Japan will restrict the export of some materials used in smartphones and chips to South Korea

Japan’s trade ministry said today that it will restrict the export of some tech materials to South Korea, including polyimides used in flexible displays made by companies like Samsung Electronics. The new rules come as the two countries argue over compensation for South Koreans forced to work in Japanese factories during World War II.

The list of restricted supplies, expected to go into effect on July 4, includes polyimides used in smartphone and flexible organic LED displays, and etching gas and resist used to make semiconductors. That means Japanese suppliers who wish to sell those materials to South Korean tech companies such as Samsung, LG and SK Hynix will need to submit each contract for approval.

Japan’s government may also remove South Korea from its list of countries that have fewer restrictions on trading technology that might have national security implications, reports Nikkei Asian Review.

Earlier this year, South Korea’s Supreme Court ruled several Japanese companies, including Nippon Steel & Sumitomo Metal Corp. and Mitsubishi Heavy Industries, that had used forced labor during World War II must pay compensation and began seizing assets for liquidation. But Japan’s government claims the issue was settled in 1965 as part of a treaty that restored basic diplomatic relations between the two countries and is asking South Korea to put the matter before an international arbitration panel instead.

Devices built with Intel’s Ice Lake and Project Athena specifications will be available in time for the holidays

Even before Computex officially launched today, AMD and Qualcomm threw down the gauntlet at Intel with a new chip and a 5G PC, respectively. Today Intel responded in kind during its keynote presentation in Taipei, introducing new processors and laptops, in addition to unveiling Ice Lake, its 10th generation Intel Core chips.

Now shipping to OEMs, the 10-nm processors will increase speeds for AI computing tasks and graphics and boost wireless speeds up to three times, Intel says. Built on Intel’s Sunny Cove architecture and Gen11 graphics engine, the series includes chips with up to 4 cores and 8 threads, up to 4.1 max turbo frequency and up to 1.1GHz graphics frequency. Gen11 will enable faster graphics in laptops, 4K HDR in a billion colors and games with up to two times faster frames per second, Intel claims. With Thunderbolt 3 and Intel Wi-Fi 6 (Gig+) inside, the company says the chips will also enable up to three times faster wireless speeds. Devices powered by Ice Lake are expected to be available for purchase by the holidays.

The company also unveiled Intel’s new class of laptops, Project Athena. Laptops built to Athena 1.0 specifications wake from sleep in less than a second, claim battery life of 9 or more hours under real-life conditions based on Intel’s testing conditions (with default settings, display brightness set to 250nits and continuous Internet connection with apps like Office 365 and Google Chrome running in the background) or 16 or more hours in local video playback mode. They are built with Thunderbolt 3, Intel Wi-Fi 6 (Gig+) and OpenVINO and scheduled to be available in time for this holiday season.

Lenovo’s senior vice president of consumer devices Johnson Jia, who helped launch Qualcomm’s first Snapdragon-powered 5G laptop yesterday, returned to the stage with Intel to showcase the the ultra-lightweight (1.2kg) Yoga S940 laptop, built on Project Athena, scheduled to go on sale in time for (you guessed it) the holidays.

Yesterday, AMD revealed the 12-core Ryzen 9 3900X, retailing for just half of Intel Core i9 9920X’s $1,100 starting price. Intel recaptured some thunder with its Intel Core i9-9900KS processor. Part of its 9th-generation chip series, the eight-core Core i9-9900KS is aimed at gamers who want to play and livestream at the same time. Like Intel’s other 9th-generation chips, it features mobile 5Ghz, and can run all eight cores at 5GHz all the time. Pricing has not been disclosed, but Intel announced that it will also be available by the holidays.

For gamers, Intel showed off its 9th-generation Intel Core-powered laptops Alienware M15 and M17, which boost mobile Ghz, a 8-core, 16-thread processor and faster frame rates and reaction times. The two laptops are expected to begin selling on June 11 at a starting price of $1,500.

Intel also announced that the Intel Performance Maximizer will be available for free download next month. The software makes overclocking more accessible by testing every core in a 9th-generation desktop processors and bringing it to maximum frequency.

Devices built with Intel’s Ice Lake and Project Athena specifications will be available in time for the holidays

Even before Computex officially launched today, AMD and Qualcomm threw down the gauntlet at Intel with a new chip and a 5G PC, respectively. Today Intel responded in kind during its keynote presentation in Taipei, introducing new processors and laptops, in addition to unveiling Ice Lake, its 10th generation Intel Core chips.

