15 hours ago

Axios Login

By Ina Fried
Ina Fried

It's always a delight to take the Login wheel — but Ina will be back tomorrow, I promise! In fact, she'll be moderating a virtual event on trust and transparency online at 12:30pm ET Wednesday with UC Berkeley professor Hany Farid and Wilson Center disinformation fellow Nina Jankowicz.

Today's Login is 1,315 words, a 5-minute read.

1 big thing: U.S.-China fight spreads to the chip factory

Illustration: Aïda Amer/Axios

The Trump administration's campaign against TikTok gets all the headlines, but the U.S. move last week to place restrictions on Semiconductor Manufacturing International Corp. (SMIC), China's top chipmaker, could end up making a greater difference.

Why it matters: Semiconductor analysts say SMIC represented China's strongest bid to build a domestic chip industry and bolster its tech independence. Sanctions that cut off its access to advanced manufacturing and testing equipment from the U.S. could seriously set that effort back.

Driving the news: The Commerce Department sent a letter Friday to U.S. semiconductor firms telling them they would need licenses to export some kinds of equipment to SMIC because anything they sold the company might be subject to "diversion to a military end use."

  • SMIC denies any relationship with China's military.

Between the lines: The SMIC restrictions don't go as far as the sanctions the Trump administration has enacted against Chinese telecom equipment makers Huawei and ZTE. But the move represents a broadening of the U.S. campaign against China's tech sector that's likely to have wide impact.

  • In the short term, it will slow China's efforts to stand up a chip industry that can compete globally with rivals in the U.S., Taiwan and Japan. But in the long run, it could deepen China's resolve to achieve high-tech self-sufficiency.

What's next: U.S. firms will have to apply for licenses to sell stuff to SMIC, and the Commerce Department gets to decide whether to grant them. China watchers expect Beijing to retaliate.

Meanwhile, the federal judge who Sunday put a hold on a U.S. order to ban new downloads of TikTok in the U.S. explained his reasoning in a ruling released Monday.

  • The national security law that the Trump administration based its order on specifically exempts "informational materials" from being targeted, and TikTok's service — a video-sharing app embraced by young users — falls into that category, the judge said.

Our thought bubble: So far, the Trump administration is having more success dealing blows to Chinese tech via moves on hardware companies than by acting against software and services providers. That could be because U.S. law and culture places a high value on the free exchange of information and ideas — which, ironically, is far less protected in China today.

2. Media fails to take on Google and Facebook
Reproduced from eMarketer; Table: Axios Visuals

The only competitor challenging Google and Facebook's digital advertising dominance of late is Amazon, Axios' Sara Fischer reports.

Why it matters: A years-long effort by major media companies to take on "the duopoly" has mostly fizzled.

Catch up quick: In 2017, media companies, eager to reclaim their share of the digital advertising pie, began to invest in pricey ad tech deals and mergers that they hoped could help them attract dollars from marketers looking for an alternative to Google and Facebook.

Driving the news: Today, most of those companies have backed off from those investments.

Disney on Monday sold ad tech provider TrueX, which it's been looking to offload since acquiring the property under its deal to buy most of Fox, per the Wall Street Journal.

  • Disney was never trying to develop a major ad tech business, although it does have ad tech that helps power its ESPN and Hulu streaming platforms, as well as its digital assets.

AT&T is exploring the potential sale of its ad-buying unit Xandr, per the Journal.

  • Xandr was created through the acquisitions of the ad tech firm AppNexus and the merger with Time Warner.
  • During the trial to buy Time Warner, executives argued that the deal made sense because it would help AT&T compete with Google and Facebook for ad dollars.

Verizon has written down half of its investment in its mostly ad-supported media arm, and reports suggest it is looking to offload HuffPost, which was once considered a traffic goldmine for an ad-supported business.

  • Verizon is still investing in its advertising technology, but its business has taken a hit due to the coronavirus.

