April 16, 2024 • 21 mins
Featuring:
Julia Wang, Executive Director and Global Market Strategist at JPMorgan Private Bank joins us in Hong Kong to discuss her perspective on APAC markets.
Vlad Savov, Bloomberg Tech Editor, joins us to discuss Apple's China sales.
Ed Ludlow, Co-host of Bloomberg Technology, sits down with us to discuss the Tesla workforce cuts.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Daybreak Asia podcast. I'm Doug Krisner. You can join Brian
Curtis and myself for the stories, making news and moving
markets in the APAC region. You can subscribe to the
show anywhere you get your podcast and always on Bloomberg Radio,
(00:23):
the Bloomberg Terminal, and the Bloomberg Business app.
Speaker 2 (00:26):
In our studios in Hong Kong is Julia Wong, executive
director and global market strategists at JP Morgan Private Bank.
To take a closer look at markets. We mentioned that
we saw a lot of selling today. So Julia, at
the moment, geopolitics and higher rates and possibly the Fed
not doing what we thought it might do. They're sort
(00:47):
of carrying the day. But earnings are nigh Will that
change things? And do you see does JP Morgan Asset
or Private Bank see this as a good dip to buy?
Speaker 3 (01:00):
Thanks for having me, so I think that you know
you're absolutely right the over the long run, earnings growth
matter more for the equity market. Uh, And we don't
really see that being a hurdle for equities. In fact,
we do think that the equity market is exiting what
we call all rolling earnings recession. Uh And there are
more sectors points to see positive earning growth this year,
(01:21):
So we do think that it's from an earnings perspective,
is actually bottoming out and there are more expansions ahead
for the equity market. So that is our medium to
longer term view.
Speaker 2 (01:31):
Uh.
Speaker 3 (01:31):
So we do think that the you know, the the
geopolitical worries, there's back and forth in terms of fat expectations.
Fat ratcut expectations are sort of near term hurdles in
the market we have to get through. It could take
a couple a few more weeks or if not a
few more months. So I think that you know, for
(01:54):
investors who are looking to you know, embrace the next
technology way in terms of artificial intelligence, who are looking
to position for longer term secular growth both in technology
as well as in sectors like healthcare, we do advocate
starting to build positions as the market pullback, but just
be mindful that you know, these are volatilities that the
(02:15):
market will have to go through and there are you know,
there could be periods of volatilities ahead as well.
Speaker 1 (02:20):
Julia, I know you as a pretty as stud economist.
Later today, for China. We're going to get the monthly
activity data. Retail sales is going to be very important
in terms of trying to get a sense of where
the Chinese consumer is right now. Do you can you
offer some insight.
Speaker 3 (02:36):
Well, the times consumers are probably still I think rather cautious.
I do think that there's a marginal There's been some
marginal evidence that you know, they've been uh, saving less
and spending a bit more, but that's on the back
of a significant accumulation of savings the last couple of years.
So I think it's very slow bottoming out process. I think,
(02:59):
you know, if we do out into the broader issues,
there really is a lack of confidence, which is weighing
weighing on demand, and so we talk about the Chinese
economy at the moment is being rather imbalanced. There's more
supply than there is demand, manufacturing production, and everything is
too reasonably good. And that's why I think some of
the indicators that tend to reflect or pick up on
these things more like GDP, like industrial production, like investment,
(03:23):
this would continue to be quite good, but there is
really a death stuff demand and that's because confidence is
still quite low. So we do need to see that
kind of pickup before we can see a more balanced recovery.
Speaker 2 (03:34):
So not so bullish on China. Perhaps you can call
that neutral on China at the moment, but you continue
to like Japan. Japan has had a good run and
people were buying on yen weakness for a long time.
But now we've got real yen weakness and dollar strength
and they're not buying.
Speaker 4 (03:52):
Why No.
Speaker 3 (03:54):
I think if you look at investor positions, there are
still many investors are shorty, they're boring again, and they're
buying Japanese assets. So I think that actually there there
is a decent chunk composition in that. I do think that,
you know, we talk about the near term, it's worth
remembering just how far we've come in terms of dollars yen, right,
(04:15):
you know, we were much much lower in terms of
the level just a couple of months ago. So I
do think that some of the structural factors driving young
weaknesses are better understood now, so such as inter sure differential,
such as the fact that Japan's trade deficit you know,
looks to be persisting. So as these become better understood,
and in the face of all these geopolitical tension and
(04:36):
dollar spike. I think it possibly it's reasonable to expect
that the government might try to interven, And that's why
we also don't advocate taking a spectative position to be
short yen at this point. With a longer term perspective,
I think yen is still going to be a care currency.
Speaker 1 (04:51):
We had a portfolio manager we quoted in the Bloomberg
story today from over a t rowe price saying that
the end will continue to drop, maybe another ten percent,
to levels not seen since the nineteen nineties, and he
really points the finger at the Bank of Japan and
the BOJ being reluctant to raise rates in a significant fashion.
