April 27, 2024 • 38 mins
Bloomberg Daybreak Weekend with Tom Busby takes a look at some of the stories we'll be tracking in the coming week.
- In the US – a look at next week’s Fed meeting and a preview of Apple earnings.
- In the UK – a look at the Vienna Conference on Autonomous Weapons Systems.
- In Asia - a preview of Samsung earnings.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:11):
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our day
Break anchors all around the world. Straight Ahead on the program,
a look at next week's BED meeting and what stubbornly
high inflation may mean for interest rates going forward. Also
earnings from a US tech giant. I'm Tom Busby in
New York.
Speaker 3 (00:29):
I'm Stephen Carolyn London.
Speaker 4 (00:30):
The question of autonomous weapons and how they should be
regulated is up for discussion at a global conference in Vienna.
Speaker 5 (00:36):
I'm dead Prisoner, looking at whether the market for memory
chips is turning as we look ahead to earnings from Samsung.
Speaker 6 (00:43):
That's all straight ahead on Bloomberg day Break Weekend on
Bloomberg Eleve Them three Own, New York, Bloomberg ninety nine
to one, Washington, DC, Bloomberg one O six one, Boston,
Bloomberg nine sixty, San Francisco, DAB Digital Radio, London, Sirius
XM one nineteen and around the world on Bloomberg Radio
dot Com and via the Bloomberg Business App.
Speaker 3 (01:08):
Good day to you.
Speaker 2 (01:09):
I'm Tom Busby, and we begin today's program with the
Federal Reserve policymakers meet this coming Tuesday and Wednesday to
decide on monetary policy. But after some rather disturbing data
on inflation, could there really be interest rate cuts in
the near future and for more? Were joined by Michael McKee,
Bloomberg International Economics and Policy correspondent, Well, Michael, after the
(01:30):
Fed's preferred measure of underlying inflation rose by just a
little more than forecast in March, what do you expect
to hear from the Federal Open Market Committee this Wednesday?
And will it change their dot plot any There's.
Speaker 3 (01:42):
No change in the dot plot.
Speaker 7 (01:43):
That dot plot won't be revised until June, so we
don't have to worry about that. No new economic forecasts,
and no change in the Fed's attitude at this point.
We saw the last couple of months before this coming
meeting a lot of FED officials starting to say, well,
maybe we're in no hurry to cut interest rates, and
the data only reinforce that. So I think at this
(02:07):
point that you're going to hear Jaypoal push back on
the idea of rate cuts anytime soon. He won't put
a time frame on it because they really don't know
what's going to happen with the inflation. So I think
what we're going to end up with is sort of
status quo anti after the meeting, where the Fed is
on hold and markets can price in November or December
(02:31):
if they want, and nobody will really care because everybody
will figure it'll change a lot between now and then
and we'll see what happens.
Speaker 2 (02:39):
But higher for longer. That's going to be the watch
through the spring, through the summer into the fall.
Speaker 7 (02:43):
Yeah, we need a new watch word, because it's not higher,
it's high, it's you know, it's leave it where it is.
There's no sentiment at all for raising interest rates at
this point. The Fed thinks that interest rates are high enough,
especially real rates being like two and a half percent,
that that will have an effect. It will push down
(03:04):
on inflation over time. It's just a question of how
long that time period is now.
Speaker 2 (03:10):
Previously, the Fed projected hinted allegations of as many as
three rate cuts this year. I think we can safely
say that maybe out the window right now.
Speaker 7 (03:18):
That's probably out the window right now. I think it's
fair to say that if there were a dot plot,
it would be showing two or fewer rate cuts this year.
But again I go back to the markets are always
trying to figure out what the FED is going to do,
and investors are taking options on what the Fed might
do because they want to be there if the story
(03:41):
changes and they want to make money on it. So
we get these narratives of the market saying two rate
cuts or three rate cuts or no rate cuts or whatever.
And Fed officials are at a point now where they
just do not know what's going to happen with inflation.
It's hard to predict given the things that are moving,
given the issues that we're seeing. So they're just going
(04:03):
to take it month by month, and they're not really
going to give you a good firm answer on what's
going to happen, and they're not going to say whether
markets are right or wrong.
Speaker 2 (04:13):
Yeah, and there's a lot of meetings. Well, we have
May first, we'll have a decision. That's that's this coming week,
a June meeting, of July meeting, a September meeting. Interesting
timing on the November meeting, and two days after the election,
two days after a little delay there, right.
Speaker 7 (04:28):
Well, the loser is of the election is going to say, well,
the FED should have and why did they wait until
I lost?
Speaker 2 (04:37):
Yeah, Yeah, it's all the Fed's fault. Well, let's talk
about there are still also good news in the economy.
The economy is still strong, There is still strength, the
labor to market market, still resilient, consumer spending a ton
of money. So what's the fundamental cause of all this
stubbornly high inflation.
Speaker 7 (04:57):
The fundamental cause appears to be that we just got
into a situation of higher inflation and for a lot
of reasons. Companies couldn't raise prices for years and years
and years, and now they can, and they're trying to
make up for the fact that they couldn't raise prices
(05:18):
for so long, raise their margins, pay for some of
the additional stuff that they're going to have to buy,
or the additional wages they're going to have to pay,
and it's it's gradually getting squeezed out of the economy.
Although for the last three months, what we're seeing is
it's sort of just paused. It's just stopped. So when
(05:40):
does it reaccelerate higher or lower, we don't know.
Speaker 2 (05:44):
And the inflation rate that we saw this was just
last week. The PCE for March two point seven percent.
Speaker 3 (05:50):
Right year of a year. It's not bad.
Speaker 2 (05:53):
I mean, it's not the two percent goal, but it
really and it didn't affect, you know, the markets all
that much you would expect if it was came in
a little higher than expected and certainly higher than it
was a year ago. But is that a new normal?
Maybe a two point seven?
Speaker 7 (06:10):
It could be at least something we have to get
used to for a while because we're not going to
see any major changes anytime soon. The base effects, the
fact that inflation was lower last year at this time
means we won't get as much of a benefit on
the year over year numbers. They are going to stay higher,
(06:32):
and so people will look at that and think this
is a problem. Also, the annualized rate of where we
are now, if you're looking at the last three months
and you look at it at an annual rate, you're
up in the threes three point nine or something like that.
So the trend is not your friend. Is the story here?
(06:54):
And even if we don't see a big breakout in inflation,
it doesn't look like we're going to see it come
down soon. So then the question becomes how.
Speaker 3 (07:02):
Do people adapt to that?
Speaker 7 (07:03):
Do they start to feel this is a normal price level,
even if the inflation rate has come down but not
all the way to where it was, or do they
still stay angry about it and complain about prices going up.
Speaker 2 (07:20):
Well, we shall see May first this Wednesday, the decision
from the Fed. Our thanks to Michael McKee, Bloomberg International
Economics and Policy correspondent, And we turn now to more
big tech earnings as Apple reports at second quarter results
this coming Thursday, and for more on what to look for,
we're joined by Anna rag Rana, Bloomberg Intelligence Senior Technology Analyst.
(07:42):
Now Honor Rock. A lot of headwinds facing Cooper Tino lately,
but let's start with what you're expecting to hear in
Apple's Q two report.
Speaker 8 (07:50):
Yeah, the expectations are pretty low. And you know, in
all fairness, things have been tough for them and we
don't see that changing at least in the next you know,
six or twelve months, only because China has been weak
and there are no signs that that's improving.
Speaker 2 (08:05):
Frankly, Now, China, there were reports that iPhone shipments in
the first three months of this year tumbled nineteen percent.
That's devastating. I mean, it's the second biggest market bare yeah.
Speaker 8 (08:15):
Yeah, they're a local brand called Wahweh, which is doing
very well, and partially they're doing well because they came
out with a new phone after a few years of
being really absent in the market. So people who you know,
I would say, wanted a new phone are probably choosing
something more local, something that they are used to, And
you know that's really hurting Apple because it is a
(08:36):
high end brand, but you know it is it is
not I would say doing as well as it was
a few years ago.
Speaker 2 (08:43):
Well, the iPhone definitely the cash cow, but there's also iPads,
max services like Apple Music, Apple TV plus what's new
and what will investors be looking for in those revenue streams?
