Hello, hello! 👋🏻👋🏻
Welcome back to another edition of Tidbits covering all the recent things worth talking about in business, media, and technology.
🗺 World Affairs + Geopolitics
#1 – NATO Pivots To Highlight Chinese ‘Challenges’ For 1st Time
NATO has for the first time singled out China as one of its strategic priorities for the next decade, warning about its growing military ambitions, confrontational rhetoric toward Taiwan and other neighbors, and increasingly close ties to Russia.
It was the first time that the leaders of Japan, South Korea, Australia and New Zealand were invited to a NATO summit. They participated in a NATO session on new global challenges after holding a side meeting outside of the summit. And United States president Joe Biden sat down with the leaders of Japan and South Korea.Source: AP News
Russia didn’t get what it wanted by invading Ukraine. It got an enlarged NATO.
Likewise, China appears to be not getting what it wants either. NATO is now expanding into Asia and linking up with US allies in the region.
We live in a Chaotic Era, an Era of Change. I’d like to think Ukraine is the thing that put some sense into everyone, but Ukraine might just be the first step down a more dangerous path for the whole world.
#2 – Japan’s Ex-Leader Shinzo Abe Assassinated During A Speech
Former Prime Minister Shinzo Abe was assassinated Friday on a street in western Japan by a gunman who opened fire on him from behind as he delivered a campaign speech — an attack that stunned a nation with some of the strictest gun control laws anywhere.
Even though he was out of office, Abe was still highly influential in the governing Liberal Democratic Party and headed its largest faction, Seiwakai, but his ultra-nationalist views made him a divisive figure to many.
That ultra-nationalism riled the Koreas and China, and his push to create what he saw as a more normal defense posture angered many Japanese. Abe failed to achieve his cherished goal of formally rewriting the U.S.-drafted pacifist constitution because of poor public support.Source: AP News
Abe leaves behind a complicated legacy, especially when it comes to Japan’s military posture. His death seems to have energized his party to pursue a more nationalist agenda, including rewriting the pacifist constitution.
Only time will tell if Asia is now on the path to a more dangerous future…or whether a more militarized Japan is necessary to restore military balance in the region.
We live in a Chaotic Era, an Era of Change. And great change is upon us. Unfortunately, we cannot ignore these changes because the world’s supply chains and markets will shift depending on how things evolve.
#3 – US Wants Dutch Supplier to Stop Selling Chipmaking Gear to China
The US is pushing the Netherlands to ban ASML Holding NV from selling to China mainstream technology essential in making a large chunk of the world’s chips, expanding its campaign to curb the country’s rise, according to people familiar with the matter.
American officials are lobbying their Dutch counterparts to bar ASML from selling some of its older deep ultraviolet lithography, or DUV, systems, the people said. These machines are a generation behind cutting-edge but still the most common method in making certain less-advanced chips required by cars, phones, computers and even robots.Source: Bloomberg
In response, China’s foreign ministry spokesperson accused the US of “technological terrorism”.
There’s a lot of interesting parallels between what is going on now and with US-Japan relations pre-Pearl Harbor attack. If I recall, the US tried to stunt Japanese wartime progress in Asia through an oil embargo that ultimately forced Japan to attack the US.
In the 20th Century, oil was the fuel of Progress. In the 21st Century, chips is the fuel of Progress. The more and more the US tightens the leash on chips, the more cornered China may feel as it loses control over its own destiny and future. Interestingly, the US also feels it is running out of time to put checks on China’s rise and control its own destiny and future. Not a good combination.
#4 – China Slams NASA Chief Nelson as Race to the Moon Gets Heated
The competition between the US and China to explore outer space turned prickly after Chinese diplomats blasted the head of NASA and encouraged neighboring countries to support Beijing’s plan for exploring the moon.
Bild cited Nelson as saying the world should be concerned that China might lay claim to the moon and stop other countries from exploring it. In the interview, he also accused China of stealing technology from other nations and said Beijing was learning how to destroy satellites launched by other countries.
“This is not the first time for the chief of NASA to lie through his teeth and smear China,” Zhao said at the Foreign Ministry’s daily press conference. “In recent years the US openly defined space as a war-fighting domain.”
In response to Zhao’s comments, Nelson said the Chinese space program is run by its military, while the US agency runs a peaceful and open civilian space program with international participation, according to an emailed statement.Source: Bloomberg
Hmm…yeah, don’t think things are going in the right direction.
