Apple’s China Syndrome – Futurum Tech Podcast Episode 002
On today’s Futurum Tech Podcast, Apple’s challenges, is Facebook backsliding? Our Fast Five including Google Plataine, IBM’s call for code, Google’s Cloud Next, and our crystal ball today focuses on trade wars, all on today’s edition of FTP.
Our Main Dive
As Apple’s earnings announcement approaches, we’ve noticed some challenges the tech company has recently faced. One of the big ones is with China, where Apple has lost a lot of market share in recent years. That’s a huge market that Apple really needs, so it’d be great to finally see some growth there, but it doesn’t look like that’s going to happen.
On a related note, Apple’s privacy protection in China is severely lacking. After all, the Chinese government is known for wanting full access to private information, which may be bad news for Chinese iCloud users since the tech company has to comply with the government’s policies. Regardless, that doesn’t exactly make Apple look like the champion of privacy that it often claims to be.
Bottom line: Apple isn’t the innovator—or privacy-first company—it once was, and that’s reflected in some of the markets where it’s lost its footing. But maybe we have to let go of some of our expectations for this company. Now it has to play by different rules than before, whether due to deals with other countries or just the fact that it’s now the incumbent, not the challenger it once was.
Our Fast Five
We dig into this week’s interesting and noteworthy news:
- If you’re trying to choose between AI devices as you build your smart home, consider which device would best understand your accent. A recent study showed that Amazon Echo and Google Home don’t understand Chinese, Indian, or Spanish accents well at all. And while Google Home can easily understand North American accents, Amazon Echo tends to be better with Southern accents.
- The CEO of Google’s Cloud Group, Diane Greene, recently led the Google Cloud Next event. Some big announcements from this event involved machine learning and AI developer tools from Google Cloud’s solution set. The event shows that Google can be taken seriously in the enterprise field, despite still trailing Microsoft and AWS.
- For the last couple of years, Facebook has been promising users that it would focus on improving privacy, protecting data, and getting rid of an abundance of fake news that many people are so quick to share. But it doesn’t seem like it’s doing that lately, with one example being its slow reaction to calls to ban conspiracy theorists like Alex Jones.
- Google Glass has made a comeback. It just doesn’t look like the same pair of goofy glasses you remember. Instead, there’s more of a focus on industrial uses, which means you might not see this kind of technology unless you work on the manufacturing floor of a warehouse.
- IBM recently started urging developers to come together to use data to create apps that would help people recover from natural disasters faster. The Call for Code allows developers—who are sometimes better known for hacking—to make a difference in a positive way.
For this week’s “tech that bites” award, let’s talk about Google. It recently revealed that YouTube streams faster on some browsers than others. Basically, if you’re not using Chrome, you’re probably not getting fast speeds. While there’s now a patch for that so you can stream faster on Firefox, the whole issue seems like it could have to do with net neutrality being gone. Is this our future now?
Crystal Ball: Future-um Predictions and Guesses
Now for our crystal ball prediction! It’s all about the trade war we have going on. While it seems good to stand our ground with other countries, there has to be a better way to go about it, because we’re afraid the tech industry is going to be affected in a big way soon. That could mean higher prices on the tech products so many Americans have come to rely on, so let’s hope this resolves soon. And there you have it, this week’s Futurum Tech Podcast.
On today’s Futurum Tech Podcast, Apple’s challenges, is Facebook backsliding? Our Fast Five including Google Plataine, IBM’s call for code, Google’s Cloud Next and our crystal ball today focuses on trade wars, all on today’s edition of FTP.
Fred McClimans: Welcome to this week’s edition of the Futurum Tech Podcast, FTP. I’m Fred McClimans, your host for today’s edition. Joining me today is Daniel Newman, the principal analyst of Futurum, and Olivier Blanchard, senior analyst at Futurum. Gentlemen, welcome to today’s podcast.
Daniel Newman: I’m excited to be here. Thanks so much for having me, Fred.
Olivier Blanchard: Likewise.
Daniel Newman: As always.
