Transcripts For BLOOMBERG Best Of Bloomberg Technology 20240714

The burn of sanctions. We have an interview with the chairman who says the company has a plan b. L. The cost of being coo an executive testifies they fired workers in an effort to compete with Companies Like google and amazon. The latest on multiple age discrimination lawsuits facing big blue. Apple forecasted revenue the top analyst estimates about seeing a surge in services which contributes to a fit of total sales. They also reported the iphone revenue, the5 of first time it has made up half of sales. In a way, this is progress towards apple less on the flagship product and more on a new lines of business. Andt more from max chafkin a portfolio manager. It was interesting, if you would have told me they would have missed on those services and revenue, i would have said there was no way they would beat on top and bottom line. Wearables was a big plus. They also used about 21 billion of cash on the quarter to repurchase shares and increase the dividend. I think they kept it at . 77. They did some other things to kind of help along which initially you would have thought would have been a tough quarter for them, at least based on how they missed estimates on revenue iphone revenues and also services. Emily still, we have got the president warning that the trade war may not get that are anytime get better anytime soon. That could impact the iphone. If tariffs come into play on the iphone, what do they do . The reality is, for years, apple has been counting on global expansion, selling lots of iphones in china. They have been able to do that to some extent, but the numbers just arent there and the outlook is not great because you have, as you said, the possibility of tariffs, further barriers. Also, these Chinese Companies are going to be pushing harder in the domestic market in china. At the same time apple is trying to get in there, there is potentially the government helping those companies along, so lots of quote unquote headwinds for apple. The good news is, the services thing, even though it is not exactly where they would like it, it is pretty strong. It is amazing. This has basically been an iphone company for years and is now below apples revenue. Half of apples revenue. It is probably a good sign because we have heard tim cook say over and over again that they want to increase services revenue, and here it is happening. Emily tim cook is speaking right now, saying he is thrilled to see a return to growth. You own a couple thousand shares of apple, how concerned are you about this tariff issue . The tariff issues as max was saying, it is kind of a double when he in regards to shipping phones with the company ministration. Then you have with the Trump Administration. Glassou have things like covers, sensors that are shipped into china that could be potentially on a tariff watch with the Chinese Government. The big question Going Forward is just what does apple do . Do they try to raise prices, which they already have extremely high average selling prices compared to the competition, or do they just absorb the tariffs into the profit margins, and how does that work into the International Expansion . You have annual average incomes in india and china that are a fraction of what they are in the u. S. It does create a conundrum Going Forward. It is an issue in terms of trying to model out what will happen with these tariffs. Emily meantime, they wants to push the services business. They still hit a record, lighter than some estimates, but in grow, they have to keep getting devices in the hands of consumers. It is kind of a circular thing where, on one hand, services are replacing iphone other, youon the cant have Services Without iphones. Are they making this revenue because services are really good or because they have set up this business where you kind of have no choice . If you have an iphone and want to buy an app, that is recurring revenue that is never going to go away, or not for a long time. In terms of revenue growth, is this real innovation or is this a powerful, Mature Company flexing its muscle and collecting revenue . Depending on what you think the answer to that question is, its how you value the stock. If you see lots of growth ahead, you will be much more optimistic. Andy that was max chafkin dan morgan. Apples biggest rival also reported earnings this week. Afterg shares fell secondquarter profit more than halved from a year earlier. I got details from selina wang in hong kong. We already received a profit warning from samsung, so they actually Beat Estimates on some fronts. The big story has been an industrywide story, around these memory chips. They have suffered from low demand and falling prices because of the overhang from the uncertainty,onomic and slowing demand. But we did hear positive news on that front. Toy are expecting demand pick up in the second half of the year, a big sign was they expect these Data Center Players to reconsider purchasing again. We also did see declines in their mobile business. 