaned from his travels fighting epidemics and conducting research around the world, meeting with numerous leaders.

Throughout the book Rosling reports the results of surveys he took among his thousands of audiences, asking simple multiple-choice questions about life in different countries. Time after time he points out how a chimpanzee making a random guess do a lot better.

One comes away with new revelations about the world and how much it’s actually improved in the past few decades.

While the book is focused on the state of the world’s condition, such things as income, living and medical conditions, lifespan, and education, it’s much more. It’s a handbook for improving how we think.

Hans Rosling, who passed away last year, was an Egyptian-born Swedish medical doctor, a professor of international health, and an adviser to the World Health Organization and UNICEF. His TED talks have been viewed more than 35 million times.

He wrote the book in the last years of his life along with help from his son and daughter-in-law, Ola Rosling and Anna Rosling Rönnlund, who invented a bubble-chart tool for displaying information in a very unique and highly visual way; that tool was eventually acquired by Google. They make heavy use of these charts throughout the book, including on the inside covers.

Nearly every page is filled with fascinating information that most of us are unaware of and is even counterintuitive. Rosling goes into detail as to why that’s the case, from explaining the motivations behind journalists, doctors and experts, to explaining the biases we each hold. He does it in logical and non-blaming ways. In fact, when it comes to blame, he has a fascinating section on it.

“The blame instinct is the instinct to find a clear, simple reason for why something bad has happened… It seems that it comes very naturally for us to decide that when things go wrong, it must be because of some bad individual with bad intentions. We like to believe that things happen because someone wanted them to, that individuals have power and agency; otherwise the world feels unpredictable, confusing and frightening.”

This is one of those books that you savor and don’t want to see end. You’ll think about things very differently after reading this remarkable book and might even believe that conditions in the world have never been better than they are today.

”

Facebook’s Misguided Strategy

When I first began articulating my theory of behavioral debt, I used some of Facebook’s efforts to branch out of it’s core product experience as an example. The more I have thought about Facebook and my research focus on human behavior and technology the more I realize Facebook is one of the best sources of research for that goal.

The core of my theory of behavioral debt is how difficult it is for humans to change behavior once habits have formed. Many know the phrase, you can’t teach an old dog new tricks. My attempt is a deeper understanding of why you can’t teach an old dog new tricks.

Facebook, is a good place to start when attempting to more deeply understand how a product strategy needs to develop along the lines of the expectation of the product itself. Facebook begins with connecting people, and the job it is hired to do is to maintain those connections first and foremost. Facebook has struggled, and will always struggle to branch out from that core experience. This is why they will never be a payments platform, for example, or a developer platform for VR or AR. There are certainly elements of VR or even AR that fit Facebook’s core premise of connecting people, but what lies at the center of their challenge is a combination of the type of connections its users may desire to use its platform for as well as user trust.

This is why I find the lack of interest in Facebook’s Portal quite telling. If we think that a company product portfolio needs to stay within the bounds of the original job it was hired for, as I do, then technically Facebook Portal should appeal to Facebook customers. The sole job consumers hire Facebook for is to stay in touch with friends and family, and Portal seems like a product fit exactly for the core use and mission of Facebook. The recent reviews are not positive, mostly due to lack of trust in Facebook, and some early consumer feedback I’ve received is not positive either. Which begs the question if Facebook is misguided and will ultimately be unsuccessful in new efforts to expand the Facebook service into other categories. A conclusion that would be detrimental to Facebook stock as it would signal a growth challenge facing Facebook many bullish investors are not counting on.

Similarly, with VR and even AR to some degree, the idea of being with friends and family socially in virtual reality seems to be aligned with the core job Facebook is hired to do. While VR is early days, it is hard to be bullish on Facebook succeeding here.

Lastly, there is one other line of thinking I’ve had lately that I’d like to flesh out at some point. When I think about the value of ads on Facebook vs. Google, I have hunch consumers are more included to pay attention to an ad on Google than on Facebook due to the job each product was hired to do. I liken this to a receptiveness to ads based on each products job to be done. Google is hired to get information, therefore seeing an ad fits the context of the job Google is hired to do. Seeing an ad is not in line with the job a consumer hires Facebook to do, and therefore the attention to those ads is less than it is on Google.

Now, one can argue the more relevant fit for an ad in Facebook is seeing the brand and products friends and family like or recommend. This would make for a more aligned product fit for an advertisement in line with the core job of Facebook which is to keep friends and family connected. We know that recommendations from friends and family are one of the more powerful ways people discovered new products and services and given Facebook is a big direct to consumer advertising platform this seems like a relevant strategy.

For example, you have probably seen ads on Facebook for a new shoe company called Allbirds. On the Allbirds ads, I see on Facebook I also see some friends or family who has clicked the like button for Allbirds. That is all fine and good but what would be more relevant would be something like so and so recommends Allbirds.

Many of you may be familiar with net promoter score metrics and if Facebook or brands that advertise on Facebook could take advantage of brands that meet a certain net promoter score metric. This way the better brands, like Casper or Allbirds, have become, can become recommended products on the platform. Consumers who find these brands early, and have positive experiences generally like to tell others about the brand they discovered so they can be seen as tastemakers or trendsetters. Facebook and direct to consumer brand ads seem poised to take advantage of this and have better-performing ads on Facebook.

Facebook will hit wall after wall in their growth strategy if they don’t fix their user trust problem. While that certainly includes dealing with the abuse and toxic content, fake news, and advertiser exploitation, more refined and relevant friends and family influenced advertising strategy would go a long way in my opinion.

Apple’s Trojan Horse-The iPad 12.9 computer

In last week’s ThinkTank piece, I stated that Apple, with the introduction of the new powerful iPad’s, was trying to change the rhetoric around these new products. Instead of directly calling them tablets, they talked about their computer like features and only once referred to them as tablets.

I also pointed out that these new iPad’s are closer to the original vision Steve Jobs had when he introduced the iPads in 2010 and suggested that someday an iPad could replace a laptop. In the eight years since the iPad has been on the market, it has become a go-to portable computer for many people. I can do about 70-80% of what I can do on my laptop with the iPad, and now that Adobe’s Photoshop and many other mainstream computer productivity apps are available on the iPad, these “tablets” are becoming more computer-like every day.

Earlier this year, I met with one the top execs of a major PC company who sells a lot of low end to mid-range laptops. This exec told me that the one thing Apple could do that would impact his laptop business was to introduce a computer for $799 or lower. I am sure he was relieved when Apple introduced the new MacBook Air with a starting price of $1199. But that relief might be short-lived. Given Apple’s new positioning of the iPad as a potential laptop placement, with a starting price of $799, his worst fears could be realized over the next year or two.

PC makers have, to date, argued that the iPad was way too underpowered to ever replace the laptop as a true productivity tool. Up to now, that has been true. But with the new iPads sporting Apple’s Bionic A12 processor that can compete for head to head with most of Intel’s Core i5 processors that are in the majority of mid-range laptops, that gap is narrowing.

If you look at Microsoft’s Surface, which is a tablet with a keyboard, this design concept has already gained some serious market traction. With the iPad’s new powerful engine and larger base of productivity software, at the very least these new iPad’s can compete head to head with Microsoft’s Surface. However, I believe that given Apples marketing muscle and new updates to their connectivity software that drives more and more of the Mac and iPad’s to cloud shared apps and services, it will, over time, allow them to compete directly with the mainstream laptop market.

This may especially be true with the 12.9-inch model. In the short time, I got to play with it in Brooklyn last week, I could see how it could evolve into a laptop replacement for me in the future. I do not doubt that laptops are not going away anytime soon and in fact, may even see some more growth in the next year or two.

But to underestimate the new iPad’s as a potential competitor to laptops would be a mistake. Apple’s posting of it as a computer says that they will continue to make it even more powerful and work with developers to create even more powerful productivity apps. Add to that Apple’s marketing budget and muscle that will clearly show how it could serve as a person’s main portable computer and you could see Apple potentially being quite successful with making the iPad a notebook replacement for many in the future.

