Daybreak Weekend: US Tech, UK PM Visits China, Apple Earnings

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This is Bloomberg Daybreak Weekend, our global look at the
top stories in the coming week from our Daybreak anchors
all around the world. Straight Ahead on the program, we'll
look ahead to earnings from some of tech's magnificent seven.
I'm Nathan Hager in Washington.
I'm Caroline Hedkit in London, where we're asking whether UK
five Minister Kastarma can throw frosty relations with China.
I'm Doug Chrisner looking at what Apple earnings will indicate
about Asia.
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
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Good day to you. I'm Nathan Hager. We begin today's
program with the Federal Reserve. Jay Powell and company begin
their first monetary policy meeting of twenty twenty six on Tuesday,
with the first rate decision of the year to come Wednesday.
So what should we expect as we map out policy
for the rest of the year. Let's bring in Michael
McKee for more on this, our international economics and policy
correspondent for Bloomberg Radio and Television. Mike, I guess, as
far as the January decision goes, would probably be a
big shock if we got another rate cut this week, right,
So what should we be looking for.
I think this is gonna be another one where the
FED is sort of going to be anxious to make
as little news as possible, which I don't think they're
going to be able to avoid, but there is no
rate cut in train, so they're unlikely to do that.
That would be a shock. There's been no news that
would justify that at this point, and all the speakers
going into the blackout period, we're saying, you know, we
don't think we need to kind anything. So I think
you'll get a unanimous decision no to sense this time
for a hold, and then the question always, as always,
moves on to what do they do at the next meeting,
which is in March. I think they're going to avoid
making any kind of specific forecast because they don't know
what the data are going to show. We're still coming
out of this as the government shutdown, data shortage, so
they won't have a lot of information.
Well, let's talk about the information that they have gotten
thus far. I mean, we have seen some more labor
market reports, we've gotten non farm payrolls, you've gotten the
Fed's preferred gage of inflation as well. What does that
tell you about what the economy looks like going into
twenty twenty six.
Well, if you're looking at it in terms of the
Fed's dual mandate, you do have inflation. The PCEE numbers
came out last week at looking at two point eight percent,
which is up from the month prior. But now these
are November numbers. The December numbers won't come out yet
for a couple of weeks, and in the December numbers,
the expectation is inflation will rise again to three percent.
And then when you look at the jobs numbers, it's
the unemployment rate went down last month and Java's claims
have stayed extremely low. So at worst, maybe you say
for the moment, the labor market has stabilized, and so
there's not really an economic argument for cutting rates. There's
also a feeling that given the tax cut bill, we're
going into tax season now, people will get higher refunds
than they have in prior years and that will feed
some spending into the economy and keep it a little
bit stronger. So there's no real need to cut rates
at the moment now.
It's interesting because at the of last year, there was
so much focus on the idea of cracks in the
labor market. Now, as you say, we are seeing this
sort of sign of stabilization. While it seems like this
last mile of getting inflation back down to the Fed's
two percent target just seems to look like an uphill climb.
Could we be seeing the Fed's focus shift now from
the job market to inflation once again.
I think they will move back they were emphasizing the
labor market. I think they'll move back to the middle
at this point and waiting for more data. Next week
we won't have the December PCE numbers, so they'll still
be looking to guess at what the numbers are going
to be, and even if it's going up to three percent,
that's going to concern them. So I think they try
to keep their options open with that and not emphasize
the labor market just as much. But the problem with
both sides of the man data and the data are
the uncertainty that the Trump administration has caused has not
gone away. We just went through a week of We're
going to put big tariffs on Europe. Oh, no, we're not,
And so companies don't know what to do. They're kind
of hunkered down at the moment. They don't want to
fire a lot of people if the economy is going
to pick up. But if the economy is going to
slow down or we're going to have inflation issues, then
they're going to try to control costs and you might
see some layoffs. So at this point we're kind of
in this no man's land that we've been in for
a year.
You talked about the Fed maybe not wanting to make
much news at this meeting. Of course, this is coming
at a time where the Central Bank is facing continued
pressures outside the committee room. This is going to be
Chair Powell's first policy meeting since he announced that he's
under a Justice Department investigation. How much could that weigh
on this decision? Will it?
