tv Bloomberg Technology Bloomberg December 20, 2018 5:00pm-6:00pm EST
emily: i'm emily chang in san francisco and this is "bloomberg technology." next hour, thee u.s. justice department accuses chinese officials of coordinating a decade-long espionage campaign to steal ip and data from dozens of companies around the world. we will talk about the fallout of this hack attack. plus, another legal win for qualcomm. they claim another victory over apple in germany. will the iphone maker have to change its strategy?
the billions netflix's spending on content is paying off as massive subscriber gains and big rewards. will the advantage be under threat in parenti 19 -- in 2019? the united states accused two andonal officials coordinating with national chinese officials against dozens of united states companies and abroad to steal intellectual property and data. rod rosenstein outlined his case before the press. >> our department has repeatedly cast the spotlight on china for its state sponsored criminal activity targeting american corporations. more than 90% of the departments department's cases of espionage over the past 70 years involved china. more than two thirds of the cases involve theft of trade secrets and are connected to china. in the mist of
rising trade tensions between the u.s. and china. we are joined by our reporter who covers enforcement news. tom, what do we know about these charges? tom: we know they are computer intrusion conspiracy charges. what the government is saying is that for 12 years, a couple of hackers tied to the chinese government were infiltrating both u.s. companies and u.s. agencies using traditional hack attack like fishing and installing malware -- like phishing and installing malware. for a long period of time. emily: presumably, these hack attacks are happening all the time so what stands out about this one? sam: i think this is a big deal,
and it's a big deal because we are negotiating with china over a trade war. it says china is in breach of a 2015 agreement made by president xi and obama not to conduct cyber enabled industrial espionage. in this situation, how are we supposed to believe anything they bring to the table in the trade negotiations? it also comes at a time where you also have a traditional espionage case, a case involving violations of sanctions by hauwei. the says china does not play fairly. emily: tom, who are the victims here? which companies are we talking about? tom: the u.s. does not name any the -- any of the companies who were breached year. , besides the government agencies like nafta and their jet propulsion unit as well as
the u.s. navy. in terms of the companies, the best way to describe it as a whole it is from automotive to telecommunications to banking and financial services. nearly every industry you could think of was a victim of this hack according to the u.s.. emily: samm, in the context of the tension of these already escalating -- of this already escalating, how do you expect the u.s. to react? samm: this is another data point saying the u.s. is potentially in a cold war with china. technology and cyber is front and center. even as we talk about paris, the issues that the u.s. has comes -- runs much deeper. some speculate that there is no deal to be had. emily: in speaking with many business people who travel with the -- within the u.s. and china, there is a lot of concern
. use the word cold war, and the concern is this will go on for a long time and the relationship between u.s. and china has been damaged for the long-term. would you agree? samm: i see the u.s.-china relationship at a fragile moment. in the tech space, it is potentially going over a cliff. these are long-standing issues. not adictments, this is recent case, this has been going on since the obama administration. we are in an environment where the u.s. government is not holding back. what worked in the past did not work, and it is a recalibration of the relationship. emily: tom, what are our next steps in this case? tom: these two individuals are not in custody. they are still in china, which we don't have an extradition treaty with china, so getting them in custody without the deal with china is unlikely. what this really does, it's at the narrative that the
government wants to set that, this 2015 policy or agreement in place, it is being violated. they are trying to publicize that for the world, and this is one in a string of cases that the doj has brought an plan to bring more as part of the china initiative they announced last month. emily: we will continue to bring you developments as we have them. samm, thankg and you both. first china and qualcomm is seeing another legal victory in germany in its patent fight against apple. a court in munich says qualcomm can block sales of some iphone models, but the ban will not start immediately. qualcomm accused apple of infringing on its patents. china said it would ban sales of certain iphones. for more i bring in ian king. int makes this ruling germany significant is that we are talking about hardware, not
software, which is the case in china. if it islutely, software, you put your program is to work and everybody gets on with their life. contrary to that here, it is related to hardware, which implies if you are not case, you havehe to redesign your phone creating a lot more trouble for the phone manufacturer. emily: we are talking about older iphone models, correct? ian: correct. everything up until the recent announcement of the new models. qualcomm has said in the china case it intends to seek an accident in -- an extension to the ban for the recent models. emily: we have seen a war of words between the companies. was on the show earlier and he said he does not believe apple has much to worry about with the china vanke. >> it's not a blow at all.