Fred McClimans: Well, we are a close-knit group. Before I launch off into today’s podcast where we’ll have a great conversation about the challenges that Apple is facing, as well as our Fast Five and Text Bites, Tech Bites and our crystal ball predictions for the coming week, I would like to mention that today, since we are talking about some companies that are also equities in the market, please, this podcast is for informational purposes only. We hope you get a lot of information out of it, but it should not, in any way, be taken as any recommendation or advice with what you might want to do in the stock market. With that, let’s kind of kick this off with Apple and some of the challenges that we see them facing today.
Now, Apple is coming up on their earnings announcement on the 31st. I’ve long been a strong proponent of Apple, but they’re having some challenges in a couple of different areas. China, in particular, is something that’s giving me a lot of concern. They’ve had difficulty in the past coming down after 2015, where they started to lose some market share and revenue pretty dramatically in China. It’s problematic for Apple. I think they really do need the Chinese marketplace. This coming-up quarter, I’d like to see actually some significant growth in China. I don’t expect them to get back to being one of the top four players in that market. They lost that position a while ago and I just don’t expect them to pull it back together. Nor do I expect them to bring it back up in India.
There’s another issue that Apple is facing that I kind of want to throw out on the table here, and that involves Apple’s iCloud and privacy protection in China. Back in 2017, China struck a deal with the Guizhou, I’m pronouncing that poorly, I’m sure, but the Guizhou Cloud Big Data company, GCBD, to host iCloud data for users based in China. Now, one of the major concerns that we have in China with hosting operations, and even with tech companies playing there, is that the Chinese government tends to set their hooks in pretty deep and, as part of that, gets access to a lot of data and intelligence that we might not otherwise want them to have access to.
So Apple set up a program where they were actually dealing with this other company, GCBD, and they were hosting all of Chinese users’ iCloud data in China with an opt-out. You could select to not have your data stored in China, but that’s an opt-out program and we know how well those don’t work. But in any event, Apple was housing or hosting the security certificates for all of the users back outside of China in the US.
So where are we today? Last week, China Telecom announced that they have struck a deal with GCBD to essentially assume control of all hosting operations. All Chinese user iCloud data now sits in a subsidiary storage unit, Tianyi, I think it’s called. That’s another tough now. That essentially puts us in a position where Apple had said, “Yes, we’re going to do this.” We all had our doubts and now the data is sitting out there. This on top of other issues with Apple performance and the new Macintosh, some performance things with Siri, Siri not being quite up on par with some of the other smart AIs out there. It just causes me pause with Apple.
Olivier, I know you are a huge fan of Apple. What are your thoughts here? Is Apple innovating any longer? Are they just operationally executing? Are they even doing that?
Olivier Blanchard: You know, I think we need to probably devote an entire show to whether or not Apple is still innovating or just executing or neither. I think in this particular instance, the real question is, is Apple still a company that can claim to be different from its competitors, from other companies in the market?
For a long time, the image that Apple kind of pushed out for itself was this, you know, think different, different kind of company, different kind of innovation. Everything about them about different. They were kind of like the uncorporation. They were the rebels.
In recent years, and I think you can trace it back pretty much to when Apple became dominant, as opposed to being a challenger perhaps. Once they became dominant in the tech world, they assumed a position of an incumbent and they assumed the behaviors of an incumbent. The fact that Steve Jobs departed the company and this world right around the same time did really stop Apple from continuing that in that strange kind of new direction.
So I don’t think it’s that weird for Apple to be behaving the way it is now. It’s just time for us, as consumers, to adapt to the new reality of Apple. That it is a huge company, that it does have investors that it answers to, that it has markets that it answers to, and that it’s going to make decisions that are the types of decisions that any company, whether it’s called Apple or Microsoft of IBM or any other company, is going to make in those kinds of situations.
My issue with this, obviously, is that there’s a divide between the perception that we have of Apple’s privacy protections for users and what they claim to be trying to do to protect the data privacy for its users and what it’s actually doing, or some of the corners it has to cut, in order to be allowed to play in markets like China. It’s not that Apple is an evil company necessarily that wants to sell your data or make it available to other people. It’s just that if you want to play in China, you have to play by Chinese rules and China wants access to that data.
Fred McClimans: Right. I’m with you in terms of the perception there and I want to get Dan’s take on this. But, Olivier, you kind of triggered something there when you started talking about personal privacy.
Apple is, in my opinion, one of the more security or privacy-first companies out there. I understand they do need to play in China. They cannot ignore that marketplace. They need the revenue; they need the growth in order to be a true international player here.
