May 20, 2019

Axios Login

By Ina Fried
Ina Fried

Situational awareness: The chairman of the FCC recommended the agency approve the proposed merger between T-Mobile and Sprint.

And, now that "Game of Thrones" is over, you may as well read today's newsletter.

1 big thing: Huawei's smartphone efforts take a giant hit

Photo: Ina Fried/Axios

When the head of Huawei's phone business told me in 2016 that he expected the company to pass Apple or Samsung (or both) to become the No. 1 or No. 2 smartphone maker in the world, it sounded improbable.

But, the Chinese phone maker did just that over the last couple of years.

  • It grabbed a significant slice of the European and Canadian markets, in addition to a large chunk of the domestic Chinese market.
  • As of last quarter, Huawei passed Apple to become the No. 2 smartphone maker in the world.

Driving the news: Its smartphone effort could be in peril, though, amid new regulations enacted by the Trump administration that ban U.S. companies from doing business with Huawei.

  • This stands to keep the phone maker from getting many of the key ingredients for its devices.
  • Most pressingly, the ban has led Google to turn off Huawei's access to the Google flavor of Android, including its services and app store.
  • Huawei can still access and distribute the open source version of Android, but that lacks a lot of the key selling points of the custom Google version.

Why it matters: In China, phone buyers don't rely on Google services and there are a number of other outside app stores. In nearly all other markets, though, access to Google's Play Store and key apps like Maps, Gmail and YouTube are considered table stakes for an Android device.

The big picture: One Huawei advantage is that, unlike many smartphone makers, it makes its own core processors, meaning it doesn't rely on Qualcomm chips. But a lot more goes into a phone than just the software and main processor, including other hardware elements Huawei obtains from abroad.

  • While Huawei has apparently tried to stockpile other key smartphone components, it's unclear just how large a supply it has built up.
  • Huawei also has a smaller computer unit that uses Microsoft Windows, which seems likely to also be impacted by the U.S. ban. (Microsoft did not immediately respond to Axios' request for comment.)
  • More importantly, Huawei also relies on U.S. software and technology for its even larger networking business, which is the core of its operations. It's unclear just what effect the U.S. ban will have on that business.
  • Per Bloomberg, a number of U.S. chipmakers have stopped supplying chips to Huawei, including Intel, Qualcomm and Broadcom. (Intel and Qualcomm declined comment; a Broadcom representative was not immediately available for comment.)

What's next: Huawei and Google can seek Commerce Department permission to continue their work together, either broadly on phones or perhaps more narrowly to ensure existing customers maintain direct access to security updates. Likewise for other partners.

The bottom line: This is a giant blow to Huawei, but don't expect China to sit idly by. Just as Huawei is dependent on U.S. software, many U.S. tech companies, including Apple, are largely or wholly dependent on Chinese companies to manufacture their products.

Go deeper: Read more of the full story.

2. Scoop: Sonos hires former engineers from Anki

Photo: Sonos

Sound hardware company Sonos has hired a good chunk of the engineering talent left jobless from the abrupt closure of consumer robot maker Anki.

Details: Sources say that Sonos has hired at least 20 technical people from Anki, with the hires to form the basis of a new San Francisco office for Sonos.

  • The San Francisco operation will be led by Brian Chapados, who will report to Antoine Leblond, the former Microsoft executive hired by Sonos in 2014 as VP of software.

Why it matters: Good hardware engineers are hard to find and Sonos sources say the company had immediate need for the skills possessed by Anki's team.

Yes, but: This probably won't help owners of Anki devices, as the team will be working on other Sonos-related projects. Sonos just hired the former engineers; it didn't acquire Anki's IP or product lines.

ICYMI: Before shutting down, Anki said it would keep operational the cloud services needed by its devices and that it had contracted for support should software updates be needed. However, it offered only scant details.

3. Peek inside an Amazon fulfillment center

Amazon packages zoom through the warehouse. Photo: Erica Pandey/Axios

My Axios colleague Erica Pandey recently spent an afternoon at a 1-million-square-foot-Amazon warehouse near Baltimore, where more than 2,500 workers assemble, package and ship orders every day.

Why it matters: These jobs are among the most stressful, low-paying and physically taxing in the country — and many of them face ongoing threats from automation. The Baltimore employees make up just 2% of the 125,000 Amazon associates across North America who ensure your Prime packages arrive the next day.

How it works: The orders make it through the Baltimore facility with lightning speed. Within 4 hours after your purchase, your laundry detergent or bag of chips is on its way.

  • Each part of the process is hyper-efficient — and automated where it can be. At the packing station, for example, a line of associates stand for 10-hour shifts, boxing the barrage of orders.
  • A human touch is still necessary to pack the boxes — for now. This week, Amazon made significant headway with new robots that can box up items, Reuters reports. Though they are not nimble enough to handle individual products, these machines are beginning to make Amazon more efficient.
  • The company says the addition of the bots will not eliminate swaths of jobs.

Our thought bubble: Erica says she tried packing 2 boxes on her visit. Each took her a couple of minutes, but Cliff Knight, a packaging associate with Amazon for more than 2 years, says he does a box every 5 to 15 seconds.

Go deeper: You can read Erica's full take here.

4. Chart of the day: The rise of the scooters
Expand chart
Data: Axios research; Chart: Naema Ahmed/Axios

Uber's explosive growth to a valuation of more than $3 billion within 3 years of its seed round has been notable, but today's scooter startups have ascended even faster, Axios' Kia Kokalitcheva writes.

Why it matters: Scooter companies like Bird and Lime benefitted from the optimism ride-hailing companies created about transportation services. But they're now facing an increasing number of questions about their ability to sustain this growth including concerns about seasonality and vehicle costs.

  • As Axios' Dan Primack pointed out last week, capital-dependent companies like scooter startups may be facing more skepticism from investors following Uber's not-quite-stellar IPO.
  • Bird has been working to raise an extension of its prior round at a flat valuation, while Lime announced new funding in February.

Of note: Bird's total scooter trips have continue to grow, though the company declined to share updated data with Axios. Instead, the company says it has been focused on its profitability per ride.

  • It tells Axios that since early April, its new Bird Zero scooters have a positive contribution margin — meaning that the company is making money on those rides (the calculation includes depreciation).

Methodology: Axios created the chart above using data from company news announcements, Pitchbook, and Uber trip data tabulated by Michal Naka.

5. The future of memory

Over the weekend, the Axios team posted a deep dive on how different technologies are reshaping human notions of memory.

The full package is worth a read, but here are a few key points I wanted to implant in your mind.

  1. Forgetting serves a purpose, for both humans and artificial intelligence systems.
  2. Deepfakes and other issues are heightening the risk of false memories.
  3. Brain supplements are a big business.

Go deeper:

6. Take Note

On Tap

  • The Wall Street Journal's Future of Everything event takes place today through Thursday in New York, while Collision conference takes place over the same period in Toronto.

ICYMI

  • Tesla shares fell on Friday in the wake of a fatal crash. (Axios)
  • Police departments are quietly rolling out facial recognition systems, according to a pair of new reports, even as scrutiny intensifies over the technology's accuracy and fairness. (Axios)
  • Salesforce had a major outage on Friday as the company took systems offline to deal with an issue that allowed some employees to view all data in their company's system. (GeekWire)
7. After you Login

I'm not much for beatbox, but I'd pay good money to watch this duo.

Ina Fried