And facebooks nightwatch. How they are fighting fake news on facebook about facebook and paying tribute to game of thrones. But first, to our top story. While the world fixates on trade tensions, another dispute between beijings neighbors is weighing heavily on chipmakers. Japan slapped restrictions on exports to south korea of crucial materials needed to produce Semi Conductors and screens. Samsung slid nearly 3 monday. 5. 5 . Ix dropped together, they count for 60 of memory chip capacity. Analysts suggest the applications may go beyond chips , upsetting the Global Supply chain from everything from iphones to laptops. Joining me in the studio is bloombergs ian king. Why is this happening now . Word ood question question. It is something that goes back hundreds of years, you could argue, with japans colonization of korea. Korea are japan never made amends, japan says yes we did. This appears to have bubbled up into the tensions were seeing right now. Emily could it have anything to do with President Trump . Ian that is the argument. The japanese side, for domestic and political reasons, look, we had enough of this. Leave us alone, this needs to be put to bed. And if you dont, here are the kind of measures we can take and similar measures. To trade sanctions. Tension between two other powers we simply have not been focused on and the longrunning dispute. With the broader trade tensions between china and the u. S. , we lost sight of these critical countries, japan and korea are very closely integrated in a of points, and ay with chips lot of ways, especially with chips. But these rising tensions have become quite acute at this point. Iiy date back to world war they have festered over the years and there is disagreement on both sides about who is to blame and exactly how much. It is surprising it is coming up at this point, but the Abe Administration in tokyo has an opportunity to gain political points as they put these restrictions in place. What are the materials being affected and how will they affect the manufacturing of these products . Ian we are talking about chips and screens. That is a chemical process. Scrapeer on materials, them off and make patterns that become chips or lcd screens. Japan is very good at the fundamentals of manufacturing and developing those chemicals which are absolutely essential. Korea is much stronger at the actual manufacturing of these componentsnts end and they go handinhand. Ofjapan cuts off this part the process, they will have to look elsewhere and that will be a major interruption. Emily you say major interruption, has serious could this get how serious could this get . Ian we have been talking to analysts about how much supply these companies have at this point and what it means. There are estimates that range of it but it may be about 30 days. This goes on for a long time, it could hit the key components ian was talking about. They are important for all of the companies we talk about in the Technology Industry from apple, to dell, hp. It could have a broad impact but it depends on how long this lasts. Emily i have a chart showing samsung profits plummeted. Plummeting. They are already suffering from larger political and macro issues. Samsung, ons impact top of Everything Else . Ian this is absolutely a worstcase scenario. Right now, they are facing demand constraints. Their key markets are not looking great given the geopolitical situation. Something could actually hurt their ability to supply it. In the shortterm, it might help as the price goes up because it is a commodity. But in the long term, they need to stay in production. The chip plants run 24 hours a day for a reason. Are pouring money into a black hole if they are not producing. Emily how is it that south Korean Companies have come to dominate this part of the chip market . Ian that is a fascinating story. Particularly, samsung is an amazing story. They were written off in the 80s and the japanese were absolutely transcendent. Out and takecome the competition by just being better. Theygument here is that are back in the spotlight and could see a way forward against the koreans. Emily could this be at opportunity for other companies . But say Chinese Companies or perhaps even huawei . Year and hit the most likely beneficiary on this front, toshiba, because it is japanese would be able to sidestep these controls. They have had many selfinflicted problems. The chipto spin off business because of a disastrous foray into the nuclear business. But that unit is still strong and would be able to gain market share. Again, who else is a beneficiary or hurt by this will depend on how long it lasts and exactly how this plays out. You have got a couple of negative factors. There was a slowdown in the Smartphone Market even before this trade were really kicked off. It has begun to shrink and is shrinking again for the second year. Ofyou have got a couple different problems that are hitting these companies in a few different spots. Emily what is the best bet for how this gets resolved . Domestic politics in korea and japan, how much political pressure, whether they can make an equitable accommodation, that will be what to watch. Japan needs this industry as well to supply customers like samsung. Emily another dispute to follow, thank you. , the venturesia capital boom in china shows signs it is turning into a bust. He value of deals a plunged from a year ago alibaba went largest in a public ipo and deals tripled that year. Up next, downgrading apple to a sell. Now with the expectation of disappointing iphone sales. We speak to an analyst with the firm next. And if you like bloomberg news, check us out on sirius xm. This is bloomberg. Toto emily it has been a wild since wall street has been this pessimistic about apple. Rosenblatt securities downgraded the stock to a sell quote there is less reward for owning apple. Will face