tv Bloomberg Technology Bloomberg July 6, 2018 11:00pm-12:00am EDT
♪ selina: i'm selina wang, in for emily chang. this is "bloomberg technology." coming up the next hour, the trade standoff between the u.s. and china intensifies. u.s. tariffs on $34 billion worth of chinese imports has gone into effect. followed a few hours later by a statement from beijing to expect retaliation. unemployment rose from an 18 year low and wage gains are unexpectedly slow. we will talk to one automation startup who closed a massive funding round.
and an ipo, while the wireless speaker pioneer is taking this route and is there enough investor interest? to the top story, the trump administration's tariffs on chinese goods have taken effect. the tariffs hit $34 billion worth of imports including a focus on high tech industry in an effort to protect american ipe and stem china's attempts to become a global leader in tech. they immediately responded with tariffs of their own. after this, president trump threatened to pose tariffs on every import into america. >> there is clear evidence in the data that the anxiety over trade is being harmful to the industries we must watch for harm for.
that is probably because these people understand the president is driving the world to a better equilibrium. >> we heard from a lot of companies that are thinking they might shift around where production happens to ensure they can have a low price. with some companies who feel like that is a capitalist venture to try to figure it out so they might try to write it out. >> if you have a hammer, you can use it to hedge yourself in the face or hit nails with it. i think trump needs to stop hitting the u.s. in the face with the tariffs. >> we need to get back to real negotiations about the real issues, such as intellectual property and opening some markets. not just sparring with each other. >> this could well be what i call the reagan moment, china cannot keep up with the u.s. suddenly you have serious discussions on intellectual property, technology transfers,
and others. this is viewed a little bit that we maybe toward the end of the process. >> there is perhaps a silver lining in that this skirmish leads to a better global trade system. selina: let's go to d.c., where scott kennedy and jenny leonard are standing by. trump is threatening to impose tariffs on every good china imports to the u.s. what is the possibility that will occur? >> you can never rule let anything with this administration. i would say right now, what is being -- what the tariffs are imposing on is not consumer
goods so it will not directly impact him or his political chances in the midterm. if you do impose tariffs on all chinese goods, that will impact consumers and might actually impact the elections in november. selina: is no accident that america is targeting the heartland's, but it is a boon to the political base saying he is being tough on china. how much economic and political follow-up has to occur before he backs down or maybe china blinks first? >> for the president to back down, he will have to start seeing poll numbers shift significantly in terms of his own approval rating and the chances of how the senate candidates in november. at this level of tariffs, whacking back and forth, that will not happen. as jenny was eluding to, it will not be the direct hit from the tariffs, it will be whether they are combined with pulling out of nafta, changes in the stock market, those are the types of
things that could change support for him and make him look to want to talk to the chinese. the other would be something that happens on the korean peninsula. that is the high priority for him as well. if the poll numbers change or outlook on the korean peninsula changes, those of the kind of things that would make him want to come back to the negotiating table in a real way. selina: many have argued that the better way to get china to the negotiating table is to work with allies and have a coordinated response. is that option still on the table given how much this administration has alienated its allies? scott: and president trump where to look to his right and left, he will not find a lot of friends who are willing to put tariffs on china themselves. there is a lot of support for the idea that china is unfair and it needs to change its
policy, but he is basically already left that opportunity -- let that opportunity pass. it is also not clear what he's asking or what his demands are. his friends in other countries, they are trying to dump his policy, not the trade balance. until he radically tries to improve relationships with our allies and friends in the pacific, and in europe, and clarifies what he wants, he will be standing alone. that makes it much harder to get the kind of deal that would support americans' national interest. selina: jenny, does any of this put a dent on the made in china 2025 plan? many sectors have low exposure to foreign revenue. jenny: it seems like china's plan is plowing ahead, the chinese have also said in the statement yesterday when they announced retaliation on $34
billion worth of u.s. goods than any sector the mic it hit by the tariffs will get government assistance of china has all the help -- whoever gets hit by the tariffs will be compensated and that is what we are seeing. this doesn't seem like what the u.s. is pursuing right now, but they will get there. selina: the trump administration would argue this is the only way to pressure china against the unfair trading practices and ip theft. do think there are better options? scott: i think unilateral pressure for screening of imports and investment or national security can be part of the solution, but just part of the solution.
