Tuesday 20/04/21

  1. In TECH NEWS, Nvidia gets Nvestigated, the UK moves forwards on drones, Apple reinstates Parler, Zoom invests and Sunak looks at a digital currency
  2. In EV-RELATED NEWS, China takes on Tesla, Musk gets involved in the Tesla crash aftermath and lithium miners get together
  3. In MISCELLANEOUS NEWS, Vanguard arrives, UK logistics benefit from Brexit and Peloton takes a hit
  4. AND FINALLY, I thought I’d bring you something surprising about a Cadbury’s Flake…

1

TECH NEWS

So Nvidia/Arm comes under scrutiny, drones advance in the UK, Apple reinstates Parler, Zoom invests and Sunak looks at digital currency…

Arm takeover investigated over threat to UK security (Daily Telegraph, Hannah Boland) shows that the proposed $40bn takeover by Nvidia of British microchip designer Arm Holdings is going to be put under the microscope by the Competition and Markets Authority (CMA). The CMA will consider whether the combination of the two will threaten national security given the use of Arm’s tech in critical UK infrastructure. The competition regulator has until the end of July to complete its “phase one” investigation, upon which time it will be decided whether or not to proceed to a deeper “phase two” investigation. * SO WHAT? * It seems to me that there is considerable opposition to this deal going ahead, which is not surprising considering Arm’s huge influence in chip design around the world. It is also being investigated in the US by the Federal Trade Commission (FTC) over competition concerns as many companies say that if the deal were to proceed it would give Nvidia an unfair advantage. Nvidia had agreed terms with SoftBank (the current owner) in September, with a view to completing the deal in early 2022.

UK regulator gives green light to delivery drone trials (Financial Times, Philip Georgiadis) shows that the use of drones in the UK has taken a step forward as the Civil Aviation Authority (CAA) has authorised West Sussex-based drone company Sees.ai to start trials of drone flights that are beyond the line of sight of their pilots. The drones will be flown by pilots who could be hundreds or even thousands of miles away from their aircraft. * SO WHAT? * This is a major step forward because, currently, pilots generally have to be in the line of sight of their drones, so if this trial goes well, they could be used for drone delivery and potentially transform the logistics industry! Clearly, this won’t happen overnight and I have to say that I wonder what sorts of things are going to be delivered by drone given that there must be weight restrictions etc. Interesting, though!

Meanwhile, in software-related news, Apple to reinstate Parler, the app at the centre of online-speech debate (Wall Street Journal, Matt Grossman) shows that Parler is about

to “come in from the cold” after Apple removed the app in January, citing objectionable content (e.g. posts that glorified racism, promoted Nazi ideology and incited violence etc.). A revised version of the app with better content moderation is about to be approved for release to Apple users. Parler says it is a victory for free speech. It’ll be interesting to see what it does now and whether its content moderation will be better than it was before.

Then in Zoom seeks to stay ahead of Microsoft with $100m for start-ups (Financial Times, Richard Waters) we see that Zoom is going to commit $100m to invest in apps that enhance its video meeting service in an effort to fend off an offensive by Microsoft, which is keen to push its “free” Zoom alternative, Teams. The company said it would invest between $250,000 and $2.5m in each start-up that helps its users to “meet, communicate and collaborate”. This will also be a sort of incubator that could be a precursor to subsequent acquisition. * SO WHAT? * This sounds like a great idea, but I do wonder whether it will be enough to stop Microsoft’s march. From what I’ve seen, it seems that many think that Zoom is more stable than Teams but the problem is that Teams comes “free” as part of Microsoft 365 and so I think that it really has to make itself stand out in both user experience and functionality. It will definitely not be able to rest on its laurels with Microsoft breathing down its neck as Microsoft itself has not been averse to buying up other companies with its vast cash piles (OK – so they’re not really Teams-related, but things like Nuance, and Discord are recent examples of chunky acquisitions). It’ll be interesting to see how these two stack up in a year’s time!

Then in Sunak launches taskforce on digital currency (The Guardian, Larry Elliott) we see that Rishi Sunak has announced that a taskforce are to explore the pros and cons of a Bank of England digital currency. This is all part of an initiative to put the City at the forefront of innovation and do something a bit interesting following Brexit. * SO WHAT? * As you know, pretty much all politicians and central bankers hate Bitcoin in particular because they have no control over it and there has been talk for quite some time now over the viability of Central Bank Digital Currencies (CBDC) given that they would be more accountable and potentially controllable than existing cryptocurrencies. This all sounds lovely, but it’ll take ages before something like this ever sees the light of day – but it’s nice to know that they are exploring the possibility.

2

EV-RELATED NEWS

Chinese makers try to close the gap with Tesla, Musk gets involved in the Tesla crash investigation and lithium miners get together…

Chinese carmakers step up challenge to Tesla with blitz of new models (Financial Times, Christian Shepherd) shows that Chinese carmakers are after Tesla’s #1 spot in China for EVs after the likes of Geely, Nio and Xpeng are showcasing their wares at the Shanghai auto show this week. Surveys suggest that domestic brands are becoming more popular with younger customers and they seem to be keen on innovation – for instance, Nio talked about the expansion of its battery-swapping and charging network and has also made a subscription model for battery use. * SO WHAT? * I really think that Chinese manufacturers are going to close the gap with Tesla over time and it could well be that some innovations could inspire other EV manufacturers that may use them in other markets. I personally really like the idea of batteries that you can swap over because it can be really fast (takes five minutes apparently) and it also makes it easier to upgrade batteries regularly because it seems to me that when you buy an EV at the moment, you just get stuck with the battery you’re given for the life of the car. Given that batteries are the biggest cost of building an EV, I think that having swappable batteries could mean that your car’s value doesn’t depreciate so quickly because the battery won’t really deteriorate over the life of the car because it’s getting swapped out all the time. Tesla continues to resist this idea, but I wonder whether this could be a viable option for other cars in the future.

