Aug 29, 2019

Axios Login

By Ina Fried
Ina Fried

Today's Login is 1,257 words, a ~5-minute read.

1 big thing: Tariffs threaten to reshape tech industry

Illustration: Lazaro Gamio/Axios

Even as businesses continue to protest the growing U.S.-China trade war, the tariffs are already causing companies in both countries to rethink how and where they do business.

Why it matters: For all their differences, the U.S. and Chinese tech industries remain very interdependent — each country contributes a great deal of business to the other's economy.

Where it stands: What tech companies want most is an end to hostilities, as evidenced by a letter issued Wednesday by more than 150 business groups calling for an end to the tariffs. However, the ongoing trade war has both sides eyeing how to lessen their dependence on the other.

  • Historically nearly all smartphones and most other consumer electronics have been made in China, but that is starting to shift. Google, for example, is joining the electronics makers looking at Vietnam as an alternative.
  • China is also likely to explore ways to reduce its dependence on U.S. technology for everything from software to chips and the tools to make them.

Yes, but: In the short term, there is a lot of pain for companies in both countries.

  • Apple remains highly dependent on China for manufacturing and it is also a key market for iPhone sales. Nearly all iPhones are made there, with the exception of phones sold in Brazil and India, where laws impose huge tariffs on imported electronics.
  • Huawei, subject to a near-total ban on business with the U.S., finds itself not only shut out of a key market, but scrambling to find new options for chips and operating systems, among other components. The company faces the prospect of launching its first high-end smartphone without Google's apps and services.
  • Meanwhile, more than 130 companies have asked the Commerce Department for permission to continue selling components to Huawei, Reuters reported this week.

Between the lines: Trump has repeatedly argued that Apple and other tech companies should return manufacturing to the U.S. But that's considered wildly unrealistic, a point that Tim Cook has no doubt tried to make during his meetings with President Trump.

  • U.S. unemployment rates are already at record lows, the Trump administration's immigration policies actively discourage expanding the domestic labor force, and efforts (like Foxconn's deal with Wisconsin) to get overseas manufacturers to build new U.S. factories have been overhyped.
  • More importantly, the U.S. just doesn't have the type of workforce concentration that would allow for devices to be made at the kind of scale Apple and others need for smartphones. At most, tariffs will cause manufacturers to move production from China to other countries.

The bottom line: The tech industry's global supply chain took years to assemble, and it will not dissolve overnight. But even if the Trump administration's most bellicose trade-war scenarios don't materialize, the tariff fight has added a deep layer of uncertainty to how companies operate globally.

  • Wide-open world trade was the rock-solid foundation for decades of tech expansion. With that condition no longer a given, more defensive behavior and slower growth are likely.
2. Uber and Lyft urge riders to fight California bill

Uber and Lyft are trying to enlist their customers to oppose a California employment bill that could upend the companies' business model, Axios' Kia Kokalitcheva reports. The push comes as the bill is headed for a state senate committee vote.

Why it matters: If it passes, the new state law would impose a much more stringent standard for classifying workers as independent contractors, one that ride-hailing and delivery companies are tacitly admitting they wouldn't pass. 

In short, Lyft and Uber both emphasized that the bill would take away the flexibility ride-hailing drivers have — and suggested it could also change the service customers experience (though it's unclear how). 

  • Uber also said that, alternatively, it wants to provide drivers with a minimum hourly wage of "approximately $21" (though that only covers time spend driving a passenger). Other elements of its plan, like "access to robust new benefits" and "empowering drivers to have a collective voice [...] and the ability to influence decisions about their work," are vague. 

What's next: The big question is what will happen if the bill passes and forces these companies to reclassify their drivers are full employees. Spokespeople for each pointed Axios to Wednesday's emails and to prior public comments

3. Indictment hangs over Levandowski's new startup

Anthony Levandowski in February 2017. Photo: Andrej Sokolow/picture alliance via Getty Images

Tuesday's indictment of former Uber executive Anthony Levandowski for allegedly stealing trade secrets from Google puts his latest self-driving technology company, Pronto.ai, in a tough spot, Axios' Joann Muller reports.

