In today’s issue:
- Competition risk bites back
- What did Apple say in that tiny little paragraph?
- Kermit’s rugby experience
Last week over at AI Collision we looked at some of the elder statesmen of the world’s tech scene – Dell, IBM, HP (both of them) and Intel.
Of note was how Dell has managed to adjust and adapt to the changing landscape of tech. HP, through its split, has at least kept relevant (for one half of it at least). IBM has become more of a quantum opportunity than AI (albeit that does still mean AI). And then Intel…
Intel is on the shakiest ground of them all. That’s due, in large part, to competition rising up and simply doing things better.
One company instrumental in the modern decline of Intel is Qualcomm (QCOM). Qualcomm’s rise to dominance has been solely focused on the smartphone market. As a pioneer of CDMA technology – the backbone of 3G which really saw smartphones explode into the mainstream – it’s also been ruthless in its approach to licensing technology (like that from Arm) to then develop and expand the technology.
The most notable of this was the development of its Snapdragon system-on-a-chip (SoC). Snapdragon combined the CPU and the GPU into one tight, powerful and energy efficient chip. It became the dominant chip used in Android phones and helped Qualcomm to find its Snapdragon SoC in roughly 50% of all smartphones globally.
But Qualcomm has also been a pioneer in wireless technology as well, with CDMA and 5G technologies, plus, importantly, modem technology. You’ll also find tech like its Snapdragon SoC in Android phones and its modem technology in Apple phones.
But that is all about to change thanks to an innocuous paragraph that Apple dropped on the world last week.
Buried about a quarter of the way down in Apple’s iPhone 16e press release, it revealed one of the biggest surprises we’ve seen in the semiconductor market for years.
It was low key, nonchalant and if you were skimming through the whole press release, you’d have missed it.
But this paragraph, this single, innocuous paragraph, is a sign of the changing times in the semiconductor market. It might also be the first sign of the death knell for the currently dominant Qualcomm.
So, what was it that Apple said that makes the path forward for Qualcomm look a little riskier than it did just a week before?
Here’s what Apple said:
Source: Phone 16e press release
The C1, its first modem. That means Apple is replacing Qualcomm’s modem tech in its latest iPhone. Which indicates it’s also going to replace them in all modem-requiring devices going forward.
This has been around six years in the making, with well over $1 billion spent simply on getting this programme off the ground.
If you go back to 2019, Apple made an unexpected move to buy Intel’s (INTC) modem business for $1 billion. As The Verge reported at the time,
Apple will acquire “the majority” of Intel’s smartphone modem business for $1 billion, the two companies announced today. Around 2,200 Intel employees will join Apple, and Apple will acquire IP and equipment from Intel as well. The transaction is expected to close toward the end of the year.
Apple has been working on getting its own modems ready for its own phones ever since. Now the iPhone 16e is the first example we’ll see of just how well (or badly) this project has gone.
If it’s all good from here, then Qualcomm could be looking at a $10 billion hit to its revenues. The licensing agreement Apple had with Qualcomm was set to end in 2027, so that was effectively the time Apple had to get itself sorted.
Apple can now roll this out over the next couple of years to achieve a seamless transition to its own tech.
The big question is, can Qualcomm replace them? A $10 billion hit could be as much as 25% of revenues. That’s gigantic for a company like Qualcomm. And it further illustrates that companies with the available resources might be looking to wean themselves off some of these licensing deals to bring everything in house.
Add to the mix that Arm (AMR), who Qualcomm licenses its chips designs from, is considering making its own chips, and quickly you see the like of Intel and Qualcomm facing long-term competition risk.
The upside is that Qualcomm has got a good market lead, so it might not happen right away. Apple’s modem rollout will also take a couple of years. The new Qualcomm Oryon chip is said to be outstanding – so there’s a little bit of runway still. But long term? It certainly looks like there’s a changing scene in tech and some of the legacy titans like Qualcomm might be in for a rough ride.
Boomers & Busters 💰
AI and AI-related stocks moving and shaking up the markets this week. (All performance data below over the rolling week.) [Figures correct at time of writing.]
Boom 📈
- Oddity Tech (NASDAQ:ODD) up 8%
- Team Internet Group (LSE:TIG) up 5%
- Gorilla Technology (NASDAQ:GRRR) up 0.26%
Bust 📉
- BigBear.ai (NYSE:BBAI) down 24%
- Tesla (NASDAQ:TSLA) down 13%
- Dell Technologies (NYSE:DELL) down 12%
From the hive mind 🧠
- xAI has released its updated models, as has OpenAI, Perplexity and DeepSeek. Now it’s Anthropic’s turn (it’s heavily backed by Amazon) and the company says it’s its “smartest” model yet – as we’d expect!
- What kind of jobs will AI take? How about 4,000 of them at Singapore’s largest bank?
- AI in jet fighters. What could possibly go wrong?
Weirdest AI image of the day
Kermit never played rugby after that ….
ChatGPT’s random quote of the day
“Controlling complexity is the essence of computer programming.”
– Brian Kernighan
Thanks for reading, see you next time.
Sam Volkering
Contributing Editor, Fortune & Freedom
PS Before I hand over to Bill below, I want to make sure you see this from my colleague James Allen. He’s got his eye on a new technology in the field of AI that he believes is one of the biggest financial opportunities he’s ever seen. And it’s all happening just 35 minutes from Oxford. Make sure to check that out here.