Speaker 8 (08:55):
Yeah, I think you know, almost all of them will
pretty much be in line with what the company said
would happen in the last quarter. So no major surprises
and iPads right now, because the next one is going
to be launched next month. No same thing for the
Mac and the back pro. The services business is the
only one that I would say is going to have
a good growth rate, somewhere in the ten to twelve
(09:17):
percent range. They have been doing well there because you know,
once you have the device, you're going to go and
buy more things in terms of games and applications, and
you know, more iCloud storage. So all sorts of things
do add up into it. You know, you break your phone,
the Apple care goes into it, so that all those
(09:37):
things bundle up and that's doing better. But you know,
services alone cannot just sustain Apple's growth. It has to
be the iPhone. So the biggest thing for us is
going to be what comments do they make about China
and do they really show us any hope of a
recovery over there?
Speaker 2 (09:54):
How about its AI ambitions? Is there a perception on
Wall Street Apple maybe a little behind some of the
other T giants.
Speaker 8 (10:01):
Oh you're too kind by staying a little uh far
behind and in that particular case, and I think I
think they've realized it. And you know, we we saw
Mark German telling us that they shut down the car
division and are putting all the engineers back in the
AI you know framework at this point. So they have
an event coming in June called the WWDC or the
(10:22):
Worldwide Developers Conference, where they have promised to showcase a
lot of their new AI features. I think it's going
to be still too early for them to come up
with something really a killer app like Opening I. I
think that's going to take a little bit longer, perhaps
another year to get get really squared away. If they
were investing crazy amount of money right now.
Speaker 9 (10:43):
What could happen though?
Speaker 8 (10:44):
And that's another rumor that we heard thanks to Mark German,
that they may do a deal with Google to license
their model to put them on the you know, the
iOS operating system. Now, if that happens, I think that
could be the catalyst investor may be looking for, because
while Apple may be behind in some of that GENEI capabilities,
(11:06):
Google's been doing well over there, and I think licensing
that intellectual property from Google may may help Apple's ambition.
Speaker 2 (11:14):
No, that would be something very new for Apple dealing
with Google then, but.
Speaker 8 (11:19):
They do that on the search side, remember they you know,
that's the default search, So they actually have a partnership
and Google pays a lot of money to Apple for
for those rights.
Speaker 2 (11:30):
Hey, let's talk about the vision pro the mixed reality
headset thirty five hundred bucks. Has this been a real
swing and a miss for Apple? I mean reports say
demand is so low that it's slash introduction.
Speaker 8 (11:42):
Yeah, But to be very honest, I saw that report. Also,
when we had first looked at this thing, we were
already at that number of four hundred to five hundred
thousand units or somewhere in that range. This is not
a killer app. Think of this as this is an
investment in what could be someday a bigger opportunity in
terms of a new kind of operating system to do things.
(12:03):
It's never going to be another iPhone, but it has
a new category, it could have new apps, so you know,
it's it's a good R and D experiment. I think,
you know, some people will own it right now at
thirty five hundred. I think a lot more people will
own it at two thousand dollars someday when it you know,
when the lower model comes out and the price goes
down and people build applications on it. So it's a
(12:26):
long term bet, but it's not going to move the
needle for you and me financially. If you're looking at
from Apple's you know overall revenue base well.
Speaker 2 (12:35):
Apple Q two earnings out this Thursday. In our thanks
to Ana rag Rana, Bloomberg Intelligence senior technology analyst, coming
up on Bloomberg Day Break weekend to look ahead to
a global conference in Vienna, where the question of autonomous
weapons and how they should be regulated will be up
for discussion. I'm Tom Busby and this is Bloomberg. This
(13:05):
is Bloomberg day Break weekend, our global look ahead at
the top stories for investors in the coming week. I'm
Tom Busby in New York. Up later in our program
will look ahead to earnings from Samsong in the state
of the chip industry. But first, UK Prime Minister Rishi
Sunak says he's committed to spending two point five percent
of his country's GDP on the military by twenty thirty.
(13:27):
France and Germany have also begun efforts to ramp up
their own military spending and on the agenda at this
week twenty twenty four Vienna Conference on Autonomous Weapons Systems, Leaders,
we're going to peek at the latest technological developments in
military weaponry which could change modern warfare forever and for more.
Let's go to London and bring in Bloomberg Daybreak. Europe
bankor Stephen Carroll.
Speaker 4 (13:48):
Tom After decades of scaling back, Russia's invasion of Ukraine
prompted a rethink of defense budgets across Europe. Germany has
started acalarrating military spending, including creating a one hundred undred
billion euro rearmament fund. France two is stepping up spending
on weapons. Here in the UK, the Prime Minister has
promised to increase defense spending to two and a half
(14:09):
percent of GDP by twenty thirty, although that would be
after an election that's set for later this year. We
spoke to a UK Politek's reporter James Wilcock about the
pledge on Bloomberg Radio this week.
Speaker 3 (14:19):
Well, he would.
Speaker 10 (14:20):
Say that we live in a more uncertain world Steven.
It's also very, very very popular with his back benches.
Some of them have even pushed for it to goes
high as three percent in the past, and that's the
Defense Secretary, Ben Wallat's former Defense acually I actually say
so it is a popular policy with the backbenchers. It's
like to play well with the public as well. It's
also something that Boris Johnson promised as Prime Minister back
in twenty twenty two. So it is worth saying that
(14:41):
this bid has now been refreshed, so it sort of
plays to all of his bases in the sense, not
to get away from the fact that it is a
large sum of money.
Speaker 1 (14:49):
Yes, I'm two and a half percent of GDP of
the target. I mean, the new element is putting the
time frame around it, right, delivering that by twenty thirty
it would seem. But of course there's a general election
coming up, so how does that work?
Speaker 10 (15:04):
Quite I mean, and this is part of what is
increasing these some quite cynical politicking by the Conservative Party
where they promise spending commitment increases that will then have
to be delivered after the next election. The big spike
in this kind of money will come in twenty twenty eight,
and so Labor for its parts, have said that in
the next year if they were to being government, would
(15:26):
have to institute a review into the military spending. That
would happen in the next year. So there is no
commitment here to continue this beyond the next government if
the next government work to be Labor. And it was
quite fascinating at the press conference which is announce this.
He was next to the Native Secretary General Jen Stoltenberg.
Journalist tried to ask YenS if he'd had spoken to Labor,
so like intervened and said, you know, YenS wouldn't be
(15:47):
answering questions on that because that's dragging him into domestic politics.
So it's a fascinating move by the Prime Minister to
sort of look strong on the world stage whilst also
trying to put labor into a spending commitment in hot water.
So worth saying though that in this reporting, Sunak says
this spending pledge, which he tops up to being seventy
(16:07):
five billion over the next six years, is already fully costed,
so it would not involve any spending cuts or any
tax rises. He says it would be partly down to
savings of nearly three billion pounds by cutting the civil service.
Speaker 3 (16:20):
The entire civil service paybill.
Speaker 10 (16:22):
Is ten billions, so there are some fascinating sums here
that civil servants and policy wonks are still yet still
properly take a look at that.
Speaker 4 (16:31):
Was Benberg Radio's UK politics reporter James Woolcock. Now, where
all of this extra money will be spent is a
topic that's going to be discussed at an event in
the Austrian capital Vienna in the coming days. The Conference
on Autonomous Weapons Systems will be tackling how developments and
artificial intelligence are revolutionizing how wars are fought. Our reporter
(16:51):
at Jonathan Tarne will be there, and I've been speaking
to him about these issues and started by asking him
exactly what sort of technology is covered by the term
autonomous weapons.
Speaker 11 (17:02):
Virtually every day there's a new deal that's announced that
involves autonomy and weapons systems. We saw the European Commission
give Fails the Defense Maker contract that will you know,
basically identify potential battlefield targets that will be uploaded into
a database so that you know, future weapon systems can
(17:23):
work with drones and artillery to more quickly kill battlefield targets. Obviously,
in the Ukraine War we've seen some application of that
concept already, drones reducing the amount of time that artillery
needs to identify as target and fire. We've also seen
in the Gaza conflict the use of artificial intelligence under
(17:47):
the so called Lavender program to identify potential targets. So
this is a very rapidly developing war space.
