As China sets the stage for its imperial influence on the market, representatives from Washington, and European Union (EU) will gather on Wednesday to address critical geopolitical, economic, and technological difficulties to fortify their alliance against Beijing’s determination of overtaking the digital market.
As global forces suffer from a semiconductor shortage, the Trade and Technology Council (TTC) will conduct its two-day back-to-back meetings in Pittsburgh this week as an attempt to fix any harm left by the Trump Administration by improving cooperation on technology matters.
On the American front, the Biden Administration will be presented by Secretary of State Antony Blinken, Secretary of Commerce Gina Raimondo, and United States Trade Representative Katherine Tai.
Biden’s representatives will conduct a meeting with European Commission Executive Vice Presidents Margrethe Vestager and Valdis Dombrovski.
So, what is the purpose of this meeting, and what resolutions is the U.S., alongside the EU, aiming to reach?
The meeting will have dominant geopolitical effects that could reflect how the council will address the rising conflict with China. The most vital issue is concluding the overlapping trade debates, structuring regulatory procedures, and create “rules of the road” for promising technologies emerging from both sides of the Atlantic.
“Europe and the United States have a shared interest in ensuring that others abide by those rules of the road,” a senior Biden Administration official addressed the state of secrecy in sharing information about the meeting.
The TTC’s concern will mainly direct its attention on maintaining a safeguarded relation between the U.S. and EU, to work hand in hand on tech trades and signals to help fight Chinese influence in the region, due to China’s unjust trade procedures that have reached its highest level of intellectual property theft.
At the moment, there is a cloud of uneasiness looming over the U.S., and EU as the TTC’s ten working groups will work on meeting objectives focusing on creating middle grounds on a multitude of areas, such as technology standards, supply chain security, climate and green energy, IT security and competitiveness, data governance, export controls, investment screening, and global trade challenges.
China is too big a market, and there is too much potential to overtake the market in one blow. Chinese magnetism is faced with global concerns of Beijing exponentially expanding its power and influence over other countries.
“There is real strategic and geopolitical importance to this new platform as a way in setting standards and rules for the 21st century. So, we need this Council to amplify our status,” European Commission’s trade and economy Vice-President Valdis Dombrovskis said in a statement.
In June, the Biden Administration set its rules to halt any political interventions in the Middle East and Central Asia, such as the U.S. 20-year military operation in Afghanistan following 9/11. The country will sustain its focus on Chinese activities in both the East and West as the East Asian country swiftly spreads its influence in high-tech innovation, a move that could potentially empower Beijing in what could be a technological industrial revolution.
At a diplomatic level, there is less reservation for the EU and China to work together at a deeper level since there is a burdensome pressure of elevating synchronized economic growth between the U.S. and EU.
Due to the COVID-19 pandemic engulfing countries on a massive scale, the pressure on mobile carriers and manufacturers grew aggressively, resulting in a global chip shortage as the demand for electronic devices of all genres detonated and grew out of proportion for the manufacturing sector.
As users’ consumption takes on a more digitalized aspect, countries are working to find means to supply and fulfill users’ high global demand. Currently, Washington is aiming to score and secure a deal with Europeans on semiconductors, a topic that will also be covered at the end of the TTC meeting.
One must understand that the U.S.’ approach to rely on other countries to fulfill its semiconductor shortage might not be a lenient move for the powerhouse. In its golden days, the U.S. was one of the leading originators of the semiconductor industry almost 20 years ago, where its manufacturing capacity satisfied approximately 40 percent of global chips demand.
Chinese tech regulations morph U.S. firms’ course of action
U.S. Big Tech legion seems to be torn between two economic powerhouses.
In a battle for dominion between the East and the West, Big Tech companies are forfeiting from the Chinese market to prevent getting caught in the conflict, except for Apple, according to the BBC.
Last week, Microsoft announced news of shutting down its professional network platform, LinkedIn, in China, despite the giant’s resumable operations in the country. The choice made came after compliance with Chinese authorities became quite an ordeal for the company to sustain.
