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This is Bloomberg Daybreak Weekend, our global look at the top stories in the coming week from our Daybreak anchors all around the world. Straight Ahead on the program, we'll look ahead to earnings from some of tech's magnificent seven. I'm Nathan Hager in Washington.
I'm Caroline Hedkit in London, where we're asking whether UK five Minister Kastarma can throw frosty relations with China.
I'm Doug Chrisner looking at what Apple earnings will indicate about Asia.
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg eleven three year, New York, Bloomberg ninety nine to one, Washington, DC, Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Syrias, XM one twenty one, and around the world on Bloomberg Radio, dot Com and the Bloomberg Business app.
Good day to you. I'm Nathan Hager. We begin today's program with the Federal Reserve. Jay Powell and company begin their first monetary policy meeting of twenty twenty six on Tuesday, with the first rate decision of the year to come Wednesday. So what should we expect as we map out policy for the rest of the year. Let's bring in Michael McKee for more on this, our international economics and policy
correspondent for Bloomberg Radio and Television. Mike, I guess, as far as the January decision goes, would probably be a big shock if we got another rate cut this week, right, So what should we be looking for.
I think this is gonna be another one where the FED is sort of going to be anxious to make as little news as possible, which I don't think they're going to be able to avoid, but there is no rate cut in train, so they're unlikely to do that. That would be a shock. There's been no news that would justify that at this point, and all the speakers going into the blackout period, we're saying, you know, we
don't think we need to kind anything. So I think you'll get a unanimous decision no to sense this time for a hold, and then the question always, as always, moves on to what do they do at the next meeting, which is in March. I think they're going to avoid making any kind of specific forecast because they don't know what the data are going to show. We're still coming out of this as the government shutdown, data shortage, so they won't have a lot of information.
Well, let's talk about the information that they have gotten thus far. I mean, we have seen some more labor market reports, we've gotten non farm payrolls, you've gotten the Fed's preferred gage of inflation as well. What does that tell you about what the economy looks like going into twenty twenty six.
Well, if you're looking at it in terms of the Fed's dual mandate, you do have inflation. The PCEE numbers came out last week at looking at two point eight percent, which is up from the month prior. But now these are November numbers. The December numbers won't come out yet for a couple of weeks, and in the December numbers, the expectation is inflation will rise again to three percent. And then when you look at the jobs numbers, it's the unemployment rate went down last month and Java's claims
have stayed extremely low. So at worst, maybe you say for the moment, the labor market has stabilized, and so there's not really an economic argument for cutting rates. There's also a feeling that given the tax cut bill, we're going into tax season now, people will get higher refunds than they have in prior years and that will feed some spending into the economy and keep it a little bit stronger. So there's no real need to cut rates at the moment now.
It's interesting because at the of last year, there was so much focus on the idea of cracks in the labor market. Now, as you say, we are seeing this sort of sign of stabilization. While it seems like this last mile of getting inflation back down to the Fed's two percent target just seems to look like an uphill climb. Could we be seeing the Fed's focus shift now from the job market to inflation once again.
I think they will move back they were emphasizing the labor market. I think they'll move back to the middle at this point and waiting for more data. Next week we won't have the December PCE numbers, so they'll still be looking to guess at what the numbers are going to be, and even if it's going up to three percent, that's going to concern them. So I think they try to keep their options open with that and not emphasize
the labor market just as much. But the problem with both sides of the man data and the data are the uncertainty that the Trump administration has caused has not gone away. We just went through a week of We're going to put big tariffs on Europe. Oh, no, we're not, And so companies don't know what to do. They're kind of hunkered down at the moment. They don't want to fire a lot of people if the economy is going
to pick up. But if the economy is going to slow down or we're going to have inflation issues, then they're going to try to control costs and you might see some layoffs. So at this point we're kind of in this no man's land that we've been in for a year.
You talked about the Fed maybe not wanting to make much news at this meeting. Of course, this is coming at a time where the Central Bank is facing continued pressures outside the committee room. This is going to be Chair Powell's first policy meeting since he announced that he's under a Justice Department investigation. How much could that weigh on this decision? Will it?