apple fundamental deterioration of the next 612 months. Of their managing directors spoke earlier to bloomberg television. Jun the reason we downgraded le is because emily having a bit of audio troubles there, but you get the gist. The call brings the total number of bearish analysts up to five. It is the highest number of ratings the company has had since 1997. I want to bring in mark gurman and an analyst at a firm with a buy rating on apple. What is your take . We added to the conviction list. On the same day they downgraded, we upgraded. We have a strong name already and what i think he is missing is that this has pivoted to a subscription and services company, which implies margin expansion. They just hit 60 million apple music subscribers. It allows you to revalue apple based on subscription revenue which is far more visible and less hit driven than a device revenue. Emily walk us through rosenblatts argument. Touably, it is due disappointing iphone sales and the fact that 20 of sales from china. Mark that is a big part of it. To theaking us back trade war and the fear that iphone sales are going to go down. A mixtend to agree with of both perspectives. Apple is trying to position itself as a Service Company and sales are in danger of not doing so well. Frankly, i dont think a lot of people are going to flock to apples new services. The apple news plus is not doing as well as apple thought it would do. Another hand, the upgrades will be slow like it was last year. We are going to see major changes to the iphone. In 2020, im expecting one of the biggest iphone overhauls in Company History with them integrating 5g. A design as well as beefed up augmented reality capabilities. I think 2019 will be a stopgap year. But in 2020 is when you will see new services pick up. You will see new launches plus a big iphone upgrade. Think 2020 is the year investors should be excited about. Emily what is your perspective on some of these new businesses that may not grow as quickly as apple may like them to grow but would grow over time . Laura i am happy to push back on march year. Everything he is talking about, a devicecentric view, is what the start was valued about two years ago. And he is late sorry mark. But they have millions and millions of users, a 15 monopoly on people in the world and devices. We saw this year that time spent on mobile devices has just crossed tv. So the notion that we are talking about devices as being important i think is antiquated. What we need to be talking about and thinking about is 900 million unique users, how much money can we get from this people, and how sticky is that ecosystem . So we need to be thinking about subscription as a way to get more money but elongating. And as you noticed, a lot of subscriptions our family planned are family planned. Talking aboutbe the lifetime value and number of unique users and not matter whether it happens to watch or a or an iphone or an iphone. Mac or an iphone. We care about time spent. That is what i think. Emily all right. Mark, your turn. Should we care less about the devices . Mark laura makes a bunch of fair points, but i disagree the argument is antiquated. The services need to run on something. The services are not good enough to compete with those coming from a google them amazon, and others. People are not going to buy a google device and then run apple services. Need to buyill apple devices to use the services or they become pointless. Sure, apple has these big numbers. Are notlem is they of. Ly taking advantage the unique users they are positioning of these at the selling point, but what they dont have is as of fiction taste service for purchasing an iphone. I think that until the services are up to snuff where you will want to use these things, they are still in a devicecentric approach and it is not antiquated. And one more point, apple gets 90 of revenue from hardware devices. So i think going all in on services is a bit early. And i dont necessarily think that full transition is ever going to happen. Emily all of that said, apples chief designer is about to leave, laura, and mark has made the argument that even though he was not as involved as he had been, he was incredibly involved in apple watch, air pockets, some of the biggest hardware hits apple has had. Does that concern you . Laura again, a devicecentric question. No, it does not concern me at all. What i care about is revenue per unique user and lifetime in the ecosystem. I really care a lot more about how Many Services are they tv, thoses, movies, are all services. Anything that adds a stickiness to the 900 million unique users, all of which are rich and global increases the valuation here. Not care who is designing the products, not important to me. I am not a devicecentric analyst. Emily we are still going to get some of the vicecentric questions given that, as you mentioned, the vast majority of apples revenue still comes from devices. To run ones needed something. They are going to augment the existing devices revenue. His services dont run in your head, they run on devices. I dont think people running competing devices are going to use apple services. It is not a replacement for apple devices, it augments it. If everyone is subscribing, that is equivalent to one year of annual apple revenue. That is about 1000. If iphone sales slowdown, that will pick up some of the slack. But if it will ever replace it, no, you need devices to run it. Argument, that argument. Argument. Emily always good to have some healthy debate. This will continue over the next few years. Tonext, broadcom is set pursue symantec. And bloomberg tech is livestreaming on twitter, check us out on technology and follow our goal breaking news network on twitter. This is bloomberg. Emily bloomberg has learned that broadcom has secured financing for its acquisition of symantec. The deal could value the firm at 22 billion. Broadcom estimates that synergy would allow the company to save 1. 