Does this particular person have a point right now that
(05:12):
there is so much conservative thinking at the BOJ that
we could see even more yen weakness.
Speaker 3 (05:20):
So I think that, you know, he has a point
in terms of the structural factors driving yen weakness, which
I also agree with, and I don't think that will
reverse any time soon. I don't, however, think necessarily that
the BOJ is the real corporate of it, because I
think that they are justified in thinking about inflation not
only as a cyclical problem, but as a structural problem
(05:41):
for Japan. Japan hasn't had inflation for twenty thirty years,
so you know, if you think about an average inflation target,
they have a long way to catch up. So I
think they's justified for them to take a more longer
term approach as they try to engineer just return to
reflation story and overlook a little bit of the near
term inflation squeeze, and because ultimately what matters is whether
(06:03):
the economy can move to a new equilibrium in terms
of productivity growth, and that takes time and some patients awards,
some patients of the central bank.
Speaker 2 (06:10):
One quick call on inflation. In the US, UBS strategists
are saying that the FED hiking rates to six and
a half percent is a real risk. Can you see that.
Speaker 3 (06:22):
We don't see that happening. I think the main difference
between now and twenty twenty two is that FED fount
rate is a five point three You know, pcees running
at two point eight percent, so the gap in terms
of real rate is already two hundred and fifty basis point.
So even if inflation becomes dicky at this level, even
if there are some bumps in the road, there's a
decent buffer for free in terms of real rate, the fact doesn't.
Speaker 2 (06:44):
Happen absolutely, Julia, thank you so much for joining us.
Julia Wong, executive director at JP Morgan Private Bank. The
closer look at Apple now, Apple iPhone shipment slid nearly
ten percent last quarter. It was the steepest drop in
(07:05):
sales for Apple since the pandemic. Joining us now is
Vlad Savov, Bloomberg Tech editor. To discuss this further. A
while back, Flad, we had Apple sales in China down
about a third, but then all smartphones were down a third.
But that's not the case here. Here you have overall
global sales Apple shipments down nearly ten percent last quarter,
(07:28):
and for the rest of the industry you had a
gain of seven point eight percent. What has gone wrong
at Apple.
Speaker 5 (07:35):
Well, it's an interesting question. One way to look at
it is it may be a matter of a cyclical
matter that just runs over many years. When you look
back to the pandemic, the iPhone was actually the most
resilient smartphone among any so when we had especially in China,
the world's biggest smallphone market, is the one to keep
the closest eye on Android. Rivusudi iPhone would down double
(07:59):
digits every single month for over a year, whereas the
iPhone was rather sustaining its momentum. Now the trend has reversed,
and there are a number of reasons for this. I mean,
one of them is when Huawei was hit with sanctions,
everyone else in the Chinese market invested really heavily, brought
a lot of inventory, seven conductors, et cetera. They wanted
to grab that Huawei market share, and they did to
(08:20):
a great extent, but they did overspend. They had a
lot of inventory which took months to clear. So now
those exact companies because of their aggressive pricing to shift
that inventory and now coming back and ramping up their shipments.
So just in relative terms, that's why they are on
the up. Whereas Apple, because it has been sustaining things, maybe,
(08:42):
as I say, it has a bit more of a
down cycle at the moment. That's let's say the positive
the upweight way to look at it from Apple's perspective.
Speaker 1 (08:49):
Yeah, we're citing data hear from the market tracker IDC
in terms of first quarter growth. One of the things
that I was just stupefied by Transhan. I hadn't even
heard of this company, shipments were up eighty five percent,
and when I did a little bit of research, I
guess Trenson sells heavily into African markets.
Speaker 3 (09:08):
Is that right?
Speaker 5 (09:09):
That's right. It's very much a budget oriented company. It
has several brands which even if I record him at
the moment, I'll forget him in a minute. I mean,
I'm being a bit dismissive. But the company does a
good job. This is the other thing. Just because you're
a budget oriented company, that doesn't mean that it doesn't
take a lot of expertise and operational efficiency to make
(09:32):
that work. Not everybody does it. Not everybody turns a profit,
and that company is doing it. It's now number four
in the world. Oppo, which is one of the big
brands over here in China, it's kind of been slumping,
whereas Shami, on the other hand, it has rebounded. Shami
is a really interesting company because it's co founder Leijun
(09:53):
has dedicated all his attention to the EV project, which
is boosted the share price, whereas the smartphone companies sally
rebounding just as well.
Speaker 2 (10:01):
Is really adding to the difficulties of other EV makers
in China. I don't want to go that direction. I
want to go back to Apple because that's the focus
of this discussion flat and Apple, you know, has never
really been first in a lot of things, but it
eventually got there by extremely good quality in its output,
(10:23):
and so it brings to mind AI. So you've had
Google and Microsoft and other companies like Nvidia and broad
Common others really take advantage of, you know, making announcements
and getting started on artificial intelligence. Not so much Apple.