it's part of qualcomm's distraction technique. they went in secret and got in order. my clients, the companies that build the iphones and ipads, did not even -- know about it. it's an order that relates to software and does not have to do with the cellular technology or the issue in the lawsuits we have against qualcomm for my clients were we seek about $9 billion in damages. emily: in the meantime, qualcomm's general counsel things otherwise. >> this is clearly something that was subsequently ruled on, and the order is something that needs to be taken seriously. unlike apple seems to be. if it were my company, i would have immediately indicated that i would be abiding by this court order and following it to the letter. so manyan, there are
open cases around the world, but these last two rulings appear to indicate the momentum is in qualcomm's favor. >> there are two sides to it. the qualcomm angle its use patents to hurt its former customer oh, apple's, shipment --customer's, apple, shipment. the judge has been restrictive in saying he cannot -- in saying, you cannot do that, qualcomm, you cannot do this, qualcomm. to put bandstempts have response -- they say we will take a couple off of the shelves and
don't worry about it. emily: does it seem apple will need to change its strategy. ian: it's too early to say. they can afford to have carried this fight on much longer than qualcomm has. they have a lot more money and you are in a financially stronger position. why wouldn't they appeal? why wouldn't they see if they can put more pressure on qualcomm. emily: fascinating. ian king, always appreciating you keeping us updated. think you for stopping by. -- thank you for stopping by. negativeis thing pushback, but will it impact the growth of the social network in the long run? if you like bloomberg news, check us out on the radio. listen on the bloomberg app, bloomberg.com, and, in the u.s., sirius xm. this is bloomberg. ♪
emily: facebook is facing government scrutiny amidst new regulations that it cut special deal with 150 companies, including spotify and netflix. sharing more information about its users than it disclose. the company is being sued by washington, d.c. and more lawsuits from the states could follow based on an inquiry from ftc -- sec. we look at how this will impact facebook growth and long-term. -- will this hurt long-term or not? >> if you zoom out of the ivingations, it is g
an opportunity for amazon to look into the advertising. they have an opportunity to take market share, google on the other hand, their mobile search potential is still underestimated. if you look at how much the search has changed, when you use the search of mobile before, there used to be like whatever thousand pages and now it is more. it has become more of an app experience. it's becoming more important for you to be there from an ad perspective on a mobile search from what google is doing. emily: that is ads, what about users? i have a chart showing the number of people using facebook everyday continues to grow 20%. 20% of the world's is using facebook everything will day. we had rich greenfield on the show earlier this week, and
to -- that they used to. facebook's most confident about is that they will be able to crack live stories, mostly in the second half of the year. is more aboutit figuring out how the monetization potential is there. risks withng with regulations, fines, and things like that. it's a story of two half's. emily: what about messaging? jitendra: messaging is an important point for the long-term growth point. you need a very strong team and gateway. a trusted team to enter customer support, e-commerce, instant messaging and things like that. secondly, you need partnerships. with all of these scandals, regulatorys, approval, payment gateway, those things become more challenging. a have to figure those things out. emily: is it apple that is the big competitor here? jitendra: you are right there.