42 decline in operating income. Of course, the whole industry has been dealing with problems, but samsung did say profitability was eroding because of intensifying competition in these low to midrange markets. Some samsungspecific issues, but theyve also been dealing with a lot of global geopolitical overhangs. Emily talk to us about how the u. S. China trade war and the dispute between japan and south korea are impacting samsung specifically. Selina one of the biggest overhangs is how long this u. S. China trade war will drag on for and how much it will globalslowdown on growth, which affects purchases of smartphones and components. The japansouth korea spat is also a huge concern for investors. There were a lot of questions from analysts on the call about how they would minimize the impact. We did not hear a lot of details from executives. We know they have enough components for now, despite the , but the problem is if these do drag on, if they become even broader, how will samsung find alternate suppliers . That is going to be very difficult and it could lead to production issues. On the huawei front, that is a doubleedged sword. On one hand, as huawei suffers from challenging demand abroad, that is a place for samsung to come in on the smartphone front, but in terms of their profitable chip business, that could be a big drag if quality is unable to purchase as many components. Emily meantime, samsung has also faced branding issues. They tried to launch a full double phone to much fanfare. They pulled it back, how are issues impacting demand for the samsung phones . Selina as you mentioned, they have had a slew of branding problems and have been seeing declining profits in their mobile division. They also made the decision that a statement that smartphone sales will be similar to april and june. It suggests the launches of these new phones may not be successful. But some of the bright spots in samsung earnings, one of them is the display. We saw apple come out with earnings recently that had strong results, stronger demand than it expected, so that is expected to be a bright spot in this display screen area. Another bright spot executives touted on the Earnings Call is the development of 5g and the growing demand for 5g chips. However, it is still early stages and theres a lot of skepticism among investors about how that will play out for the rest of the year. It is worth pointing out that another reason why there was such a negative share impact after their announcement is that they ended up delaying the announcements in shareholder return plans until next year, citing concerns to Global Growth and geopolitical uncertainty. Emily that was bloombergs selina wang. Coming up, the federal trade commission has left facebook with the largest fine in history. But will facebook learned its lesson . We talk about it with a dissenting ftc commissioner who says the fine is not enough. And if you like bloomberg news, check us out on the radio. This is bloomberg. Emily last week, the federal trade commission formally announced the details of its settlement with facebook four years of privacy violations. As part of the settlement, facebook must submit to oversight from an independent committee as well as new privacy certifications. While the fine was largest ever andsed, many lawmakers privacy groups are arguing the company got off too easy. I talked to an ftc commissioner who voted against the government. I voted against the settlement because i thought, when you look at the terms taken as a whole, not just the fine at the injunctive relief, i was not convinced it would do enough to change facebooks behavior and make sure they kept their promises. Emily what would have been better . Finding zuckerberg directly . Directly,zuckerberg perhaps personally . Realistically, you have to look at what the options were. It would have made a lot of sense to take facebook to court. To ay, you may not agree settlement we think will change your behavior, so we will pursue the terms we care about in court. And open litigation and a public court of law would provide transparency and accountability that i think is missing. I also think the settlement is missing meaningful limits on how facebook collects, uses, and shares data. Emily suing facebook directly what have been a riskier path, wouldnt it . You could have risked losing the suit. I agree. And if you think the entire point of litigation is the outcome at the end of the day and you think the remedy in the settlement was enough to change behavior, then i can understand supporting it. But if you do not think the remedy change their behavior, you can think of other advantages litigation could have in terms of public accountability and transparency. Day, wethe end of the the ftc are not a private corporation. We are not just making an expected value calculation. We are trying to work in the interest of the American Public and we have an obligation to seek justice, even if we are not guaranteed to achieve it. Emily i spoke to your colleague noah phillips, i told him about your response to the deal. He voted in favor of the deal. Take a listen to what he had to say about your suggestion. Noah i dont think that is an accurate characterization of the state of play. The remedies we have achieved, both financial and injunctive, meaning the changes we are making to facebook, are very unlikely to have been achieved through a court process. In normal litigation, you are waiting the certainty of less against the chance of more. Thehis case, were facing certainty of more and the uncertainty of getting even