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We’re talking Amazon Climate Pledge, What’s Ahead for Semis, Apple Flips and Flops, and More – The Six Five Webcast
by Daniel Newman | March 22, 2022

On this episode of The Six Five Webcast hosts Patrick Moorhead and Daniel Newman discuss the tech news stories that made headlines this week. The six handpicked topics for this week are:

  1. The Amazon Climate Pledge
  2. T-Mobile/BMW Magenta Drive
  3. What Lies Ahead for Semis
  4. Qualcomm Ventures and Metaverse Fund
  5. Adobe Summit – Digital Economy Index
  6. Apple Flips and Flops

For a deeper diver into each topic, please click on the links above. Be sure to subscribe to The Six Five Webcast so you never miss an episode.

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Disclaimer: The Six Five Webcast is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such.

Transcript:

Patrick Moorhead: Hi. This is Pat Moorhead with more insights and strategy and we are here for another Six Five Podcast. I’m here with my co-host Daniel Newman, Futurum Research who has rolled in, I think, at about 2:00 AM. Daniel, I just want to thank you for the commitment to the Six Five, our listeners and myself thank you.

Daniel Newman: It’s good. Partially my fault though, that we didn’t do our normal Friday. I did say Pat, this is usually one of, if not my weekly highlight, doing the show. Fridays tend to be a little more awesome because it’s you finish your week, you’re feeling great. Friday, like to get on and pod. Now Monday, you’re like, oh, I just did the best thing I’m going to do all week and it’s 10:00 AM on Monday.

Patrick Moorhead: Yeah. It’s great. But if you haven’t logged into the Six Five Podcast, we cover six topics, five minutes each, sometimes 10, whatever is appropriate. And we do analysis. We really don’t hit the news. We talk about the news, it’s generally enough just to get the idea across so you know what the heck we’re even talking about. We are going to talk about publicly traded companies so please don’t take any of this of it as investment advice. The show is for entertainment and informational purposes only. Daniel, we’ve put together what I think is going to be an awesome show here. We are going to be talking Amazon, T-Mobile, chips, supply chain, Qualcomm, Adobe and end with Apple flips and flops. With that said, let’s dive right in to topic number one, the Amazon Climate Pledge update. We both wrote notes on that. I did on Forbes and you did on your awesome research site. What’s the update?

Daniel Newman: Yeah. First of all, Pat, thank you for one of our most impressively fast introductions ever that we’ve done on this show. That’s pretty awesome. There is so much going on. And of course, as we are dealing with a ton of macro and geopolitical issues, one of the issues that sits in the background that most of the world seems to be very interested in and cares about is climate. And of course, Amazon, which is sometimes appreciated for its innovation and the things it tries to do for creating jobs and small businesses and climate and sometimes it’s loathed by society because it is such a big successful company. But this is one of those things Pat, that I continue to think is important that we talk about.

Amazon, which partnered with Global Optimism, was able to announce in this past week, a 600% growth in the participation in what it calls the Climate Pledge. They have now more than 300 signers that made it a 600% growth. And just to kind of give a quick bit of background, because we do this every maybe six to 12 months, you and I pop in and talk about this. This is a few year old. It was founded in 2019 by Amazon with an organization called Global Optimism. And the whole premise behind the pledge is that these organizations are committing to get to net zero carbon by the year 2040. Now, if you’re familiar with the Paris Agreement, basically it was all about getting to this point by 2050. What the pledge is all about is these enterprises across almost every industry now, committing to put the resources forward, to accelerate their process in becoming carbon neutral.

There is a number of standards that you have to partake in, in order to be part of this, you have to be willing to measure and report the greenhouse gas emissions your company creates. You need to be able to show that you can implement the decarbonization strategies that are in line with the accord and then you need to be able to neutralize any remaining emissions with quantifiable, permanent and socially beneficial offsets. This is a complicated task Pat, because for a lot of companies you’re asking them to reconsider and we’ll talk more about supply chain later, but all the materials that are being sourced, all the facilities that they’re utilizing, if they’re delivering services, you might have trucks, plane, ships, all these things create greenhouse gas. And so we’ve got a couple of complexities, A, the complexity of actually changing your business model to support carbon neutrality and B is, how do you do that faster and then actually measure it?

