Tidbits in the News: Samsung, Amazon, and Sony’s New Chapters

In this edition of Tidbits in the News, we’ll be focusing on major corporations, as it’s been that sort of week. The stock markets have seen their worst performance in years, all while the US government seems to be in incessant turmoil. All this a week before the winter Olympics in PyeongChang, and there’s a sentiment that there’s more to come in the following days.

Today, we’ll be focusing on 3 rather interesting developments, and what they mean for you as an individual.

Samsung’s ASIC Venture

In a rather surprising turn of events (at least personally), Samsung has confirmed, and began production for, its own ASIC chips. Now, for those of you who are unenlightened in the field of cryptocurrency, as I was for a while, you may be wondering what ASIC stands for.

ASIC stands for application specific integrated circuit. That tells us all we need to know for  this article. In essence, it’s a circuit board that’s specifically tailored to one very specific task — in this case, bitcoin mining. There’s been a huge boom for these types of chips, especially with the growth in interest for cryptocurrencies in general, with Chinese manufacturers taking an early lead in the yet nascent market.

So what does this have to do with you?

Do you remember how over the past year, graphics card prices have gone up to insane levels due to a shortage in supply? A bulk of that insatiable demand just so happens to be from cryptocurrency miners. There’s 2 things inherently wrong with this. First, GPUs were built as general purpose processors, and, as such, aren’t too great at running crypto currency mining operations — in short, it’s rather inefficient for miners. Second, the GPU shortage disproportionately affected consumers, especially gamers.

Now, this third point is a bit speculative at the moment, as there’s no definitive article making the same claim, but I suspect it sent a lot of AI companies back to the drawing board for scheduling. I say this because currently GPUs are the go to processors for AI applications. In fact, it’s the main driver for Nvidia’s massive growth in recent months. Crypto mining has largely eaten into that growth driver for Nvidia, but AI startups could take months to adjust to this new reality.

What ASICs, specifically crypto mining ASICs, can do for this market is take the pressure off of GPU makers, lowering prices, and stabilizing the market. Problem is, ASICs have been in existence for a while now, and yet, they’ve seemingly had no such impact.

Well, Samsung’s foray into the space could be the game changer. So far, the only crypto mining ASICs have come from China, which helped them gain an early lead in the market. In fact, China’s seeming dominance in Bitcoin mining is a key argument against calling the asset “decentralized”. But no Chinese ASIC manufacturer currently has the capacity to rival Samsung, which could be the key to breaking the Chinese hold on hash processing.

What’s more, this foray into ASIC should accelerate the alleviation of GPU markets, which should help massively with gamers, AI companies, and everyone in between.

Now, whether ASIC chips will replace GPUs in AI applications is one we have to wait and see..

Amazon Health?

Now this story is about a lot more than Amazon. There’s also Berkshire Hathaway, and JPMorgan Chase, as well, but I’m focusing on Amazon for a reason.

See, out of the 3, Amazon is the only one without an insurance company under its helm. In fact, Berkshire Hathaway offers health insurance by way of Geico. And yet, the three companies have come together to disrupt the healthcare industry. Sure, it may be a small effort, reserved for the three companies’ employees and families, but it’s an effort worth taking note of.

Healthcare, specifically health insurance and affiliated costs, have been a point of contention in the US, where a universal healthcare system does not exists for most. Medicare and Medicaid are reserved for very specific demographics of the population, and, even then, each state can impose its own limitations to coverage. This has made it such that the only way for most Americans can get affordable health insurance was to get a job that offered one.  In short, it was a point of differentiation for employers.

If you look in the article, the mission of this new entity (which has full autonomy) is to separate the two, seemingly clashing objectives of quality care and P&L statements. But why would 2 financial giants, with insurance operations, agree to a non-profit making entity?

There’s 2 ways of seeing this. You can see this as a sign that Silicon Valley’s influence has outgrown that of Wall Street. Which is fair. I’m almost certain that Amazon was the one who started talks of this venture. The others are just along for the ride. But this explanation isn’t clean cut. In fact, it doesn’t make sense from a financial  perspective that Berkshire Hathaway in particular is seemingly forgoing profits.

I think it’s better explained by this second theory I have. Perhaps Americans are likening up to the idea of a cheaper, universal healthcare. Perhaps they see that capitalism cannot be applied to all industries. Perhaps they see that they have a huge, gaping flaw in their system, and are seeking to rectify it, at least in their microcosm of three entities. But that’s speculation.

We could see other internet giants follow suit, perhaps creating a non-profit insurance entity that replaces the US government in many instances.

Kaz’s Great Adventure

So, Kaz Hirai, long time face of Sony, for better of for worse, has stepped down as CEO. At the helm will be his second in command, current CFO, Kenichiro Yoshida. This is rather sudden (again, my opinion), considering Sony was just starting to net profits after undergoing heavy restructuring under Kaz’s leadership. To be fair, he’s not gone totally. Kaz will transition to become the new chairman of Sony, which should see him continue to influence key decisions the company makes in the coming years. But it still begs the question, why is he leaving the position at, what seems like, a crucial junction in the company’s history?

Presumably, Kaz sees the company continuing its profitability streak into the near future. That’s the first, major assumption we have to make going into this. In fact, he makes it rather clear, stating that he is “very proud that now, in the third and final year of our current mid-range corporate plan, we are expecting to exceed our financial targets.” He goes on to state that there will be a new 3-year plan for the company, spearheaded by his successor, current CFO Kenichiro Yoshida.

Question is, what makes Kaz so sure that Yoshida can continue the success of Sony?

The key reasoning behind this move is that Yoshida was key in Kaz’s success. He was a confidant and a business partner that Kaz claims “combines a deeply strategic mindset with a relentless determination to achieve defined targets” and that Yoshida “possesses the breadth of experience and perspective, as well as the unwavering leadership qualities required to manage Sony”.

Trouble is, Yoshida returned to Sony in 2013.

Of all fairness, up until 2013, Yoshida was still, very much, affiliated with Sony, just with So-net, an internet venture that Yoshida helped take public during his tenure there. It’s fair to say that Yoshida is highly familiar with the Sony culture, and that his 4 year run as Kaz’s right hand man is proof of that. And I’d say you’re right. Except for a small difference in opinion.

See, Kaz has long been a champion of Sony’s media business in Sony Pictures and Sony Music. In fact, he was consistently looking to integrate the business with its Playstation business to create a comprehensive media juggernaut. Whether or not it succeeded is irrelevant. What is relevant is that Yoshida doesn’t share the same view.

“The top global companies now are all technology companies.”

His words, not mine.

This may seem trivial, especially considering the wide variety of industries that the term “technology companies” entail, but it’s important to note that movies and music are not considered technology companies by any major publication. Except for one — streaming.

What does this mean? Perhaps Sony will leverage its media holdings into its own, comprehensive streaming platform, specifically for its Playstation console. Or, perhaps, it’ll liquidate its media holdings to focus on its tech efforts. If I have to give a bookie’s quote, it’d say the odds are 30% chance the status quo sticks, 50% liquidation, and 20% its own streaming platform.

This might be another great opportunity for private equity firms to snatch up Japanese assets and profit, especially since Sony is home to big movie franchises, and major recording artists. The proceeds of the sale would definitely help Sony double down on its  efforts to secure its lead in the markets it already competes in.

Or, maybe Sony will surprise us as it did in the 90’s.

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