The big picture: The San Francisco-based startup, believed to be funded mostly by Levandowski himself, has been working on aftermarket kits to outfit heavy-duty trucks with driver-assistance technology.

The big picture: The San Francisco-based startup, believed to be funded mostly by Levandowski himself, has been working on aftermarket kits to outfit heavy-duty trucks with driver-assistance technology.

  • Already facing an uphill battle against big truck manufacturers working on their own integrated systems, Pronto.ai's future seems uncertain.

Catch up quick: Levandowski, 39, was charged by federal prosecutors with 33 counts of theft and attempted theft of trade secrets from Google and its self-driving unit, Waymo.

  • Levandowski, an original member of Google's self-driving car project, allegedly stole more than 14,000 proprietary files, including designs for lidar technology, from Waymo before leaving in 2016 to start his own company, Otto.
  • Uber acquired Otto a few months later for $600 million and made Levandowski the head of its self-driving project.
  • Waymo sued Uber in February 2017, but the companies abruptly settled in the midst of trial a year later.

Go deeper: Joann has more here.

4. TSA tests facial recognition at Vegas airport

The Transportation Security Administration is preparing to launch its 4th round of facial recognition testing at Las Vegas' McCarran International Airport, as part of the agency's multi-year plan to pilot using passengers' biometric data at security checkpoints, Axios' Orion Rummler reports.

The big picture: The federal government sees the tests as an effort to boost the efficiency and effectiveness of airport screening. But some privacy and surveillance analysts at the ACLU and the Project on Government Oversight, a nonprofit watchdog organization, raise concerns that the technology could ultimately turn airports into police checkpoints.

Details: The facial recognition test at McCarran will last 30 days, according to TSA media manager Dani Bennett.

  • Only travelers in the TSA Precheck lane will be able to volunteer.
  • Through a Credential Authentication Technology device equipped with a camera, passengers' live facial images will be captured and verified against their IDs or usual documentation.

Go deeper: Read the whole story.

5. Trisha Yearwood to make cameo in "Farmville 2"

Courtesy of Zynga

Country star Trisha Yearwood is making an appearance in Zynga's "FarmVille 2: Country Escape," or at least her avatar is.

What's new: Yearwood's avatar will greet players starting Sept. 9 as she looks to promote her new single, "Every Girl in This Town," and Zynga celebrates the 10th anniversary of the "FarmVille" franchise.

The tie between the two seems a bit thin, though Yearwood gamely tried to make a connection in a statement.

"Just as this album reminds people that it's OK to be whoever you are, FarmVille offers a similar experience and lets you customize and build your farm just how you'd like."
— Trisha Yearwood
6. Take Note

On Tap

  • VMWorld continues in San Francisco.
  • NLGJA: The LGBTQ journalists organization hosts its annual conference in New Orleans starting today. Sad to miss it this year, but if you are there say hi to my Axios colleagues.

Trading Places

  • The FCC named Indiana University professor Jeffrey Prince as chief economist.
  • Jim Prosser announced he is stepping down as head of communications and public policy for SoFi.

Errata

  • An item in yesterday's Login referred to Samsung's recent launch of the Galaxy Note 4. That model debuted in 2014, while it is the Galaxy Note 10 that hit the market earlier this month.

ICYMI

  • Box topped earnings estimates, reporting a narrower-than-expected loss on revenue that rose 16% from a year ago. However, its outlook wasn't rosy enough to keep the company's shares from falling 8% after hours. (Reuters)
  • China's ZTE, which was previously subjected to a ban on U.S. sales, has launched a new device for the market, the Axon 10. (Gizmodo)
  • Google is shutting down the Google Hire job site it began testing in early 2017. (The Verge)
7. After you Login

How tight is the housing market in Manhattan? These landlords allegedly tried to turn two legit apartments into 18 illegal micro-dwellings.

Ina Fried