And that, by the way, is becoming an increasingly large trend with companies like ServiceNow, SAP, Salesforce, AWS, all rolling out data driven services. Honeywell’s doing this on the industrial side, that enable companies to better understand how they’re utilizing carbon, their footprint and then of course being able to offset it. In the most recent update, the company did have some pretty impressive signatories that were added. One of the biggest is one of that I just mentioned, was SAP and there was several others, but we’ve seen companies like Microsoft, Verizon, Mercedes-Benz, VMware, Salesforce, HP, Pat. A number of people we work with and then of course, consumer brands, Visa, Alaska Air, PepsiCo. So many companies have now helped get to this point.

And of course, Amazon, having such a big footprint, such big contributions to the world in terms of getting us our quote unquote stuff, has a great opportunity to use the visibility, the brand and the massive supply chain that it leads in order to help drive better levels of climate responsibility within enterprises. Pat, this is a little update and I hope for everybody out there, they understand now what is required to be part of it. Some of the companies taking part, but more than anything is that 2040 is still so long from now. I’m very interested in understanding how we’re measuring, holding accountable and making sure companies that did sign up for this thing, have done enough each and every passing year. And I think that’s going to be the really hard part.

Patrick Moorhead: Yeah. First off, I really like the market led approach versus some mandate from the government. And essentially what that means is if you love it, you can get behind it. If you hate it, you can stop buying from those companies. My hope, particularly in light of the last 24 days, is that we do this in an intelligent way. And Daniel, that’s the thing that I really want people to start talking about a little bit more. It’s unaffordable and unrealistic to say that we can snap our fingers and magically get to an all-electric world.

Plus if we had to, first of all, we couldn’t afford it. And second of all, we don’t have enough electrical production that it globally, that wouldn’t burn more fossil fuels and more coal. Essentially we would be polluting the environment more in order to get to electricity. For some reason, we’ve decided at least as a country, to not invest in nuclear. And I know it’s all scary and it’s all spooky, but it could take 40 years to get enough windmills and get enough solar panels to get there. I don’t know if you noticed, but Denmark said it was pushing off its, you got the biggest grin on your face. Is he going now?

Daniel Newman: I’m just, I know where you’re going and just sorry, there’s a really weird kind of parallel a conversation here about what we’re experiencing right now with supply shortages and gasoline. And I just was thinking to myself while you were talking, Pat, I was thinking we are in such a predicament right now because we should be doing this and that, meaning we should be doing exactly what Amazon is leading, but at the same time, we shouldn’t be saying, we should be energy dependent until we figure out in 2040. Sorry. Yes, I was grinning.

Patrick Moorhead: No, no, no. It’s good. No, no, it’s good. I didn’t know if maybe you were watching something else on TV.

Daniel Newman: No, it was just, I just thought about where this conversation could go.

Patrick Moorhead: By the way, did you see Denmark actually decided to give its nukes 10 more years. Because guess what? They don’t think it’s a good idea to outsource their energy to Russia. Surprise. Now, one thing I do love about the Climate Pledge is it talks too, about reducing the amount of energy draw. And I love that. I love it because it talks about efficiency and Daniel, who can’t get behind using less? As long as it’s through not brute force and making gas 15 bucks a gallon.

Daniel Newman: Yeah, and through innovation. It’s just like the chip makers making more efficient chips that are still more powerful.

Patrick Moorhead: That’s exactly right. I love this topic. I love talking Climate Pledge and environmental because it does let me to talk a little bit holistically about this. And listen, I’m passionate about climate. I’m passionate about innovation. I’m passionate about not giving autocrats the ability to put a stranglehold on a near term economy. Thank you, Amazon and the 300 Climate Pledge signees. Let’s get more efficient. Let’s use less energy and let’s use market forces to make this happen. With that said, unless you wanted to do a boomerang.

Daniel Newman: No, let’s rock and roll. We could do a whole show on that, Pat, but I just like, like I said, I’ll call it this and that. It’s a this and that strategy, not this or that strategy. We’ve just got way too much this or that but this is a good reminder, there is progress being made.

Patrick Moorhead: Absolutely. Let’s go to our next topic. T-Mobile and BMW are partnering on what’s called Magenta Drive and that’s essentially putting two 5G ports in the latest BMWs and future BMWs. And while we don’t talk about the news, we do actually have to talk about what’s going on to get into this. To me, this indicates that we’re in what I would call the second wave of a new G, once it starts getting into the things. And as we’ve seen, the car is the ultimate edge computing device, the amount of semiconductors, the amount of compute, the amount of intelligent that goes into modern day cars is quite incredible. And I also think it portends to what I would say is the long tail of this, not necessarily in this new 2022 BMW iX xDrive50 but vehicle as a service. That’s where this is going.