Speaker 3 (17:55):
Tell Us about who's going to be attending this conference.
Speaker 11 (17:58):
I would categorize them as the rule takers rather than
the rule makers. Generally, these are going to be largely delegations,
high level delegations from the Global South, some European countries
on a foreign minister level. But these are not going
to be the countries that are necessarily making the weapons systems.
These are the countries that have a huge interest in
(18:20):
regulating the autonomous weapons systems because they conceivably could be
on the other end, and they want to have a
rule book in order before they're before these systems widely proliferate.
Speaker 4 (18:32):
Because of course, this is an issue that poses major
ethical questions for those that are in this industry. What's
being thought around the impact that the proliferation of these
kinds of weapons could have on conflict?
Speaker 11 (18:45):
Yeah, absolutely, you know, aside from the ethical issue of
you know, reducing individual human lives to data in a
potential autonomous weapons system, you know, you're seeing people trying
to frame within established humanitarian law. So I mean, you know,
humanitarian law does exist on the books. It requires distinction, proportionality,
(19:10):
and precaution when militaries engage each other with civilians oftentimes
in between. And so people are trying to step inside
the technological development and the engineering development and trying to
apply some of the ethical norms that have been established
(19:30):
in the wake of the Last World War and try
to bring some responsibility to bear to the developers, the engineers,
the algorithm makers, and as well as the militaries who
are going to have to develop rules of engagement when
using this technology.
Speaker 4 (19:47):
When we talk about the sort of the development of
this technology, where are we seeing the bulk of the
development happening which parts of the world.
Speaker 11 (19:58):
Well, I mean it's the It closely tracks general military
expenditures as well as arms exports.
Speaker 9 (20:04):
So you're talking about the big three.
Speaker 11 (20:06):
US, China, and Russia in terms of development and where
we're focusing. It really depends on who you talk to. Obviously,
if you speak to the companies, they're going to tell
you that we're talking about narrow versus general autonomous system
development that is narrow, which is where we are currently
with autonomous systems, drones, satellites identifying potential targets that will
(20:30):
help a human make a decision, but whether it's to
engage versus eventually conceivably and this is kind of the
sky net what has been here too for science fiction,
generalized artificial intelligence that can target and engage by itself.
If you ask military people, they're going to come out
with a different set of answers about where we are
(20:53):
in the development arc, and I think rules of engagement
speak prominently there. I mean, do we you use this
in an urban battle landscape populated by civilians and then
you move down the spectrum to the general public represented
by officials and diplomats, and you know, that is what
(21:14):
next week's conference is mostly about speaking too, and that
is where there's a rising call for regulation.
Speaker 4 (21:22):
Is there any hope of progress being made on that issue?
Because as you say, there an ativy outline, there are
so many elements to this that would need to be
thought about and discussed. What is the hope that there
might actually be some consensus on what can be regulated?
Speaker 9 (21:40):
Yeah, I mean the short answer is no.
Speaker 11 (21:42):
The reason this is taking place in Vienna is because
Vienna is home to arguably the most successful arms control
convention in history. That's Nuclear Non Proliferation Treaty one hundred
and ninety three parties signed that. You know, it's subsequently
helped to bring into force the Treaty against the Nuclear Weapons.
(22:03):
But the point here is that we're really at the
beginning in these and if there was any treaty or
tangible set of rules, that will take years to negotiate,
and there's a lot of skepticism that negotiation can keep
pace with the rate of technological change, and there are
just some very fundamental questions such as monitoring and verification.
(22:27):
I mean, with something like the NPT, which has very
successfully prevented nuclear weapons from proliferating. You have physical inspectors
going around the world and measuring grand levels of enriched
uranium or plutonium, and there's a material regime in place.
Much more complicated in the digital realm, where you're conceivably
(22:53):
programming and developing algorithms that frankly break the space.
Speaker 9 (22:58):
And time continuum. You know, we.
Speaker 11 (22:59):
Were like used to as human beings hitting each other
over the head with the rock, and then that developed
into projectiles, long bows or guns. But this sense of
immediacy and the process of killing one another is stretching
into days and weeks or months with autonomous systems where
(23:24):
items can be programmed to kill at a distance and
great time length.
Speaker 3 (23:30):
I mean, given the absolute enormity of these dilemmas, how
are the industry playing this in the meantime.
Speaker 9 (23:37):
Well, the industry is very excited because it means more.
Speaker 11 (23:41):
Contracts, and we've seen the markets reaction to the AI
hype in recent weeks and months, and so you know,
this is a way for the military not only to
plug into the AI buzz, but also they're riding a
wave of increased militarism at present. We see nations increasing
(24:05):
defense budgets, We see the outbreak of war on multiple
fronts and multiple theaters around the world, and so you know,
clearly the defense industry stands to benefit from this, and
there's a number of arguments that they make, and some
of them may well turn out to be accurate, that
(24:26):
this will help to reduce casualties and help decision making
so that civilians are not caught in the crossfire. Nevertheless,
there's legitimate concern by a number of countries that will
be attending the Vienna meeting next week to make sure
that rules are enforced. Just as rules of war are
(24:47):
enforced with older technologies, they want to ensure that rules
are enforced with digital technologies.
Speaker 4 (24:56):
Thanks to our apporter in Vienna, Jonathan Cherone Stephen Carol
in London, you can catch us every weekday morning here
for Bloomberg Daybreak. You're it be getting out six am
in London and one am on Wall Strace.
Speaker 2 (25:08):
Tom Well, thank you, Stephen, coming up on Bloomberg day
Break weekend and look ahead to Samsung earnings and the
state of the computer chip industry. I'm Tom Busby, and
this is Bloomberg. I'm Tom Busby in New York with
(25:35):
your global look ahead at the top stories for investors
in the coming week. When it comes to tech earnings
these days, the focus is on artificial intelligence, and that's
especially true for chip makers. Their products are used in
a variety of applications, from smartphones to data centers and more.
And one of the biggest AI chip makers, South Korea, Samsung,
is out with its latest earnings this week. Daybreak Asia
(25:56):
co host Brian Curtis and Doug Krisner join us now
for a preview.
Speaker 12 (26:00):
Tom. The chip makers are at the heart of the
AI revolution. As we've seen, much of the focus has
been on AI data centers and accelerators made by Nvidia,
but high bandwidth memory chips are equally critical, and we'll
talk more about that. They've been called the backbone of
both artificial intelligence and machine learning. Here's Bloomberg Semiconductor reporter Ian.
Speaker 13 (26:21):
King, and this is really an essential part of these
large AI training models, the speed at which the process
that can get into memory, grab the information and get
back out and get back on with what it's doing.
Has a huge impact on how quickly you can train AI.
So that's a really good opportunity for some song, for
(26:42):
Micron and for.
Speaker 5 (26:43):
Heinix, that is Bloomberg C and King. Now, just last week,
South Korea's sk Heinix said sales related to AI more
than doubled in the latest quarter. Sk Heinex is the
world's number two maker of memory chips. In the week ahead,
we'll hear from number one Samsung once again, Bloomberg C
and King.
Speaker 13 (27:02):
The traditional volume, which memory is all about volume really
comes from smartphones and comes from PCs. Those markets aren't
getting any worse, but it's way too early to say
that they're in growth mode again. What people are really
focused on is the data center and AI market and
how that is going to have an impact on memory.
(27:22):
Twenty twenty four is going to be a good year
for these companies. Everybody's forecasts a double digit revenue growth
after a pretty disastrous year last year.
Speaker 12 (27:31):
Bloombergs Ian King for a closer look at semiconductor markets
and to help preview the Samsung earnings. We're joined by
Bloomberg's Glad Savov, our tech editor in Hong Kong, and
Youlam Lee, Bloomberg, senior tech editor based in Seoul. ELM,
let me go to you first. So we already had
the preliminary results from Samsung sales and profit higher than expected,
(27:52):
so we kind of know what to expect, and analysts
are projecting net income up fourfold from a year ago.
It seems an astonishing number. Will will that be more
because of semiconductors or smartphones or both?