If they do push to make the iPad a notebook replacement and it is successful, could that cannibalize their notebook business? Apple has done this before. The iPhone took out the iPod and Apple planned it that way. Last year, Apple sold 42 million iPad’s compared to about 25 million Mac’s. Keep in mind that Apple’s goal is to sell as many Mac OS and IOS devices and tie them to their growing echo systems of apps and services. I don’t believe Apple will ever discontinue their MacBook’s as there will always be a need for them by some customers, but I can see how many MacBook users who are not power users might default to an iPad Pro as an alternative to a laptop.

One other thing they did that makes it possible for the iPad to act as a computer is the addition of USB-C for the connector. It can now be used with a 4K monitor. There have been many attempts to try and make a smartphone the center of a PC experience and Samsung has created the DEX to tie their smartphones to a monitor and keyboard. But most smartphones did not have the kind of power you need in a PC to make it the center of a computing workstation.

These new iPads now sport PC class processors, and with an external keyboard, it will be interesting to see if people begin using it in this format to handle real-world productivity tasks in the future. While many reviewers dismiss Apple’s new positioning of the iPad as a potential laptop replacement, and this version may not be enough to get people to move from their laptops to an iPad Pro yet, I am convinced that over the next two years Apple will make this product more powerful and PC like and spend the kind of money and marketing to make it a serious option to a laptop.

What the iPad Pro Enables Matters More Than What It Replaces

It has been quite fascinating reading the reviews of the new iPad Pro this week, and even more so reading the comments those reviews received. The process highlighted a few interesting challenges we have when we go through significant technology transitions and what might be holding us back from moving faster.

We Feel Compelled to Put Devices into Buckets

Of course, we give everything a name: a baby, a dog, and a device. We name items to market them and sell them which, of course, makes a lot of sense, but then because of that name we compartmentalize them to count them, project them and see how they are performing in relations to other devices.

Most of the times this works, especially when devices are single purpose: a camera, an MP3 player, a VR headset. But when devices can do multiple things and what they can do is determined by the software or apps they run or even by the accessories you can attach to them things get complicated very quickly.

Often we end up creating artificial categories based on how the product is marketed even though the way it is used is very different from what it says on the box.

Those Buckets Might Prevent Us from Looking Beyond the Hardware

For those devices that do multiple things, it is at times harder to see what they are competing with because the one thing that might drive buyers to get them in the first place is different from person to person. If you think about smartphones, for instance, some buyers might prioritize the screen size, others the camera, and others the quality of their calls.  While many will be similar the importance put on those features will be different and more importantly what people consider a deal breaker is likely to be even more different.

The look of a product is at time deceiving. Something might look like something else but behave very differently, or something might look very different but behave the same or drive the same behavior. Think about netbooks and notebooks for instance. On the surface, they looked very similar with the most significant difference being size. Yet their performance was very different which in turn drove very different use cases. Another example is lower-end tablets running Android. At the beginning of the market they looked very much like an iPad, but in countries like China, they were really competing against MP4 players because their software and weak app ecosystem limited their use cases to watching videos. When you think you are competing with something different than what you are, success is hard to come by as marketing, channel presence, pricing, target audience, all will be off for the product.

The look, however, often determines what people expect. If you quack like a duck you are a duck the same way that if you look like a notebook I expect you to run a specific OS, support a mouse, be great at productivity.

Let’s Talk About the Mouse and Other Must Haves

The PC market is a unique case study because of how many entrenched workflows users have. These are workflows that are old and might not be perfect, but the familiarity we have with them leads us to believe we cannot do without. The mouse is a good example. For many PC users the mouse is a core part of the experience which means that because the iPad Pro does not support a mouse, it cannot be a PC replacement.

Let’s look though at where the mouse comes from, which is a world where the PC was in the same place day after day, after day. Over time that PC moved around with us and the mouse cut the cord and came with some of us. I will always remember one day being in an airport lounge at SFO and seeing a lady who set herself up at a table with her laptop, a mouse and a portable printer. In her mind, I am sure, she was being mobile, but the reality was quite different.

If Apple thinks the iPad is a true mobile computer, then it makes sense that it is looking at an alternative to a mouse when you are trying to pinpoint something on the screen. If you are using the device on the subway, as you walk, in the car touching the device with your finger or the Apple Pencil makes much more sense than using a mouse. If I am right, mouse support is not a technical issue but a conscious decision of what fits the experience. The same can be said for support for a wired printer. This might not match people’s expectations of a true computer, but it matches human behavior.

File systems at an OS level is another behavioral debt we have. Does it still make sense to have one when much of our work is done in siloed apps and or stored in the cloud for easy collaboration?

Focus on What Devices Enable

We can argue as much as we want about whether or not an iPad Pro is a PC or not but I think we cannot argue with the premise of what the next computing experience is likely to include:

  • a mobile, not a portable device that is always connected
  • a more versatile operating system that transcends product categories
  • multiple input mechanism: touch, pen, and voice
  • “satellite” experiences driven by other devices such as AR glasses, wearables, IoT devices and sensors

Because of these characteristics, new workflows will be created, and old ones will evolve. Like for other industries, like the car industry, these changes will happen over the course of many years and impacting, people differently based on their line of work, their disposable income, the market availability in their region and most importantly their entrenched behaviors. Who gets there first does not get a medal but gets to show the way to others by showing what works and what does not.

 

iPhone Unit Sales, and the Most Relevant Metric

Apple surprised everyone when they announced last week that they would no longer be disclosing iPhone unit sales. There is a lot to unpack with this new revelation, and to the chagrin of many of the short view traders, their Apple investing game got a bit more challenging.

What stood out to me the most was Apple’s commentary on their earnings call where they explained their justification of this reporting change and emphasized that THEY don’t believe the reporting of a unit sale of iPhone is the most relevant way to understand the whole Apple story. I completely agree with this point. I do, however, disagree that it is not a pertinent metric as Apple wants to paint it.

The Story Apple Wants to Tell
Throughout the last few years, Apple has worked on getting their investor’s minds wrapped around new stories. Apple has long been battling the short investor mindset vs. the long. Much of their strategy has been to bring more long (value) investors into the picture and try to minimize the number of short investors in volume. Whether that was to chase them away (intentionally take a stock hit), join the DOW, split the stock, etc., Apple seems to take the long view of itself and is ok with some short-term market turmoil. Looking back historically, Apple’s stock always seems to recover.

It seems Apple is in the same place now, as they look to get investors to buy into a new growth story. One that is not as entirely dependent on iPhone sales as it has been the past 7-8 years. The typical investor sentiment has always been Apple is an iPhone company. While short sided, the financials many investors use to make decisions made this sentiment right. But Apple now wants investors to fully understand the big picture that Apple is not an iPhone company but an ecosystem company. This is a story not about iPhone sales, but about iPad, Mac, iPhone, AirPods, Apple Watch, HomePod, services, third-party developers, enterprise software partners, retail, and so much more.

I expect all of Apple’s commentary around earnings to continually highlight the ecosystem story, not just the iPhone story. Apple wants investors to focus on Apple’s ability to grow revenue, not just iPhone sales. I’ve long affirmed this view, and even in talks with investors, I have encouraged a view that looks at Apple’s total revenue growth on an annual basis. Below is that cart since 2007.

In my mind, this chart is one of the more important. Followed by tracking the growth of other categories as a part of Apple’s total revenue mix. For Apple’s story, about not being an iPhone company to work out, then the percentage of revenue iPhone brings in as a part of the revenue mix needs to decrease a bit more, and other categories need to rise. Here is revenue mix, and in particular tracking, the services category will be the most interesting. It is now the second biggest contributor to revenue.

Apple desires to shift focus from iPhone has the most focused on metric and move that to things that tell the ecosystem story. Things like active installed base, growth in subscriptions, services growth holistically, customer loyalty, new customers gained in the quarter for a particular category, and more. These are the things that demonstrate Apple’s ability to hold onto customers, and those customers ability to grow the value of the ecosystem for all the stakeholders.

Ballpark Figures
While Apple won’t release exact unit sales, many folks already have built out models and will easily be able to stay in the ballpark of unit sales. It may be exact, but I strongly doubt they will be horribly off either. What will become a bit more important statistically is to focus on the mix of iPhone model sales. Apple has never disclosed this, and when it comes to iPhone sales going forward, this will be important to get a handle on.