You can picture electric robotaxi cars, I think even questions whether people will own cars in the future. And as a car nut, thank you very much, Daniel Newman and Pico Moorhead and F1, I can’t imagine myself not having or not owning a car that I can just go pick up, I can pet it, I can love it, I can hug it whenever I want. I do think looking out 10, maybe 15 years, vehicle as a service is a reality. And to be able to do that, a lot of things have to come in place. One of those being high speed, low latency connectivity. Now the Magenta service is not millimeter wave, rather it’s mid band and low band. But what this is really all about is to give, first of all, have an open port for telematics and infotainment. And then what I’ll call a rider port, 5G port for people in the car who want to hop on what I think is going to be a superior 5G experience.

Now wait a second, why would I need 5G on the inside of the car when I have a 5G phone or a 5G based tablet? Well, if you look at the strength of the antenna that the Magenta service has, and oh by the way, it’s outside the car, not inside the car, you can imagine just how better your 5G performance is going to be. To me, a point of news at a certain point along the 5G chain but portends to, not pretends, portends with an O, to our vehicle as a service future.

Daniel Newman: Yeah. It’s really interesting to watch. One of the things I had been keeping my eyes on for some time as 5G came to more market, was the killer apps. What are going to be the opportunities for carriers to monetize besides the obvious? Everyone’s kind of been trying to figure that out. Of course we’re going to see devices all turn up and light up 5G and that’s going to mean greater connectivity. But the thing we kind of have come to appreciate about the future of the vehicle is that the amount of driving we’re going to do is going to continually lessen in the coming decades as the intelligence of the vehicle increases. The amount of consumption, the amount of productivity that is going to happen within the vehicle is going to only continue to increase. You look at connectivity for its profiles in safety, its profiles in connectivity, its profile in mobility and transport. And like you said, having that dedicated.

It’s kind of like having OnStar in some ways. Of course, we all have our phone, but having the vehicle fully connected and intelligent provides a lot of opportunities for the vehicle to do things. We all know when you get into a crash, even if your phone was in your hand or in your lap, it won’t be anymore. It just, that’s not where your phone’s going to end up. If the vehicle’s intelligent and of course being reliably connected in that moment could be a lifesaver. You got those very kind of practical things, all the way up to just being able to hotspot more dependably inside the vehicle because like you said, that higher throughput, stronger antenna means you could be hotspotting a device right off of the vehicle.

And of course the number of devices that you’re going to have to pay for to have always on connectivity could be different. Because if this is your vehicle for transportation, you could connect the vehicle and then you could bring iPads, laptops, things for your kids while they’re driving in the car to be able to use and connect to, without having to have every one of your devices with its own plan. That’s another really great opportunity. There’s a lot going on here. I think T-Mobile is really being in innovative, on the front foot. Continues to really cause some pain for the Verizons and the AT&Ts right now. But again, I always expect innovation to drive innovation. T-Mobile’s been on the offense for some time right now but I’m not ruling anybody out, but this is a good move. And of course it’s never bad to be associated with BMW, a very reputable, very high profile brand.

Patrick Moorhead: Yeah. I will do a little boomerang here and just say three years ago, I did a who’s leading in 5G and this was before 5G and this was before T-Mobile bought Sprint. They did have an offer in there, but I called that T-Mobile was going to be the 5G leader in the United States. I got mocked. I got laughed at like, well, wait a second. How could T-Mobile do better than AT&T and Verizon? And I think what was what was very clear to me, I think is very clear to people today is that T-Mobile is leading in 5G in the United States. I would like to see them get a little bit more on the millimeter wave bandwidth a but hey, everybody, you can’t be perfect. But you can imagine all of the spectrum that the company has available for IoT and edge devices like a car and here we go.

Let’s move to the next topic and it really comes from an article, a research note that you’re working on Daniel, and that’s what’s next for the semiconductor supply chain? I am looking forward with bated breath to you publishing this out there on MarketWatch, but you’ve had a lot of really intelligent things to talk about with respect semiconductors. And I’m super impressed to see how in the last four years you’ve really stepped up your game and your research and your insights into semiconductors.

Daniel Newman: Well, first of all, thanks Pat. This is a really interesting set of forces that are sort of colliding. You’ve got economics, you’ve got markets, you’ve got technology and innovation and of course you have what I would call the impacts to the every person right now that we’re looking at at scale. And so the pandemic was fascinating and you and I have had some great conversations, we’ve done a ton of press, television, both of us talking about the supply chain thing. And so an interesting note came out this past week. I think it was about the past week from IDC and you and I love to quote other analysts and firms, but this, when I think they’re wrong, I do like to quote them. And in this case, I think it might be wrong.