Meanwhile, Elon Musk weighs in on a fatal Tesla crash as safety officials investigate (Wall Street Journal, Rebecca Elliott) shows that Musk himself has put a bit of a spanner in the works as crash investigators are currently working on the assumption that the Model 3 that crashed with two fatalities in the US over the weekend was on Autopilot.

Neither passenger was in the driver’s seat. Musk said that “Data logs recovered so far show Autopilot was not enabled”, thus pouring water over that theory. The crash is currently being investigated by the National Highway Traffic Safety Administration (NHTSA) and the National Transportation Safety Board (NTSB). Tesla’s share price fell by 3.4% in trading yesterday. * SO WHAT? * Whenever there is a Tesla-related fatality, Musk gets right in there. I have always thought that Tesla gets off quite lightly when crashes happen and that incidents like this always end up disappearing. I am NOT a fan of any kind of Autopilot thing at the moment as I just don’t trust its effectiveness but I am sure that in years to come it will drastically cut accidents and fatalities IF EVERYONE USES IT.

Then in Lithium miners in $3.1bn merger as electric vehicles fuel demand (Financial Times, Jamie Smyth) we see that Aussie mining groups Orocobre and Galaxy Resources are going to merge in a deal worth A$4bn ($3.1bn) to create one of the world’s biggest lithium producers in order to get scale in anticipation of a continued ramping up in demand from EVs. They reckon that the combined entity will be able to expand annual production of lithium carbonate, which is the stuff they use in batteries, from 40,000 to 100,000 tonnes over the next few years. * SO WHAT? * This sounds like a decent deal on a strategic basis considering that the price of lithium has bounced back with a vengeance after a rather anaemic two years. I really think that it’s important to do as much as possible to produce lithium as quickly as possible while demand is so hot because I think that there’s a risk that, if they leave it too long, alternative technologies may be found that use less lithium than the batteries in use at the moment. There will be pressure to innovate given the potential shortage of the material if EV demand really picks up from here. I suspect that there will be more moves like this among miners of materials that are key to EV and battery production as they will want to take advantage of scale and a bigger combined balance sheet to support expensive projects.

3

MISCELLANEOUS NEWS

Vanguard makes a splash, UK logistics benefit from Brexit and Peloton stumbles…

In other “big news” today, Financial adviser from across Atlantic plans to capsize UK sector (The Times, Ben Martin) shows that Vanguard, the American asset management behemoth, is planning to stirring things up in the cosy British financial advice industry with a low-cost service that is bound to ruffle the feathers of the likes of St James’ Place et al. It is going to focus on investors with at least £50,000 in assets and charge them 0.79% per year – everything included – to use its advice service. At the moment, average charges are around 2%, so this will really make incumbents sit up and take notice. * SO WHAT? * For example, a saver with a £250,000 initial investment that has 5% returns a year for 30 years, would save a whipping £275,571 over this period. Those with £50,000 will get a personal finance plan and those with over £100,000 will get access to a team of financial planners and those with over £750,000 will get a dedicated planner. I think that financial advice has huge growth potential as we live longer and can’t rely on the State to pay for us into our old age. It seems to me that more people have taken an interest in their own personal finances over lockdown and it may be that more people feel that they should do this to ensure a more secure future. Vanguard are massive, generally have a good track record and I think that the UK is under-advised. This could really stir things up IMO.

Then in UK logistics groups buoyed by Brexit (Financial Times, Harry Dempsey) we see that some UK logistics companies including Clipper Logistics, Eddie Stobart, Wincanton and Xpediator are actually doing pretty well from Brexit due to a surge in demand for warehouse space and custom clearance services. They were already benefitting from the boost in online shopping under lockdown. * SO WHAT? * Given the massive uplift in demand for their services and the general need for scale to lower costs in this business, it is highly likely that there will be consolidation in this industry – there have already been 28 takeovers in the sector in the six months to March, signalling a return to pre-pandemic levels. Strap in – this could get even more interesting!

Peloton faces mounting pressure to recall treadmills after one death, dozens of injuries (Wall Street Journal, Sharon Terlep) highlights current challenges facing Peloton after it told people with young children or pets to stop using its treadmills – a federal safety agency urged it to do a recall. * SO WHAT? * Peloton has not really responded very well following the recent tragic death of a child involving one of its machines, which then dug up lots of other similar instances. It needs to up its game quickly or all the goodwill it built up over lockdown will vanish as the competition intensifies. I really think that although Peloton benefited greatly from lockdown I would have thought that take-up of their products will fall as gyms open and people realise that their bikes have now become expensive clothes horses and sell them off on eBay, thus potentially putting a lot of secondhand product in the market that will dent sales of new machines. Peloton needs to get itself into gear – and quickly – to sort this out.

4

...AND FINALLY...

…in other news…

I thought I’d leave you today with the example of someone who clearly has waaaaay too much time on their hands in Man blows people’s minds as he shows Cadbury Flakes don’t melt in microwave (The Mirror, Courtney Pochin). Well at least this person found the answer so you don’t have to 😁!

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