apple's business chat, they are integrating businesses with apple pay. basically, you could chat with someone from a business directly, use of payments network if you want to. there is a developed market to give facebook the competition. both are going to different strategies, but what will hold facebook back is this difficulty in striking payment network issues and difficulty -- or delays in striking. emily: will they figure out how to monetize whatsapp? jitendra: i'm more confident about live stories monetization than messenger and whatsapp, at least for 2019. it will take time. first they have to address the misinformation issues. going back to the regulatory aspect of things, those things need to be addressed. then, the monetization aspect would come. investors need to adjust the
emily: a tobacco giant is spending $12.8 billion for a 35% stake in jull in an effort to offset declines in cigarette sales. at $38l values juul billion. that may could one of silicon valley's most voluble private health companies. ago, it was not unit $16 billion after tiger global management led a $1.2 billion investment in the company. meantime, foxconn is known for being the biggest assembler of iphones. terry gou, the chair and largest shareholder of foxconn, he is
taiwan's richest man. this is the story of how gou turned a small operation in his shed into the biggest electronics operation on the planet. he's now building a $14.5 billion factory in wisconsin. >> if you open an iphone, this is what you would see. all of these parts were put together by a company called foxconn. many of the parts themselves are manufactured by foxconn. almost every piece of electronics have some components from the company. which is owned by this guy. billionaire terry gou. he found success by making deals with the biggest tech companies and following through. following through client delivery is number one. -- even if that means taking big risk because he is confident once he lands that partner, there will be benefits. into the u.s.nd
by building a $14.5 billion factory in wisconsin. this is how one man turned a small operation in his shed into the biggest electronics operation on the planet. foxconn is one of the largest employers in the world, with over one million workers during peak iphone season. that is a commodity politicians like to offer during election time. when it came time for president donald trump and various u.s. states to decide where they want has themtory, gou playing against each other for the best offer. >> they took the bait and offered a lot. they offered massive incentives to get talks con. they had a lot of incentive packages. >> critics say the factory will most likely not create as many jobs as promised. people are calling it a white elephant. care.esn't
wisconsin is paying him $4.5 billion in taxpayers money or $1800 per taxpayer out. >> we have agreement packers jersey with your name on it. >> in the end of the day, terry gou is a big winner. >> other countries have sought brazil,deals including indonesia, and various chinese provinces because gou has a reputation of pulling off massive operations. offering companies a one-stop shop to electronics. >> there's no other company in the world that can do what terry gou does. foxconn is still the master of assembly because terry gou is always looking to try to look ahead and keep customers happy. so opportunityu by streamlining process by automation and cutting out the middlemen. taiwan had a, booming export economy. most electronics from that time were made in japan, where the
factories were. and then they were treated in taiwan who had the connections to the rest of the world. a 23-year-old gou got a first-hand view of the potential to make money. is money ined there this and maybe i should go out on my own and do this. why be the person in the middle when i could be the one doing the original production? >> he decided to go into business for himself. --ng a seven point $5,000 $7,500 loan from his mother. he started making channel changing knobs for black-and-white televisions. after that, he had a series of big breaks, starting with making opponents for tarry -- for atari and dell. dell would buy parts from their suppliers and ascend them -- assemble them in their own factories, but gou created a production line integrating most of these policies to the final
assembly. gou was also among the first wave of taiwanese factories in mainland china. >> this is a place to do business, to manufacture things not only at the low labor rate, but it was going to be plentiful staff. later, it's one of the most perfect government corporate partnerships in the industry. >> eventually he landed a deal for 50% of their estimated $165 billion in revenue now coming from revenue. it was not always going smoothly. foxconn hit international headlines after a series of suicides at their main factory in shenzhen. context, thein suicide rate in china is around 20 per 100,000. he had about 20 million people
working for him at the end of the cycle which would imply 200 suicides per year, but they had well below average but higher than anyone expected. because this was a company supplying to apple, it came famous as an apple supplier and suicide problem. >> after the 2010 scandals, you raised wages, set up health care clinics and hotlines to give advice to help workers. foxconn whether the crisis, but it was already facing a big long-term issue. revenuesast decades, for hardware manufacturing has decreased, and software is on the up. almost all of the biggest tech companies are non-hardware. gou has not been able to diversify products. >> foxconn has been trying and trying for years to get into things i cloud services, software, but they are not good at it. terry gou does not have that
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"all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. emily: this is "bloomberg technology." i'm emily chang in san francisco. streaming has become the next gold rush. netflix has competitors racing to catch up. it has been a banner year for the streaming giant with nearly 29 million total subscriber additions expected. original content in its first box office debut. it took the emmys by storm with 112 nominations. >> nbc has th emost nominations of any broadcast network. great. >> yeah. >> which is kind of like being the sexiest person on life support. not great. >> still not looking great.