I don't think it weighs on the decision at all, because the of Powell is sort of vengeance by the President and the rest of the members of the Open Market Committee aren't going to think it means anything, and they will ignore it. But what will be interesting is, since the FED is not expected to do anything exciting or surprise anybody with monetary policy, is the first question going to be about the decision or is it going to be about the president's efforts to atara and feather
the FED chair. There probably will be a lot of focus on that, and my guess is that Powell will try to shut that down, maybe say I've already spoken my piece on this, maybe something about the importance of FED independence, But I don't think he wants to spend the entire news conference in a shouting match with the President.
We know you're going to be there for that news conference and for the decision as well, with the January policy decision of the Federal resis coming up later on Wednesday. Thank you for this, Mike. As always, it's Michael McKee, international economics and policy correspondent from Bloomberg Radio and Television. We move next to a slew of corporate earnings. The focus this week turns to some of the biggest names in tech. We're going to hear from Tesla, Microsoft, meta
platforms all on Wednesday. We'll also hear from Apple after the closed Thursday, let's bring in Bloomberg Tech co anchor Ed Ludlow to get a set for the Magnificent seven earnings kickoff. Great to have you here.
Ed.
Let's start with Tesla because we heard from the CEO Elon Musk at the World Economic Forum this past week. He was talking about the optimist robots. Is that where the focus is going to be for investors when it comes to the earnings.
Yeah, when it comes to earnings, like you have to kind of unpick all of the noise that comes from Elon Musk in the interim. So what happened at the end of twenty twenty five is Tesla had its second consecutive sales decline on an annual basis. Basically, they're not selling as many evs and there's lots of evidence that musks medical activities last year impacted that we had the end of federal credits in the United States and other
factors you know about the economy and competition. So when it comes to earnings, you kind of look for, well, was that story true. What is Tesla's explanation for it? Because it's the first chance that they really talk about it. Then there's all the big picture stuff, and you know, we say on Bloomberg Tech all the time, Must's greatest skill is keeping all the investors looking to the horizon on those future projects, which are robotaxi and humanoid robots.
So when it comes to the core business, though, what's the show me story for Elon Musk and for Tesla when it comes to EV demand the fact that we don't have those incentives and we're seeing that draw down in demand across the EV sector. What's that going to mean for Tesla when it comes to the earnings.
Yeah, again, it's a cutting through the noise kind of thing, especially when we're reporting the news on it. But what Tesla has done more recently inconsistently is in their earnings deck a growth target. They will either say or they won't say, we expect fifty percent compound annual growth rates. And that's the only indication that we get to tell us that they have firm data and firm belief that they will or won't grow. Historically, that's been the story
for many years. Grew at fifty percent a year, and then it stopped and as I just said two straight years of declining growth, declining sales growth, so you look into the deck. But again, you know, it depends on the questions the analysts asked. It depends on what tests does. A bit differently, the retail investors get to ask questions that they submit through an online portal, and lots of those often don't even worry about the day to day
business of selling evs. They just care about those shiny things.
Yeah, speaking of shiny things, let's move on to some of the other companies reporting earnings this week, including Meta Platforms. Of course, they've gone all in on AI spending right now. Is there such a thing as too much AI capex When it comes to Meta.
Quite the opposite. The expectation is that capital expenditures across Meta and then the hyperscalers. So Meta, as you know, is a social media company that's also very interested in artificial intelligence, but it does not operate in the business of renting computer capacity to others. Those are cloud providers in other words, Amazon, Microsoft, Google, and to a lesser extent, Oracle. But metas spending on its own data centers is so significant that we put it in that bucket, and the
story's not changed from last quarter or last year. We track capital expenditures across all those names, and the market wants to see confidence of spending. The basic logic is if capital expenditures are in the range that investors forecast, they're higher than they were last year, then that shows a commitment to spending, because the companies believe on the other side of building more data centers comes revenue growth, comes profit from all their work, particularly in AI.
And we're going to hear from one of those hyperscalers. You just mentioned Microsoft. Of course there as your cloud business. It seems like that's been going gangbusters for several quarters now. So what's the expectation when it comes to Microsoft.