But IDC came out basically saying that with all of this focus on demand and the requirements for semiconductors, that there’s a fairly high probability due to the macroeconomics, geopolitics and various circumstances that we’re going to end up going and ending up with a chip glut and then we’re going to end up with too many chips. And so I kind of sat down and I said, “I got to think about this a little bit, but what’s the next couple of years look like? What’s the highest probability?” We’ve had the pandemic largely subside as the war in Ukraine has escalated. There’s some new variant that might pop up. We’ve still seen, there’s been some factory closures in China that’s affected Apple. We know there’s palladium and neon gas in Ukraine and Russia that could impact the supply chain down the way. We know some of the harnesses for cars, BMW in fact are built I believe in Ukraine, shutting down supply chain there. And of course we know that the supply chain wasn’t just limited to chips. We had everything from our food supply has been impacted, finished goods, paint, material, chemicals, materials.

And so chips got into focus because we have a strong relationship with our devices. We love being on social media. We want to be connected. We want to work. We want to be more productive. We had to get our kids back into school even if they couldn’t go to class, we’ve got to be able to travel. We want smart vehicles. We want smart grids, all these things, the cloud, all these things that are happening. Long and short Pat, is I’m going to have to point everyone to the OpEd because this is going to be a 25 minute diatribe. But what I kind of want to come down to is what are the two most likely scenarios? I’m going to just kind of in short, say one, IDC could be right, but I think they’re wrong.

And the reason I think they’re wrong is basically despite the pullback in markets around growth and around innovation, the actual earnings have been really good and those companies are continuing to perform very strongly. The secular trends, 5G, autonomous vehicles, metaverse, blockchain and crypto, you go down the line, gaming, mobility, social media, all super dependent on chips. And then you look at the deflationary value of technology. If companies did get into a strong recessionary environment, what are they going to do? They’re going to buy more. They’re going invest further in tech. They’re going to go to the cloud. They’re going to look for automation. They’re going to look for lower cost of wages and employment, which means you need more remote workers, working in areas that have lower costs, which mean more chips, more chips, more chips. And so, as I see it, there’s not really a circumstance in which we don’t continue to see this strong demand.

The weakness or, Pat, the one risk I do see is this. If the market goes into a deep enough recession and the war lasts for a long enough period of time, and we do see a big enough pullout back, the discretionary spending that jettison PCs, Pat, over the last couple of years, PCs, gaming, somewhat devices, people being able to upgrade on the cycles with stimulus checks and free money, in the market that only went up, could get pulled back a little bit for a period of time. But as I see it is if the market pulls back too much, we end up in a stagflation state, which ends up pushing our government and our policymakers, which love to give stimulus, to put out more stimulus, to invest more in technology, more in semiconductor, Pat. And so I basically can’t really come to a scenario that will last for a long time where the utilization of chips.

And by the way, I barely even mentioned AI, accelerator. There’s so many other things that are going on. What I’ve essentially come to Pat, is the Russia conflict could be a problem. The Russia Ukraine conflict for a while. Of course, if China and Taiwan have any major issues, but in all cases, if you actually look at chips and chip makers and demand for chips, I actually don’t see it being pulled back much. The biggest risk is that we don’t get the resiliency right? Intel’s fabs take a long time. We don’t get enough other manufacturing done here in the US. We continue to depend on the East to provide us with all of our chips. And if that actually does come into play, we’re going to end up not with a glut of chips, we’re going to end up with not enough chips. The prices are going to soar and we’re going to be in a recessionary state that’s only going to be a bigger harm to the economy. Like I said, I can go for 20 more minutes. Going to stop there because I’m sure you’ve got a lot of reaction.

Patrick Moorhead: Yeah. I could probably talk about this for 15 minutes, but we won’t.

Daniel Newman: I only did four or four and a half.

Patrick Moorhead: Daniel, I don’t know. I’ve been in and around semiconductors for over 30 years. I’ve had relationships with IDC. I used to buy their research. I think they’re really good at their numbers looking in the rear view mirror. If you want to know how many rack mount servers were sold in Malaysia in the third quarter, I think they’re pretty good but looking forward is tough. And the farther you go out, you and I do longterm forecasts and the longer you go out, the higher the chance is of being wrong. The other thing I want to point out about semiconductor forecasts is depending on whether they’re done by the units or they’re done by the revenue. If you’re do them by the revenue, there’s so much money in memory, you can just look at memory and storage and that can throw off. It could be hot in memory and storage and horrible in CPUs, it could be vice versa. That’s what I always recommend people to do the double click on. I think you said 2023 we were going to be in an over supply situation?

