Rethink Technology business briefs for December 6, 2017.
Cook walks the thin line of constructive engagement at China's World Internet Conference
Tim Cook at WIC, source: Quartz
] Back in March, I wrote a warning article against Apple (AAPL) that uses confrontational tactics against the People's Republic of China (PRC). Constructive engagement, he claimed, would make much more progress.
What exactly do I mean by "constructive engagement"? I would say that CEO Tim Cook's keynote speech at the China World Internet Conference is an excellent example.
Bloomberg quoted Cook as saying:
The theme of this conference, the development of a digital economy for openness and shared benefits, is a vision we share in Apple. We are proud to have worked together with many of our partners in China to help build a community that will unite a common future in cyberspace.
Cook has been criticized for supporting Internet censorship policies of the People's Republic of China, and Apple has complied with China's regulations that require it to remove certain applications (such as VPN applications) from the Chinese app store. In a subsequent interview at the Fortune Global Forum Conference in Guangzhou, China, Cook defended Apple's position this way:
From my American mindset, I firmly believe in freedoms. They are at the core of what it is to be American, and I have no confusion about that. But I also know that every country in the world decides its laws and regulations.
So, for Apple, the constructive commitment implies a frank exchange of opinions and an adhesion of values, moderated by the search for common points and shared objectives. And, above all, it means respect for national sovereignty.
Greater China is still a very important market for Apple, but certainly not the most important one. In Apple's fourth fiscal quarter (ended September), Greater China was the third largest region by revenue, after America and Europe. And Greater China includes Hong Kong and Taiwan. While it's important, I do not think China's influence forces Cook to "kiss the ring," as a recent Bloomberg article by Tim Culpan claims. Culpan writes:
Tim Cook is desperate to retain any remaining Chinese market. That's a blessing for the country's internet model and for the local players who dominate.
The problem with this claim is that it ignores the fact that Apple increased revenues in Greater China by 12% y / y in the fourth fiscal quarter. iPhone also grew its market share in China in the quarter. Apple is not "desperate" in China, and Cook did not "kiss the ring" even bent his knee.
Dialog Semiconductor will probably succumb to the new paradigm
For some time now I have been pointing out that the consolidation of the semiconductor industry is a consequence that I call the "new paradigm". The new paradigm has mobile device manufacturers such as Apple that designs its own systems on chip (SOC) instead of buying processors from a commodity provider such as Intel (INTC) or Qualcomm (QCOM). This allows Apple to optimize device features, such as battery life.
It is a secondary effect of the new paradigm that the nodes of the process are reduced and the device manufacturers become more skilled in SOC design, each time it is handled more incorporated in the SOC. The suppliers of discrete integrated circuits for Apple tend to live on borrowed time. Just look at Qualcomm.
So it was no surprise when Dialog Semiconductor (OTC: DLGNF) acknowledged that Apple could start building its own power management devices. Dialog now supplies such chips for Apple's iOS devices. For a long time it was rumored that Apple was working on its own chips.
Most likely, Apple is not working on a discrete chip, but will simply incorporate functionality into future SOC Series A.
Apple is part of the Rethink Technology Portfolio and carries a Buy rating.
Windows on Qualcomm Snapdragon Systems unveiled
Qualcomm has seized the occasion of its second annual Snapdragon Technology Summit to announce the first Windows devices based on the Snapdragon 835 mobile SOC. These are part of a class of devices that Microsoft (MSFT) calls "PCs always connected", although this category also includes Intel-based systems.
The first of these devices is the Asus NovaGo 2-in-1 laptop and the HP Envy X2 Tablet. In addition to LTE connectivity, the main differentiation of Intel systems is a superior battery life of more than 20 hours.
Asus NovaGo, source: Ars Technica
Of course, the other main difference is that these ARM-based processors they run a new version of Windows 10 specifically for ARM architecture. This sounds like another failed attempt on Windows RT, but Microsoft provides a full 64-bit version of Windows 10, while RT was a 32-bit operating system.
All Windows system libraries have been recompiled in 64-bit ARM native code and apparently help with x86 emulation that allows running 32-bit x86 applications without modification through an emulator. According to Ars Technica, the emulator actually recompiles the x86 code into ARM code and stores it for future use. Intel has said that this could infringe its intellectual property. We will have to see.
As before, the Windows Achilles cure in ARM is the lack of native applications. This re-launch of Windows in ARM seems very incomplete in that sense. Currently, developers have no way to create applications for the system, even if they wanted to. There is still no 64-bit ARM SDK from Microsoft. You would think that Microsoft would have learned from the experiences of Windows RT and Phone.
Despite the somewhat unstable release, I hope that Windows on ARM gets a better reception this time. The Snapdragon 835 offers better performance and energy efficiency than Intel in the slim and light tablet form factor. With Windows on its ARM mobile processors and Windows Server on its ARM server processors, Qualcomm seems ready to interrupt Intel in key markets.
Qualcomm is part of the Rethink technology portfolio and has a Buy rating.
Disclosure: I am / we are long AAPL, QCOM.
I wrote this article myself, and expressed my own opinions. I am not receiving compensation for it (which is not from Seeking Alpha). I have no business relationship with any company whose actions are mentioned in this article.
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