The Telecoms.com Podcast: trade wars, Huawei and vRAN

Summary

Highlights

• Trump introduces high tariffs, sparking global economic debates and potential trade wars. 🌍
• Huawei's smartphone sales surge despite sanctions, highlighting their strategic ingenuity. 📈
• Ericsson is collaborating with Nvidia on vRAN, aiming to revolutionize telecom infrastructure. 🤝
• The team's banter and in-depth analysis make even the densest topics engaging. 😂
• Complexities of cloud computing and its influence on telecom infrastructure are demystified. ☁️

Key Takeaways

• Trump's tariff war has everyone scrambling; it's a geopolitical chess game with economic consequences. ♟️
• Huawei is bouncing back in the smartphone market despite U.S. sanctions, showing resilience and adaptability. 📱
• Virtual RAN is the talk of the town, with big players like Ericsson and Nvidia making tech magic happen. 🔧
• The complexities of international trade influence telecom strategies, reminding us that it's all interconnected. 🌐
• The podcast crew keeps it real with insightful, humorous commentary on heavy topics. 🎙️

Overview

Chapters

• 00:00 - 60:00: Introduction and Contextualize Trade Tariffs The chapter titled 'Introduction and Contextualize Trade Tariffs' discusses the historical context and implications of implementing trade tariffs. It references a historical instance, the Smoot-Hawley Tariff Act from the 1930s, which is believed to have exacerbated the Great Depression. The chapter suggests that current tariffs are being applied at even higher levels than those during the Smoot-Hawley period, raising concerns about potential economic consequences.
• 60:00 - 120:00: Impact of Trade Tariffs The chapter discusses the impact of trade tariffs and protectionism on economic activity. It highlights the suppressive effect tariffs have on economic activity and explores the political and economic incentives that lead countries to adopt protectionist measures. The content suggests that, when faced with unused labor and a lack of manufacturing, countries might resort to protectionism as a means to boost internal economic activity. This is noted in the context of America, although the concept is applicable more broadly.
• 120:00 - 150:00: Huawei's Changing Business Landscape The podcast begins with a light-hearted introduction by the hosts, welcoming the audience to the show. They mention returning to the studio after having to record remotely previously due to one of the co-hosts, Pierre, being unwell. The tone is casual and camaraderie is evident as they tease Pierre about his illness and recent trip to the US west coast. They joke about setting up a bed for him in the studio for quarantine purposes, establishing a friendly and humorous atmosphere as they delve into the discussion.
• 150:00 - 180:00: Exploring Virtual RAN and Cloud Computing in Telecom The chapter begins with an informal conversation about a scheduling miscommunication that led to a guest not appearing on the show. The speakers, despite the hiccup, proceed with their discussion, highlighting that there are still many topics worth discussing. The chapter sets the tone for a candid and engaging session, reinforcing a friendly and adaptable atmosphere.

The Telecoms.com Podcast: trade wars, Huawei and vRAN Transcription

• 00:00 - 00:30 I mean, this is the thing, I suppose, just to to sign off on that one. Yeah. There's a reason why no one's tried this [ __ ] before. I think the last time it got tried, and I've heard people talking about this, is something called Smoot Holly, which happened in the 30s, which apparently in turned the the Great Recession to the Great Depression, or at least was one of the contributing factors. Um and so you know if we take that as an example and apparently these tariffs are a higher level than even Smoot Holly was um if we take that as an
• 00:30 - 01:00 example it obviously suppresses economic activity. So and protectionism does on the whole we can see the the political and perhaps even the economic incentives for protectionism. You know your country you got a lot of skimp people you got a lot of um unused labor. If only we just had more manufacturing, more more economic activity happening here to America anyway. But yes, you made that point very well earlier [Music]
• 01:00 - 01:30 on. Hello and welcome to another telecoms.com podcast. Um, we're back in the studio cuz Pierre, I mean, you're still fighting off your bug, aren't you, Pierre? But but poor poor bloke. He's had to go off to the west coast of the US since we did the last pod, which we had to do remotely because Pierre was too ill to come in. That's probably just as well, isn't it? We we would have caught it all off you. He's got his bed in the studio, though. Yeah, exactly. Just make him kip here in his little quarantine room. Um but uh thanks for
• 01:30 - 02:00 struggling in and we'll be gentle with you, Pierre. Okay. Thank you. Um so we're back in the studio. We were going to have a guest, but there was a miscommunication about scheduling and so it's just two of us and that person will reschedule and hopefully get them soon. I'm obviously not going to name them. Um, but there's plenty to talk about. Um, before I get into that, like in terms of um, opening bollocks, got to give another shout out. It feels like we do it every week. Another shout out to
• 02:00 - 02:30 CC Group. Shout outs for CC Group. Well, you know, but they did take they did take us out and and buy us beers on Tuesday. Mhm. Um, so that was, you know, we we've spoken before on the pod about how they've been acquired by Hoffman Agency. Yeah. Um, and it was just Paul. Rich wasn't around. I think he's on holiday. So, just Paul and then um a few other uh people. There was Katie and Zoe and Chloe and Adam were all out. Hi everyone. Special shout out to Katie who
• 02:30 - 03:00 stayed out for the duration. Other people being sensible. Adam just got back from Sunderland. The duration, by the way, being the three of us, I think. Well, Ray hung around for quite a while. He did and then Ray and Ray from um Telecom TV and and Keith from Mobile Network came along cuz they just been some incredibly dry sounding event at the Excel LF networking. Yeah. Something something where you know Linux Foundation stuff, isn't it? Something where I just have to like give myself dead legs just to stay awake. Um and um but Ray hang around for quite a while.
• 03:00 - 03:30 Um, he kept he I started going to the bar and he went, "I'll just have a single ramen coke." And so I just kept getting him doubles and he just he sort of went with the flow. Yeah. And then I medic medicineed us with some with some cheeky bourbons. He didn't he didn't work out that he was that he was drinking doubles. No, he knew. I didn't I didn't attempt to deceive him about it. Yeah. Um, but yeah, it was great. I great chats with everyone. But yeah, special shout out once more to Katie who who's hung around for the duration and she was just emailing me saying uh she's
• 03:30 - 04:00 stayed out much later than she thought she would. But fair play. Someone's got to Yeah. [ __ ] beer's not going to drink itself, is it? No. Need to help the beer industry. Yeah, exactly. In the bourbon industry, especially especially uh in this era of tariffs, which on which plenty more in a minute. Um so shout out to them. That's the only out and about stuff um I think I've done. Have you Is there anything else for you to mention? No. Is that it? No, I've not been out. Not for work. Anyway, got one other little mention. Someone who says
• 04:00 - 04:30 um he's spoken to you once or twice. Um he's called Kevin Holly. Yeah. BT. Yeah. Industry standards director and distinguished engineer at BT. Mhm. Do you think Kevin, do you start as just engineer and then someone goes, "Oh, he's a rather distinguished chap." You sort of come in with a bow tie and and a and a waist coat or something like that. He does look quite distinguished. He does. Well, anyway, he's he's distinguished as far as I'm concerned cuz he sent me a message on LinkedIn, so which I'll read out. He goes, "Uh, really enjoy your podcast. The length is
• 04:30 - 05:00 just right, Pierre. Um, even if it takes me a couple of days to listen, so there's a there's a sort of contrasting thing. The in-depth review of Telecom's issues is really thoughtprovoking, and the balance between Scott and Ian is great. Real world issues are hugely important when thinking about what customers truly value." There's there's another endorsement for my MO. Um uh and you bring those across very well. Thanks for a great podcast. So, thank you very much, Kevin. That's that's really kind. So, now we got six fans. I think I Kevin. Yeah. Yeah. Yeah. Um so, those
• 05:00 - 05:30 are great. Obviously, very gratifying when people he's often at events, right? Yeah. Yeah. I mean, he he doesn't um and I imagine he would have been at this. In fact, I think he was because I think he said he was going this South Korea confab about 6G. Oh, right. I'd imagine he would have been at that. Yeah. Yeah. Well, he did mention in follow-up chat he mentioned that Neil McCrae used to be his boss. So, I think it was listening to the McCrae one from last week that inspired him to write him. Um, so yeah, cheers for that. Um, and it's always
• 05:30 - 06:00 good to hear, you know, the format's interesting. I mean, the format's obviously completely organic. It's just us two sitting down and chatting. So, what what passes for segments like the opening bollocks is just spontaneous. It's just me, you know, just ranting off the top of my head on what we've been up to before we get into the main stuff. Um, and I think most podcasts are fairly unstructured. Yeah. Um, that makes sense. And then all we really do is um pick we try and pick three sort of stories to cover each week. And then if we've got a guest, the main segment's always whatever the guests into. Yeah.
• 06:00 - 06:30 But we don't have a guest. So um the three stories we're going to uh we we we decided there's no avoiding this tariff thing that went on earlier on this week, which um Donald Trump called Liberation Day. Liber Yeah. Yeah. I was going to say Independence Day. Um, well, they should make a film of it though, shouldn't they? Liberation Day. It's a great name for a movie. There was Did you see the starring Who is Donald Trump? Did you see the video? They They came up with a video. Really? They've already done it. What? Yeah. Look. Oh my god. I'll see if I can get some audio.
• 06:30 - 07:00 It's basically a montage of of cherrypicked reports on what a [ __ ] great idea all these tariffs are. Um, but it's such a cheesy video from Fox News and Fox News, but it's put out it's put out by the White House and it's called Happy Liberation Day America exclamation mark. Yeah. Um, and uh, anyway, so uh, and we'll get into that properly in
• 07:00 - 07:30 a sec, but it's basically Trump just going, "Do you know what? [ __ ] it. I'm going to put loads of tariffs on everyone." Yeah. Um, so basically the thing that he was threatening to do is that everybody went, "No, no, he's not going to do that. He's all he's all bark and no bite." Yeah. No, turned out they were wrong. Say what you want about Donald Trump if he does [ __ ] follow through on his promises. Um, so you were warned. Yeah. So, we'll talk about that. And there are, you know, as as Kevin just said in his kind message, you know, the big picture stuff obviously affects everyone, including the telecoms
• 07:30 - 08:00 industry, but there are some more telecom specific angles we can take on that. And then and then at the start of the week um Huawei which which is probably quite insulated from these tariffs by virtue of the fact that America's already banned it anyway. Yeah. Um uh came out with its uh annual number. So it sort of teased them. Do you remember we did a whole episode of the pod just based on one data point. Well now we got all the data points. So in theory we could talk a lot more but um yeah we'll drill down into that and
• 08:00 - 08:30 see what it says about it. I see you did a bit of analysis um looking in. we both focused on um their lower margins. Yeah, I think the profit was the most interesting thing because we knew the result. We knew the sale. I know I saw a few news um wires last week coming out with the sales as though it was a new thing, but that had already been reported about 3 months ago. So, and also they say profits plunged as if it was somehow scandalous whereas a lot of it was down to like one-off disposals. Some of it was down to one disposal.