you need all of the above strategies, collaborating with allies, transpacific partnerships, investing more in high-tech, and education in health care at home. the president has focused on this one aspect of dealing with the problems, but you don't build a house only with a hammer. you need a lot of other tools to fix this thing and to get the job done. selina: a big focus has also been reforming the committee in the u.s. does the u.s. government actually have the infrastructure to fundamentally, properly screen all of these investments and scrutinize them? jenny: what is happening right now is that congress of the legislation is being reformed. part of that is also having more personnel, having more funding. that is making its way through
congress. when the trump administration endorsed that plan as the investment restrictions they're putting on china and investments from other countries, they endorsed it and said congress i need you to pass this, we need you to move quickly so this is what is happening on the hell right now. it is a recess week so we will see that picking up in the next week and moving forward. that is what is going to happen. what is also in this is more personal and funding. that is needed. selina: scott kennedy and bloomberg's jenny leonard, thank you for joining us. a look sex slowing demand for smartphones might be catching up with samsung. the galaxy phone makers are operating a close to $30 million falling short of estimates. the chip and he vectoring business which remains its largest profit maker may end up benefiting from u.s. tariffs on china. the south korean trips -- ships could be an alternative.
coming up, u.s. unemployment picks up in june while wages stand a pressure. are bots to blame? we will talk with one man helping to lead the revolution the workforce. if you like bloomberg news, you can listen on the bloomberg radio app, bloomberg.com, and in the u.s. on sirius xm. this is bloomberg. ♪
bringing more cost to the workforce. the company closed a $250 million funding round led by golding sacks. the automation cofounder and ceo joins us now. more than 1000 organizations are using your technology including google, general motors, and others. how are they using your tech? >> is using particularly in the industry. they are using our platform to automate business processes. selina: are your customers replacing any of their workforce as a result of using automation anywhere? >> the main thing to think about this is this is not a replacement, it is augmentation. were human and bots are working side-by-side, doing what bots do best and what people do best. think of it like a computer. computers were first introduced,
we had the same worries. if i take away your computer, most people would say how you expect me to get my job done. it is the same story we are hearing from our customers that they are using bots, and they cannot go back to doing a deal fashion way. selina: it is a beautiful picture of bots and humans working side-by-side but, at one point, will humans be stripped out of the picture and these automated platforms run on their own? >> not at all. there are fears that are overblown on this. i might have something that is slightly better, which is data. we are in the middle of the 1100 large scale products. you see companies that use bots and they get three times more job applicants. because you want to work on the most cutting edge stuff. you want to make work more human and employees love that.