There was one thing that Apple did interesting in the new 2018 MacBook Pros that kind of is in line with their sort of dual philosophy here of driving people to the cloud and improving security. The new MacBook Pro, the 2018 model, if you look at MacBooks for the last few years, the logic board and the hard drive, the solid state drive, are one and the same. They are literally one piece of equipment in the unit. When you have an issue with the logic board, there used to be a data recovery board that you could plug into on that board so that you could recover data if the logic board failed.
That is gone in the latest version of the MacBook Pro. While that enhances security, it also puts users into a bit of a tenuous situation where you’ve got to be updating in almost real time if you want any hope of recovering data in the event of a failure. Where should you do that? Well, of course, in the iCloud and drive additional revenue for Apple services unit.
Dan, what’s your take on this? I know you’re not the biggest of Apple fans.
Daniel Newman: Let me be fair. I am a true Apple consumer so I am talking on my MacBook Pro. I’m looking over at my 27-inch iMac. I’m living my life on my iPhone 10. So the fact that I challenge Apple is every bit as much as someone who’s been a long-term fan, as it is somebody that really doesn’t like Apple. I just don’t like what Apple has become to kind of what Olivier said, I think they’ve changed their identity. I like the Apple ‘Think Different’, I like the Simon Sinek ‘Start with Why’ Apple, the Apple that really exploded in the minds and became the defining brand for which people should want to be and they’re not that anymore.
You said something, Fred. You said that they’re the privacy and security company and I said I don’t know about that. I think they’re the closed architecture company that hackers haven’t spent or invested the time because, realistically, they’re long on profits per device and they’re short on total devices. So, of course, they’re not hacked as much because the hackers aren’t spending as much time trying to hack them.
Are they really into privacy? Well, they’re into privacy when it’s convenient for them. They’re into privacy when it makes them look good in a public relations standpoint. But are they always into privacy? I’m pretty sure they shared our user data with Uber freely, while we were waving our cabs for a long period of time and even giving Uber a God mode where they could look at screenshots of us and what we were doing on our phone while we had Uber running in the background. So privacy? Security? I don’t know.
To quickly touch on the three topics that you really kind of outlined, one, the China data center thing. I do agree with you. When want to play in China, you got to play by China’s rules, but you can’t have it both ways. You can’t say we’re the privacy and data and security company that continue to sell yourself, can sell your stuff into a market where data and privacy are not private or secure to those that think and believe that they are. Having it be an opt out thing is like not doing anything at all because asking people to voluntarily take the time to opt out is limited to the 1% of the 1%.
You mentioned India and I read an article going into this. The premium phone devices for Apple in India, they are absolutely floundering. Their performance is lacking, their prices are too high and they are less than 1% of the market share of the premium devices, which is insane for Apple, which has a huge market share in every other place.
Finally, Apple, known as the company that does it best, if not first, is also floundering behind Google right now in AI. So reading about the AI assistant of Google actually outperforming consistently Siri. And I will validate that in my own experiences. So without completely cutting the head off of Apple, I still think they’re a good company. I still think they have potential. But I do think that a lot of their reputation is built on history and a lot of that history is becoming further and further into the past.
We have to be realistic about who they are today is not who they were. I don’t see it coming back anytime soon. So that’s a little preview through the crystal ball for anyone that wants two predictions in our show.
Fred McClimans: That’s some great insight, Dan. You know, like you, I’m a Mac user, a heavy Mac user, Mac Book Pro in front of me. I’ve got dual 27 inch monitors, I’ve got my iPhone, only an 8+ here sitting next to me. I can’t think of getting business done without it but they are falling behind. Siri, I rarely use Siri except for the most mundane of tasks out there. I actually have better luck using Cortana or some of the other AI assistants on my iPhone.
But that brings us up to our next subject in the fast five. Olivier, we were talking offline about accents and the challenges that they face for AI assistants. What’s going on with that?
Olivier Blanchard: Well really briefly, there was a study done not too long ago that compared the performance of Google Home and Amazon Echo with regards to their ability to understand accents. What we found, and this is kind of interesting, it may have something to do with the fact that the iPhone doesn’t do super well in India, but the accents that were performing horribly or that were not well understood by either Google Home or Amazon Echo were Indian accents, Chinese accents and Spanish accents.