I don't think it weighs on the decision at all,
because the of Powell is sort of vengeance by the
President and the rest of the members of the Open
Market Committee aren't going to think it means anything, and
they will ignore it. But what will be interesting is,
since the FED is not expected to do anything exciting
or surprise anybody with monetary policy, is the first question
going to be about the decision or is it going
to be about the president's efforts to atara and feather
the FED chair. There probably will be a lot of
focus on that, and my guess is that Powell will
try to shut that down, maybe say I've already spoken
my piece on this, maybe something about the importance of
FED independence, But I don't think he wants to spend
the entire news conference in a shouting match with the President.
We know you're going to be there for that news
conference and for the decision as well, with the January
policy decision of the Federal resis coming up later on Wednesday.
Thank you for this, Mike. As always, it's Michael McKee,
international economics and policy correspondent from Bloomberg Radio and Television.
We move next to a slew of corporate earnings. The
focus this week turns to some of the biggest names
in tech. We're going to hear from Tesla, Microsoft, meta
platforms all on Wednesday. We'll also hear from Apple after
the closed Thursday, let's bring in Bloomberg Tech co anchor
Ed Ludlow to get a set for the Magnificent seven
earnings kickoff. Great to have you here.
Ed.
Let's start with Tesla because we heard from the CEO
Elon Musk at the World Economic Forum this past week.
He was talking about the optimist robots. Is that where
the focus is going to be for investors when it
comes to the earnings.
Yeah, when it comes to earnings, like you have to
kind of unpick all of the noise that comes from
Elon Musk in the interim. So what happened at the
end of twenty twenty five is Tesla had its second
consecutive sales decline on an annual basis. Basically, they're not
selling as many evs and there's lots of evidence that
musks medical activities last year impacted that we had the
end of federal credits in the United States and other
factors you know about the economy and competition. So when
it comes to earnings, you kind of look for, well,
was that story true. What is Tesla's explanation for it?
Because it's the first chance that they really talk about it.
Then there's all the big picture stuff, and you know,
we say on Bloomberg Tech all the time, Must's greatest
skill is keeping all the investors looking to the horizon
on those future projects, which are robotaxi and humanoid robots.
So when it comes to the core business, though, what's
the show me story for Elon Musk and for Tesla
when it comes to EV demand the fact that we
don't have those incentives and we're seeing that draw down
in demand across the EV sector. What's that going to
mean for Tesla when it comes to the earnings.
Yeah, again, it's a cutting through the noise kind of thing,
especially when we're reporting the news on it. But what
Tesla has done more recently inconsistently is in their earnings
deck a growth target. They will either say or they
won't say, we expect fifty percent compound annual growth rates.
And that's the only indication that we get to tell
us that they have firm data and firm belief that
they will or won't grow. Historically, that's been the story
for many years. Grew at fifty percent a year, and
then it stopped and as I just said two straight
years of declining growth, declining sales growth, so you look
into the deck. But again, you know, it depends on
the questions the analysts asked. It depends on what tests does.
A bit differently, the retail investors get to ask questions
that they submit through an online portal, and lots of
those often don't even worry about the day to day
business of selling evs. They just care about those shiny things.
Yeah, speaking of shiny things, let's move on to some
of the other companies reporting earnings this week, including Meta Platforms.
Of course, they've gone all in on AI spending right now.
Is there such a thing as too much AI capex
When it comes to Meta.
Quite the opposite. The expectation is that capital expenditures across
Meta and then the hyperscalers. So Meta, as you know,
is a social media company that's also very interested in
artificial intelligence, but it does not operate in the business
of renting computer capacity to others. Those are cloud providers
in other words, Amazon, Microsoft, Google, and to a lesser extent, Oracle.
But metas spending on its own data centers is so
significant that we put it in that bucket, and the
story's not changed from last quarter or last year. We
track capital expenditures across all those names, and the market
wants to see confidence of spending. The basic logic is
if capital expenditures are in the range that investors forecast,
they're higher than they were last year, then that shows
a commitment to spending, because the companies believe on the
other side of building more data centers comes revenue growth,
comes profit from all their work, particularly in AI.
And we're going to hear from one of those hyperscalers.
You just mentioned Microsoft. Of course there as your cloud business.
It seems like that's been going gangbusters for several quarters now.
So what's the expectation when it comes to Microsoft.