• 08:30 - 09:00 Yeah. But as you as you went into there's some other stuff. So, you dug under the skin of that a bit, which is good. Yeah. And then we um and then you've written um you know, I take the pits out of you cuz I say you're obsessed with talking about rand chips and all that sort of thing. Um well, you know, third biggest company in the world is doing rand chips or trying. No, and as you said just before we started chatting, you're you're one of the few people that journalist that is focusing on it. So, fair play to you. And also what I can't argue with is you say you normally get a fair bit of interest each time you write something about seem to be interested in reading about that
• 09:00 - 09:30 stuff. So, I stress I only taking the piss just cuz whatever you wrote a lot about, I take the piss out of you about obsessing about that. It just happens to be that. Um, but it but it is also interesting and and I've got some, you know, less expert but nonetheless slightly informed opinions on the whole thing. It some of it we touched on when we spoke about um Nvidia's big initiative a few weeks ago, but we'll we'll finish off talking about that. Um, you also revealed that you do know the difference between open rand and virtual rand before we came on the pod, even
• 09:30 - 10:00 though you complain that you don't. Yeah, I do. It's it's where I get more confused is how how they're used. You know, they sometimes come up and and I mean, you can have a purpose-built ran that open interfaces appliances and AS6, but you open the interfaces to allow that to run. It's the messaging from the industry that sometimes throws me because sometimes they get sort of slightly conflated or at least the ven diagrams overlap a little bit and it's
• 10:00 - 10:30 like orange actually groups virtual ran under open ran they say it's a part of but you're right I mean to be specific open ran is about sort of decoupling the the actual radio and then the stuff that that immediately supports it like yeah do the compute stuff yeah whereas whereas virtual ran um and again changing the stuff in the servers changing to from appliances to servers. Yeah. And so and again is there a difference between virtual run and cloud run? Uh
• 10:30 - 11:00 is cloud run more they get used interchangeably and it's harder then to tell what the difference is but I think cloud run implies that you're doing what we I mean we can talk about this let's not steal our own thunder but um so that's what we'll do at the end and it might sound dry and arcane but by that stage we'll have had three or four beers. Yes. We'll make it really interesting bring some life to it. Um so let yeah let's start on the tariffs and you know we often have this this benign tension um where I'm inclined partly
• 11:00 - 11:30 just because I've got shitty attention span and partly because to be quite honest I think I don't find the telecom's arcana as interesting as you do or someone like Ray does. You know I was chatting to Ray and Keith and they've both gone to this they've both gone to this very in the weeds conference and fair play to them and I've just got to be honest you know that I well they're worse than I am. I mean Ray started writing about all that service provider IT stuff years ago when companies like Amdocs and Netcracker that's even more baffling than virtual ran and Keith is properly elbows deep in all this. Um but yeah I just I'm just
• 11:30 - 12:00 being honest about my makeup. I I find it interesting but I think it's just partly I've just got a shitty attention span you know and I'm not very good at at sort of reading stuff in depth. I can write read news articles or even extended news analysis like you write but much more than that my conver my concentration just wanders off probably from playing too many computer games and all that sort of thing. Yeah. Um it is but um killed your brain. So yeah so so I so I often end up steering us towards
• 12:00 - 12:30 non-core telecom stuff like it could be digital civil liberties or or or more current affairsy stuff. Yeah. But well that can be confusing as well in in the weeds. You can go quite deep into the tariff stuff from a kind of nerd. Yeah. It's funny, isn't it? Well, so so every everyone's just got their inclinations and and I'm more inclined sort of general current affairs. I think I'm just I think I'm from fundamentally interested in how power works. Yeah. And obviously a lot of that's politics, but not exclusively politics. You know, it can well power play. There you go. Um
• 12:30 - 13:00 Yeah. Yeah. And and that's why that's why we've I've always found the the dynamic like with Huawei and and the dynamic between the US and China interesting because it's basically just great big global chess beating. No, but I I agree with you on that. I think when I do detailed stories, I'd always like to try and bring it back to why it matters and the virtual rounds a power play. It's totally it's totally a power play with with the with the big sort of um the big IT company. Yeah. The big IT companies trying to get more of the action and who's it going to be, you know? Cool. Well, let's again let's not
• 13:00 - 13:30 um steal our own thunder on that one. So I I say all that as a sort of precursor to saying, you know, talking about the big current affairs story of this week, which is Trump announcing what he called these reciprocal tariffs. Yeah. Very reciprocal. Yeah. Well, we'll we'll get into we'll interrogate that. I was pleased that you'd you'd read up on the on the methodology as well because it's quite it's quite hilarious when you when you get to the bottom of it. when I when I woke up in the morning and read about them because you you you get up early and the first thing you do these days is go has a war broken out or
• 13:30 - 14:00 something or something something else BBC News or something and and there's this little white board that he's holding up with all these reciprocal things on and I was like really is he saying this is some kind of response to tariffs that other countries have imposed on the US. That's certainly what he'd like us to believe. Yeah. Um and so yeah, so he did this presentation and he held up this board that's only about, you know, um it's it's not mega big, the size of him. Um and it and it has had reciprocal tariffs at the top and and the usual um sort of
• 14:00 - 14:30 uh Do you want a beer here? Oh, no. I'm all right. That's the last thing I need. Um uh and and he basically had two columns. you. All right, Ian. Ian's Ian's already on his second beer and he's giving me [ __ ] vibes for lagging behind. Um, and he had these two cuz I've been talking, mate. Sorry. Go on. Um, he had these two columns. One which said something along the lines of um, tariffs charged to USA and then asterisk
• 14:30 - 15:00 including currency manipulation and other [ __ ] I'm obviously paraphrasing that, but not just a strict tariff, but other what he considers to be bad faith faith measures. Yeah. that create this effective tariff. The um uh and then and then he said well I well he wasn't saying it creates an effective tariff he was saying it was a tariff more or less. Yes. But but there was I mean even even the expression currency manipulation is misleading because that's all to do with trade anyway and and he does other little in Congress
• 15:00 - 15:30 things like putting VAT and stuff into the mix. Anyway, whatever, you know, he just came up with this figure which he figured was the effective tariff um that uh those countries uh are imposing on US exports into that country and like at the top of it was China with 67% there is a European Union with 39%. And then the next column he said Vietnam's pretty high. You what? Vietnam Vietnam's right
• 15:30 - 16:00 up there. Yeah. Yeah. Um, Vietnam's on something like 90%. Cambodia is 97%. And Cambodia's Yeah, Vietnam's 90. I suppose Cambodia has got a similar profile to Vietnam where it does quite a lot of contract manufacturing and that sort of thing. Yeah. And low low cost of labor. Yeah. Which we could get into because this is one of the [ __ ] reasons you get these trade imbalances. Yeah. Um, well, the Vietnam is a classic example. So, the people were like, what what does that mean? The reason that Vietnam's at 90% is because a lot of factories moved out of China to Vietnam to do things like making trainers for Nike so that
• 16:00 - 16:30 Americans can go out and buy their basketball shoes and go and shoot hoop and all that stuff and and not have to spend a fortune on doing it. So it gives the Vietnamese something to do and it gives the Americans lowcost trainers and the only way that they could ever like the Vietnamese are never going to buy high price American product. So the only way that trade imbalance could be addressed is if they move all those factories out to the US which is ridiculous. And so what they what they're effectively doing is um importing wage deflation. Yeah. So that's where you get all this contentious stuff to do with like NAFTA,
• 16:30 - 17:00 all these trade agreements um and how you get this hollowed out middle America where no one could get a job because you pay a Vietnamese person or a Chinese person or a Cambodian person or whoever or maybe a Central American person or a Mexican Yeah. a fraction of the money to do the same job that you would pay an American person. Yeah. So, it's it's important wage deflation and such that now for for much manufacturing um America's uncompetitive because people expect to get paid more. I'm not
• 17:00 - 17:30 saying they shouldn't expect to get paid more. Yeah. You know, lefties are going why the [ __ ] shouldn't they? But that's just but that's just how it is anyway. That's how it is. And America actually does very well out of that because they have big companies like Nike that export lots of products to other parts and their added value is through design and marketing and they do other things. By the way, the American rate of employment unemployment at the moment, I think it's about 4%. You know, so it's not a historic low. I think it's been down at 2 and a half as low in the past, but it's pretty low. I mean, it was up at 15% in 2020. There aren't loads of Americans sitting around waiting to do all these lowcost jobs that are done in
• 17:30 - 18:00 Vietnam or um Asia for well, they would do them, but they'd want to get paid more. The point is that they don't exist. Those people aren't there. America is like the unemployment rate is very low at the moment. You don't have I haven't I haven't interrogated that. But I mean what's relevant I'm not I'm not I'm not saying that I disagree with you or I think you're wrong or I'm questioning your the accuracy of your statement but Trump's assertion. But that's but that's the basic problem with protectionism isn't it? If you take it to its end goal which is that we only do
• 18:00 - 18:30 things for our own country. Like by the way no one's ever going to buy from you because if everybody moves in the same direction imposes tariffs and thinks the same way they're all going to be protectionist as well. So if everybody implements the same philosophy to its ultimate extreme, you have the market serves its own consumers. It'd be like more like China where you make stuff and you sell it at home. Yeah. Although China's biggest exporter in the world as well. Biggest Yes, it is. So it's not even comparable to China. You you have an American system. Everything autonomous that Americans need is done
• 18:30 - 19:00 by Americans, but which is such a radical change. Like seeing as we've gone off on this more economics 101 tangent, let's just stay with it and I'll bring it back to the actual news. Um once we've done that tangent, well you could look at that specifically from a telecom perspective though if you wanted to. But let me let me just say you know your point about how to extrapolate this to to the nth degree every country is ultimately protectionist where they only make and sell stuff to themselves. Yeah. Then you get into this basic economic precept of comparative advantage and I think
• 19:00 - 19:30 Ricardo was one of the people who first spoke about this who is actually English despite the Spanish sounding surname. Um and the comparative advantage is that one country for a variety of reasons, natural resources, training and specialization, um geographical positioning, whatever, just happens to be better at making stuff. Yeah. Um either to a higher quality andor for a lower price than everyone else. Well, it's economies of scale as well. Economies of scale. It's,
• 19:30 - 20:00 you know, it makes sense to have three big companies doing radio access network equipment for a market of 8 billion people or whatever it is at the moment. If if you're selling to a market of 350 million people and all of your staff are coming from that market and your research and development budget is quite small because you're not going to make the same by serving a market of 350 million people only compared with a market of 8 billion people, then everything's the unit costs are obviously going to go up. And that's the same by the way for every industry. Yeah. Plus, you can't get a lot of the raw materials that you'd need to get
• 20:00 - 20:30 anyway. So, that does it doesn't even consider that aspect of it. If you start going into this sort of tariff mad system, uh some countries I mean, it's almost the end of trade. Yeah. It's almost saying and so this is the point I was um you tugging me around the table. You keep to the corner. You keep slinking around like you're I mean, I'm I'm more left here than I was starting off though. That's good. That's good. Um so, back back to what I was just saying about comparative advantage. He said to move his camera now cuz he's tugged. so far around the table I'm anticipating
• 20:30 - 21:00 right um so you know I mean you could even you can even um reduce it down to the level of the individual um you know so money one of one of the many economic misunderstandings of what Trump is coming from coming from is is the understanding of money and money is just a liquid form of labor in effect so I always think of it as like let's say you're like a a very early man like a caveman Um, and you got one bloke, you
• 21:00 - 21:30 got one bloke who's good at um uh hunting and and preserving meat and and maybe agriculture. You got another bloke who's good at fashioning stuff from wood. And back in those days, they would have bartered, you know, he would have exchanged, you know, a a an animal skin for a for a chair. Yeah. let's say and then as as economic systems became more sophisticated they realized that you bartering reaches limits not least to do with scale but also in terms of accuracy. How do you know whether you've
• 21:30 - 22:00 got the exact equivalent value between one item and another? And so making a liquid form of that labor in the form of money is a is a much more efficient way of exchanging stuff. And what America effectively does with the rest of the world is it's got more money than everyone else. So, it gives them money in exchange for their goods. And Trump seems to think that's wrong. Yeah. It seems to think that there should be a complete at the very least um uh a complete balance. Um I they should give
• 22:00 - 22:30 us just they they should give the states just as much money as the states gives them. But if I buy stuff off you, it's not it's not to my detriment. I bought it off you because you've got a thing that I want and I happen to have the money to buy it off you. And then I'll go off and do my thing with my skills and earn more money so I can buy more [ __ ] And and by the way to the point that the American economy is not in a dreadful place at the moment. No, not at all. It grew like about 3% last year. I think the European Union was at 1%. Yeah. You know, it's this idea that the
• 22:30 - 23:00 Europe that the American economy I mean the the biggest and most valuable companies in the world are American companies. As I say, unemployment is pretty low at the moment historically speaking. People are well employed. They earn high wages. you know, salaries are good there. The average standard of why why is there this perception that Americans are being screwed? It's Well, I think I think it's because Trump's political platform has always been protectionist and, you know, make America great again sort of thing. It's always been he he's a national populist, I think, is the more technical political term for him. I he appeals he used
• 23:00 - 23:30 populist um messaging, i.e. quite simplified political messaging to appeal to the masses, which isn't necessarily bad. publications like The Economists tend to use populists as a projorative, I don't agree. I think it's just one way of messaging. And and if it's and if it's the if the opposite is being a technocrat where you think that communicating with a populist is unnecessary because they're too stupid to understand your clever machinations, then I'm in favor of the alternative. I think the reason it gets used poratively is because the it's the idea that you're
• 23:30 - 24:00 you're only doing thing you're doing things in a sort of expedient way. Short termist. It's short-term. You're only doing it because you want support from the that group, you don't have any principles and it's all about just getting you do any any policy that suits your popular base is something that you'll adopt and inevitably when people get a bit demagoguic um people quickly extrapolate all the way through to Hitler. Um, and you know, you could I wasn't going to make that leap. No, no, I'm not saying you were, but you could argue that that is, it's
• 24:00 - 24:30 not a totally hysterical um, extrapolation because when you start putting your country first, you can get you can get more and more belligerent towards other countries. I don't think Trump's like that, by the way, but people quite often go there. Yeah, they do. I mean the the the stuff that's going on at the moment with the tariffs I find quite as I think it's very aggressive and it's also quite bizarre because I think we were talking before we came on there's not any there's nobody nobody thinks this is a sensible idea apart from the kind of Trump circle well Trump's just convinced that trade imbalance is about what's that guy so a
• 24:30 - 25:00 lot of the Republicans at the moment are really upset about this I think um the sort of mainstream sort of older school Republicans who have actually been quite behind Trump over the last few years I think you're starting to see some cracks now where this just doesn't look very sensitive to anybody. Yeah. What the hell's going on? I think we should talk about it as regards telecom though. Yeah. Yeah. Well, so let's let's just get the overall story out the way and and the macroeconomics out the way. I won't dwell on it for too much longer. So, the reason we went off on that tangent is partly because he held up this little chart where he'd just come
• 25:00 - 25:30 up with these percentages that he thought they were that were effective tariffs into which he'd thrown a bunch of other factors including currency manipulation and VAT and and other what he considers to be bad faith trade activities. But then as you know as we both found out um we realized that the way he'd come up with these percentages and then and then basically what he done is just have it to decide what the reciprocal tariff he was going to impose on everything else. Imports imports minus exports divided by imports divided by two the formula. But they they used a
• 25:30 - 26:00 lot of funny symbols to make it a little more complicated than it is. But that's basically what it is. Yeah. Well, but I mean there's one guy who I embedded a um a tweet from him in the story I wrote today. Uh an economist. He goes, "Just figured out where these fake tariff rates come from." They didn't actually car calculate tariff rates and non and non-tariff barriers as they said they did. Instead, for every country, they just took our trade trade deficit with that country and divided it by the country's exports to us. So, it's even simpler than that calculation. So, well,
• 26:00 - 26:30 the trade deficit is is imports minus exports. Okay, fair enough. Fair enough. Um, and so yeah, so that's what they came up with and that came up with a figure and then they just turned that into a percentage. Yeah. And then they h haveved it as you say to decide what the quote reciprocal tariff should be which is very unscientific. Yeah. And so all all it really is, you know, to finish off on on the macro side, Trump has long decided that trade deficits are bad. And and in his sort of, you know, he can sometimes be very
• 26:30 - 27:00 infantile and he'll use words like unfair and nasty and just really sort of juvenile simplistic terms. And he he's just decided that America's getting [ __ ] over by the rest of the world. And the evidence of that is a trade imbalance. and some of the stuff we got into, you know, another point I'll make about trade imbalance, leaving aside the fact that it's just a fair exchange of money for goods. Yeah. Is another reason why there could be a trade imbalance, apart from the the cost of labor, which is a big part of it, is maybe American
• 27:00 - 27:30 manufacturing manufactured goods aren't very aren't very good. Yeah. I mean, I think their car industry started falling behind places like Japan and Europe um in like the 80s when they were still making these tanks, these sort of Lincoln. Yeah. But it's not as though they it's not as though they don't have companies that that are extremely valuable companies that do. I mean, I'm just talking specifically about manufacturing before we get into big tech and that sort of thing, which maybe is where you headed. Well, it was, but I mean, it's notable that the most
• 27:30 - 28:00 valuable companies in the world at the moment are all American. You know, it's not like they've got this lack of industry. Certainly not. Certainly not. And and it's interesting that tariffs tend to focus on manufactured goods as opposed to digital services, which is what they're really good at. Yeah. Um they're good at making chips. Good at Wow. I mean, okay. You could say they don't make them. We've had this argument before. Yeah, indeed. They're good at design. Nvidia is a maker, though, and an ARM as a designer. No, they're good at designing. They're good at designing chips. Um and then the actual manufacturing is largely done by TSMC
• 28:00 - 28:30 and that sort of thing. That's true. Um, but yeah, no, they're they're great semiconductors and obviously Intel is is fallen from its pedestal quite significantly, but that was always one of the most significant companies. Yeah, totally. So, they're brilliant on chips. They're pretty [ __ ] good on AI at the moment. Cloud, well, anything that's hyperscaler, they obviously kick ass. So, we got like the, you know, we've got um Amazon and Google and and all that. Yeah. Um and Microsoft and
• 28:30 - 29:00 they're always right up there. And of course Apple. Yeah. Um but they're, you know, and their cars aren't bad. I've always had a Ford, by the way. I've always had a Ford Focus. So I they've always been perfectly adequate, but that's all I can afford. If I want to get a bit more swanky, I might go Japanese or German. Well, the the the way the market regards the way that the um you know the the investment community regards things these days is that the most valuable assets are software and intellectual property and stuff. Intellectual property and in those areas America is way ahead of everybody. I
• 29:00 - 29:30 completely agree. So, so it's interesting that this is all just done on on goods and I had a look at it when I was researching it when I was writing it up um yesterday. Um who is it? I think the Wall Street Journal, they had a good piece where they sort of illustrated the main um where there is a trade imbalance what what um product categories that falls into. So there's a massive trade imbalance with China and the main categories they flagged up that that US imports from China electronics
• 29:30 - 30:00 and machinery. Machinery kept coming up which is interesting. I never really think of it because it's not a consumer device. Yeah. Um unless unless this is what's really going to hurt American companies though a lot of them is is that they can't get access to the the stuff that they buy from China to make things quite and and then one of and then from the European Union as well as pharmaceutical products and vehicles machinery was one of the main products that the Wall Street Journal flagged up from Mexico where it has a massive trade imbalance although a lot of that will be stock isn't it with Mexico yeah vehicles
• 30:00 - 30:30 vehicles machinery and electronics again um and uh yeah And the only other one it really detailed was Canada where there's a bit of an imbalance and a lot of that is an import of energy which is interesting when you consider how good America's got at at um fracking and all that. But yeah, an interesting one with with machinery and also with Mexico and you were talking about this earlier and again this is a more macro thing. The the way the way global trade works now and the way global manufacturing works
• 30:30 - 31:00 now is there's so much comparative advantage that you constantly jumping over borders to get bits of your manu especially for a very complicated um piece of manufacturing like a car. Yeah. You're constantly jumping over borders to get various components, various bits of assembly and all that sort of thing. It's not like you've just of course because the only other way to do the only other way to do it is to have extremely expensive cars and extremely expensive stuff and probably people would all be a lot worse off. you know, we wouldn't be able to pay people enough
• 31:00 - 31:30 to actually, you know, the consolidation that's happened in the ran industry, for instance, you know, it's the base base companies doing base station equipment where they used to be 12 and it's gone down to three has brought these enorm it's one of the reasons why there are now like god knows how many million billion rather uh smartphone subscriptions in the world. That wouldn't happen if you didn't have that kind of globalization. Yes. No, totally. And and the smartphones themselves are all made in China or Vietnam. Yeah. You know, Foxcon is the biggest contract
• 31:30 - 32:00 manufacturer in the world and that's it's actually a Taiwanese company, but a lot of its plants um are in China. China. Yeah. Um which is always an interesting thing. I mean, Apple was one of the worst hit companies, wasn't it, by all this? Unsurprisingly, I suppose it went down. What did it go down? Pier though. It went down like 10%. 10% or something. Yeah. Yeah. So, Oh, it's below 200 now. 200 dollars per share. Wow. It went down from 223 to 200. Now, were they uh while
• 32:00 - 32:30 while you while you got the mic in front of you, you were just in the States. Did you hear any chatter about all this while you're over there? No. I mean, it was literally like happening as I was there. So, I only talked to really Phil about this. Right. Yeah. People on the street were just Let me guess Phil rolled his eyes and went, "It's the end of Imagine Phil was a fan. People at the airport were crying." No. Well, like you say, there will be a lot of people like Trump's hardcore base in the US will all will think this is a good idea. And I suspect in a year's time they won't think it's such a good
• 32:30 - 33:00 idea, but it'll, you know, actually that Wall Street Journal one also had a has a chart where it it factors in services. So, per your point about big tech and all that. Um, and the US runs a services surplus. Nvidia is $100 as well. Sorry. So, it runs a services surplus with the rest of the world, of course. It has a total trade deficit which you if you include goods and services. That's quite interesting. It has a total deficit. So the sur the services surplus is much smaller than the goods deficit is. Yeah.
