Dear Reader,
It barely made the news.
And what coverage it did receive was widely misunderstood by journalists, showing there’s a complete lack of understanding of how the industry works.
But what’s most certainly clear is that the U.S. has now started an all-out economic war against China. All we needed was another war… as if the proxy war with Russia wasn’t enough.
Whoever’s in control in the U.S. clearly wants more conflict, not less. This won’t end well.
The war hammer (a blunt instrument) used to incite the war is new policy adopted by the U.S. government with regard to export control of semiconductor manufacturing equipment and other semiconductor technology.
Announced days ago by the Bureau of Industry and Security – a division of the Department of Commerce – the rule “Implementation of Additional Export Controls: Certain Advanced Computing and Semiconductor Manufacturing Items; Supercomputer and Semiconductor End Use; Entity List Modification” outlines aggressive new export controls regarding semiconductor technology, which is set to go into effect on November 7.
The new controls put in place will broadly restrict the exports of advanced semiconductor manufacturing technology to China, effectively blocking the country’s ability to manufacture advanced semiconductors. These are the kinds of semiconductors widely used in smartphones and supercomputers around the world.
The press largely suggested that this would fracture the semiconductor industry, and that it would put China in a bind, as “China consumes more than three quarters of the semiconductors sold globally.”
Reporting like this is so shallow and demonstrates a complete lack of understanding of how the industry works. The sale of semiconductors from a business in one country to a business in another doesn’t tell us much at all. After all, businesses in China may appear to “buy” semiconductors, but that doesn’t mean they’re consuming them.
Mainland China is the largest market in the world for electronics manufacturing and assembly. Semiconductors are simply critical components required for the manufacturing of electronics destined for end markets in developed countries. Semiconductors are shipped into China, only to be assembled and shipped back out as quickly as they entered.
While the new policy will largely relegate China’s domestic semiconductor manufacturing to technology that was available back in 2016, ironically, it won’t stop China from gaining access to advanced semiconductors.
The most advanced semiconductor manufacturing technology – extreme ultraviolet (EUV) – is manufactured by a Dutch company called ASML. U.S. semiconductor companies are so important to ASML that it’s long agreed not to sell its advanced technology to China-based companies.
But that doesn’t mean China won’t have access to it. It already does, and it will continue to have access despite the new policy.
The reality is that most fabless semiconductor companies use either TSMC in Taiwan or Samsung to manufacture their bleeding edge semiconductors. Both TSMC and Samsung manufacture using ASML’s EUV semiconductor manufacturing equipment. And China-based companies hire TSMC and Samsung to produce their semiconductors.
While the policy will make it more difficult for China-based companies to acquire advanced semiconductors from U.S. companies – such as NVIDIA, AMD, Cerebras, and others – there are always secondary markets and intermediaries that will step in to facilitate transactions.
In other words, semiconductor distribution is a massive, convoluted business. And products will find a way to their desired end markets.
But the most obvious catalyst for implementing these export controls, which can be easily understood by anyone crazy enough to read the new policy, is that it’s not really about semiconductors.
It has everything to do with artificial intelligence (AI).
The U.S. government’s new policy is an effort to engage in technological warfare to stymie China’s ambitions to become the global AI superpower by 2030.
It won’t work. AI is software, and whatever trajectory China is on is nearly impossible to change. And these policies will damage U.S. technology companies in the process – spelling the worst possible outcome.
I’ve long maintained that the competitive advantage of U.S.-based tech companies, and other tech companies in developed markets, is their ability to attract and retain the best talent in the world. This is possible due to how well the public and private capital markets function to fund and reward innovation.
This simple truth is what resulted in the world’s most successful economy. And the entire world benefited from the technological advancements that its companies produced.
Ham-fisted and restrictive export controls won’t make things better; they’ll only break things down. And while it will take several years, it will force China to develop its own domestic technology and become an even fiercer competitor on the global stage.
The dragon eggs have been hatched…
Google just announced that it’s starting to roll out early access to Project Starline. This is the telepresence product Google introduced last year.
As a reminder, this is a unique product that incorporates advanced software with a hardware product for telepresence.
Google paired cameras and a booth with light-field display technology to create a new medium for videoconferences. It’s designed to make it look like users are sitting right across the table from each other.
Here’s a look:
Project Starline Videoconferencing
Source: Google
As we can see, Project Starline provides an incredibly immersive videoconferencing experience.
Google uses advanced video compression technology to make the calls work in real time with very little latency. And the “magic” of Google’s technology integration of hardware and software results in an experience that feels like users are looking each other in the eye.
This is certainly a step up from standard videoconferencing software like Zoom.
It’s more immersive. And Zoom doesn’t compensate for the fact that the alignment between our web camera and our focal point on the screen always gives the appearance that we aren’t looking at the person we’re talking to.
So Google appears to have cracked the code here. And the company announced that Salesforce, WeWork, T-Mobile, and a number of others are now installing Project Starline booths in their offices.
Notice also that Google’s approach to telepresence is starkly different from Meta’s, which we talked about last week.
Meta’s vision is that we’ll all wear headsets and interact with each other through digital avatars in a metaverse. As we discussed, these headsets will capture our eye movements and our facial expressions so they can be reflected in the virtual world via our avatar.
So we have two fundamentally different approaches here. I’m very curious to see which way the world goes.
Do people prefer the immersive in-person experience provided by Google’s Project Starline? Or would they rather interact in a virtual world through their own unique avatar?
