(#59) Expected less iPhones sold in 2024; China's business strategy; Can GenAI do strategy?
Apple’s new rules for the App Store in the EU means weaponising the free apps
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China flooding all markets…with everything
Financial Times reports that:
“On a recent quarterly earnings call, the chief executive of Semiconductor Manufacturing International Corporation, China’s leading chipmaker, predicted a “global supply glut” in the types of semiconductors his company produces. Simultaneously, he announced a $7.5bn increase in capital expenditure.”
Now, China has this overall policy: Invest in a certain industry until it has the cheapest products and then flood the markets.
We have seen it with textiles, chemical products, steel, and glass and we are now seeing it with batteries and electric cars. For the latter, the investment decisions were made 10 years ago.
When it comes to chips we talk also about decades, but billions of dollars spent in CAPEX in manufacturing chips for cars, washing machines, and other household products don’t require advanced machinery from ASML (hint! hence avoiding the chip import ban).
So the implications are twofold:
1/ It will be a blood war on price and TMSC, Samsung and other key players might survive it
2/ Europe will be hugely affected and for sure will miss its 20% target of manufacturing in the EU by 2030. LINK
Hopefully, we have some analysts who do a great job translating what is happening in China. One of these analysts is Dan Wang who sent his 2023 letter. LINK
Here is a quote from it:
“More perplexing were the politics. 2023 was a year of disappearing ministers, disappearing generals, disappearing entrepreneurs, disappearing economic data, and disappearing business for the firms that have counted on blistering economic growth.”
Another key point of rùn:
“No wonder that so many Chinese are now talking about rùn. Chinese youths have in recent years appropriated this word in its English meaning to express a desire to flee. For a while, rùn was a way to avoid the work culture of the big cities or the family expectations that are especially hard for Chinese women. Over the three years of zero-Covid, after the state enforced protracted lockdowns, rùn evolved to mean emigrating from China altogether”.
Really great read.
Apple’s new rules for the App Store in the EU
The Digital Market Act proposed by the EU meant that Apple should allow other companies to connect to the NFC or have their App Store…on the iPhone. Now Apple responded in the worst way possible: “Yes, you can have it all, but on our terms and you will not like it”.
Here are some key messages:
1/ Marketplace app developers will need a EUR 1 million letter of credit from an A-rated financial institution to receive the entitlement
2/ Apple will charge the developers 0,5 euro cents for each app installed in the developer’s App Store. You can’t have apps in the Apple App Store and your App Store. At this price, expect Meta to pay $1bn per year for this kind of fees, but Spotify doesn’t have that money. LINK
Why do we need other apps and App stores on our iPhone/iPad/Mac? Look at the ipad how much is limited by the software and how it ranks on productivity vs. android devices.
Two on Apple
1/ The company has started shipping Vision Pro to clients. We look forward to the reviews (the analysts expect 500k units sold this year), but The Verge has submitted one already. LINK
2/ iPhone sales are expected to decrease by -15% this year from two causes: (1) competition with Huawei in China and (2) people switching to foldable phones. LINK
Both challenges can be dealt with:
1/ Look for other markets to mitigate the decrease from China (ie. India)
2/ Build a foldable iPhone.
The hotel of the future
McKinsey presented its findings in a new report. The hotel of the future will offer highly personalized guest experiences, sustainable travel options, and attractive employee opportunities. LINK
Meantime, the average price of a hotel room in Manhattan is now $375 per night. LINK
Harvard Business Review: “Can GenAI Do Strategy?”
1/ The integration of AI, specifically generative AI like ChatGPT, into strategic planning processes can significantly enhance and expedite strategy development. This was demonstrated in an experiment comparing traditional strategy development by MBA students with strategies developed using AI tools integrated with the Blue Ocean Framework. The AI-generated strategies were not only comparable in quality to those developed by the students, but in some cases, they were more original and innovative. This suggests that AI can effectively contribute to high-level strategic thinking, challenging the traditional notion that strategy development is exclusively a human domain.