Yeah, Microsoft can be a pretty straightforward story. Again, we
look at its capital expenditures because as one of the
biggest data center operators and owners, you want to see
their commitment to doing it. But then in terms of segments,
it's just about the top line growth of that as
your cloud computing business, and you know it's in the
thirties and plus or minus a few percent against street consensus,
makes a really big impression on how AI. The investment
starts with the chips that go in data centers, you
have to spend a lot of money on that. But
when you start to show sales growth in cloud, it's
evidence that that payoff is happening.
So when we start to look at these earnings, Z,
what are you expecting when it comes to this ongoing
debate about AI valuations and you know circular spending in
the space as well.
Yeah, but the issue then takes us back to growth.
The valuations are being justified by that growth narrative. And
you know, if you read on the Bloomberg terminal, the
team on equities in particular point out that actually that
growth if we take the MAGS seven as a bucket,
or we take the higher growth tech stock s and
P five hundred, it isn't expected to be where it
was in more recent quarters. So that gives you the
potential for upside, of course, but it also means that
they're going to have to tell a pretty good story
to convince investors that where valuations are currently, these are
stocks worth putting money into.
You're going to see that story play out later on
this week. Thank you for this and again great have
you on with us. That's Bloomberg Tech co anchor Ed
Ludlow and coming up on Bloomberg Daybreak weekend, we'll look
at whether the UK's Prime Minister Keir Starmer can thought
frosty relations with China. I'm Nathan Hager and this is Bloomberg.
This is Bloomberg Daybreak Weekende will book ahead at the
top stories for investors in the coming week, and Nathan
Hager in Washington up later in the program will look
ahead to how earnings from Apple may have been affected
by business in Asia. But first in the coming days,
UK Prime Minister Keir Starmer will become his nation's first
leader to travel to China in more than seven years.
Starmer seeking to improve diplomatic ties as several geopolitical points
of tension remained between the two countries. So how will
Starmer's planned visits to Shanghai and Beijing play out? For
more Let's go to London and bring in Bloomberg Daybreak
Europe anker Caroline Hepger Nathan.
The last British premier to visit China was Treisa May
back in twenty eighteen. Since then, relations between the two
countries have worsened. After the crackdown on pro democracy protests
in Hong Kong, a spate of espionage and cyber attack allegations,
and Beijing's support for Russia's war in Ukraine. Despite the
frosty state of affairs, Starmer is seeking something of a thaw.
His optimistic approach is one he defended during a recent
speech in which he called for the UK to take
a pro business approach to China, whilst recognizing that it
poses a threat to national security.
I am clear that no transformation today carries greater consequence
than the rise of China. It is a nation of
immense scale, ambition and ingenuity, a defining force in technology,
in trade and global governance. So our response will not
be driven by fear nor softened by illusion. It will
be grounded in strength, clarity and sober realism, in line
with our wider international approach, and guided by our conviction.
That was the UK Prime Minister Kirs Starmer speaking there.
So can the British government draw a line under what
has been a turbulent period for UK China relations or
could you o political tensions and US influence maybe change things?
To think about this, I'm joined by Bloomberg's UK political correspondent,
Ellen Milligan and our chief Asia correspondent was in Matheson.
Welcome to both of you, and then can I start
with you. There was a time when under the previous government,
the Conservatives, we were talking about the Golden Age in
UK China relations. I remember that, but it does seem
like a long time ago, doesn't it.
Yes, So do you remember when David Cameron and Gguping
went to that kind of village pub and pulled pints chips.
I mean, we just really haven't seen that in the
last ten years, and you were saying that, I mean
really kind of that short lived Golden age. You know,
billions promised in Chinese investment, much closer ties break down
and sad over initially over that crackdown on activists in
Hong Kong, a former British colony, but also over espionage
and cyber attack allegations, and then more recently in the
last few years China support for Russia. So what Kiss
Starmer's administration has long complained of is that under the
Tories there was this kind of back and forth between
the Golden era and then a complete almost freeze of
ties under particularly Boris Johnson, and that they wanted to
get back to a more cooperative approach, but where they
would still challenge China where they needed to in.
Terms of Kiirs Stalma's recent foreign policy ideas. Then the
effort to try to set the record straight on Labour's
China strategy. What is their view, because there does seem
to be still a push pull, a strong push pull
in the UK about what attitude to adopt to Beijing.
Yeah.
I mean kir Starmer came in promising clarity over their
China policy and I think we've had anything but that.