Now shipping to OEMs, the 10-nm processors will increase speeds for AI computing tasks and graphics and boost wireless speeds up to three times, Intel says. Built on Intel’s Sunny Cove architecture and Gen11 graphics engine, the series includes chips with up to 4 cores and 8 threads, up to 4.1 max turbo frequency and up to 1.1GHz graphics frequency. Gen11 will enable faster graphics in laptops, 4K HDR in a billion colors and games with up to two times faster frames per second, Intel claims. With Thunderbolt 3 and Intel Wi-Fi 6 (Gig+) inside, the company says the chips will also enable up to three times faster wireless speeds. Devices powered by Ice Lake are expected to be available for purchase by the holidays.

The company also unveiled Intel’s new class of laptops, Project Athena. Laptops built to Athena 1.0 specifications wake from sleep in less than a second, claim battery life of 9 or more hours under real-life conditions based on Intel’s testing conditions (with default settings, display brightness set to 250nits and continuous Internet connection with apps like Office 365 and Google Chrome running in the background) or 16 or more hours in local video playback mode. They are built with Thunderbolt 3, Intel Wi-Fi 6 (Gig+) and OpenVINO and scheduled to be available in time for this holiday season.

Lenovo’s senior vice president of consumer devices Johnson Jia, who helped launch Qualcomm’s first Snapdragon-powered 5G laptop yesterday, returned to the stage with Intel to showcase the the ultra-lightweight (1.2kg) Yoga S940 laptop, built on Project Athena, scheduled to go on sale in time for (you guessed it) the holidays.

Yesterday, AMD revealed the 12-core Ryzen 9 3900X, retailing for just half of Intel Core i9 9920X’s $1,100 starting price. Intel recaptured some thunder with its Intel Core i9-9900KS processor. Part of its 9th-generation chip series, the eight-core Core i9-9900KS is aimed at gamers who want to play and livestream at the same time. Like Intel’s other 9th-generation chips, it features mobile 5Ghz, and can run all eight cores at 5GHz all the time. Pricing has not been disclosed, but Intel announced that it will also be available by the holidays.

For gamers, Intel showed off its 9th-generation Intel Core-powered laptops Alienware M15 and M17, which boost mobile Ghz, a 8-core, 16-thread processor and faster frame rates and reaction times. The two laptops are expected to begin selling on June 11 at a starting price of $1,500.

Intel also announced that the Intel Performance Maximizer will be available for free download next month. The software makes overclocking more accessible by testing every core in a 9th-generation desktop processors and bringing it to maximum frequency.

Tencent CEO warns companies must keep innovating to survive amid US-China tensions

On Tuesday, Tencent’s usually low-profile founder and CEO Pony Ma made rare comments to weigh in on escalating tensions between the United States and China, calling domestic tech companies to build more self-reliance in a bid to stay competitive.

“China has come to the forefront of development. There is less and less room for taking the best from outside and improving on them. As the ZTE and Huawei cases have intensified recently, we are also constantly watching whether the trade war will turn into a tech war,” said Ma at an event in China’s Yunnan Province per a transcript Tencent provided to TechCrunch.

Ma’s concern is not unexpected. As recent US-China negotiations show, the Shenzhen-based telecommunication and smartphone giant has become deeply entangled in the trade spat. The Commerce Department last week restricted American companies from selling components and other technology to Huawei — which the Trump administration has labeled as posing a national security threat — though it has since scaled back the ban. That would eventually cut Huawei off from certain services from Google, chips made by Qualcomm and Intel, and its other American suppliers.

Despite China’s efforts to lead in global innovation, many of its tech startups and champions still rely heavily on imported technologies to deliver products and services. People have celebrated this level of interdependence as a result of trade, but increasingly they worry decoupling the US and China will hurt companies on both sides and lead to a bifurcation of the global tech economy.

“[China]’s digital economy will be a high-rise built on sand and hard to sustain if we don’t continue to work hard on basic research and key knowledge, not to mention the transformation from old to new forms of drivers or high-quality development,” Ma pointed out.

Jack Ma, founder of Tencent’s arch-foe Alibaba, remarked along the same line following a similar ban placed on the sale of American components to Huawei rival ZTE in April of last year.

“It is the compelling obligation for big companies to compete in core technology,” said Alibaba’s Ma at an industry event per a report from the South China Morning Post.

The latest technology ban from the US has now accelerated Huawei’s efforts to become more technologically independent. That includes designing its own chips and rolling out its own smartphone operating system, though observers and stakeholders, including Huawei’s founder Ren Zhengfei himself, have raised questions on their viability in the short run.

“We will give it a try. Making the operating system isn’t too difficult. What’s difficult is the ecosystem. How do you build an ecosystem? This is a big project, and it will take time,” said Ren during an interview with state media on Tuesday.