But now you have the WWDC coming in June. Is
(10:44):
that going to be the beginning of a new push
for Apple to the upside?
Speaker 5 (10:48):
Well, it's the beginning of the AI story, shall we say,
or let's say the reboots of it, because Apple Serrie
Digital Assistant is supposed to be some version of AI.
But again what we refer to his AI today is
the generative AI, the chat GPT class. So Apple really
hasn't given the world a narrative around that. It has
(11:09):
had again a rally in a share price just because
there was indication that it's indicated integrating more AI processing
and its chip in. Tim Cook has spoken repeatedly saying
AI is going to be a priority.
Speaker 2 (11:22):
But our own.
Speaker 5 (11:23):
Reporting at Bloomberg says that Apple is looking to contract
Google for its Gemini AI model for the coming generation
of iPhones. It is fair to say that Apple has
been quite flat footed. It's playing catch up. Just as
you said, Brian, there were smartphones many many years before
the iPhone, and then the iPhone came in and it
said the standard. It defined what a smartphone is for
(11:44):
all of us today. So absolutely no reason to rule
Apple out, but it is the case that the company's
playing catch up and it needs to show some evidence
that it's closing the gap.
Speaker 1 (11:55):
In June, well, they're doing some business in India. We
know that, right The last figure that we had for
Apple sales in India was pretty pretty strong.
Speaker 3 (12:03):
Yeah.
Speaker 5 (12:03):
Absolutely. And the other thing that Apple's doing is shifting
it's iphl manufacturer into India. That doubled this past fiscal
year ending in March, and it had tripled the previous one.
So India in the space of a couple of years
has gone from just a percentage of iFilm manufacturing to
fourteen percent. And as I mentioned, because the iPhone had
(12:25):
been so steady, one way to call it is steady,
the other way to call it a stagnant it's very
easy to say all this manufacturing has gone out of
China to go into India. It isn't additional to manufacturing
in China.
Speaker 2 (12:36):
So Tim Coulk spent a lot of time in China
here just recently. I'm wondering whether or not that's a
kind of push to reinforce among Chinese officials that Apple's
here to stay in China.
Speaker 5 (12:50):
Literally, that's something that he literally put out there. He
declared his love for China on his most recent trip.
He has been on free public visits to the country
in the past year. It's increasingly common for him to
be in China. It's supposed to be reassuring. One way
to read it is the other way, because if you're
(13:11):
really sure in something, you don't need to go and
attend to it on such a regular basis.
Speaker 1 (13:14):
I guess he was just in Hanoi as well, or
maybe he's still in Vietnam, and so that's another manufacturing
site for them that they want to be able to fortify.
Speaker 5 (13:23):
Yeah, I think he's just hang out in Asia and
just back to the US. It's a busy time, and yes,
he's hanging out with influences and YouTubers in Vietnam, and
there is the prospect for him to announce fresh investments
in there as well.
Speaker 2 (13:39):
All right, lad, out of time, unfortunately, but a great session.
Thank you, Lad's have all Bloomberg chech editor.
Speaker 1 (13:50):
Let's go to Tesla next. The company is cutting more
than ten percent of its workforce. That's roughly fourteen thousand jobs.
Let's take a look under the hood. I know I
couldn't resist with our own Ed Ludlow, co host of
lumber Technology, Ed's joining us from San Francisco. Is this
something more than a company that is struggling with softer demand?
Speaker 4 (14:15):
I think it is something more than that. It's been
a long day, long night. It's been a long twenty
four hours. But you know something you said there more
than ten percent. You know, it kind of got lost
in the kind of cadence of headlines that we broke.
But what I'm hearing now is that the cuts in
certain teams is a lot deeper than ten percent. In
many cases, it's near it to twenty percent. And as
(14:38):
we reported, it seems to be largely coincidental timing. But
there were two very prominent executives at Tesla that handed
in their resignation last night, and they would have known
full well these cuts were coming. So and I think
the stock cloak down more than five percent, So there's
a lot there there.
Speaker 2 (14:57):
We're journalists, so we like to have a certain sobriety,
but then we're radio hosts and so we like to
stir things up a little bit.
Speaker 4 (15:03):
So inputting to hit me with it.
Speaker 2 (15:05):
This is not necessarily throwing in the white tell. It's
not really the tail between the legs. But it is
the year of efficiency for Tesla. Is that right?
Speaker 4 (15:17):
Yeah, Yeah, that's a really good way of putting it.
Like you know, oftentimes in the bottom technology when a
company announces big layoffs. You know, it's never pleasant to
talk about people losing their jobs, but you'll see the
stock go up, and you'll see the stock go up
because investors it is a sign of cost discipline, and
obviously reducing your cost base has impact on the bottom line.