Speaker 14 (28:07):
That's right, there are something is a very complex company
with different type of businesses. Obviously, semiconductor unit is such
an important pivotal unit for the company that is expected
to rebound in the first quarter, as well as smartphone unit.
(28:30):
Smartphone obviously they have introduced you know, the S twenty
four new AI phone in the first quarter, so that
is really boosting their shipments and revenue during the quarter.
Their division together is with home appliances and together they
(28:57):
account for you know, majority of the maybe forty percent
of the revenue. So we expect both the semiconductor unit
as well as the semiconductor and Home applians unit to
do well in the first quarter.
Speaker 5 (29:13):
Vlad, when we consider chips used in AI. Fast speed
comes to mind, reduced power consumption comes to mind. I'm
wondering when you compare the chips manufactured by Samsung and
you compare them, Let's say to sk Heinex, how do
they stack up one against the other.
Speaker 15 (29:30):
Well, that's the interesting thing, and I mean Julien can
speak more to that, but really Heinis for the first
time in their relationship Samsung, Heine's being very close to
America competitors, has the lead. Heinis took that lead. It
invested very early into HBM as a category, and it
has the lead in having the better technology. It has
the lead in having Nvidia as its customer, and Vidia
(29:52):
trusted Heinex and its technology first. Now, the thing that's
happening and the thing that's going to happen over the
next few months, is Samsung is catching up. It says
that it has a more advanced version of HBM. It's
moving fast. It has the bigger resources. And one of
the interesting things that we saw in the wake of
Heinex's earnings, which were really impressive, was share price actually dropped.
(30:13):
And part of the reason for that was because investors
and analysts we're looking at Heinex. Henix has to increase capacity,
so it has to increase spending. Every bit of growth
for Heinex in terms of its productivity and in terms
of its sales is going to come at the cost
of more capex.
Speaker 12 (30:29):
So a lot. We have heard some different comments from
the companies that we've heard from so far. We had
very strong numbers from Texas Instruments looking more at the
automotive and industrial sectors, and then you already highlighted sk
Heinex and TSMC actually raised a few questions about smartphones
and PCs and ASML's numbers were kind of scarily bad.
(30:54):
Should we be positive about the overall semiconductor industry here
or should we be somewhat cautious?
Speaker 9 (31:01):
Oh?
Speaker 15 (31:01):
I believe so again. AI is such a massive trend.
This past week, Metas earnings gave a warning sign to
a bunch of people in the US, and I came
on radio and I said, do mistake Meta for being
a representative for the entire industry. And what happened immediately
the next day, Microsoft and Google boths of past expectations,
largely driven by the cloud businesses, the ones that provide
(31:24):
those AI services that infrastructure the facility for companies, startups,
et cetera to train the AI models. The demand is
their Heinix, TSMC, Samsung, all the component suppliers and video
as well. They had gone to sell as many chips
as they can make. That is the thing that we've seen,
especially with Heinis. We've had Tom Kang in South Korea saying,
(31:45):
if Henis wants to sell more chips, it needs to
build more factories.
Speaker 5 (31:48):
You limb when you think about artificial intelligence, so much
of the focus has been on these data centers, but
I'm wondering when it comes to the individual devices, the
smartphones in particular, how sophisticated it has Samsung become in
building smartphones that can handle a lot of the AI
technology that we're looking forward to applying to various aspects
(32:10):
of life.
Speaker 9 (32:10):
Yeah. Sure. So.
Speaker 14 (32:11):
One one of the areas that some song is really
pollish this R is the rise of on device AI applications.
So in other words, traditionally, if you want to have
applications such you have to go through you know, Cloud
or some such. But companies like Samsung and Google and
(32:34):
trying to build you know, a on device basically you
know applications that you don't have to go through a
cloud that is going to be helpful to you know,
for security reasons. So they are really betting the chips.
You know, they are expecting stronger robust demand for chips
(32:56):
that are going to be used on devices this year
as more companies really move into this space.
Speaker 12 (33:01):
And VLADI in terms of monetizing AI for companies out
there in the industry, are we about ready to switch
or is it too early to start talking about the
Microsoft's and Googles and companies that are either in the
enterprise or in the consumer sector and seeing some real
monetization there.
Speaker 15 (33:21):
Well, I won't answer the question. I will let the
CIOs of a bunch of tech companies answering the question.
And NOBO did a survey of the CIOs chief information
officers of global firms, and the major takeaways were Number one,
they also were the companies is unprepared to capitalize on AI.
Speaker 3 (33:40):
Number two.
Speaker 15 (33:41):
A good two percent of them said that they won't
be able to show return and investment on AI for
the next two years. So that really gives you a
sense of the timeline that we're working on here. And
then you also have to bear in mind AI has
been around for a long time, but just kind of
working behind the scenes. What are you talking about, like
AI in small phone cameras or AI to detect and
(34:02):
categorize the photos that you take with those cameras. It's
been around, and what we're seeing is it's much more
of a smooth transition than you might imagine. So AI
today in monetization terms, it's happening, but it's subtle. You
can't really tell. Tencent, for example, says AI is doing
a helpful job in improving its ad targeting meta likewise
(34:25):
Google likewise, But again that's kind of under the hood,
behind the scenes. The impactful AI the stuff that people
pay subscription fees for, that's years down the line.
Speaker 5 (34:34):
Honestly, I want to bring in the China chips story
into the equation here. We know that the US export
controls are in place, obviously limiting China's access to certain
chip making technology. Earlier, Brian and I spoke with Robert Lee,
the senior tech analyst over at Bloomberg Intelligence. He's based
in Hong Kong, and the question was on China's chip
(34:56):
industry and how it's developing, and whether or not a
company like Samsung or even sk Heinez should be concerned.
Speaker 16 (35:03):
It's probably a little bit early days for Samson and
others to worry about the threat from the Chinese. But
at the end of the day, the weight of the
state is backing Huawei and SMIC and SMIC being the
Chinese equivalent of TEARSMC. So you've got you know, you've
got a lot of national pride, a lot of strategic
national long term objectives, and a lot of money flowing
(35:24):
into that sector.
Speaker 5 (35:25):
That is rapidly of Bloomberg Intelligence. So if we can
agree that there is some sort of race happening. Broadly
speaking about what's going on in the semiconductor industry, you lim,
I'm wondering when it comes to a company like Samsung,
how much are they devoting to research and development to
trying to find the next generation of memory chips.
Speaker 14 (35:46):
It's tremendous, that's all they're really betting on right now.
When the smartphone came along, you know, the world changed.
They see the same moment, so they want to capitalize.
They want to secure the leadership.
Speaker 5 (35:59):
LA based in Hong Kong. But for the purposes of
our visit today, you're in Tokyo and our studios there
and give me a sense of what's happening right now
in Japan with the semiconductor industry and how it's growing.
Speaker 15 (36:12):
Just like saith Korea, just like Taiwan, Japan has made
semiconductors and national priority. And one very interesting example, we
were talking to a chip making startup in the US
and one thing that they said was Japan is making
a push to bring Japanese semiconductor designers and engineers back
to the country. They want to get their own national
(36:33):
talent back to the country. They have a startup called
Rapidus Corp. Which is aiming to do two nanometer highly
advanced I mean it's not available today chip making by
twenty twenty seven. It's a very aggressive thing to go
from zero to super advanced chip making by twenty twenty seven.
But that's back by many of the biggest companies in
the country, Sony and many others. And when you bring
(36:58):
in all that expertise that Japan already had, as it
is already the source for many of the key materials, components,
equipment for chip making, if you do all of that,
if you bring in the expertise, and Japan is also
investing and subsidizing TSMC setting up at least one factory
to maybe even three or four, depending on how that
negotiation goes. It wants to do just like the US.
(37:20):
It wants to bring in the expertise that he lacks,
and he wants to lean into the expertise that he
already has.
Speaker 12 (37:25):
Vlad, thank you very much, and Eulam thank you as well.
Bloomberg's Lad Savov, tech editor in Hong Kong, and ulm Lee,
Bloomberg Senior Tech editor based in Seoul. I'm Brian Curtis
in Hong Kong, along with Doug Krisner. You can catch
us every weekday here for Bloomberg day Break Age the
beginning at eight am in Hong Kong and eight pm
on Wall Street.
Speaker 2 (37:46):
Tom our thanks to Brian and 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.