less. Emily what is your response to that, commissioner . Respectfully, i disagree. I dont think the terms on the table were enough to guarantee facebooks behavior would change or even to make it likely. Did not oppose any public accountability or meaningful limitations on how facebook uses data. I would rather take the chance in court and i think the process of public litigation can make a big difference. If our goal in bringing enforcement action is to turn the company from doing something wrong, and deterring others from doing something wrong, the prospect of a public trial can have a very effective deterrent effect even if the remedy may be different than what you could get in a settlement. Emily what about the zuckerberg personally . What sort of punishment or penalty would you have liked to seen like to see . What i am going for is accountability and transparency. The settlement the ftc entered into excused mr. Zuckerberg, and all other executives at facebook, from any liability. And i did not think the investigation we did justify that excuse. I did not think we have a basis to say no liabilities. At a minimum, i would have liked to see some transparency, some testimony, some documents in insightt gave us better and that gave us better insight. Concerned you facebook wont learn his lesson . Its lesson . Given that there are no structural changes, things will just go back to the way they were . Fundamentally, that is my concern. I think that is why it is important for the ftc to use the resources they have, limited as those may be, to fight to change the behavior of companies that are breaking the law and teach them the lesson that it is not worth doing again. In the meantime, the ftc has opened an antitrust investigation into facebook. About thatu tell us investigation, or at the very least, your position on whether facebook is too big . Tellfortunately, i cannot you anything about the substance of a particular investigation, this or any other. Ftc has an the obligation to look into questions of antitrust violations. Those are often going to be by big companies. And to open investigations where it is appropriate. Emily uft ftc commissioner Rebecca Kelly slaughter. Demand and ane downbeat forecast, we talk about the impact of trade tensions. This is bloomberg. Emily qualcomm gave a downbeat Sales Forecast yesterday. At the highend, they are looking at 5. 1 billion while analysts predict and 5. 7, that is in line with a warning issued in april that demand for smartphones, particularly in weak. Would be week i got a rundown with our editor in new york. That forecast was very light. The forecast for the quarter was also really liked. The adjusted eps of . 75. Down to qualcomms basic Business Model it has this model. S. Boils down to the basic it has a controversial practice of not just selling chips to manufacturers but licensing and they want royalties equal to a certain percentage of the value of the device. This has caused a lot of litigation problems for qualcomm. They actually settled with apple earlier this year. There are a lot of questions about similar case brought by the ftc. A judge in the ninth circuit ruled against qualcomm. They are waiting for an appeal and there is not a lot of clarity in todays Earnings Reports. They may be getting into it on the call as we speak but not a lot of clarity about when they can expect resolution on this idea. Qualcomm was very upbeat about the prospects for 5g in their Earnings Report saying their design wins have doubled. But investors are not sure what that revenue stream is going to look like because of this unsettled issue with the ftc. They also came out and said until they get a deal with huawei over the same issue, it is unclear if huawei will make additional payments to them. Also saying that huawei is taking market share in china which has ramifications for the entire space. Qualcomm has been on a roller coaster ride this year. It is down 18 . More than 20 now if these declines hold tomorrow. Still up 29 on the year. So quite a wild ride for qualcomm this year. President trump abruptly escalated his trade work with china thursday, tweeting quote the u. S. Will put an additional tariff of 10 on the remaining 300 billion of good and products. This does not include the 250 illion already terrorist terrorist tariffed. It included a raft of consumer and tech goods, including most apples Major Products apples Major Products. I am not concerned about that at all. People dont understand what happened. Emily to discuss, we are joined by our reporter and bloomberg businessweeks max chafkin. What does he think people dont understand . The theory from the Trump Administration is, number one, this a temporary thing, all part of a negotiation, the art of the deal, and Trump Supporters basically agree with that. Other point is that American Companies can adapt. The reason you dont see apple stock stinking right now is because apple uses contract many fracturing and in the long run, they can shift manufacturing out of china if they needed. Obviously, it would be a pretty big lift for them and a bit of a nearterm disaster. Emily so, sarah, as usual, there is ambiguity on the length of time this would be imposed , the president indicating it could go up or down, be short or longterm. Give us the details. Trump later, when he spoke with reporters, said it could go well beyond 25 if he had to go there. It just creates a whole new world of uncertainty for the business community. And i think companies, like apple for instance, this is a 10 tariff that trump announced today. When they first announced the 300 billion possibility of tariffs on the final batch of imports, the rate was 25 . 