 Coming up on DTNS, forget the politics. We talk about the technological challenge of buying TikTok. Huawei admits they can't make chips anymore, and Amazon's plan to save malls. This is the Daily Tech News for Monday, August 10, 2020 in Los Angeles. I'm Tom Merritt. And from Studio Redwood, I'm Sarah Lane. I'm the show's producer, Roger Chang. Very happy to welcome back Rob DeMillo, CTO at Skidmore, Owings & Merrill, and Venture Partner at Spark Labs Global. Welcome back, Rob. Good to have you back, man. Thank you so much. Nice to be here. We are going to draw upon your CTO experience later on. Thank you for sharing it with us. Oh, no. OK. It's going to be good. We just need you to fix Microsoft. It's going to be fine. If you want the wider conversation on TikTok birds, Mime, Making Hummus, and more, you got to get our expanded show, Good Day Internet. Become a member at patreon.com slash DTNS. Let's start with a few tech things you should know. Amazon announced that it rebranded Twitch Prime to Prime Gaming. The service will keep all the same game benefits, including exclusive in-game content, free games, and a free monthly Twitch subscription. Google Maps now supports CarPlay dashboard. Let's users have turn-by-turn navigation alongside music controls and other CarPlay app widgets. And while they were at it, Google also brought Google Maps back to the Apple Watch. They had removed it back in 2017. NVIDIA teased a August 31st announcement posting the phrase, 21 days, 21 years, on its GeForce Twitter accounts. The original GeForce 256 GPU came out in 1999. So this may be an announcement of the new GPUs based on the Amper architecture that the company unveiled back in May. Hyundai announced the launch of a dedicated battery electric auto brand spinning out its Ionic brand name. Ionic cars will be built on the Electric Global Modular Platform, with the first model being the Ionic 5, a mid-size CUV expected in early 2021. Uber CEO, Dara Khadrusha, he wrote an opinion piece for the New York Times outlining a third way for workers to be classified beyond traditional and contractor distinction. He called for an industry-wide benefits fund to let workers build up benefits across different gig services. TikTok told the ad agencies that it will honor planned ad campaigns and refund any that it can't fulfill as a result of any possible restrictions that happen in the United States. TikTok will also work with major influencers to migrate them to other platforms if necessary. The Russian competition Watchdog FAS ruled that Apple abused its dominant market position in mobile apps by reserving rights to block any third-party apps in the app store, as well as requiring exclusive use of the app store to download apps on iOS. The ruling comes in response to a complaint brought by Kaspersky Labs when its SafeKids parental control app was declined by Apple. Apple said it will appeal the ruling. And the Wall Street Journal reports that Twitter held preliminary talks with TikTok about a US merger. Twitter thinks its small size would be more likely than Microsoft to pass antitrust scrutiny. Now, Twitter might not be able to finance a deal all on its own, but some of ByteDance's existing investors might step in. SoftBank and General Atlantic are possibilities. The most likely might be Sequoia Capital, which owns 10% of ByteDance. Sequoia's global managing partner Doug Leone has contributed to the president's re-election campaign. So he's got some connections there as well. Twitter investor Silver Lake is another possible aider to that bid. All right, let's talk a little more about saving malls. The Wall Street Journal sources say the largest mall owner in the US, Simon Group, has been in talks with Amazon to turn empty department store locations into Amazon distribution hubs. So you'd shut up that old Sears and turn it into a warehouse. The talks date back to before the pandemic, so this has just accelerated the process. Talks have focused on former locations of Sears and JC Penny department stores that have been closed down, though Amazon could also potentially buy locations still in use if maybe a store just doesn't wanna afford that lease anymore. Amazon is also talking to other mall owners, not Simon Group, about possibly putting its Amazon fresh grocery stores in some former JC Penny spaces. Yeah, it sort of sounds like two different scenarios, right? There's okay, big space, not being in use, no other large chain is coming in here anytime soon. What can Amazon do warehouse-wise just so it has more presence in urban areas or areas where they have a lot of customers and so you just fill it up with a bunch of junk and it's just a warehouse. Talk about your one hour delivery, right? Suddenly you're in right now with a bunch more people. Yeah, and then you've got the Amazon fresh experience where it's like, let's make this a destination where it's a place that you go and it's Amazon branded and there's all sorts of great stuff that Amazon does and they can play around a little bit with their contactless pain and the sort. Yeah, I mean, you have to consider a bunch of different angles from Amazon's point of view. It makes sense for the mall owners, it makes sense. It does feel a little bit like, okay, so we've just evicted the people from this apartment, we're gonna move into it. So there's a little of that to it. But it's gonna do things