Tech Newsround – Arm China, Fitbit & Huawei.

Arm & NVIDIA.

• The risk of China causing a problem for NVIDIA’s acquisition of Arm is increasing as the dispute between SoftBank and Arm China’s CEO, Allen Wu shows no sign of ending.
• Despite a 7-1 vote to remove him by the Arm China board, Mr Wu still has control of the company under the old Chinese corporate system as he still has physical possession the company’s official stamp.
• This gives him the luxury of time in his negotiations with SoftBank (still the current owner) as SoftBank and NVIDIA have a deadline for the transaction which is very likely to be contingent on sorting this problem out.
• NVIDIA has not yet even applied for regulatory clearance of this deal in China and I suspect that it might be waiting for this issue to be resolved before it does so.
• I suspect that a resolution will result in a substantial “severance” payment being made to Mr Wu as time becomes tight, but there is no sign of any movement yet.
• The delay in filing for approval could mean that the 18-month deadline is not met which may make some worry that the acquisition does not go through.
• This remains by far the biggest risk to the success of the acquisition but seeing is it really boils down to a disagreement over money, it is solvable.

FitBit & Google.

• Google has completed the acquisition of Fitbit but in its self-congratulatory statement, Fitbit has let slip just how little its users actually use its products.
• During its life as an independent company, Fitbit said that it sold 120m devices, tracked 275tn steps and logged over 15bn hours of sleep.
• This means that each device on average during its life tracked 2.3m steps and 125 hours of sleep.
• If the average user takes 10,000 steps per day and sleeps 7 hours a night, the average use time for the device is 7½ months for steps and 18 days for sleep tracking.
• This implies that the user buys the device fully intending to wear it all the time but gets fed up with wearing it when sleeping after 3 weeks and in its entirety after 7½ months.
• This is pretty much what we have observed over the life of this company and it would appear that there was very little that Fitbit could do about it.
• This is what inevitably led to Fitbit having to sell to Google and very little here appears to have changed.
• Hence there is very little hope of challenging the Apple Watch which the fanbase wears religiously.
• Google continues to struggle in this space which combined with a poor showing in the smart home and in smartphones continues to lead me to wonder why Google does hardware at all.

Huawei.

• The outgoing US administration took what is likely to be its parting shot at Huawei by revoking 8 entity list licenses from 4 companies.
• Intel was one of the companies and Kioxia Corp (formerly Toshiba Memory) was another and I suspect that Microsoft could also have been targeted.
• The Department of Commerce also signalled its intention to refuse the licences of other applicants in a move that meaningfully hardens the current stance.
• This stance had been “softened” to imply that as long as the technology-related did not support 5G, then the license would be granted (see here), and I suspect that it is this that has been turned around.
• However, a new administration takes over this week and it can, at its sole discretion, amend or cancel any of these actions with little or no notice.
• The one thing that everyone seems to agree on in the USA these days is that China’s rise must be contained and so I can see the new administration letting the current status-quo drag on for a while.
• Hence, I do not expect a sudden reprieve for Huawei which may be close to running out of components for base stations and smartphones in another 3 months or so.
• Huawei has done a great job at mitigating the impact from the USA so far, but I think that it is now pretty much out of options (see here).
• 2021 is likely to be extremely difficult.