And with regards to American regional accents, there were some discrepancies. So while both were kind of equally bad at understanding Indian, Chinese and Spanish accents, Google Home was actually pretty good at understanding North American accents. So California is doing great. Google Home was terrible at understanding southern accents whereas Amazon Echo was actually pretty decent at understanding southern accents.
So it’s interesting that based on where you are in the country or where you’re from, what type of accent you may have, your choice of AI digital assistants could be determined by how you speak and what kind of performance you want to get from your individual assistant.
Fred McClimans: That’s wild that if you think about where they’re deficient. China, India, Spanish language markets. China and India, they are the massive markets out there in the world for smart phones. There’s something going on there. I’m suspecting it’s a little bit of perhaps developer bias.
You develop for what you are and where has Apple developed? It’s not developed in China. That’s, I think, a major shortcoming. So let’s move on here. Our next of the fast five. Dan, tell us about what’s going on with Google Cloud next.
Olivier Blanchard: This week, Diane Greene took the stage to lead … She’s the CEO of Google’s Cloud Group to sort of lead the big Google Cloud next event, which is their annual event dedicated on the cloud now. About two quarters ago, Google announced to the market that they had reached $1 billion. I’m going to come back to that in just a second.
Some of the big announcements of this event: One was the machine learning and AI tools that Google Cloud is rolling into their solution set. An expanded set of developer tools, mostly wrapped around those specific areas, machine learning and AI, and of course, the speed and connectivity. Then they’ve got this whole unified cloud concept that they were really pushing this year at the show. That was all about the hybrid to public cloud connectivity and Google’s out to really make this easy.
I think the wrapper that really went around this, in my perspective, for Google was they wanted to become a more serious player in enterprise space. While Google is one of the three big players in the public cloud space, they are still trailing behind AWS and Microsoft as your … And I think they were hoping that this event and their announcements at this event would make them a bigger player to the enterprise, which is where Google has sort of lacked.
I think their announcements put them on the right track. I didn’t see anything that really made me say, oh my gosh, people at AWS and Microsoft are going to bail and run over to Google. But I think for people that are already on the platform, they’re gonna feel secure and I think in the competitive environments going forward, they’re going to feel like Google is a legit competitor in this area.
My last thought on this whole thing is Diane Greene basically has not and will not talk about revenues two quarters later. So they made that billion dollar revenue announcement. Two quarters later she does not want to talk about revenue, which as an analyst, has me very concerned to say why did they not want to share with the market their growth and the revenue specifically pertaining to Google Cloud. So I’m watching out for that but I am a little bit bear-ish on them because of their lack of willingness to discuss numbers.
Fred McClimans: You know, transparency is so important in this market place. It’s not as if Google doesn’t have big names shifting to them. I remember back about two years ago when Spotify left AWS and went to Google. That was a huge win for Google. In fact, there was somebody just this week that cut over to Google. I can’t remember who that was.
But they’re getting the big names coming in. Do you think, just quick take here, do you think that they can actually challenge AWS and Microsoft? Can Google really be that premier player?
Olivier Blanchard: You know their growth, Alphabet’s growth as a whole, shows tremendous financial capabilities. We know how big Google is, the size of their market cap. I think they can challenge in any market that they want to challenge in. But Microsoft doubled in size in five years, it’s market cap. It’s been growing and gaining on AWS.
It’s gonna be a fight; it’s gonna be a really, really tough battle out there for all three of these players but I think they’ll all continue to challenge each other.
Fred McClimans: All right. So next up in our fast five. Olivier, we spoke about Facebook briefly in the last edition of the FTP, what’s going on there? It doesn’t seem like they’re making any traction when it comes to conspiracy theorists?
Olivier Blanchard: Yeah, so we’re gonna get off the super technical bend for a second and just talk about one of … Facebook and culture. There’s actually a lot of things that we could be talking about Facebook today but one of the ones that really caught my eye is the fact that the last year, year and a half, Facebook has been dealing with a lot of bad press and some level of jeopardy, legally and politically speaking, with regard to data privacy, with dubious contents making its way into the platform; campaigns of misinformation, the way that the platform may be abused by hostile actors, whether they’re foreign or domestic.