to the areas around the malls too. It's gonna affect traffic patterns and shipping in and out of those malls and how they're used. So if you are in an urban area or a suburban area and you're living around those malls, what happens? Like how to affect you? I mean, not that there weren't huge traffic problems around malls anyway, right? With people going in and out, but now instead of, you know, a lot of SUVs go into pick up the latest deals, you've got a lot of big trucks, you know? So that is a different traffic problem. Well, yeah, and a place like Sears, you'd say, well, they have to stock stuff too. So they had a solution, but you know, Amazon, the turnover is so different. That really is a different situation. Yeah, it's a different situation because you've got every hour, there's going to be semis going in, semis going out, Amazon delivery trucks going in, UPS trucks going in, you know. It'll be interesting. And I would imagine that the Simon Group and maybe Westfield, Westfield isn't named in this report, but I imagine they might be curious how this turns out, would be into the idea, not only Amazon Fresh Stores, but even if it's just a warehouse, Amazon having return locations or locker locations, you know, things that maybe do still bring in a little bit of foot traffic from people who might still go to the rest of the mall. Yeah, agreed. So yeah, we are going to see a lot more stories like this, not even involving Amazon about, you know, uses for previous retail establishments because there's a lot of holes in the checkerboard right now in the retail space. There are. And malls are, I don't know, they've changed a little bit over the years, but the big stores tend to be the bookends, right? So it's like, okay, if you had a JC Penney in one end and now it's some sort of Amazon branded place that is bringing in foot traffic, how does it change the retail stores that might be in the rest of the mall going forward? Those urban, I'm sorry, the suburban malls that exist right now, the ones that have the Sears and the JC Penneys and where Amazon could potentially take over, feel like they would become different things. And malls would sort of move into urban environments or retract into urban environments where there's high end stores and more logical reason for foot traffic to go in and out, you wanna go to Hugo Boss and you wanna try on a suit, you wanna do that kind of thing. Yeah, yeah, more of the way targets started opening city targets. They would want to think about it, yeah. That's right. A note from analyst Ming-Chi Kuo looks at the potential impact on iPhone sales of the US executive order banning transactions with WeChat. Now, if WeChat were only removed in the US, Kuo predicts iPhone shipments would fall three to 6%. If removed globally, Kuo sees iPhone shipments declining 25 to 30%, with shipments of other Apple products like Macs and iPads and the Apple Watch declining 15 to 25%. And Apple's latest earnings report, Greater China accounted for roughly 15% of Apple's quarterly revenue. So it's something that's very important to the company. Kuo expects Apple suppliers, LG and a tech and genius electronic optical rather also adversely affected. Yeah, we talked about on Friday that WeChat is dominant in everyday life in so many ways in China. And Kuo has put a number on that, how that would impact Apple if a Chinese customer and other places that use WeChat, expats and tourists just looked at it and said, well, I can't buy this phone. It doesn't have WeChat on it. Right. I don't think that it's going to be blocked anywhere outside of the US, right? So the first number I believe, like the predicting the iPhone shipments would fall three to 6% if it's blocked in the US. That makes sense to me. But as you said, China lives in breeze on WeChat. It'd be really difficult to imagine it not being on iPhones that were sold and distributed inside of China. Yeah, and three to 6%, it's not nothing, but that's a lot easier to overcome and maybe try to grow your way past than 25 to 30%, for sure. Apple will be fine. I am not too worried about newly minted billionaire Tim Cook. I think he's going to make his way out of this. But yeah, I am curious if there's even going to be a ban or if there is what, how it manifests and will these executive orders be challenged and all of that. So we've got a ways to go on all of that stuff before we have clarity. But I think this analysis is important nonetheless to say like, all right, we don't know what really is going to happen. But if this happened, this would be our best guess on its impact at least on this. That's right, yeah. Huawei consumer business president Richard Yu notes the direct impact on his business of US trade restrictions saying the company will stop production of its arm-based Kiran chips September 15th. Huawei suppliers use US manufacturing technology and that is restricted for making parts for Huawei. Huawei smartphone production has quote, no chips and no supply according to you. Last year, if you remember the US Department of Commerce placed Huawei on its entity list requiring a license to export anything from the US to the company. And in May, those rules extended to restrict the sale of semiconductors or any other part made outside the US if it uses US designs or intellectual property in the manufacturer. And that meant chip fab TSMC which uses US designs