(15:38):
This time, Tesla shares with down five percent and very much.
This time. It's kind of a compounding effect of negative
headlines that we've had. In the first quarter, Tesla missed
deliveries by a very big margin. The data suggests that
Tesla is facing increasing competition from domestic players in China.
So cutting this with the added negative headline that Drew Baglino,
(16:03):
who has been at that company for eighteen years and
was one of only four named executive officers on Tesla's
management team, that he resigned and there's deep layoffs. I
think it just added to a downward trend that this
company and literally its soccers seen so far in twenty
twenty four.
Speaker 1 (16:23):
So, ed, how is this going to impact a product
line right now? Do we know that?
Speaker 2 (16:28):
Yeah?
Speaker 4 (16:29):
Reading the memo that Elon Musk sent to employees around
the world last night, you know he's attributing the need
to cut BA to a their people in duplicate roles
because they grew too fast, but also productivity and cost discipline.
And as you guys know, Tesla's narrative right now is
it's between two waves of growth. Wave one has been
(16:51):
gone driven by Model three and Model Y and Wave
two we're a little bit confused about. But it's either
a twenty five thousand dollars ev or it's a ROBOTAXI,
depending on whether Elon Musk is right or Reuter's that
reported the twenty five thousand dollar v was dead last week.
And you know amid losing some pretty important intellectual capital
(17:12):
in those executive departures. I think Elon's just trying to
rein it in. You know, what I'm hearing is that
he's kind of clear in house and making sure that
he has the people in place that he wants to
get this next phase of growth going.
Speaker 2 (17:26):
And as I heard you say in an interview more
than a year or two ago, that Elon Musk is
the wild card man. Should we doubt him? I mean
Mark Zuckerberg pulled it off, didn't he at Meta? Should
Is this a big challenge now that Elon Musk will
embrace and he will get this company more efficient and
more profitable. Yeah?
Speaker 4 (17:48):
I mean I talked about this on air and I
wrote about it in my column today as well on
Tech Daily that there are times where Elon Musk is
just consistent, and this in terms of layoffs is one
area that Musk is consistent. He did it in twenty
twenty two where they cut around ten percent of staff.
He's talked about the impact of rates on demand presently,
(18:12):
and he's always had this mantra that the leaders of
each business unit should be aggressive in pursuing cost savings. Basically,
he says to all of them, get me cents off
the dollar on every component, shave cost out of every process.
And he's always done that, and this is him doing
it again. The difference is that, you know, he's got
(18:34):
a lot else going on. He's the CEO leader of
five other companies, and it's just disconcerting when two big
name executives that are highly competent leave the company at
the same time. So this time, I think investors and
Tesla shareholders and Tesla owners as well basically trying to
wade through it and go is the net result that
(18:55):
Lance got this or not?
Speaker 1 (18:56):
Well, that goes to the next question. I mean, if
he's spread himself to friendly, do we need to see
him kind of remain more laser focused on the Tesla
problem at the exclusion of some of the other things
he's got his hands in.
Speaker 2 (19:09):
Yeah.
Speaker 4 (19:09):
Yeah, you know, to the root of your previous question,
there is an element of key man risk. Tesla now
literally puts it in its regulatory filings that if anything
would happen to Elon Musk, you know, horrible to say.
The easiest example for our globe audience, if Elon Musk
were to be hit by a bus Tesla would have
a problem. And that's me paraphrasing. And again it goes
(19:30):
back to when Drew Baglino resigned or you know, he
announced he'd left Tesla, but a source told me he
resigned rather than he was fired. A lot of people
thought Drew might be next in line potentially to be CEO.
He'd done eighteen years at Tesla. He leads all energy
and powertrain activities at the company, or he did until
last night. So with him out the running, there's now
(19:51):
only three named executive officers, including Musk. And you wonder
like if he ever turned around and said, I'm done
with Tesla for now, I'm moving on to something else.
Who person might be.
Speaker 2 (20:02):
Ed just in twenty seconds or so? Does this mean
lower prices across the board for evs and does this
bring in viability? How viable are these companies?
Speaker 4 (20:13):
Well, the answer is no. I don't think if you
see job cuts in other ways to save money, that
you'll continue to see price drops. I think they've cut
as deep as they can, but you never know. They've
not been afraid to use price changes as a lever.
Speaker 1 (20:26):
Yeah, so far this year the stock is down thirty
five percent. Talk about price cuts, and it's always a pleasure.
Thank very much for making time to chat with us.
Bloomberg's Ed Ludlow, co host of Bloomberg Technology on the
Tesla story shares today in the regular session down to
five point six percent.
Speaker 2 (20:43):
This is the Bloomberg Daybreak Asia podcast, bringing you the
stories making news and moving markets in the Asia Pacific.