10 is not quite there yet. Still, this is the part of chinas imports that will hit consumers. Even a 10 tariff, if a company cannot eat that up, it will be passed onto the consumer. Everything from childrens clothes to toys, your iphone, this raises the possibility of those prices going up. Emily now, thus far, apple goods like the apple watch and air pods have not been tariffed, max. So how do Companies Deal with this uncertainty . Sarah and i were talking yesterday, and she indicated it is increasingly looking like there is not going to be a shortterm resolution. Max i think you are seeing companies talking more and more about manufacturing outside of china. India, manufacturing in india or other countries would be a possibility. The entire highend manufacturing ecosystem is in china right now. The other thing is they could raise prices. Part of the problem is, already, the iphone is kind of under pressure from consumers. Consumers have been hesitant to upgrade. The upgrade cycles are getting longer. You wonder if you start raising prices even a little bit, that could change the economics for apple. Emily coming up, u. S. Sanctions continue to bite the chair of huawei. They say there has been a genetic slowdown of sales growth in the midst of a trade war. In an exclusive interview, they can debt uber they hint at even tougher days ahead. Check out our global breaking news tictoc on twitter. This is bloomberg. Emily welcome back to the best of bloomberg technology. I am emily chang. Huawei continues to face the fallout of president trumps efforts to thwart it. Huawei sales growth dropped dramatically in the first half of the year amid u. S. Sanctions. Tom mackenzie sat down with the companies chairman. Roletalked about huaweis and how the smartphone business can survive without googles android operating system. The u. S. Not know when will make a decision on android and when that decision will come. We have to make reparations for our products. We will evaluate our strategy. If we are not able to use android, we have the ability to develop our own operating system and ecosystem to become the basis to the customers. Give us a sense of how fundamental you have had to change supply chains to mitigate these pressures . Have you completed those changes or are there more to be done . List placed by the u. S. Was disruptive to our supply chain as we already made plans for the u. S. For our business. Suppliers stopped supplying us, so we had to make adjustments to our supply chain, including our process of purchasing, manufacturing, and delivering products. We will do adjustments to our supply change and change to other suppliers and use our own chips for the core components. I think the damage to the u. S. Suppliers is bigger. We will have to increase our workload and manage continuity. From theremoves huawei entity list, that would be a solution. What impact are you seeing for demand for your 5g equipment . U. S. Has beene launching a campaign amongst its allies, it is up to each country to decide among its partners, if medication demands and construction demands. Right now there may be some impact in places like australia, but there are others willing to work with huawei. Tom when it comes to components, you say you are blocked by some key suppliers. Can you give us clarity on of who those suppliers are, and the success you have had, or not, of finding alternative suppliers . We might have some components we cant buy from the u. S. , but we will use our own components to supplement. Smartphone operating systems like googles operating system and ecosystem havent resumed business with us yet. We are working to find a way to patch this hole. We hope to see good news, but if there isnt any, we will try to enhance our own capabilities. Tom do you expect huawei to be part of the conversations when the trade negotiators meet in the next few days in shanghai . Will they be discussing huawei, and do you welcome the backing of the Chinese Government for your company . Huawei is purely a company. When two countries talk, they talk about topics. In the talks between china and the u. S. , they will talk about big topics. For us, huawei only needs to do its job. Patch up the holes, manage continuity, as well as ensure product delivery. We do not sell to the u. S. Doing ado care about is solid job to make sure the products are delivered to our customers. Emily that was Tom Mackenzie in an exclusive interview with huaweis chairman. What language should car speak . The answer could determine who will lead the way when it comes to developing self driving cars. Billions of dollars could be at stake and so could thousands of lives. Ed ludlow has the story. Cars that can talk to each other interact with traffic lights and see around corners the advent of 5g could make , these real, bringing faster speeds for smart Traffic Systems and truly autonomous vehicles. But it is not the only option for connecting cars. Its up