in its plants had to stop taking orders from Huawei May 15th and it had four months to ship its existing orders. So times up on September 15th. Now a few US companies have received licenses to allow some of their products to be sold to Huawei because it's a restriction that says you need a license to sell with to Huawei and some have gotten them. Intel got one for some minor parts. Micron got one, Xilinx got one. Wall Street Journal reporting that Qualcomm is currently lobbying the US Department of Commerce for such a license to sell advanced components related to 5G modems to Huawei. The Qualcomm argument is that an export ban on those components would strengthen overseas competitors like MediaTek and Samsung who are not subject to any of these restrictions because they're not US companies and they're not using US technology to make their stuff. So I think what Qualcomm is trying to argue is like, look, you gave a few licenses to a few people. If you don't give us a license, it's not like Huawei isn't gonna get the 5G parts. They're just gonna get them from companies that aren't in the US. Wouldn't you rather have the money come to the US? That is the problem with all the themes running through the articles that you've discussed today is that these attempts to prevent surveillance by China or prevent commerce coming in from China, it winds up hurting US companies almost as much as it hurts Chinese companies. And in the case of Huawei, you can't just bring up a fab plant out of nowhere. It takes years and years and years, decade, to put one of those things together and get them up and running and functioning. So more power to Qualcomm if they can get through this. Yeah, I mean, I think they have an argument whether the administration will agree with that argument or not, I'm not going to try to venture a prediction, but I think they could. I don't think it's outside the realm of possibility that commerce goes, oh, right. Yeah, no, we're not actually hurting anybody. That doesn't help our leverage, et cetera. It could happen. But Huawei is in a pickle. This is the first time we've seen something from them that wasn't like, yeah, things are slowing down, but we have options. They certainly could get chips from elsewhere within China using Chinese manufacturing processes, but it's not going to be Kirin chips. It's not going to be chips that have been designed specifically for their phones and that's going to have an impact on those phones. Yeah, you can't just take a chip from one manufacturer and plop it in and expect it to work in another environment. And those chips, I mean, the phones, the Huawei phones were all, the reason they can compete in the market so aggressively is they've been leveraging the global supply chain for years and years and years, right? They don't have fair plans. They don't make their own components at that level. They build the phones, they buy the parts, they throw them all in and off they go, right? But if you change any one of those components, it's going to interrupt their distribution. I'm going to float a scenario out here. It's a little bit tin foil hat, but bear with me. I kind of expect Huawei to have a solution to this. I expect the solution will be, well, it's not a Kirin chip, but we have contracted ex-Chinese manufacturer to make these chips for us that we called something else and then there will be accusations that they're in fact mimicking the manufacturing processes of TSMC when they make those chips and that will be another side battle in this whole thing. Maybe. Yeah, I mean, that's a very realistic possibility. It could also be they just cut them off guard as well. Yeah, that's quite possible as well. Well, Bloomberg sources say that Facebook is creating a new group focused on payments called F2 for Facebook Financial. David Marcus, co-creator of Libra, will head the new division, which will include existing products like Facebook Pay, Libra Wallet Novi, What's At Pay, and perhaps others. The aim would be to unify payments across the platforms, including Instagram and Messenger. Facebook Pay can already be linked to a credit card or PayPal account and used to exchange funds on Messenger, WhatsApp, and Instagram. Yeah, if this wasn't Facebook, this story would be a, oh, company has reorganized its reporting structure and its divisions to move all the payments together, but because it's Facebook, it's Facebook starting a bank. Oh no. People have been wringing their hands over for a solid year now once Libra was first announced. I would forgive anybody for being confused as to what is happening with Facebook at this point because there seems to have been so much internal. All right, people aren't really, we've got some pushback on the first announcement. Let's figure out how to draw that back in a way that seems more consumer friendly. Now we've got large bank partners, perhaps dropping out of the plan altogether because it's a little too wishy-washy. I don't know, Rob, what do you think? Yeah, well David's a really smart guy and Libra, you know, crash and burn before takeoff even happened. So I can't even say crash and burn on impact. So he had a group of people that were very, very intelligent and he spun and pivoted as fast as he could, I think within Facebook. And Facebook has always been concerned about getting money in and out, right? And so if they can do it internally, I