The World’s Biggest Crypto Firm Is Melting Down

After FTX crashed, the world of crypto seemed to belong to the largest exchange, Binance. Less than a year later, Binance is the one in distress.

Under threat of enforcement actions by U.S. agencies, Binance’s empire is quaking. Over the past three months, more than a dozen senior executives have left, and the exchange has laid off at least 1,500 employees this year to cut costs and prepare for a decline in business. And while Binance still looms large in crypto, its dominance is dwindling.

Binance now handles about half of all trades where cryptocurrencies are directly bought and sold, down from about 70% at the start of the year, according to data provider Kaiko.

What happens to Binance will have immense implications for the crypto industry because the exchange is so big. Industry players and watchers say other exchanges would fill the void if Binance were to collapse. But in the short term, liquidity in the market could evaporate, driving the price of tokens sharply down.

One institutional trader told The Wall Street Journal that his company has conducted fire drills to withdraw its assets from Binance quickly in the event of a meltdown.

Yi He, Binance’s co-founder and chief marketing officer, vowed to overcome the troubles in a message to Binance staff last month.

“Every battle is a do-or-die situation, and the only thing that can defeat us is ourselves,” she wrote in the message viewed by the Journal. “We have won countless times, and we need to win this time as well.”

Binance is a frequent investor in third-party crypto projects and beyond. Binance has invested in X, formerly known as Twitter. Binance co-founder Changpeng Zhao—or CZ as his 8.6 million X followers know him—is the biggest face of crypto.

“You just can’t quantify what would happen to the industry if Binance disappeared, given it has been responsible for fostering a huge amount of innovation and growth,” said Anthony Georgiades, a general partner at Innovating Capital, a fund that invests in early-growth companies.

The U.S. Justice Department has undergone a years long investigation that could result in criminal charges for Binance and Zhao as well as billions of dollars of fines, according to people familiar with the probe.

Binance also faces a Securities and Exchange Commission lawsuit that alleges it and Zhao operated illegally in the U.S. and misused customers’ funds. The firm has acknowledged past mistakes but says customer money is safe and it is committed to compliance.

“We have worked tirelessly not just to learn the lessons of the past, but also to continue to invest in the teams and systems that ensure user protection,” a spokesman said.

Binance launched in China in 2017, though it claims to be based nowhere, with staff scattered around the world. Its global website is accessible by traders almost everywhere, but that number is falling as its presence has been forbidden in many countries. In Europe, more countries are shutting their doors to the exchange.

In the U.S., activity at its local exchange, Binance.US, has basically dissipated. Its chief executive officer, legal chief and risk head all left recently.

In a virtual Binance.US meeting days before his departure earlier this month, Binance.US CEO Brian Shroder said revenue at the exchange had fallen 70% year to date, according to a presentation viewed by the Journal. Executives looked on with dismay.

Shroder told employees Zhao would need to resolve “his regulatory matters, put his .US holdings in a blind trust, or sell his shares” in order for the U.S. platform to maintain its growth initiative. Those steps would allow the company to unblock banking relationships and get licenses, he said. Zhao is the majority owner of Binance.US and the global exchange.

A spokeswoman for Binance.US declined to comment.

Binance and the DOJ have been talking for months, according to people familiar with the discussions, and inside Binance, there have been discussions on whether Zhao should step down.

Zhao’s insistence in remaining at the helm of the company has frustrated some executives who believed him leaving would improve the chances of the company surviving, the Journal previously reported.

The company upheaval has also hurt employee morale.

Employees confronted Zhao in a summer meeting following layoffs, according to messages viewed by the Journal, in a rare showing of criticism.

“Some ppl laid off were given 0 days notice and/or found out they got laid off because they couldn’t login to the system anymore. How is that treating them respectfully? Is 2 weeks severance respectful?” one anonymous employee asked Zhao in the all-hands meeting chat. Nine others upvoted that. The question went unanswered.

A further stumbling block for Binance came in late August, when the Journal published an article on Binance customers’ use of sanctioned Russian banks. The DOJ has also been investigating Binance in connection with possible violations of U.S. sanctions on Russia, the Journal has reported.