When it comes to Huawei’s homegrown chips, Ren said the company is “capable of making American-quality semiconductors, but that doesn’t mean it won’t buy them.” On the other side, chip experts interviewed by Reuters have called out Huawei for its claim, saying it would be difficult for the Chinese company to manufacture network gears without American suppliers.

When will customers start buying all those AI chips?

It’s the best and worst time to be in semiconductors right now. Silicon Valley investors are once again owning up to their namesakes and taking a deep interest in next-generation silicon, with leading lights like Graphcore in the United Kingdom hitting unicorn status while weirdly named and stealthy startups like Groq in the Bay Area grow up.

Growth in chips capable of processing artificial intelligence workflows is expected to swell phenomenally over the coming years. As Asa Fitch at the Wall Street Journal noted yesterday, “Demand for chips specialized for AI is growing at such a pace the industry can barely keep up. Sales of such chips are expected to double this year to around $8 billion and reach more than $34 billion by 2023, according to Gartner projections.”

Yet, all those rosy projections don’t suddenly make the financial results of companies like Nvidia any easier to swallow. The company reported its quarterly earnings last week, and the results were weak — pretty much across the board.

The Exit: an AI startup’s McPivot

Five years ago, Dynamic Yield was courting an investment from The New York Times as it looked to shift how publishers paywalled their content. Last month, Chicago-based fast food king McDonald’s bought the Israeli company for $300 million, a source told TechCrunch, with the purpose of rethinking how people order drive-thru chicken nuggets.

The pivot from courting the grey lady to the golden arches isn’t as drastic as it sounds. In a lot of ways, it’s the result of the company learning to say “no” to certain customers. At least, that’s what Bessemer’s Adam Fisher tells us.

The Exit is a new series at TechCrunch. It’s an exit interview of sorts with a VC who was in the right place at the right time but made the right call on an investment that paid off. 

Fisher

Fisher was Dynamic Yield founder Liad Agmon’s first call when he started looking for funds from institutional investors. Bessemer bankrolled the bulk of a $1.7 million funding round which valued the startup at $5 million pre-money back in 2013. The firm ended up putting about $15 million into Dynamic Yield, which raised ~$85 million in total from backers including Marker Capital, Union Tech Ventures, Baidu and The New York Times.

Fisher and I chatted at length about the company’s challenging rise and how Israel’s tech scene is still being underestimated. Fisher has 11 years at Bessemer under his belt and 14 exits including Wix, Intucell, Ravello and Leaba.

The interview has been edited for length and clarity. 


Saying “No”

Lucas Matney: So, right off the bat, how exactly did this tool initially built for publishers end up becoming something that McDonalds wanted?

Adam Fisher: I mean, the story of Dynamic Yield is unique. Liad, the founder and CEO, he was an entrepreneur in residence in our Herzliya office back in 2011. I’d identified him earlier from his previous company, and I just said, ‘Well, that’s the kind of guy I’d love to work with.’ I didn’t like his previous company, but there was something about his charisma, his technology background, his youth, which I just felt like “Wow, he’s going to do something interesting.” And so when he sold his previous company, coincidentally to another Chicago based company called Sears, I invited him and I think he found it very flattering, so he joined us as an EIR.

Cisco to acquire silicon photonics chip maker Luxtera for $660 million

As networks get put under increasing pressure from ever-growing amounts of data, network equipment manufacturers are facing huge challenges to increase data transmissions speeds over further distances. As a premiere networking equipment company, Cisco wants to be prepared to meet that demand. Today, it opened up its checkbook and announced its intent to acquire Luxtera for $660 million.

Luxtera, which was founded in 2001 and raised over $130 million, will give Cisco a photonic solution for that data networking problem. Rob Salvagno, head of Cisco’s M&A and venture investment team sees a company that can help modernize Cisco’s networking equipment.

“That’s why today we announced our intent to acquire Luxtera, Inc., a privately-held semiconductor company that uses silicon photonics technology to build integrated optics capabilities for webscale and enterprise data centers, service provider market segments, and other customers. Luxtera’s technology, design and manufacturing innovation significantly improves performance and scale while lowering costs,” he wrote in a blog post announcing the acquisition.

Photonics uses light to move large amounts of data at higher speeds over increased distances via fiber optic cable. Cisco sees this as a way to future-proof customer networking requirements, while keeping them on Cisco equipment. “The combination of Cisco’s and Luxtera’s capabilities in 100GbE/400GbE optics, silicon and process technology will enable customers to build future-proof networks optimized for performance, reliability and cost,” Salvagno wrote.