on friday, 40 or 50 bots, new bots, are being used. the reality couldn't be further from the fears. selina: i don't think an analogy of bots has been used in that way before. you see japan relying more and more on automation. are using the united states moving in that direction? >> absolutely. this is happening across the entire country. with customers in over 90 countries. for most of us, we may not be realizing but the working age population is in sharp decline. because of the bots, there is no way to keep the loath -- without the bots, there is no way to keep the growth rates going. selina: and i you operate in more than 90 countries, what is
your operation like in india? a country that is a huge outsourcing hub. >> it's erupting there. organizations are using the bot to accelerate the business processing. selina: bots can be good but also bad. a lot of the social media platforms have been dealing with these sophisticated bots that are iterating faster to spread spam and manipulation faster than they can deal with it. how do companies like that make sure they are staying ahead? >> you point out something very valid. yet the good guys bots and the bad guys bots. when you go back to when the software came in, how do we deal with viruses? we made another program to stop
all the viruses. so when the bad guys' bots attack the infrastructure, many people are using the good guy' bots to counteract. selina: are you working with any social platforms? >> we are working with many insurance companies, and this problem is faced with companies today. selina: goldman is one of your lead backers, are they a customer, why did they invest in you? >> they are customers. being a customer, they probably saw the impact this can bring to them another financial services, not to mention they have exposure to a much wider working area. they can see this is the technology of the future. selina: your company is more than a decade old and you are valued at almost $2 billion in
the recent fund-raising round. is an ipo in the near horizon? >> you never know. we like to focus on building a great company, and take it a year at a time. selina: mihir shuka, thank you so much for stopping by. the scandals on facebook are starting to stack up. we'll have an impact on user growth? we discuss. this is bloomberg. ♪
selina: the pace controversies and facebook are not slowing down. the social media giant apologized this week for taking on a post containing excerpts of the declaration of independence saying it was mistakenly flagged as hate speech. this hit a new record high on friday and prices were recently raised on the stock adding facebook is a must-have utility
for staying connected. let's bring in david kirkpatrick in new york. david, if facebook is a much-needed utility, should be regulated will as one? >> whether it should or shouldn't, the answer is it will be. anything that has that degree of influence on the world in literally every country really has to be having government oversight. there's too many consequences on the way facebook operates in our society not to have government looking over the shoulder in my opinion. selina: that document that facebook recently released to congress had dozens of pages on relationships with companies like alibaba. where those dealings common practice or something more? >> to some extent they are common practice.
if you have the kind of service facebook has, you will make it work really efficiently on a wide range of devices, you will need some version of those kinds of partnerships. the problem is their candor. specifically, it is the problem that some of the things are covered said -- that zuckerberg said or declined to not not to be true. the document showed that where he said they stopped data sharing with apps in 2015, in reality, they extended a number of the partnerships for much longer than they said. it is a little fuzzy to me when they actually ended all of them, because there's so many caveats and call of vacations in there. second of all, they announced something that had not been asked about during the hearings. and, something that most of us described as the partnerships with hardware companies. that may be that those are
legitimate, but the existence of the partnerships contradicts things zuckerberg said in the hearings that they are no longer sharing personal data with companies. they have a semantic excuse that these are not actually app partners. i forget the terminology but they are extensions from facebook in the way they like to think of it. but that is not the way the users think of it and it is contrasting to some of their promises and even the ftc, which is investigating with facebook based on an earlier complaint, may find this is a violation of what facebook promises. selina: clearly this raises tons of questions and answers. it doesn't give any visibility into why they didn't investigate apps when they found out they had violated its rules. >> that is a question they have not addressed. they bypassed that sort of rationale issue.
they don't explain the thinking. they say we did not do what we should have done and we are sorry that we made a mistake. we know the cambridge analytical thing led to potential manipulation in the presidential election as a result of their not correctly given oversight to one app. now they're saying there were many other apps that have the same kind of data and they have not explained why they did not tell users about that or why they did not take action earlier. there are plenty of unanswered questions that deserve answers. congress and others will demand answers for them. selina: david, you have been covering facebook since its early days. you have even built a personal relationship with mark zuckerberg. can his company optimize for-profits and the well-being of its users? >> that is a good question. i don't think he is that your to talk to me right now because i've been criticizing him a lot
lately. the key question is, the stock is going up, someone put a $275,000 target on it today. they are making unbelievable profit read 43% net margins which is unheard of in any business, yet they have all of these bizarre impacts on society and zuckerberg claims that he is creating global community. i don't think it is possible to retain your 43% margin if that is your primary goal. that is where the conflict lies that has not been addressed. selina: facebook recently took one of its highest-ranking executives and put him in charge of this blockchain project, what do we know about it and what does that signal? >> that is an interesting issue. david is one of the executives everyone has to be most interested in the guys he is one of the most experienced executives that facebook.
he had previously been ceo of paypal. i don't think they have any other executive who was ceo of a company of that scale prior to joining facebook. he was previously running facebook messenger and caused growth to spectacularly grow so that it is now in the $1.2 billion -- 1.2 billion user range. they took them off that job and put them on this blockchain project, which i think is indicative of the fact that they are worried about the use of personal data could become more and more under threat, and there are many people who believe blockchain is a potential tool to help users to take their undated -- protect their own data. you could see what they're doing is a hedging strategy. selina: david, you are sticking with us. coming up, the effect of trade tensions on technology. how will the escalating dispute between washington and beijing impact the tech sectors?