• 33:00 - 33:30 Um but yeah, what were you saying about Nvidia is below $100 as well now. Yeah. This is a good like a second conse like a second day in a row. Well, exactly. So let's take someone like Nvidia and we were just talking about chips. Nvidia's, you know, one of those they were exempt. Well, see, this is this is one of the things that that we're going to lead up to. This it's such a blanket thing. I don't think so. No, it's it's blanket. I don't think conductors are exempt from any of this. I thought there was something like pharma and No, I don't
• 33:30 - 34:00 think this Well, there will be. I mean, whether they are now, there obviously will be. And this is what's interesting and this was kind of my analysis on both the stories I've written about this this week is it's such a crude and as we just as we just discussed such a hamfisted initiative that the only hope is that he hasn't completely [ __ ] lost his marbles. Yeah. I mean components are exempt Apple wouldn't have performed as badly as it did by the way. Yeah. What if components were exempt Apple wouldn't have performed as badly as it did afterwards. And then
• 34:00 - 34:30 it's not just Apple. Leonard Lee who we met at um mention him because you might listen to this occasionally. We met in Barcelona's good analyst. He was saying one of the I don't know I haven't looked at their share prices but some of the companies that might be particularly badly affected by this that are US manufacturers are companies like Dell and HPE. Yeah. Because they make server equipment but it's all done in like it's the same as Apple almost. It's like it's all assembled in China you know. It's not even like uh I mean we're going to come on talk about Nokia Dale went down
• 34:30 - 35:00 from 95 to 72. Yeah. See 20%. Um that's bad. Yeah. I mean I didn't realize I hadn't checked but that's that's a bunch of American jobs gone. So well quite and so look you know I don't think it's the I don't think it's our role to dig deeper into the sort of socioeconomic implications of this to Americans. There's plenty of other people who will do that. But I think just from that from those anecdotes anecdotal evidence we were just throwing around now it's very
• 35:00 - 35:30 likely to be very detrimental to normal Americans and to American businesses. So it's very likely to be highly unpopular. Um and where he where he goes with it um remains to be seen. But the um what was the point I was trying to make? Um, yeah. I guess the hope is that it's just an initial negotiating position that he's just done his Trump thing. He's done his art of the deal thing where he's going, "Okay, I'm charging you loads of money." And then people are
• 35:30 - 36:00 coming back. I think um my colleague Arita was sharing a story with me in the Guardian where where apparently Stal was already thinking about making concessions to get let off a bit of it. And so that's playing totally into his hands. He's he's hoping to [ __ ] people up and extract concessions by this ballsy initial move. That's the Well, I mean, that's the best case scenario. Even that's bad. It is, but I'm saying it's a belligerent bullying tactic. And what I mean, a lot of the stuff to do with Canada and Mexico specifically, who
• 36:00 - 36:30 already hit with tariffs, by the way. So, those have been implemented and and all of that was complete [ __ ] It's like this perception that there's loads of fentinel crossing the Canadian border. There was like there's probably less fentinel across the Canadian board than there is alcohol in this room, you know. It's it's just there's still quite a lot of fentinel. That's true. You only have to have like a dot of it, don't you, on your apparently. So, I've been told that was more talking about the amount of alcohol in this room. Um Yeah, I know. And and he just says comes up with reasons and he just pulls reasons out of his ass. It could be fentinel. It could be whatever. Um uh but yeah, that's the hope and then that's the best
• 36:30 - 37:00 case scenario. And then China panicked. Did you see? Say it again. He said China played it wrong. They panicked by because they retaliated, right? They have retaliated. That's not panicking, is it? Yeah. They played it wrong. They should have come to me and kissed me. Yeah. Well, there we are. So, so that sort of feeds into the narrative. What I did, how is that fair? Yeah. Exactly. And so, he's just, it just, it just seems very crude and sometimes it works. And you know, if this story that my colleague shared with me about Starmer already looking to make concessions to
• 37:00 - 37:30 US, special concessions to US companies, then that's exactly what Trump wants. But there's also been reports that Star I mean they they have a list now of of of goods that they could hit in return for instance and and I mean they don't want to show that they're being soft and weak. Okay. But if if our response to this is to make special concessions to US companies, then then that is a capitulation, isn't it? Yeah, it's a capitulation. But as I say, there's also reports that the opposite's happening and that they're preparing some Well, and they'll be leaking those reports out going, "Yeah, yeah, we're not going to
• 37:30 - 38:00 take just like the EU's come out with a bunch of stuff that it's planning on. I've got Yeah, I've got more on that on that EU, especially France. Actually, I could have done with you leaning over my shoulder cuz I was trying to listen to an interview in French where where it wouldn't do an auto translate. Um, but I looked at a chart and the UK and France actually are pretty low on the tariff scale. Well, so what's happen? No, they're not the same. The whole of the EU is 25. The EU gets treated the same way. But there was something with France specifically where it looked No, mate. You're in the EU. You don't get some kind of special where French. So what
• 38:00 - 38:30 probably what will happen is that there will be negotiations, there may be capitulations, there may be or it could be people like China just going [ __ ] you, I'll see your tariff and raise you some [ __ ] Um but it it will settle down in time that the question is what level it'll settle down to um and how much damage is done in the in the meantime. Um and you know it might not it might not settle down. That's one
• 38:30 - 39:00 scenario. The worst case scenario is that he he just says, "Fuck it. I'm going to keep this forever." There's there's the settling down scenario and there's a scenario where it just gets ramped and and and the countries respond with their own tariff war. That's like what happened in this sort of 30s sort of thing. Okay. Well, actually that leads on to the story I wrote this morning where um uh this this woman um is called what's her name? Um oh yes, Sophie Primas or Prima. I guess you'd pronounce it in French, wouldn't you? P R P P P P P P P P P P P
• 39:00 - 39:30 P P P P P P P P P P R R I M A S Path. Um which which means um female cousin in Spanish as well, by the way. Um and she's uh the government spokesperson. So they seem to have one particular spokesperson. Um and she went on to uh a Luxembourg um radio program, a broadcaster called RTL. Um and I'll I'll read out some some quotes. So, I mean, I was reliant on um AFP, Azan France
• 39:30 - 40:00 Press. Is that what it is? Yeah. Yeah. Um for the translation, but I embedded the the the French for anyone who speaks it. So, if you're really interested, Pierre, you can you can check that out while you're recovering. And she goes, she goes, um, we have a whole range of tools and we're ready for this trade war. Then we will look at how we can support our production industries. Trump thinks he's the master of the world. It is an imperialist stance that we have somehow forgotten about, but which is returning with such great force and great
• 40:00 - 40:30 determination. And then she went on to say, um, we're also going to attack services, for example, online services, which are not taxed today, but which could be. Now, of course, they are taxed. There will be a corporation tax and that sort of thing, but as I think we know, they get away with a lot of tax just through clever accounting and offshoring and that. And so, that's really interesting. back to what we were saying about how Trump's um tariffs are mainly on physical goods. Yeah. Well, Europe's going, "Okay, how about we tax your [ __ ] services, which is big
• 40:30 - 41:00 tech." Yeah. Uh and that would be a massive escalation, wouldn't it? Totally. You can just see Trump throwing his toys out the prem if they did that. Well, you think about uh the use of the cloud. I mean, it's quite interesting this week reading about things like Deutsch Telecom having a closer deal with Google Cloud, for instance. We just wrote that up this morning. Yeah. Yeah. I mean um you think about how the sector we're in how much it is in with American you know software companies relying on them for you know data centers and artificial intelligence
• 41:00 - 41:30 and all this stuff that's massive that's a real escalation you know in terms of it is I mean how they'd implement it I don't know I mean how do you how do you work out the value exchange when I use my Gmail or something like that yeah I mean this the danger is though that you you you then end up hurting your own if you're very reli on these companies, the UK's the UK's um which I was looking at today because I'm sort of midway through writing a piece specifically about UK's approach to public cloud, but they have this ongoing cloud investigation. I mean, these things are drawn out. It's like that look at Vodafone 3 sort of
• 41:30 - 42:00 merger. It goes on forever, but they came out with some preliminary findings in January and I was going over those and they're pretty they're pretty scathing what they've got to say about the US providers. AWS and Google have each got about 40% share of the UK market and then the next biggest one guess what is AWS and Microsoft sorry the next one is Google yeah and that leaves some some companies that don't really count and they were they were basically saying things like um everybody's paying too much and that money be better invested somewhere else
• 42:00 - 42:30 but there's evidence that Microsoft has been making it hard for you to run applications on AWS or as opposed to Azure I mean this has been this has been a topic we've spoken about for almost as long as we've been talking about public cloud. I remember where I got a quote from um Scott Petty at Vodafone. I asked him at a press event. I think you were on holiday when that press event happened and asked him about migration from one public cloud provider to another and his quote was it's a pain in the ass. Yeah, I think I used your I think you I think I relied on you to feed it back to me is what he'd said.