I mean when he entered office in twenty twenty four,
there was quite a quick succession in terms of high
profile visits to China. David Lammi, who was the Foreign
Secretary at the time now Deputy Prime Minister, the Chancellor
Rachel Reeves both went over there and that pretty much
stopped when Donald Trump and re entered the White House
in January last year. I think Kirstarmer's foreign policy priorities
were very much about establishing of relationships with the US,
avoiding of the most harsh trade tariffs Ukraine, and also
the reset that he has been pursuing with the European Union.
And Donald Trump is of of famous China hawk and
so no visits really happened, and if they did happen,
they were very much under the radar and Britain didn't
shout about them. And I think what has happened in
the last few months, Macron did a hyper file visit
to Bishi, Mattz, the German Chancellor, has one planned, and
crucially Trump had his own bilateral meeting with Uguping and
has also planned a state visit, and I think Starmer
felt as though that paved the way for him to
be able to kind of soften relations with China.
Now to Okay Rozu in Asia, how does China see
its relationship with the UK? Maybe sort of historically and
also now, Well.
It depends how far back you want to go, because
there is a lot of history there. In more recent history,
it's probably been more down than up obviously from that
moment of the beer and the beer and the pub
after that, but it's never been easy in the past
in a ways, just to find this relationship from the
China side. You know, they now see themselves, no doubt
as the senior partner, shifting from one hundred years ago,
the aftermath of the Opium Wars, which very wounding to China,
you know, they manage an arrangement to get the return
of Hong Kong. But China probably sees the UK still
having a sense of a proprietary air, you know, weighing
in particularly on Hong Kong issues, protests there, the rule
of law. We've seen Kiss Starmer criticize the conviction of
the former Hong Kong media mogul jimmy Li. So a
sense in China's eyes that the UK is still willing
to interfere in its business in a different way perhaps
than during the Opium Wars, but it's still there. And
for China, what they want to do is put this
relationship to focus really on business and investment and trade
because that's where China wants to benefit. And for them,
the UK is a useful market as they also want
to diversify in trade. So for them now they probably
see this relationship as very transactional, but probably themselves is
a bit more of the senior partner. Yeah.
Is the UK seen as a strategic who by China
or is it simply as a kind of trading partner?
Do you think was my dut of China sees many,
if any Western nations as strategic allies. It might see
them as useful, but not as allies, perhaps since of
dividing and conquering in the West a bit so splitting
Europe and the UK off somewhat from the US, maximizing
the tensions that the US has right now with Europe
and the UK on different matters. So probably as a
useful partner, not strategic ally, a transactional partner. Definitely a
trading partner as long as the totality of that relationship
is still to China's advantage. So net net, are its
companies better off? Is it selling the sorts of things
it wants to? Does it have a foothold in the
industry as it wants? But that's probably how China would
see it as less a strategic ally because it're not
partnering on security matters. On defense, I mean, the UK
has actually been quite critical of China for its tacit
support of Russia for example in Ukraine was economic support
for Russia. But certainly China would see them as a
useful partner. Potentially.
We have seen the likes of Rachel Reeves and David
Lammy visiting China. Have they managed to make any progress?
There was no substantial outcome from either of those visits.
I think those initial visits were more about no one's
been in years, so let's go and make sure that
we get diplomacy back on track. More progress has been
made recently. Peter Karl, the Tech Secretary when he's now
Business Secretary, went out late last year and they've resumed
this economic trade dialogue which had not taken place I
think since before Boris Johnson. But you know, it means
that Kisdom has almost put more pressure on himself with
this state visit coming up. I mean the way he
describes China as this is like the most consequential global
shift to the UK of them, and so the stakes
are really high for him.
Roz does China want the UK to pick between the
US and China? What is their perspective? I mean America
has a view or mat doesn't.
It They do, And for China they probably realize it's
not realistic to try and say the UK has to
pick a side there, but they can take advantage because
that's what they like to do, is to spot an
opportunity and to maximize ruptures and tensions. You know, and
that sense just said the US led global order is
changing into something more fractured into spheres of influence Trump
in the Americas, China in Asia and so on, and
exploiting that when it comes to trade, because it's clear
Europe and the UK are acknowledging they need to do
business with China. As Ellen was saying, there's a lot
at stake for STARMA in this visit, you know, to
manage the relationship and to walk those lines. And they'll
be aware of that too him coming in, and they
understand the UK will always have a relationship of sorts
with the US. There is a lot of cooperation that
still goes on between them, including on the defense side,
despite what Donald Trump may say about that.