Speaker 3 (37:58):
I'm Tom Busby. Stay with us.
Speaker 2 (38:00):
Top stories and global business headlines are coming up right now.
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:11):
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our day
Break anchors all around the world. Straight Ahead on the program,
a look at next week's BED meeting and what stubbornly
high inflation may mean for interest rates going forward. Also
earnings from a US tech giant. I'm Tom Busby in
New York.
Speaker 3 (00:29):
I'm Stephen Carolyn London.
Speaker 4 (00:30):
The question of autonomous weapons and how they should be
regulated is up for discussion at a global conference in Vienna.
Speaker 5 (00:36):
I'm dead Prisoner, looking at whether the market for memory
chips is turning as we look ahead to earnings from Samsung.
Speaker 6 (00:43):
That's all straight ahead on Bloomberg day Break Weekend on
Bloomberg Eleve Them three Own, New York, Bloomberg ninety nine
to one, Washington, DC, Bloomberg one O six one, Boston,
Bloomberg nine sixty, San Francisco, DAB Digital Radio, London, Sirius
XM one nineteen and around the world on Bloomberg Radio
dot Com and via the Bloomberg Business App.
Speaker 3 (01:08):
Good day to you.
Speaker 2 (01:09):
I'm Tom Busby, and we begin today's program with the
Federal Reserve policymakers meet this coming Tuesday and Wednesday to
decide on monetary policy. But after some rather disturbing data
on inflation, could there really be interest rate cuts in
the near future and for more? Were joined by Michael McKee,
Bloomberg International Economics and Policy correspondent, Well, Michael, after the
(01:30):
Fed's preferred measure of underlying inflation rose by just a
little more than forecast in March, what do you expect
to hear from the Federal Open Market Committee this Wednesday?
And will it change their dot plot any There's.
Speaker 3 (01:42):
No change in the dot plot.
Speaker 7 (01:43):
That dot plot won't be revised until June, so we
don't have to worry about that. No new economic forecasts,
and no change in the Fed's attitude at this point.
We saw the last couple of months before this coming
meeting a lot of FED officials starting to say, well,
maybe we're in no hurry to cut interest rates, and
the data only reinforce that. So I think at this
(02:07):
point that you're going to hear Jaypoal push back on
the idea of rate cuts anytime soon. He won't put
a time frame on it because they really don't know
what's going to happen with the inflation. So I think
what we're going to end up with is sort of
status quo anti after the meeting, where the Fed is
on hold and markets can price in November or December
(02:31):
if they want, and nobody will really care because everybody
will figure it'll change a lot between now and then
and we'll see what happens.
Speaker 2 (02:39):
But higher for longer. That's going to be the watch
through the spring, through the summer into the fall.
Speaker 7 (02:43):
Yeah, we need a new watch word, because it's not higher,
it's high, it's you know, it's leave it where it is.
There's no sentiment at all for raising interest rates at
this point. The Fed thinks that interest rates are high enough,
especially real rates being like two and a half percent,
that that will have an effect. It will push down
(03:04):
on inflation over time. It's just a question of how
long that time period is now.
Speaker 2 (03:10):
Previously, the Fed projected hinted allegations of as many as
three rate cuts this year. I think we can safely
say that maybe out the window right now.
Speaker 7 (03:18):
That's probably out the window right now. I think it's
fair to say that if there were a dot plot,
it would be showing two or fewer rate cuts this year.
But again I go back to the markets are always
trying to figure out what the FED is going to do,
and investors are taking options on what the Fed might
do because they want to be there if the story
(03:41):
changes and they want to make money on it. So
we get these narratives of the market saying two rate
cuts or three rate cuts or no rate cuts or whatever.
And Fed officials are at a point now where they
just do not know what's going to happen with inflation.
It's hard to predict given the things that are moving,
given the issues that we're seeing. So they're just going
(04:03):
to take it month by month, and they're not really
going to give you a good firm answer on what's
going to happen, and they're not going to say whether
markets are right or wrong.
Speaker 2 (04:13):
Yeah, and there's a lot of meetings. Well, we have
May first, we'll have a decision. That's that's this coming week,
a June meeting, of July meeting, a September meeting. Interesting
timing on the November meeting, and two days after the election,
two days after a little delay there, right.
Speaker 7 (04:28):
Well, the loser is of the election is going to say, well,
the FED should have and why did they wait until
I lost?
Speaker 2 (04:37):
Yeah, Yeah, it's all the Fed's fault. Well, let's talk
about there are still also good news in the economy.
The economy is still strong, There is still strength, the
labor to market market, still resilient, consumer spending a ton
of money. So what's the fundamental cause of all this
stubbornly high inflation.
Speaker 7 (04:57):
The fundamental cause appears to be that we just got
into a situation of higher inflation and for a lot
of reasons. Companies couldn't raise prices for years and years
and years, and now they can, and they're trying to
make up for the fact that they couldn't raise prices
(05:18):
for so long, raise their margins, pay for some of
the additional stuff that they're going to have to buy,
or the additional wages they're going to have to pay,
and it's it's gradually getting squeezed out of the economy.
Although for the last three months, what we're seeing is
it's sort of just paused. It's just stopped. So when
(05:40):
does it reaccelerate higher or lower, we don't know.
Speaker 2 (05:44):
And the inflation rate that we saw this was just
last week. The PCE for March two point seven percent.
Speaker 3 (05:50):
Right year of a year. It's not bad.
Speaker 2 (05:53):
I mean, it's not the two percent goal, but it
really and it didn't affect, you know, the markets all
that much you would expect if it was came in
a little higher than expected and certainly higher than it
was a year ago. But is that a new normal?
Maybe a two point seven?
Speaker 7 (06:10):
It could be at least something we have to get
used to for a while because we're not going to
see any major changes anytime soon. The base effects, the
fact that inflation was lower last year at this time
means we won't get as much of a benefit on
the year over year numbers. They are going to stay higher,
(06:32):
and so people will look at that and think this
is a problem. Also, the annualized rate of where we
are now, if you're looking at the last three months
and you look at it at an annual rate, you're
up in the threes three point nine or something like that.
So the trend is not your friend. Is the story here?
(06:54):
And even if we don't see a big breakout in inflation,
it doesn't look like we're going to see it come
down soon. So then the question becomes how.
Speaker 3 (07:02):
Do people adapt to that?
Speaker 7 (07:03):
Do they start to feel this is a normal price level,
even if the inflation rate has come down but not
all the way to where it was, or do they
still stay angry about it and complain about prices going up.
Speaker 2 (07:20):
Well, we shall see May first this Wednesday, the decision
from the Fed. Our thanks to Michael McKee, Bloomberg International
Economics and Policy correspondent, And we turn now to more
big tech earnings as Apple reports at second quarter results
this coming Thursday, and for more on what to look for,
we're joined by Anna rag Rana, Bloomberg Intelligence Senior Technology Analyst.
(07:42):
Now Honor Rock. A lot of headwinds facing Cooper Tino lately,
but let's start with what you're expecting to hear in
Apple's Q two report.
Speaker 8 (07:50):
Yeah, the expectations are pretty low. And you know, in
all fairness, things have been tough for them and we
don't see that changing at least in the next you know,
six or twelve months, only because China has been weak
and there are no signs that that's improving.
Speaker 2 (08:05):
Frankly, Now, China, there were reports that iPhone shipments in
the first three months of this year tumbled nineteen percent.
That's devastating. I mean, it's the second biggest market bare yeah.
Speaker 8 (08:15):
Yeah, they're a local brand called Wahweh, which is doing
very well, and partially they're doing well because they came
out with a new phone after a few years of
being really absent in the market. So people who you know,
I would say, wanted a new phone are probably choosing
something more local, something that they are used to, And
you know that's really hurting Apple because it is a
(08:36):
high end brand, but you know it is it is
not I would say doing as well as it was
a few years ago.
Speaker 2 (08:43):
Well, the iPhone definitely the cash cow, but there's also iPads,
max services like Apple Music, Apple TV plus what's new
and what will investors be looking for in those revenue streams?
