Displaying items by tag: tech

(Washington)

Consider it a warning shot across the bow of Silicon Valley, the opening salvo in a potentially brutal antitrust war. The head of the Department of Justice said in a public speech yesterday that low prices and free services would not shield “monopolists” from scrutiny. “There are only one or two significant players in important digital spaces, including internet search, social networks, mobile and desktop operating systems, and electronic book sales … This is true in certain input markets as well. For example, just two firms take in the lion’s share of online ad spending”, said the head of the DOJ, Makan Delrahim. He continued “Like today’s tech giants, Standard Oil was pioneering and generated a number of important patents. Scholars have noted, however, that Standard Oil’s innovation slowed as it became an entrenched monopolist”. Delrahim also listed specific behaviors which would spark investigation, including bundling products together.

FINSUM: The government is poised to launch a large and multi-fronted war on big tech. How long this will take, or how it will play out in markets is anyone’s guess, but it is hard to find any positives as far as big tech company share prices are concerned.

(New York)

Markets sold off in a big way when new of the government’s antitrust push against the FANGS came out. The stocks lost $130 bn of value. However, the reaction may be overblown, with each stock needing to be assessed on its own merits, as the antitrust picture would look different for each of them. A managing partner at Andreesen Horowitz, one of Silicon Valley’s top venture capital firms, makes an interesting point, saying “The big challenge with these antitrust things is, it’s not obvious what the consumer harm is today”.

FINSUM: We think that point is very salient, as given the fact that it is hard to assert how consumers are being harmed, we expect the ultimate output of these investigations may be relatively light touch (such as a GDPR-like regulation).

(San Francisco)

All of the last year’s fear of anti-trust regulation seem to be coming true. Tech shares dropped yesterday on news that top US regulators had divvied up jurisdiction of tech giants for a forthcoming probe. The Department of Justice and the Federal Trade Commission, the agencies in charge of anti-trust, have decided who will manage what as they prepare to launch an anti-trust probe into Facebook, Amazon, Google, and Apple. It is still unclear exactly what will be investigated, as well as the scope of the probe. After the market closed, the US House of Representatives also announced its own investigation. The tumble in shares sent Google into a bear market.

FINSUM: This has been looming for some time, but now looks like a reality. This could be the start of some very serious volatility and changes for the FANGs.

(Washington)

The next phase of the US-China trade war is coming, and it looks like it may be even worse. At the beginning both sides focused on levying higher tariffs on more goods, then Trump took the step of limiting China’s access to semiconductors with his ban on Huawei. Now the next phase may be much more specific and potentially damaging for the US—China is likely to limit the US’ access to rare earths used to make all kinds of technology devices. Access to such rare earth elements is one of the biggest US weaknesses in tech and Beijing has the power to block access because the US imports 80% of its rare earths from China.

FINSUM: It is hard to tell how bad this could be. On the one hand, the total US imports of Chinese rare earths are only $160m, but on the other, if there is not another easy source then it could hamstring the businesses that use them.

(San Francisco)

One of the trade war’s big victims could be Apple. While much of the trade war panic has been focused on other products, Apple could be the biggest victim to suffer. The the reason why may have more to do with sentiment than with tariffs. While there is much talk of Chinese “national champions”, Apple is undoubtedly an American national champion in China, and with sentiment souring against the US in the face of the trade war, it is likely that Chinese consumers will move towards purchasing domestic smart phones. Apple will be forced to raise prices because of tariffs, which would accelerate the trade. China accounts for about 18% of Apple’s revenue and a higher percentage of its profits.

FINSUM: There could be a big hit to Apple’s top and bottom lines here. China could also take measures to specifically wound Apple the way Washington has done to Huawei. Anything seems to be fair game right now.