5 billion. Joining us to discuss is liana on the bloomberg deals team. What is the latest . The companies are making a lot of progress. There is financing committed to buy symantec. Broadcom has identified of these and they are aiming for a midjuly announcement for announcement. Not all of broadcoms attempts to buy other companies have panned out. Symantec has had a bit of unrest. The former ceo is trying to drum up a rival bid, as i understand it. Is there a chance for a legitimate rival bid . The activist investor who essentially ousted clark, they are involved at symantec. The question is what they want to sell to the ceo they just ousted . But to private equity firms have partnered with clerk. My sources say is a long shot. They cannot compete with broadcom on price. The deal involves a lot of financing and symantec is a big company. Clarks bid is not the Main Attraction here. Emily what is the chant what are the chances this happens as is . Liana as in deal making, you never know for sure. Talks can always fall apart. But it seems like the deal is on track to be announced in mid july midjuly. This is something both companies are working very hard at right now. There are still a few things they dont know. The final previa, the final stock price. But we do know it is an allcash bid and there is financing committing committed. Broadcoms a ceo is known for his great ambition. What is his longterm plan . Liana that is a great question. One of my sources told me that his vision is to see Broadcom Software revenue and 50 hardware. That is a tall order for a Semi Conductor industry. To softwareition will take a while but he is doing a, ambitious, bold plays to get there. This will be the largest deal since ca technologies last year. Emily bloombergs liana baker, thank you so much for that update. Coming up, who watches the watchmen . We look at how facebook fights fake news about facebook on facebook. Thats next. This is bloomberg. Hey im bill slowsky jr. , i live on my own now ive got xfinity, because i like to live life in the fast lane. Unlike my parents. You rambling about xfinity again . Youre so cute when you get excited. Anyways. Ive got their app right here, i can troubleshoot. I can schedule a time for them to call me back, its great you have our number programmed in . Ya i dont even know your phone anymore. Excuse me . what . I dont know your phone number. Aw well. He doesnt know our phone number you have our fax number, obviously. Todays xfinity service. Simple. Easy. Awesome. Ill pass. Emily this is bloomberg technology. Facebooks history with fake news is infamous. From the disinformation campaigns 2d bunk bunking conspiracy theories to doctored videos. But what about when those lies are about facebook . According to documents seen and facebook, they use tools like storm chaser and the knights watch. Nights watch. Is curtus all about it wegner. What exactly is facebook doing here . There are a couple of Different Software programs you mentioned which allow facebook to scrape the service and find out if a meme that might be untrue is going viral. What we saw they used it for was to find when there was misinformation about facebook. You might have seen those copy and paste means were sent this to 10 friends or we will delete your account. That kind of thing facebook would track and would jump in and tell people this is not true. Emily the question here is was facebook giving the same attention to stories about the pope endorsing President Trump or killings in myanmar . Do we know . It certainly looks bad but there is a difference between facebook knows what is going on with its own companies than things in myanmar. So theyve hired Fact Checking companies about and concerned these other stories. It certainly does show where its priorities lie. Obviously wants to quash rumors about itself a lot more than rumors about other things. Emily and facebook routinely does surveys you talk about this a little bit, how do people feel about . Sheryl sandberg and parts of . How do people feel about Sheryl Sandberg and parts of facebook . Saw them do things a Political Campaign might do, Mark Zuckerberg and Sheryl Sandberg, what are their strengths, what are the words associated with them . So if you understand where marketing go out and lead a message for people can go and say we dont trust mark, that can be very helpful as we try to navigate this regulation or problems. So we saw a slide deck that highlighted the research we had done and it was just fascinating to see how they were comparing them popular celebrities them into popular celebrities. Is it isnt it fair for companies to do Market Research and manage their own reputation . It isasked people and common to do that and come in for companies to go on social media to see what people are saying. Facebook is different, both from the social network part of the point that they own it but also from the services point, facebook is superpowerful now. The most interesting comparison that i saw was the comparison with bill gates. Super interesting. Emily tell us about it. Have gone through three stages of his career. One was an innovator, one was a monopolist, and one was a philanthropist. And if you compare where Mark Zuckerberg is, while he has gone to the innovation stage, he is at a regulatory crossroads and is a budding philanthropist. The question is still out. Emily the comparison pegged to zuckerberg as on innovative. Then he had a next to jeff bezos and elon musk. We heard that when the slide. As reported to Mark Zuckerberg they said they were current innovators and you could hear a pin drop. You could not quite believe he could be viewed in that way. , he is still in the early 30s. It matters a lot to him not only from a recruiting standpoint. Wantbuilding facebook