Visit the Bloomberg Podcast channel on YouTube to get more
episodes of this and other shows from Bloomberg. Subscribe to
the podcast on Apple, Spotify, or anywhere else you listen
and always on Bloomberg Radio, the Bloomberg Terminal, and the
(21:04):
Bloomberg Business app.
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Daybreak Asia podcast. I'm Doug Krisner. You can join Brian
Curtis and myself for the stories, making news and moving
markets in the APAC region. You can subscribe to the
show anywhere you get your podcast and always on Bloomberg Radio,
(00:23):
the Bloomberg Terminal, and the Bloomberg Business app.
Speaker 2 (00:26):
In our studios in Hong Kong is Julia Wong, executive
director and global market strategists at JP Morgan Private Bank.
To take a closer look at markets. We mentioned that
we saw a lot of selling today. So Julia, at
the moment, geopolitics and higher rates and possibly the Fed
not doing what we thought it might do. They're sort
(00:47):
of carrying the day. But earnings are nigh Will that
change things? And do you see does JP Morgan Asset
or Private Bank see this as a good dip to buy?
Speaker 3 (01:00):
Thanks for having me, so I think that you know
you're absolutely right the over the long run, earnings growth
matter more for the equity market. Uh, And we don't
really see that being a hurdle for equities. In fact,
we do think that the equity market is exiting what
we call all rolling earnings recession. Uh And there are
more sectors points to see positive earning growth this year,
(01:21):
So we do think that it's from an earnings perspective,
is actually bottoming out and there are more expansions ahead
for the equity market. So that is our medium to
longer term view.
Speaker 2 (01:31):
Uh.
Speaker 3 (01:31):
So we do think that the you know, the the
geopolitical worries, there's back and forth in terms of fat expectations.
Fat ratcut expectations are sort of near term hurdles in
the market we have to get through. It could take
a couple a few more weeks or if not a
few more months. So I think that you know, for
(01:54):
investors who are looking to you know, embrace the next
technology way in terms of artificial intelligence, who are looking
to position for longer term secular growth both in technology
as well as in sectors like healthcare, we do advocate
starting to build positions as the market pullback, but just
be mindful that you know, these are volatilities that the
(02:15):
market will have to go through and there are you know,
there could be periods of volatilities ahead as well.
Speaker 1 (02:20):
Julia, I know you as a pretty as stud economist.
Later today, for China. We're going to get the monthly
activity data. Retail sales is going to be very important
in terms of trying to get a sense of where
the Chinese consumer is right now. Do you can you
offer some insight.
Speaker 3 (02:36):
Well, the times consumers are probably still I think rather cautious.
I do think that there's a marginal There's been some
marginal evidence that you know, they've been uh, saving less
and spending a bit more, but that's on the back
of a significant accumulation of savings the last couple of years.
So I think it's very slow bottoming out process. I think,
(02:59):
you know, if we do out into the broader issues,
there really is a lack of confidence, which is weighing
weighing on demand, and so we talk about the Chinese
economy at the moment is being rather imbalanced. There's more
supply than there is demand, manufacturing production, and everything is
too reasonably good. And that's why I think some of
the indicators that tend to reflect or pick up on
these things more like GDP, like industrial production, like investment,
(03:23):
this would continue to be quite good, but there is
really a death stuff demand and that's because confidence is
still quite low. So we do need to see that
kind of pickup before we can see a more balanced recovery.
Speaker 2 (03:34):
So not so bullish on China. Perhaps you can call
that neutral on China at the moment, but you continue
to like Japan. Japan has had a good run and
people were buying on yen weakness for a long time.
But now we've got real yen weakness and dollar strength
and they're not buying.
Speaker 4 (03:52):
Why No.
Speaker 3 (03:54):
I think if you look at investor positions, there are
still many investors are shorty, they're boring again, and they're
buying Japanese assets. So I think that actually there there
is a decent chunk composition in that. I do think that,
you know, we talk about the near term, it's worth
remembering just how far we've come in terms of dollars yen, right,
(04:15):
you know, we were much much lower in terms of
the level just a couple of months ago. So I
do think that some of the structural factors driving young
weaknesses are better understood now, so such as inter sure differential,
such as the fact that Japan's trade deficit you know,
looks to be persisting. So as these become better understood,
and in the face of all these geopolitical tension and
(04:36):
dollar spike. I think it possibly it's reasonable to expect
that the government might try to interven, And that's why
we also don't advocate taking a spectative position to be
short yen at this point. With a longer term perspective,
I think yen is still going to be a care currency.
Speaker 1 (04:51):
We had a portfolio manager we quoted in the Bloomberg
story today from over a t rowe price saying that
the end will continue to drop, maybe another ten percent,
to levels not seen since the nineteen nineties, and he
really points the finger at the Bank of Japan and
the BOJ being reluctant to raise rates in a significant fashion.
Does this particular person have a point right now that
(05:12):
there is so much conservative thinking at the BOJ that
we could see even more yen weakness.