• 42:30 - 43:00 And um and yeah and and and these investigations are going is it more of a pain in the ass? It has to be. In other words, other artificial Yeah. um obstacles and incumbrances. Yeah. And and actually on that point, while we're talking about that, you know, the other thing that the EU is very good at is [ __ ] on US companies that get too big for their boots. Yeah. And there's been a lot of pressure. I mean, at the start when Trump first came in, you had people like Zuckerberg going and sucking up to him. Um, and one of the reasons he was sucking up to him is because he
• 43:00 - 43:30 could see some aggro coming on the horizon from the European Commission to do with competition and the digital services act, digital markets act, all that stuff. Yeah. And he wanted Trump to lean on them. Uh, you know, and then we had things like um JD Vance doing that that infamous speech at the Munich Security Conference where he had a pop at Europe. And while a lot of it was to do with things like censorship, he was definitely there was definitely an undertone of like you're being a dick to our companies and you better stop if you want to do business with us. Well, now they've come up with this unilateral
• 43:30 - 44:00 preemptive bit of aggression. I would have thought the European Commission is going to be like, well, we're just going to be, you know, we're certainly not going to slack off on going after your big tech companies for competition and regulatory reason. You know what the other thing that I find interesting with this is and because I was getting texted by um someone that we both know earlier on today about the usual sort of Huawei situation in Europe and more American pressure on them to do something about that might be. Yeah. I mean the the Americans trying to put pressure on
• 44:00 - 44:30 Europe to do something that they because they've deemed Huawei to be a security threat is all of a sudden you're thinking hang on a minute the European Union is going to regard Huawei in quite the same way potentially. I wrote a piece um along those lines um a little while back going basically saying the Yanks have got a [ __ ] nerve asking Europe to play ball when they're doing all this stuff and and this if it's the person that I think you're referring to, they got in touch with me to correct me and I'm like I stand by it. Yeah. You know, you can't have it both ways. Of course not. I mean, I think their point was talking about this toolbox and all
• 44:30 - 45:00 that sort of thing. Yeah. But I just I don't think I don't think Europe is aligned. Americans who've already done as much economic damage as they've done this week have a lot less cudos and a lot less ability to kind of persuade the Europeans to do what they want. There's no goodwill at all really. Let's be honest at the moment. You see that they figured out the the formula, right? The how they were. Yeah, that's what we were just chatting about earlier. Where the [ __ ] have you been? Sorry. You put you put in your article. He really hasn't got over his flu, has he? I put it in my
• 45:00 - 45:30 article and we spoke about it for about 5 minutes in the room you're sat in. How can people not talk about this more? How what do you mean? I don't know. It should be all over the news everywhere. I think it is. It's It's been quite widely covered. Yeah. So, it has nothing to do with what tariff we put on them. No, they're just forcing us to buy their [ __ ] Basically, they they've basically just come up with a very crude calculation based on the um the proportion of total trade that they think is out of balance. Yeah. and they
• 45:30 - 46:00 come up with a percentage and then they've h haveved it and gone that's that's the tariff we're going to slap on you but it says like just buy our [ __ ] and then a small country like Laos whatever be like but we we can't really afford your stuff anyway. Well, I don't think they're saying buy our [ __ ] So that the political I think the political motivation is back to this whole MAGA thing that he's been talking about since you know his first was first running for office in 2015 which is to try and restore a lot of the sort of hinterland economic activity. So that could be
• 46:00 - 46:30 heavy manufacturing. It could be it could be coal mining. Um I mean if you're La the example you gave, you're basically just [ __ ] if if it plays out the way Trump wants it to because as you say they're not going to buy lots of expensive American goods. They're just going to lose the manufacturing base where they do things for Nike because it will get on shores. So someone was talking about the Loysto one where it's like oh is that going to all of a sudden you know start diamond mining in the US out of nowhere like in Pennsylvania? Oh, we're going to start. What about the coffee train? I mean, there's so many
• 46:30 - 47:00 there's so many ramifications of all of this now. Well, exactly. And and that's the and and maybe we'll take this opportunity to move it onto a slightly more telecomsy direction, but there's there's so much interconnection. Yeah. So, nothing, you know, back to my point about comparative advantage. No one. Ford doesn't have a factory where it mines the aluminium. It refineses the aluminium or the steel or whatever and and then it and it makes all the parts and then it makes all the electronics and it writes the software and it and it makes the seats and and and harvests the
• 47:00 - 47:30 leather and all that kind of [ __ ] You know, obviously it has to rely on a million different partners and it's all because of comparative advantage. Yeah, Ford's core competence will be its assembly plant and then maybe its marketing and distribution networks, but everything else that comes into making a Ford Focus, it gets from third party. So, same goes for people like Erikson Nokia to to to bring up on. So, I I mean, I thought it was interesting that this has all happened the same week that an American has taken over the uh the running of Nokia. Yes, indeed. I saw you
• 47:30 - 48:00 wrote a piece about him. What's his name again? His name's Justin Hotard. So, um he's the successor to Peeka Lumark at Nokia. He's like formerly of Intel at their data center and AI groups. Um, interestingly, one of the reasons they recruited him if you if you listen to the Nokia chair when she was sort of introducing him back in February is what we the US is a big important market for us. Yeah. And his experience there is really important all of a sudden these tariffs have come. I mean the other interesting thing that's happened with Nokia very recently which is quite
• 48:00 - 48:30 fertuitous timing is this Infinera takeover which I I remember Pekka Lumark who hotel is replacing or has replaced now um saying in Barcelona that that gives them a kind of optical manufacturing presence in the US that they didn't have before which is very very useful right now but there are things that they so should be stressed just to interrupt quickly uh one characteristic of these um Trump tariffs obviously is he's trying to say that if you do your manufacturing in the US, you're exempt from it. Totally. Yeah. So, so and that's the question is how
• 48:30 - 49:00 much manufacturing does Ericson and Nokia do in the US? They got their clever, haven't they? They've got their clever. So, Erikson in particular has got this highly automated factory in Lewisville, I think, that um they say, although I don't know if this is true, but the intention was always for everything made that's sold to you as customer made. So, they're kind of ahead of the game on that. They are. problem is uh I mean this wasn't explicitly raised by Erikson in their annual report and I don't think boy really got asked about it although he probably will do I suspect on the next earnings call that
• 49:00 - 49:30 comes up pretty soon but Pekka Lunar got asked about it in Barcelona uh this tariffs issue and he said well there are things that we can't get you know there are components printed circuit boards that just don't exist the supply chains for those don't exist in America that's exactly what we're talking about with Apple basically this stuff's not done in America it's done somewhere There isn't a single iPhone made in America to the best of my knowledge. Yeah. I mean, so I think Leonard Lee's point and by the way I should mention that the I didn't speak to him directly because I mentioned him
• 49:30 - 50:00 recently analyst. He was he he was quoted in an article that Fierce Wireless had done. Okay. Fierce network as I think it's called nowadays. Okay. Um, but I thought it was quite a good piece and he was saying that he thinks that they're a bit less exposed Nokia and Ericson than the likes of Dell and share price movements would suggest that's right because they do have manufacturing facilities in um in the US. One thing that's really interesting has happened with Nokia by the way is and I suspect this is connected with their whole pressure to like cut costs is that they've closed down loads of their own facilities in the last year.
• 50:00 - 50:30 Like they had a lot of radio systems done in like Connecticut for instance. Okay. Um they've gone down from having all these owned factories that they used to use to produce goods to so 20 I think almost a quarter of their stuff was owned manufacturing was owned two years ago. Now 4% is uh and they've basically gone and relied on contract manufacturers more which and that was your I I linked to your piece. Yeah. Lar was saying that gives us a better like it's actually quite advantageous at the moment because we can get it done in the
• 50:30 - 51:00 market that we're selling to. But the point he made was there are things we can't get the things we can't get in those markets. Yeah. These components that you have to source from other parts of the world. And so the the knock-on effect is going to the implication is it's going to drive up costs for Nokia and for Ericson in the same way that it would for Dell or whatever. Yes. Because you're going to get hit by tariffs. Then then there's a question, do you pass those on to customers? You try and swallow it. I mean, they're already under a lot of pressure anyway, these companies. I well I think more broadly you always pass on to customers which is
• 51:00 - 51:30 why this stuff is inflationary. Yeah. Um you know if we it could be telecoms or it could be it could be anything that gets exported to the US. Um if there's if there's a tariff on it well the person who's doing the exporting is just going to raise their price. Yeah. And you know, another bit of what passes for logic that goes along with this is Trump's thinking, well then that means that American consumers will buy more American [ __ ] because it'll be relatively cheaper. And maybe they will,
• 51:30 - 52:00 but there's a reason why they don't buy that American [ __ ] now. Yeah. It's because they consider the imported stuff to be better, either better value or high quality or whatever. But so what he's doing is he's he's he's forcing his own people to buy stuff they wouldn't buy otherwise. Yeah. And the the other the other interesting thing I think about both Nokia and Ericson in the context of geopolitics and what's happening at the moment is there's been a lot of speculation over the last year or so about first of all people like Echo saying oh Europe's rubbish maybe we should move to America be American
• 52:00 - 52:30 headquartered company and often that's a [ __ ] about regulation [ __ ] about regulation let's go let's go and live in America and be an American headquartered company there's speculation uh that's been running for ages about Nokia's mobile business being uh you know sort of sort of carved off and maybe with someone like Hotar joining he's clearly I mean you've said this yourself that he's more interested in the data center and AI stuff obviously background over extrapolated and said they're not interested in mobile anymore quite clearly the big growth opportunity for
• 52:30 - 53:00 uh Nokia that doesn't exist for Ericson by the way is not mobile because it's a flat market and it's forecast to be a flat market by anybody who knows anything about it it's forecast to be flat stuff we learned like when we had lunch with Ncale and yeah but the the issue I have with Nokia being acquired by some kind of US interest. Um, other than I mean there's loads of complexities about that and all sorts of barriers I can I can see regarding that is that I wouldn't imagine any of Nokia's customers viewing that as a very good thing. Any of their mobile
• 53:00 - 53:30 customers and usually these people get consulted on what they think about this sort of why do you think they wouldn't view it as a good thing? Because none of them are American. There's not a single customer apart from T-Mobile. So, you'd basically have an American-owned RAN provider that sells stuff to other parts of the world. Well, in a in a market where a trade war has just started and tariffs have been imposed, that's not a good look. And and oh, by the way, is because we've got an American headquartered company that does RAN equipment all of a sudden that's quite significant. Are AT&T and Verizon who
• 53:30 - 54:00 pivoted away from Nokia previously suddenly going to change their minds and start buying from Nokia? Of course they're bloody not because I mean AT&T's already Maybe they will if if this trade war goes mental. No chance. All right. No chance. I mean AT&T's whole justification for it. It's already taken out a huge amount of Nokia equipment that had not fully depreciated costing it potentially billions. Yes. Right. Some someone's paid for that. Whether it's Erikson or AT&T, someone's had to swallow that. We
• 54:00 - 54:30 reckon Erikson probably swallowed a to then explain to investors why you were suddenly going back to Nokia. Not to mention the fact that their whole justification for that move in the first place was to have this sort of single platform, you know, this horizontal layer of service management and orchestration technology that you then add components on top of in a kind of open ran way. Uh would it would make that look nonsense as well. Uh I mean swap swap outs in the telecom sector don't happen unless there's a really good reason like somebody bad and by
• 54:30 - 55:00 swap out you mean you mean replacing something before it's reached the end of its useful life. Yeah. Yeah. So, so I think the whole idea of Nokia being acquired, Nokia's mobile business being acquired by the US, this whole tariff thing makes that look really awkward at the moment. Yeah. Well, it it it throws a spanner in the works of nearly everything. That's what's so remarkably disruptive about it. There's a part of me that's almost like fair play to the bloke for just being as utterly reckless and gung-ho as he is. Um, but then
• 55:00 - 55:30 there's a bigger part of me that thinks steady on old chap. Yeah. Um well, I just think he's an economic vandal and um like Americans voted for him. Now you're going to have to live with it. But unfortunately, the rest of us have got to live with it as well. He's got a lot of other redeeming features at the same time, is it? Yeah. Well, exactly. I mean, he he was always considered to be quite strong on foreign policy, but none of that's really working out in like Ukraine and and Israel and that sort of thing, is it? Well, I mean, he was going to he was
• 55:30 - 56:00 going to sort Ukraine out in 24 hours. Exactly. that incentive which he just seems to be sort of letting Putin do whatever he wants. And as for as for as for Israel, I mean, it's just basically let's turn um bits of bits of the Palestinian authorities territory into golf courses seems to be the uh the approach. Yeah. Other than that, he's a wonderful man, though. Well, I mean, yeah, I mean, I'll tell you another thing, actually, talking about antagonism with Europe, which I which I briefly nodded to in the piece I wrote
• 56:00 - 56:30 today. Do you remember I said I I still won't say who it was but when I wrote my piece after Mobile World Congress I said one of the most remarkable things we heard while we were there was an off the record thing from a from a seale person at a major European operator that had basically had the Americans say scrap your DEI policies or we won't [ __ ] work with you right and you know that was something I just heard you know on chitchat so I I can't attribute it but now it's coming out into the public domain there's a big fuss in France
• 56:30 - 57:00 um about that. There's also a big fuss going on in Sweden. Well, that they they've had similar pressure to scrap DEI policies from the Americans. Yeah. Okay. It's it's like in the public domain now. It's like front page news. Um where you should you should have written about that, mate. Well, just that wasn't a telecoms angle. Telecom's company though. Well, no, but the one I mentioned that I can't that was off the record. I did mention it in my post war congress write up. I didn't do a whole Oh, yeah. Yeah, I did read I just didn't do a whole story on it because all I had
• 57:00 - 57:30 was that one off thereord comment. I mean, I suppose I could if I if I was incentivized more in a sort of Bloombergy FTish way, maybe I would have done a big splash on it. But um I just thought I just thought it was an interesting thing. And anyway, I do remember you writing about it in your but now this has become like front page news in in France and also in Sweden. There was a big fuss actually to do with Erikson. Yeah. where someone at one of their papers, they've got a fairly robust active press in Sweden, haven't they? They really keep everyone on their
• 57:30 - 58:00 toes all got names that I couldn't begin to pronounce. Yeah. Um and um Oh god. Yeah. And someone had not noticed that in the latest Ericson annual report, all mention of diversity, equity, and inclusion have been taken out. Whereas in the previous year, if you did like a a control F searchable, there was about 100 of Do you know what I find sad about all this though is and you've made this point yourself in the past and and I probably thought oh yeah that's just sort of Scott going on about something but but the whole the whole DEI stuff that was a few years ago obviously going
• 58:00 - 58:30 back to almost to a different world it seems now everybody was crazy about this all companies were it was like you know it was like the main priority ES is it ESG and all this stuff yeah so ESG environmental social and governance yeah that's right and then EI, diversity, equity, and inclusion. And it was the it was almost like what I call corporate virtue signaling and and you this is the thing you always said it was corporate virtue. How quickly have all these companies swung? It shows how unprincipled companies are. They don't have this part of it. They don't have
• 58:30 - 59:00 principles. They're just about making and haven't I always said that I actually think it's impossible for a company to have principles principles. That's just not their mo. It's possible for an individual, it's possible for the CEO of that company to have principles, but it's not possible for the company on the whole. And so when they try this corporate marketing, they go, "Well, we're all about touchyfey fluffy yumminess." It's being it's just marketing. If I'm being if I'm trying to be more sympathetic towards what's happened, I could say that maybe they they they probably massively overreached with the DEI stuff, even though some of it was well-intentioned. I'm trying to