Daniel Newman: Well, I didn’t say that. They said it.

Patrick Moorhead: Okay. Yeah. No, I find that highly unlikely for a couple reasons but I do understand where they’re coming from, in that a lot of the memory and storage folks are putting a lot of capacity online. Intel’s big time capacity won’t be online for a while. You’ve got TSMC adding capacity but here’s what people are missing. The right kind of capacity is not going online. Lagging edge, PMICs, audio, the things that never get covered out there.

And I always like to remind people, you only need one chip, one 50 cent PMIC to keep an entire car from being shipped and guess what? The rest of those chips inside that car don’t get shipped and they don’t get ordered because they know they can’t ship the car. I’m skeptical on it. I can see that if we went into a deep recessionary period, they could absolutely be right. I do think there are double ordering, potentially triple ordering going in by end users to be able to get what they consider their fair share. But Daniel, I’m going to go with you and let’s put on our calendar on January 1st, 2024 and we’ll get back on.

Daniel Newman: Yeah. And just a quick boomerang, look, this is all speculative at this point. This is the funnest part of our job is having the opportunity to look. I give credit to the firms that try to make these predictions. I know how hard it is, especially predictions within windows that we could be able to hold you accountable for rather than by 2050, this is going to happen. I’m going to be retired by 2050. I’m just telling you. But this is really tricky. It really is tricky. And you made some great points about the lagging edge, which I didn’t really dig into very much Pat, but we saw that was one of the biggest problems that still remains.

These parking lots full of F150s that can’t get the right radio part in on them because they’re missing, like you said, one 50 cent chip. That’s the whole thing is there’s a gambit from the 30, 20, 30 plus nanometer process all the way to the three, five leading edge that’s got to be developed and this surging demand that we have. I just can’t wrap my head around it. It’s always possible. Sometimes that’s when you’re most at risk is when you can’t wrap your head around it. I’ve seen it. But I don’t know, Pat, I think we followed this pretty close. We probably got this right.

Patrick Moorhead: Yeah. Let’s move on to the next topic here. Speaking of chips, this is an update on Qualcomm Ventures. Oh yeah, we keep hitting it. I wanted to start off with a quick, Daniel, you and I cover a lot of venture activity, but I don’t think we’ve really talked about or written about Qualcomm Ventures, but I’ve started to get into really analyzing what I would call the big tech venture arms. And I wrote an update on Forbes talking about how Qualcomm did in 2021 and all also their, what I would call investment strategy, but very active in 2021. Qualcomm currently has over $2 billion of assets under management. They made 25 new investments and over 20 exits. You look at companies like Inovium, Altiostar, Matterport, SentinelOne. These are ones that I’ve heard of before that they invested in 2021.

Do I understand their exact ROI that they got out of it? I don’t but I’m trying to hunt for that. But to me, if you’re a big venture arm for a company like Qualcomm and I had their investment arm, Quinn Li on the phone for a couple hours kind of going through it, it’s really about how does Qualcomm Ventures support the overall corporate strategy of Qualcomm? There’s only what, four ways to innovate. You can do it organically, you can partner, you can invest or you can acquire. And ventures arms are all about the investments. And it’s kind of like the three bears, you can’t get too close and too hug, otherwise you’re going to smother your investment. And all you’re going to do is try to turn it into Qualcomm and turn it on to, but you really want it to kind of be like an animal in the wild that can not only go out there, but the ability to make investments and do work in a low friction environment, that’s risky.

Qualcomm is one of the last remaining companies that actually does research out there that’s super speculative, but they can’t do research for everything. Their focuses right now are automotive, 5G, AI, enterprise and consumer. Which brings me to an announcement they made today, which Qualcomm Ventures announced a $100 million Snapdragon Metaverse Fund. And it’s funny just when we got sick of calling it XR and AR and then we got all behind metaverse and then Meta had a meta-horrible earnings where then we question the metaverse again because they had one quarter. What people have to realize, this is a 10 year haul, folks. We’re probably three years into a 10 year investment cycle. And the people that couldn’t hack it, they bailed.

I don’t want to name and shame, but oh okay, maybe no. I won’t go into that. But really, Qualcomm is one of the only remaining semiconductor companies to invest big in it. And you have what you would expect, these major ecosystem vendors, Microsoft, Google, Apple, Tencent. Folks like this who can still afford to invest in something that might not pay off for five or six years. But just an update on Qualcomm Ventures and their metaverse investment. Good strategy from Qualcomm.