think this makes some sense for Facebook, but just to bring back a devil's advocate point here, aren't they becoming a bank? It was really hard for PayPal to move forward in this arena for that very reason. Because they're using credit cards in PayPal, I think they're safe from being deemed a bank at this point, right? There's a lot of confusing factors. First of all, Libra was an entirely separate organization. David Marcus was involved with that, that's gonna confuse people, but this isn't Libra. It's also confused because Novi was the wallet they were gonna use with Libra and that's part of this organization. But really, this is just Facebook very wisely, in my opinion, saying, hey, you know what? We need to diversify our income from just advertising. Payments is a way to do that. Let's tighten this up. David Marcus is a really smart guy who has a lot of experience dealing with the global banking system now. Let's take advantage of that. So that's all true. Where I will meet you on that point is that's now. What they do next will be very interesting because that's where you start to say, well, now they're stepping outside of just using PayPal and credit cards as the backend maybe, right? And as soon as Facebook even looks like their toe is about to cross that line, people are gonna pay attention and crack down on it, for sure. Yeah, and by the way, that path you described, that was PayPal's path. Right, right, exactly. Which I can't say three times in a row, but yeah. So it's- I'm not even gonna try, yeah. So, you know, taking a page from that playbook, that does seem to be the direction that people are headed. So I can understand what people are concerned. There's already enough concerns in the market about Facebook in general and its control over certain sectors of, you know, people's attention spans and social media and delivery of content. And yeah, so now they're stepping into financial issues and I can understand they're gonna be under a lot of scrutiny. Yeah, it's just knowing the difference between concern over what they are doing and concern over what they might do next. That's the only thing I try to shine a light on. Valid concerns. Not sure they can be separated, but okay. Yeah, it's, well, always in motion, the future is. Correct. Folks, if you wanna get all the tech headlines each day in about five minutes, be sure to subscribe to DailyTechHeadlines.com. All right, folks, Microsoft has until September 15th to reach a deal to acquire summer all of TikTok from Bike Dance. You know that, you listen to this show. There is that executive order we talked about Friday that would ban transactions with TikTok if nothing changes by September 20th. That's the ticking clock. Those dates are aggressive just for the business side of the transaction. Just trying to get a merger of this size done challenging is not a sufficient word for that, but they're practically impossible for the technical side. Let's say they do overcome the business challenge and get it done. Bike Dance has been working on a full technical separation of TikTok and its Chinese app Duyan for months now, right? They're not gonna finish it in 45 days. TikTok says user data has never been combined, but Reuters reports that code for the logo and feel is obviously separate, but there's some server code such as telling the app where that data is stored, telling like, oh, you look the US for this stuff, you look at Australia for this stuff, Singapore for that stuff, content recommendation and moderation algorithms, code for managing user profiles, those are all combined on the server end between Duyan and TikTok. Even if Microsoft were to buy all of TikTok, it would still need to review and revise that code and move to a new backend infrastructure, a potentially potent demonstration of its Azure shops, sure, but one that would still likely take at least a year. Another issue is how the recommendation algorithm is maintained. You need training data to have your algorithm healthy and it needs to keep getting data to get better and you will have to segment that if you're buying TikTok away from Bike Dance, especially if Microsoft doesn't buy all of TikTok, just buys the four regions we talked about, Australia, Canada, US and New Zealand. Jim Dubois, former chief information officer at Microsoft told Reuters that hard disks of data would likely need to be transferred between Bike Dance and Microsoft. So a little bit of a sneaker net approach is a potential here. Rob, you've been a CTO at a number of companies and I'm sure you don't envy the folks having to figure this out. What kind of insight can you give us on the gargantuan task here? Having been bought and sold many times with this sort of thing. I see this and I just sort of get sweaty palms. So when Bike Dance created, Julian to begin with, and they knew they were on to expand outside of China, they did segment the system, right? So that if you think of the software path as a big X where there's two different user interfaces, two different data warehouses and then the server, the control mechanisms and the algorithms and the logic and the AI are all in the center and then the content delivery and all that stuff. That's how they've got it set up, which made sense as long as control remained in Beijing. And now that they are scrambling to get the US division over to a US company, which is what it feels