• 59:00 - 59:30 be sympathetic here. They overreach the constant rainbows and all that. the the Yeah, but I think if you look at it in a sympathetic way and you say, well, there was an effort to try and do something about let's get more, you know, ethnic minorities or disadvantaged groups perhaps into the workplace. They overreach by making it a a quot thing and and and a positive and that word is is at the at the core of my objections and and therefore there's been some kind of public backlash. So you could say that the companies rather than being
• 59:30 - 60:00 unprincipled are just basically reflecting public opinion and a change in public opinion. I don't know. But but it's still I where I agree with you. thing I find really surprising because they're they come from a touchyfey country. Oh, they're very they're very right on in Sweden. Um you know and and and in a lot of ways sincerely. So you know when I say that I don't think it's possible for a company to have a moral compass. That doesn't mean that I I can't generalize about a a national culture. Yeah. And I think I think
• 60:00 - 60:30 Sweden I mean I don't know any of those, you know, the sort of Nordic countries that well, but I'm pretty sure all of them I know Ericson. Um I know Lego. Um uh I think all I think they're all quite ahead of the game, certainly when it comes to um sexual equality. Yeah. Uh and all that sort of thing. And I think in some ways it's it's backfired a little bit. I I know there's there's a lot of um immigration related agro in Sweden these days, but anyway, I'm not going to go down that rabbit hole. Um
• 60:30 - 61:00 but if Erikson has done that, and this is, you know, this is me just um secondary reporting. Um you're right, it's a completely pragmatic thing. And it would be because the Trump administration has been leaning on European companies and said that we won't [ __ ] do business with you if you don't wind your neck in. Now I that actually really bothers me. Even though I'm not a big fan of DEI and corporate virtue signaling, I still think companies should be free to virtue signaling as much as they want. It
• 61:00 - 61:30 shouldn't be down to the Americans to tell European countries how much they can do that. Do you know the interesting thing about Erikson is do you know how much sale how much of Ericson sales came from the USA last year? About a quarter. 40%. Oh [ __ ] Is it 40%. Now you imagine what they what that was as a percentage of profits given given everything we've heard and been told by people and the the suspicion anyway looking at what happens when you lose an American deal. What happens to your margins? 40% 40%. [ __ ] me. Yeah. Um Yeah. And I think even
• 61:30 - 62:00 Nokia after its mobile setbacks, I mean obviously they're big in Well, I've just got Nokia's numbers up from from the last time I wrote them up. Nokia across North America is 28%. Which is obviously quite a bit less. And that would include, I'm guessing, the way they do it, Canada and maybe even Mexico as well. Yeah. So, um, but it's, yeah, it's a significant obviously, but it's a lot lot less considering Erikson's is 40% just in the US market. But I guess after picking up this um, this big Ericson deal, this big AT&T
• 62:00 - 62:30 deal, you know, they've got half of T-Mobile, they've got a massive chunk of Verizon. I mean, it's almost got hands. I think Mike Dana, my colleague, wrote a story about Erikson being the the provider to America and they're almost the same now in the UK by the way. Every core network of the four mo mobile network operators, every core network comes from one company. And when I wrote that story um about Huawei in the UK recently, you know, Huawei um ban and we
• 62:30 - 63:00 should we should pivot to them soon. Um prompting security concerns. One of the things in that document that the government released was the dangers of reliance too much on one company. Yeah. Well, your whole core network infrastructure in the UK comes from someone in Sweden. Yeah. Quite and and a company that um well they're not in any danger of going bust and not necessarily in the most robust sort of health they've ever been. They're not. And also if they have an outage, remember a few years ago they had some problems that
• 63:00 - 63:30 caused issues in Japan and the UK because of a a software upgrade, right? You know, you get a problem then all UK networks could potentially be affected because it because it's the same vendor that's got the issue. Um let's um on on this tariff thing, let's let's start to wrap it up. Why are you staring at worry about him? Cuz he's sighing. No, he just looks not with it. Yeah. Well, bless him. He's he's been fighting off. sick. He's sick of being ill. Also, he's flown like a lot recently. I'm reading about
• 63:30 - 64:00 the tariffs and it's making me depressed as well. Oh, okay. That as well as if he wasn't feeling like under the weather enough. Um, so yeah, to wrap up the tariffs like in in the in the broadest sense, I think we can all agree. I was listening to a pod on the way in that was quite interesting and he said there's basically three main reasons for doing tariffs. This is good. This is taking a step back. I apologize to the macro side. There's there's revenue generation. Fair enough. That's understood. Um but he also made the point that that in a sort of laugher curve kind of way you have to there's an
• 64:00 - 64:30 optimal level of you know you've heard a laugher curve haven't you probably okay well let let me very briefly explain it it's basically a a curve that let's say for the sake of argument a bell curve shape it's not an S-curve no it's a bell curve where along the bottom um I think the typical example of it is along the x-axis you've got tax rate uh starting at 0% % and ending at 100%. And then along the y-axis, you've got tax revenues. Okay. Now, you might think
• 64:30 - 65:00 that there'd just be a straight um arithmetic um uh direct correlation, but it goes up for a bit, but then once you get beyond a certain level of taxation, it tails off and then starts to go down. And there's two main reasons for it. One is tax avoidance. If you're getting taxed at 100% or people leave, well, yeah. Or or or they just use a black market or whatever. If you're getting taxed 100% or or they stop working. If you were getting taxed 100% maybe you just wouldn't bother getting out of bed because you're not, you know, you got no
• 65:00 - 65:30 incentive. So apparent apparently the UK system at the moment is crap for if you go over 100,000. Oh yeah, I know. There's a big article in the Economist about it that was really good this week that Badget wrote about if you gave them£1 over you're worse off. Massively worse off. It's And the reason is they start um chipping away at your um at your taxree allowance. So everyone's got a taxree allowance up to about 12 grand. the first 12 grand of what you earn. Yeah. Um gets taxed at 0% and then you start paying 25% and then 40% and then 45%. I mean people but if you go 100 go
• 65:30 - 66:00 over 100 grand they start chipping away at that such that once you reach 120 grand you've got no taxfree allowance. So your actual real tax rate is about you're better off earning a lot less basically. You've got a situation now where people are saying I don't want to pay your rise beyond this point. uh pay me, you know, if they're lucky enough to be at that level, pay me 900 and you know, 99 grand a year. Anyway, um so there's there's a laugher curve. There's an example of how when you start tax people more and more, you you a create
• 66:00 - 66:30 incentives for them disincentives for them to work at all and incentives for them to avoid tax and pay accountants and and live in [ __ ] Channel Islands or whatever or Cayman Islands. And then the other one is it reduces economic activity. So you know the total tax the total receipts for a country is a product of the economic activity and as we've seen throughout the late 20th century with communist countries USSR um Mauist China etc etc etc um North Korea as it still is now uh when when
• 66:30 - 67:00 you when you have too many disincentives for enterprise you just end up getting no enterprise at all and thus no tax. Yeah. So um and that applies why did I come up with that laugher curve? What was the other thing we were talking about? Was it the tariffs? Oh, yeah. So, the tariffs again, there'll be an optimal level of tariffs. If if you're just looking for revenue generation, there'll be an optimal level. And once you go over that, your revenue starts to drop off because you got a disincentive from people importing into your country. Yeah. Um, so revenue generation's one. Um, another one is protectionism, which
• 67:00 - 67:30 we've already explored at great length. And then the third one is like geopolitical [ __ ] which we've also explored at great length, which seems to be part of what Trump's all about. he's just using it as a as a stick as America is the biggest spender in the world. He's decided that that spending power needs to be used more aggressively. Um and this podcast, you know, he just made the point that he made two points. Firstly, he thinks the levels they're at now um uh are [ __ ] in that LEA curve sort of way. And secondly, he said you
• 67:30 - 68:00 can't do all three at once. you can't achieve optimal outcomes for both revenue and in and protectionism and geopolitical maneuvering at the same time. You have to kind of pick one whereas he seems to be trying to pick all three. Yeah. So so that's a that's a really interesting thing as well. But I think you know the long and short of it and um you know if you've got any other thoughts from a more telecomsy side I know you're working on a story right now which you think might have some bearing on this. Um, the long and short of it is
• 68:00 - 68:30 as long as they stay as they are, it will escalate more. People retaliate. Trump will counter retaliate cuz that's what he does. Yeah. He's always got to be the one who's winning the pissing competition. Yeah. Um, and it'll impoverish everyone. Yeah. I mean I mean Yeah. I I there's not a lot I've got to add on a telecom front. I think the companies that we cover regularly that would be mainly effectively we've talked about a bit Eric and Nokia and there's obviously the handset guys like Apple and Yeah. you know, and there's the server companies like I mean that there may be more to worry about. That's
• 68:30 - 69:00 interesting actually in the context of virtual ran because they're in that game. People like HP and Dell. Yeah. Uh and anything that's lower by that's that's like a bit frightening, you would say, for those companies and what what it could mean for them financially, I suppose. But one trillion was wiped off big tech, right? Yeah. And you're using the correct um verb there. You got to say wiped. Yes, of course. Yeah. Everyone knows that. Those are the rules. I don't make the rules. Um, sorry. I just thought No, no, it's fine.
• 69:00 - 69:30 News and in the middle of whatever you No, mate. I wasn't I wasn't winding you up. You're in good company when that cliche 1.5 trillion. What is it when it's been added though? Well, quite What's the opposite of wipe? Yeah, exactly. I don't want to go there. It's been unwiped. Uh, wiped. Skided. Tagged. Tagged along. Tagged on. I don't know. Um, anyway, attached. Attached. Um, yes, painted. They I don't know. All right. Thank you. Thank you for that brain impromptu
• 69:30 - 70:00 brainstorming. Um, so yeah, so that's that really. I mean, it's it's fascinating. I think it's I think it's net negative, but it is interesting just to have these things going on that are going to shake things up. Yeah. Um, I think if Europe starts having a go, I don't like it. It's interesting. Yeah. It gives us something to talk about. But if Europe starts having a go at at the big tech and the hyperscalers, that that was the only thing I was prompting to do. I think you're writing about hypers. I'm I'm covering the hyperscalers very much from a UK perspective because
• 70:00 - 70:30 they're under a bit of pressure in the UK market. Um there's a big investigation going on into them as dominant players. Yeah. Uh and there's also this telecom security act that was that's being implemented that's actually like it was drafted a long time ago, but it's now sort of being rolled out and companies have to it. And um and that I didn't even realize until I talked to Ian Milligan. Um spells his name the right way by the way. Three guy. Yeah, he's Thre's chief network officer. Last saw him at the darts. Yeah. So they've
• 70:30 - 71:00 they what they've moved to a new core network provider which is Ericson. Uh and one of the reasons for that that one of the reasons that they didn't go with someone like Microsoft uh with I mean there's a whole issue with Affirmed obviously that's been um that's potentially up for sale. it seems to actually be up for sale. Uh but the other reason they didn't do it is apparently because the telecom security app makes it very hard to use public cloud now for um for telco stuff and and then I was chatting is that in a sovereign cloud sort of way? No, the sovereign cloud's a little bit different. The sovereign cloud's a little little bit sort of that's more
• 71:00 - 71:30 like um so what is it about that act that makes it hard to use a public cloud? It's just that you have to have things on premises and and that you and that you also have to so basically public cloud genuine public cloud in telco would be doing what someone like telefonica Germany's done in Germany which is actually putting part of their 5G network in AWS facilities. Yeah. In in Frankfurt I think it is. They you couldn't do that I don't think in the UK nowadays. Uh now BT because I chatted to Howard Watson who's BT's chief security networks officer at um at Barcelona with
• 71:30 - 72:00 with Pierre and um they they didn't do that anyway but he was like going on about how uh a lot of the stuff in the TSA would just make it really hard now to do public cloud and telco. But the other thing is this push back that's come with sovereign cloud. this idea that that's more of a sort of um you know um enterprise services on public cloud basically like a c more more of a sort of BT customer perspective where would you is there an opportunity there
• 72:00 - 72:30 maybe for BT to be that player that has a cloud role everybody in the past sort of said no chance because you can't compete against the hyperscalers with the economy of scale but if it opens up an opportunity because people are saying we don't want the public clouds involved because they're they're they're not sovereign clouds But doesn't someone like AWS just create a data center in the UK and then put up all sorts of Well, so this is the difference with sovereign cloud is that now it's it's not just an issue about um it being on UK soil, it's who owns it, right? So
• 72:30 - 73:00 it's ownership rather than geographic, which I think is really interesting in context of what's going on with tariffs at the moment. Totally. Totally. And if Europe starts saying that we're going to just do your companies regardless of where they happen to have plunked their data centers. Yeah. I mean, this is the thing, I suppose, just to to sign off on that one. You there's a reason why no one's tried this [ __ ] before. I think the last time he got tried, and I've heard people talking about this, is something called Smoot Holly, which happened in the 30s, which apparently in turned the the Great
• 73:00 - 73:30 Recession to the Great Depression, or at least was one of the contributing factors. Um, and so, you know, if we take that as an example, and apparently these tariffs are a higher level than even Smoot Holly was. Yeah. Um, if we take that as an example, it obviously suppresses economic activity. So, and protectionism does on the whole, we can see the the political and perhaps even the economic incentives for protectionism. You know, your country, you got a lot of skimp people. You've got a lot of um unused labor. If only we
• 73:30 - 74:00 just had more manufacturing, more more economic activity happening here. Not always America anyway. But yes, you made that point very well earlier on, especially at the at the semi-skilled and unskilled level. Yeah. because you know um highly skilled people they've they've got you know it's back to that I can't remember who said it I think it's goodart um the the somewares and the anywhere's do you remember did you hear that he talked about people and basically some are people who who attach their their culture and their economic activity very much to a specific place
• 74:00 - 74:30 whereas anywhere are more your cosmopolitan people who've got degrees and they could take their skill set um anywhere in the world and it's transferable and So you know the ar one of the arguments for protectionism is to try and protect those somewares those people who perhaps aren't so highly skilled at least not an academic way they may have great blue collar skills like plumbers and electricians and [ __ ] like that which those skills yeah no they're incredibly useful skills um and and there's not enough of them by
• 74:30 - 75:00 all accounts um and you like we're we're definitely anywhere you know what we do we're just we're laptop class all we need is a laptop to do our job in it. Yeah. Um so so obviously the laptop can do it itself now. Well, increasingly. Yes. Um so that's what they're trying to do. They're trying to get more jobs for what what you would broadly call blue collar people. Yeah. But I just think the genie's out the bottle. Yeah. Uh globalization's happened. A lot of these
• 75:00 - 75:30 jobs are being automated anyway, frankly. So yeah, I know he's picked a funny time to to try and um to try and um channel more work towards blue collar labor at a time when automation is proceeding at such a rate. Has he been to the Tesla factory? It's all robots. I noticed by the way you mentioned Elon Musk. He's been remarkably quiet about this whole um tariff thing. He's outpouring on Twitter as I continue to call it. We used to call it X. Well, he's very conflicted name. He he's he's obviously
• 75:30 - 76:00 thinking I don't want to say he's he's trying to get as much help. He doesn't want to piss off the Chinese for starters. Totally. Yeah. He's he's in a really awkward spot. That's why I said conflicted. He doesn't want to piss off Chinese, but he doesn't piss off the US government because he does loads of business with the US government with Starink and all that sort of thing. He's got a serious margin call coming his way if the the stock market keeps going down because now it's going down at this point because of volatility. You know, if it keeps going down and he has a I think Tesla's latest quarterlys, their
• 76:00 - 76:30 revenues were down double figure percentages. May on fire apparently. But then and then Yeah. And then they've got this PR problem in the States where loads of people have got the [ __ ] with No, but so the they released the numbers, they were terrible. The stock went down, but then the stock went back up when there was a rumor that came out that he would leave the government. Yeah, that is apparently going to happen. Now it's back down again. Politico reported on it and those they all went, "Oh, it's fake news." Um, no. I think on the contrary, what I heard is it was it was always
• 76:30 - 77:00 baked in by June, but I think Politico was reporting he was going to go imminent bit earlier cuz he's [ __ ] himself. He's starting to think like, okay, I'm risking to really be bankrupt. Well, he's spread incredibly thin that I don't know how he does it. He must never sleep. Well, I don't know how he spends so much time on Twitter. that as well. I wonder how much work he actually does to No, but I actually think one of the reasons one of the many reasons he's such a gobshite on Twitter or X is because he probably sets aside you let's assume he sleeps like 4 hours a night.