Following the Journal story, the Justice Department questioned Binance about the banks’ usage, and Binance’s chief compliance officer, Noah Perlman, met with department officials to discuss their concerns, a person with direct knowledge of the matter said.

Pressure from the DOJ was partly responsible for Zhao’s decision to begin winding down Binance’s business in Russia, once one of its most important markets, the person said. Over the following two weeks, Binance barred customers from using the sanctioned banks and forced out the executives managing its Russia business. It said it was considering a full withdrawal from Russia.

Zhao publicly remained defiant. “We are one community,” he wrote on X on the day the Russia executives left. “Keep building!”

But behind closed doors, Zhao has been bringing new lawyers to handle the DOJ case, according to people familiar with the move. And Zhao has been staying put in his home in the United Arab Emirates, which doesn’t have a mutual extradition treaty with the U.S.

Meet the Dark Knight—a Brooding, Souped-up Tesla Model S

The US$104,990 three-motor 2023 Tesla Model S Plaid Edition is among the fastest cars in the world, able to reach 60 miles per hour in just two seconds. It puts out 1,020 horsepower and 1,050 pound-feet of torque.

The Plaid is so quick it leaves its drivers gasping for breath, but can the car be improved? Unplugged Performance, a tuning shop in Hawthorne, Calif., that launched in 2013, thinks it can. So was born the Dark Knight, a tweaked Model S-APEX Plaid that has been extensively reworked to better hug the pavement. It sells for approximately US$230,000, including the donor car. But the many options could make it costlier.

The powertrain stays the same, but the car gets a 19-piece carbon fibre wide body kit that allows it to wear big 21-inch, lightweight forged wheels. Airflow is improved with “bargeboard” bodywork in front of the front wheels, a technique adapted from Formula One. Also directing air is the company’s Autobahn front carbon-fibre diffuser. The car meets the world with a sinister satin-black finish, featuring more exposed carbon fibre.

The car’s centre of gravity is lowered via a kit, and there’s a three-way adjustable rear sway bar and a rear-mounted GT strut tower brace. Also part of the suspension build are a series of billet-aluminium adjustable control arms that cut weight, increase strength, and allow some fine adjustments. For those choosing optimum track performance, there are full-race coilover suspension choices available. The Dark Knight needs to stop, so there are carbon ceramic brakes all around, cooled via a ducting system.

The interior was designed in collaboration with von Holzhausen, a company created by Vicki von Holzhausen (married to Tesla chief designer Franz von Holzhausen) that specialises in vegan leather products, including handbags. The tough-wearing interior fabric is in Serrano red and made from bamboo.

The Dark Knight interior uses vegan leather from von Holzhausen.
Unplugged Performance

Unplugged also makes over the other Teslas, including the S, 3, X, Y, and will also tweak the forthcoming Cybertruck. Brendan Sangerman, who directs marketing at Unplugged, says the Dark Knight is “the ultimate daily driver sports sedan.” Asked why the electric motors are left alone, he says, “You wouldn’t want it to be any faster than it is. Instead, we match the performance of the suspension and braking to the level of performance that the car already has.”

Sangerman emphasises that the Dark Knight is a bespoke product, and that the customer has a wide choice in the interior colours and fabrics. “We want customers to be very hands-on in the process,” he said. “If you tell us you like the interior shade in a specific Rolls-Royce, we can match it. Our parts catalog is pretty extensive.”

Unplugged is located close to the Tesla Design Center in Hawthorne. Its first Model S build was shown at the SEMA Show in Las Vegas in 2014, and the company exhibited at the Tokyo Auto Salon in 2016. Unplugged began putting its vehicles to the test on race tracks, and it set some EV records. It also won the exhibition class at the Pikes Peak International Hill Climb in 2021.

There will always be a market for performance tuners, and Unplugged has found a niche market in making some of the world’s most exciting EVs be just that little bit more intoxicating.

American Express Travel President Talks About the Post-Pandemic Vacation Boom

Audrey Hendley, as the president of American Express Travel, is attuned to how trips have evolved in recent years and what vacationers are seeking on those getaways.