Speaker 8 (08:55):
Yeah, I think you know, almost all of them will
pretty much be in line with what the company said
would happen in the last quarter. So no major surprises
and iPads right now, because the next one is going
to be launched next month. No same thing for the
Mac and the back pro. The services business is the
only one that I would say is going to have
a good growth rate, somewhere in the ten to twelve
(09:17):
percent range. They have been doing well there because you know,
once you have the device, you're going to go and
buy more things in terms of games and applications, and
you know, more iCloud storage. So all sorts of things
do add up into it. You know, you break your phone,
the Apple care goes into it, so that all those
(09:37):
things bundle up and that's doing better. But you know,
services alone cannot just sustain Apple's growth. It has to
be the iPhone. So the biggest thing for us is
going to be what comments do they make about China
and do they really show us any hope of a
recovery over there?
Speaker 2 (09:54):
How about its AI ambitions? Is there a perception on
Wall Street Apple maybe a little behind some of the
other T giants.
Speaker 8 (10:01):
Oh you're too kind by staying a little uh far
behind and in that particular case, and I think I
think they've realized it. And you know, we we saw
Mark German telling us that they shut down the car
division and are putting all the engineers back in the
AI you know framework at this point. So they have
an event coming in June called the WWDC or the
(10:22):
Worldwide Developers Conference, where they have promised to showcase a
lot of their new AI features. I think it's going
to be still too early for them to come up
with something really a killer app like Opening I. I
think that's going to take a little bit longer, perhaps
another year to get get really squared away. If they
were investing crazy amount of money right now.
Speaker 9 (10:43):
What could happen though?
Speaker 8 (10:44):
And that's another rumor that we heard thanks to Mark German,
that they may do a deal with Google to license
their model to put them on the you know, the
iOS operating system. Now, if that happens, I think that
could be the catalyst investor may be looking for, because
while Apple may be behind in some of that GENEI capabilities,
(11:06):
Google's been doing well over there, and I think licensing
that intellectual property from Google may may help Apple's ambition.
Speaker 2 (11:14):
No, that would be something very new for Apple dealing
with Google then, but.
Speaker 8 (11:19):
They do that on the search side, remember they you know,
that's the default search, So they actually have a partnership
and Google pays a lot of money to Apple for
for those rights.
Speaker 2 (11:30):
Hey, let's talk about the vision pro the mixed reality
headset thirty five hundred bucks. Has this been a real
swing and a miss for Apple? I mean reports say
demand is so low that it's slash introduction.
Speaker 8 (11:42):
Yeah, But to be very honest, I saw that report. Also,
when we had first looked at this thing, we were
already at that number of four hundred to five hundred
thousand units or somewhere in that range. This is not
a killer app. Think of this as this is an
investment in what could be someday a bigger opportunity in
terms of a new kind of operating system to do things.
(12:03):
It's never going to be another iPhone, but it has
a new category, it could have new apps, so you know,
it's it's a good R and D experiment. I think,
you know, some people will own it right now at
thirty five hundred. I think a lot more people will
own it at two thousand dollars someday when it you know,
when the lower model comes out and the price goes
down and people build applications on it. So it's a
(12:26):
long term bet, but it's not going to move the
needle for you and me financially. If you're looking at
from Apple's you know overall revenue base well.
Speaker 2 (12:35):
Apple Q two earnings out this Thursday. In our thanks
to Ana rag Rana, Bloomberg Intelligence senior technology analyst, coming
up on Bloomberg Day Break weekend to look ahead to
a global conference in Vienna, where the question of autonomous
weapons and how they should be regulated will be up
for discussion. I'm Tom Busby and this is Bloomberg. This
(13:05):
is Bloomberg day Break weekend, our global look ahead at
the top stories for investors in the coming week. I'm
Tom Busby in New York. Up later in our program
will look ahead to earnings from Samsong in the state
of the chip industry. But first, UK Prime Minister Rishi
Sunak says he's committed to spending two point five percent
of his country's GDP on the military by twenty thirty.
(13:27):
France and Germany have also begun efforts to ramp up
their own military spending and on the agenda at this
week twenty twenty four Vienna Conference on Autonomous Weapons Systems, Leaders,
we're going to peek at the latest technological developments in
military weaponry which could change modern warfare forever and for more.
Let's go to London and bring in Bloomberg Daybreak. Europe
bankor Stephen Carroll.
Speaker 4 (13:48):
Tom After decades of scaling back, Russia's invasion of Ukraine
prompted a rethink of defense budgets across Europe. Germany has
started acalarrating military spending, including creating a one hundred undred
billion euro rearmament fund. France two is stepping up spending
on weapons. Here in the UK, the Prime Minister has
promised to increase defense spending to two and a half
(14:09):
percent of GDP by twenty thirty, although that would be
after an election that's set for later this year. We
spoke to a UK Politek's reporter James Wilcock about the
pledge on Bloomberg Radio this week.
Speaker 3 (14:19):
Well, he would.
Speaker 10 (14:20):
Say that we live in a more uncertain world Steven.
It's also very, very very popular with his back benches.
Some of them have even pushed for it to goes
high as three percent in the past, and that's the
Defense Secretary, Ben Wallat's former Defense acually I actually say
so it is a popular policy with the backbenchers. It's
like to play well with the public as well. It's
also something that Boris Johnson promised as Prime Minister back
in twenty twenty two. So it is worth saying that
(14:41):
this bid has now been refreshed, so it sort of
plays to all of his bases in the sense, not
to get away from the fact that it is a
large sum of money.
Speaker 1 (14:49):
Yes, I'm two and a half percent of GDP of
the target. I mean, the new element is putting the
time frame around it, right, delivering that by twenty thirty
it would seem. But of course there's a general election
coming up, so how does that work?
Speaker 10 (15:04):
Quite I mean, and this is part of what is
increasing these some quite cynical politicking by the Conservative Party
where they promise spending commitment increases that will then have
to be delivered after the next election. The big spike
in this kind of money will come in twenty twenty eight,
and so Labor for its parts, have said that in
the next year if they were to being government, would
(15:26):
have to institute a review into the military spending. That
would happen in the next year. So there is no
commitment here to continue this beyond the next government if
the next government work to be Labor. And it was
quite fascinating at the press conference which is announce this.
He was next to the Native Secretary General Jen Stoltenberg.
Journalist tried to ask YenS if he'd had spoken to Labor,
so like intervened and said, you know, YenS wouldn't be
(15:47):
answering questions on that because that's dragging him into domestic politics.
So it's a fascinating move by the Prime Minister to
sort of look strong on the world stage whilst also
trying to put labor into a spending commitment in hot water.
So worth saying though that in this reporting, Sunak says
this spending pledge, which he tops up to being seventy
(16:07):
five billion over the next six years, is already fully costed,
so it would not involve any spending cuts or any
tax rises. He says it would be partly down to
savings of nearly three billion pounds by cutting the civil service.
Speaker 3 (16:20):
The entire civil service paybill.
Speaker 10 (16:22):
Is ten billions, so there are some fascinating sums here
that civil servants and policy wonks are still yet still
properly take a look at that.
Speaker 4 (16:31):
Was Benberg Radio's UK politics reporter James Woolcock. Now, where
all of this extra money will be spent is a
topic that's going to be discussed at an event in
the Austrian capital Vienna in the coming days. The Conference
on Autonomous Weapons Systems will be tackling how developments and
artificial intelligence are revolutionizing how wars are fought. Our reporter
(16:51):
at Jonathan Tarne will be there, and I've been speaking
to him about these issues and started by asking him
exactly what sort of technology is covered by the term
autonomous weapons.
Speaker 11 (17:02):
Virtually every day there's a new deal that's announced that
involves autonomy and weapons systems. We saw the European Commission
give Fails the Defense Maker contract that will you know,
basically identify potential battlefield targets that will be uploaded into
a database so that you know, future weapon systems can
(17:23):
work with drones and artillery to more quickly kill battlefield targets. Obviously,
in the Ukraine War we've seen some application of that
concept already, drones reducing the amount of time that artillery
needs to identify as target and fire. We've also seen
in the Gaza conflict the use of artificial intelligence under
(17:47):
the so called Lavender program to identify potential targets. So
this is a very rapidly developing war space.
Speaker 3 (17:55):
Tell Us about who's going to be attending this conference.