♪ selina: this is "bloomberg technology." our top story, the escalating trade tensions between washington and beijing. in the crosshairs, the tech industry. a 600% increase in the amount of advanced technology the u.s. imports from china. it leans heavily on the aerospace industry, with technology coming in second. i want to welcome back to economy ceo david kirkpatrick and tom giles. tom, what are the broader effects of this on the
technology industry, which sectors are getting hit hardest? tom: the first one to talk about is the chip industry. they seem to be caught up in this in the biggest, most romantic way. what i mean by that is that it is not that there are direct tariffs on the chips themselves, it is that there are a lot of big chipmakers getting caught up and used as pawns. zte, this is an electronics maker. the impact for them, is the u.s. going to ban zte equipment? there is a long-running grudge for them allegedly selling technology to countries like iran and north korea, then lying about it.
another company wants to buy a chipmaker and has to get approved in china. china is holding up approval. selina: micron as well, also getting hit. zte recently got approval to resume activities in the u.s. this was seen as a bargaining chip of sorts. what is going on here? david: i think, when trump banned exports of u.s. components to zte a month or so ago, i think it was sort of a strategic negotiating ploy. it was ostensibly in order to punish them for having traded with iran in violation of the embargo. i think the point of it from trump's perspective was to demonstrate to china how devastating it could be if the u.s. cut off the flow of key technologies to chinese companies which, like in this
case, our national champions. zte beginning to shut down immediately same that significant. that has been modestly soft and they are back to shipping things back into the u.s. and accepting american goods in their products. i think it was a way of demonstrating what we could do. selina: the u.s. has insisted that these terrorists haven't impacted the u.s. consumer, but there are u.s. companies being caught up, like u.s. bikes. tom: there are these small components, things like capacitors. if you are a small company and you need these components from china, you are going to be affected. some larger companies, apple for example, they have alternatives
were a little increase or a big increase in parts. it is small electronics maker startups that could be affected most. then, we are going to see potentially a second wave of tariffs on finished goods. if you see a tariff on that, some of these startups that are gaining momentum right now -- selina: what is the risk for apple, operating in china, looking to expand, as well as google and facebook that want to operate there but whose core businesses are currently blocked? david: think about how many products we received that are quote unquote designed in california but made in china. it's a lot. if trump would put tariffs on everything imported into the u.s., that would be a lot of iphones. they have to be very nervous watching this whole dispute
unfold because they can ship a lot of stuff over there in order to put it into the assembly and ship it back all over the world. they could be seriously affected. i don't think that trump would take the risk of denying iphones to the american people, and apple computers and all the other things. air pods -- just name the things you get from china, they are a lot. it is an interesting moment we are in. i think it is good reason to put china on notice that some of the things they have been doing are inappropriate, but it is a complex issue to figure out exactly how to play those levers. selina: i want to get your take on how effective the china 2025 plans could be anyways.
david: i think they made in china 2025 plan, which is basically aiming for china to effectively dominate every category of major technology, has enormous potential for them. they are moving steadily on the path toward achieving a lot of those things. look at what they are doing for example with high-speed rail. they are already dominating the world and that. could they become the same kind of global leader in autonomous vehicles? they already have a bigger ride-hailing business than we do. these are all targets for them. i think they could really hurt the rest of the world if they are allowed to do all of that. the reason it is a worry is that many of the ways they have been getting those technologies is inappropriate, through industrial espionage, etc. that is not all they do. they also have tremendously high-quality local technology development. i think it is important for us to put the brakes on so when they are going toward dominating, they don't do it unfairly.
