Administration responds with a cyber attack. Iran has a Cyber Strategy of its own, how they are attacking u. S. Banks online. First to our top story, the continued back and forth between beijing and washington has put tech in the crosshairs of the trade war, impacting Companies Like apple, huawei, and many more. A new article details how chinas tech sector is mostly insulated from exposure to the u. S. On many fronts. But there is one area where it is still dependent, semi conductors. Over the last decade, china has seen a surge in chip imports. More than 300 billion now. For more on the ongoing impacts in both countries, we spoke to bloomberg techs ian king. He covers the chip industry and cowrote the affirmation article the aforementioned article and Senior Editor brad stone. Esoteric parts like broadcoms switch chip, more common parts like an intel microprocessor, china really cant replicate those yet. They have been trying for years and it just has not come close. Emily why not . Ian it is difficult. When you are arranging tens of billions of transistors on something the size of a postage stamp, you have to kind of know what you are doing. Making them just costs so much money. They have just never been able to develop that skill set. Emily which companies in particular in china are the most vulnerable . Ian it is the biggest pc market. It is also home to some of the largest pc makers like lenovo. They need these products. Huawei, it goes without saying. You cut them off, they wouldnt be able to make their core routers. They need memory chips, all kinds of things. Things that we dont know about but that are absolutely essential. Emily brad, you have a piece out about how u. S. Tech giants, even though they may be complaining about the trade war, are in the best position to weather it. Big Companies Like apple, they have the cash and negotiating power. Apple supplier foxconn has already talked about moving production to other companies in southeast asia. India, malaysia, thailand, taiwan. Of course, the Trump Administration would like to see it here in the u. S. That is unlikely to happen. But i do think they are worried we saw a bunch of letters go to the u. S. Trade representative last week. Apple sent a letter saying these tariffs are going to hit, iphones, macbooks, air, air pods. They are saying it is going to hurt apples global competitiveness. Emily this was right after a meeting between tim cook and president trump. As you mentioned, they do have the negotiating power and we dont know if that will pay off. Brad it has worked in the past. Some of these product categories were on previous lists of tariffs as early as last year. They got off the list at the last second. I think the Tech Companies are hoping for that kind of reprieve. We will see what happens at the g20. Emily meantime, huawei, they are dependent on u. S. Chips somewhat. They do also make two thirds of their own chips, right . For smartphones. The key component of the smartphone is the nickel processor. They have been arguably the most Successful Company outside of apple for weaning themselves off qualcomms technology, so they can supply themselves in that particular market very strongly. Emily there is a line in your article have they no compassion at all . [laughter] brad they are coming for our drones. Emily how would you break apple versus amazon, for example . Amazon is shutting down its entire china marketplace next month. Brad you would think amazon might not be that exposed. They have a huge business there. Our colleagues have a great story out today. These companies have no negotiating power, they are one or two people shops, they sell everything on the amazon marketplace. Really it is the uncertain that is impacting them. They have no idea what is going to happen. They have to get their holiday orders in now. It is not that easy to look for another factory in india. Emily so what is their plan b . Crad brad i think their plan b is to cut orders and raise prices. That will have an interesting impact on amazons holiday quarter. If selection is going down, prices are going down, it is another way the u. S. Consumer is going to be hurt by the trade war. Emily if prices rise, how does that ripple back and impact china . China also depends on a lot of these companies in china. Ian apple is an example of that. Yes, we by not need that many iphones, but so many people are employed directly as a result of the manufacturing chain. That cannot help but impact the economy. You have all these relatively high paid jobs, tax revenue, if that starts to go away, that fundamentally undermines the chinese economy. Emily what is their plan b . What we try to show in the story to an extent is that a lot of people dont recognize just how powerful they are. When sanctions have been used in the past against countries like korea or japan, they are relatively small domestic economies. We use this statistic all the time. China mobile has more subscribers than the u. S. Has people. There are people who have never looked at Google Search because they never needed to. There are people who are not using apps supplied in the u. S. Because there is enough in the market on its own terms. Emily we dont know if the tariffs will go into effect at all. We are still waiting for the meeting to happen. But you wonder, even if these new tariffs did not go into effect, if the uncertainty has been so intense for this company that they are already moving to plan b and start making arrangements for the future . Brad what we have heard from our own reporting and that of others suggests that big Companies Like apple are looking at other sources of manufacturing outside china. It makes a lot of sense. The one thing i would say is that if you look at the market lately, i get the sense that maybe the market thinks there will be a resolution to this. Otherwise, we would see a lot more volatility in the stock prices than we have seen. Emily are your sources optimistic or scared . Ian it depends whether you are talking about the market or the companies. If you talk to executives, the companies are not keen to go on the record about this topic, but