Ellen just lastly, how important do you think the recent
approval of a new Chinese embassy in London is It
was an enormously contentious decision.
Well, we've spoken about how the US approach China and
Donald Trump coming back has complicated this research. There've been
two other major obstacles in the past year for STARMA.
One is this embassy approval. The government decided to call
that embassy decision in from the local authorities almost a
year ago now and have constantly delayed a decision on this,
they've sought more information on what exactly China intends to do,
how close this embassy would be to sensitive communication cables,
and the timing is no coincidence that this decision has
been made just the week before this state visit, and
it really kind of paves the way for Starma to say, look,
we've been able to make this big decision that you've
wanted for a long long time. And also it's important
because Britain has its own crumbling embassy in Beijing that
it has had planning application to rebuild out for a while,
so that's really important. And the second thing I would
just say, because it would be a miss not to,
is this criminal case against two Brits accused of spying
for China that collapsed towards the end of last year,
and that has been a big obstacle too. And we've
spoken about there's a lot of China hawks across political
parties in UK's Parliament and those are really the two
big things that they continually point to for for examples
for Starma to be much more cautious with China.
Okay, Ellen, thank you so much for being with me.
That Isenbag's UK political correspondent Ellen Milligan, and my thanks
also to our chief Asia correspondent ros In Matheson for
discussing this visit by Kirs Starmer to China, and we
will of course have full coverage of the Prime Minister's
trip to China, including reaction on the ground and the
key takeaways from the talks. I'm Carolin Hetgar here in London.
You can catch us every weekday morning for Bloomberg Daybreak
you at beginning at six am in London. That's one
am on Wall Street.
Nathan, Thanks Caroline, and coming up on Bloomberg Daybreak weekend,
we look ahead to earnings from tech giant Apple and
how they may have been impacted by business in Asia.
I'm Nathan Hager, and this is Bloomberg. This is Bloomberg
Daybreak week and our global look ahead at the top
stories for investors in the coming week. I'm Nathan Hager
in Washington. We get Apple's latest earnings this week, and
the company's business in Asia will be a key focal point.
Let's get more on this from Bloomberg's Doug Krisner, host
of the Daybreak Asia podcast.
Nathan, there will be a couple of issues to consider
from this quarterly report, First sales of Apple devices in
Greater China, a market where the competitive landscape is shifting.
And second, what those sales figures mean for Apple's partners
and parts suppliers in the Asia Pacific. Joining me now
for a closer look is Bloomberg's Vlad svov Lad is
Tech editor for Asia, and he joins from our studios
in Hong Kong, thank you for being here. What do
we know about how well Apple products have been selling
in Greater China, especially the iPhone?
Well, absolutely, that is the company's iconic product. And Tim
Cook did give us a little bit of foreshadowing at
the last earnings saying that he looks forward to growth
in China. And we got a hold of numbers from
Counterpoint Research that showed that the iPhone overperform the broader
smartphone market significantly. That was up roughly about twenty eight
percent year and year in the holiday quarter, whereas the
overall China smartphone market actually dipped a couple of percentage points.
So really it signifies how big the iPhone seventy upgrades
have been, how they're resonated with consumers. The analysts also
pointed out that you had that covid era refreshed cycle,
so all the people who got a smartphone at that
time were due to get a new one, and presumably
all the iPhone owners just kept going with the iPhone.
So you and I have spoken in the past about
the intense competition from Chinese handset makers like Quabwei and
shao Me. Did that not show up in the last quarter.
Well, those two particular brands were down double digit in
percentage terms year and year for that quarter. It is
significant to say that for the entire year in terms
of shipments, while it was the biggest in China, it's
just the particular quarter because of product cycles. Apples is
very regular, it is like clockwork, but the likes of
Huawei Shami, they tend to jump around, so you have
some quarterly unevenness, so to speak. And one of the
interesting things with the Chinese manufacturers themselves is that they
keep handing over the crowd. So one year Apple will
be ahead, one year it will be Vivo, Shami, Huawei,
et cetera. So there's never really a clear cut leader
or winner amongst them. Whereas Apple there is just one Apple,
there is just one iPhone, and that's the recurring theme
with the company. It has that ecosystem that nobody else had.
Now Apple has established a well oiled supply chain right
across the APAC region, although recently some capacity constraints seem
to have become a factor. How well has Apple supply
chain held up in the face of this demand.