selina: despite the escalating trade conflict between washington and beijing, one company is unfazed. a chinese electric vehicle maker is continuing its plans to enter the u.s. market. they are looking to sell their electric suv stateside by 2020. the ceo spoke with tom mackenzie about why he is not afraid of trade tensions. >> you will find byton is a global company, a global team using global technology. the supply chain is more than 99% in china and we are producing in china. we believe in global business. over time, you might see frictions in trade relationships within countries -- between countries.
this is unavoidable. tom m.: the fact that so much of the business and supply chain is based in china, that isolates you to some degree? >> i just said we are a global product, a global brand, a global team. we are able to supply our product to the world. tom m.: you were considering opening a factory in the u.s. that was part of the discussion. is that now off the table? carsten: our plan now is to bring the product to production. we will start in the chinese market by the end of next year, which is not only the most important but the biggest market for us. we're going to the u.s. and europe in 2020. whatever the u.s. implications are, we will take into consideration.
we would have to react to anything from a production side. tom m.: do you get any sense that your investments in the r&d center could be curtailed by chinese investment in the u.s.? carsten: i didn't get any indications in this area and i'm not so much afraid of it. i believe in the global economy, global teams and global products. we will have to find a solution and the nations will have to find a solution to keep that going. tom m.: it sounds like there are no significant changes to your strategy as a result? carsten: our strategy is exactly the same. tom m.: do you get any sense that the reform moves in china around the auto sector may be delayed because of these trade tensions? carsten: i don't see this for
now. there are no indications are no indications or evidence toward this direction. again, from a byton perspective, i'm not worrying too much about it. we are here, this is our market, we are producing here, and we have a lot of local r&d here. tom m.: very recent news that china is going to be cutting electric vehicle subsidies again, or further. how does that change the competitive landscape? carsten: i never have been a fan of subsidies. subsidies, they can initiate new technologies, but at the end of the day, the product and the business model has to convince the people by itself. byton's business model does not rely on subsidies. it has to be stable by itself. you will only be successful in this market if you have the right products that can compete in the market with other products.
companies have been talking. only one company has developed the product that scale, virgin hyperloop one. joining us is the virgin hyperloop one co-founder in los angeles. you recently met with european regulators, many regulators around the world. there is obviously a lot of hype and excitement, but what is the number one concern regulators have when you talk to them? josh: i think the number one concern is that this doesn't exist yet. everyone is used to dealing with rail, boats, planes, trains, and they are trying to think of us in that concept. we are not any of those ridiculous modes of transportation. we can draw from the best of them, autonomous vehicles, platooning, but we need to be regulated from our own energy, because we can build a brand-new
experience based on the technology we are building. selina: your company recently announced the intent to build a hyperloop in india. what would be the biggest technical hurdle and when would a demonstration track be put in place? josh: we are targeting construction to begin over the next couple of years, then passengers operational in the 20 20's. one of the biggest things there is the regulation side. there is over 150 million people that travel that route every year. a number of our employees grew up in that area. being able to see their parents every day. instead of taking a 2.5, three hour train ride on a good day, you are dropping that down to 25 minutes. you are really able to completely revolutionized how people live and work in those two cities.
from a challenge standpoint, the biggest challenges that there is a hill between the two. for us, our technology can deal with that, but there are a lot of switchbacks, it is really slow for the road on that spot, so it is exciting that our technology can replace that in making better. selina: you have competition from elon musk, foreign companies. how to the approaches differ in what are the advantages to each, not just your company? josh: elon is focusing on intra-city transport. what he and the boring company is doing in chicago, they are looking to connect distance between two airports, fully tunneled. they are trying to leverage with electric vehicles to put large buses inside a two.
