Sep 14, 2020

Axios Login

Tonight on "Axios on HBO," I interview Melinda Gates as her foundation releases its annual Goalkeepers report, sharing how the world is doing with regards to UN targets around poverty, disease, education and more.

  • Gates also talked about the failure of the U.S. national response to COVID, which she called "a lack of leadership." You can watch a preview here, and tune in tonight at 11 pm ET/PT on all HBO platforms for much more.

Today's Login is 1,535 words, a 6-minute read.

1 big thing: TikTok's fresh swirl of uncertainty

Illustration: Aïda Amer/Axios

There's now a deal on the table to let TikTok continue operating in the U.S. with the backing of a major American tech firm, potentially staving off President Trump's plan to ban the popular Chinese-owned video app by mid-month, Axios’ Kyle Daly and I report.

Yes, but: Software giant Oracle's proposed deal isn't the straightforward acquisition that Microsoft had jockeyed for until falling out of the running this weekend, and the whole affair is still rife with unknowns.

Driving the news: The Trump administration is reviewing a deal that would make Oracle TikTok's "trusted technology partner" in the U.S., Treasury Secretary Steven Mnuchin confirmed to CNBC Monday, after multiple press outlets reported Sunday night that Oracle had made such an offer.

  • The proposal includes "many representations for national security issues" from Oracle, Mnuchin said, as well as a commitment to establish TikTok's global headquarters in the U.S. and create 20,000 new American jobs.

Meanwhile: Chinese state media reported early Monday that TikTok parent ByteDance isn't selling its U.S. operations or the algorithm driving the app — to Microsoft or Oracle.

  • Some commenters took that as a sign that Beijing is quashing all hopes of a deal of any kind. Yet the report would also appear to track with the more limited arrangement Mnuchin described.

Between the lines: In the middle of talks last month between U.S. companies and China's ByteDance, which owns TikTok, the Chinese government instituted new rules that prevent "technology based on data analysis for personalized information recommendation services" from being exported without a license.

  • China's move threw a new spanner in the works of a TikTok deal because TikTok's recommendation algorithm is the "secret sauce" that has won the app its success.
  • It also transformed the conflict from one where U.S. and Chinese businesses served as shadow proxies for their governments to one where the two nations' leaderships are directly clashing.

The intrigue: Oracle's CEO Larry Ellison is a prominent Trump supporter and the company has close ties to the administration. That could give the company an edge in trying to win White House approval for a deal that might not meet all the demands Trump has made.

  • The president has said that TikTok must become a fully U.S.-owned company — so the "trusted technology partner" approach may not fly.
  • Trump has also insisted — without providing any rationale for such an unprecedented demand — that the U.S. Treasury receive a cut of any deal.

The catch: The U.S. has argued, without providing evidence, that TikTok's ties to the Chinese government imperil the data of its U.S. customers.

  • It's unclear how a deal that gives TikTok an American "partner" to run its cloud operations would satisfy U.S. security concerns.
  • "A deal where Oracle takes over hosting without source code and significant operational changes would not address any of the legitimate concerns about TikTok," Alex Stamos, a cybersecurity expert and former Facebook security head, wrote on Twitter.

Of note: Last year TikTok signed an $800 million contract with Google to provide cloud services, according to The Information.

What's next: For a deal to happen, ByteDance, Oracle, and both the U.S. and Chinese governments would all need to sign on.

  • Any one of the four could blow it up, so "no deal" remains a real possibility.
  • Mnuchin said the deadline for a deal is this coming Sunday, as laid out in Trump's executive order banning the app, and not this Tuesday, as the president has repeatedly insisted.
  • If Sunday rolls around without a deal, TikTok — which has already filed a lawsuit over the executive order — is likely to seek a temporary injunction to stop the government from shutting it down.
2. SoftBank sells Arm to Nvidia for $40 billion

In what has been called the biggest deal in the history of the semiconductor industry, Softbank announced Sunday it is selling chip design giant Arm to Nvidia for up to $40 billion in cash and stock.

Why it matters: Arm keeps a low public profile outside the semiconductor biz, but its chip blueprints are used by everyone from Apple to Samsung to Qualcomm. While SoftBank was seen as a neutral owner, Nvidia's purchase raises some questions as Nvidia is a competitor to many of the companies that license Arm's designs.

Details: Nvidia is paying $21.5 billion in stock and $12 billion in cash, including $2 billion payable at signing. SoftBank can receive up to $5 billion more in stock and/or cash if the company reaches certain financial targets, with another $1.5 billion in Nvidia shares set aside for Arm employees.

  • Arm will remain based in Cambridge, U.K., with Nvidia setting up its own "center of excellence" for AI research there.

