Piccioni: GT Advanced Technologies was “locked in a deadly embrace” with Apple. This has been another very slow tech news week. Most websites continue to dedicate resources to promoting things like Tesla, which, late in the week launched a vehicle with two (2!) electric motors. Perhaps this is to provide redundancy as “long term” tests show the drive systems on the Model S last about10,000 miles between replacement.
Perhaps the most interesting story is that Adobe’s “Digital Editions 4” turns out to have all the attributes of malware. While the “EULA” probably cover this, expect a sizable lawsuit as a consequence. Be warned: this sort of thing is increasingly common.
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Personally I avoid Adobe software like the plague: the ubiquitous PDFreader is a 73 MB file with incredibly frequent security updates while the more functional and stable Nitro PDF reader is about 1/20th the size. I’ve never used this Adobe software, but it seems that it is needed to loan ebooks from libraries so this particular malware attack appears to be directed to those most dangerous of people: “readers”. Large software companies are faced with a conundrum: they no longer innovate and their markets are saturated. Every now and they they get brilliant ideas such as this, which is probably motivated by the desire to aggregate and exploit big data. When you have had no growth for the past four years, pay no dividend, produce little in the way of cash flow, and yet have a $33B market value, you gotta do something.
“Adobe has just given us a graphic demonstration of how not to handle security and privacy issues. A hacker acquaintance of mine has tipped me to a huge security and privacy violation on the part of Adobe. That anonymous acquaintance was examining Adobe’s DRm for educational purposes when they noticed that Digital Editions 4, the newest version of Adobe’s Epub app, seemed to be sending an awful lot of data to Adobe’s servers. My source told me, and I can confirm, that Adobe is tracking users in the app and uploading the data to their servers. (Adobe was contacted in advance of publication, but declined to respond.)”
I first heard of this company in the lead up to the launch of the iPhone 6, which was rumored to have a sapphire display. As a general rule, I never invest in small supplier to companies such as Apple because they end up locked in a deadly embrace: they have one very large customer and no pricing power. Eventually that customer moves on and the supplier goes bankrupt. Event risk is not something I like, especially when I cannot predict the event. To put things in perspective when rumors flew that GTAT would supply the display glass for the iPhone 6 the stock was around $20, for a market value of $2.2B. What is odd is that their reported financial statements, which may or may not reflect the actual position of the company do not appear to predict any sort of risk of bankruptcy.
“GT Advanced Technologies, which has a supply relationship with Apple after an agreement struck late last year, has filed for Chapter 11 bankruptcy protection. The company will continue to operate as normal despite the filing, which is designed to protect its assets and operating budget from debt while it restructures and re-finances its obligations.”
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Every time Apple comes out with a new phone, somebody has to compare the over-hyped virtues of a camera with less than $20 in content (including an aspirin sized lens) with an actual, honest to god camera. Usually they choose an expensive camera, such as this one, and discover that, while the really expensive camera is better, the iPhone is pretty good. Realistically, what they should do is compare a cheap $200 real camera with the iPhone and have the comparison done by somebody who knows something about photography, depth of field, gamut, depth perception, etc., etc.. In which case the conclusion would be that ALL smartphone cameras are crap.
“This is a fair amount of scratch to lay down for a camera, especially when the Internet is full of examples of pro photographers going the opposite direction, ditching bags of expensive gear in favor of smartphone cameras for most applications. The idea here is that the person, not the gear, takes the picture. And there is a (likely apocryphal) story that tells the tale of an encounter between famous novelist Ernest Hemingway and famous photographer Ansel Adams. In the story, Hemingway is purported to have praised Adams’ photographs, saying, “You take the most amazing pictures. What kind of camera do you use?” Adams frowned and then replied, “You write the most amazing stories. What kind of typewriter do you use?””
Chip Options Sought as Costs Rise
Every now and then I encounter a small semiconductor company and, while I wish them luck, I feel rather sad. Setting aside the overwhelming power of ODMs such as Foxconn, which strip most semiconductor companies of even a semblance of pricing power, the costs of producing a cutting edge chip are now well beyond the ability of a small company to fund. In the incredibly unlikely event the small company happens upon a profitable market segment (and it tends to be multiple small companies addressing the same segment at the same time) the most likely outcome is that titans such as Samsung, Texas Instruments, etc., who are all desperate to keep their factories busy, simply move into the space. It never ends well.
“The low cost of capital is fueling M&A across all industries, and the rising cost and complexity of making chips is pouring gas on the fire in semiconductors. It could cost $53 million to make a 20 nm chip, up from $36 million for a 28 nm part, and cost will take another leap with the 16/14 nm node, Edelstone told the crowd. “It requires a really big market to make money on such an investment, and this will have a dramatic impact on how the industry evolves. The cost per gate is going up with the [16/14 nm] FinFET generation, which changes the dynamics of the industry pretty dynamically — that tells you scale matters.””