Jun 22, 2018

Axios Login

If you read this really, really slowly, it might be the weekend by the time you are done.

1 big thing: The race to fill Intel's CEO vacancy

Illustration: Sarah Grillo/Axios

The abrupt resignation of Intel CEO Brian Krzanich has created what could be the first succession crisis in the company's history.

Why it matters: Intel has typically groomed and then promoted one of its own longtime leaders. But the combination of Krzanich's sudden departure and a number of high-level executive exits in recent years has left the company with a surprisingly slim bench.

Though not perhaps the dominant force it was during the heyday of the PC, Intel remains the largest U.S. semiconductor company and a foundational institution in Silicon Valley.

The bottom line: Intel could end up with its first outside CEO, or at least the return of a former executive rather than the promotion of a current leader.

Here's a list of early possibilities, according to current and former Intel employees, as well as chip industry experts.

Internal candidates:

  • Navin Shenoy, VP of Intel's data center group. He's the most likely of the Intel lifers, but he's also seen as having less experience than the company would normally like.
  • Murthy Renduchintala, president of Intel's Technology, Systems Architecture & Client Group. He's an insider, yes, but not an Intel lifer, having come over from Qualcomm in 2015.

External candidates with Intel ties:

  • Renee James, Intel's former president, left the company in 2015 and is CEO of her own server chip startup, Ampere.
  • Stacy Smith retired in January as group president of manufacturing, sale and operations after 30 years at the company.
  • Diane Bryant, who ran Intel's data center group until 2015, is currently COO of Google's cloud unit.
  • Pat Gelsinger, CEO of VMware, was seen as a possible Intel CEO candidate, but that was a long time ago. Speculation is he has been gone too long, and might not want the job in any case.

True outsiders:

  • Intel has always promoted from within, so it's hard to say who might be interested and who might pique the board's interest.

Intel declined comment on its search or potential candidates.

Meanwhile, there's just as much discussion over Krzanich's sudden departure. Yes, Intel's rules do prohibit consensual relationships among subordinates. Plus, according to its statement, Intel only recently became aware of this relationship even though it started some time ago.

  • But Intel has a long history of such relationships within the company, including at its highest ranks. That left some people on Thursday wondering if there is more to the story or if Intel is just applying a stricter standard in the #MeToo era.
  • It's also possible that the board could have been tempted to look the other way if it took this one problem by itself. But this isn't the first time questions about Krzanich's judgment have come up. For instance, there were lots of questions — never fully answered — about why Krzanich sold Intel shares ahead of the disclosure of a big chip flaw last year.
2. How the online sales tax ruling affects consumers

The U.S. Supreme Court. Photo: Chip Somodevilla/Getty Images

The Supreme Court ruled 5-4 Thursday to allow states to collect sales tax from online and out-of-state retailers. Axios' Marisa Fernandez took a look at the ruling and its implications.

Why it matters: As the U.S. tries to catch up with digital companies that operate without a physical presence, the ruling has created an extra hurdle for companies handling online transactions. The decision may prompt Congress to introduce new legislation for an overhaul on unifying e-commerce for all 50 states.

The details: Currently, 45 states collect sales tax. Major e-commerce sites like Amazon and Nordstrom already have sales tax built into consumers’ purchases, and are equipped to deal with the complexity, while others will have to adapt to the changes.

What's next:

  • Companies, especially small and medium-sized, will have to automate collection efforts to keep track of sales.
  • However, the ruling recognizes the limitations smaller businesses may have, and exempted businesses that make less than $100,000 in annual sales or less than or equal to 200 transactions.
  • Consumers will have to pay the sales tax on e-commerce items. E-commerce sites will be treated on an equal footing with brick-and-mortar stores.

What's next: Many major online retailers are looking to Congress to clarify the ruling with a framework to defend small businesses and provide uniformity and consistency, said Eric Fader, state and local tax partner for BDO.

What they’re saying:

  • Etsy CEO Josh Silverman said in a statement that the decision could hurt the small businesses that use his company's platform.
  • eBay called for Congress to create a small business exemption “to help small businesses take advantage of the internet to grow and create local jobs.”
  • President Trump tweeted his approval for the ruling, calling it a "big victory for fairness and for our country. Great victory for consumers and retailers."

Go deeper: Supreme Court opens the door to online sales taxes

3. Chip industry fights to protect IP from China

Illustration: Rebecca Zisser/Axios

Chinese raids of U.S. intellectual property have helped China build a solid high-tech economy. But the U.S. semiconductor industry is still far ahead — and China is desperate to catch up.

The bottom line: Semiconductor manufacturers are fighting to protect IP from the Chinese, fearing that, without coherent action from the Trump administration, Beijing could bulldoze their industries.

Inside Micron: Axios' Erica Pandey has a deep look at the issue, and how it has affected one company in particular, memory-chip maker Micron.

What's happening: Three weeks ago, Micron and South Korean chipmakers Samsung and SK Hynix all reported that the Chinese government had launched antitrust probes into their firms and accused them of setting artificially high prices for memory chips.

  • Yes, but: American companies and the U.S. government have long been suspicious about the link between China's anti-monopoly policies and its industrial goals.
  • "They want access to the intellectual property. They need us to teach them how to do it. Once they have the industry, they want to push us out," an industry source familiar with China's investigation into Micron tells Axios.
  • The price hikes, the source says, are largely due to a boom in demand for memory chips in everything from smartphones to autonomous vehicles. China's investigation is "a clear indication that they're not ready to make [semiconductors] work," says the source.

Micron's fight to protect its IP is not new. Other U.S. firms have run up against the same Chinese antitrust policies or regulations and have been forced to strike deals with Beijing.

  • The bottom line, per one industry source: "We're all dependent on China because everything is assembled there."

The stakes: Chinese President Xi Jinping has clearly outlined in speeches that he'd like to see China become the global leader in cutting-edge technology — including semiconductors — by 2025.

  • But, semiconductor manufacturing is technically challenging, with the processing done at a microscopic level. Even if the Chinese can design these chips, the actual manufacturing presents enormous hurdles.

Meanwhile, the Trump administration seems to be focusing more on balancing trade with China than addressing IP concerns. Trump's flip on Chinese phone maker and sanctions violator ZTE — though blocked by the Senate — was "hugely problematic," the industry source says.

Go deeperChinese theft of U.S. tech is hard to stop.

4. Smartphone use heats up in the summer

Usage of smartphones goes up 42% in the summer, according to Edelman Intelligence research conducted for Samsung.

My thought bubble: I know that people are off school and work a bit less, but it's hard to believe there are enough hours in the day for usage to go up that much.

5. Take Note

On Tap

  • It's Pride weekend in San Francisco and a number of other cities. Happy Pride to all my fellow LGBTQ techies. See you out and about at Trans March, Dyke March, etc.

Trading Places

  • As I reported on Thursday, former Microsoft hardware executive and Doppler Labs CEO Brian Hall has landed at Amazon, where he is a VP in its web services unit.
  • The White House named Grant Schneider to head a government board tasked with deciding which computer vulnerabilities can be kept secret.


6. After you Login

It turns out gnocchi is easier to make than one might think, according to the Wall Street Journal.