• 77:00 - 77:30 So he's being productive for 20 hours a day. He probably only sets aside half an hour for X. So he just goes on and goes blah for half an hour. Um and and it's just however intelligent he is, it's not very well at the end of the thought out stuff. Yeah. No, no. I think he's just filling when he's on the can, you know. Yeah. Yeah. Just just when that's the only time he has, you know, he's he like eats eats a bowl of brown flakes and does tweeting like I like they see him going to the bathroom go, "Oh, guys,
• 77:30 - 78:00 watch Twitter." So he sees something to do with his his his lady friend in Italy who runs the country and he he goes, "Ah, this is disgraceful. What have they done to her?" Is it? Without even considering it. What's not the prime minister? Not not melons. Melons is his is like his girlfriend, isn't she? Basically now. Well, I don't think she was. They they found one photo of them at a dinner together where they happen to be looking at each other and it looked a bit affectionate and everyone just sort of run with it. Yeah, but they're like that, aren't they? I don't know. Ian is gesturing two fingers around each other, by the way, for for
• 78:00 - 78:30 the majority of people who listen to the pod. Um, no, I don't think he's um seeing Melanie. Um, but they I didn't call them melons. Well, that is what that's Italian. Okay, that's good then. Yeah, know what Maloney actually means. Yeah, it means melons. Yeah, I wasn't being like misogynist. I can't believe anybody in this country has a surname Mrs. Melons. Well, she she once did a hilarious video u I think when she was still running and she did one of those little Instagrammy videos where she was holding two melons in front of her at a
• 78:30 - 79:00 kind of chest height. Yeah. Um but you know, she obviously didn't make any lewd carry-on film references, but she went, you know, which one are you going to choose? and she was like moving these two melons up and down and she was obviously riffing on her own surname there which I thought was hilarious. It shows she got a good cheeky sense of humor. Um but anyway, we digress. Um so yeah, to wrap that thing up um I honestly it's still going down by the way. The market has been open for an hour and 15 minutes. It's still going down market straight for an hour. Well,
• 79:00 - 79:30 well, because because I presume investors are all looking for a sign of what I'm about to wrap up on before we move Tesla is down 10% today. Oh, it's 10 to 12 already. I know we did get started at half past. Oh, that's all right then. But yes, well, that's why I keep trying to move it on. So, I will now um the hope is and what markets will be hoping for and perhaps why it keeps going down is because each day it doesn't happen, they get more pessimistic that this is just a belligerent opening negotiating position and then sooner or later it'll settle down. But I can see why people are
• 79:30 - 80:00 pessimistic because you just never know with this bloke. Okay, let's let's move it on. Um Ian, yes. Uh Huawei came out of its numbers. I'll I'll quickly tear it up, but then I'll I'll um pass the ball to you. Um so it numbers it numbers were good. Uh it certainly brings in a lot more revenue than its direct competitors. Granted, it is a bit more diversified than them as well. In fact, one thing I
• 80:00 - 80:30 thought was interesting is some of its business segments. So, by far it's B two business segments are ICT infrastructure which is the new name for networking kit um and then consumer. And one of my takes on it, the consumer was up nearly 40% yearonear which is basically primarily fueled by the fact that Huawei has raised its smartphone game. Huawei and this is relevant to all the the geopolitical stuff. Huawei wasn't able to make decent smartphones for a little while for two main reasons. One, the
• 80:30 - 81:00 American attempt to starve China of cuttingedge chips, which are especially important for smartphones because of the the very space and heat constrained nature of phones. The more you can cram into whatever little rectangle uh of space that you have in the in the circuit board of the smartphone, the more powerful the smartphone is, the more productive it is. And then the other one is that America banned Google from letting it have proper access to Android. So what the [ __ ] is the point um in getting a Huawei phone when you
• 81:00 - 81:30 can't get access to the Play Store and Gmail and all that sort of as my mother found out. As your mom found out one time when she Yeah. She thought I've heard about this Huawei company. They do good phones, don't they? And then apparently they didn't cuz they can get a little of software that Did you say the provider gave her a refund once she realized it was Well, the provider was as as we're saying nice things about them. might as well mention them. But she was using E and they were pretty quick to sort of replace it with a Samsung phone which I thought good. Yeah. Cool. I mean they shouldn't have sold her it or at least they should have made it clearer to her what the I guess they it was probably done by a saleserson who didn't know though did it. I mean it was happening so quickly I
• 81:30 - 82:00 think at the time people weren't really sure what was going on but fair enough. In fact um for once uh we won't get a me message from Alex going I heard you slugging off a cuz he's he's moved on. Bye Alex. If if you're still listening we'll miss you. keep in touch, mate. And you know where we are on a Friday. Yeah, that's that's a nice shot out for Alex. But yeah, he's he's our he was our main in-house contact um for E's PR and he's he's moving on to greener pastures. Y um even greener there. Oh no, look look what happened. Yeah, you messed that up.
• 82:00 - 82:30 It didn't open properly. That's a school boy error. Now I'm going to cut myself trying to open it up. Sorry, I just tried to open the tin and it it it didn't work. Um yes. So their consumer Huawei's consumer um division is now almost back up to level in terms of revenue with its main networking division. Mhm. And my my headline on it was we both focused on margins but we came at it from different directions. Mine was more superficial and you did
• 82:30 - 83:00 more of a deep dive. So I'll say my superficial one and then invite you to talk about your perspective. My headline was smart Chinese smartphone recovery boosts Huawei annual revenues but hits margins. So basically the margins on smartphones are much smaller especially if you're Android. If you're anyone except Apple margin on on smartphones are much smaller than they are on networking kit. So it stands to reason that a higher proportion of your total sales mix that comes from um smartphones the the lower your margins are going to be. Yeah. So that that was my big take
• 83:00 - 83:30 on that and I got that's probably the basic reason for it actually. Yeah that's fair enough. But but why don't you talk about some other reasons that you think? Well, you could you could ponder cuz there's been a lot of speculation about how they've done the smartphones. This is a big question like ever since 2023, late 2023 when they when they came out with this Mate 60 Pro, I think it was called the first sort of this range of smartphones that they've started to release that all of a sudden have got these 5G chips in and like 7 nanometer processors and
• 83:30 - 84:00 everybody's like at the first one they do like how are they doing that? I think and and just to recap because their domestic chipm capacity isn't supposed to be that advanced. Then we get back into ASML and whether they can get hold of EV. So previously they were allowed to get their chips from TSMC. The biggest foundry does most of the world's most advanced chips, the ones that everybody Apple and all all the guys use that. And Huawei was apparently at one time I think one of their biggest customers, maybe like number two on the list behind Apple.
• 84:00 - 84:30 Mhm. Um and then US sanctions cut it off from TSMC. And the problem with not being able to get access to TSMC is that they had equipment there they bought from a Dutch company called ASML um based on this technique called extreme ultraviolet lithography um which is like a very sophisticated technique basically for producing uh the most advanced chips with the smallest transistors. And it was assumed that anything sort of smaller than 10 nanometers with um older um technologies
• 84:30 - 85:00 and the previous generation I think it's called deep ultraviolet lithography was extremely difficult to do and like like so hard to do they wouldn't have been able to achieve it. So if you're cut off from TSMC um and you um and you're relying on Chinese foundaries, which have been banned by the way from um buying stuff from ASML, this this Dutch provider of EV, which you by the way can't get from anybody else, how how all of a sudden are you able to produce? By the way, can I can I butt in? Um I got I got a
• 85:00 - 85:30 message from a guy who wrote a book about ASML and he got in touch with me on LinkedIn. He goes, "Have you [ __ ] read it yet?" And I went, "Sorry, I'm really bad." Well, I have read it. Oh, you have read it? Well, I And I just want to say to him, if you're listening, I've forgotten his name off the top of my head. I have started reading it a bit. I'm just really bad at reading books. As I said at the start of the pod, my my attention span's really poor. Well, you sent it to me and I read it. It's a good book. It's quite readable. Okay. All right. Well, okay. Well, well, hold tight. If you're listening to this one, author of that book, when I get through it, we will have a proper chat about it on the Yeah. Yeah. He it's it's
• 85:30 - 86:00 a it's a good read, actually. Okay. Cool. Anyway, sorry. Carry on. Um, yeah, he did a good job on that. uh he obviously delved into the history. I think he's Dutch and he and he Yeah. Yeah. No, he's properly proper deep dive going all the way back to the 80s and it's good. Um but they they have this monopoly in this EUV technology. So and they're cut off from selling their stuff to China. So the concern was what does Huawei do uh about producing much smaller um chips with much smaller transistors which you need for the most
• 86:00 - 86:30 advanced smartphones. You know Apple's now at probably 3 nm even know but um all that Mo's law stuff. Yeah. And then they did tear downs of this Mate 60 Pro that they'd released in late 2023 and it was a 7 nanometer chip from SMIC. And I think the most um analysts have have worked out that what they've done is um their chip foundry they're using in China is SMIC. uh basically using an DUV technology this older generation the predecessor technology to EUV in
• 86:30 - 87:00 combination with a technique called like multiple patterning where you kind of repeat the process essentially as the name implies to to sort of eradicate errors but the downside is it produces lower yields which is like the percentage of chips and it's more expensive because you have to keep redoing it yeah so there's a lot of waste in it I guess in the process so your margins are going to be worse and I think my some of my speculation is there was a massive increase in like the explanation for so if you look at Huawei's headline results I think their
• 87:00 - 87:30 net sales were up about 22% 21 22%. And they were the highest they've ever been by the way since 2020 and only a bit yeah they're up to their previous peak only a bit less than in 2020 so um and um but their net profit was down um quite significantly 28% maybe um yeah which a lot of people led on. Yeah. And uh and if you look at the 20% well remembered yeah the explanation I think from the official explanation from the sort of Huawei people um which is is
• 87:30 - 88:00 kind of valid this is clearly a factor was that if you looked at it last year there was a big gain from the disposal of assets which included this honor honor smartphone which was like it's more budget smartphone brand and uh also some service stuff that they had. Yeah. Um which brought them a lot of money. Um, and there was also an increase in R&D spending this year. I mean, they're spending a huge amount on R&D. It's ridiculous. It's like 24 billion, I think it works out. It's mad, isn't it? Um, and therefore, that's the reason for
• 88:00 - 88:30 the dip in like net profit. But if you look even if you look at the sort of gross profit level, which doesn't, by the way, that happens that line comes before you would include the gains from asset disposals and R&D costs. There was a hit to profitability. their gross margin went down like a couple of percentage points almost I think certainly more than a percentage point and there was a huge I looked at it there's a huge increase in cost of sales which I think your explanation that if you're just doing more smartphone stuff
• 88:30 - 89:00 that's going to be a natural consequence of that one but I'm wondering whether this this reliance on DUV technology from SMIC is partly responsible for that conjecture in my yeah I saw your piece so your piece for people are wondering um online light reading is headlined Huawei profit pain goes undiagnosed but maybe down to chips. Well, it probably is down to chips but it's because if it's smartphone chips then it's going to have some kind of impact anyway. I I think we could both be right. I mean I think it'll be multi multiffactorial.
• 89:00 - 89:30 One will be the lack of one-off disposals which will probably be the single biggest factor to be honest. Yeah. And another will be the the margin difference with smartphones. But a third one could be, you know, if if Huawei is being incentivized or forced to by the Americans to to get its chips from SMIC and SMIC is having to charge relatively more for a 7 nanome chip than than they would get charged by TSMC because it's using a less efficient process, then it stands to reason it will pass on that cost to Huawei. And then, you know, I
• 89:30 - 90:00 always speculate in my pieces is Huawei that the Chinese state Xiinping will find a way of going, "Don't worry, Huawei, you buy Chinese and and we'll make sure you're taken care of." The other the other thing to note about them is that they're um in terms of profit movements and margins changing is that they're very very different looking company from what they were in 2020. Yeah. So, they're getting about 15% of revenues now, I think, from things like automotive. And so, I've got that table in my piece. I I've got the business segment breakdown. So, by far their
• 90:00 - 90:30 their two biggest segments, I mean, doing the math off the top of my head, it must be between 80 and 90% is is networking gear and smartphones. What they call 80 Yeah, 85% it will be. There we go. There we go. That's not bad for a um fourth tin in on back of a [ __ ] packet bit of maths. Um but then you look at you look at a couple of other bits that grew a lot. intelligent automotive solution as they call it grew nearly 500%. So it nearly it nearly quintupled.