Yeah, Microsoft can be a pretty straightforward story. Again, we look at its capital expenditures because as one of the biggest data center operators and owners, you want to see their commitment to doing it. But then in terms of segments, it's just about the top line growth of that as your cloud computing business, and you know it's in the thirties and plus or minus a few percent against street consensus,
makes a really big impression on how AI. The investment starts with the chips that go in data centers, you have to spend a lot of money on that. But when you start to show sales growth in cloud, it's evidence that that payoff is happening.
So when we start to look at these earnings, Z, what are you expecting when it comes to this ongoing debate about AI valuations and you know circular spending in the space as well.
Yeah, but the issue then takes us back to growth. The valuations are being justified by that growth narrative. And you know, if you read on the Bloomberg terminal, the team on equities in particular point out that actually that growth if we take the MAGS seven as a bucket, or we take the higher growth tech stock s and P five hundred, it isn't expected to be where it
was in more recent quarters. So that gives you the potential for upside, of course, but it also means that they're going to have to tell a pretty good story to convince investors that where valuations are currently, these are stocks worth putting money into.
You're going to see that story play out later on this week. Thank you for this and again great have you on with us. That's Bloomberg Tech co anchor Ed Ludlow and coming up on Bloomberg Daybreak weekend, we'll look at whether the UK's Prime Minister Keir Starmer can thought frosty relations with China. I'm Nathan Hager and this is Bloomberg.
This is Bloomberg Daybreak Weekende will book ahead at the top stories for investors in the coming week, and Nathan Hager in Washington up later in the program will look ahead to how earnings from Apple may have been affected by business in Asia. But first in the coming days, UK Prime Minister Keir Starmer will become his nation's first leader to travel to China in more than seven years. Starmer seeking to improve diplomatic ties as several geopolitical points
of tension remained between the two countries. So how will Starmer's planned visits to Shanghai and Beijing play out? For more Let's go to London and bring in Bloomberg Daybreak Europe anker Caroline Hepger Nathan.
The last British premier to visit China was Treisa May back in twenty eighteen. Since then, relations between the two countries have worsened. After the crackdown on pro democracy protests in Hong Kong, a spate of espionage and cyber attack allegations, and Beijing's support for Russia's war in Ukraine. Despite the frosty state of affairs, Starmer is seeking something of a thaw.
His optimistic approach is one he defended during a recent speech in which he called for the UK to take a pro business approach to China, whilst recognizing that it poses a threat to national security.
I am clear that no transformation today carries greater consequence than the rise of China. It is a nation of immense scale, ambition and ingenuity, a defining force in technology, in trade and global governance. So our response will not be driven by fear nor softened by illusion. It will be grounded in strength, clarity and sober realism, in line with our wider international approach, and guided by our conviction.
That was the UK Prime Minister Kirs Starmer speaking there. So can the British government draw a line under what has been a turbulent period for UK China relations or could you o political tensions and US influence maybe change things? To think about this, I'm joined by Bloomberg's UK political correspondent, Ellen Milligan and our chief Asia correspondent was in Matheson. Welcome to both of you, and then can I start
with you. There was a time when under the previous government, the Conservatives, we were talking about the Golden Age in UK China relations. I remember that, but it does seem like a long time ago, doesn't it.
Yes, So do you remember when David Cameron and Gguping went to that kind of village pub and pulled pints chips. I mean, we just really haven't seen that in the last ten years, and you were saying that, I mean
really kind of that short lived Golden age. You know, billions promised in Chinese investment, much closer ties break down and sad over initially over that crackdown on activists in Hong Kong, a former British colony, but also over espionage and cyber attack allegations, and then more recently in the
last few years China support for Russia. So what Kiss Starmer's administration has long complained of is that under the Tories there was this kind of back and forth between the Golden era and then a complete almost freeze of ties under particularly Boris Johnson, and that they wanted to get back to a more cooperative approach, but where they would still challenge China where they needed to in.
Terms of Kiirs Stalma's recent foreign policy ideas. Then the effort to try to set the record straight on Labour's China strategy. What is their view, because there does seem to be still a push pull, a strong push pull in the UK about what attitude to adopt to Beijing.
Yeah.