The organisation is one of the largest travel and lifestyle networks in the world and spans 7,000 travel consultants in 23 countries. Its global footprint includes 1,400 lounges in 140 countries and more than 1,500 properties in its collection of Fine Hotels + Resorts.

Business at American Express Travel is bouncing back from the pandemic slump: In the second quarter of this year, bookings through the network across 138 million American Express cards that are currently in use reached pre-Covid levels.

Hendley, who lives in Westchester, New York, speaks to Penta about the most in-demand travel destinations, the new movement of traveling with a purpose, and her top advice for maximising any trip.

Penta: What are some travel trends you’re seeing this year?

Audrey Hendley: We have seen a notable shift in people’s interests driving travel decisions. Travellers are booking “set-jetting” trips that are inspired by shows like The White Lotus and Emily in Paris because they are increasingly inspired by pop culture.

Food also continues to impact booking decisions, with people building entire trips around reservations at incredible restaurants like Noma in Copenhagen or blocking off afternoons to do a taco tour in Mexico City. Travel has become less about the “where” and more about the “why.”

Which destinations are the most popular and what’s up and coming?

We put out a Trending Destinations list every year that highlights the places our card members are traveling to; 2023 is a mix of perennial favorites like Paris and the Florida Key, and some lesser-known destinations like Woodstock, Vermont, and Montenegro. While people are still revisiting the cities they love, we are also seeing an increase in trips to places that are off the beaten path. And as borders have opened post-pandemic, we’re seeing more trips being booked to places like Asia and Australia.

How do you think the rising cost of travel will impact decisions in 2023?

Our 2023 Global Travel Trends Report found that 80% of travellers would rather take a dream vacation than purchase a new luxury item. Our values have fundamentally shifted since the pandemic, and now, people want meaning in everything they do—travel included. They’re more purposeful.

Pre-pandemic, travel was about checking off a list of destinations you wanted to see. Now, it’s about really exploring and seeing a place in depth. Travellers will go to fewer places but see more where they do go. And they’re willing to spend on experiences and memories—what better way to create those things than travel?

How are younger generations shepherding the travel trends that we are seeing today?

As they continue to gain independence and financial freedom, millennial and Gen Z travelers are putting their stamp on modern travel trends. They want experiences, especially ones that look good in photos on social media. We are also seeing that they are extremely conscious of the impact their trips have on the environment and the communities they visit. They are pushing the industry to be more purposeful—they want hotels that prioritise sustainability, support local economies by employing locals, and value inclusion and diversity.

Can you speak to the hallmark of a great hotel and a great hotel stay?

It’s a property that knows you when you’re there. The staff addresses you by name and makes you feel at home. They offer exceptional service, a luxury that’s relaxed and infuses your stay with personal touches. I was in Paris on a recent work trip, for example, and stayed at the Maison Delano, one of the newest properties in the city. I walked into my room and found a charger that worked in France waiting for me as a welcome gift. It was such a simple gesture but meant so much on a work trip.

The Centurion Lounge Network has been regarded as one of the most luxurious airport lounge experiences. What sets it apart from other airport lounges?

I think it’s the quality of the product. We try to offer elevated food and local flavors. The lounge at San Francisco Airport, for example, features wines from nearby Napa Valley, and in Seattle, home to a big coffee culture, we have a coffee and espresso bar. With cuisine, we try to use chefs from that location to create menus, and they’re all different by location. We also try to use as many local producers as possible.

In addition, we offer high-touch services like chair massages and manicures in some lounges.

As a globetrotter yourself, what are some of your best travel tips?

I like to travel like a local, especially to touristy destinations. I always look for the small shops and restaurants that give me the true flavour of a destination rather than the big names where all the tourists go.

I also enjoy visiting popular destinations during the so-called off-peak season. I was in Venice [Italy] in February where the weather was glorious, and there weren’t nearly as many crowds as there are during the summer.

On business trips, I love carving out some personal time to balance the intensity of long workdays. I also start the day with some form of exercise whether it’s a run or jog—this also gives me an opportunity to see the destination.

This interview has been edited for length and clarity.

How Research in Space Helps Doctors Treat People on Earth

Medical research in space is leading to advances that could help patients on Earth.

