When Apple cancelled its wireless charging pad project (AirPower) this week…
Month: March 2019
「Podcast of the Week」a16z Podcast Comments On Apple’s Services
Lyft On Nasdaq
The first of a series of tech IPOs – Lyft debuted on Nasdaq today. With its stock priced at $72, Lyft is offering 32,500,000 shares of its Class A common stock, plus up to an additional 4,875,000 shares (raised $351 million in total).
The market cap excludes things like RSUs to be issued: 1) 77,390,807 shares of our Class A common stock reserved for future issuance under our equity compensation plans 2) 31,605,338 shares of our Class A common stock subject to RSUs outstanding, but for which the time-based vesting condition was not satisfied as of December 31, 2018 (including 15,065,349 shares of our Class A common stock subject to RSUs granted after December 31, 2018) 3) 7,037,379 shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock outstanding as of December 31, 2018 (weighted average $4.74 exercise price)
New Foreign Investment Law, Boao Forum for Asia 2019 And China Development Forum 2019
Following the closing (March 15) of National People’s Congress (NPC)’ 2019 annual meeting in Beijing, two important annual forums were held – China Development Forum 2019 (March and Boao Forum for Asia 2019
One of the major progress made during NPC’s annual meeting is the approval of the new foreign investment law #中华人民共和国外商投资法 (original link here)
The law was first introduced as a draft in 2015 and will come into effect on January 1, 2020.
The new foreign investment law will replace the “three foreign capital laws” – Law on Sino-Foreign Equity Joint Ventures #中外合资经营企业法, Law on Foreign-Capital Enterprises #外资企业法 and Law on Sino-Foreign Cooperative Joint Ventures #中外合作经营企业法, which were introduced in 1979, 1986 and 1988 respectively. They were updated along the way but structural/fundamental changes won’t be easy. (you can’t expect a law to be efficient and perfect after 30-40 years.. in a fast-changing environment)
China Development Forum is more focused on China. And of course, the newly-passed foreign investment law was discussed and introduced to all the CEOs/managements from foreign companies among others.
Again, on Boao Forum For Asia, Premier Li Keqiang reemphasized the plan to make detailed regulations to enforce the effective implementation of the foreign investment law.
Updates:
- 3/28, JP Morgana and Nomura have been approved to set up JV in mainland China with equity ownership percentage of 51% with no ban on any specific services, as a part of Beijing’s promise to open up financial services sector to foreign companies.
Recently adjusted (cut) government subsidies for electric EV in China
EV is probably one of the most mature new market. It is still something new for most families, but it seems to me that the global EV technology readiness is pretty much similar to that of iPhone in 2013-2015 (iPhone 5S – iPhone 6S).
The industry is more likely to make incremental improvements over the next decade. It won’t be easy in terms of technological progress; it will also need much more effort/thinking in terms of commercial strategies.
One of the latest sign is the most recent subsidy cut for “new energy vehicles”, dated March 26 in Beijing #财建〔2019〕138号.
The reduction in subsidies has been outlined as early as April 2015 #财建〔2015〕134号, in which 1. the subsidies for 2016 was announced and 2. projected that certain vehicles’ 2017-2018 subsidies shall be 20% lower & 3. 2019-2020 subsidies shall be 40% lower, among other things.
2017－2020年除燃料电池汽车外其他车型补助标准适当退坡，其中：2017－2018年补助标准在2016年基础上下降20%，2019－2020年补助标准在2016年基础上下降40%。
Here is the list of updates in the following years:
#财建〔2016〕958号 – Announced Dec 30, 2016; Effective Jan 1, 2017
#财建〔2018〕18号 – Announced Feb 12, 2018; Effective Feb 12, 2018; Grace Period till Jun 11, 2018, during which passengers would follow the previous program x 40%, trucks would follow the previous program x 70%, fuel cells would follow the previous program
#财建〔2019〕138号 – Announced Mar 26, 2019; Effective Mar 26, 2019; Grace Period till Jun 25, 2019, during which vehicles unqualified for 2019 standard shall follow previous program x 10%, qualified for 2019 standard shall follow previous program x 60%, policies for fuel cells and buses will announce separately
A summary of national government (not including regional) subsidy base for battery electric vehicles
More restrictions are added in 2018 and 2019, especially in terms of technical standards.
Smaller EV manufacturers with little R&D resources will need to restructure or pivot. Profitability will be an issue for many companies; but a needed test to form a mature market that can run itself and benefit most stakeholders.
Current State of Cannabis Companies And The Market (3)
Part III … [see the previous post for Part I and Part II]
Oversupply and Drop in Average Selling Price (ASP)
Compiled from companies’ SEC filings.