like is going on here. Yeah, I agree with everything she said. Like it's the business end of this, it is going to be interesting to see if they can get it in by September 15th. They can, but it's deals of this size and this magnitude with this sort of momentum behind each of these two companies plus the language barrier and everything else is gonna be tough. But the technology side of this, I mean, you're 12, 18, 24 months, right? I mean, even though everything is nicely separated, it's hard to imagine that there are recommendation engines and just for you section and all that is not borrowing information from the metadata from both data sets, right? And there's probably code sitting in that server section that's very key to saying, oh, if this person in the US like this, they might like this stuff over here that folks in China liked doing that, right? So that has to get teased apart. The data sets probably are reliant on some commonality. So that has to get teased apart. So it's not only a huge code separation problem, it still feels like there is like a data schema, data warehouse problem that they need to sit down and deal with. And because this is a acquisition of a subset of BiteDance's product, it's going to slow down any effort that BiteDance had in separating the stuff apart, right? So it'll be pens down, check your code in, we're going to sound for three or four months and do due diligence on everything. So they've got a task ahead of them. Well, and it strikes me too that if you are under the gun to get this done faster, let's say the business deal gets done and let's say the administration says, that's fine, but you only have this amount of time to separate that data out. You need to do it fast. That encourages mistakes, right? Yeah. Because instead of pencils down for three months, you're like, well, let's just commit all your code today and then, you know, we'll jump right on it tomorrow and that's how you lose stuff. And it also could trigger escape clauses. There's no document that's going to get passed and signed between now and September 15th, that does not include a paragraph that says, hey, if we get constrained to this timeframe and we don't hit these milestones, this thing is done. Yeah. All right. What about the idea that in the course of separating this data goes wayward and maybe either appears to have not been in the US after all or somehow gets copied over to the wrong server, right? Oh yeah, that's always a possibility. I'm interested by the, by the way, I think the person that said that they had the sneaker net everything over, I think it was the former CIO. Yeah, former chief information officer, Jim Dubois. Yeah. Right, so he's probably conjecturing as well, although it sounds right because it's going to be like petabytes of data which over the transatlantic cables or trans-specific cables are going to take quite some time. So it would make sense to ship that stuff out but once it's shipped out and then installed in Microsoft Azure data centers and then you start finding issues, like it's going to be hard to correct them. Yeah, I think it's probably tempting for some people to say, well, wait a minute, if there's code shared, isn't that the smoking gun? Isn't that saying that there was in fact data from TikTok on Chinese servers? Is there any way you can make that clear to people to understand why both things can be true? Both things can be true, but that's, it's a revelation that would not be surprised to see either. I mean, I haven't seen the code, so it's hard to tell, but when you bifurcate a data set like that, engineers are engineers, right? And they're going to say, oh, listen, I've got metadata over here in this database that's going to be helpful for my predictions with this database over here. So it's entirely possible that there's code that does tie those two things together. Even if that is not true, to make life easier for the engineers, the data schemas, which is the way data is laid out inside of a hard drive that's in a database, data schemas are probably extremely similar just to make their lives easier. So they don't have to write in, you know, basically in different database languages, different code paths. So that comes into play as well. But it is absolutely too early to say that that conjecture is not correct. And it is possible that the server code and the data code are somehow intimately tied. Yeah, and that's going to come out, right? But it wouldn't have to be. I guess what I'm trying to point out is it's not a smoking gun to say there is some code for TikTok that's executed on a server in Beijing. That's not the same as saying there was user data stored in Beijing. Because it would be the, yeah. That is correct. Yeah, yeah, yeah. So the thing that operates on the data is not the data. And so machines can be running anywhere and the data can be sitting in Des Moines and the data would be separated from anything else that's happening inside of the Chinese firewall. But it certainly could lead some government officials to look at that and think, oh, well, wait a minute, but if that server over there is running it, wouldn't the data also be there, right? So that could be part of this as well. Yeah, yeah, it's going to be an interesting couple of months as we keep reading on this. There's also the interesting tie-in that Microsoft Azure is, what's the word I want? They