I mean kir Starmer came in promising clarity over their China policy and I think we've had anything but that. I mean when he entered office in twenty twenty four, there was quite a quick succession in terms of high profile visits to China. David Lammi, who was the Foreign Secretary at the time now Deputy Prime Minister, the Chancellor Rachel Reeves both went over there and that pretty much stopped when Donald Trump and re entered the White House
in January last year. I think Kirstarmer's foreign policy priorities were very much about establishing of relationships with the US, avoiding of the most harsh trade tariffs Ukraine, and also the reset that he has been pursuing with the European Union. And Donald Trump is of of famous China hawk and so no visits really happened, and if they did happen, they were very much under the radar and Britain didn't
shout about them. And I think what has happened in the last few months, Macron did a hyper file visit to Bishi, Mattz, the German Chancellor, has one planned, and crucially Trump had his own bilateral meeting with Uguping and has also planned a state visit, and I think Starmer felt as though that paved the way for him to be able to kind of soften relations with China.
Now to Okay Rozu in Asia, how does China see its relationship with the UK? Maybe sort of historically and also now, Well.
It depends how far back you want to go, because there is a lot of history there. In more recent history, it's probably been more down than up obviously from that moment of the beer and the beer and the pub after that, but it's never been easy in the past in a ways, just to find this relationship from the
China side. You know, they now see themselves, no doubt as the senior partner, shifting from one hundred years ago, the aftermath of the Opium Wars, which very wounding to China, you know, they manage an arrangement to get the return of Hong Kong. But China probably sees the UK still having a sense of a proprietary air, you know, weighing in particularly on Hong Kong issues, protests there, the rule of law. We've seen Kiss Starmer criticize the conviction of
the former Hong Kong media mogul jimmy Li. So a sense in China's eyes that the UK is still willing to interfere in its business in a different way perhaps than during the Opium Wars, but it's still there. And for China, what they want to do is put this relationship to focus really on business and investment and trade because that's where China wants to benefit. And for them, the UK is a useful market as they also want
to diversify in trade. So for them now they probably see this relationship as very transactional, but probably themselves is a bit more of the senior partner. Yeah.
Is the UK seen as a strategic who by China or is it simply as a kind of trading partner?
Do you think was my dut of China sees many, if any Western nations as strategic allies. It might see them as useful, but not as allies, perhaps since of dividing and conquering in the West a bit so splitting Europe and the UK off somewhat from the US, maximizing the tensions that the US has right now with Europe and the UK on different matters. So probably as a useful partner, not strategic ally, a transactional partner. Definitely a trading partner as long as the totality of that relationship
is still to China's advantage. So net net, are its companies better off? Is it selling the sorts of things it wants to? Does it have a foothold in the industry as it wants? But that's probably how China would see it as less a strategic ally because it're not partnering on security matters. On defense, I mean, the UK has actually been quite critical of China for its tacit support of Russia for example in Ukraine was economic support for Russia. But certainly China would see them as a
useful partner. Potentially.
We have seen the likes of Rachel Reeves and David Lammy visiting China. Have they managed to make any progress?
There was no substantial outcome from either of those visits. I think those initial visits were more about no one's been in years, so let's go and make sure that we get diplomacy back on track. More progress has been made recently. Peter Karl, the Tech Secretary when he's now Business Secretary, went out late last year and they've resumed this economic trade dialogue which had not taken place I
think since before Boris Johnson. But you know, it means that Kisdom has almost put more pressure on himself with this state visit coming up. I mean the way he describes China as this is like the most consequential global shift to the UK of them, and so the stakes are really high for him.
Roz does China want the UK to pick between the US and China? What is their perspective? I mean America has a view or mat doesn't.
It They do, And for China they probably realize it's not realistic to try and say the UK has to pick a side there, but they can take advantage because that's what they like to do, is to spot an
opportunity and to maximize ruptures and tensions. You know, and that sense just said the US led global order is changing into something more fractured into spheres of influence Trump in the Americas, China in Asia and so on, and exploiting that when it comes to trade, because it's clear Europe and the UK are acknowledging they need to do business with China. As Ellen was saying, there's a lot at stake for STARMA in this visit, you know, to
manage the relationship and to walk those lines. And they'll be aware of that too him coming in, and they understand the UK will always have a relationship of sorts with the US. There is a lot of cooperation that still goes on between them, including on the defense side, despite what Donald Trump may say about that.