Several technologies developed for space exploration have afterward contributed to medical products. Infrared thermometers, for example, stem from infrared sensors created to remotely measure the temperature of distant stars and planets.

But increasingly, scientists aim to perform research in space specifically for human health. Interest in conducting medical research in space has grown as researchers recognise possibilities enabled by microgravity, in which objects appear to be weightless, aboard the International Space Station, or ISS, which orbits the Earth about 250 miles from its surface.

Removing gravity’s influence alters biological systems, enabling experiments that can’t be done on the ground. Researchers are sending materials into space to study treatments for cancer, heart disease, neurological disorders, blindness and other conditions.

Such investigations extend beyond civilian medicine. With preparations under way for long-term missions to the moon, and eventually to Mars, scientists are advancing technologies to help astronauts endure extended space travel and confront illnesses and medical emergencies.

Justifying the expense

Several factors complicate space-based research. The cost of transporting materials, for one, as well as preparations needed to convert experiments conducted on Earth into ones that can be run on the ISS, which is itself a complicated partnership of five space agencies from 15 countries. The station has been occupied continuously since November 2000.

Space studies’ potential to discover cures and create tools that make healthcare more accessible justify the expense and complexity, some scientists say.

“Everything we do onboard has potential applications for healthcare on Earth,” says Dr. Dave Williams, who conducted neuroscience research on space shuttle Columbia, and is now chief executive of Leap Biosystems, a developer of medical devices for virtual clinical care in space and on Earth.

Space travel itself, for example, is known to cause bone and muscle loss, immune suppression, central nervous system changes and other effects. Detrimental as these effects are, they are of particular interest to scientists.

For the most part, health concerns astronauts develop in space resolve when they return, says Dr. Christopher Austin, former director of the National Center for Advancing Translational Sciences and now CEO of biotechnology startup Vesalius Therapeutics. Studying how this reversal occurs could provide insight on turning back the clock on disorders of ageing on Earth, he adds.

Exposure to microgravity seems to replicate the effects of aging at the cellular level, says Michael Roberts, chief scientific officer of the U.S. National Laboratory on the ISS. As a result, investigators in months can glean insights from studies that might require years of research on Earth.

“What happens in space is akin to accelerated ageing,” says Arun Sharma, assistant professor at the Board of Governors Regenerative Medicine Institute at Cedars-Sinai Medical Center, who says his experience with space research includes sending stem-cell-derived heart cells to the ISS. “We can study these aging processes in a faster way in microgravity.”

Anticancer drug

Meantime, companies including drugmaker Merck and biotechnology concerns Axonis Therapeutics and LambdaVision aim to capitalise on microgravity to improve existing treatments or optimize experimental ones.

Merck has been conducting experiments aboard the ISS to determine whether it can come up with a crystalline form of an anticancer drug in its portfolio, Keytruda. The drug, which treats several cancers, generated $20.9 billion in sales in 2022. Patients receive it in 30-minute intravenous infusions. Its active ingredient, pembrolizumab, a large molecule known as a monoclonal antibody, isn’t highly soluble, so developing a high-concentration liquid formulation that can be given through a simple injection is difficult, says Paul Reichert, a Merck Research Laboratories scientist.

One solution is to produce it in crystallised form, a routine process for small-molecule drugs taken as pills. But making an optimal crystalline suspension is challenging for large-molecule, antibody drugs, Reichert says.

So Merck decided to attempt it in space. In 2017 it sent pembrolizumab to the ISS to see whether crystals would form better in space. Without gravity, molecules move more slowly and forces including convection currents are limited. Crystals produced on the ISS were smaller and more uniform than Earth counterparts, Reichert says.

On the ground, Merck identified techniques to mimic these effects and enable high-quality crystals. Now it is conducting long-term stability research to enable a Keytruda formulation that is injectable and, unlike today’s version, stable at room temperature. That would make it more accessible in areas with limited refrigeration.

Such studies will take years, but could lead to a lower-cost version of Keytruda that is easier to administer and cheaper to transport, Reichert says.

“That would be a game-changer for biologics drug delivery,” he adds.

Surprising results

Sometimes space research yields surprising results.