While Cisco has been acquiring its share of high-profile software properties in recent years including AppDyanmics for $3.7 billion in 2017 and Jasper Technologies for $1.4 billion in 2016, it also acquired Israeli chip designer Leaba Semiconductor for $320 million in 2016 for its advanced chip making capability.

Today’s announcement would seem to build on that earlier purchase as Cisco tries to modernize its hardware offerings to meet increasingly stringent demands inside large-scale data centers.

The acquisition is subject to the typical regulatory scrutiny, but Cisco expects it to close in its fiscal year 2019 Q3. It reported its Q1 2019 earnings in November.

Nvidia’s limited China connections

Another round of followups on Nvidia, and then some short news analysis.

TechCrunch is experimenting with new content forms. This is a rough draft of something new – provide your feedback directly to the author (Danny at [email protected]) if you like or hate something here.

Nvidia / TSMC questions

Following up on my analyses this week on Nvidia (Part 1, Part 2) , a reader asked in regards to Nvidia’s risk with China tariffs:

but the TSMC impact w.r.t. tariffs doesn’t make sense to me. TSMC is largely not impacted by tariffs and so the supply chain with NVIDIA is also not impacted w.r.t. to TSMC as a supplier. There are many alternate wafer suppliers in Taiwan.

This is a challenging question to definitively answer, since obviously Nvidia doesn’t publicly disclose its supply chain, or more granularly, which factories those supply chain partners utilize for its production. It does, however, list a number of companies in its 10-K form as manufacturing, testing, and packaging partners, including:

To understand how this all fits together, there are essentially three phases for bringing a semiconductor to market:

  1. Design – this is Nvidia’s core specialty
  2. Manufacturing – actually making the chip from silicon and other materials at the precision required for it to be reliable
  3. Testing, packaging and distribution – once chips are made, they need to be tested to prove that manufacturing worked, then packaged properly to protect them and shipped worldwide to wherever they are going to be assembled/integrated

For the highest precision manufacturing required for chips like Nvidia’s, Taiwan, South Korea and the U.S. are the world leaders, with China trying to catch up through programs like Made in China 2025 (which, after caustic pushback from countries around the world, it looks like Beijing is potentially scrapping this week). China is still considered to be one-to-two generations behind in chip manufacturing, though it increasingly owns the low-end of the market.

Where the semiconductor supply chain traditionally gets more entwined with China is around testing and packaging, which are generally considered lower value (albeit critical) tasks that have been increasingly outsourced to the mainland over the years. Taiwan remains the dominant player here as well, with roughly 50% of the global market, but China has been rapidly expanding.

U.S. tariffs on Chinese goods do not apply to Taiwan, and so for the most part, Nvidia’s supply chain should be adept at avoiding most of the brunt of the trade conflict. And while assembly is heavily based in China, electronics assemblers are rapidly adapting their supply chains to mitigate the damage of tariffs by moving factories to Vietnam, India, and elsewhere.

Where it gets tricky is the Chinese market itself, which imports a huge number of semiconductor chips, and represents roughly 20% of Nvidia’s revenues. Even here, many analysts believe that the Chinese will have no choice but to buy Nvidia’s chips, since they are market-leading and substitutes are not easily available.

So the conclusion is that Nvidia likely has maneuvering room in the short-term to weather exogenous trade tariff shocks and mitigate their damage. Medium to long-term though, the company will have to strategically position itself very carefully, since China is quickly becoming a dominant player in exactly the verticals it wants to own (automotive, ML workflows, etc.). In other words, Nvidia needs the Chinese market for growth at the exact moment that door is slamming shut. How it navigates this challenge in the years ahead will determine much of its growth profile in the years ahead.

Rapid fire analysis

Short summaries and analysis of important news stories

Saudi Arabia’s Crown Prince Mohammed bin Salman. FETHI BELAID/AFP/Getty Images

US intelligence community says quantum computing and AI pose an ’emerging threat’ to national security – Our very own Zack Whittaker talks about future challenges to U.S. national security. These technologies are “dual-use,” which means that they can be used for good purposes (autonomous driving, faster processing) and also for nefarious purposes (breaking encryption, autonomous warfare). Expect huge debates and challenges in the next decade about how to keep these technologies on the safe side.

Saudi Arabia Pumps Up Stock Market After Bad News, Including Khashoggi Murder – A WSJ trio of reporters investigates the Saudi government’s aggressive attempts to shore up the value of its stock exchange. Exchange manipulation is hardly novel, either in traditional markets or in blockchain markets. China has been aggressively doing this in its stock exchanges for years. But it is a reminder that in emerging and new exchanges, much of the price signaling is artificial.