• 90:30 - 91:00 Yes. Car car related [ __ ] Um and then and then the other one that's doing quite well apart from cloud computing which is a bit flat for them was what they call digital power. And I made I made the that's solar apparently. Yeah. Exactly. And so I made the note in my piece that that happens to coincide with two areas where China as a country is incredibly strong. Apparently I was listening to one podcast. Apparently they've just completely cornered the market in solar. Oh, it's all it's all Chinese. Yeah. So why are we allowed to
• 91:00 - 91:30 buy Yeah. solar panels? Oh, because it's not smart. I mean to be fair, you know, it's not it's not AI driven, is it? No. I mean, I suppose I suppose if you're going to be really paranoid, you could argue they could put some back door in it where they could just suddenly turn off all the solar panels. But it feel it's less of a smart component, isn't it? True. Less of a smart appliance. Um, but the car one, you know, talking about a Chinese company and giving it the funds it needs to go and do sinister stuff in AI. Scott, well, quite I mean,
• 91:30 - 92:00 well, you know, I'm always going on about the the sort of underlying xenophobia of all this stuff. You know, you could argue that buying a [ __ ] Chinese takeaway is some unpatriotic if you're going to extrapolate that to a ridiculous. Well, I think I mean, this ties into what we were saying earlier that I think this whole Chinese push back personally. I mean, as a, you know, as an average guy, when you see the stuff that's coming out of America at the moment, it kind of makes you feel slightly less sympathetic
• 92:00 - 92:30 towards America and maybe more sympathetic towards other parts of the world. Going back to our main segment, a knee-jerk reaction to that is Yeah. Well, we said it earlier. They're expending a lot of goodwill and goodwill is not infinite. They are expending a lot of good will. Yeah. Um it's not infinite. And you know, I every time I slag off something America's done, I always feel the need to sort of explain to our audience that this isn't out of some because we do have this in Europe and in the UK. We do have a sort of spikiness towards America born partly of the fact that they've had to come in and
• 92:30 - 93:00 bail us out in a couple of world wars and and have generally got a lot more money and cultural influence than we do. Yeah. See, I've always been very pro-American and I feel I feel I'm at the at the moment I'm not saying I'm anti-American, by the way, but I'm more concerned and slightly antic America than I think I've probably ever been in my life at the moment based on what's going on right now. Yeah. And when you get culturally when you get things like the the the JD Vance thing at that Munich security conference where he comes over and goes and accuses us a
• 93:00 - 93:30 bunch of stuff. All of all of the accusations were accurate by the way. But what he was discounting was how much that [ __ ] happens in America as well like to do with things like freedom of speech. Of course. Yeah. And you know I mean there's there's a story this is a complete tangent. I'll say it very briefly. There's a story about it's far worse than that than we are frankly. I don't know. It's hard to know exactly who's worse. But they're for every anecdote they come up with like they they're obsessed with the fact that one person got arrested in the UK and we are really bad on civil liberties in the UK
• 93:30 - 94:00 so I'm not defending us but one person got arrested in the UK for silently praying outside an abortion clinic and the police took him away. There was a thing the other day just in Hartford cheer someone wrote a few shitty emails to their school and suddenly six coppers went around the house and arrested them. So there's all sorts of authoritarian nasty stuff going on here. But I'm I would all I'll say quickly is for every anecdote like that and and the Trump people do seem to rely on anecdotes quite a lot rather than hard data, we could come up with a a similar anecdote.
• 94:00 - 94:30 Of course, I mean, it's so stupid. It's it's very Elon Musk territory that is that he'll he'll he'll find one of these incidents agenda like some Muslims done something appalling, therefore all Muslims are bad and how how can he possibly appoint Muslims to be politicians? It's a classic logical fallacy appeal to like racism. some of the stuff he's come out with in the the wake of that um that of that sort of child abuse scandal that was that was going right that got him all worked up. The comments he was coming out with were outright racism frankly. Right. Okay. Um so um but anyway that was that was our
• 94:30 - 95:00 previous segment. Back to the back to the Chinese thing. They Huawei does seem to be increasingly aligned with strengths of Chinese industry on the whole which just it kind of reinforces my feeling that maybe this process was going to happen anyway but American belligerance towards Huawei specifically has just made sure that it's basically one of the core industrial champions for the whole country and I think I think Huawei's
• 95:00 - 95:30 activities will incre increasingly start to reflect the economic activity of the country on the whole. Yeah. So, I noticed their um their sales generated in China are now 71%. I think that's mad, isn't it? I think if you go back to 20 like just before 2020, it was about 59%. So, yeah, 71. You're right. Yeah. No, exactly. I made those comparisons in my piece. Yeah. It's much more Chinese company than it ever was. Exactly. And that goes back to the point you were making earlier about protectionism where does every country just start just
• 95:30 - 96:00 selling to itself? Yeah. which by the way it's it's viable but what that what that does is it rules out all the cool things to do with comparative advantage. Yeah. Um you know uh I mean it's easier in a country of 1.4 billion people than it is anywhere else on the planet. Definitely especially one with a lot of central planning. Yeah. Um and and and and less individual freedom you can you can control these things. And also with a lower average standard of living. I mean this is the one last thing. Sorry,
• 96:00 - 96:30 I keep trying to take us away from the from the tariff thing, but I think American standard of living by whatever indices there are is much higher than typically European one is. Yeah. The the the purchasing power of your typical yank is quite a fair bit higher than it is for you and me. Yeah. Size of the house is a lot bigger as well. So the houses Yeah. So, so, so basically they have a more they're horrified coming over here looking at the Victorian plumbing and these little boxes that people live in and our streets where
• 96:30 - 97:00 where basically if people park on both sides you can't even get through the [ __ ] thing. Um, and you know, and I can't blame them for all those comparisons. But um, but one of the reasons their standard of living is so high is because of this trade deficit. Yeah. because they import they've got lots of money and they import cool [ __ ] from all around the world and and and then and then you know use it. Yeah. And managed to maintain quite low unemployment levels as well. Yes. Hence what's the problem. Um so yeah. So so
• 97:00 - 97:30 Huawei's increasingly as you say at 71% and I think it was as low as 62% China even 2 or 3 years ago. So it's quite rapidly accelerating. Yes it was. That's a point I made. Look at me. remembering my own writing. Um, so um, so there we are. So, so you got China getting served by, um, Huawei and then people like, you know, Alibaba as long as, as long as their CEOs don't get too lippy about Xiinping. Yeah. Uh, and all that sort of
• 97:30 - 98:00 thing. America will become more inward-looking and all that sort of thing. The EU will do its thing. I I did have to make a point when the EU was shaking its fist about all these tariffs. Um, what was it? I've got a quote from Ursula Vanderlayan, who's the the head of the European Commission, unelected, I might add. Um, she goes, uh, she goes, sorry, I know I'm getting back to the previous segment again, but it just keeps being relevant. Um, she
• 98:00 - 98:30 goes, President Trump, this is a quote, President Trump's announcement of universal tariffs on the whole world, including the EU, well done for noticing the EU is part of the whole world, um, is a major blow to the world economy. Um and then I noted that I noted that Trump has imposed a blanket tariff of 20% on all imports from the EU. And then quote again uncertainty will spiral and trigger the rise of further protectionism. And again in my own editorial I went the EU of course is inherently protectionist too which it is. The EU is almost designed to favor
• 98:30 - 99:00 members of the EU over non-members of the EU as we've been experiencing post Brexit. Yeah. And then she goes on to say um all business big and small will suffer from day one from greater uncertainty to the disruption of supply chains to burdensome bureaucracy. The cost of doing business with the United States will drastically increase. And what's more, there seems to be no order in the disorder. No clear path through the complexity and chaos that is being created as all US trading partners are hit. And again, I couldn't I had to make
• 99:00 - 99:30 the point that I said there's an excruciating irony to the EU lamenting burdensome bureaucracy as they're the [ __ ] kings of it. But then but then I said the rest of her points were good. And and the biggest one is where she said there seems to be no order disorder, no clear path through the complexity. They just don't you know I was I was hypothesizing that the exit might just be a compromise. But you were saying though, I mean, if you look at the scenarios of how this plays out, one of them being that there's a certain amount of threats and maybe it gets
• 99:30 - 100:00 deescalated and there's some concessions that get made and and that's one way it plays out and and another one being it just gets worse and worse. I'm kind of wondering I mean bringing it back to sort of telecom's companies involved in all this because one of the key things here and this gets into the open rand stuff a little a little bit. Yeah, but we'll use that as a segue in a sec. was um not not um the absence of US com US headquartered companies that make mobile network equipment and this idea that as long as you do it here it's okay but
• 100:00 - 100:30 maybe one way that this escalates and actually gets worse is that that becomes more of a well hang on a minute it's not good enough in the same with the sovereign cloud stuff I was just talking about a minute ago where Watson's saying it's not good enough now to put your data center here and be AWS you actually need to put your data center here and not be AWS Maybe you need to be an Erikson that's got a headquarters in America or a Nokia that's owned by an American company. And again, I keep referring back to it that will start to negate all this comparative advantage stuff because that's not a core competence of of
• 100:30 - 101:00 Ericson. Yeah. Now, it may be that it wasn't a core competence of Huawei, going back to, you know, that segment we were talking about, to do things like um solar panels and and connected, you know, smart car stuff. By the way, who who's the one? We were talking about Tesla earlier. There's a Chinese company that I think's just over overtaken Tesla in terms of what they called BYD. BYD. There we are. Um, so, so China's kind of kicking ass on that one to the detriment of Tesl.
• 101:00 - 101:30 You what? I saw one today. Cycling here. Oh, really? Yeah. God, I don't know if I'd recognize the branding of those cars. Um, well, they should be banned, shouldn't they? Outrageous. Yeah, I know. Chinese cars software in them. They're probably just [ __ ] they got bombs in them. You could drive them off the tops of, you know, buildings where they got parking lots upstairs. It be like that film Fast and Furious or whatever it is. All the cars drive off the buildings and suddenly Vin Diesel gets taken over. Um anyway, let's um
• 101:30 - 102:00 we're running out of time. Um you just made you just set up a little segue into um the chip side. Oh yeah, we're moving back. We we touched on this a couple of times um in a deep section earlier on. Oh yeah, but it's at the end of the pod, so it'll be both drunken and hurried. Um but um we were talking uh before when we were waiting for Pierre to turn up cuz he's a bit late. Um he didn't even respond to that. He's he's too he's too knackered to even respond to my to my provocations. Um you cycle here, did
• 102:00 - 102:30 you? I did. Yeah, he did cycle. Fair play to him. Yeah, but it's electric, remember? I don't make any effort. Oh, that's true. Even say you still got to concentrate on where you're going. I still miss the days when he had his silver surfer little powered surfboard that he used to have. I know. That was good. Till he got busted. How much did you get fined for for using that? It's like £100 or something. [ __ ] man. He He looks so cool. That was a lot back in those days. It go Yeah. Um anyway um but yeah so we were just chatting while while we're waiting for Pier to turn up um about a third segment
• 102:30 - 103:00 and and you've just written a piece that was published yesterday was headlined Ericson close to Nvidia breakthrough in virtual Iran and we thought we'd talk about it not just because you'd written the story and I'll invite you to to outline that in a sec but this whole thing from my point of view. So, you know, as like I said at the start of this podcast, I always sort of take piss out of you cuz you write so much about um the RAN and the the diversification of the RAN and es especially the
• 103:00 - 103:30 interest of um other principally US silicon providers um in in getting involved in the RAN. Um but I only wind you up just cuz I noticed a pattern that you write about a lot. It's not I don't think it's worthwhile. Um and and where I get into is the cloud aspect of it. So I understand the basic premise of cloud computing which is that you've got a bunch of computing resource in a central location obviously connected up by companies like Infiner and that sort of thing. Yeah. Um and and if you're
• 103:30 - 104:00 especially if you're a smaller business or even a larger business again this is a comparative advantage thing to labor the point even more you know is it's a core competence of AWS or Microsoft or Google or or some other specialist some people at Ncale we had lunch with to provide that computing resource at the at the remote location and then you access it through communications networks and it's just more efficient for you to do that then create your entire whole on premise computing
• 104:00 - 104:30 situation. And that's basically the cra the cloud proposition. Yeah. And then one of the reasons it works for cloud providers is they have clever software which means that when their hardware has stopped doing a task for one customer, it goes straight on to doing a task for another customer. So it's operating at optimal capacity the whole time. And now that they're trying to apply that logic to the RAN the radio access network I you know the macro cells the well it's I think it's yeah the RANs followed the core in this area with Telos. Well, why
• 104:30 - 105:00 don't I shut up? Why don't why don't you carry on the narrative from I mean, so so telos are moving some of their telco and their network workloads to the the cloud, you know, whether it's the public cloud or a private cloud that that's that's that move's already happened in the core network to some extent. Um, in terms of the radio access, I the clearest example of this actually in a proper sort of we were talking about the distinction between the virtual run and cloud run expressions earlier. The clearest I um way I would think about
• 105:00 - 105:30 cloudr run is something that actually happened at MWC Barcelona this year uh which was AWS coming out with this outposts server that um which is the server that it would provide. So, it's blurring the lines a little bit between public cloud, I guess, and and private cloud, but it could it could feasibly in some instances, I guess, be a server that's that's based in an AWS facility rather than a a telco facility.
• 105:30 - 106:00 uh and it's got a Graviton chip in it which is um AWS's own chip based on ARM architecture and it's now been engineered to provide support for radio access network workloads. So the idea is that Ericson or Nokia or whoever else can run their radio access network on that as a as a as a cloud workload. Let's take it back to its simplest premise. I'm sure everyone who listens to this already knows this but spell it out anyway. There is quite a lot of computation that has to happen. Yeah.