By the numbers: Google and Facebook still control an overwhelming percentage of the U.S. digital ad market, even though they are losing some ground to Amazon. 

  • Jason Kint, CEO of digital media trade group Digital Content Next, tweeted in July that he still expects Facebook and Google to bring in 88% of all new digital ad dollar growth this year.
  • Google and Facebook combined will own 52.8% of the U.S. digital advertising market this year, predicts eMarketer, with Amazon poised to take another 9.5%.

What's next: Smaller media companies are trying to collectively offer advertisers an alternative to Google and Facebook, instead of competing with those firms head-on.

  • Vox on Tuesday launched Concert Ad Manager, a self-serve tool in the vein of Google and Facebook's ad platforms that will help marketers buy ads across Vox's network of websites.
  • The Washington Post earlier this year also launched a platform that allows companies to buy automated ads in real time.
  • Hearst started building a self-serve ad platform last year.
3. Trump sought to deter Black voters in 2016

In 2016, the Trump campaign's voter database placed 3.5 million Black voters in a category called "deterrence" with the aim of trying to discourage them from voting, according to an investigation by a British TV network.

Driving the news: The U.K.'s Channel Four News got a hold of what it says is the Trump campaign's 2016 voter database of nearly 200 million records.

  • In battleground states each voter was placed in one of eight "audiences" organized to facilitate targeting Facebook ads. "Deterrence" was one of these categories.

The big picture: Trump won the election despite losing the popular vote by squeezing out victories in a handful of swing states.

  • Facebook's critics have long maintained that the victory was propelled by a fat budget spent on Facebook ads carefully targeted at swing-state voters with help from a Facebook employee embedded with the campaign and data insights provided by the now-disbanded British company Cambridge Analytica.

Yes, but: No one knows whether Trump's Facebook advertising was actually effective, and the ads themselves are no longer retrievable for study.

  • Some misinformation experts argue that the leak of hacked emails from the Democratic National Committee and the Clinton campaign aided Trump more than the targeted Facebook ads.

What's next: We're about to enter the final month of the sequel to this movie.

4. Apple and Epic face off in court

Photo: Chris Delmas/AFP via Getty Images

Epic Games' legal fight with Apple is likely headed to a July trial, and Fortnite won't be back on the App Store anytime soon, Apple Insider reports from a virtual hearing in the case Monday.

Why it matters: In challenging Apple, Epic has raised a banner for smaller companies seeking to curb Apple's power as a gatekeeper to mobile phone users. But the fight is getting messy and will almost certainly drag into next year, Axios' Ashley Gold reports.

Flashback: Epic sued Apple last month after Apple removed its game Fortnite from the App Store for breaking Apple's rules against alternative payment systems, which Epic did to get around Apple's 30% commission on in-app purchases.

What they're saying: Judge Yvonne Gonzalez Roberts suggested the case be heard before a jury rather than a bench trial. Roberts said during Monday's hearing that Epic put itself in this situation and Fortnite could have been re-admitted to the App Store if it followed Apple's rules, according to the Apple Insider report.

  • Gonzalez also said Epic had not been forthright with Apple and pushed back on Epic's declaration that Apple is a monopolist, according to the Apple Insider report.
  • Epic did not have documents to produce for discovery at today's hearing, which Gonzalez said was not acceptable, according to FT's Patrick McGee.

What's next: We'll know today whether Apple or Epic choose to demand a jury trial. Initial disclosures for the case are due Oct. 12 and complete document production is due by Jan. 6 with a potential trial date next July.

5. Take note

On Tap

  • President Trump and Joe Biden square off in their first debate at 9pm ET.

Trading Places

  • Shobhana Ahluwalia joins Peloton as chief information officer. She was formerly CIO at Uber.

ICYMI

6. After you Login

A man in North Carolina who was trying to steal surveillance cameras was caught in the act — by surveillance cameras. The authorities are asking for help identifying him. Apparently, face-recognition wasn't working.

Ina Fried