When it comes to business and remote work, I suspect Google’s vision will win out. Technology like this is the next best thing to an in-person meeting. That’s why we see some major companies adopting the technology already, such as Salesforce, WeWork, and T-Mobile.
It just makes too much sense. Corporations can dramatically reduce business travel expenses this way while maintaining, or even improving, productivity.
That said, we would be wise to think about Google’s motives here.
After all, Google’s focus has always been on software. Even its Google-branded smartphones were just a mechanism for seeding its software – the Android OS – into the market.
And there’s good reason for that. Margins on hardware are much lower. Hardware companies just don’t make nearly as much money.
So what’s Google up to here?
As regular readers know, Google’s primary business is data collection. It’s in the business of building comprehensive profiles for each of us. Then it sells access to that information to advertisers. Advertising revenue is where Google makes nearly all of its money.
And that’s what this is about.
We can be sure that Google will collect all the data generated by Project Starline booths. It will run our videoconferences through its AI to provide context and gather insights. Then it will use that information to enhance our existing consumer profiles. And of course, Google will make a killing selling this information to advertisers.
It already has access to the data of any enterprise that uses Google’s Gmail, Calendar, Docs, Drive, and even Meet software applications. Project Starline takes things one step further…
So that begs the question: Do we really want to invite Google into our homes and offices? That’s not so easy to answer given how fantastic this telepresence product is.
Are you interested in this kind of technology, even if you know your videoconferences will be recorded and analyzed? Would the convenience of being able to sit across the table of friends and family in real-time – irrespective of where they are in the world – be enough for you to sacrifice your privacy?
I’d love to hear from you. Let me know right here.
There’s been quite an interesting development that may transform an early stage company that we’ve been tracking.
Some of us might remember Veeve, an early stage company behind AI-powered shopping carts. We last talked about this company back in January.
Veeve’s “smart carts” are quite interesting. They use computer vision to scan every product we put into them. And for items priced by weight, the cart also has a built-in scale at the bottom of the cart. So it knows exactly how heavy each added item is.
Here it is:
Veeve’s Smart Shopping Cart
Source: Veeve
As we can see, each cart comes with a display. When we enter the store, we grab a cart and sign into our account through that screen. Then the cart keeps a running tab of our groceries as we go.
When we’re done shopping, we simply press the checkout button. If there’s a credit card tied to our account, it will be charged automatically. If not, the cart also has a credit card terminal attached. We can see it to the right of the display.
So this makes “grab and go” shopping quick and easy for consumers. There’s no need to interact with anyone at a checkout line. Just grab what you want and go…
Veeve’s carts also simplify everything for grocery chains. There’s no need to put up cameras all over the ceiling, as Amazon has done with its “Just Walk Out” stores. Instead, grocery chains just need to adopt Veeve’s smart carts.
Theoretically, this should make adoption quick and easy as well. And I believe Veeve just got its big break…
Veeve already has pilot programs in place at both Kroger and Albertsons. For context, Kroger is the second-largest grocery chain in the U.S., and Albertsons is the fourth. For anyone curious, Walmart is No. 1.
And that’s why Kroger’s announcement that it will acquire Albertsons caught my eye.
The nuance here is that Albertsons is backed by notorious private equity shark Cerberus Capital Management. And as it often does, Cerberus loaded Albertsons up with debt.
From a corporate executive perspective, any time you acquire a company with significant debt, there has to be strong operating efficiencies to make it all work. In other words, the acquisition has to increase revenue and / or cut costs such that it makes financial sense.
And if we look at the grocery industry – where’s the most obvious place to cut costs? It has to be labor.
I think we’ll see Kroger and Albertsons invest heavily in Veeve’s shopping carts as a way to minimize the amount of labor needed in stores to support check-out lines. That would dramatically reduce the combined company’s expenses.
So I think Veeve is perfectly positioned for rapid adoption here. If Kroger and Albertsons deploy these smart carts in a big way, other grocery chains will be forced to follow suit.
We’ll certainly track Veeve closely in these pages. And subscribers shouldn’t be surprised if they start to see Veeve smart carts in their local grocery store soon.
It’s been a rough year for the non-fungible token (NFT) market. After a massive boom last year, NFT activity has dramatically slowed down.
But it’s not dead.
Oscar-winning actor Anthony Hopkins just launched a new NFT art collection. It’s called “the Eternal Collection.” It consists of 1,000 original art pieces depicting the various roles Hopkins played throughout his acting career.
Here’s one of the pieces:
An Original NFT From the Eternal Collection
Source: orangecomet.com
Hopkins put the collection up for sale on NFT marketplace OpenSea… and it sold out in seven minutes.
The floor price of the collection currently stands at 0.83 ETH, and there are 1,000 items included in the body of work. So we can assume that Hopkins’ collection has a market cap of 830 ETH (or $1.1 million).
Incredible.
Hopkins is at the end of his career. And here blockchain technology and NFTs gave him a way to monetize his entire life’s work in a matter of minutes. That simply couldn’t have been done any other way.
What’s more, the NFTs in this collection came with additional attributes.
Some come with autographed physical prints that are mailed to the owner. Some come with special audio clips from Hopkins. And the high-end NFTs come with an invitation to meet Hopkins in person.
This is the kind of “digi-fizzy” offering that I believe is so compelling in the world of digital assets. The NFTs convey real-world benefits, enhancing their value behind just a piece of digital art.
This is certainly encouraging for the NFT market.
Despite the current climate, there’s still plenty of interest in top-tier NFTs. That’s a sign of good things to come when the markets return to health.
Regards,
Jeff Brown
Editor, The Bleeding Edge
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