against a more established wifibased technology. There is a debate about which is better. The choice is between the existing wifi standard called dscr, or dedicated short range communication, or cb2x, celluar to vehicle to everything which would eventually use 5g networks. China was the first to make a decision favoring cellular technology. With recent development in 5g, that could be handing china the early lead. Their focus is leading to this real timetomarket advantage. They would be saving hundreds, if not thousands of lives much sooner than we will as we fumble to determine which is the standard that is best for the longterm roadmap in the western world. Ed in october, china ended the use of cb2x. They gave it a dedicated band of spectrum. In the u. S. And europe, the spectrum issue is unresolved and there is a split on which technology to use. Settling the standard matters. If the federal government mandated a technology today, its estimated up to 8. 1 million car crashes and 43,000 deaths could be prevented. How will the technology differ . Both are designed to connect cars directly to other vehicles and infrastructure around them. The cellular tech could harness the 5g networks wider range and greater bandwidth and crucially s lower latency. That one millisecond delay in latency in 5g to let you know there is a car coming around the corner is going to be critically important. Today, with 4g, that might be 10, 20 milliseconds. It will be crucially important to the safety levels. Ed the wifibased standard has low latency and backers argue it is a better option because the technology is mature and ready for deployment now. Supporters of the cellular tech say it has superior range and is more secure. Bison is a u. S. E. V. Startup that will build its car in china and bring it to market with basic selfdriving capabilities. 5g will enable vehicles to talk to different infrastructure. It will enable vehicles to talk to each other. Autonomous driving can use up to 1. 5 terabytes of data per hour. That data needs to come into the vehicle and leave the vehicle. Ed cb2x can evolve with each new generation of Cellular Networks starting with 5g. It will be as simple as switching the modem. Critics of the wifi standard say that technology is outdated and not appropriate for the cars of tomorrow. So, which will prevail . 5g is now backed by a trade Group Representing more than 100 Car Manufacturers and chipmakers, including qualcomm. They are becoming more and more autonomous, relying on cameras and sensors. Once we start blending in both 5g and cameras and sensors, we get to see a far more transformative experience. Ed the Eu Commission plan was defeated in july, opening the door for a 5g standard supported by audi and bmw. In the u. S. The Trump Administration has put off taking a decision, but ford is not waiting for washington. In the carmaker omitted to january in january the carmaker committed to deploying cb2x in its cars from 2022. General motors is the only u. S. Carmaker promoting the older wifi standard. Bloomberg new Energy Finance says in the longterm, the u. S. , korea and japan will adopt the cellular option as they aggressively deploy 5g networks. For now, the western world has left it to automakers to fight it out as to which standard to adopt. Ed ludlow, bloomberg news, San Francisco. Andy coming up, testimony age discrimination claims against ibm. They may have fired 500,000. Orkers multiple lawsuits and ibms response. Demand is growing in Silicon Valley for manmade everything from 5g networks to satellite to engagement rings. I visit one of the top producing labs to see for myself. This is bloomberg. Emily ibm has laid off as many as 100,000 workers in recent years, according to a recent lawsuit. In fact, they are facing several lawsuits claiming age discrimination against Older Workers. A former employee alleges it was part of an attempt to make ibm appear cool and trendy as it tried to appeal to millennials. Olivia we have a classaction lawsuit filed in manhattan and different civil suits filed across the country in california, pennsylvania, and texas. The similar thread is they are alleging ibm fired older employees in order to bring in and retain new younger workers. They actually call these cases a fire and hire discrimination scheme. They allege ibm has been carrying out this sort of resource action since as far back as 2014. Emily ibm in a statement said they have reinvented ibm in the last five years to target higher value opportunities for clients. The Company Hires 50,000 employees every year. Tell us more about how the company is responding. Olivia ibm is a 108yearold company and for the past seven years straight it has faced stating revenues, and it has been trying to reinvent itself. It has kind of totally missed the mark in the Cloud Computing revolution and has been lagging behind the likes of amazon, microsoft, and google for about a decade, so the company is on this new growth trajectory, bringing in hybrid cloud and trying to become a whole Different Company that focuses on newer technologies like Artificial Intelligence and hybrid cloud, and it just made a 34 billion acquisition. Part of the strategy of laying off Older Workers and bringing in new younger workers is to turn the company around and become, as we read in this