The Big Men are Back
Bill Bonner, writing from Baltimore, Maryland
‘There will be a little disturbance, but we are OK with that… all we needed was a new President. ‘
– Donald Trump, after edging out George Washington as best president in US history
The USA had the first mover advantage. Its Declaration of Independence in 1776 began the Age of Democracy.
France had a messier upheaval in 1789… and reverted to Big Man rule only a few years later, when Napoleon crowned himself. Nevertheless, democracy was the Primary Political Trend of the 19th and 20th centuries.
The idea was that nations could be governed by principles…rules… and laws, rather than the will of dictators, kings or strongmen. The US wrote a Constitution… a set of rules on paper that everyone accepted, more or less. Whatever challenges the new nation faced would be met according to the plan.
Power was channeled through institutions. Laws would be written by the peoples’ representatives in elected parliaments. They would be administered by the President, also elected by the voters. Conflicts would be settled in courts.
The model was so attractive that it became one of America’s leading exports. European nations took to it wholeheartedly after the Big Men – Adolph Hitler and Benito Mussolini – were defeated.
Then, after 1945, all over the world ‘democracy’ became as fashionable as Coca-Cola, tailfins and freeways. African nations adopted versions of the US system. Ho Chi Minh in Vietnam also favored the US model… until the US spurned him. Mexico, the Philippines, China – all were influenced by the US democratic system.
And then, with its 800 forward bases, and its CIA spooks promoting regime change in dozens of countries…t he US model grew more sinister. But it was still a ‘rules based’ order… with a scope that got bigger and bigger. The World Trade Organization promoted rules for trade. UNESCO sought to apply US leadership to education, science and the arts, just as the UN itself offered a version of globalized parliamentary democracy to the entire planet.
And there was the judicial branch. The International Court of Justice… the International Criminal Court… there is even an International Tribunal for the Law of the Sea. All are expected to provide means of settling disputes without resorting to Big Man bossing or war.
When exactly ‘Peak Democracy’ was reached is a question we leave to others. Perhaps it was that moment in 2005 when Iraq held its first election following the US invasion. Voters held up their index fingers with a purple stain, to show that they had gone along with the gag.
By then, there was already something phony about it. Globalized democracy was becoming decadent – backed, or enforced, by America’s off-the-charts military budget. The US had conquered Iraq; it was replacing previous elites with some of its own choosing. It was no surprise, then, that a former CIA asset – Ayad Allawi – became prime minister.
The larger the scale, the bigger the scam. On a small scale – say, a small town or a church vestry – democracy can work reasonably well. Everybody knows both the policy issues… and the people behind them. They are local. Understandable. Manageable. ‘The People’ really can have a government by, for and of themselves.
Not so for the USA… and even less so for globalized ‘democratic’ institutions. Power corrupts them. Time and distance corrode them. Instead of by, for, and of ‘The People,’ the government is taken over by smallish, privileged elites who devote their entire careers to extracting wealth and power from the people they are meant to serve.
These globalized elites – coming out of the same culture, same schools, same ideology – are very different from ‘the people’ who vote for them. And suddenly it becomes obvious that they hold their constituents in contempt. So it was that the Democrats lost the support of their own base, after tagging those who didn’t concur with their world-improving fantasies as “deplorable” (Hillary Clinton) or “garbage” (Joe Biden).
The electorate may not be too bright or too well informed but it doesn’t like being insulted. And so, come November 5, 2024, voters pulled the lever for a different kind of politician… one who signals a whole new… but much older… government tradition – the Big Man.
The Big Man – Putin in Russia, Xi in China, now Trump in the US – is not necessarily better or worse than the democratic model. On the minus side, he is often blinded by his own genius and makes Big Mistakes. Napoleon in Moscow… the Fuhrer in Stalingrad, Mao’s Cultural Revolution – Big Men tend to overestimate their own abilities and over-reach, often with disastrous consequences.
On the plus side, a Big Man leader is able to do things a more conventional ‘democrat’ – such as Joe Biden – couldn’t do.
Today’s democratic system – like an old oak tree, now home to squirrels, worms, birds, vines and other parasites – cannot fix itself. The parasites are in control.
The Big Man – less beholden to elites – might be able to clean it up. Governing by edict – Executive Orders, rather than laws – he trashes billions of dollars’ worth of foolish spending… and tosses out much of the claptrap that led the Democrats to their much-deserved loss.
If he were wise and well-meaning, a big man leader might also crash the feds’ runaway spending, balance the budget and save the country from a fiscal catastrophe. He might bring the troops home, too, slash the military budget and avoid any more costly, disastrous adventures.
But as big as he is, he is never entirely independent of the courts, Congress, the bureaucracy, Wall Street, lobbyists, the Deep State, the military, donors… or rich people. Not even Louis 14th had absolute control over the government; he had even less control over the country itself. In every case, an army of willing enforcers, informers, influencers, hangmen and administrators is needed.
By the evidence of his speech on Tuesday night, Mr. Trump has found his yes-monkeys… ready to jump up in interminable applause at every dumb thing he says.
Next time, let’s see how he might tackle the biggest threat facing the US. Or not.
More to come…
Bill Bonner
Contributing Editor, Fortune & Freedom
For more from Bill Bonner, visit www.bonnerprivateresearch.com