The reason I say mix, is not because of the need to calculate an ASP, but more to understand what percentage of Apple’s installed base is on latest generation technology. This is one of the most relevant things to understand because users who upgrade to Apple’s latest technology platform tend to increase their value to the ecosystem. This is because latest generation hardware allows consumers to take advantage of the latest and greatest the full Apple ecosystem has to offer. And services will remain the single greatest benefactor for growth as Apple customers adopt the most recent technological platform.

With that in mind, many data points I have come across lately, suggest it takes about four years for the bulk of Apple’s customer base to move to the latest platform. Meaning, the step change from the iPhone 5 design, to the iPhone 6/6 Plus design took about four years for ~80% of the iPhone base to be on a model that was iPhone 6 or higher. Using this formula, that means around 2021 ~80% of Apple’s iPhone base will be on the iPhone X technology platform.

For the foreseeable future, iPhone sales will still be a highly relevant part of the story. The iPhone is and will be some time, the center of Apple’s ecosystem story. Essentially, the big grand ecosystem narrative Apple wants to tell does revolve around the iPhone.

Automotive Tech Now Focused on Safety

After years of hype and inflated expectations, it’s clear that the mania around fully autonomous cars has cooled. In a refreshing, and much needed change, we’re starting to see companies like Nvidia, Intel/Mobileye, and Arm now talk much more about the opportunities to enable enhanced safety for occupants in cars supporting advanced technologies.

It’s not that the tech industry is giving up on autonomy—as recent announcements about new rounds of trials from Lyft, Uber, and others, as well as advanced new chip designs clearly illustrate—but the timeframes for commercial availability of these advancements are starting to get pushed out to more realistic mid-2020 or so dates. Even more importantly, the messaging coming from critical component players is shifting away from roads packed with Level 5 fully autonomous cars within a few years, to ways that consumers can feel more comfortable with and safer in semi-autonomous cars.

Over the last few weeks, Nvidia, Intel, and Arm have all discussed research reports and technology advancements in the automotive market that are focused primarily on security, with the technology providing a supporting role. Nvidia, for example, released a comprehensive study called “The Self-Driving Safety Report” that provides a view into how the company incorporates safety-related technology and thinking into all aspects of its automotive product developments. The report covers everything from AI-based design, to data collection and analysis, to simulation and testing tools, all within a context of safety-focused concerns.

Intel, for their part, released a comprehensive study on what they termed the Passenger Economy this past summer, but recently touted some findings from the report that focus on the relatively slow consumer acceptance for self-driving cars due to concerns around safety. Essentially, while 21% of US consumers say they’re ready for an autonomous car now, it’s going to be 50 years before 63% consumers believe they become the norm. To address some of these concerns, Intel is touting its Responsibility-Sensitive Safety (RSS) model, which it describes as a mathematical model for autonomous vehicle safety. The idea for RSS is to develop a set of industry standards for safety that can then be used to reassure consumers in a transparent way about how autonomous cars will function. Recently, Intel announced that Baidu had chosen to adopt the RSS model for its autonomous driving efforts in China.

Back in late September, Arm announced a new program called Safety Ready that ties together a number of the company’s security and safety technologies into a unified structure that, while not limited to the automotive market, is very well-suited for it. Safety Ready incorporates both chip IP designs and software that are focused on applications where functional safety is critical and allows the company to meet the key automotive-related functional safety certifications, including ISO 26262 and ASIL-D. At the same time, the company also introduced a new automotive-specific chip design called the Cortex-A76AE that integrates a capability called Split-Lock that allows a dual-core CPU to either function as two individual components doing separate tasks or two single components running in lockstep, where one can take over immediately if the other fails. As in many automotive applications, redundancy of functions is key for safety concerns and the Split-Lock capability of this new design brings it to digital components as well.

While it may seem that all these announcements are a somewhat dramatic shift from how the tech industry had been talking about autonomous cars, in reality they are simply part of a maturing perspective on how this market will develop. In addition, they’re based on some practical realities that many in the autonomous automotive industry have started to recognize. First, as research has continued to show, most consumers are still very leery of autonomous car features and aren’t ready to trust cars that take over too much control.

Second, the level of difficulty and technical challenge in getting even basic autonomy features to work in a completely safe, reliable way is now recognized as being even harder than it was first believed. Even semi-autonomous cars integrate an extraordinarily complex combination of advanced technologies that includes AI and machine learning, advanced sensors and fusing of sensor data, and intelligent mapping, all of which have to work together seamlessly to ensure a safe, high-quality driving experience. There’s no doubt that we will start to get there, but for now, it’s reassuring to see companies focus on the critical safety enhancements that assisted driving features can bring, as we look further out to the world of full autonomy.

The Pen(cil) is Mightier Than the Mouse

Apple is touting the newest iPad Pro models as the biggest change that has come to iPad since the original device launched. For Apple, iPad has always been their clearest vision of a large screen computing device. Like all of Apple’s products, iPad has an industry-leading customer satisfaction rating, and nearly all consumers of all ages love their iPad. Where iPad has succeeded in consumer sentiment and satisfaction, it has still not fully met its full potential as the perfect large screen computer for the masses.

Fascinatingly, in poll after poll I’ve seen in both our own consumer research and other sources, many consumers indicate they would gladly make the iPad their primary large screen computer, ditching their legacy PC or Mac, if they believed they could. While we can debate whether this perception is the reality, there is no debating the positive sentiment and desire to go all in on iPad by a large number of consumers.

Even in tech circles, the desire is high to jump to what is considered a better way forward. In countless conversations, I’ve had with techies, and even tech-leaning early adopters in our research panel and on Twitter, I continually hear how they would love to switch to iPad if they could. When I press deeper on the reasons why they feel they still need a PC/Mac it often comes down to a mouse/trackpad.

More specifically, they explain how many of their primary workflows still require a mouse/trackpad and the precision of a mouse pointer and the many legacy apps which make efficient use of this legacy solution. After spending some time using the new iPad Pro and Apple Pencil, it left me thinking the future of precision input tools for iOS may be the Apple Pencil not a mouse/trackpad.

The Pen(cil) is Mightier Than the Mouse
After Apple announced the new iPad Pros, along with an updated Apple Pencil, I began to look at Apple’s website for iPad and looked specifically at the areas where they highlighted some of the new gesture features of Apple Pencil and software experiences that support this feature. It was then I began to wonder if Apple Pencil is Apple’s mouse, or more specifically, their precision input tool for iPad.

With this thinking, I’d like to draw a potential parallel. When the iPhone first came out, there was a heavy dose of skepticism about Apple’s all screen phone with a soft-keyboard. Every single smartphone at the time had a smaller screen but a physical keyboard. Apple’s rationale for the soft keyboard was straightforward. They could simply do more from an input standpoint with a software-based keyboard than with a physical keyboard which functions are fixed in the hardware. Things like multiple language support, emoji, and a range of other software based features took smartphones text input to an entirely new level and and there is no going back.

I’m curious if Apple thinks about Apple Pencil in a similar way. Where the software based keyboard for iPhone opened up entirely new forms of input and new, more efficient type based workflow, I think Apple Pencil has the potential to do the same thing from a precision pointing/input tool.

Apple’s new gestures clearly support this theory. Apple may be easing people into this new functionality but the idea of a multi-touch function on the Apple Pencil seems like a logical path forward. At the moment, you can customize the double tap gestures on Apple Pencil to switch between the two tools you use the most. However, ProCreate implemented a clever example that brings up a more sophisticated menu designed to use the Pencil gestures to enable a more seamless workflow. Here is a picture of what a double tap with Pencil brings up when you enable.

While in it’s early stages, I contrast this with Microsoft’s Windows Pen/Ink support. With Windows a mouse is still available to use as a precision pointer, meaning most people will still choose this method by default. The presence of a mouse/trackpad enables the user to stay in their comofort level rather than embrace a new paradigm. The implication is the pen is likely only used for pen use cases and not in a position to become the new mouse. The lack of a traditional mouse pointer/trackpad is precisely the reason Apple has the potential to innovate and encourage software to be built around new precision input paradigms instead of old ones.