So for the last year and a half, Facebook and Facebook executives, including Mark Zuckerburg, have been kind of doing the rounds and promising that Facebook was going to change its ways and do a better job with privacy, data protection and also with policing itself with regard to the type of contents that it allows to be published and also give users better tools to determine whether or not what they’re reading or sharing or seeing in their feed, is fact based or not.
What I’m noticing in recent weeks is that there seems to be kind of a backsliding of that promise, of that effort by Facebook to kind of clean up its act. The two things that caught my eye are comments made by Mark Zuckerburg and also just reactions by Facebook in general with regard to complaints and particularly with regard to Alex Jones, who’s kind of a notorious conspiracy theorist.
Olivier Blanchard: And in spite of the fact that people like Alex Jones have used the platform to spread untruths and most recently, make veiled, very thinly veiled threats against, violence against people, the platform refuses to block them or to acknowledge that they’re breaking community standards. So it’s just something to look out for, something to keep an eye on the next few weeks to see if Facebook is backsliding or if it’s actually moving forward with what users have asked it to do.
Fred McClimans: Excellent. Yeah, that’s certainly something to keep an eye on. Facebook just doesn’t have a great track record there yet, and definitely needs to improve. So, moving on in the Fast Five. There’s one here, guys, that I just want to toss out there. Do you remember Google glasses when they popped out, and the whole meme about glassholes out there?
Daniel Newman: I’m trying to forget.
Fred McClimans: Yeah, yeah. Well, Google glasses are back. They were re spun by Google to an industrial platform. And in that light, there’s an agreement that just came out between Google and [Platane 00:20:35] to partner to develop AI based Google glasses for industrial environments. For me, that’s really the big win from a tech perspective in that kind of augmented reality space. Yeah, we’ve got the snap glasses or snaptacles or whatever those were called, and those are all great from a consumer perspective, but the real value is in improving industrial and operational performance in the manufacturing floor in the warehouse. Being able to make the job of that wearer all the much simpler by identifying everything that’s around them, helping them find items, to me it’s just a big win. So, I’ve got to ask if either of you were working in an Amazon warehouse would you wear Google glasses?
Daniel Newman: Yes. To make my bosses mad.
Fred McClimans: So, that’s the established use case, great. So, moving on. Dan, and the Fast Five, on sort of a big note or an up note, IBM recently had a call for code. What’s that all about?
Daniel Newman: Yeah, so actually I had a great opportunity to participate in this, but IBM’s call for code has been this global effort launched alongside of David Clark Cause. The idea is a global cause of getting developers … we’ll often get a reputation for the negative, the hacking, and stealing of data, to come together and use their talents to build applications using big data in analytics that can help recover from disasters, from natural disasters more rapidly, so the hurricanes, the tsunamis. What kind of code and what kind of applications could be developed to enhance communications, to improve first responders, to get people the information that they need more timely, more rapidly if they are in markets where they are suffering from a natural disaster? How do we connect families back to those that are missing?
So, they’ve been doing these Hackathons all over the world and IBM’s been part of it. I just thought it was a really great cause, and something really interesting to be part of, and say hey, we need more of this kind of dialogue out there that hey, there are developers out there doing really great things trying to make a difference. And while there were some small prizes being awarded a lot of people, thousands and thousands of developers, came to the table and got involved in this and are developing code that can make a difference. I’m hoping this is something that really snowballs into a larger effort with more tech companies around the world.
Fred McClimans: Now that’s great. We spend so much time talking about the impact of tech in the enterprise sometimes we forget that yeah in the real world space where people live, where they wake up, where they eat, where they go to school, where their families are, that’s one of the areas that we have so much technology that we can apply to improving people’s lives, and for me this is a great one.
So, let’s move on to tech bites. This is not b-y-t-e-s. This is b-i-t-e-s. Something that we’ve seen in the past week that’s just made us scratch our head and go, yeah that bites. My candidate for today’s Tech Bites segment here is Google. Now, I know we were talking about Google earlier in terms of some of the really cool things they’re doing, but Google recently it was disclosed has changed the way You Tube operates in terms of its streaming capability across the net and in particular with browsers.