With the ever-growing emergence of regulatory scrutiny on tech companies in China, U.S.-based enterprises are finding it challenging to accommodate the governmental demands, and Apple is encountering a list of obligations owed to the government.
According to the BCC, last week, the iOS developer witnessed the removal of two vigorously powerful applications from its App Store in its Chinese market. Later, news surfaced that Amazon’s Audible, and Yahoo Finance were also extracted from the store.
The mogul’s Apple Censorship group disclosed that recently, the company observed an extensively high rate of applications being removed from its store.
One cannot help but marvel at the reasons behind these tactics adopted by the Chinese authorities against the American Big Tech giant and if the time is of significance to China’s plan to surpass U.S. influence in the tech market.
In the last couple of months, Beijing has been tightening its scrutinizing hold on the tech industry. A factor paraded in Microsoft’s and Apple’s domestic battle with the Chinese authorities amidst regulatory ripple on the innovative sector.
If we look closer, last months’ event led by the country’s harsh regulation on its own Big Tech firms, such as Alibaba, Tencent, and Huawei, left U.S.-based companies subjected to similar behavior, as China grows exasperated from all the supremacy forged from tech companies.
“The crackdown suggests that both Apple and Microsoft are very aware that their position is more tenuous than it’s been in recent years. They know they need to walk carefully,” author of The Great Firewall of China, James Griffiths, said in a statement.
Microsoft’s decision to extract LinkedIn from the Chinese market was mostly driven by law due for legislation on November 1st.
The personal Information Law (PIPL) forces these firms to abide by any regulation imposed on them. Meaning, the software developer will be “facing a significantly more challenging operating environment and greater compliance requirements in China.”
From there, immerges another riddle.
Why didn’t Apple follow in its Big Tech fellow’s footsteps? Why can’t the iPhone parent extract its manufacturing plans from the Chinese market?
The answer is simple. For Apple, it is not a plain black and white scenario, as it is with Microsoft’s LinkedIn.
The company’s manufacturing operations are embedded deeply into the country’s market, more than any other Big Tech company. This product integration into the Chinese market increases demands for products.
Apple’s 2021 second quarter (Q2) revealed a $15 billion revenue in China and Taiwan alone, marking a phenomenal figure compared to other tech companies since the iOS developer’s global supply chain relies heavily on Chinese manufacturing.
For this reason, Apple is comprehensively aware that it must comply with the powerhouse’s rules, even if it would force censorship to its Apple Store.
Although Beijing’s broadening dominion on tech firms might highlight some red flags in reference to the country’s view on the industry, it does not mean that China is extensively monitoring and fixating its gaze at U.S.-based tech firms.
China clearly wants global tech firms to abide by its set of rules, as it is rightfully valid for a rising reign to impose authorities on expanding tech influence on its territory.
“The Western media is wearing tinted lens when they say China is over-regulating. The U.S. should think more about whether its own government is setting the restrictions too high in its exchanges with China, especially for those high-tech enterprises,” a professor at the Institute of International Relations of the China Foreign Affairs University, Li Haidong, told the Global Times.
Beijing’s desire to push lucrative tech companies to abide by Chinese laws on its province will force American firms to fasten their adaptation to the latest adjustment to the country’s market.
With U.S. empowered restrictions on China, one cannot deny that time would eventually come for U.S. Big Tech firms to be affected by their country’s harsh tactics on Chinese firms.
In this case, China could either be retaliating against U.S. sanctions or simply exacting regulatory tech authority on its turf. Or it could be both.
EXPLAINER: What the metaverse is and how it will work
The term “metaverse” seems to be everywhere. Facebook is hiring thousands of engineers in Europe to work on it, while video game companies are outlining their long-term visions for what some consider the next big thing online.
The metaverse, which could spring up again when Facebook releases earnings Monday, is the latest buzzword to capture the tech industry’s imagination.
It could be the future, or it could be the latest grandiose vision by Facebook CEO Mark Zuckerberg that doesn’t turn out as expected or isn’t widely adopted for years — if at all.