• 106:00 - 106:30 Yeah. So, so the the the radio access network, the two big elements of that are the actual radio units themselves that pick up the signal and do the do the first of magic on it and then it kind of gets passed down to a server, a a compute server uh uh at the base of the master usually in traditional networks. That's I mean it's traditionally it's been like an
• 106:30 - 107:00 appliance so it's like a server but it's dedicated just to do radio access network stuff and it would it would include a A6 application specific integrated circuits. The whole idea about virtual RAN is that you move uh those um that the software onto uh kind of common IT platforms basically. So you put it on general purpose a Dell a Dell Exactly. a Dell server with Intel chips in basically and that's essentially where we've been with virtual RAM. That's that's all that's existed has been um this is the to get
• 107:00 - 107:30 to my story that I wrote this week, but what Erikson's done and Eric Erikson's probably Eric Samsung's kind of the market leader I guess in virtual ran um and then maybe Ericson's number two. I don't I haven't looked at the Omnia stats recently but I imagine it's that order. Um, but they're both the the platform that they're both relying on is basically Intel chips. Yeah, it's it's it's putting your um your RAM software
• 107:30 - 108:00 on a on a CPU that's that's done by Intel running on either. And historically, those chips have been bespoke specialist chips. So, so in the traditional world, what Ericson would do is sell you an appliance that's got its own A6 in and Samsung would do the same. And and this is moving it and and their own not just AS6, their own chips. Yeah. Yeah. Yeah. And so the so you're moving it to a world where um you you decouple is a tra is a word that gets used the software from the hardware and the network functions are delivered as
• 108:00 - 108:30 software on general purpose silicon which is that's right. Well and and the the the thing is that because the world of general purpose silicon has really just been Intel and a bit of AMD. That's a server CPU world. It's like x86 world. It's an x86 world where Intel traditionally had like 80% of the market, let's say, and AMD's had the most of the remainder. Um, it's been very much dominated by Intel, the world of virtual RAM. In fact, they've pretty much the only company. And in fairness to Intel, they've done a pretty good job
• 108:30 - 109:00 of of supporting it. I mean, they have their critics. They have people who say they've had to customize the chips they're providing. It's no longer as general purpose as it looked. But but they are the the kind of market leader and and Intel over its history like over decades have got quite a few missteps in trying to diversify its silicon off offering beyond just that core um you know really good really powerful really reliable CPU into more specific environments. Yeah I mean I I I the
• 109:00 - 109:30 virtual RAM's not really taken off you know still only and why hasn't it? So I I don't I' my sense is it's not necessarily specifically an Intel thing. I just don't think that um Telos have seen the attractions of doing it necessarily. The benefits haven't outweighed the disadvantage. And does that come back to my generalization about cloud computing earlier where you know whatever advantages they get from using a chip that can be used for other functions have not offset the
• 109:30 - 110:00 disadvantages of using something that's not specialist. Yeah, exactly. I think that sums up really well. So you you I mean even Erikson now with all of it's like we're all about virtual RAN we want to be we're going to be completely virtualized in the future you go you ask them the question you specifically say so does that mean you're not going to be doing your own AS6 in the future and it's all going to be general purpose silicon and they go no AS6 is still a lot better and it seems that operators kind of agree I mean they're locked there's a certain amount of like uh the industry being quite slow to change
• 110:00 - 110:30 through generations and and you know you roll out your network we were talking about this earlier who's going to move away from swap outs don't happen very often unless you're forced to do a swap out. You've built a lot of equipment out of great I think one I mentioned and I think it was on last week's pod about the maven panel I did at Mobile World Congress and they were talking about 8year sort obsolescence cycles. Yeah. Right. It's a long time. Yeah. You spend all this money on putting up your mast equipment and you build out your appliances and someone goes, "Well, we can do virtual round for you." And it's
• 110:30 - 111:00 like, "Well, what are the benefits of doing virtual round?" and they're like, "Well, you can put it in a you can put it in a data center and you can use those servers potentially maybe for doing some other things." Well, you talk to Ericson, they go, "Well, it's unlikely that actually be used for other stuff. It's maybe going to be at the m site still probably." It's like, "Well, then, you know, there's some automation benefits you can get." There's not enough of an advantage. They've got all the downsides, by the way, of general purpose silicon just not being as efficient to do the complexities of the radio access network
• 111:00 - 111:30 as dedicated silicon basically as custom. Well, exactly. So, so the trade-offs, as you know, as I said a minute ago, the trade-offs have got to be there. Yeah. Whereby um Okay, it's not quite as good in a in a specific way. Yeah. But we get the cloud trade-offs. And this is where it comes up to the question I wanted to ask you. Have you got you got room for more? We've only got about 10 more minutes, but we can start one. So, you can have a a Brixton Laga or a punk IPA. You choose. I'll have the other one. Brixton. Okay, there you go. Um,
• 111:30 - 112:00 is it I my understanding of a lot of this and and it's less than yours, so I'm saying this for you to correct me if if need be, is a lot of it comes down to the edge where where Telos can play a part. Obviously, Telos's Erikson or or an operator is not going to compete with AWS at what AWS does well. Yeah. No one's going to with the possible exception of Microsoft and Google. Yeah. But when it comes to the edge, I maybe we've got these macro cells, you know, we've got all these masks that we all
• 112:00 - 112:30 see by the side of the A1 or whatever when we're driving along that I sometimes sadly point out to my family when we're driving into aing your base station spotter stuff. Exactly. That's where you get your [ __ ] mobile phone from. Um, no, actually I probably normally say that's what pays the bills. Yeah. Um, uh, that at the bottom of that base base station where there's always been some degree of small server activity, you just get a much bigger server presence. Yeah. And you, and you get and you spend more money and and and this will lead us
• 112:30 - 113:00 back um to your story about Nvidia. You spend more money on the processing and then do more [ __ ] with it. And the argument I've always found elusive and unconvincing is what is this other [ __ ] What is the ROI? What's the incentive to spend all this money on let's say uh one of these Nvidia like um weapons grade graphics cards? Yeah. Um when only let's say for
• 113:00 - 113:30 the sake of argument 10% of its capacity is required for the core telecomsy stuff. Yeah. Oh man, what do you do with the rest of it? Yeah, so that's the so the story I wrote this week was about um this kind of breakthrough that Erikson's made um where so as I say up till now all of its virtual RAN stuff has run on Intel CPUs and um they've not really they've talked for a long long time about having alternatives. It doesn't look very good by the way to be dependent on Intel. Even if Intel was in
• 113:30 - 114:00 brilliant health, it wouldn't be very good because the whole point about things like open ran, which virtual ran often gets groups with is it's about diversity and competition. So to be have to have only one company that does it, it's a bit like the ASML situation. It doesn't really look healthy in a market. Yeah. And as we spoke about a fair bit with Neil last week, I mean, it's it's not consistent with the open round promise of 5 years ago. If you're having a single vendor, it's just nonsense. So, and they've talked for a long time about bringing in other
• 114:00 - 114:30 options, and you've basically got the alternatives fall into a couple of categories. One is AMD, which is on the same x86 platform. And and the nice thing there is that because it's on the same x86 platform. This promise of virtualization um is easier. you know, you could take the same potentially take the same software and move it to an AMD chip and not have to make changes as much because because you're using the same core code or you look to alternatives beyond that because that's still only two companies
• 114:30 - 115:00 and the alternatives beyond that are all pretty much companies that are based on a different architectural platform which is ARM which is a UK based company but owned by SoftBank these days. For a long time has been trying to sort of crack into the server CPU. He's doing all right by the way. Do well. I mean that your his laptop now is uh an ARM based CPU in it. So these these Apple M series ones are changing quite a bit and one of the things that came out of MWC Barcelona is quite a bit of momentum happening all of a sudden with ARM. So that I just mentioned AWS with this Graviton stuff that's ARM based. There's
• 115:00 - 115:30 a company called Ampia Computing that's just got bought by SoftBank. Interestingly I'm wondering whether that's going to run into some regulatory concerns because they also own ARM. That guy that what's he called? Masayoshi son. Yeah, it just [ __ ] buys everything. Yeah, but you just chuck 40 billion um open AI totally. Yeah, there amp is very much in this virtual RAM space. They're trying to present trips. And the other big one is Nvidia, which has this position, this story called AI RAN. And the whole thing about AI ran is
• 115:30 - 116:00 what does that mean? It means um having chips that you use both to do virtual RAN, so they compete against Intel in that market. But your point about you're only going to use 10% of the chip because it's a GPU. There's a big power hungry. They're like the kind of strong men of the chip world. You know the Arnold Schwarzenegger, you know, going back to like world's strongest man from the 80s like getting Jeff Capes to bring your your shopping home. Yeah, exactly. He's got a few eggs. That's the RAM. And then and then and then the really heavy loading stuff is like what they what
• 116:00 - 116:30 Nvidia's pitch is is that all of that is all these AI applications that you provide at the edge of the network, which has never really worked out for Telos in the past. this idea that you do edge computing, you host applications closer to the end user, um you reduce latency. Yeah. The example that SoftBank came out with I thought was quite laughable a few months ago when they were talking about why would you need to do AI applications at the edge rather than in a hyperscala facility. They had this inst this example of um like a robot dog walking around with you. Yeah.
• 116:30 - 117:00 And if you had to host it from the hyperscaler facility that's a long way and it wouldn't respond as quickly. No and robotics. Who knows where it's going to go? I don't know. Robotics and drones are probably the best um use case I've heard of for low latency. Yeah. That and autonomous driving which counts as robotic. We don't know where it might go. But the but for the time being for the time being that's what that's the trouble with the economics angle of the Nvidia story I think. But the the
• 117:00 - 117:30 Ericson pitch um about um the Nvidia thing that I wrote this week is that they are quite advanced in terms of putting their virtual ran software uh that they've developed initially to run on Intel and that is running on Intel in some deployments commercially on Nvidia's chips instead. And what when we say Nvidia's chips by the way we're not talking about the GPUs. Ah, we're talking about Grace, which is a CPU based on ARM's architecture. So that's
• 117:30 - 118:00 pretty much what So you got Grace Hopper, which is You got Grace Hopper. There's two elements to Grace. Grace is a CPU, Hopper is the GPU. And what Erikson's done is so it's the same as basically putting it on Graviton or putting it on Ampere. The idea being that if ARM architecture is fairly common about along those you know between those chip plat those different chip providers um you should be able to put it on any of them if it's properly virtualized and it's properly hardware independent which is the whole one of
• 118:00 - 118:30 the whole purposes of virtualization this this hardware software decoupling. Exactly. the the issue with moving from x86 to ARM is a bit more of a challenge because there's some differences between those two um systems. Yeah. And it has been for ages. I remember when back in previous jobs when we were talking about um Windows on ARM. Yeah. It took Microsoft ages. I still don't know how good it is to try and make Windows work as well on ARM as it did. Ericson says, so I talked to Erikson for this story and they say they've been able to put um
• 118:30 - 119:00 they've been able to port from x86 to Nvidia's ARMbased CPU Grace without that many changes. They've actually got software now that's fairly agnostic. The main challenge has come with this instruction set called um you need vector processing basically to be included in the CPU, right? effective processing is basically the ability to do um like multiple calculations at the same time which is which is a real strength of GPUs. It is a strength of GPUs but they they needed this to be in
• 119:00 - 119:30 the CPU support for this in the CPU. Now in Intel for a long time has had this thing called AVX 512 um which is like it's an instruction in your piece. Yeah. It's like an instruction set extension that allows you to do vector processing. And the reason vector processing is really important is because you have this category of software that's very very challenging called layer 1. It's all the phys physical layer which all the most heavy lifting. Yeah. And AVX 512 has been very useful for uh helping them to support that. And for a long
• 119:30 - 120:00 time one of their concerns was that ARM didn't have an equivalent and there's in the most recent ARMbased processors there's this thing called SVE2 which is basically ARM's equivalent of AVX 512. Okay. And that's allowed them to to do software that works on an ARM processor, in this case Nvidia's Grace chip as well as it works on um the Intel one. The challenge is moving it from AVX 512 to
• 120:00 - 120:30 SV2. That's where that's that's where that needs to be some tweaking. Okay. But they've said it's fairly minimal. And a lot of this is based on you chatting to a guy from Eric who's in charge of but there's um it might even get it simpler in the future's been working on this abstraction layer which would basically mean that you can move from AVX 512 to SV2 without even needing to do any changes. That's the idea of it. But Erikson's not even sure if it needs to do that. They're saying that they've got a got a system now where you
• 120:30 - 121:00 there's a few tweaks to go from AVX52 to SV2 but it's not required like a huge development effort to do it. So I get your point. I think I think it's great reporting and great interview with there and you you get into that arcana that you were just describing with the AVX 512 and all that. I think my question is and I think we'll have to wrap up here. Yeah. Getting getting some body language of Pierre. You've been very patient mate. Um is even if so the premise of your story, the headline was Erikson close to Nvidia breakthrough in virtual round. Yeah. Even if this breakthrough
• 121:00 - 121:30 happens, as you detail in your story, and I I urge people to to read it to find out more, it still doesn't really answer my question about why you would bother. Yeah, that's the that's the that's the key thing is um why why they might want to bother, why Erikson would be want would want to bother is because they probably want to have alternatives to Intel. Okay. Because there's a lot of speculation at the moment about Intel's future. Uh I mean, they've got a new CEO at the moment. There's Oh, yeah. No, they have offered around their their um their ran assets. I've been told there
• 121:30 - 122:00 was there's also a story about them going into business with TSM and C for the found. I mean I I think that would be fine, but the bigger concern for Erikson is if they suddenly decide that they're going to retreat completely from doing virtual RAN stuff. The point is they're at a shaky phase of their their life and maybe you don't want to be all in on that. And that's that's the reason why it says close to and not an Nvidia breakthrough because the one challenge that remains for them is there's still a little bit of the software that doesn't run on the CPU. There's a bit that runs
• 122:00 - 122:30 on an accelerator, right? Um which is this uh function called forward error correction that consumes a lot of resources. Consumes a lot of IT resources. Feck for sure. FEC. Yeah. [ __ ] hell. Sounds like father Ted. [ __ ] this. Yeah. So that that function they get from Intel basically. Uhhuh. And they need to find they need to find an equivalent that they can use and this is where the GPU would come in. Yeah. So
• 122:30 - 123:00 this is potentially what they could do is take a fck that uh Nvidia's designed which they have. they have one that they've provided as part of this aerial stack that they've um developed or the alternative solution is for Ericson to develop that themselves for a GPU. But then the question you've raised, this is the big thing is does it make economic sense to use a GPU as an accelerator for that one function and not anything else? And that's why edge computing, this AI
• 123:00 - 123:30 RAM thing, you know, running other applications on that GPU really needs to take off for it to make sense. I think okay, I'm getting getting very tired by He loves all of this. This is very technical. I'm just like, he's like, why did you have to save this one to the end? Busy from this monologue. I'm amazed I managed to talk it through. No, I think you've done very well and you be very coherent. I am going to wrap it up just cuz we ran out of time even though you just cracked open another tin. Good skills. I want to say one last thing um before you I thought you were turning the camera off. Um we're going to go out
• 123:30 - 124:00 after this after you've just finished that tin that you just opened. We're going to go out and have farewell drinks with our Yeah, they're they're asking where we are by the way. Right. So we're going to have farewell drinks with our our friend Becky who's been our colleague for what, eight years? Six, seven, eight years. Um so she probably won't listen to this, but um but I look forward to seeing you in a minute, Becky. And you'll be greatly missed. She's been great. She's top girl. Uh I'm not quite sure what she's going to do next, but I'm sure she'll do very well in a minute. Um and uh yeah, so I just
• 124:00 - 124:30 want to say if you have for for posterity, u it's been great working with you, Becky, and keep in touch. I look forward to having a drink with you in a minute. And on that note, we will wrap up. Um we Oh, yeah. We're going to have a bit of a break because of these holidays. I think Pierre's selfishly going to go off and have holidays with his family, aren't you? Mhm. Um and I think the next one, what is this? It's the fourth. The next one's not going to be for a couple of weeks. There's a f bank holiday on the Friday. Yeah, exactly. And we've got we've got the
• 124:30 - 125:00 Easter bank holiday. So, the next one's going to be recorded on about the 22nd, I think. Yeah. Uh so, sorry. You got about a two and a half week gap. So, I hope um I hope you cope. Right. Okay. Blame Jesus. Blame Jesus. Oh, we blame for everything. Uh so, on that, he's he's that guy. He's that guy. I'm going to blame Trump. Um, so on that note, thanks for listening and join us in 2 and a half weeks. [Music]