>> netflix, of course, has the most nominations tonight. that's right. if you are a network executive, that is the scariest thing you can possibly hear, except maybe one.ronan farrow is online emily: but it is not just smooth sailing ahead for netflix. come petition is on the horizon with disney, at&t and nbc planning their own rival. joining us now from new york to discuss paul burnett and from connecticut we have true optics cofounder. netflix nominated for a lot of golden globes. more than the other streaming services, more than hbo. is 2019 going to be as smooth? andre: no, it won't be. emily: why not? never i think netflix has
really had to face direct competition for audience attention. they were the first mover in terms of the overhead -- over the top streaming service and had a head start in terms of licensing content, but producing content specifically for streaming. you mentioned disney, at&t potentially nbc universal. there is also a lot of free streaming solutions that are gaining market share. no barrier tos entry in terms of technology. i think 2019 is going to be a year where it is very challenging for netflix to maintain that market dominance. emily: this is a company continues to spend billions of dollars on original content. lot oft get a information on viewership but this year they did release a list of their top 10 most binge watched shows. some of the usual suspects weren't actually on this list. so, how successful does this indicate netflix's original
content strategy has been? i think it is important to distinguish between the most binge watched shows and the most watched. it does not mean if the show is being binge watched, it is not the most popular show. all of that is academic when you look at the bigger picture which is that netflix is driving a lot of new subscribers to the service and retaining a lot of subscribers mostly with originals and with the content they licensed. and i would push back a , that on andre's point they never had direct competition because i think hulu and amazon are direct competitors. the competition is going to with disney 2019, and at&t and others but i think netflix has not only the early mover advantage but also just a great wealth of content in its portfolio. emily: yet there is a criticism it is quantity over quality.
they do have this new movie " roma" out now. some of the reviews have been mixed. the launch did not come off as smoothly as netflix would've liked. think netflix is doing too much? past: i have in the thought that netflix might be overstating itself in terms of the amount of money was spending on developing new content and licensing content, particular not just a mystically but also trying to fight on multiple front lines overseas as well where they are competing against media companies in brazil, global tv or i-flix in southeast asia that have a lot of the local content right. know,would say, you netflix is doing a separate with they would have to do, because they knew that it some point the switch of scale would and the content they are most reliant on for growth would be
pulled from the likes of disney and others. ars, if not more, they have been planning to, h ow the comingnd off battles. uluould say amazon and h have not been can legitimate competitors, because the amount of money that were spending was not in their stratosphere of what netflix was. that is now catching up as well. they are also going to be more legitimate competitors than they were previously. emily: netflix has really high profile content deals with thent like shonda rhimes, obamas. are we going to see the fruits of that? a while fors take the kinds of shows that the people you mentioned plus some others, those things take a while to develop. i think we are going to start see the fruits of that.