It will be very interesting to see how Apple continues to develop the gestures feature on Pencil and what developers do with it. I’d love to see Microsoft run with this idea and explore new Office experiences focusing on the pen as a new type of precision input that can go beyond just ink/drawing.

From a use case standpoint, when you need a precision input tool, there is not that much different in motion than taking your hand off the keyboard and using a trackpad then picking up the pencil. And, I’d argue that what can be enabled by pencil, gestures, and software, will take precision input to a level not possible with a trackpad/mouse.

A few Points about the New Keyboard
I’ve been very clear in my affection for the keyboard design of the Microsoft Surface. As a touch typist, and someone who types north of 7,000 words a week, the feel of the keys when typing is important to me. While not yet perfect, Apple’s new folio keyboard is a huge step up for someone who does a lot of typing like me. I also prefer the additional rigidity of the keyboard cover which closes like and feels like a hardcover book when closed and sits firmly on your lap or table with a strong sense of stability.

Another welcomed improvement and something I have been asking for with the iPad keyboard experience was a way to alter the screen angle. With the previous generation iPad Pro case you could only use the screen in 65-75 degree angle. The new iPad Pro Folio case has an additional groove to dock the screen that is closer to a 90 degree angle which is a more common notebook orientation. Having both these options is excellent for both lean back and lean in workflows and experiences.

Lastly, a subtle point about magnets. Apple’s material science and design team does some excellent work with magnets. The Pencil’s magnetic dock and charging experience allows you to carry the pencil without worry of it falling off. Upon first dock you will find it surprisingly strong. Similarly, the magnetized grooves on the keyboard dock are surprisingly strong. This makes all the difference in the world when you are touching the screen with any degree of force. The firmness and stability of the iPad when using with the new keyboard cover design certainly feels much more notebook-like than ever before.

A Whole Computer and Nothing But
To truly understand the iPad, I firmly believe you have to take the long view. Most consumers are not power users. Most consumers use their smartphones more than their notebooks and most have a somewhat dysfunctional relationship with their notebooks. Most kids are similarly growing up in a world where their smartphone is their primary computer and their comfort level with mobile operating systems is drastically higher than their comfort level with legacy desktop/notebook operating systems. It is within this environment that I feel the iPad will find its sweet-spot.

Apple’s challenge is to make the iPad a somewhat new experience and one that challenges the idea of what you can do with a big-screen computer. While Apple is continuing to make solid improvements in hardware, it will truly be up to their software developers and broader ecosystem to buy into the vision and participate in creating the future. But within that thinking still lies a distinguishing observation about the way a person may perceive the iPad vs a notebook while they are shopping.

When you buy a Mac or a PC, you get the whole computer experience out of the box. You get the screen, keyboard, and mouse/trackpad. That is still not true of iPad. If Pencil can live up to its potential as the precision input tool of the future, then it is likely Apple would need to include this in the box at some point. Similarly, the Keyboard may need to be included. My concern is that the market may perceive the emission of these critical accessories as an admission by that it is not yet a full computer. They may look at the total price and justify getting a PC or Mac because it comes with all the inputs they need in the box for one set price. The iPad is really not a full computer, the way Apple wants to position it, without the Keyboard and potentially without the Pencil. Someday, if Apple hopes the market to perceive iPad as a whole computer it may be necessary to include all the critical components in the box.

After using the new iPad Pro, I’m more convinced than ever that Apple is heavily invested in continuing to advance iPad as the future. It has taken baby steps to get here, and will still take baby steps forward as it gets closer to reaching its full potential from a hardware, software, and accessory standpoint. But what is most interesting to me in this thinking, is how when I think about the traditional PC/Mac form factors it seems as though those devices have essentially reached their peak where iPad still has a lot of opportunities to grow and many future innovations in store.

News That Caught My Eyes: Week of November 2, 2018

Google’s Employees Walk Out

On Thursday, there were a series of employee walkouts at around twelve Google offices around the world. The demands of the employees:

  • And end to forced arbitration
  • A commitment to end pay and opportunity inequality
  • A publicly disclosed sexual harassment transparency
  • A clear, uniform, globally inclusive process for reporting sexual misconduct safely and anonymously.
  • Promote the Chief Diversity Officer to answer directly to the CEO and appoint an Employee Representative to the Board

Via Recode

  • I covered the New York Times story about Rubin last week and as I said, Google should be doing more and it seems that many employees thought that too.
  • While Pichai had responded to the New York Times story he had not offered any concrete steps on how he was planning to change processes and culture
  • On Thursday, Pichai showed his support by sending a letter to the employees saying managers were informed of the walkouts and supportive and so was he: “I understand the anger and disappointment that many of you feel. I feel it as well, and I am fully committed to making progress on an issue that has persisted for far too long in our society… and, yes, here at Google, too.”
  • While Pichai’s letter shows empathy, once again, it fails to give concrete suggestions on what he and the board will implement to drive culture change.
  • Google’s employees have been vocal before about Google’s projects like Dragonfly (the censored search-engine for China) and Project Maven (for better AI for the US Military).
  • A week after the Project Maven protest, Pichai released ethical guidelines for AI so it will very interesting to see what his response is after today.
  • This is of course not just a Google issue and I feel any company that will step up first in creating new processes along the line of the demands put forward by the Google employees will have not just a hiring advantage but a better working culture that will ultimately benefit the overall business.

 

Royole’s bendy-screen unveiled in China 

Royole Corporation – a specialist in manufacturing flexible displays – unveiled the FlexPai handset at an event in Beijing. When opened, the device presents a single display measuring 7.8in (19.8cm) – bigger than many tablets. But when folded up, it presents three separate smaller screens – on the front, rear and spine of the device.

Via BBC

  • It is quite impressive that this six-year-old California based company was able to be first at what Samsung, LG, and Huawei all promised to do soon.
  • The demo of the device launched at an event in Beijing looked pretty rough, but that is not a big issue given the company plans to sell mostly to developers at a pretty hefty price too.
  • Despite their stated intent to want to seed this device to developers one has to wonder if they wanted to show their tech early to land a deal or even an acquisition from one of the main vendors.
  • I remain skeptical about foldable screens on a phone for a few reasons:
    • Apps optimization
    • The overall thickness of the device
    • Price
  • If the price is too high for mainstream adoption then app optimization will lag which in turn will delay volume sales and price decline.
  • This was one of the big reasons why larger tablets never took of in the Android ecosystem and I fear foldable phones might die a similar death.

Apple’s Q3 Earnings

Revenue reached $62.9 billion, which is a 20% increase. For fiscal year 2018, revenue grew over $36 billion to $265.6 billion, an all-time record. Apple experienced double-digit growth in all geographic segments and new revenue records in almost every market we track.

  • This was the best quarter ever for Services, with revenue up 27% to an all-time record of $10 billion.
  • iPhone revenue grew 29% year-over-year, and the installed base again grew by double digits.
  • Apple returned more than $23 billion to investors during the quarter, including almost $20 billion in share repurchases.
  • In the December quarter Apple expect revenue to be between $89 billion and $93 billion.