deposition, a cooler, trendier company where young talent would want to work for ibm in a similar way they would want to work for google or amazon. Emily that was bloombergs olivia carville. After year and a half of searching for new headquarters, amazon split its campus between virginia and new york. Shortly after the decision, we watched the downfall of the new york campus as local politicians pushed back, and amazon pulled out. Cities have dubbed the any to persuade the giant to bring jobs to a new location. One area is nashville, tennessee. Amazon set its operation of excellence would move there and bring 5000 jobs with it. We asked about the move and how to bring other Big Tech Companies to his space. We are a state with the business friendly environment, a Regulatory Environment that is friendly to businesses. Companies know that about states. We are fiscally soundly managed. Companies know that so they sort that out than i look at and then they look at incentive packages that states have to offer. We certainly deal with companies in that way. We incentivize companies to come there. They look at Workforce Development and we have done a lot in our state to create workers for companies that are coming there. Particularly Tech Companies and technologybased companies. Our administration has done something called a future Workforce Initiative that is establishing the kinds of education curriculum and pathways that will create the workers for the future. Emily there are some Tech Companies already there. T has an operation there. What in the future do you think you can offer Tech Companies . You are obviously making the case here in San Francisco this week to put a bet on tennessee. The biggest thing we can do is show to them our commitment for workforce. Technologyrelated jobs require a workforce of the future. They require an Education System that i believe understands the needs of the workforce. We created something called the give act. The futures Workforce Initiative. Those are legislative initiatives that in fact create workers of the future. It changes the way our middle schools and high schools look. It changes the type of skills that people and workers in tennessee have. We need to be a place that when lyft is looking to expand their operations in tennessee, they know that they can add the thousand jobs they need to or amazon will know that the 5000 jobs they need to fill that there will be a workforce out there to do it. Our investment and that is very important. Emily voters overwhelmingly rejected a transit bill that would have brought light rail. Do you see a risk that nashville or tennessee might not learn the lessons of seattle which saw a rising housing costs, a traffic crunch because it didnt move fast enough when amazon came calling . We have to lead on this. What i think is most important that we have to do, and we are talking about this in our department of transportation but with other municipal leaders is made to think about what transportation is going to look like in the future. Investing in a multibilliondollar system that may be antiquated by the time it is built is not what we want to happen. Transportation is rapidly changing. If you talk to some of the companies here about how people are going to move, that is what we need to be investing in from a transportation standpoint. We have to stay ahead of the curve in our major cities in tennessee. We want to be ahead of the growth curve as much as possible so that we cannot make the same mistakes that other cities have had to make and had to learn. We are going to learn from their mistakes and not make them. Emily my conversation there with governor bill lee of tennessee. The company prepares for an ipo, reportedly looking to go public in september and expect to be the second biggest initial offering of the year. Of 3. 5g a share sale billion. I got insight from bloombergs ellen hewitt. Todayy were hosting one and have at analysts come in and hear the pitch. Learn about the Business Model and get a chance get a sense of how they might be covering it. Most analysts had to agree not to discuss what was shared until the actual ipo. Is this . W typical i do not remember them having an analyst day. The situation is that the s1 has not yet been made public. We know they filed confidential documents last april and announced they have filed those documents but we still have not gotten to see them. The company is aiming to do an ipo in september based on our reporting, so one would think maybe theres a chance in the next month we might get to look at the documents that show their earnings, losses, all the nittygritty, which certainly many of these people are excited to look at. It has been a company that has gotten a lot of attention. People will be interested to look at the cold, hard numbers. Emily lets talk about what analysts are actually looking for. What are the questions they want answers to . I think they are trying to assess this as a Real Estate Company or tech company. It is something wework has gone back and forth on for many years about its business identity. At once to be seen as a tech company, in part because it is interested in getting that sort of multiple in the markets, and it would be a much more valuable proposition for wework to be seen a such. Many people look at it and say