even with some of the things they have been doing with bruce springsteen. they're working with ellen degeneres. that celebrity driven strategy is going to pay off for them eventually. emily: what about international? this is the first year that netflix overseas revenue surpassed u.s. revenue. where should we be looking for netflix to make some huge gains and perhaps run into some challenges abroad? think so, i mean, i everybody has known the international is going to be where the real opportunity for growth is. domestically in the united states you have about 80 million over-the-top connected tv's, several times more than that internationally. and markets like latin america and asia are growing faster than north america. so, there's definitely going to be times of opportunity. i think the challenge for going to ben is pricing in some of those markets is going to be difficult to increase pricing. also, the amount of money that
they are going to have to spend on original content is going to be very high, because the popular content in many of those markets, they just will not have rights to for the next two years because it has been locked up already. the other challenge that i will mention, i think that is going to be very interesting as we look into 2019-2020, disney is more than just a content company. they are whole entertainment experience, a lifestyle with the merchandising and the theme parks. i think one of the things that may be interesting as netflix content,ted a lot in what are the other things they could do to diversify their revenue stream outside of the discussion revenue? emily: paul, how does netflix do that? the situation -- the disney situation is a double whammy. not only are they launching their own human service, they are pulling their content off of netflix. absolutely. i think if not 2019, then maybe
2020 will be a year when netflix is really forced to either doinvent itself or pivot, s something different from what it is doing now, which is a simple, straightforward business based on subsequent. there is a ceiling. they are getting close to that in the u.s. they are not as close to it in overseas markets, critically some of the ones that andre mentioned but yes, i think there is going to come a time when that business model run its course and netflix will have to do something different. i wish i could tell you what that might be but i think if i knew what it was, i would be sipping a tropical drink on my around in my caribbean village. emily: the rest of us will be holiday binge watching. thanik you for stopping by. meantime, twitter shares fell to medically on thursday after report. the firm cites a reports by
amnesty international's they says twitter is a popular place for women who use the platform. that prominent women in government and journalism receiver abusive or problematic. twitter has become the harvey weinstein of social media. looking back in 2018, the stock gained 20% while it peers saw decline. you and i have both been on the receiving end of some of these tweets. so, this is nothing you. what's significant about this ? >> the attention is receiving the citron, which has reputation of going after companies and successfully having active his position on them. and so, that is one reason the stock is reacting so much, because we've seen a lot of talk about abuse on twitter for years. i mean, it has always been a problem there. but now, the idea that that kind of abuse can affect the bottom
line for the company and its nprospects is something that thisy has'nt''t been at level before. emily: what to this mean -- what does this mean? twitter says they are working on it. but what's next? well, twitter needs to figure out where the line is going to be drawn. a lot of their decision seem subjective and inconsistent. they will make a decision and then it will be a blowout. it is similar to what we see with facebook. there will be a blow up in the public. how did you decide that, why did you us is i that? then twitter will reverse a decision and say we made a mistake. it is just this constant process of things that don't makes sense to every day users. meanwhile you have broader concerns about what the company
is decided to take off its platform. is it having bias against any certain kinds of people with opinions? and so, i think, abuse of women is certainly an area that, it's hard, are these opinions, is this harassment, is a credible? against these women? so, these companies have a very tough time coming to a consistent policy application. emily: is this going to impact advertising finally? sarah: it always has a little bit. advertisers when i talked to them say there is a brand safety issue on social media. you do not want your ads to show up next to one of these abusive comments. twitter's all the rhythmic ordering in the last couple years has helped fix some of that. a lot of the worst of the worst doesn't get bubbled up to the top the way it used to. but still a long way to go. and i think it helps that advertising is separate from the user posts on twitter, but with
video and other categories, new categories of advertising that are more difficult. emily: we will keep our eye on the impact of this report. thanks for stopping back. the future of mining. differentlook at aspects of how technology is disrupting the financial sector. a u.k. start of says it aims to become the amazon a banking. uber's self driving cars are returning to pittsburgh. but have the safety measures improved? this is bloomberg. ♪
emily: amazon is struggling in the grocery business more than a year after it bought whole foods. the number of prime members who shop for groceries on amazon at least once a month fell this year. the average amazon grocery order is smaller than those that use grocery delivery and pickup from brick-and-mortar retailers. our future on the future of money where we take a look at how the digital world would impact money. lodon has been a hotbed for starters for britain's decision to exit the your opinion come located life are a lot of businesses. now u.k. firms are looking to other european areas for licenses. the first to receive one is resolute, company awarded a license by -- a central bank. joining us to explain what it means for business is the ceo of revolut. thanks so much for joining us.