Daniel Newman: Yeah. The quick punch here is you covered it well and there’s not a ton here, but is that these companies in their venture arms have the propensity to be extraordinarily nimble and innovative and get involved in technologies that aren’t limited just to the Silicon Valley VC funds. These companies invest in interesting technology and oftentimes have incredible domain expertise in certain areas because of the research they do. Of course, Qualcomm is one of the penultimate companies for doing legitimate research and development. The company also has a very acute understanding of the horizon in order to make money on that research. It doesn’t happen, it’s not always a one, two punch. It can be a one, 5, 10 year punch. Yes Pat, I think you hit it on the head, a number of good investments. We all know you don’t need to get them all right. You just need to be right more than you’re wrong, in this particular space to do particularly well.

Also the metaverse, look, I actually want to focus just on one thing and that’s I see and I read a lot of doubters out there about Web3 and the metaverse. There is a reason that whether it’s Salesforce’s NFT cloud, Qualcomm’s $100 million metaverse venture fund, that you’re seeing billions of dollars. I think Silicon valley poured over 30 billion into metaverse startups, Facebook made its decision to change its name, Nvidia is focused on the omniverse, the investment that’s being put into crypto mining and other decentralization efforts, this is happening.

The same people that were sort of Web2 deniers, the people that were dot bomb, this was over, oh that lasted. Glad to see that fad is over.

It’s not if this is going to happen, it’s kind of more when and how this happens. And so the smart money and the smart companies are pouring into this space. Now again, some are dipping toes, some are going full steam ahead, but the fact is, is we will see greater transparency. We will see decentralization and we will see the continued evolution. Now, the enterprises are trying to find their way into this, because remember, and I’ll leave my thought here, Pat. But the whole idea of decentralization and Web3 was to sort of democratize the power. And so you have a handful of companies really right now that hold the vast majority of the power over the web. And now you look at where all the money’s being poured in. Well, it’s the same companies that basically are saying, “We want to be able to control what comes next and have a lot of say in it.”

And so the interesting thing is, is a lot of the originals that got into crypto and stuff, got in because they were doubting the dollar, they doubted digital currency, they were doubting the centralization and the power of the corporation. Not to get a little off the path here Pat, but it’s kind of interesting to watch corporate and large companies that have tons of resources, pouring investment in. But in the end, I think Qualcomm’s making the right call, getting into this space. They were already in this space with a ton of an investment in XR and other augmented reality technologies. Good to see the investment. It’s just the beginning.

Patrick Moorhead: Yeah. Good stuff, Daniel. I’m hoping to go to their venture conference coming up, just to kind of get a bird’s eye view of that, but we shall see. Let’s move to the next topic, that’s Adobe Summit and they have published a digital economy index.

Daniel Newman: Yeah. Last week was Adobe Summit. It was an interesting event, a lot of speakers, leadership. They always pull in quite a show. They had CEOs from companies like Nike, Walgreens. They had Ryan Reynolds doing a session. All always about having that star studded lineup. You’re talking about a company that really does touch on all things creative, all things shopping and transaction. And one of the really interesting things that I spent some time focused on was this digital economy index. You’ve heard now me thematically talking about economics in half our topics. Oops. I don’t know what’s on my mind, but one of the things that came out that was really interesting to me was the last couple of years, we’ve heard a lot of what I would say, anecdotal type of examples of how behavior has shifted during the pandemic.

Well, instead of doing a survey or another questionnaire and asking people’s opinions, Adobe looked at the data because of the business, the technology it offers of how people are spending money online. They looked at $1.7 trillion in revenue that was spent on retail over the last couple years to look at what’s coming ahead. And so for instance, predicting, despite the fact that we’re going into potentially a recessionary environment, they still predict 2022 to be a record online shopping year. They looked at where people were shopping and what they spent their money on. I have a couple of just breakdowns here that I thought were really pretty interesting.

That in the beginning of the pandemic, lots of electronics were bought and that the most recent phase of the pandemic, you’re seeing a massive spike in groceries. People are changing the behavior. And what was also really interesting, Pat, is that a lot of people shifted into buying things that early in the pandemic, they indicated they wouldn’t buy online. I’m not doing my grocery shopping online. I’m not doing that. Well, it turns out that, that ended up being a fairly large surprise. And at the same time, the spike in electronics was down Pat, from 26% growth of online shopping in electronics to only 8% in 2021. You see where growth is happening, where growth is shifting out. And one of the really interesting things Pat, that did come out of this particular study was just how real inflation is. And that was one of the things, how do we really know what’s happening? Because I think there’s a lot of skepticism that inflation is actually quite a bit higher than some of those benchmark numbers that we get reported.