Via Apple 

  • Apple stock declined after earnings due to the softer guidance for 4Q18. Interestingly this was in large due to expected continued weaker consumer confidence in emerging markets and continued weakness of the Dollar.
  • It seemed that Apple factored in a prolonged weakness of the $ following the mid-term elections.
  • iPhone ASPs stole the show with a 28% increase year over year driving growth in revenue despite units. We should see a similar trend in iPads once the new iPad Pro models start shipping.
  • As it happened with the iPhone last year, ASP guidance for next quarter is softer due to the mix of products which more early adopters’ purchases of the iPhone Xs Max happening in the third quarter.
  • Demand in China continued to look healthy across product lines which is always good news
  • Services revenue grew to $10 billion with 300 million subscriptions. While the first number is impressive it is the second that speaks to how prosperous Apple’s future will be as it moves into more subscription option with the rumored video service and news service
  • Some believe that part of the share decline following the call was linked to the announcement that Apple will adopt new reporting practices that involve no longer reporting unit volumes. Apple will report revenue by product line only.
  • This should not really be a surprise as we see market saturation limiting sales but ASP increase and mix shift benefitting revenue. Apple seems to be forcing the hand of investors after asking for months to look at other data points that help to understand the health of the company other than unit volumes alone.
  • On the call, Luca Maestri pointed out that other vendors such as Samsung do not release unit volumes which albeit true should not be a decision driver on Apple’s part nor a justification.
  • Tim Cook talked about the retail business both in terms of stores opened and activities within the stores from Kids camps to sessions. We heard those numbers on stage in Brooklyn at the voice of Angela Ahrendts. It is amazing how these stores continue to be a strong revenue generator, marketing opportunity and now a learning center for many users. Apple is educating customers in doing more with their devices and as I said many times engagement drives loyalty.
  • For the holiday quarter, it will be interesting to see how the iPhone XR will do and what Apple learned about planning for three different products at the same time when it comes to production.
  • On the iPad and Mac front, it seems that pre-orders of the new models are going well but of course it is very early days.

 

iPad Pro’s Impact on the PC Market

I flew out to Brooklyn for Apple’s launch event this week and was pleasantly surprised that they introduced major upgrades to the MacBook Air and the iPad Pro line. Although these were rumored in advance of the event, getting to see them in person and touch them and play with them is much better than just seeing it streamed.

The new MacBook Air is a significant new version of the MacBook Air design that makes it the most powerful thin and light laptop in Apple’s line. And for MacBook Air fans, this upgrade is very welcomed. One of the more interesting things I overheard when the media had hands-on with the MacBook Air after the event is that many said that this is the laptop they would want to buy themselves. It has serious power, a Retina screen, one of Intel’s best Core i5 processors and more than enough memory and storage for even the most hardcore laptop user.

One important technical side note about the new MacBook Air that did not get enough attention is that Apple created a new aluminum alloy that includes some recycled aluminum for the unibody casing from the ground up. In a nod toward their overall approach to creating more green products, this new alloy material does not need to be smelted and is instead created with a new, much greener process, although Apple would not tell me what that process is. Apple has a long history of inventing new materials and manufacturing processes that do not exist if they need it to make any of their products. This is an excellent example of that.

I too would covet this as my go-to laptop, especially for travel, but I found the most exciting product at the launch to be the new iPad Pro’s. This new tablet goes way beyond being a tablet. I think that this is the iPad that Steve Jobs originally envisioned when he said at the iPad launch in 2010 that someday a “tablet” could replace a PC. And with new Photoshop from Adobe, and apps from Autocad and a whole host of new and powerful drawing tools, along with full Office support from Microsoft, I would argue that most of what a person does on a PC can now be done on an iPad Pro. It also uses their Bionic A12 processor that can go head to head performance wise, with most core i5 processors on the market today.

Traditionalists will scoff at the idea that the iPad Pro, even with its increased power, could ever supplant a laptop or PC, but for a lot of people, it already has. Many use it as their primary computer now and only default to a desktop or notebook for apps that need heavy lifting as they call it. Today, the majority of people who have an iPad also have a PC or laptop. But the amount of time they spend on a PC versus an iPad has changed and the iPad, for a lot of people, is where they spend most of their time when doing mainstream computing tasks.

One other thing they did is add USB-C to the new iPad Pros, which now makes it \possible to connect it to a 4K display and even use it to charge your iPhone. Apple did stress the creative aspect of the new iPad at the launch, but they also hinted that they too see the iPad becoming more than a tablet and began positioning it as a laptop replacement. In fact, I think that their initial target is Microsoft’s Surface line and within the next two years will build on this new iPad Pro and add other features like mouse support and better continuity with their Mac platform and, over time, begin migrating more of their customer base to the iPad Pro line as a laptop replacement for general users.

That does not mean they would get out of the laptop business. They will continue to build more powerful laptops and Macs and could even move from Intel-based processors to their own A-series sometime in the future. Although we know they have no plans to merge IOS and Mac OS, that will not matter if they deliver greater continuity between the two and their software developers make versions of their apps for the Mac and the iPad, thus giving users an even broader choice of hardware designs to meet their individual needs. In this case, it would either be the iPad Pro with its tablet-focused design or a MacBook Air, with its clamshell design. Add to that fact that much of what we use in the way of apps are cloud-based and either a MacBook Air or an iPad Pro could meet individual needs in new ways.

From an industry standpoint, the new iPad Propositioned as a laptop replacement could eventually be a big deal. All of the traditional PC players have discounted Apple’s iPad as being too low powered and weak to compete with conventional laptops. This new iPad Pro is now as powerful as most mid-level to even some high-end laptops since almost all use Intel’s Core i5 processors.

Apple had a slide that showed that Apple sold more iPads than any individual PC company sold in PC’s in the last 12 months. That slide was not an accident. It was Apple signaling that they plan to compete with laptops directly in the future. They are not trying to revive the tablet category. They are changing the focus and saying that the iPad Pro could replace a Windows or even a Chrome-based laptop.

How long will this take for Apple to transition the iPad Pro to a worthy laptop competitor? This new iPad Pro with computer-like power is the first step in what I believe is a three-year journey. Their rhetoric on the new iPad Pro, as well as what they shared at the event is interesting. Tim Cook barely mentioned the word “tablet.” When describing the iPad Pro. And the chart, along with the demos of PhotoShop and the mention of Auto Cad and AR-based apps tied to real-world applications, only enforced their view that the iPad Pro is more than a tablet.

I will write more next week on the impact it could have on the PC laptop market.

The other thing that interested me is the new 12.9 inch iPad Pro’s design. When I held it next to the new 11-inch iPad Pro, the size difference and weight is close. You have to see the new 12.9 inch iPad Pro when it hits stores next week. The current 13.1 inch is too big for me to carry around all of the time so I default to the 10.5 inch iPad Pro as my go everywhere device. But I am pretty sure that I will move to the 12.9 version given the new design is so similar in size to the new 11-inch iPad Pro and make it my go everywhere device in the future.

I suspect both products will gain serious attention from Apple fans and even draw in many switchers. Both products, along with strong iPhone sales should help them break unit sales and revenue numbers this holiday quarter.

The Next Two Years Will be Pivotal for Wireless and Telecom

The conventional wisdom is that the wireless industry has sort of stagnated. Differences in wireless coverage, data capabilities, and pricing have narrowed. Most smartphones are good, if not great, and even the latest flagship phones show more ‘small i’ than ‘big I’ innovation. It’s been awhile since there was a real blockbuster app. And IoT, while growing modestly, is still waiting for its breakout.

But fasten your seatbelts, because the 2019-2020 are going to be the most pivotal years in telecom in some time, setting the stage for the next phase of connectivity. Of course, 5G will be the headline story. Although we’ll see a handful of deployments before the end of this year, 2019 is when 5G gets going in earnest. That’s when 5G New Radio (NR) becomes commercially available, and true, standards-based 5G services are launched by all major U.S. operators. Additionally, during the first half of 2019, we’ll see the introduction of several 5G smartphones, although it will likely be 2020 before Apple announces a 5G iPhone.

By a year from now, all major U.S. operators will have rolled out 5G to a healthy number of major cities – each of them with a slightly different approach/strategy. There will also be 5G launches in several other countries – notably South Korea, Japan, China, and a handful in Europe. So we  should have a pretty good idea of what this first wave of 5G looks like, and whether there are any breakout business cases.

In the U.S., I’m expecting two flavors of initial 5G services: hot spots in cities that will deliver more of a wow factor on speed; and ‘coverage’ oriented 5G, such as what T-Mobile is planning with its 600 MHz-based launch, which will cover a broader geography but will look more like 4G Plus or 5G Minus. Also by this time next year, Verizon will have launch its fixed wireless access service in a multitude of cities, some of them on standards-based equipment, and we’ll have a much better sense of how well 5G mmWave works as an option for fixed wireless access and whether Verizon’s service is taking any meaningful share from the incumbent broadband providers.