this is a company that takes on leases, rents out smaller parcels of real estate and should be considered more like a Real Estate Company or investment that is modeled more on how models are done. Emily you mentioned the more unconventional metrics. There has also been controversy around the founder and how much money has been taken off the table. What is the status of that . That is still part of the story of wework people will try to get their hands around when they are deciding how to value this company. You mentioned the founder and ceo has taken out loans against some of his holdings. Wework has sold some of his equity in the company. He has also been known to have personal holdings of real estate. The company has made steps to try to resolve some of those perceived conflicts of interest, but it is something i imagine is a big question on a lot of analysts and investors minds. Do we think this might be a problem for the company as it goes public . Emily do we have a sense of how much money they are making, if they are profitable . They are not profitable. Thats why we talked about adjusted ebitda. That is a metric by which they see themselves as profitable on a building by building basis, almost equivalent of the Unit Economics type approach. Does that building itself make a positive profit, and they say yes, but it is removing a lot of expenses other people think should be counted into the greater populations. Greater calculations. Emily coming up, Lab Grown Diamonds. They supply everything from five g networks, satellites, to engagement rings. I visit one of the top labs to see myself. This is bloomberg. Emily finally, you may think of diamonds is a girls best friend, you may not know they are considered to be the computer s best friend and a superior alternative to silicom. In Silicon Valley they are being used to fuel advances in 5g, satellites, quantum computing. I recently visited a lab that grows diamonds and how they are made, what they are for, and of course tried a few on. It sparkles. It shines, and it is oneofakind. But this diamond is not the product of mother nature. Instead, it comes from a lab in a process that is shaking up the 80 billion diamond industry. How long does it take from start to finish to grow a two carat diamond . It takes a coue emily Lab Grown Diamonds have the same characteristics income of mined stones without the controversy of their origin. You start with this foundational piece. Once it is in the reactor, carbon atoms start to come down one at a time and connect to the diamond below it. Atom by atom, a growing diamond. All of the reactors we created inhouse. Not just built, but designed inhouse. That is where all the magic happens. Emily martin and his team at Diamond Foundry in San Francisco have been making these gems. Silicon technology, and we recognized the technologies we use can be applied to diamonds of high quality in ways that previously were impossible. Emily but they are not the only ones. There is new Diamond Technology in st. Petersburg. Technologies in singapore. And even in the centuries old diamond business getting in on the act. In 2018, it launched a Fashion Jewelry retailer called lightbox jewelry, targeting younger consumers with lab diamonds and selling them for 800 a carat. 1 10 of an actual gem. Nremain hl manmade diamonds will hold their value. Debeers will probably will produce 35 cubits of natural diamonds this year. You look at the global output of manmade diamonds produced for jewelry, it is probably 5 million carats. But it was well under one million carats just a few years back. Emily last year a major win for producers of manmade diamonds when the federal trade commission amended its jewelry guidelines, clarifying a diamond is a diamond, regardless of its origin. Currently, manmade diamonds account for 1 of the 14 billion global rough diamond market. That number is expected to grow to 7. 5 by as early as 2020. Much of that growth is in the luxury jewelry market. But the real money opportunity to use with a developed in this lab to fuel the future of Silicon Valley. We now have the ability to develop the first diamond wafer. That will enable a lot of technological applications, for digital networks, 5g networks. These applications go anywhere from quantum computing to hightech laser and equipment. We are probably still a good 10 years away. Emily ultimately, diamonds are forever but consumers now have a choice. And the prospect of them enabling advances in technology of the future is bright. That does it for this edition of the best of bloomberg technology. We will bring you all the latest in tech throughout the week. Tune in. We are Live Streaming on twitter. Follow our global breaking news network tictoc on twitter. This is bloomberg. Jonathan from new york city, im jonathan ferro. Bloomberg real yield starts right now. Jonathan coming up, no drama in this months payroll report. The attention firmly elsewhere as the white house whipsaws wall street, announcing more tariffs on chinese imports, providing more fuel for global bond markets, driving the german yield curve below zero. Lets begin with the big issue. Is the fed prepared to underwrite the trade war . It is highly likely the trade issue will dominate a thinking at the fed. You have to extrapolate this and think about the fed de