Biotech startup Angiex sought to better understand how an experimental cancer drug interacted with normal cells lining blood vessels, known as endothelial cells, says Paul Jaminet, co-founder, president and chief operating officer. The problem was these cells, when cultured on Earth, typically die quickly unless they are cultured with growth factors and changed to a proliferative state similar to that of endothelial cells in tumours. As a result, there is no good cell-culture model for the normal endothelial cells in which Angiex’s drugs are expected to have their toxicity, he says.

Angiex’s team hypothesised that culturing them in microgravity would be a solution, sending endothelial cells to the ISS in 2018. The cells did grow in space, but as they adapted to microgravity, they took on unusual characteristics that may not have a counterpart on Earth, Jaminet says.

The findings may advance understanding of how microgravity affects astronauts, he says. “In science, unexpected results are very precious,” he adds.

But since it appears the cells cultured in microgravity don’t resemble normal endothelial cells, and acquired a novel pathological state not previously seen, it isn’t yet clear if these cells are useful for drug-development purposes. Further work, he says, will be needed to understand this novel state and see if it is useful for understanding diseases on Earth.

“When you put cells into a completely new system, you’re going to get intended results and unintended results,” says Dr. Serena Auñón-Chancellor, an astronaut who worked on the Angiex research on the ISS, and a clinical associate professor of medicine for the LSU Health Sciences Center in Baton Rouge.

Axonis in August had good luck with a project to coax two kinds of human brain cells, neurons and astrocytes, to unite into a three-dimensional model of the brain in microgravity. It used the model to test a gene therapy designed to restore neural connections damaged by neurodegenerative diseases or spinal-cord injury.

The experiment provided evidence that Axonis’s gene therapy travels to its intended target, neurons, and avoids astrocytes, says co-founder and Chief Scientific Officer Shane Hegarty. In labs on Earth, neurons and astrocytes would form a carpet-like, two-dimensional layer. This doesn’t fully represent the brain’s complexity and is less useful for advancing the gene therapy, Hegarty adds.

The implications of this research are that scientists could use patients’ own cells to create models of their disease in space to speed their search for treatments, he says.

“For any drug-development effort, you need a good model first,” Hegarty says.

Restoring sight

One long-term research program on the ISS is LambdaVision’s effort to restore vision to people blinded by diseases of the retina, the light-sensitive tissue at the back of the eye.

LambdaVision has flown eight payloads to the ISS since 2016, says Chief Scientific Officer Jordan Greco, adding that the company has found that its artificial retina seems to come together better in microgravity.

Microgravity enables more ordered and even packing of protein molecules onto the scaffold, CEO Nicole Wagner says. If its artificial retina, expected to enter clinical trials in about three years, earns regulatory approval, LambdaVision will manufacture it on the ISS or a commercial space station, she says.

Considering the demand for vision-restoration therapy, reimbursement from insurers should be sufficient to justify this expense, Wagner says. “With artificial retinas, there’s a clear unmet need,” she says.

To convert its lab process into one viable for the ISS, LambdaVision teamed with space-biotech company Space Tango to condense the process into a device that looks like a metal shoebox. The automated system contains proteins, polymers and solutions to assemble the artificial retina layers, and cameras that let researchers monitor and control the process from the ground, Wagner says.

Also using Space Tango is Encapsulate, a biotech with grant funding to launch into space biochips containing micro tumours made from patient cancer cells. The chips could predict an individual’s response to drugs, helping oncologists tailor treatment, Encapsulate co-founder and CEO Armin Rad says.

When adapting scientists’ projects for space “we have to take the human out of it and stuff it all into a box,” Space Tango Chief Strategy Officer Alain Berinstain says. Biotechs also express interest in the automated system for ground use, which was unexpected, he says. “It’s turned into a new business opportunity for us,” he adds.

The National Aeronautics and Space Administration plans a crewed mission to the lunar surface in 2025 and eventually a mission to Mars. Astronauts will require medications for the trip, and they can’t pack every drug they might need, says Phil Williams, a professor of biophysics in the School of Pharmacy at the University of Nottingham.

Medications degrade faster in space because of high radiation levels, says Williams, who is working with NASA researcher Lynn Rothschild on an astropharmacy, a briefcase-like system enabling astronauts to produce medications on demand.