Ellen just lastly, how important do you think the recent approval of a new Chinese embassy in London is It was an enormously contentious decision.
Well, we've spoken about how the US approach China and Donald Trump coming back has complicated this research. There've been two other major obstacles in the past year for STARMA.
One is this embassy approval. The government decided to call that embassy decision in from the local authorities almost a year ago now and have constantly delayed a decision on this, they've sought more information on what exactly China intends to do, how close this embassy would be to sensitive communication cables, and the timing is no coincidence that this decision has been made just the week before this state visit, and it really kind of paves the way for Starma to say, look,
we've been able to make this big decision that you've wanted for a long long time. And also it's important because Britain has its own crumbling embassy in Beijing that it has had planning application to rebuild out for a while, so that's really important. And the second thing I would just say, because it would be a miss not to, is this criminal case against two Brits accused of spying for China that collapsed towards the end of last year,
and that has been a big obstacle too. And we've spoken about there's a lot of China hawks across political parties in UK's Parliament and those are really the two big things that they continually point to for for examples for Starma to be much more cautious with China.
Okay, Ellen, thank you so much for being with me. That Isenbag's UK political correspondent Ellen Milligan, and my thanks also to our chief Asia correspondent ros In Matheson for discussing this visit by Kirs Starmer to China, and we will of course have full coverage of the Prime Minister's trip to China, including reaction on the ground and the key takeaways from the talks. I'm Carolin Hetgar here in London. You can catch us every weekday morning for Bloomberg Daybreak
you at beginning at six am in London. That's one am on Wall Street.
Nathan, Thanks Caroline, and coming up on Bloomberg Daybreak weekend, we look ahead to earnings from tech giant Apple and how they may have been impacted by business in Asia. I'm Nathan Hager, and this is Bloomberg. This is Bloomberg Daybreak week and our global look ahead at the top stories for investors in the coming week. I'm Nathan Hager in Washington. We get Apple's latest earnings this week, and the company's business in Asia will be a key focal point.
Let's get more on this from Bloomberg's Doug Krisner, host of the Daybreak Asia podcast.
Nathan, there will be a couple of issues to consider from this quarterly report, First sales of Apple devices in Greater China, a market where the competitive landscape is shifting. And second, what those sales figures mean for Apple's partners and parts suppliers in the Asia Pacific. Joining me now for a closer look is Bloomberg's Vlad svov Lad is Tech editor for Asia, and he joins from our studios
in Hong Kong, thank you for being here. What do we know about how well Apple products have been selling in Greater China, especially the iPhone?
Well, absolutely, that is the company's iconic product. And Tim Cook did give us a little bit of foreshadowing at the last earnings saying that he looks forward to growth in China. And we got a hold of numbers from Counterpoint Research that showed that the iPhone overperform the broader smartphone market significantly. That was up roughly about twenty eight percent year and year in the holiday quarter, whereas the overall China smartphone market actually dipped a couple of percentage points.
So really it signifies how big the iPhone seventy upgrades have been, how they're resonated with consumers. The analysts also pointed out that you had that covid era refreshed cycle, so all the people who got a smartphone at that time were due to get a new one, and presumably all the iPhone owners just kept going with the iPhone.
So you and I have spoken in the past about the intense competition from Chinese handset makers like Quabwei and shao Me. Did that not show up in the last quarter.
Well, those two particular brands were down double digit in percentage terms year and year for that quarter. It is significant to say that for the entire year in terms of shipments, while it was the biggest in China, it's just the particular quarter because of product cycles. Apples is very regular, it is like clockwork, but the likes of Huawei Shami, they tend to jump around, so you have
some quarterly unevenness, so to speak. And one of the interesting things with the Chinese manufacturers themselves is that they keep handing over the crowd. So one year Apple will be ahead, one year it will be Vivo, Shami, Huawei, et cetera. So there's never really a clear cut leader or winner amongst them. Whereas Apple there is just one Apple, there is just one iPhone, and that's the recurring theme with the company. It has that ecosystem that nobody else had.
Now Apple has established a well oiled supply chain right across the APAC region, although recently some capacity constraints seem to have become a factor. How well has Apple supply chain held up in the face of this demand.