Well, the supply chain, I can kind of guess what
you're getting into, which is that memory chip crunch, which
has been the southern and overwhelming theme that we've seen
across the entire supply chain. It is brought on by
the AI demand. The likes of Nvidia and AMD are
the ones who are buying up the capacity at Samsung,
s k Heinix, and Micron. So all the memory that
used to be the most commodified, the most boring component
is now surging in costs, So that's hitting laptop manufacturers,
smartphone manufacturers, et cetera. Again, Apple is fairly unique in
this because Counterpoints and other analysts have said the premium
tier of the smartphone market is not being affected, is
the entry level is the mid range. We've seen some
indications that some of the smaller manufacturers actually canceling products
because they cannot get a hold of memory at a
price that makes the product viable.
Now we know that Apple outsources chip production to Taiwan Semiconductor.
This relationship goes back years. TSMC has been the exclusive
partner for producing processors for things like the iPhone, the iPad,
and even Max and for a long time, Apple was
TSMC's most important client. But these days that distinction seems
to belong to Nvidia. Given the explosive demand that we
have seen for high end chips now, TSMC has responded
recently by raising the lower end of its CAPEX spending target.
So when you consider expanding capacity, let's bring into the
conversation Apple's other critical partnership in Asia, and that is
fox Con, the largest contract manufacturer for Apple. So Vlad,
I'm wondering whether fox Con, like TSMC, is being forced
to increase its CAPEX to meet demand.
Well, Foxcone is an interesting one and clearly it doesn't
have that much in the way of capacity issues when
it comes to consumer electronics light the iPhone. But increasingly
FOXCNE is moving into being a data center hardware manufacturer.
So effectively, when TSMC builds in video chips, somebody needs
to put them in racks, build them into like fridge
sized units that then go into data centres. Foxcone is
doing a whole bunch of that. The company hasn't recently
spoken about amping up its own spending, but it does
stand to reason. Fox con does want to be has
a very close relationship with video, just as it does
with Apple. It does want to be the leader in
this space. So to your point, it may well be
the case that fox Conne and some of its competitors,
many of them being Taiwanese companies as well, are going
to ramp up as well because the demand. We saw
this at c Yes Jensen, CEO from a Video and
Other adjective said, the demand for AI hardware is still
outstripping supply.
When I think of memory chip makers, I think of
South Korea. I think of Samsung and sk Heinex. But
I also want to consider what's happening in China. We
have Semiconductor Manufacturing International Corp. Known as SMIC or SMICK.
This company also produces memory chips. So if the supply
of memory is being constrained, I'm wondering whether Chinese firms
like Smick are benefiting.
Yeah, the opportunity right now is in fact for the
Chinese manufacturers of memory chips. You have YMTC and some
other players within China. They have the opportunity because they
don't have the cutting edge the HBM technology that Heinigs
and Samsung are dedicating all their attention to. So for
them they can fill in the gap because Heinnicks has
already said twenty twenty six memory capacity is already booked
out and sold. And you're seeing these things emerging when
you look at the consumer prices if you want to
build your own PC, prices have more than doubled for ramsticks.
So Smick itself also a lot like TSMC that it
has its hands busy with orders from Huawei, which wants
to build AI accelerators to compete with in video, and
a number of players such as more Threads, which is
another Chinese chip designer that wants to compete with in video.
So Smick not necessarily busy with memory, but the likes
of YMTC are going to have more of an opportunity
in the broader market.
So how well have the Chinese chip makers been doing
in terms of improving the quality of their semiconductors, whether
we're talking about memory or even processors.
I would say that probably they're much closer to closing
the gap on the memory front because, again, to do
consumer electronics memory, some of these things are stabilized. Some
of that technology is mature and hasn't jumped by leaves
and bounds in the same way that it has done
with logic processes, especially AI processes. So SNICK again is
a very good example because it is effectively stuck at
seven nanometer technology, while TSMC and Samsung are this year
moving to two nanometers, which is several generations ahead, and
the difference that that makes is kind of consistent. It
means more transistors in less pace, it means more performance
for less energy consumed. And again, when we're talking AI
and data centers, energy consumed is a big factor.
What about the adoption of artificial intelligence in China, especially
on mobile devices.
Apple intelligence doesn't even exist in China at the moment.
Apple Intelligence outside of China has also been a disaster
by Apple standards. It has gone nowhere. It is not
a selling point whatsoever. But for Apple's constellation, the fact
is that AI on devices is not selling point for anyone.