🛡 Defense and Cybersecurity
#5 – Vast Cache of Chinese Police Files Offered for Sale in Alleged Hack
A vast trove of data on Chinese citizens allegedly siphoned from a police database, some of which checks out as legitimate, is being offered for sale by an anonymous hacker or hacking group. If confirmed, it would mark one of history’s largest leaks of personal data.
The cache allegedly includes billions of records stolen from police in Shanghai, containing data on one billion Chinese citizens
A sample of the data posted by the hacker, who claimed it included 750,000 records, contained individuals’ personal names, national ID numbers, phone numbers, birthdays and birthplaces, as well as detailed summaries of crimes and incidents reported to the police. The cases ranged from incidents of petty theft and cyber fraud to reports of domestic violence, dating as far back as 1995 to as recently as 2019.Source: WSJ
This is an incredible situation. China is very good at gathering data on its citizens. And it’s all centralized. And now the data has been scraped.
In a way, this shows why China has been extremely sensitive to cybersecurity and data security over the past year. But it seems like there is a long way to go.
I’m curious what the data will reveal about the nation as a whole (e.g. the true size of the population vs the official 1.4 billion number disclosed by the government).
#6 – Tesla Cars Barred For 2 Months In Beidaihe, Site Of China Leadership Meet
Tesla (TSLA.O) cars will be prohibited from entering the Chinese coastal district of Beidaihe, site of a secretive annual summer party leadership conclave, for at least two months starting on July 1, a local traffic police official told Reuters on Monday.
The decision by the Beidaihe authorities comes just weeks after Tesla cars were also barred from driving on to some roads in the central city of Chengdu in early June, which coincided with a visit by Chinese President Xi Jinping to the city.
Last year, the Chinese military banned Tesla cars from entering its complexes, citing security concerns over cameras installed on the vehicles, Reuters reported at the time citing sources who had seen the directive.Source: Reuters
Back in Tidbits #66, we discussed the future of cameras, devices, and security and questioned whether the lack of trust between countries would doom many camera-enabled devices like Teslas outside of their country of origin. Increasingly, cybersecurity matters…and having things with cameras (and AI-enabled) everywhere is a risky idea, especially if it is manufactured by a foreign company.
Scrutiny for Tesla (and others) will likely continue to increase in China.
China is also increasingly wary of Elon because of SpaceX and Starlink and their cooperation with the US military.
(In other Elon news, he has terminated his deal to acquire Twitter…a successful acquisition of Twitter would have also been an interesting flashpoint in the intersection of politics, US, and China.)
🤑 Economics + Markets
#7 – Rising Covid Cases in China Raise Threat of Lockdowns, Rattling Chinese Markets
China’s Covid-19 cases are rising at the fastest pace since late May, unnerving investors wary of a repeat of Shanghai’s two-month lockdown, which snarled global supply chains and sank hopes that the country would reach Beijing’s economic-growth targets.
The uptick in cases is fueling concern about the return of sweeping and stringent pandemic restrictions—particularly in view of the spread of BA.5. China-related stock indexes fell Monday as investors weighed the likely risk to the country’s already weak economy and consumer confidence.Source: WSJ
#8 – American Factories Are Making Stuff Again as CEOs Take Production Out of China
There has been a sense in financial circles that the fever among American executives to shorten supply lines and bring production back home would prove short-lived. As soon as the pandemic started to fade, so too would the fad, the thinking went.
And yet, two years in, not only is the trend still alive, it appears to be rapidly accelerating.
Rattled by the most recent wave of strict Covid lockdowns in China, the long-time manufacturing hub of choice for multinationals, CEOs have been highlighting plans to relocate production — using the buzzwords onshoring, reshoring or nearshoring — at a greater clip this year than they even did in the first six months of the pandemic, according to a review of earnings call and conference presentations transcribed by Bloomberg. (Compared to pre-pandemic periods, these references are up over 1,000%.)Source: Bloomberg
Seems like there is rising interest in changing supply chains, but the actual dollars spent on US manufacturing hasn’t really accelerated vs long-term trend, yet (especially if you note that the following chart is not adjusted for inflation, which has spiked in the last two years):
#9 – Klarna in Talks to Raise Fresh Cash at Slashed $6.5 Billion Valuation
Klarna Bank AB is nearing a deal to raise new money at a valuation of around $6.5 billion, according to people familiar with the matter, a humbling comedown and a testament to the punishing environment facing startup companies.
The deal has yet to be completed and could still hit last minute snags, the people said. But if completed, it would represent a huge discounton the company’s valuation when investors led by an arm of SoftBank Group Corp. valued Klarna at $45.6 billion in June 2021.Source: WSJ
Private valuations are getting reset…just like what has happened in public markets over last 6 months.