And finally with respect to 5G, mmWave spectrum auctions are starting in November and will continue in waves through much of 2019. We’ll see if it’s just the rich getting richer or whether there are any potentially viable new entrants. There are also a large number of 5G spectrum auctions scheduled to occur in Asia and Europe. These will be pivotal in their own right, but will also influence the development of a ‘global’ 5G band and will put pressure on the U.S. to move on mid-band spectrum.

There will also be several developments next year that will set the tone for years to come. The 3GPP is expected to approve Release 16 in the 3Q-4Q timeframe. There are many key aspects here, among the most notable being Ultra-Reliable Low Latency Communications (URLLC, say that five times quickly). This will be among the anchors for exciting new applications leveraging 5G, such as AR/VR, plus the other ‘pillars’ of 5G beyond Enhanced Mobile Broadband, such as industrial IoT and autonomous vehicles.

The launch of CBRS will also be an exciting development. In addition to introducing an innovative spectrum sharing infrastructure that could be a model for other countries and future spectrum auctions, we could also see a new model for indoor coverage and services. The PAL auctions for CBRS will occur later next year or in early 2020. This is also an area where there could be new market entrants, such as cable companies, wireless internet service providers (WISPs), and perhaps some of the more influential Silicon Valley types.

During 2019, we will also see further definition of the industry’s future structure, starting with the likely approval the T-Mobile/Sprint deal will be approved. This could trigger some other M&A activity, more broadly focused on the future of broadband than just relegated to the wireless sector. DISH will also figure in here. Even as it builds its NB-IoT network, we will know over the next 12-18 months whether its spectrum assets are acquired by another operator or whether it plans to build a wholesale 5G network, for which an anchor tenant (Amazon?) is needed.

If you’re not already out of breath, our eyes are also on the following:

  • The launch of T-Mobile’s Mobile TV service based on the Layer3 acquisition. The OTT TV space is pretty crowded already, so T-Mobile will have to do something characteristically disruptive to make a mark.
  • AT&T’s project AirGig. There have been some interesting trials. We’ll know more within a year or so as to the potential commercial viability of this technology.
  • Small cell siting. A Battle Royale is shaping up between the feds and the municipalities regarding new rules on small cell siting (pricing and shot clock). The results here will have important implications on further 4G densification and how quickly high-band 5G is rolled out. The “U.S. Competitiveness” card could be a factor here, as other countries such as China and South Korea are able to get small cells deployed at a much more rapid clip due to a different model of ‘government involvement’.

Most importantly, within 12-18 months we’ll have a much better sense of what 5G really is and can do. This will set the stage for the development of other use cases beyond enhanced mobile broadband. The fixed wireless access piece is important as well. If 5G wireless can be a viable option for broadband, there could be a shakeup of cable’s near monopoly in that market. Who knows – maybe by 2025, a fair number of households will only have to pay for one broadband connectivity solution.

The iPad’s Blank Slate

The iPad’s form factor has been a subject I have been writing on for years. I’ve always believed Apple when they frame this product as the ultimate personal computer and the device that has the most potential to enable things not possible before with mouse and keyboard computers. The problem, though, is most consumers still struggle to see the iPad like that and while they may have an iPad as a companion or entertainment-focused device they still use a PC/Mac for the bulk of their production workflows. With the latest generation of iPad, Apple wants to change all of that.

Apple is touting the newest iPad Pro lineup as the biggest change to iPad since the first iPad. Which is important because they need consumers to start fresh in their mind when they think about iPad going forward. If everything has changed then all the preconceived notions they have about iPad can be put aside.

Ending the Debate
It does feel like an entirely moot debate, but many in the mainstream media still like to haggle with the idea the iPad is a computer. That being said, I do feel Apple still has to make the case to the end market that iPad is undoubtedly as capable, and in some cases more capable than a notebook.

While Apple has been building their marketing in this direction for a few years, I think this year is the full court press for iPad marketing. Note a couple of catchphrases I pulled off the iPad’s landing page on Apple.com.

A12X Bionic is the smartest, most powerful chip we’ve ever made. It has the Neural Engine, which runs five trillion operations per second and enables advanced machine learning.

Translation: It’s faster than most PC laptops.

It’s all new, all screen, and all-powerful. Completely redesigned and packed with our most advanced technology, it will make you rethink what iPad is capable of.

And what a computer is capable of.

Like a computer. Unlike any computer.

It’s more powerful than most computers. And more portable than all of them

It’s a computer that lets you do everything with touch.

iPad Pro does what a computer does but in more intuitive ways.

Use multiple apps at the same time with a few taps. Move objects between apps simply by dragging and dropping, or switch apps with a single swipe.

That is a small sample, and after I indexed the page, I counted 11 references with the word computer in it when talking about or comparing iPad. Apple also is hitting hard on most the main use cases from web browsing, email, multitasking, messaging, Office, wireless printing, and a slew of other things that normal consumers will see and conclude iPad Pro does pretty much everything they can do with their PC or Mac and more.

Having analyzed Apple’s iPad Pro landing page the last few years looking specifically for a full court press to position it against a notebook I can conclude this year is Apple’s biggest push yet.

It Boils Down to Workflows
Interestingly, in many of the end consumer research we do, when we talk about reasons they stick with a PC form factor it all comes down to a heightened awareness of their workflows. They always cite certain things they can’t or don’t think they can do with iPad that is a barrier to replace their notebook with it. I know many people who have successfully done this and aren’t looking back, but they are still in the minority.

Consumers start with workflows in their mind, even though they don’t think about it in those words. Then they look at the hardware and determine the best choice to fit their workflows. Apple has the best leverage here, as a major trend has emerged where the iPhone has become a central part of most consumers daily workflows. Consumers are waking up to how much their iPhone can do and how many workflows it has taken from the PC that there should be a comfort level that if their iPhone can do it, then iPad can do it, and more. This comfort level with iPhone as a critical part of most consumers daily workflows could be the most leverage Apple has in getting consumers to think about iPad as their next big screen computer.

Marketing and the Ecosystem
For Apple, it is up to their stellar marketing prowess to tell this story more broadly and entice consumers to go all in with iPad. The big design changes are certainly going to get their attention, and I have a feeling there is an aged iPad installed base that is due to upgrade, and this may be the year.

Lastly, the third party ecosystem is what can truly turn the tide for iPad. Apps for iPad are already numerous but we are still waiting for a large wave of creativity from developers when it comes to third-party apps for iPad that are unique, exclusive, and take advantage of all the unique hardware of iPad.

On this point, I’m leaning toward flipping my thinking about Apple’s efforts to bring iOS apps to Mac as a strategy for more iOS software on Mac. Perhaps the best way to understand this is to as a Trojan horse for more Mac specific developers to bring their apps to iOS/iPad.

For iPad, I’ve always thought the analogy of a blank slate was apt. It is a device where anything is possible and a blank canvas for its owner to use it in any way they see fit. Let’s hope the market sees iPad’s true potential.

Apple’s Vertical Integration Shines with the New iPad Pro Line

This week at an event in Brooklyn, Apple launched a new MacBook Air, a new Mac Mini, and two new iPad Pro. It is interesting to me that these devices came to share a stage because in a way they represent key products in the history of Apple’s computing offering. The Mac Mini reinvented the desktop computer, focusing on a minimalistic design yet without sacrificing performance. The MacBook Air took the MacBook line to a higher degree of mobility and introduced an all Flash architecture. And finally, the iPad Pro started to lay the foundation for what Apple calls the “future of computing”. I want to focus on the iPad Pro because to me it is certainly the product with the most fascinating but also the most complex story to tell.

The iPad’s Journey

When the first iPad came to market in 2010 the easiest way to explain it was to describe it as a big iPhone. Users were in love with their iPhones and they were spending more and more time on mobile devices to the detriment of many other things including their computers. At least at the start of the whole tablet market, these devices, including the iPad, were seen as a companion to a computer as well as a companion to a smartphone. Back then the four biggest shortcomings that people listed as reasons why the iPad could not replace their computer were: the operating system, the keyboard and screen size, and the performance.

Since then, the iPad has grown in size, power and brain in particular with the iPad Pro. So much so that the latest additions to the line are, as Apple pointed out, faster than 92 percent of the PC sold over the past year. You might argue on this number but the fact of that matter is that the new iPad Pro models are as powerful as many PCs.