Speaker 3 (05:20):
So I think that, you know, he has a point
in terms of the structural factors driving yen weakness, which
I also agree with, and I don't think that will
reverse any time soon. I don't, however, think necessarily that
the BOJ is the real corporate of it, because I
think that they are justified in thinking about inflation not
only as a cyclical problem, but as a structural problem
(05:41):
for Japan. Japan hasn't had inflation for twenty thirty years,
so you know, if you think about an average inflation target,
they have a long way to catch up. So I
think they's justified for them to take a more longer
term approach as they try to engineer just return to
reflation story and overlook a little bit of the near
term inflation squeeze, and because ultimately what matters is whether
(06:03):
the economy can move to a new equilibrium in terms
of productivity growth, and that takes time and some patients awards,
some patients of the central bank.
Speaker 2 (06:10):
One quick call on inflation. In the US, UBS strategists
are saying that the FED hiking rates to six and
a half percent is a real risk. Can you see that.
Speaker 3 (06:22):
We don't see that happening. I think the main difference
between now and twenty twenty two is that FED fount
rate is a five point three You know, pcees running
at two point eight percent, so the gap in terms
of real rate is already two hundred and fifty basis point.
So even if inflation becomes dicky at this level, even
if there are some bumps in the road, there's a
decent buffer for free in terms of real rate, the fact doesn't.
Speaker 2 (06:44):
Happen absolutely, Julia, thank you so much for joining us.
Julia Wong, executive director at JP Morgan Private Bank. The
closer look at Apple now, Apple iPhone shipment slid nearly
ten percent last quarter. It was the steepest drop in
(07:05):
sales for Apple since the pandemic. Joining us now is
Vlad Savov, Bloomberg Tech editor. To discuss this further. A
while back, Flad, we had Apple sales in China down
about a third, but then all smartphones were down a third.
But that's not the case here. Here you have overall
global sales Apple shipments down nearly ten percent last quarter,
(07:28):
and for the rest of the industry you had a
gain of seven point eight percent. What has gone wrong
at Apple.
Speaker 5 (07:35):
Well, it's an interesting question. One way to look at
it is it may be a matter of a cyclical
matter that just runs over many years. When you look
back to the pandemic, the iPhone was actually the most
resilient smartphone among any so when we had especially in China,
the world's biggest smallphone market, is the one to keep
the closest eye on Android. Rivusudi iPhone would down double
(07:59):
digits every single month for over a year, whereas the
iPhone was rather sustaining its momentum. Now the trend has reversed,
and there are a number of reasons for this. I mean,
one of them is when Huawei was hit with sanctions,
everyone else in the Chinese market invested really heavily, brought
a lot of inventory, seven conductors, et cetera. They wanted
to grab that Huawei market share, and they did to
(08:20):
a great extent, but they did overspend. They had a
lot of inventory which took months to clear. So now
those exact companies because of their aggressive pricing to shift
that inventory and now coming back and ramping up their shipments.
So just in relative terms, that's why they are on
the up. Whereas Apple, because it has been sustaining things, maybe,
(08:42):
as I say, it has a bit more of a
down cycle at the moment. That's let's say the positive
the upweight way to look at it from Apple's perspective.
Speaker 1 (08:49):
Yeah, we're citing data hear from the market tracker IDC
in terms of first quarter growth. One of the things
that I was just stupefied by Transhan. I hadn't even
heard of this company, shipments were up eighty five percent,
and when I did a little bit of research, I
guess Trenson sells heavily into African markets.
Speaker 3 (09:08):
Is that right?
Speaker 5 (09:09):
That's right. It's very much a budget oriented company. It
has several brands which even if I record him at
the moment, I'll forget him in a minute. I mean,
I'm being a bit dismissive. But the company does a
good job. This is the other thing. Just because you're
a budget oriented company, that doesn't mean that it doesn't
take a lot of expertise and operational efficiency to make
(09:32):
that work. Not everybody does it. Not everybody turns a profit,
and that company is doing it. It's now number four
in the world. Oppo, which is one of the big
brands over here in China, it's kind of been slumping,
whereas Shami, on the other hand, it has rebounded. Shami
is a really interesting company because it's co founder Leijun
(09:53):
has dedicated all his attention to the EV project, which
is boosted the share price, whereas the smartphone companies sally
rebounding just as well.
Speaker 2 (10:01):
Is really adding to the difficulties of other EV makers
in China. I don't want to go that direction. I
want to go back to Apple because that's the focus
of this discussion flat and Apple, you know, has never
really been first in a lot of things, but it
eventually got there by extremely good quality in its output,
(10:23):
and so it brings to mind AI. So you've had
Google and Microsoft and other companies like Nvidia and broad
Common others really take advantage of, you know, making announcements
and getting started on artificial intelligence. Not so much Apple.