have a relationship with Tencent, which is also under scrutiny, right? And there are Azure-labeled data centers inside of the Chinese firewall that are really Tencent data centers. And they're separate things. Like if you have an account on Azure outside of China, when you're inside of China, you have to get a separate account to use their version of Azure, but it's running inside of the Tencent data centers. That could come into play as something questionable as well. Interesting. Well, you probably have thoughts on this and if so, a good place to have a conversation about it would be in our Discord, which you can join by linking to a Patreon account at patreon.com slash dtns. Let's finish off with the mailbag. Our friend, Allison Sheridan. Hi, Allison. I miss you. Had some thoughts on our XCloud discussion, XCloud issue really on iOS from Friday. Allison says it seems that Allison has two bad options available to them on the streaming gaming issue given their desire for a policy against streaming because there's no way to control what gets streamed once an app is approved. Option one, which is what they're doing now is forbidding streaming games altogether and living by that policy as well. As Tom mentioned, Apple Arcade can't stream games either, so it's not like they're favoring their own service. Option two, what's been proposed, carving out a special category for a legitimate gaming streaming services. The problem with this, Allison says, it would absolutely favor the giant, themselves monopolistic services like Google Stadia, Microsoft XCloud, Facebook Gaming. Small devs probably can't be considered legitimate if they're trying to just get started. Maybe. I mean, when I said that, I was thinking of Amazon's premium video program, but your point's the same about that, right? If I'm a small video streaming service, can I get in the premium video streaming? I don't know. Apple might say, yes, you can. You just have to meet these qualifications. I would argue with game streaming, it's really hard to be a small dev and get started anyway because that's just such a capital intensive situation, right? It's always been the acceptance part of it. Back in the days when there was the Xbox 360 and the PS3, right? There was an attempt to have independent game developers develop for those machines and some of it carried forward to the PS4 and the Xbox One, you know, and you got wonderful games like Limbo, which was, from what I can tell, was one person, maybe two people that developed Limbo and pushed out. And so it was put on those platforms along with the stuff from Gearbox and name your favorite game developer. And sold relatively well and there were a couple of indie hits that came out of that. Streaming is a different animal in that you have to partner with an application streaming service of some sorts. And so you have to pay for those servers and you have to do all this stuff. So it does increase your cost a little bit, but your flexibility also goes up. This comes back to Apple and gaming just in general, which, you know, not to say anything too terribly controversial here, but they don't really get it that much, right? And so, you know, the attempt of Apple to try and keep their own ecosystem, they have to do some policy changes, right? In order to play in this pool. Otherwise, it's gonna be really, really hard for people. I mean, I think it would be fair to say we'll have a policy change that says if it's just a game streaming service and as long as we check your app and we only see a game streaming service, then that's fine because the same, like, well, but they'll say it's a game streaming service and it's not, that also goes for the companies that are allowed to stream remote desktops. They say they're doing a full remote desktop, but they could change that, right? And I think it's interesting to note that one of the smaller game streaming services out there, Shadow, is legitimately in the Apple App Store because they said, well, we will give them the whole machine and Apple's like, fine, that's great. Then you can do that as long as you don't have shortcuts that go straight into a game in your app. You have to let them get to the machine and launch it. So there's an example of a smaller company that did get started within Apple's existing rules. So maybe Allison does have a point. I think she does. Hey, shout out to patrons at our master and grandmaster levels. You all have very good points, including Brad, Paul Boyer and Ken Hayes. Also thanks to Rob D'Millo for being with us this fine Monday. Rob, what have you been up to? I have been sitting exactly where you're sitting right now for working longer hours than I've been working for seven months. Yeah. Well, where can people keep up with your work? I can take a look at my About Me page, which I think will get flashed up here at some point and you can find everything that's connected to me there. Excellent. Thank you, Rob. Really, really appreciate the insights, man. It was super helpful. Thanks, everybody. Appreciate it. Always fun to be here. Folks, if you want to wear some DTNS on your face, on your head, on your chest, wherever you want it, we got it for you, dailytechnewshow.com slash store. We got shirts, we got hoodies, we got caps, we got masks. Go check it out, dailytechnewshow.com slash store. 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