they are saying look, this is the wrong way to go about things. We have so much to lose here. We want a resolute a resolution. Emily bloombergs brad stone and ian king. Coming up, the competitive video streaming market is getting another player. Why this mobileonly platform will stand out from the rest. And if you like bloomberg news, check us out on the radio and on the Bloomberg App and in the u. S. On sirius xm. This is bloomberg. Emily former hp and ebay Ceo Meg Whitman has taken her expertise to hollywood as the ceo of quibi. A new short form video platform startup. Founded by jeffrey katzenberg, it will be mobile only Subscription Service in april next year. Promising hbo quality episodes under 10 minutes. The company has already raised 1 billion from alibaba and major studios like disney, sony, lions gate and more and they plan to raise another halfmillion soon. We spoke at a tech conference on thursday. First was to explain what we are doing and attract talent. It was, we dont know what it is. We dont know how it will work. It was harder to attract talent. Now we have our own space, it is more accepted and understood. The second was we have done things differently from hollywood in terms of the deals and how long we have to make content. It is a different cadence so we have been able to get that done. It was harder. Emily people said 2020, it is like a lifetime from now. Yes, but in hollywood but when you have to make all of this content, remember we are the first ott streaming service where you dont buy a library. You cant take an hour show and chop it into six 10 minute segments. It has to be written and shot for mobile in this format. Emily because of that, you can you in the past have told me that disney and netflix are not really competition. You are trying to do some a Something Different but you are fighting for mind share whether it is them, youtube, instagram, snapchat. You think the tumult that social media is facing right now, is it good for you . Viewers will want to turn away . I dont know about that. We are creating an app that will give you alternatives in those in between moments, commute, waiting for coffee, in a doctors office. What we want to do is give you something that is fantastic in that 10 minute time slot. Our target audience 25 to 35yearolds spends five hours a day on the phone and the average session length is 6. 5 minutes. We have an opportunity to give them alternatives. Emily what about kids content . Youtube, for example, has been under the gun, criticized, exposing children to horrible things. What are they doing wrong . We are not doing any kids, kids are not going to really be on quibi. This is 18 and up and we are going to make it clear this is an adult app. Maybe over time when we do something later, but right now it is adult, 1844 with the target of millennials. Emily in general, you have to think about how healthy your content is. Who the audience is. Do you think youtube is making mistakes . Listen, it is hard to argue with youtubes success, the most democratized platform in the world. We would not be here without youtube. They are doing the best job they can in enormous uploading of video. I remember with ebay, listings were 100,000 a second. We have to have all kinds of things. I am certain they are taking toponsibility and try try make it great. Emily you raised 1 billion. There were reports for another 1 billion, maybe closer to half a billion. How far along are you and those conversations . We have not started yet. We think we will probably go raise in the fall, early part of next year but 500 million we dont need it before we launch but i do think it is wise when you can raise money and the markets are good to do that. Ultimately, we will need that money to break even. We will start in the fall and look for an anchor investor to price this around. A lot of listing investors will want to keep their share. Emily have you sensed any uncertainty or discomfort given the trade war and what is happening . Not so much for the investors in quibi but the Business Community in general is somewhat unsettled. You can see it reflected and the in the stock market and bond deals, there is no question there is an unsettled element around the world today. What Business Leaders like like more than anything else or that is predictability and certainty. That is not our world today. Emily if you were ceo of hp today, how worried would you be . I would be worried about a trade war with china. These companies that make things, much of the supply chain is in china. That quarter of trade is incredibly important and the ability to be competitive selling to other countries depends on being able to manufacture in lowcost locations. Emily how vulnerable you think these companies are right now . Tech companies adapt and you can see people trying to figure out what they will do in terms of a trade war. Everyone adapts and it is easier if there is more predictability. I can tell you that. Emily you have got a lot of chinese investors, partnerships with folks in china. Do you have any concern that it could affect you should things continue to go south . Our joint venture partner is alibaba. They are an investor in the platform. We have a great relationship. We dont think that will affect us. Remember, a company like ours cannot go to china without a china partner. Alibaba is one of the best we can be with. We are not worried about that at the moment but we will see what happens. You never know how this could escalate but we got a lot of confidence. Emily traditional Tech Companies have struggled to break in to china. Facebook, google ebay, as you know well. Do you think entertainment could be a new way in for u. S. Business and industry . American entertainment exists in china today. There are quotas on how much foreign content can be imported and there is censorship, but there is no question. I think the chinese Entertainment Industry is coming of age and growing. And i think there will be more opportunity for worldwide content into china over time. Maybe not in the next couple of years, but listen. The China Economy is growing, there is a middleclass