Speaker 11 (17:58):
I would categorize them as the rule takers rather than
the rule makers. Generally, these are going to be largely delegations,
high level delegations from the Global South, some European countries
on a foreign minister level. But these are not going
to be the countries that are necessarily making the weapons systems.
These are the countries that have a huge interest in
(18:20):
regulating the autonomous weapons systems because they conceivably could be
on the other end, and they want to have a
rule book in order before they're before these systems widely proliferate.
Speaker 4 (18:32):
Because of course, this is an issue that poses major
ethical questions for those that are in this industry. What's
being thought around the impact that the proliferation of these
kinds of weapons could have on conflict?
Speaker 11 (18:45):
Yeah, absolutely, you know, aside from the ethical issue of
you know, reducing individual human lives to data in a
potential autonomous weapons system, you know, you're seeing people trying
to frame within established humanitarian law. So I mean, you know,
humanitarian law does exist on the books. It requires distinction, proportionality,
(19:10):
and precaution when militaries engage each other with civilians oftentimes
in between. And so people are trying to step inside
the technological development and the engineering development and trying to
apply some of the ethical norms that have been established
(19:30):
in the wake of the Last World War and try
to bring some responsibility to bear to the developers, the engineers,
the algorithm makers, and as well as the militaries who
are going to have to develop rules of engagement when
using this technology.
Speaker 4 (19:47):
When we talk about the sort of the development of
this technology, where are we seeing the bulk of the
development happening which parts of the world.
Speaker 11 (19:58):
Well, I mean it's the It closely tracks general military
expenditures as well as arms exports.
Speaker 9 (20:04):
So you're talking about the big three.
Speaker 11 (20:06):
US, China, and Russia in terms of development and where
we're focusing. It really depends on who you talk to. Obviously,
if you speak to the companies, they're going to tell
you that we're talking about narrow versus general autonomous system
development that is narrow, which is where we are currently
with autonomous systems, drones, satellites identifying potential targets that will
(20:30):
help a human make a decision, but whether it's to
engage versus eventually conceivably and this is kind of the
sky net what has been here too for science fiction,
generalized artificial intelligence that can target and engage by itself.
If you ask military people, they're going to come out
with a different set of answers about where we are
(20:53):
in the development arc, and I think rules of engagement
speak prominently there. I mean, do we you use this
in an urban battle landscape populated by civilians and then
you move down the spectrum to the general public represented
by officials and diplomats, and you know, that is what
(21:14):
next week's conference is mostly about speaking too, and that
is where there's a rising call for regulation.
Speaker 4 (21:22):
Is there any hope of progress being made on that issue?
Because as you say, there an ativy outline, there are
so many elements to this that would need to be
thought about and discussed. What is the hope that there
might actually be some consensus on what can be regulated?
Speaker 9 (21:40):
Yeah, I mean the short answer is no.
Speaker 11 (21:42):
The reason this is taking place in Vienna is because
Vienna is home to arguably the most successful arms control
convention in history. That's Nuclear Non Proliferation Treaty one hundred
and ninety three parties signed that. You know, it's subsequently
helped to bring into force the Treaty against the Nuclear Weapons.
(22:03):
But the point here is that we're really at the
beginning in these and if there was any treaty or
tangible set of rules, that will take years to negotiate,
and there's a lot of skepticism that negotiation can keep
pace with the rate of technological change, and there are
just some very fundamental questions such as monitoring and verification.
(22:27):
I mean, with something like the NPT, which has very
successfully prevented nuclear weapons from proliferating. You have physical inspectors
going around the world and measuring grand levels of enriched
uranium or plutonium, and there's a material regime in place.
Much more complicated in the digital realm, where you're conceivably
(22:53):
programming and developing algorithms that frankly break the space.
Speaker 9 (22:58):
And time continuum. You know, we.
Speaker 11 (22:59):
Were like used to as human beings hitting each other
over the head with the rock, and then that developed
into projectiles, long bows or guns. But this sense of
immediacy and the process of killing one another is stretching
into days and weeks or months with autonomous systems where
(23:24):
items can be programmed to kill at a distance and
great time length.
Speaker 3 (23:30):
I mean, given the absolute enormity of these dilemmas, how
are the industry playing this in the meantime.
Speaker 9 (23:37):
Well, the industry is very excited because it means more.
Speaker 11 (23:41):
Contracts, and we've seen the markets reaction to the AI
hype in recent weeks and months, and so you know,
this is a way for the military not only to
plug into the AI buzz, but also they're riding a
wave of increased militarism at present. We see nations increasing
(24:05):
defense budgets, We see the outbreak of war on multiple
fronts and multiple theaters around the world, and so you know,
clearly the defense industry stands to benefit from this, and
there's a number of arguments that they make, and some
of them may well turn out to be accurate, that
(24:26):
this will help to reduce casualties and help decision making
so that civilians are not caught in the crossfire. Nevertheless,
there's legitimate concern by a number of countries that will
be attending the Vienna meeting next week to make sure
that rules are enforced. Just as rules of war are
(24:47):
enforced with older technologies, they want to ensure that rules
are enforced with digital technologies.
Speaker 4 (24:56):
Thanks to our apporter in Vienna, Jonathan Cherone Stephen Carol
in London, you can catch us every weekday morning here
for Bloomberg Daybreak. You're it be getting out six am
in London and one am on Wall Strace.
Speaker 2 (25:08):
Tom Well, thank you, Stephen, coming up on Bloomberg day
Break weekend and look ahead to Samsung earnings and the
state of the computer chip industry. I'm Tom Busby, and
this is Bloomberg. I'm Tom Busby in New York with
(25:35):
your global look ahead at the top stories for investors
in the coming week. When it comes to tech earnings
these days, the focus is on artificial intelligence, and that's
especially true for chip makers. Their products are used in
a variety of applications, from smartphones to data centers and more.
And one of the biggest AI chip makers, South Korea, Samsung,
is out with its latest earnings this week. Daybreak Asia
(25:56):
co host Brian Curtis and Doug Krisner join us now
for a preview.
Speaker 12 (26:00):
Tom. The chip makers are at the heart of the
AI revolution. As we've seen, much of the focus has
been on AI data centers and accelerators made by Nvidia,
but high bandwidth memory chips are equally critical, and we'll
talk more about that. They've been called the backbone of
both artificial intelligence and machine learning. Here's Bloomberg Semiconductor reporter Ian.
Speaker 13 (26:21):
King, and this is really an essential part of these
large AI training models, the speed at which the process
that can get into memory, grab the information and get
back out and get back on with what it's doing.
Has a huge impact on how quickly you can train AI.
So that's a really good opportunity for some song, for
(26:42):
Micron and for.
Speaker 5 (26:43):
Heinix, that is Bloomberg C and King. Now, just last week,
South Korea's sk Heinix said sales related to AI more
than doubled in the latest quarter. Sk Heinex is the
world's number two maker of memory chips. In the week ahead,
we'll hear from number one Samsung once again, Bloomberg C
and King.
Speaker 13 (27:02):
The traditional volume, which memory is all about volume really
comes from smartphones and comes from PCs. Those markets aren't
getting any worse, but it's way too early to say
that they're in growth mode again. What people are really
focused on is the data center and AI market and
how that is going to have an impact on memory.
(27:22):
Twenty twenty four is going to be a good year
for these companies. Everybody's forecasts a double digit revenue growth
after a pretty disastrous year last year.
Speaker 12 (27:31):
Bloombergs Ian King for a closer look at semiconductor markets
and to help preview the Samsung earnings. We're joined by
Bloomberg's Glad Savov, our tech editor in Hong Kong, and
Youlam Lee, Bloomberg, senior tech editor based in Seoul. ELM,
let me go to you first. So we already had
the preliminary results from Samsung sales and profit higher than expected,
(27:52):
so we kind of know what to expect, and analysts
are projecting net income up fourfold from a year ago.
It seems an astonishing number. Will will that be more
because of semiconductors or smartphones or both?
Speaker 14 (28:07):
That's right, there are something is a very complex company
with different type of businesses. Obviously, semiconductor unit is such
an important pivotal unit for the company that is expected
to rebound in the first quarter, as well as smartphone unit.