Samsung has the most integration, uses Google Gemini for a
whole bunch of stuff, it uses Samsung's own technology. Nobody's
buying Samsung device because if its AI. Likewise, for Shaomi, Huawei,
Honor is one of these companies that has its own
built in AI agent that will do things for you
on the device. These are interesting technologies. There are things
that make a nice tech demo, but no consumer is
actively going out and saying I will buy this brand
over the other because I think it's AI agent is
more valuable.
When we have spoken in the past about the iPhone,
the camera obviously becomes a focal point pun intended here,
But when it comes to the iPhone seventeen, I'm wondering
whether that's been a big selling point. The camera has
been a selling point for Greater China.
I'm sure it is mean people in China always care
about specs. With them, more is always more. I would
say that in particularly the iPhone seventeen, the base model,
no other affixes after the seventeen has been a massive upgrade.
One of the things Apple did is they added more memory. Again,
memory the big thing right now without raising the price.
So just looking iPhone sixteen to iPhone seventeen at that
price level, there was a bigly, big uprating specification. So
I feel like things like battery life camera improvements always come.
There hasn't been like a blow your socks off kind
of camera improvement from the iPhone, but the overallspec improvement,
all those quality of life improvements are the things that
people look for, and clearly the iPhone seventeen here's a
sweet pot.
You and I have spoken in the past about Apple
diversifying some of its manufacturing outside of China, especially to India.
Among the lessons from the pandemic was the vulnerability of
being overly reliant on just one jurisdiction. So I'm curious
to get your take, Vlad on where Apple is right
now in trying to reduce its reliance on China as
a manufacturing center.
That is still the case increasingly what we're seeing, and
the move to India in fact has been accelerating. But
that's been quiet for several months now, and to my
sense is that Apple will speak on it and figures
will emerge when more pressure from say the Trump administration
to do more in the way of the coupling. Over
the long run, you can kind of see that made
in China will be for the China market, which Let's
not forget, is the world's biggest smartphone market, so Apple
will never get rid of that part of its business
so long as that's within its control, and that will
always be very, very significant. India is again the big
hub for doing manufacturing outside of China. Worth bearing in
mind that India is also one of the biggest growth
markets for smartphones, one of the biggest growth markets for
the premium range. So Apple is putting a lot of
focus on that. I would say that the company is
trying to have everything effectively, like make sure it's big
in India, make sure it's still big in China. Nothing
will ever go neglected by Apple so long as there's
big potential there.
And Vietnam, which as we know, has been another manufacturing
location for a few Apple products.
That's right.
The Vietnam is a place where things like iPads and
let's say air pods production can happen. It is a
place that others. Fox has facilities there and other manufacturers
are also doing work. Again, that tends to be the
move of manufacturing out of China toward India and Vietnam
tends to be more of a high priority. When you
hear more noise from the US administration, to say less
of manufacturing leaf China. It tends to come and go
with pressure from the White House.
Effectively.
One of the questions for me at this point as
it relates to the shortage in memory components is whether
Apple's margins will come under pressure and whether or not
the company will be confronted with having the increase prices.
It seems like the scarcity of memory is going to
produce higher prices, and presumably those increases are going to
be passed on ultimately to the consumer.
Absolutely, the rising consumer electronics prices is already on the way,
especially with laptops. I would again say you will see
on the lower end of things, entry level devices will
become much pricier. Mid range two. I suspect that Apple
is one of the companies that will do with something
to not let that price premium pass on to the consumer.
Apple tends to be very steady with its pricing, so
the premium end of the market will not be so
much affected. But again it's worth recounting Micro and one
of the Micro and executive sodas. This memory crunch is unprecedented,
and we're talking something stretching deep into twenty twenty seven
for sure.
Glad we'll leave it there. Thank you so very much.
Flat Savov, Bloomberg Tech Editor for Asia, joining from Hong Kong.
By the way, Apple will be reporting those earnings on
Thursday after the US close. I'm Doug Prisner. You can
catch us weekdays for the Daybreak Asia podcast. It's available
wherever you get your podcast Nathan.
Thanks Doug, and that does it for this edition of
Bloomberg day Break Weekend. Join us again Monday morning at
five am Wall Street Time for the latest on markets
overseas and the news you need to start your day.
I'm Nathan Hager. Stay with us. Top stories and global
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