What has also grown is the numbers of apps that have been designed for the iPad to take advantage of both a touch and pen-based workflow. At the same time, we have also seen workflows shift more and more to apps which are helping to see less of a difference between what an iPad and what a Mac could do, especially as a consumer.

The latest iPad Pro models and their increased performance push apps further like Adobe demonstrated on stage. Adobe was an early believer in the iPad, designing a mobile version of its Photoshop app with touch and pen in mind. At the event this week, Adobe was on stage showing what they referred to as the “real” Photoshop which will arrive in the App Store in 2019 and offers a full desktop app still optimized, of course, for touch and pen. What was interesting to me, as Adobe went on to show Project Aero, their AR focused creativity suite, was that now on the iPad Pro you can do what you do on a computer and more. More importantly, you are not necessarily bound to do it in the same way you used to. You can be creative or productive in similar or different ways, the choice is really yours.

The Future of Computing is not for Everybody…Yet

I said several times that I was looking forward to an event where new Mac and iPad models were introduced side by side because I wanted Apple to tell a story. A story of where computing is going and which device is for whom. Apple did not tell a story, but it certainly tried to shape our thinking around the iPadPro by talking about sales and performance compared to notebooks. This is where Apple believes the iPad Pro is competing. But Apple realizes that this transition is not going to be as simple as the kind of change they introduced with the MacBook Air. This is because with mobility the biggest change in workflow was where you could work not how. Embracing new workflows will take a while.

It was fascinating to have people point out to me after the event that the only thing that the iPad Pro is missing now to be a computer is mouse support. This to me is a symptom that shows how these people are not ready to transition all their computing needs to an iPad Pro. Either because of comfort or because of the kind of tasks they perform, a touch and pen first workflow would not suit them. This is why Apple continues to update its Mac line. But also, this is why Mac OS, while remaining a separate OS, will allow for apps to look and feel more like they do on iOS so that workflows could seamlessly go between an iPhone or an iPad to a Mac. The more you will be able to do that the more you will be able to consider an iPad Pro as your main computing device.

Build it and they will come

For Apple, there is no question that the future of their computing experience is in the iPad Pro rather than the Mac. You just need to look at the latest products to see how much Apple owns the experience on iPad Pro from the silicon for both performance and intelligence, to the ecosystem of apps and services, to the accessories, pretty much everything they need to control the end to end experience.

It is interesting that when I look at Surface Pro, the sole iPad Pro competitor in my mind,  I see clearly that the lack of that vertical control is what is holding them back especially in the consumer segment. Ironically Microsoft is better than Apple at first-party apps that take advantage of what the OS and the hardware have to offer to drive their vision of new workflows, but the lack of custom silicon and the much weaker App Store makes it much harder for them to compete on equal footing.

Apple has been known to drive change even when the market does not seem to be ready. With the future of computing, they have the luxury of not having to rush. They have built a strong platform and they will continue to lead people to it without yanking away the safety net that Mac products provide to many.

Buying New Tech Before the End of the Year

If you are keeping up with the news, you know that there is a trade battle going on between the US and China. Our president has already placed significant tariffs on many products imported from China and is looking at adding another $250 billion in tariff’s that would cover just about all products coming from China. While talks continue to go on between China and US, with trade officials trying to avert these new round of tariffs, many of my the sources in Washington tell me that they believe it is inevitable that President Trump will enforce these new tariffs after the first of the year.

To date, most, if not all of the major tech companies, have had their lobbying arms trying to get the President to back off these tariff threats and to try to find a diplomatic resolution to this trade problem. However, many in Washington are doubtful that China will give in to the US trade demands and are now starting to work out how new tariffs would impact them shortly.

Most tech companies are now doing some significant long-term planning to try and find ways to avoid paying these tariffs by looking at moving some of the final test and assembly to other countries like Viet Nam, Malaysia or India. They would then ship these products from there, thus avoiding any Chinese tariffs. However, since so much of tech is made in China and will be shipped from there, it would be difficult for the majority of companies to employ this tactic to avoid paying what may be as much as a 25% tariff on goods shipped directly from China.

The economists I have talked to about the impact these tariffs would have on PC’s and Laptop prices say that the worst-case scenario is that it would add a full 25% to the final consumer price of a laptop or PC shipped under these new tariffs. In this case, PC vendors would pass all of the tariffs onto the customer to pay this increase.

A best-case scenario is that the PC or laptop companies eat some of the profit margins and take some of the tariff burdens from the customer and could pass on half or a portion the cost of the tariff to the final buyer.
In either case, after new tariff’s become law, it is very likely that laptops and PC’s will have higher prices. That is why, if you are in the market for a PC or laptop, it would be wise to consider buying them before these tariffs go into effect.

From an industry standpoint, any new tariffs could not have come at a worse time. For the last five years, the demand for PC’s have steadily declined and only this year have we seen a slight uptick in PC and laptop demand. Even more interesting, the growth has not come in the low end of the PC and laptop market where margins could be as low as 3%. The area of PC and laptop growth have been in the $799-$999 range, and we have even seen strong sales for PC’s and Laptops in the $1100 to $1500 price range too.

While margins are better for products in these price ranges, how the PC vendors deal with their pricing due to these tariffs is not clear. As I stated above, they could eat some of the margins to offset price rises from the tariff’s, but some of the tariff costs will be passed on to the customer if they want to remain profitable.

However, the tariff impacts on the tech companies today is not the biggest problem they will have due to other trade issues with China in the future.
That will come from the initiative in China that wants only products made in China sold to the Chinese public by 2025. Called the Made in China 2025 policy, China’s current leaders are moving the country to be independent of products and services made anywhere but in China.
While 100% of the products and goods China needs can never come from or be made in China, they are working hard to get as much created and manufactured in China by 2025 as possible.

For example, China is the largest market for US Soybeans. They have a plan in place to spend billions on soybean farming in various areas of China and by 2025, plan to be 100% self-dependent for their soybean needs. China has already put tariffs on US Soybeans, and by 2025, they plan to make no purchases of US soybeans at all.

While Trump has tried to get more US Companies to manufacture in the US, many of the tech companies are instead expanding their mfg for the Chinese market in general and then trying to find ways around the tariffs by pushing final test and assembly out of China. One PC maker told me that should they even want to manufacture in the US, cost of labor and increased real estate and manufacturing costs would add at a minimum 25-30% to the final price of their PC’s or laptops. So even with paying the tariff’s now (which they hope will be a short-term issue), it would not make that much difference to bring that manufacturing back to the US.

As I look at the current crop of mid to high-end laptops and PC’s, it is clear that you can get a lot of technology still at reasonable prices now. But once the new tariffs kick in, if your PC maker has not found a way to get around these tariffs, prepare to pay higher prices for that special desktop or laptop you can get today at reasonable prices now.

Podcast: Q3 2018 Tech Earnings Analysis and Outlook

This week’s Tech.pinions podcast features Carolina Milanesi and Bob O’Donnell discussing the major tech earnings from this week including Amazon, Google/Alphabet, Intel, Microsoft and others, and analyzing how the overall tech market is evolving.

If you happen to use a podcast aggregator or want to add it to iTunes manually the feed to our podcast is: techpinions.com/feed/podcast

News That Caught My Eye: Week of Oct 26, 2018

Twitter Stock Up After Earnings

Stock up 17% on Thursday after earnings results are out.

Key data points:

  • Earnings per share of 21 cents (adjusted) vs. 14 cents expected by analysts
  • Revenue: $758 million vs $702.6 million, according to the survey
  • Monthly active users (MAUs): 326 million vs. 330.1 million projected by FactSet and StreetAccount

Via Twitter

  • It seems that investors are starting to look at the signs that point to a long-term benefit to the platform rather than focusing so much on the MAU numbers, a number that Twitter missed for the second quarter in a row.
  • Twitter Daily Average Users (DAUs) went up by 9 percent this past quarter, marking eight quarters of consecutive growth. This is a more telling data point in my view that benefits from the previous one going down.
  • In other words, overall users are decreasing mostly due to the continued purging of bots, fake accounts, and abusive users. The elimination of some of the noise and hostility is helping drive engagement.
  • Other than engagement, a cleaner, and healthier platform will likely drive more advertising revenue. Twitter revenue was up 29 percent year over year. Advertising revenue, in particular, reached $650 million, also a yearly increase of 29 percent.
  • What is also encouraging to the Street is that after ten years Twitter is finally profitable and profitably is lasting. In the past four quarters, Twitter’s net profit is just over $1 billion. In the four quarters prior, Twitter lost $367 million.
  • There is still a lot that needs to be addressed by Twitter, but at least from a business performance perspective things are looking positive.