But a lot of the reason that we’re going to see record growth according to Adobe actually has less to do with overall real growth and more to do with the fact of cost of goods have gone up so much. The thought process is that we will see a ton of inflation data this year. It’s going to drive growth. And by the way, you want to know about just how bad our supply chain is? One of the numbers that came out of the index, consumers received over 59 billion out of stock messages during the last two years. Just think about that.

When we think about, we talk about chips, for instance, Pat, about this supply chain, but people can’t get notebooks, they can’t get batteries and remote controls, they can’t get odds and ends, parts and pieces to anything. And that kind of goes back to your point about anything from a lagging process tech that you can’t get. Like I said, a part for your stereo to fix in your car or in your home or your old Xbox, all the way down to, like I said, not being able to get groceries that you order. Can’t tell you how many times I get replacements sent because that’s part of most grocery store processes now. But just a fascinating swath of data that we are going to see a shift.

And the biggest, I guess, thing I’ll take away from it, Pat, is that in the end, the shift to digital is permanent. And that’s something that I think that that came out of this thing was we’re not going to see a return to more normal pre-pandemic levels but what we will see, like I said, is that a lot of these behaviors that happened during the pandemic are going to stick but that our supply chain and the issues with it are much deeper than just semiconductors.

Patrick Moorhead: Daniel, I think you got blood out of a stone on this one.

Daniel Newman: Well it was really interesting.

Patrick Moorhead: No, it was. I didn’t attend Adobe Summit, the company isn’t that interesting to me and that doesn’t mean, I don’t use their products. My gosh, what would I do without them and a PDF viewer and an editor.

Daniel Newman: Oh boy.

Patrick Moorhead: I’m forced to use their, I’m sure they count me as a marketing cloud user, even though I’m kind of forced to sign up and put my stuff in the cloud. But no, you did great. I have nothing to add.

Daniel Newman: Link to my Forbes piece in the show notes, you can dive in deeper. There were so many things, I probably didn’t get to them all. And Pat, you’ve got a great fun topic so I’m going to let you retake the host seat and let’s wrap this baby up.

Patrick Moorhead: Yeah, let’s do this. Interesting thing, Apple’s just been on an absolute tear from a valuation standpoint, the M1 and all its family members for chips have been looking pretty good. Not as dominant as Apple says, but I thought what was interesting, two journalists who I respect a lot, Joanna Stern and Nilay Patel, who was talking about an article that Chaim Gartenberg wrote about some Apple stuff and Daniel, when is the last time you heard something like this? And let me quote Joanna Stern, even better yet, let me put her article up here so we can both look at it. Her tweet, “I wanted to love you Apple Studio, I really did, but your webcam is bad and your display is no better than some more affordable displays, my review.”

And then Joanna goes through it and essentially talks about how the webcam is bad and the display quality is okay but you can get a much cheaper display and get better performance out of it. She did talk about how great the audio sounded though, which was great. And then I think this was the same day and here’s what Nilay came out with, “The M1 one ultra is a triumph but Apple’s goofy relative performance charts set it up for a needless 3090 comparison that wasn’t borne out in any of our testing.” And here is Chaim Gartenberg’s in the case of the wacky charts where power just ends at about a 150 Watts. And by the way, that’s a 3090 on the right hand side. And then looking at all the performance that came out, basically the 3090 from Nvidia ran circles around Apple’s M1 Ultra, and then which I love the best. This is what the curve should look like for Apple.

And then you’ve got Tae Kim from Bloomberg who comes in and says, “Hey, let’s look at gameplay that the Mac Studio stinks at.” Let’s look at Cinebench, gosh, versus the latest from Intel. It doesn’t even win on Cinebench. And then of course, Blender, where with the help from the Nvidia 3090, just completely runs up the scores. And then Daniel, I had to get in on here basically saying that the M1 Ultra can’t run half of the Steam games out there. This is the kind of the incriminating evidence, but I kind of wanted to bring up this thought that why all this? I don’t know, is it that Apple’s products aren’t as good as they should be? Or is that Apple’s marketing and their claims are just getting over their skis and Apple is in one of these, I am cocky modes?