Well, the supply chain, I can kind of guess what you're getting into, which is that memory chip crunch, which has been the southern and overwhelming theme that we've seen across the entire supply chain. It is brought on by the AI demand. The likes of Nvidia and AMD are the ones who are buying up the capacity at Samsung, s k Heinix, and Micron. So all the memory that used to be the most commodified, the most boring component is now surging in costs, So that's hitting laptop manufacturers,
smartphone manufacturers, et cetera. Again, Apple is fairly unique in this because Counterpoints and other analysts have said the premium tier of the smartphone market is not being affected, is the entry level is the mid range. We've seen some indications that some of the smaller manufacturers actually canceling products because they cannot get a hold of memory at a price that makes the product viable.
Now we know that Apple outsources chip production to Taiwan Semiconductor. This relationship goes back years. TSMC has been the exclusive partner for producing processors for things like the iPhone, the iPad, and even Max and for a long time, Apple was TSMC's most important client. But these days that distinction seems to belong to Nvidia. Given the explosive demand that we have seen for high end chips now, TSMC has responded recently by raising the lower end of its CAPEX spending target.
So when you consider expanding capacity, let's bring into the conversation Apple's other critical partnership in Asia, and that is fox Con, the largest contract manufacturer for Apple. So Vlad, I'm wondering whether fox Con, like TSMC, is being forced to increase its CAPEX to meet demand.
Well, Foxcone is an interesting one and clearly it doesn't have that much in the way of capacity issues when it comes to consumer electronics light the iPhone. But increasingly FOXCNE is moving into being a data center hardware manufacturer. So effectively, when TSMC builds in video chips, somebody needs to put them in racks, build them into like fridge sized units that then go into data centres. Foxcone is
doing a whole bunch of that. The company hasn't recently spoken about amping up its own spending, but it does stand to reason. Fox con does want to be has a very close relationship with video, just as it does with Apple. It does want to be the leader in this space. So to your point, it may well be the case that fox Conne and some of its competitors, many of them being Taiwanese companies as well, are going
to ramp up as well because the demand. We saw this at c Yes Jensen, CEO from a Video and Other adjective said, the demand for AI hardware is still outstripping supply.
When I think of memory chip makers, I think of South Korea. I think of Samsung and sk Heinex. But I also want to consider what's happening in China. We have Semiconductor Manufacturing International Corp. Known as SMIC or SMICK. This company also produces memory chips. So if the supply of memory is being constrained, I'm wondering whether Chinese firms like Smick are benefiting.
Yeah, the opportunity right now is in fact for the Chinese manufacturers of memory chips. You have YMTC and some other players within China. They have the opportunity because they don't have the cutting edge the HBM technology that Heinigs and Samsung are dedicating all their attention to. So for them they can fill in the gap because Heinnicks has already said twenty twenty six memory capacity is already booked
out and sold. And you're seeing these things emerging when you look at the consumer prices if you want to build your own PC, prices have more than doubled for ramsticks. So Smick itself also a lot like TSMC that it has its hands busy with orders from Huawei, which wants to build AI accelerators to compete with in video, and a number of players such as more Threads, which is another Chinese chip designer that wants to compete with in video.
So Smick not necessarily busy with memory, but the likes of YMTC are going to have more of an opportunity in the broader market.
So how well have the Chinese chip makers been doing in terms of improving the quality of their semiconductors, whether we're talking about memory or even processors.
I would say that probably they're much closer to closing the gap on the memory front because, again, to do consumer electronics memory, some of these things are stabilized. Some of that technology is mature and hasn't jumped by leaves and bounds in the same way that it has done
with logic processes, especially AI processes. So SNICK again is a very good example because it is effectively stuck at seven nanometer technology, while TSMC and Samsung are this year moving to two nanometers, which is several generations ahead, and the difference that that makes is kind of consistent. It means more transistors in less pace, it means more performance for less energy consumed. And again, when we're talking AI and data centers, energy consumed is a big factor.
What about the adoption of artificial intelligence in China, especially on mobile devices.