A law firm in the trenches against media unions – Andrew McCormick writes in the Columbia Journalism Review how law firm Jones Day has taken a leading role in fighting against the unionization of newsrooms. The challenge of course is that the media business remains mired in cutbacks and weak earnings, and so trying to better divide a rapidly shrinking pie doesn’t make a lot of sense to me. The future — in my view — is entrepreneurial journalists backed up by platforms like Substack where they set their own voice, tone, publishing calendar, and benefits. Having a close relationship with readers is the only way forward for job security.

At least 15 central banks are serious about getting into digital currency – Mike Orcutt at MIT Technology Review notes that there are a bunch of central banks, including China and Canada. What’s interesting is that the trends backing this up including financial inclusion and “diminishing cash usage.” Even though blockchain is in a nuclear winter following the collapse of crypto prices this year, it is exactly these sorts of projects that could be the way forward for the industry.

What’s next

More semiconductors probably. And Arman and I are side glancing at Yelp these days. Any thoughts? Email me at [email protected].

This newsletter is written with the assistance of Arman Tabatabai from New York

Sony posts $2.1B profit as PlayStation sales keep on growing

Sony’s PlayStation business continues to come on leaps and bounds after a 27 percent increase in gaming revenue helped the company record a $2.1 billion profit in Q2.

The PlayStation division is Sony’s top performer and once again that was the case, carding $4.9 billion in sales during the quarter with an operating profit of $800 million for the division, that’s up around 65 percent year-on-year. That caused Sony’s operating profit to jump by 59 percent as revenue rose six percent to $19.6 billion.

Outside of gaming, Sony saw big gains in sales within financial services, its second-biggest revenue generator which jumped 27 percent, and semiconductors, up 11 percent, although losses for its troubled mobile unit widened to reach $265 million for the quarter while mobile revenue declined by 32 percent year-on-year.

The Sony is so bullish about the rest of the year that it has raised its full-year operating profit forecast to 870 billion JPY, that’s $7.7 billion and an increase of about 30 percent to the original target.

That’s partly down to the strong performance of its PlayStation but also the impact of its $2.3 billion buyout of EMI Music Publishing, as pointed out by Bloomberg. Sony previously held a 39.8 percent share in the venture but the deal — which just got the regulatory green light in Europe — will see the value’s of original stake increase while adding additional revenue from the business. Tellingly, those EMI gains represent 55 percent of the additional revenue Sony is forecasting to hit this financial year.

Virus shuts down factories of major iPhone component manufacturer TSMC

Apple touts the cybersecurity of its iPhone, but less can be said for the exclusive manufacturer who makes the processor for the iPhone.

Semiconductor foundry TSMC, or Taiwan Semiconductor Manufacturing Company, was hit by a virus late Friday night, which forced it to shut down several factories according to Debbie Wu at Bloomberg. The virus and the shutdown were confirmed by TSMC representatives.

It is not clear at this time which factories were hit, or whether those factories were producing the iPhone’s main processor. Apple is expected to unveil new iPhones this fall, and supply chain disruptions in the critical month of August could have significant adverse consequences for the rapid availability of the new phone before the key Christmas holiday.

TSMC has grown to become the largest independent semiconductor foundry in the world, with profits last year of $11.6 billion. The company has benefitted from partnerships with smartphone companies like Apple, which produces the designs for its own A-series chips and then contracts out their manufacturing to foundries.

TSMC is a critical partner for the launch of the new iPhone. It announced earlier this year that it had begun volume production of 7mm chips, which will drive performance while limiting energy usage.

The origins of the virus are not known, although a statement by the company to Bloomberg said that it wasn’t introduced by a hacker.

Cyberattacks are nothing new to the island nation, which has increasingly faced sophisticated cyberattacks, mostly originating from China, which holds deep antipathy for Taiwan’s president Tsai Ing-wen. Taiwan’s government websites have sustained 20 million cyberattacks per month, with the bulk believed to be originating from China. Jess Macy Yu at Reuters reported earlier this summer that Chinese cyberattacks had grown more successful, even as their total volume has declined. Taiwan’s local elections will be held later this year in November, and the number and intensity of attacks is expected to increase as the date approaches.

Alongside Foxconn, TSMC is one of Taiwan’s most important and profitable companies, and is an obvious target both due to its wealth and scale, as well as its centrality in the increasingly fraught cross-straight relations between China and Taiwan. China has made becoming the world leader in semiconductors a national priority, and companies like TSMC are deeply competitive with mainland foundries.

That’s the paranoid context for many tech executives in Taiwan, and while the culprit of this particular virus is not yet publicly known, eyes and fingers are already beginning to point in one direction.

More information about the attack is expected to be available next week.