The other thought that I had was, gosh, I’ve looked at Apple’s performance claims and their chips over the last decade, and listen, you have to give them credit for what they’ve been able to do. I am unaware of any vertical play that’s ever been able to do this since, I would say Sony in the early 90s, to be able to do semiconductors well and do end consumer products well. But on the other side of my mouth, I’m going to say they have twisted the truth. They don’t show evidence for their claims or they wait for three or four days later to post on their site. And I just don’t know what’s going on in Apple or if these even matters at all, because people love Apple and they trust Apple and Apple can say pretty much whatever Apple wants to say and people will buy it anyways. What do you think, Daniel?

Daniel Newman: I think you hit it on the head in that very last couple sentences that you said. There are some rules and there are some regulatory stuff by FTC and related to claims made, but Apple and burden of proof is very complicated. They can make a lot of claims. And if someone debunks it, there’s a difference between maybe debunking and arguing with the claim and the actual ability for someone to want to stand up in a court of law or actually have a body like the FTC pursue those claims. Apple is able to draft off of an immense amount of market trust that it has created, that has made it the most valuable company in the world on multiple occasions. And I believe at this moment, as we speak, there’s a reason that despite constantly lagging on features and technologies, whether that was in the Mac or in the smartphone slash mobile device space, that their sales and revenues and margins have always been off the charts.

It goes back a couple years to when we were trying to explain to the market why Apple was abusing its power in what they tried to do with Qualcomm, what we talked about earlier. It also is a reason that Apple store, the most obvious instance of antitrust that I can find in the world is still not being regulated or enforced at any level. I don’t mean to go off the reservation, but you covered the particular instance well. I just love that you said trust because in my opinion, it’s all about the fact that people buy on, they take pictures of the pretty charts. They agree and believe the performance without any third party validation or any legitimate third party skeptic analyzing that data. And like you said, by the time those four or five days later, how many orders are already in for these products before the company’s even required to present evidence?

This by the way, doesn’t negate, I liked liked Nilay’s comments about, these are really good, robust, powerful products, but why lie about it? It’s kind of like, Pat, I go to the gym, I bench press 315 and I want to come home and tell you I did 335. It’s like, why would my instincts do that? 315’s pretty good, you know what I mean? And that seems to be a little bit what’s going on here is, let’s push it to the edge. No one’s going to challenge us. Everybody trusts us. And if they do challenge us, it’s going to take years in court and it’s not worth challenging us for, so eh, off we go, we’ll just fib, we’re not lying.

Patrick Moorhead: Yeah. The irony and my last tweet was about this, is you don’t have to do this Apple. You have on the whole, good products, you have a few stinkers here and there and nobody’s perfect in tech but you don’t have to stretch the truth and stop it. Listen, it’s a slippery slope and I have to tell you, when Apple does decline and there’s never been a company in the history of companies that hasn’t declined. That’s why here history lesson kids are very important, the market is absolutely going to jump on them and it’s going to be a horrific but fun car crash as it happens.

But maybe in the meantime, until that happens, Apple, don’t do that. I know who does the testing over there and I know who does the marketing and I don’t know where this is coming from, but has to come in there. And by the way, our regulators are afraid to regulate Apple because they much rather have our monopolies being bigger than China’s monopolies. We haven’t seen any action on Google. We haven’t seen any action on Apple. My only thought that potentially what kicks this off is in the EU with the iOS App Store.

Daniel Newman: Yeah, but they’re just fundraising, dude. They don’t do anything. They’ll just send a bill.

Patrick Moorhead: No, that’s right. They got to get their pound of meat out of US tech companies, if they’re not going to get taxes. I think you and I both agree on that. At least the Chinese regulators are upfront about it. Literally they’re just like, “Listen, you’re make too much money and you need to write us a check.” I’m not kidding. I’m not even being, this is the way that that happens in China. But I applaud the openness that China at least has, not beating around the bush.

Daniel Newman: They’re like the decentralized web over there, Pat.

Patrick Moorhead: Yeah, exactly. Wow. What a fun way to end the show. We talked Amazon, we talked T-Mobile, BMW, we talked supply chain with semiconductors, Qualcomm, Adobe and ended up on Apple’s flips but mostly flops. With that folks, I just really appreciate you coming on. Daniel, thank you so much. You did great on four hours of sleep. We appreciate your dedication to the show. And whenever you have a family event that keeps us from doing this, I understand because I pull the family card often, actually probably twice in the last three months. Thanks everybody for tuning in. We appreciate you and tune in in four days for the next Six Five Podcast. We love you.

About the Author

Daniel Newman is the Principal Analyst of Futurum Research and the CEO of Broadsuite Media Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise. Read Full Bio