emerging in a major way and they like entertainment. Emily that was quibi Ceo Meg Whitman. Coming up, facebook is building its own socalled Supreme Court for content moderation. But will that solve all its problems . We discuss the plan next. And a reminder, the boston pops fireworks spectacular is the countrys largest and oldest fourth of july event. Here is a taste of what to expect. [bombastic orchestral music] best day of the year 3,2, [music crescendos] [applause] emily do not miss the boston pops fireworks spectacular, only on bloomberg television. Emily facebook is looking to create a new content oversight board. The social media giant is hosting a series of simulations across the globe as they plan an independent board to review controversial content moderation decisions. The board will provide final rulings on posts. This, as their control of Global Speech has been criticized. Zuckerberg has mentioned the idea for independent appeals process almost like a Supreme Court. We spoke about how it would operate. They want to be independent but we dont know exactly who will be picked for this court, how big it will be, they say it will be around 40 people and then they break up into small groups of 35 to review individual cases. But how do you pick a group of 40 people that accurately reflects a 2. 4 billion Person Community . That is one of the biggest challenges. Emily how do you do that if facebook is doing the picking . It is going to be very hard, and obviously, facebook is paying for this board so independence will be the question. That is inevitable in the situation. The point that kurt made is a good one, that facebook is now a global platform. They have many users in places like india, indonesia, other places that have different values than facebook in the United States that was founded largely by american executives. The question is will the board draw from people from those countries that are now basically facebooks future . Emily so, kurt, talk to us about these simulations that facebook is conducting. A controversial decision comes to this group of people and then they debate. Correct. I actually sat in on one that was at facebooks headquarters in california. It was interesting, about 30 employees. They presented them with a post that was controversial. Someone had listed 70 different academics and accused them without proof of being sexual harassers. They left the list up and said to add more names to the list if you know someone else who is a sexual harasser. Obviously, that is a dramatic and severe claim to make. Facebook wanted its employees to discuss, is this the kind of post that should be left up or taken down . It was two hours long and they went through all of the different questions. And what theyre trying to do is to get at how do people think about this stuff, what kind of questions do they ask so that when the real board has to make decisions like this, they are prepared. Emily so much of these decisions are cultural. Who are these people . Are these all englishspeaking people . How will they understand the nuances of the situation with the rohingya in myanmar . Yeah, i think that will be really difficult. And what facebook has said as they talked about this out loud, and to their credit, they have sought input on this oversight board. What they have said is that this board would kind of tap outside experts. So if they are dealing with an issue that is culturally specific to germany or india, that they would seek experts in those areas. But lets not gloss over the fact that the vast majority of content decisions, judgment calls about what is ok to leave up on facebook, are made by this kind of lowwage contract workforce. Not by this kind of high gloss Supreme Court type authority. Emily and there has been more reporting on this from the verge recently about the often horrifying situations that these content moderators have to go through day in and day out. Does that jive with your reporting . Yeah, yeah, it is a really terrible job. Think about policing the internet from the most violent and graphic stuff and seeing that consistently. All day, every day, that is what these folks do. This board, to be clear, would not replace that job. What this board would do is say, hey, this is a decision our moderators made, lets review it and see if we agree with it now that we have a little more time to look at the fact or discuss it amongst the group. What they do is speak, something pops up, they have to watch it right away. Does it violate the policy, yes or no, and make a decision. Emily theres a question of whether facebook should be doing this at all. Facebook has made the argument that perhaps this should be a government decision. Nick clegg, their new chief of policy, spoke to the bbc and said i dont think it is in any way conceivable and i dont think it is right for private companies to set the rules of the road for something as profound as how tech serves society. You wonder, would they be better off having governments make these decisions . Is that even plausible now . It doesnt really feel plausible, does it . I understand the position facebook is in. They created this platform, these platforms where many billions of people congregate every day. It turns out that facebook is a reflection amplification of the best and worst in humanity. And now that the genie is out of the bottle, they want to basically turn over a little bit of responsibility. I think what facebook wants in this engineering mindset is to give us a formulaic solution. If x and y happen, we do z. I dont think we will ever be in a position where that is feasible, given that the internet reflects people and people cant be reduced to formulas. Emily so, kurt, how comfortable is facebook and facebook insiders with this formula . Proposed formula. I think they are very comfortable, they want this. Mark zuckerberg does not want to be the one at the top of this foodchain saying, this is taken down, this stays up, ultimately that is my call. I dont think he wants that responsibility, actually, we know he doesnt because he has said so repeatedly. I think they see this as a very clean op