👻 Cryptocurrencies + NFTs
#10 – Crypto Fund Three Arrows’ Troubles Spill Over to Exchange
The fallout from troubled crypto hedge fund Three Arrows Capital Ltd. has reached Voyager Digital Ltd., sending shares of the crypto exchange down 51% in Toronto trading with analysts raising the prospect of further damage.
Voyager said it may issue a notice of default to Three Arrows for failure to repay a loan, the exchange disclosed in a statement. The broker’s exposure to Three Arrows includes 15,250 Bitcoin and $350 million of stablecoin USDC, worth roughly $660 million based on Bitcoin’s price on Wednesday in New York.Source: Bloomberg
And the dominoes don’t stop there…others like Solend and MakerDAO and crypto lender, Vauld, are now in trouble. The contagion is also spreading to crypto miners that often take out loans to purchase equipment. These miners are now facing margin calls right when the output (coins) is falling in price.
#11 – Bitcoin Billionaire Sam Bankman-Fried Bails Out Embattled Crypto Firms BlockFi And Voyager
With no central bank willing to come to the rescue, beleaguered crypto companies are turning to their peers for help.
Billionaire crypto boss Sam Bankman-Fried’s companies has signed deals to bail out two firms in as many weeks: BlockFi, a quasi-bank, and Voyager Digital, a digital asset brokerage.Source: CNBC
In other words, crypto has rediscovered central banking and bailouts.
And SBF is crypto-Powell. SBF says he has a few billion more to support the industry. Money printer go brrrrr.
But unlike fiat central banks, SBF is bailing out companies to own them, not bridge them through the storm. This is not like the bank bailouts of 2008 where the banks were eventually freed from government ownership. This seems more like the nationalization of Fannie and Freddie, which remain under government ownership to this very day.
This is also another reminder that companies that come to dominate their industry usually do it by outlasting their peers, not by being more aggressive than everyone else when times are good.
#12 – An Ex-Employee At A Crypto-Lender That’s Holding Customer Deposits Hostage Has Sued The Company, Calling It A ‘Ponzi Scheme’
A former investment manager at Celsius is suing the crypto lending platform, alleging it committed fraud and calling it a Ponzi scheme.
Jason Stone, the CEO and co-founder of the Defi firm KeyFi, later Celsius acquired in 2020, filed the complaint in New York on Thursday.
Celsius offerered users interest in exchange for their crypto holdings that it then lent out to others. According to the lawsuit, it also used those customers’ holdings to artificially raise the price of its own coin, the “Celsius token” or CEL, and failed to account for certain payments that it owed to its users, resulting in a $200 million hole.
The company then lured in new crypto holders with higher interest rates to try to repay initial depositors and creditors, per the lawsuit.Source: Business Insider
These are some serious (but unsurprising?) allegations!
#13 – How A Fake Job Offer Took Down The World’s Most Popular Crypto Game
Ronin, the Ethereum-linked sidechain that underpins play-to-earn game Axie Infinity, lost $540 million in crypto to an exploit in March. While the US government later tied the incident to North Korean hacking group Lazarus, full details of how the exploit was carried out have not been disclosed.
The Block can now reveal that a fake job ad was Ronin’s undoing.
After what one source described as multiple rounds of interviews, a Sky Mavis engineer was offered a job with an extremely generous compensation package.
The fake “offer” was delivered in the form of a PDF document, which the engineer downloaded — allowing spyware to infiltrate Ronin’s systems.Source: The Block
So blockchains are secure…but the people running it remain as flawed as everyone else.
#14 – Jan. 6 Hearings: What We’ve Learned So Far – And What Questions Remain
Through six hearings, the committee has provided evidence — much of it in firsthand testimony from Republicans who worked for Trump in high-level positions — that the then president knowingly spread false claims that the 2020 election had been stolen from him, that he and his allies engaged in a campaign to pressure state officials to change election results, that he sought to install an attorney general who would advance that campaign and that he tried to pressure Vice President Mike Pence into overturning the election.
On July 12, after a brief hiatus, the committee is set to hold its seventh hearing. Before the next hearing convenes, let’s take a step back and look at what we’ve learned from the first six hearings, according to witness testimony and evidence presented by the committee, and the questions that remain unanswered.Source: Yahoo
There’s been a number of gripping testimonies in recent weeks. In case you haven’t been following, this article highlights some of the key revelations.
Although this mostly seems like domestic politics, I would argue it defines a significant portion of the potential outcomes (and volatility) that we can expect in the coming two years. The upcoming midterm elections and 2024 Presidential elections will be influenced by the actions (or lack of actions) taken post-investigation. And this will have significant impact on who will be directing policies both domestically and internationally.