into he wants to let us into your that was an interesting anecdote we heard and we thought it conveyed a little bit about how it things about. Meantime, there is the social media summit that has not invited facebook or reportedly twitter. What is going to happen at the summit . We dont know and it is hard to have a social media summit when you do not invite facebook sounds like conservative thought leaders actually have problems. Because the companies themselves dont sound like they are going youe there, it does make question what exactly will be accomplished at a hearing like this. It could be a facebook bass session facebook bash session. Emily the president has certainly other companies. As i understand it, we have some bloggers invited and allies of the president and conservative groups. What are we expecting . Some defunct social networks. I think it will probably be another attack on social networks. I imagine it will be quite, quite political. The two main ways to criticize social networks, we are not the attention to all of the content. Side is cracking down on conservative voices in your bias, which is kind of two separate things. Facebooks is response to the storm chaser and nightwatch revelation . The biggest concern was that they would go in full circle. Not want to be viewed as having a tool to fix a fake news and having only been using it on themselves. The on the record statement was pretty much that you cannot really compare this storm chaser tool. I think the reality is less that it could have been used. As far as i can tell, if they had wanted to track a certain thinkr fake news story, i the difference is they were not looking for it and neither was anybody else. They were using it for a narrow purpose which was to deal with facebook specifically. Emily could now be applied to other issues . I think it could come at the Technology Still exists. We are told it is no longer being used in the way it was to fight fake facebook means, but it is still there. The reality is they were looking for it so much more closely and there are other systems that they did not have in place, for checker. He fact they are working with other organizations cannot just track of his stuff but to debunk it. Emily thank you, fascinating story. Up, high metrics is bringing ai to recruiting. Using text to combat discriminatory bias in the hiring process. Thats next. This is bloomberg. Emily the average job posting receives over 250 applications but applicants based socially on gender can fall victim to bias. Pymaetrics wants to level the Playing Field by helping companies. They build a unique profile based on the performance of current employees and matches it to the best talent. 57has already raised thousand dollars 57,000 in funding. Joining us is the pymaetrics ceo and cofounder. How exactly does this work . Take peoples cognitive and emotional traits and use that to match them to their ideal role, rather than looking at the resume which can often lead to a bias and eight not productive outcome for the candidate. Emily have you determined the cognitive and emotional traits . Sure, i spent 10 years at harvard m. I. T. As a cognitive neuroscientist. Now scientists have developed a series of activities that can tell you things about memory, attention, sequencing, reward sensitivity, all sorts of cognitive and emotional facets. And instead of using sumon reza resume to predict success, we look at fundamental traits. Instead of judging a book by the. Over emily would this be good enough to replace and in person interview . Frida we dont replace any human to human contact. What we do replace is the process of a person scanning a resume. Which we know from countless studies is highly biased. I want to say if you want to racist,ate just sexist, ageist, or elitist decision, use a resume. Just shortlisting candidates for recruiters to look more closely at the month rather than having us go through the manual repetitive review of a resume. Emily i understand the goal is to take the bias out of the process, but out rhythms are always biased thanks to the vices of our creators. Can you be sure we are not introducing new kinds of bias . Lets say in the 60s and 70s when they were looking for tech talent, they did a lot of aptitude tests and personality tests, which to be fair, illuminated and not illuminated eliminated a lot of people. It is not always. He case ai has to be biased. When we propose and have open sourced is a way to audit the algorithm to see if it is biased for caucasians or males. So what we do is tweak the fairme to produce a outcome. Technology is neutral and it is how you design it. You cant remove bias from an algorithm but you cannot remove it from a human so i think we will have more success if we use these methods. Emily fascinating stuff. Pymaetrics ceo, thank you for sharing that with us. Ahead, amazon prime shopping day is primed for a worker strike. Why some employees are saying enough is enough. Thats next, this is bloomberg. Emily microsoft is looking to highlight the power of its Cloud Computing when it comes to health care. They have announced they have signed a fiveyear deal with a multistate hospital chain to be a customer for its as her clout and ai tools. Tools to use these track Electronic Health data like surgery outcomes and cancer therapies. Asy now joined kroger customers. I wanted to bring in the health care microsoft president peter leek who joins us live from washington. What kind of things is providence going to do and how will it impact patients . Peter great to talk to you again. We will be bringing microsofts clouds and health tools across all the employees in Providence Health to improve clinical outcomes and improve the daytoday working experience of the caregivers. It is intended to bring much more data and intelligence to the people that matter. Emily lets talk about some specific