Andy Rubin and Sexual Misconduct in Tech

The story in four bullets:

  1. Google’s creator of Android software accused of sexual misconduct by employees
  2. Google found the allegation credible
  3. Then-CEO Larry Page asked for his resignation
  4. He left with a $90 million payout & public congratulations from Google

Via New York Times

  • This is an amazing scoop by the New York Time. As you might remember many reported on the allegations over a year ago but there was just not the same level of evidence available to make it into the story published this week.
  • As the story points out, Rubin was not the only high-level executive involved in sexual misconduct at Google, but he is the most high-profile one for the role he played in tech with Android.
  • There are a few points I would like to make about the story which I think are important but by no means exhaust the conversation we should have around sexual misconduct in Silicon Valley
  • First, tech has proven to be quite forgiving over the years. Once there is judgment, that is not always the case, it passes quickly. People involved apologize, fly low for a while and they come back in a different role/form and all seems forgotten, if not forgiven.
  • Second, while the allegations might have not been as solid as they are today speculations on the reasons behind Rubin’s departure from Google have been around for over a year. Yet this did not stop Rubin from closing a door in tech and opening another under a lot of cheers with his Essential endeavor.
  • Most importantly though, as I woman, it is hard to get over the fact that despite the allegations that now turn out Google was able to validate, Rubin left Google 90 million Dollars rich.
  • It is hard because if you think it is wrong when women are paid for their silence it is even worse to think that a man gets rewarded despite what transpired. It is really making those women feel abused all over again.
  • Google’s Sundar Pichai in a memo to employees said the company is dead serious about sexual harassment and misconduct. He went on to say that over the past two years 48 people have been fired from Google over sexual harassment allegations over the past two years, Pichai said, 13 of whom were senior managers and above. None was compensated when they left.
  • The high number of people who were fired is not my concern. I would rather see a high number and think something is being done about it than see a low number and think that in a company as big as Google everything is just unicorns and rainbows.
  • Tech already has a diversity problem and stories like this are not helping women to feel the company they are working for has their back. The memo from Pichai helps a little, but Google must come out with a stronger statement to their employees both female and male. It would be good to hear from Paige as some have asked on social media.
  • Nothing will speak more than how employees will be treater in the future by HR of course, but maybe in the meantime, Google could donate money to an organization of their choice that helps victims of abuse. Showing money is not used to reward wrong-doers but to help the ones being wronged.

Amazon’s 3Q18 Earnings

Net sales increased 29% to $56.6 billion in the third quarter, compared with $43.7 billion in the third quarter of 2017. Excluding the $260 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 30% compared with third quarter 2017.

Operating income increased to $3.7 billion in the third quarter, compared with operating income of $347 million in the third quarter of 2017.

Net income increased to $2.9 billion in the third quarter, or $5.75 per diluted share, compared with net income of $256 million, or $0.52 per diluted share, in third quarter 2017.

Via Amazon 

  • There were some data points that worried investors and they had to do with Amazon’s core business. Sales growth slowed to 11% year over year. This coupled with a slow down in third-party reseller sales is showing signs of saturation which some might think could be related to this being the quarter just before the holidays. However, Amazon’s guidance for next quarter was quite conservative which is what made overall results concerning.
  • The conservative outlook for 4Q18 is not due to the increased in the minimum wage that Amazon announced earlier this month, although this will, of course, add to its operational costs. Rather, Amazon is being cautious about actual sales revenue.
  • Long-term the added cost will help with personnel retention but most of all it will help with minimizing the strong criticism Amazon has been under over the past few months in relation to working conditions at its dispatching facilities.
  • Of course, when you compare Amazon’s online sales and revenue to any leading retailer the growth they see could only be dreamed of.
  • Reading through the release it is staggering the number of devices that Amazon announced over the quarter. While most of the devices were announced at an event in Seattle last month, a lot more was sprinkled throughout the quarter.
  • Even more amazing is to see that Amazon is saying that the number of Alexa-compatible smart home devices has quintupled year to date to more than 20,000 devices from over 3,500 brands. That is an amazing growth for an ecosystem which leads Alexa well ahead of Google.
  • The problem with the Echo ecosystem is that despite its breath in products its reach is limited by the number of languages Alexa supports at the moment, which makes Amazon’s short-term opportunity mostly reliant on the US market.
  • AWS grew 46% and advertising which is not directly disclosed but makes up the vast majority of the “others” category more than doubled growing to $2.5 billion. Both are great numbers but still small in the overall revenue pie.

 

Semiconductor Stocks and the Crypto Bubble

Smart investors know to look for companies or technologies to invest in that are part of a wide infrastructure buildout. For the rise of the Internet era, stocks like Cisco and Qualcomm were practically printing money for investors as they were the backbone of the Internet and connectivity infrastructure. It’s the kind of thinking in line with the saying when there is a gold rush to invest in picks and shovels. This strategy is known as the pick and shovel play in investor circles.

With that in mind, the past 12-18 months about, investors have looked to semiconductor stocks, and specifically AMD and NVIDIA as companies that fit the pick and shovel investor play. Both AMD and NVIDIA graphics cards are critical on the backend and the front end of the blockchain movement. However, with the steep slowdown in the blockchain and crypto market, it seems these stocks are taking hits.

While NVIDIA will report earnings in November, AMD reported yesterday and continued to fuel a downward trend in semiconductor stocks. Yesterday after reporting a few positive numbers in both revenue growth and gross margin growth. However, all the positive figures for AMD were negated by weak channel inventor for graphics which was hit the most by the stall in the crypto/blockchain market. This market was strong end of 2017 and into 2018 and resellers believed the trend would continue throughout 2018. When the market stalled, and interest in crypto and blockchain wained, too much inventor was left in the channel and impacted AMD this quarter.

Broadly, however, it seems investors have turned a bit bearish on most semiconductor stocks. Which, at a high-level, is an interesting trend to unpack given there are some very positive trends for semiconductor growth ahead. But, it seems that crypto/blockchain was a bit too strong of a factor in most investors bull cases for stocks like AMD and NVIDIA.

It will be interesting to see if NVIDIA tells a similar story around crypto/blockchain impact when they report earnings. Both companies are continuing to see increases in cloud, gaming, and mix shifting to higher-end products. But the slowdown in crypto/blockchain is one of the biggest factors for negative investor sentiment as big banks continual to put our research reports that oversupply will continue to be an issue for the foreseeable future. There are a lot of picks and shovels sitting on shelves. This is a clear indicator that crypto/blockchain peaked and we will see where it goes from here.

The meta-point here is that it does appear the crypto/blockchain bubble has indeed popped. For how long, and how big the pop will be is still unknown. As I’ve written before, there is a legitimate reason to be optimistic about the blockchain, but there may be some pain and turmoil that has to happen before we see the true potential of the technology.

Lastly, the other main point that is impacting semiconductor stocks is the uncertainty of the US trade war with China. Nearly every semiconductor buy-side analyst report I read continues to cite this concern and the overall impact this trade war will have on the supply chain. This is a fair point and probably the biggest unknown factor. From nearly all vendors I’ve talked to, the trade war is a major concern issue, but many companies that are key parts of the supply chain in China are already seeking creative solutions to move some operations outside of China as they don’t want this to impact their business either.

From what I can gather, not too long after the start of 2019 we should see some clear solutions on how everyone impacted by the trade war on both sides of the Pacific ocean plan to move past this and manage through the trade war. That point also seems to suggest that companies both in the US and China don’t believe this trade war will be resolved any time soon.