But now you have the WWDC coming in June. Is
(10:44):
that going to be the beginning of a new push
for Apple to the upside?
Speaker 5 (10:48):
Well, it's the beginning of the AI story, shall we say,
or let's say the reboots of it, because Apple Serrie
Digital Assistant is supposed to be some version of AI.
But again what we refer to his AI today is
the generative AI, the chat GPT class. So Apple really
hasn't given the world a narrative around that. It has
(11:09):
had again a rally in a share price just because
there was indication that it's indicated integrating more AI processing
and its chip in. Tim Cook has spoken repeatedly saying
AI is going to be a priority.
Speaker 2 (11:22):
But our own.
Speaker 5 (11:23):
Reporting at Bloomberg says that Apple is looking to contract
Google for its Gemini AI model for the coming generation
of iPhones. It is fair to say that Apple has
been quite flat footed. It's playing catch up. Just as
you said, Brian, there were smartphones many many years before
the iPhone, and then the iPhone came in and it
said the standard. It defined what a smartphone is for
(11:44):
all of us today. So absolutely no reason to rule
Apple out, but it is the case that the company's
playing catch up and it needs to show some evidence
that it's closing the gap.
Speaker 1 (11:55):
In June, well, they're doing some business in India. We
know that, right The last figure that we had for
Apple sales in India was pretty pretty strong.
Speaker 3 (12:03):
Yeah.
Speaker 5 (12:03):
Absolutely. And the other thing that Apple's doing is shifting
it's iphl manufacturer into India. That doubled this past fiscal
year ending in March, and it had tripled the previous one.
So India in the space of a couple of years
has gone from just a percentage of iFilm manufacturing to
fourteen percent. And as I mentioned, because the iPhone had
(12:25):
been so steady, one way to call it is steady,
the other way to call it a stagnant it's very
easy to say all this manufacturing has gone out of
China to go into India. It isn't additional to manufacturing
in China.
Speaker 2 (12:36):
So Tim Coulk spent a lot of time in China
here just recently. I'm wondering whether or not that's a
kind of push to reinforce among Chinese officials that Apple's
here to stay in China.
Speaker 5 (12:50):
Literally, that's something that he literally put out there. He
declared his love for China on his most recent trip.
He has been on free public visits to the country
in the past year. It's increasingly common for him to
be in China. It's supposed to be reassuring. One way
to read it is the other way, because if you're
(13:11):
really sure in something, you don't need to go and
attend to it on such a regular basis.
Speaker 1 (13:14):
I guess he was just in Hanoi as well, or
maybe he's still in Vietnam, and so that's another manufacturing
site for them that they want to be able to fortify.
Speaker 5 (13:23):
Yeah, I think he's just hang out in Asia and
just back to the US. It's a busy time, and yes,
he's hanging out with influences and YouTubers in Vietnam, and
there is the prospect for him to announce fresh investments
in there as well.
Speaker 2 (13:39):
All right, lad, out of time, unfortunately, but a great session.
Thank you, Lad's have all Bloomberg chech editor.
Speaker 1 (13:50):
Let's go to Tesla next. The company is cutting more
than ten percent of its workforce. That's roughly fourteen thousand jobs.
Let's take a look under the hood. I know I
couldn't resist with our own Ed Ludlow, co host of
lumber Technology, Ed's joining us from San Francisco. Is this
something more than a company that is struggling with softer demand?
Speaker 4 (14:15):
I think it is something more than that. It's been
a long day, long night. It's been a long twenty
four hours. But you know something you said there more
than ten percent. You know, it kind of got lost
in the kind of cadence of headlines that we broke.
But what I'm hearing now is that the cuts in
certain teams is a lot deeper than ten percent. In
many cases, it's near it to twenty percent. And as
(14:38):
we reported, it seems to be largely coincidental timing. But
there were two very prominent executives at Tesla that handed
in their resignation last night, and they would have known
full well these cuts were coming. So and I think
the stock cloak down more than five percent, So there's
a lot there there.
Speaker 2 (14:57):
We're journalists, so we like to have a certain sobriety,
but then we're radio hosts and so we like to
stir things up a little bit.
Speaker 4 (15:03):
So inputting to hit me with it.
Speaker 2 (15:05):
This is not necessarily throwing in the white tell. It's
not really the tail between the legs. But it is
the year of efficiency for Tesla. Is that right?
Speaker 4 (15:17):
Yeah, Yeah, that's a really good way of putting it.
Like you know, oftentimes in the bottom technology when a
company announces big layoffs. You know, it's never pleasant to
talk about people losing their jobs, but you'll see the
stock go up, and you'll see the stock go up
because investors it is a sign of cost discipline, and
obviously reducing your cost base has impact on the bottom line.
(15:38):
This time, Tesla shares with down five percent and very much.