Apple intelligence doesn't even exist in China at the moment. Apple Intelligence outside of China has also been a disaster by Apple standards. It has gone nowhere. It is not a selling point whatsoever. But for Apple's constellation, the fact is that AI on devices is not selling point for anyone. Samsung has the most integration, uses Google Gemini for a whole bunch of stuff, it uses Samsung's own technology. Nobody's
buying Samsung device because if its AI. Likewise, for Shaomi, Huawei, Honor is one of these companies that has its own built in AI agent that will do things for you on the device. These are interesting technologies. There are things that make a nice tech demo, but no consumer is actively going out and saying I will buy this brand over the other because I think it's AI agent is more valuable.
When we have spoken in the past about the iPhone, the camera obviously becomes a focal point pun intended here, But when it comes to the iPhone seventeen, I'm wondering whether that's been a big selling point. The camera has been a selling point for Greater China.
I'm sure it is mean people in China always care about specs. With them, more is always more. I would say that in particularly the iPhone seventeen, the base model, no other affixes after the seventeen has been a massive upgrade. One of the things Apple did is they added more memory. Again, memory the big thing right now without raising the price. So just looking iPhone sixteen to iPhone seventeen at that
price level, there was a bigly, big uprating specification. So I feel like things like battery life camera improvements always come. There hasn't been like a blow your socks off kind of camera improvement from the iPhone, but the overallspec improvement, all those quality of life improvements are the things that people look for, and clearly the iPhone seventeen here's a sweet pot.
You and I have spoken in the past about Apple diversifying some of its manufacturing outside of China, especially to India. Among the lessons from the pandemic was the vulnerability of being overly reliant on just one jurisdiction. So I'm curious to get your take, Vlad on where Apple is right now in trying to reduce its reliance on China as a manufacturing center.
That is still the case increasingly what we're seeing, and the move to India in fact has been accelerating. But that's been quiet for several months now, and to my sense is that Apple will speak on it and figures will emerge when more pressure from say the Trump administration
to do more in the way of the coupling. Over the long run, you can kind of see that made in China will be for the China market, which Let's not forget, is the world's biggest smartphone market, so Apple will never get rid of that part of its business so long as that's within its control, and that will always be very, very significant. India is again the big
hub for doing manufacturing outside of China. Worth bearing in mind that India is also one of the biggest growth markets for smartphones, one of the biggest growth markets for the premium range. So Apple is putting a lot of focus on that. I would say that the company is trying to have everything effectively, like make sure it's big in India, make sure it's still big in China. Nothing will ever go neglected by Apple so long as there's big potential there.
And Vietnam, which as we know, has been another manufacturing location for a few Apple products.
That's right.
The Vietnam is a place where things like iPads and let's say air pods production can happen. It is a place that others. Fox has facilities there and other manufacturers are also doing work. Again, that tends to be the move of manufacturing out of China toward India and Vietnam tends to be more of a high priority. When you hear more noise from the US administration, to say less of manufacturing leaf China. It tends to come and go with pressure from the White House.
Effectively.
One of the questions for me at this point as it relates to the shortage in memory components is whether Apple's margins will come under pressure and whether or not the company will be confronted with having the increase prices. It seems like the scarcity of memory is going to produce higher prices, and presumably those increases are going to be passed on ultimately to the consumer.
Absolutely, the rising consumer electronics prices is already on the way, especially with laptops. I would again say you will see on the lower end of things, entry level devices will become much pricier. Mid range two. I suspect that Apple is one of the companies that will do with something to not let that price premium pass on to the consumer. Apple tends to be very steady with its pricing, so the premium end of the market will not be so
much affected. But again it's worth recounting Micro and one of the Micro and executive sodas. This memory crunch is unprecedented, and we're talking something stretching deep into twenty twenty seven for sure.
Glad we'll leave it there. Thank you so very much. Flat Savov, Bloomberg Tech Editor for Asia, joining from Hong Kong. By the way, Apple will be reporting those earnings on Thursday after the US close. I'm Doug Prisner. You can catch us weekdays for the Daybreak Asia podcast. It's available wherever you get your podcast Nathan.
Thanks Doug, and that does it for this edition of Bloomberg day Break Weekend. Join us again Monday morning at five am Wall Street Time for the latest on markets overseas and the news you need to start your day. I'm Nathan Hager. Stay with us. Top stories and global business headlines are coming up right now