2/ While AI shows promise in automating and improving the strategy-making process, the article highlights the continued importance of human insight and creativity. The combination of AI tools and human expertise can lead to more inclusive and sustainable value propositions, enhancing overall business strategy. The use of AI in strategy development frees human strategists from routine tasks, allowing them to focus on more imaginative and experimental aspects of strategy. This synergy between AI and human strategists is expected to become increasingly prevalent, with AI becoming an integral part of strategy teams in the near future. LINK
Microsoft is today a USD 3 trillion company
How? Because of AI, of course.
1/ Microsoft's market valuation exceeding $3 trillion is significantly attributed to its strategic investment in AI technology, particularly through its partnership with OpenAI. This partnership has enabled Microsoft to incorporate cutting-edge AI technologies into its core products, significantly enhancing their capabilities and appeal. This move has positioned Microsoft as a leading player in the AI industry, outpacing rivals like Alphabet and Meta, and has been a key driver in increasing its market value and investor confidence.
2/ The leadership of CEO Satya Nadella has been instrumental in Microsoft's recent success. Under his guidance, Microsoft has not only made significant investments in AI, such as the $13 billion investment in OpenAI, but has also successfully integrated these technologies into its flagship products and services. This integration has boosted Microsoft's stock performance and market capitalization, indicating strong investor belief in the company's AI-driven growth strategy. Additionally, Microsoft's long-standing presence in the tech industry and its ability to adapt to technological changes, like the shift to cloud computing with its Azure platform, further underscore its sustained success and growth potential. LINK
The app could be the AI-powered search alternative that changes how we interact with the internet.
Internet search is a major component of the digital world. Annually, the internet sees trillions of search queries, with search advertisements contributing approximately 58% to Google's $162 billion revenue in 2022. Therefore, any claim of a superior internet search alternative is noteworthy.
Recently, Perplexity introduced its AI-driven search engine, making waves in the industry. Following suit, The Browser Company has unveiled its AI-enhanced search tool, Arc Search. This innovative tool integrates a search engine, a web browser, and artificial intelligence, offering a novel approach to online searching.
Arc Search stands out by not just returning a list of links, but by analyzing these links and generating a personalized webpage with tailored, intuitive responses. This process not only streamlines the search experience but also curates all pertinent information into a single, easily accessible webpage. Josh Miller, the CEO, asserts that Arc Search delivers a search experience that is twice as fast as those provided by Safari and Chrome, thereby saving users both time and effort.
Erik Brynjolfsson, a Stanford professor, on Generative AI: ‘This could be the best decade in history — or the worst’. LINK
McKinsey’s Bob Sternfels forced into a run-off in leadership ballot. LINK
[Podcast/Youtube] Balaji on the Tribal Lens, America’s blunder, and his plan to save San Francisco. LINK
Elon Musk says Neuralink has 'successfully' implanted a brain chip into human. LINK
American Dynamism, by a16z. I’m super bullish on Anduril. LINK
Carbon footprint of homegrown food is five times greater than that grown conventionally. LINK
Apple Card has over 12 million users in the United States, with cardholders earning more than $1 billion in Daily Cash rewards in 2023. Why is not Apple bringing its card to the EU? Regulation, of course. More exactly, the fees using the card are regulated by the EU and Apple can’t make any money out of it. LINK
Trade tensions usually lead to trade…wars
China made clear its strategy for 2025 back in 2015, so many people, especially EU deputies, are surprised by the trade deficit and product avalanche on the EU market. FT made a summary of some key Chinese industries. LINK
De-risking in progress
The USA has decided to de-risk from China and started moving production elsewhere. Mexico seems to be a clear winner. LINK
Nvidia is a happy company. But who A-rate clients? LINK
Interview: Sarah C. Paine, by Noah Smith. Topics addressed: types of great powers, the nature of the global order, the rise of the China-Russia axis, the objectives of Xi and Putin, the challenges of internal U.S. and European politics, and what the U.S. needs to do next. LINK
Chris Dixon, an OG in the blockchain space, has launched his latest book called “Read Write Own”. I have a theory myself: what if the AI will flood the internet with fakes and we’ll need blockchain technology to prove what’s ours? A must-read. LINK
Alaska doesn’t have enough rocks. LINK
Happy anniversary to the Macintosh, which turned 40 this week. LINK
How ants persuaded lions to eat buffalo. LINK
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