(28:30):
Smartphone obviously they have introduced you know, the S twenty
four new AI phone in the first quarter, so that
is really boosting their shipments and revenue during the quarter.
Their division together is with home appliances and together they
(28:57):
account for you know, majority of the maybe forty percent
of the revenue. So we expect both the semiconductor unit
as well as the semiconductor and Home applians unit to
do well in the first quarter.
Speaker 5 (29:13):
Vlad, when we consider chips used in AI. Fast speed
comes to mind, reduced power consumption comes to mind. I'm
wondering when you compare the chips manufactured by Samsung and
you compare them, Let's say to sk Heinex, how do
they stack up one against the other.
Speaker 15 (29:30):
Well, that's the interesting thing, and I mean Julien can
speak more to that, but really Heinis for the first
time in their relationship Samsung, Heine's being very close to
America competitors, has the lead. Heinis took that lead. It
invested very early into HBM as a category, and it
has the lead in having the better technology. It has
the lead in having Nvidia as its customer, and Vidia
(29:52):
trusted Heinex and its technology first. Now, the thing that's
happening and the thing that's going to happen over the
next few months, is Samsung is catching up. It says
that it has a more advanced version of HBM. It's
moving fast. It has the bigger resources. And one of
the interesting things that we saw in the wake of
Heinex's earnings, which were really impressive, was share price actually dropped.
(30:13):
And part of the reason for that was because investors
and analysts we're looking at Heinex. Henix has to increase capacity,
so it has to increase spending. Every bit of growth
for Heinex in terms of its productivity and in terms
of its sales is going to come at the cost
of more capex.
Speaker 12 (30:29):
So a lot. We have heard some different comments from
the companies that we've heard from so far. We had
very strong numbers from Texas Instruments looking more at the
automotive and industrial sectors, and then you already highlighted sk
Heinex and TSMC actually raised a few questions about smartphones
and PCs and ASML's numbers were kind of scarily bad.
(30:54):
Should we be positive about the overall semiconductor industry here
or should we be somewhat cautious?
Speaker 9 (31:01):
Oh?
Speaker 15 (31:01):
I believe so again. AI is such a massive trend.
This past week, Metas earnings gave a warning sign to
a bunch of people in the US, and I came
on radio and I said, do mistake Meta for being
a representative for the entire industry. And what happened immediately
the next day, Microsoft and Google boths of past expectations,
largely driven by the cloud businesses, the ones that provide
(31:24):
those AI services that infrastructure the facility for companies, startups,
et cetera to train the AI models. The demand is
their Heinix, TSMC, Samsung, all the component suppliers and video
as well. They had gone to sell as many chips
as they can make. That is the thing that we've seen,
especially with Heinis. We've had Tom Kang in South Korea saying,
(31:45):
if Henis wants to sell more chips, it needs to
build more factories.
Speaker 5 (31:48):
You limb when you think about artificial intelligence, so much
of the focus has been on these data centers, but
I'm wondering when it comes to the individual devices, the
smartphones in particular, how sophisticated it has Samsung become in
building smartphones that can handle a lot of the AI
technology that we're looking forward to applying to various aspects
(32:10):
of life.
Speaker 9 (32:10):
Yeah. Sure. So.
Speaker 14 (32:11):
One one of the areas that some song is really
pollish this R is the rise of on device AI applications.
So in other words, traditionally, if you want to have
applications such you have to go through you know, Cloud
or some such. But companies like Samsung and Google and
(32:34):
trying to build you know, a on device basically you
know applications that you don't have to go through a
cloud that is going to be helpful to you know,
for security reasons. So they are really betting the chips.
You know, they are expecting stronger robust demand for chips
(32:56):
that are going to be used on devices this year
as more companies really move into this space.
Speaker 12 (33:01):
And VLADI in terms of monetizing AI for companies out
there in the industry, are we about ready to switch
or is it too early to start talking about the
Microsoft's and Googles and companies that are either in the
enterprise or in the consumer sector and seeing some real
monetization there.
Speaker 15 (33:21):
Well, I won't answer the question. I will let the
CIOs of a bunch of tech companies answering the question.
And NOBO did a survey of the CIOs chief information
officers of global firms, and the major takeaways were Number one,
they also were the companies is unprepared to capitalize on AI.
Speaker 3 (33:40):
Number two.
Speaker 15 (33:41):
A good two percent of them said that they won't
be able to show return and investment on AI for
the next two years. So that really gives you a
sense of the timeline that we're working on here. And
then you also have to bear in mind AI has
been around for a long time, but just kind of
working behind the scenes. What are you talking about, like
AI in small phone cameras or AI to detect and
(34:02):
categorize the photos that you take with those cameras. It's
been around, and what we're seeing is it's much more
of a smooth transition than you might imagine. So AI
today in monetization terms, it's happening, but it's subtle. You
can't really tell. Tencent, for example, says AI is doing
a helpful job in improving its ad targeting meta likewise
(34:25):
Google likewise, But again that's kind of under the hood,
behind the scenes. The impactful AI the stuff that people
pay subscription fees for, that's years down the line.
Speaker 5 (34:34):
Honestly, I want to bring in the China chips story
into the equation here. We know that the US export
controls are in place, obviously limiting China's access to certain
chip making technology. Earlier, Brian and I spoke with Robert Lee,
the senior tech analyst over at Bloomberg Intelligence. He's based
in Hong Kong, and the question was on China's chip
(34:56):
industry and how it's developing, and whether or not a
company like Samsung or even sk Heinez should be concerned.
Speaker 16 (35:03):
It's probably a little bit early days for Samson and
others to worry about the threat from the Chinese. But
at the end of the day, the weight of the
state is backing Huawei and SMIC and SMIC being the
Chinese equivalent of TEARSMC. So you've got you know, you've
got a lot of national pride, a lot of strategic
national long term objectives, and a lot of money flowing
(35:24):
into that sector.
Speaker 5 (35:25):
That is rapidly of Bloomberg Intelligence. So if we can
agree that there is some sort of race happening. Broadly
speaking about what's going on in the semiconductor industry, you lim,
I'm wondering when it comes to a company like Samsung,
how much are they devoting to research and development to
trying to find the next generation of memory chips.
Speaker 14 (35:46):
It's tremendous, that's all they're really betting on right now.
When the smartphone came along, you know, the world changed.
They see the same moment, so they want to capitalize.
They want to secure the leadership.
Speaker 5 (35:59):
LA based in Hong Kong. But for the purposes of
our visit today, you're in Tokyo and our studios there
and give me a sense of what's happening right now
in Japan with the semiconductor industry and how it's growing.
Speaker 15 (36:12):
Just like saith Korea, just like Taiwan, Japan has made
semiconductors and national priority. And one very interesting example, we
were talking to a chip making startup in the US
and one thing that they said was Japan is making
a push to bring Japanese semiconductor designers and engineers back
to the country. They want to get their own national
(36:33):
talent back to the country. They have a startup called
Rapidus Corp. Which is aiming to do two nanometer highly
advanced I mean it's not available today chip making by
twenty twenty seven. It's a very aggressive thing to go
from zero to super advanced chip making by twenty twenty seven.
But that's back by many of the biggest companies in
the country, Sony and many others. And when you bring
(36:58):
in all that expertise that Japan already had, as it
is already the source for many of the key materials, components,
equipment for chip making, if you do all of that,
if you bring in the expertise, and Japan is also
investing and subsidizing TSMC setting up at least one factory
to maybe even three or four, depending on how that
negotiation goes. It wants to do just like the US.
(37:20):
It wants to bring in the expertise that he lacks,
and he wants to lean into the expertise that he
already has.
Speaker 12 (37:25):
Vlad, thank you very much, and Eulam thank you as well.
Bloomberg's Lad Savov, tech editor in Hong Kong, and ulm Lee,
Bloomberg Senior Tech editor based in Seoul. I'm Brian Curtis
in Hong Kong, along with Doug Krisner. You can catch
us every weekday here for Bloomberg day Break Age the
beginning at eight am in Hong Kong and eight pm
on Wall Street.
Speaker 2 (37:46):
Tom our thanks to Brian and 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.
Speaker 3 (37:58):
I'm Tom Busby. Stay with us.
Speaker 2 (38:00):
Top stories and global business headlines are coming up right now.
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