examples. There is an example in our news story about this partnership about eight knee surgery in particular and how you and they can use data to get a better handle on what does and does not work. Peter that is a great example to bring up. It is one of the examples that really impressed me. All of the across knee surgerys providence has done, you find tremendous sometimes as many as a 10 at variation in the satisfaction or a 200 x variation in cost. And if you plot out all of the data that went into each one of the surgeries, you start to thatver Clinical Pathways allow you to optimize and give clinicians physician support to produce the best possible satisfaction at the most reasonable cost. Healthcare industry has been an tory asleep slow to adopt new technology. It could be impossible to even send your doctor and email, for example an email, for example. How long will that take to change . Peter i know it seems slow and is frustrating, but in fact it is hard to remember that just 15 years ago, less than 15 of Health Records were in digital form. Wheres today, 100 are no digital. For gives us the foundation a lot of possibility in extracting insight from data. Slow, but we are now in a place where we have this wonderful digital foundation. This is exactly the foundation we want to build on. Emily lets talk about the possibilities. How will the cloud make my experience as a patient vastly different . Peter one of the projects we s weoing with providence are going to look across all of the Electronic Health records for all of our patients providences patients undergoing cancer treatment. Hidden and all of that text and unstructured data are patterns that might lead to insights, earlier diagnosis, and other treatment possibilities. Right now, that data is the silod across data. By bringing that together and solaborating on dynamics that operations can be managed all in a cloud, it gives the possibility to grow at scale across the entirety of our health system. Emily interesting stuff. Peter lee, thank you for sharing. Amazons annual prime day starts july 15 and workers at one of the ecommerce giants in minnesota are to use that day to highlight what they view as unfair working conditions. They are planning a sixhour strike on prime day. And some engineers are planning to join the strike as well. This is not expected to disrupt amazon logistically, but will it be enough to get amazon to meet demands . , spencer, who has been covering it. What are the demands . R they are fairly general. They want amazon to convert more temporary employees to permanent status. A problem with amazon because of the cyclical nature of the business. They ramp up around the holidays and then let people go. Some production rates relax. Amazon is always turning the knobs and trying to get them to make these places run as efficiently as possible. This is the first time that amazon workers are striking event. Middle of a huge but say a prime day or over christmas or black friday. Is this not going to have any impact on the logistics . Spencer well, amazon has faced this in europe and the best. They have faced in the past. They have faced them on big days and were able to weather them just fine. We are looking at probably 100 workers and we are looking at hundreds of warehouses and thousands in the. In them. So it will be a small fracture of the overall workforce. It is a bigger threat optically because amazon is very sensitive about its public image and how it treats workers. To ayear, it raised wages minimum of 15 an hour after criticism of tax breaks and having employees on food stamps. So they are very sensitive to this image. The will broadcast that labor unrest remains during one of amazons big shopping days. Bernie sanders is also trying to pass the stop the stop. Act to put an extra that amazon already provide the opportunities they are asking for. Comparerage anybody to our employment and benefits to other employers in the community and across the country. And we invite anybody to see for themselves by taking a tour of the facility. Of thoseee who is one folks organizing the strike also told us that amazon is going to be telling the story about itself, which is that they can ship a kindle to your house and one day. We want to take the opportunity to talk about what it takes to make that were cap to put pressure on amazon to protect us and provide safe and reliable jobs. So the question is will they inflict that pressure and will it be enough . Spencer that is a great question. There are two things working in the workers favor. One is a tight labor market. Workers can feel emboldened about making demands and companies out of necessity have to be more receptive. Thing is interesting how some of amazons corporate employees will actually be traveling to minnesota to help. These are employees who have been active on the climate front and want amazon to do more to reduce fossil fuel consumption and address climate change. We are seeing coalitions between amazon employees coalitions building between amazon employees. See the employees by the banding together to make the voices a little louder. Emily we will be following it. , thank you for the reporting. U. S. Womens team was not the only winner of the world cup, with watchers 20 higher than the mens final. And in the netherlands, nearly 90 of those watching tv tuned in. Go, team. That does it for this edition of bloomberg technology. Our globalck out breaking news network tictoc on twitter as well. This is bloomberg. Manus this is bloomberg daybreak middle east. How the strong u. S. Jobs report will factor in. Goldman sachs says they are relying on the wisdom of the crowds. Cuts, u. S. Interest rate and the removal of the Turkish Central Bank governor rocks the lira. , the Islamic Republic threatens to push uranium two 20 purity
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