TLRY is the only company that didn’t double its sales from Q3 to Q4. The driver here should be the channel discount. CGC’s Q4 sales in kilograms is almost five times the same figure in Q3 (2,197kg -> 10,102kg), while TLRY is only modestly growing comparatively (1,613kg -> 2,053kg, but still very impressive compared with other industries).
Apple March Event, Officially Marching Into Broader Services Categories
Apple announced 3 new (subscription) services today: Apple News+, Apple TV+, Apple Arcade. [they are actually very similar to a previous post Apple’s Service Bundle]
Apple News+ is a $10 per month subscription bundle. Essentially, it is a product of “securitization” of reading magazines & newspapers – just like Spotify as a securitization of listening to musics.
Apple TV+ will be offered through new Apple TV app. This is important as it might be the first major service/software by Apple that doesn’t require an Apple device.
It doesn’t have a price tag yet. And it is reported that Apple will partner with brands like HBO to offer an add-on option (i.e. additional $10 per month), just like what Hulu, DirectTV and many other streaming plans are providing.
Another question tho, is how the Apple TV app (and the Apple TV+ service) will impact the sales of Apple TV as it will be available on many smart TVs such as Roku, Fire TV (Amazon), Samsung, etc.
Apple Arcade is coming sooner that I thought. And it will be a cross-platform product working across iPhone, iPad, Mac, and Apple TV.
It is a very good showcase/test of how Apple is merging or making it compatible between iOS and MacOS (and tvOS).
What’s next?
A master membership from Apple is possible – something like $98 per month that includes Apple TV+, Apple News+, Apple Music, Apple Arcade, iCloud storage, AppleCare, etc.
Or a modular membership system.
At the core could be the financing of Apple devices’ purchases – maybe around $30-50 per month – and each subscription will be an add-on. This may provide an extra synergy with the new credit card service by Apple and Goldman Sachs.
Apple has those great plans to translate sales and customers into cash flows.
But for consumers, there will be some psychological differences between purchasing a device (as an asset) and paying an indefinite monthly fee (as an expenditure). And services are not as showable as devices. Apple (and Apple investors) might need to prepare and think carefully about those subtle changes.
AWS And Its Appearance In Other Companies’ (IPO) Filings
Following upon a previous post about all those tech companies’ rush to Nasdaq, a group of companies have filed S-1 the past weeks, including Lyft, Pinterest and Zoom.
Plus the previous filings from companies such as Snap, we could get a glimpse into the empire of AWS… as the infrastructure of the current tech industry and all these companies’ commitments to pay Amazon.
Several examples. Starting with Pinterest:
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- 2018 revenue $775.9 million
- 2018 cost fo revenue $241.6 million
- Total commitment: at least $750 million in 7 years, from July 2017 to June 2023, first year of $125 million
- Remaining $441.1 million as of Dec.31 2018
- On average used: $206 million/yr [estimation: (750-441.1)/1.5=206]
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- 2018 revenue $2,157 million
- 2018 cost of revenue $1,243 million
- Total commitment: at least $300 million in 3 years, from Jan 2019 to Dec 2021, each year at least $80 million
- On average used: $60 million/yr [estimation: (144-24)/2=60]
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- 2018 revenue $ 1,180 million
- 2018 cost of revenue $799 million
- Total commitment: at least $1.1 billion in 6 years, from Jan 2017 to Dec 2022, ($90.0 million in 2018, $150.0 million in 2019, $215.0 million in 2020, $280.0 million in 2021, and $349.0 million in 2022)
- On average used: $60 million/yr
- Snap relies more on Google Cloud: at least $2 billion in 5 years, Jan 2017 to Dec 2021, at least $400 million/yr
- estimated usage: at least $530 million/yr in 2018
AWS achieved a revenue of $25,655 million in 2018, equivalent to the usage of ~48 Snap combined.
It will be interesting to see how AWS is going to renew/grow those contracts (should be easy, considering the friction to change a cloud provider) and how those companies will negotiate those terms, as more providers are as legit.
And when tech companies are using a blend of private cloud and those services, how AWS and others are going to fill the revenue “hole/gap”.
After all, the Cost of Revenues (partially due to AWS) will be limited by the Revenues (of internet companies); the growth heavily rely on new usages and the overall revenue of all internet companies.
「Video of the Week」Robotics In Manufacturing
most will agree that automation is coming to fill up the shortage of labor and prepares us for the demographic shift in the next few decades.
While that should be the future, along the way, I believe there will be miserable frictions., as technology advancements and deployment is not as smooth as changes in the working population.
How to minimize the negative impacts of those frictions will be a critical topic. After all, we want people to live in good lives.