Plus, many have concerns about a new online world tied to a social media giant that could get access to even more personal data and is accused of failing to stop harmful content.
Here’s what this online world is all about:
WHAT IS THE METAVERSE?
Think of it as the internet brought to life, or at least rendered in 3D. Zuckerberg has described it as a “virtual environment” you can go inside of — instead of just looking at on a screen. Essentially, it’s a world of endless, interconnected virtual communities where people can meet, work and play, using virtual reality headsets, augmented reality glasses, smartphone apps or other devices.
It also will incorporate other aspects of online life such as shopping and social media, according to Victoria Petrock, an analyst who follows emerging technologies.
“It’s the next evolution of connectivity where all of those things start to come together in a seamless, doppelganger universe, so you’re living your virtual life the same way you’re living your physical life,” she said.
But keep in mind that “it’s hard to define a label to something that hasn’t been created,” said Tuong Nguyen, an analyst who tracks immersive technologies for research firm Gartner.
Facebook warned it would take 10 to 15 years to develop responsible products for the metaverse, a term coined by writer Neal Stephenson for his 1992 science fiction novel “Snow Crash.”
WHAT WILL I BE ABLE TO DO IN THE METAVERSE?
Things like go to a virtual concert, take a trip online, and buy and try on digital clothing.
The metaverse also could be a game-changer for the work-from-home shift amid the coronavirus pandemic. Instead of seeing co-workers on a video call grid, employees could see them virtually.
Facebook has launched meeting software for companies, called Horizon Workrooms, to use with its Oculus VR headsets, though early reviews have not been great. The headsets cost $300 or more, putting the metaverse’s most cutting-edge experiences out of reach for many.
For those who can afford it, users would be able, through their avatars, to flit between virtual worlds created by different companies.
“A lot of the metaverse experience is going to be around being able to teleport from one experience to another,” Zuckerberg says.
Tech companies still have to figure out how to connect their online platforms to each other. Making it work will require competing technology platforms to agree on a set of standards, so there aren’t “people in the Facebook metaverse and other people in the Microsoft metaverse,” Petrock said.
IS FACEBOOK GOING ALL IN ON THE METAVERSE?
Indeed, Zuckerberg is going big on what he sees as the next generation of the internet because he thinks it’s going to be a big part of the digital economy. He expects people to start seeing Facebook as a metaverse company in coming years rather than a social media company.
A report by tech news site The Verge said Zuckerberg is looking at using Facebook’s annual virtual reality conference this coming week to announce a corporate name change, putting legacy apps like Facebook and Instagram under a metaverse-focused parent company. Facebook hasn’t commented on the report.
Critics wonder if the potential pivot could be an effort to distract from the company’s crises, including antitrust crackdowns, testimony by whistleblowing former employees and concerns about its handling of misinformation.
Former employee Frances Haugen, who accused Facebook’s platforms of harming children and inciting political violence, plans to testify Monday before a United Kingdom parliamentary committee looking to pass online safety legislation.
IS THE METAVERSE JUST A FACEBOOK PROJECT?
No. Zuckerberg has acknowledged that “no one company” will build the metaverse by itself.
Just because Facebook is making a big deal about the metaverse doesn’t mean that it or another tech giant will dominate the space, Nguyen said.
“There are also a lot of startups that could be potential competitors,” he said. “There are new technologies and trends and applications that we’ve yet to discover.”
Video game companies also are taking a leading role. Epic Games, the company behind the popular Fortnite video game, has raised $1 billion from investors to help with its long-term plans for building the metaverse. Game platform Roblox is another big player, outlining its vision of the metaverse as a place where “people can come together within millions of 3D experiences to learn, work, play, create and socialize.”
Consumer brands are getting in on it, too. Italian fashion house Gucci collaborated in June with Roblox to sell a collection of digital-only accessories. Coca-Cola and Clinique have sold digital tokens pitched as a stepping stone to the metaverse.