Something similar should probably be said about the currently highly active Supreme Court including their recent actions to limit the reach of the EPA (and I’m sure you’ve heard all about the Supreme Court overturning Roe v. Wade already.). These actions will have ramifications far beyond the issue they affect because it affects how business is done, how people live, and how people and businesses plan for the future regardless of how you feel about the EPA or abortion as a general matter.
#15 – Germany Dims The Lights To Cope With Russia Gas Supply Crunch
Germany is rationing hot water, dimming its street lights and shutting down swimming pools as the impact of its energy crunch begins to spread from industry to offices, leisure centres and homes.
A huge increase in gas prices triggered by Russia’s move last month to sharply reduce supplies to Germany has plunged Europe’s biggest economy into its worst energy crisis since the oil price shock of 1973.
As tensions over Russia’s war in Ukraine escalate, officials fear the situation could get worse. On Monday, Russia is shutting down its main pipeline to Germany, Nord Stream 1, for 10 days of scheduled maintenance. Many in Berlin fear it will never reopen.Source: FT
The belt is probably only going to get tighter for many countries in the coming months…
And the energy sphere is also potentially in the midst of cyberwar as well.
#16 – EU Lawmakers Approve Sweeping Digital Regulations
The European Parliament on Tuesday voted its stamp of approval for the two laws—one focused on anticompetitive behavior, the other on content deemed illegal in Europe—after reaching an agreement on them with European Union member states in the spring.
The laws, which are backed by the threat of noncompliance fines in some extreme cases of as much as 20% of a company’s annual world-wide revenue, are the most far-reaching Western efforts to rein in technology companies in at least a generation.
The Digital Markets Act will impose new obligations on how a small number of digital giants operate, with rules dealing with online messaging, digital advertising and the app ecosystem. The Digital Services Act will require large social-media platforms to take steps to deal with illegal content and other material regulators view as harmful, and give users an avenue to register their complaints about content moderation.Source: WSJ
#17 – Canada to Compel YouTube, TikTok and Streamers to Boost Domestic Content
Canada approved legislation that targets what video- and audio-sharing platforms like YouTube and TikTok can broadcast to a Canadian audience, as the country follows in Europe’s footsteps in imposing a heftier regulatory burden on the digital sector.
This marks the second attempt in as many years by Canada’s Liberal government to compel digital platforms, including streaming companies like Netflix Inc., to prominently feature Canadian artists on their services when users with a Canadian internet-protocol address log in. As contemplated under the new measures, users who search for music, television programming, films or do-it-yourself video shorts would get results incorporating a certain quota of Canadian-made content.Source: WSJ
The Internet is possibly splintering. Most countries already want data stored locally. But now some countries like Canada want to promote domestic content ahead of foreign content. And, of course, this is sort of the model that China has been running with for a while.
#18 – Replicating a Sense of Touch in the Metaverse with Robotic Hands
What if VR could connect more of your senses—beyond just sight and sound—to a virtual world? What might that leap enable? This is precisely what Meta Reality Labs (MRL) is working on, beginning with touch. Imagine if you could touch objects in VR. Imagine if you could hold an object and feel the shape, ridges, and every nook and cranny. What important VR applications might that core sense enable?
This future is becoming a reality, thanks to advancements in technology at the intersection of haptics, soft robotics, and microfluidics, enabling people to touch, feel, and manipulate virtual objects. The team at MRL is bringing this to life, by building soft, lightweight, and robotic gloves.Source: Reasons to be Optimistic
Fascinating piece delving into the work that Facebook (and others) have done on haptics.
🍪 Semiconductors + Chips
#19 – Samsung Electronics Starts 3-Nanometer Chip Production Ahead Of TSMC
Samsung Electronics said Thursday it has kicked off mass production of 3-nanometer chips, becoming the first company to do so globally, as it aims to beat Taiwan Semiconductor Manufacturing Co, or TSMC, the world’s most advanced foundry chipmaker.
Samsung said it’s using gate-all-around (GAA) transistor architecture, which allows these first-generation 3-nm chips to have 16% smaller surface area, 45% reduction in power usage and 23% performance improvement compared with current 5-nm chips. The South Korean company also said in a statement that the second generation of the 3-nm process would allow 50% lower power consumption.Source: Techcrunch
Impressive. There’s two firsts here – first to 3nm and first to gate-all-around, which is a new way of wiring chips. Question is whether Samsung is biting off more than it can chew in order to try to leapfrog TSMC. If there are no yield issues, then this would be quite impressive.