It turns out that they used a particular ABI in the browser that resulted in poor performance on browsers that weren’t Chrome. Surprise, surprise. Now there is a patch for that, that you can get into the Firefox browser. I don’t know about Safari. But, at this point I just got to scratch my head and go, Google, what’s up with that? That’s a childish thing, and it makes me all the more concerned given that net neutrality is now gone, and maybe this is an example of what we see moving forward. Dan, what are your thoughts? I mean is this an issue that people should really be concerned about?
Daniel Newman: Yeah, this bites big time. The thing about it is, is this is every tech company right now. The difference is going to be transparency. It’s really not are you doing something to give yourself a competitive advantage while proclaiming open standards? It’s really what is the true deficiency when you don’t choose our standard? I think some of this is just good marketing, good competitive advantage building, good revenue creation. Then you got to give tech companies credit for that. But some of this is lack of transparency and I think that’s where people get really upset. It’s really not different than it’s when you get less than what you expect. It’s like the ad wasn’t what you actually came into the store for. And so, the more the tech companies can transparent, I know it’s become really hard, it isn’t just tech this is in business, this is in politics, this is in everything, the more transparency will lead to better results. If you can’t make an experience good on someone else’s browser, just tell us and then we can make a decision on our own.
Olivier Blanchard: I just want to add that this a really good way for Google to earn its third largest potentially disastrous Anti Trust case in Europe. This is exactly the kind of stuff that the EU, or the European Commission, looks for in terms of attacking Google for Anti Trust behaviors.
Fred McClimans: Absolutely. I couldn’t agree more. And it’s not just a consumer issue. You Tube is big business and used by a lot of big business to communicate to their markets. So, before we wrap things up guys, our Crystal Ball where I’ll ask you just in one word or less, tell me what’s gonna happen in this space? Today’s Crystal Ball is the trade wars that are going on. Right now we know that there’s incredible tension between the US and China, the US and Europe, in fact just the US and everybody with regard to global trade. What we’re starting to see, however, is that trade war, that tariff war back and forth that is restructuring the supply chains and the availability of product. I’m concerned that the tech industry is gonna get wrapped up in this and that all of our precious technology is gonna get a lot more expensive if we don’t resolve this soon. So Dan, I’ll give you one word and a quick thought behind it. Go. Is this going to impact the tech industry?
Daniel Newman: Disaster.
Fred McClimans: That’s a great word.
Daniel Newman: In one word, it’s a disaster. It’s a disaster for every industry. Every company is a tech company. Every company is deep and rich and rooted in technology. They’re buying tech, data, analytics, AI, mobility, Cloud. Every company is consuming it. I think there’s opportunities to get this right. I don’t agree with most of the policies of Trump. I do think China’s taken advantage of us for a long time, so it’s good to see us going and holding our ground, but not the way he’s doing it. So, we’ve got to figure out a better approach. And we’re also pissing off all of our friends. So again, not a political rampage, but we should really try to keep our friends close and our enemies close because it seems like we’re spending way too much time focused on our enemies.
Fred McClimans: So Olivier, here’s your chance to insert your crystal ball and take a contrarian view to Dan if you like?
Olivier Blanchard: Ah, no. I completely agree with Dan.
Daniel Newman: Yeah.
Olivier Blanchard: Yeah. It is very, very dangerous. The longer it lasts the longer lasting the impacts. It doesn’t only just affect supply chains, which in and of itself would be a huge problem since they’re so intertwined and global, but also it has a cascading or cumulative effect outside of tech impacting tech in that people’s purchasing power is going to be impacted. And so, we could see a lot of consumers hold back on tech purchases and make the entire industry slow down over the next six to 14 months. And that’s a pretty big concern because if the industry starts to slow down, we start seeing layoffs, and that slows down innovation and product development. It just knocks everything backwards and that’s not good for anybody.
Fred McClimans: No, it isn’t. No, it isn’t. So, Dan and Olivier I want to thank you for being part of today’s FTP. I’d like to thank you the listener as well for listening to today’s podcast, and we certainly hope you hit the Subscribe button and come back next week for another edition.
Outro: There will be plenty of more tech topics and tech conversations right here on the Futurum Tech Podcast, FTP. Hit that subscribe button. Join us, become part of our community. We would love to hear from you. Check us out, futurumresearch.com, or Futurum Tech Podcast, Daniel Newman, Fred McClimans, Olivier Blanchard. We’ll see you later.