This time. It's kind of a compounding effect of negative
headlines that we've had. In the first quarter, Tesla missed
deliveries by a very big margin. The data suggests that
Tesla is facing increasing competition from domestic players in China.
So cutting this with the added negative headline that Drew Baglino,
(16:03):
who has been at that company for eighteen years and
was one of only four named executive officers on Tesla's
management team, that he resigned and there's deep layoffs. I
think it just added to a downward trend that this
company and literally its soccers seen so far in twenty
twenty four.
Speaker 1 (16:23):
So, ed, how is this going to impact a product
line right now? Do we know that?
Speaker 2 (16:28):
Yeah?
Speaker 4 (16:29):
Reading the memo that Elon Musk sent to employees around
the world last night, you know he's attributing the need
to cut BA to a their people in duplicate roles
because they grew too fast, but also productivity and cost discipline.
And as you guys know, Tesla's narrative right now is
it's between two waves of growth. Wave one has been
(16:51):
gone driven by Model three and Model Y and Wave
two we're a little bit confused about. But it's either
a twenty five thousand dollars ev or it's a ROBOTAXI,
depending on whether Elon Musk is right or Reuter's that
reported the twenty five thousand dollar v was dead last week.
And you know amid losing some pretty important intellectual capital
(17:12):
in those executive departures. I think Elon's just trying to
rein it in. You know, what I'm hearing is that
he's kind of clear in house and making sure that
he has the people in place that he wants to
get this next phase of growth going.
Speaker 2 (17:26):
And as I heard you say in an interview more
than a year or two ago, that Elon Musk is
the wild card man. Should we doubt him? I mean
Mark Zuckerberg pulled it off, didn't he at Meta? Should
Is this a big challenge now that Elon Musk will
embrace and he will get this company more efficient and
more profitable. Yeah?
Speaker 4 (17:48):
I mean I talked about this on air and I
wrote about it in my column today as well on
Tech Daily that there are times where Elon Musk is
just consistent, and this in terms of layoffs is one
area that Musk is consistent. He did it in twenty
twenty two where they cut around ten percent of staff.
He's talked about the impact of rates on demand presently,
(18:12):
and he's always had this mantra that the leaders of
each business unit should be aggressive in pursuing cost savings. Basically,
he says to all of them, get me cents off
the dollar on every component, shave cost out of every process.
And he's always done that, and this is him doing
it again. The difference is that, you know, he's got
(18:34):
a lot else going on. He's the CEO leader of
five other companies, and it's just disconcerting when two big
name executives that are highly competent leave the company at
the same time. So this time, I think investors and
Tesla shareholders and Tesla owners as well basically trying to
wade through it and go is the net result that
(18:55):
Lance got this or not?
Speaker 1 (18:56):
Well, that goes to the next question. I mean, if
he's spread himself to friendly, do we need to see
him kind of remain more laser focused on the Tesla
problem at the exclusion of some of the other things
he's got his hands in.
Speaker 2 (19:09):
Yeah.
Speaker 4 (19:09):
Yeah, you know, to the root of your previous question,
there is an element of key man risk. Tesla now
literally puts it in its regulatory filings that if anything
would happen to Elon Musk, you know, horrible to say.
The easiest example for our globe audience, if Elon Musk
were to be hit by a bus Tesla would have
a problem. And that's me paraphrasing. And again it goes
(19:30):
back to when Drew Baglino resigned or you know, he
announced he'd left Tesla, but a source told me he
resigned rather than he was fired. A lot of people
thought Drew might be next in line potentially to be CEO.
He'd done eighteen years at Tesla. He leads all energy
and powertrain activities at the company, or he did until
last night. So with him out the running, there's now
(19:51):
only three named executive officers, including Musk. And you wonder
like if he ever turned around and said, I'm done
with Tesla for now, I'm moving on to something else.
Who person might be.
Speaker 2 (20:02):
Ed just in twenty seconds or so? Does this mean
lower prices across the board for evs and does this
bring in viability? How viable are these companies?
Speaker 4 (20:13):
Well, the answer is no. I don't think if you
see job cuts in other ways to save money, that
you'll continue to see price drops. I think they've cut
as deep as they can, but you never know. They've
not been afraid to use price changes as a lever.
Speaker 1 (20:26):
Yeah, so far this year the stock is down thirty
five percent. Talk about price cuts, and it's always a pleasure.
Thank very much for making time to chat with us.
Bloomberg's Ed Ludlow, co host of Bloomberg Technology on the
Tesla story shares today in the regular session down to
five point six percent.
Speaker 2 (20:43):
This is the Bloomberg Daybreak Asia podcast, bringing you the
stories making news and moving markets in the Asia Pacific.
Visit the Bloomberg Podcast channel on YouTube to get more
episodes of this and other shows from Bloomberg. Subscribe to
the podcast on Apple, Spotify, or anywhere else you listen
and always on Bloomberg Radio, the Bloomberg Terminal, and the
(21:04):
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