lithuania is not as jurisdiction known ford financial transparency -- for financial transparency. why there? for abecame a tech hub lot of financial companies. in lithuania because of, i think, digitalization, right? so, i mean, the central-bank there is very tech from the. friendly. we decided not to apply from the commandinor lithuania. emily: this need to have more opportunity but it also means you have more risk. and will potentially need to hold a lot more capital. couldn't that limit your growth? nik: a lot of our customers -- for other banking products. we decided that we need to get -- so we applied. for a customers it means 100,000
euro protections on their accounts, there debits, trading. and so on. emily: to what extent do you think your growth has been due to a decision to appeal to the crypto community? so we launched a cryptocurrency in december. there was a huge jump in the number of users. at the moment cryptocurrency -- it's actuallyhink a significant in the growth numbers. emily: you have got plans to launch in the united states. 100,000 people on the waiting list. how do you plan to compete with companies here like robin hood? nik: just offering products. trading app. while we plan to come to the u.s. and offer the whole range of taking services, including trading. emily: saying that you aim to
become the amazon a banking, that is quite bold. what makes you think you can become the amazon a banking? nik: well, we have -- we are fast in developing new products, we have great platforms, we have a great team, we have resources to launch as many products as possible. we are actually doing it. right now we are in 28 countries. we have more than six products on our platform. we'll continuing innovating. and launching products people need. emily: well, we'll continue to keep our eye on you, revolut. uber's self driving car program getting a reboot after fatal car accident. what changed? we are live streaming on twitter. networkur global news tictoc on twitter, powered by -- this is bloomberg
emily: inemily: the u.k., london's gatwick airport was closed for six hours after drones flying over the field. that led to two dozen incoming flights being diverted. aerial vehicles of becoming a safety threat to airplanes. they are banned from operating near airfield. uber's self driving cars are , nine monthsoad after a death of a pedestrian arizona. it receive the all clear from the department transportation to resume testing at pittsburgh. the company says it will return one or two cars to public roads in pittsburgh were testing
resumes with new safety measures including improvements to er monitoring.iv autonomous car's will be deployed in san francisco and toronto to be driven in manual, human driven mode. what has uber been doing since that accident up until the? eric: reassessing an average level. looking at the safety drivers, looking at what braking technology, they use, what is on and what is off. what they maintain from the cars -- they get this technology from automakers and a couple it with their self driving technology to intricatei think -- to interact. i also think changing processes, ok. we are going to drive at a slower speed we're going to do it on a much smaller circuit here. where they are going to be driving a pittsburgh will be a much smaller course than before. emily: one or two, that is not very many. where else are they testing of? eric: there is not a lot of room on this course.
fill it with a time of self driving cars because it is so small. in toronto in san francisco, they are in manual mode, which literally means a human being is driving the car. they are taking data that uber can use. getting them back in manual mode is one step on the path to try to get them back into autonomous mode. emily: what is going to be the importance of self driving with the ipo coming up? eric: it is sort of a risk for uber, certainly a major cost center. i think, hundreds of millions. i think that's going to be a risk for them. we talked to -- a while ago in he said they are going to look at all sorts of ways to spin it out or different financial vehicles for the program. i think that is still an open question. sort of what they do with the autonomous program. what they want is an upside. is good to be able to say, whenever these bugles are ready,
we are in the business of autonomous vehicles but it is a major cost center. emily: and how is where u ber is in self driving compared to lyft? eric: lyft, more partnerships, started later. uber has more of its own self driving vehicles out and about. but lyft is aggressively trying to catch up with the idea that they come partner and just as time passes it becomes easier to catch everybody else. what was once novel is easier for a new company to play catch up. emily: all right. eric newcomer, thank you. that does it for this edition of "bloomberg technology." on friday we will look back at the biggest successes and blunders for apple over the last year. of course we are live streaming on twitter. follow our global breaking news network tic toc on twitter. this is bloomberg. ♪