for us, one of the advantages we have is a big, large scale. we have a significant amount of funding so we have been able to build the technology. we will ride this, my kids will ride this, grandma's will ride this. being able to have everyone in one spot building of a testing, learning, then iterating, is very important. one of the other companies believes in a crowd sourced model, which i think is an interesting way to do a number of developments. if you look at what software is doing. i think that one is a little bit challenging to build hardware with though. selina: bloomberg has reported that he replaced three board members. a fourth one is charged abroad in your co-founder just stepped down. how do you explain all this? josh: it keeps things exciting to say the least. for us, what is important is
that we have got different levels of funding in the company throughout time. as that funding has come in, like you have seen with other companies, it changes the makeup of the board. two of the members that moved off the board are still advisers to the company. one member, who had some issues in russia, stepped down in may. the former co-founder, sherman, ended up leaving the board at the end of last year. richard branson has stepped up at the chairman of how board. we have moved into a process of creating -- we're trying to commercialize this technology. we are done doing prototypes. we are building big hardware now. it is important to have someone who has done that before with virgin planes, virgin trains, virgin atlantic. all of those things are providing value to us as an organization.
selina: one of your former board members controlled caspian ventures. are they still with the company, have they sold any shares? josh: they are still a major backer of the company. as i mentioned before, the member who stepped down in may because of issues in russia. they still have their shares and still have a board seat in our company right now. musk's boring company are working on a route in chicago. they say they can do it all on their own without any government funding. is that a scenario that would be possible for you, or some sort of public-private partnership, is that the better think? josh: it all comes down to ridership. one thing that is attracting will be a is the amount of riders on that route. 5000 miles of hyperloop could be built in india. there are so many people moving into cities there that you will be able to pay for most of those
projects through private financing. as long as you have a significant amount of riders, not an insane amount, just a reasonable amount. in amount that is normal for high-speed rail in europe, you could make the case for private financing, public-private partnerships, then ultimately it comes down for the government paving the way for a regulatory aspect. selina: i hope it is not too far off in the future when i can ride in a hyperloop myself. thank you, virgin hyperloop one cofounder and cto josh giegel. coming up, they have built fence with speakers, but can they handle the pressure of the market? ♪
selina: it may not be a blockbuster ipo, but sonos's public offering is reportedly seeking a valuation of up to $3 billion. sonos is a pioneer in the market of internet connected speakers but is facing stiff competition from apple and others. let's bring in bloomberg news field reporter alex barinka. sonos is a hardware maker, they have huge competition. that is a tough position to be in. alex: it is. but the thing we have -- the thing they have going for them is that this will be a bet on the audio speaker industry. whether that resonates with investors, we will see. today is just the public filing. we reported a range of $2.5 billion to $3 billion market
value. as the ipo gets closer, you will see what kind of premium they put on the company. one thing that jumped out with me is that they are inching toward profitability. $990 million in revenue last year, a $14 million loss. close. especially for a hardware maker, that margin will be important. they will continue leaning on the fact that they sell expensive speakers and they have that kind of margin play. the other thing that i thought was so important about this s1 is that it comes at a difficult time for the trade discussion. they did flag the fact that the trump back and forth with china right now could have an impact on the back and forth with this company. selina: the s1, it said, more tariffs placed could affect the
operations materially. do you think that will impact the valuation? alex: we will have to see how it plays out. we had president today basically looking to put tariffs on all chinese goods. steel and aluminum tariffs, the existing ideas that could impact the cost of manufacturing, a cost they said they could have to pass through to customers. one thing that is clear is that these political discussions seem to be moving quickly. when this company hits the roadshow, whether or not the tariffs discussion has a meaningful impact on the bottom line. selina: why are they choosing to ipo at this time period? alex: the folks who are in on these companies do need to see an out sometime.
eventually, investors need to show their investors returns as well. selina: thank you. that does it for this edition of "bloomberg technology." on monday, full coverage of the ipo in hong kong, for full reaction on what is one of the biggest technology debuts in the region in years. this is "bloomberg technology." ♪