Between the lines: Arm doesn't make chips itself, but its designs are widely used by other chipmakers to power phones, tablets, game consoles and internet-of-things devices as well as servers and networking gear.

  • Arm designs have come to dominate the smartphone market, serving as the core of processors from all the key players, including Samsung, Apple and Qualcomm.
  • Nvidia says it will keep Arm's open licensing model, and in the near term, it is hard to imagine the firm's key customers going anywhere.
  • But over a longer term they could seek to develop alternatives rather than depend on a rival for chip designs.

Flashback: SoftBank bought Arm in 2016 for $32 billion, with CEO Masayoshi Son saying it would help the Japanese firm be at the forefront of technology for the next 200 years.

What's next: The deal will need approval from regulators around the globe.

3. Big Tech's fight for high-skilled visa holders
Data: National Foundation for American Policy and USCIS; Chart: Naema Ahmed/Axios

The technology industry has long advocated for access and expansion of H-1B visas for skilled foreign workers. But, as Ashley Gold reports, President Trump has moved to limit such visas and denial rates have gone up significantly under the current administration, per government data compiled by the National Foundation for American Policy (NFAP).

Between the lines: It's harder than ever for tech companies to recruit and retain foreign professionals seeking to work in the U.S. — even as the pandemic fuels further demand for high-skilled technical labor and more of people's personal and professional lives move online.

By the numbers: The annual cap for H-1Bs is 85,000, a number tech companies were trying to increase long before the Trump administration's restrictive policies. In fiscal year 2019, 190,098 applications were filed.

  • Denial rates for new H-1B petitions for initial employment rose to 29% through the second quarter of fiscal year 2020 from 6% in fiscal year 2015, according to data from U.S. Citizenship and Immigration Services compiled by NFAP.

The Trump administration is now looking to further tighten restrictions on H-1B visas.

  • It has been pushing a change to the definition of a "specialty occupation," and on Sept. 4 sent a proposed new rule to the White House Office of Management and Budget. The rule is partly meant to "better protect U.S. workers and wages" while requiring employers to pay "appropriate" wages to H-1B visa holders.

Flashback: In June, big tech companies signed onto an amicus brief arguing for a preliminary injunction against the Trump administration's moves to suspend a number of foreign visas, including H-1Bs.

  • The brief cites executives from Amazon, Facebook, Apple, Microsoft, Google and PayPal arguing the administration's policies would hurt American innovation, slow progress and cut the U.S. off from key talent.
4. Apple relaxes App Store rules for video game streaming

Illustration: Sarah Grillo/Axios

Apple on Friday announced a series of changes to the rules of the iOS App Store that make a bit more room for cloud-based video game services to run on iOS devices, but only if each game is separately submitted to Apple for review and approval.

Why it matters: Apple is under considerable criticism from a range of developers who want to see it soften its strict control of what's allowed in the App Store and reduce the number of products that are subject to a 30% commission.

Details:

  • Under a rule change announced Friday, Apple said companies like Google, with Stadia, or Microsoft, with xCloud, can offer a single "catalog" app of all their games, as long as the games are made individually available for Apple to review and for customers to download.
  • Apple also said it would not take a cut of online services that are offered by one individual to another, potentially easing concerns from Airbnb that Apple could demand a cut of online "experiences" its hosts offer.

Between the lines: Apple is trying to tweak things without giving up either its control over what is allowed in the store or the financial gains that come with its 30% cut of digital goods and services sold within apps.

Our thought bubble: The change is another example of Apple trying to make its 2008 business model and rules fit with a dramatically changed world in which far more services are handled in the cloud and the distinction between digital and physical is blurring.

What they're saying: Microsoft said it was not satisfied with Apple's concession.

  • “This remains a bad experience for customers,” a company spokesperson said in a statement.
5. Take Note

On Tap

  • It's shaping up to be a fairly busy week in tech (after an all-too-busy weekend). Apple has a media event on Tuesday, where it is expected to introduce new Apple Watch models, and Adobe reports earnings the same day. Meanwhile, TechCrunch is holding its Disrupt conference online.

ICYMI

  • Facebook said Saturday it would start removing posts that falsely blame left-leaning groups for starting the Oregon wildfires. (Reuters)
  • Facebook introduced Watch Together for Messenger to let up to eight people on Messenger chat or up to 50 people in a Messenger Room stream video together. (TechCrunch)
  • Verizon is buying prepaid wireless reseller TracFone from Mexico's America Movil for up to $7 billion in cash and stock. (Wall Street Journal)
6. After you Login

The return of football means the return of some incredible last-second plays. And you have to check out this one from a high-school team in Alabama that was down by two points, with just 2.9 seconds left and seemingly no place to go and the ball at their own 41-yard-line.