Zuckerberg’s embrace of the metaverse in some ways contradicts a central tenet of its biggest enthusiasts. They envision the metaverse as online culture’s liberation from tech platforms like Facebook that assumed ownership of people’s accounts, photos, posts and playlists and traded off what they gleaned from that data.
“We want to be able to move around the internet with ease, but we also want to be able to move around the internet in a way we’re not tracked and monitored,” said venture capitalist Steve Jang, a managing partner at Kindred Ventures who focuses on cryptocurrency technology.
WILL THIS BE ANOTHER WAY TO GET MORE OF MY DATA?
It seems clear that Facebook wants to carry its business model, which is based on using personal data to sell targeted advertising, into the metaverse.
“Ads are going to continue being an important part of the strategy across the social media parts of what we do, and it will probably be a meaningful part of the metaverse, too,” Zuckerberg said in the company’s most recent earnings call.
That raises fresh privacy concerns, Nguyen said, involving “all the issues that we have today, and then some we’ve yet to discover because we’re still figuring out what the metaverse will do.”
Petrock she said she’s concerned about Facebook trying to lead the way into a virtual world that could require even more personal data and offer greater potential for abuse and misinformation when it hasn’t fixed those problems in its current platforms.
“I don’t think they fully thought through all the pitfalls,” she said. “I worry they’re not necessarily thinking through all the privacy implications of the metaverse.”
IBM brings $17.79 billion for Q3 revenue
IBM released on Wednesday its third-quarter (Q3) revenue report, revealing the hardware company’s rise in cloud unit, faced with a drop in IBM Z Power systems.
The hardware computer mogul reported a non-generally accepted accounting principle (GAAP) of $2.52 earnings per share (EPS) revenue, resulting in $17.6 billion, with a 1 percent rise Year-over-Year (YoY).
Non-GAAP earnings are earnings measured that are not developed using GAAP and are not needed for external reporting or other public disclosures.
In parallel, the company revealed that its cloud and cognitive software sum reached $5.7 billion its Q3 revenue, with a 2.5 percent augmentation.
While IBM witnessed a rise in cloud incomes, its system revenue dropped by 11.9 percent, resulting in $1.1 billion in total revenue. This decline was mostly directed by a drop in IBM Z and Power Systems that was faced with a storage system growth of 11 percent.
On the other hand, IBM’s Global Technology Services (GTS) unveiled a 4.8 percent drop, summing to $6.2 billion, while Global Business revenue rose by 11.6 percent, growing to $4.4 billion.
“We again had solid cash generation for the quarter and over the last year, while maintaining a strong balance sheet and the liquidity to support our hybrid cloud and AI strategy,” IBM senior vice president, and chief financial officer James Kavanaugh said in a statement.
“Our post-separation portfolio mix is shifted toward our growth vectors, with a higher-value recurring revenue stream and strong cash generation, allowing us to continue to invest in the business and provide attractive shareholder returns,” he added.
As for its cash flow and balance sheet, IBM produced $2.7 billion in net cash from Q3’s operating activities. Throughout the past 12 months, the computer hardware giant generated $16.1 billion from operating activities alone compared to 2020’s free cash flow, which accumulated to $9.2 billion for its Q3 revenue.
After excepting cash impacts of $1.8 billion directed at the structural actions and transaction separation costs, IBM altered the cash flow revenue to reach a total of $11.1 billion.
“With the separation of Kyndryl early next month, IBM takes the next step in our evolution as a platform-centric hybrid cloud and AI company,” said IBM chairman and chief executive officer Arvind Krishna.
“We continue to make progress in our software and consulting businesses, which represent our higher growth opportunities. With our increased focus and agility to better serve clients, we are confident in achieving our medium-term objectives of mid-single-digit revenue growth and strong free cash flow generation,” he added.
The hardware firm closed its Q3 with an $8.4 billion cash on hand – accessible balance referring to all cash – which also includes marketable securities. The balance witnessed a $5.9 billion drop from the end of 2020, mirroring a sum of acquisitions of $3.0 billion, in addition to debt reduction payments.
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