In one version under study, cellular machinery that certain microbes use to make proteins would be combined with genetic sequences that code for specific biological medicines, Williams says. This could be paired with a production system to express the therapeutic protein and DNA-synthesis technology, he adds.

The notion of an astropharmacy extends to other extreme environments. If the technology proves effective in space it could also be used in hard-to-reach locations on Earth, he says.

“If we can make the drug for the astronaut, then we can make it for anybody,” Williams says.

America’s Billionaires Love Japanese Stocks. Why Don’t the Japanese?

TOKYO—Japan’s government is on a mission to make buying stocks hot again.

Many of America’s biggest investors are bullish on Japan. Warren Buffett shared that he increased his investments in Japanese companies during an April visit to the country. Ken Griffin is preparing to reopen an office in Tokyo for his hedge fund, Citadel, and investment banks Goldman Sachs and Morgan Stanley have issued optimistic outlooks for Japan’s stock market.

Japan’s problem is this: There are few signs its estimated 125 million residents share in the excitement.

Burned by dismal returns since the bursting of Japan’s asset bubble in the late 1980s and early 1990s, generations of families here have stashed most of their money in low-yielding savings accounts rather than trying to increase their wealth through the stock market.

Japanese households put an average of just 11% of their savings into stocks and 54% in cash and bank deposits, according to Bank of Japan data released last month. That trails well behind the U.S., where households have about 39% of their money tied up in the market and only 13% in cash and bank deposits, according to Federal Reserve data.

Haruyo Arai, a 62-year-old office worker, began investing in the stock market just last month.

“I was brought up by parents who would say, ‘Don’t dabble in stocks,’ ” she said.

Japanese Prime Minister Fumio Kishida has pledged to double households’ asset incomes, in part by encouraging people to invest in risky assets like stocks. The government is raising caps for Japan’s tax-exempt investment system for small investors, the Nippon Individual Savings Account, with changes set to take effect in January. The Tokyo Stock Exchange has been urging companies to boost their valuations and increase shareholder returns.

Arai cited the upcoming expansion to NISA, along with a desire to save more money for the future, as some of the reasons she decided to begin taking investing more seriously. She has been taking weekend classes at Tokyo-based Financial Academy to learn more about stocks and waking up early every morning to watch a TV news program focused on the economy.

Some believe investors like Arai will prove to be the exception, not the rule. Stocks here haven’t hit a record in decades. There isn’t much buzz among ordinary people about investing in Japanese markets.

“I’ve got the impression that Japanese people don’t really think positively about the desire to make money,” said Takashi Kawaguchi, a 48-year-old office worker who, like Arai, has been learning about investing at Financial Academy.

While the 2023 rally has helped lift Japanese stock indexes to 33-year highs, long-term returns pale in comparison to what an investor would have gotten by investing in U.S. stocks. The Nikkei closed at 32,402 on Friday, still 17% below its record hit in 1989. The S&P 500 has grown more than twelvefold over that time. That has made many investors here turn to foreign markets instead of focusing their bets within Japan.

“The Nikkei might hit 40,000, god knows when,” said Heihachiro “Hutch” Okamoto, foreign equity consultant at retail brokerage Monex. “But most of our investors prefer U.S. stocks.”

To Okamoto’s point, the most popular names traded on Monex daily aren’t Japanese stock indexes like the Topix or Nikkei, brand-name companies like Sony or even the “sogo shosha”—the trading houses that Buffett has invested in. Instead, they are all American names: companies like Nvidia, Tesla, Apple and Amazon.com, as well as funds tracking the S&P 500 and the Nasdaq-100.

And that is just among those interested in investing in the first place. While in past years, everyday investors in Japan made a name for themselves with their forays into the foreign exchange market, the overall trading culture here has been one of hesitation.

“Most people here think investing is very risky,” said Hidekazu Ishida, a special adviser at FinCity.Tokyo, which works with the government and the financial industry to try to boost investment in Tokyo. Being into finance comes off as “kakkowarui,” he added, referencing a word for uncool.

Even some heads of companies are lukewarm about the idea of encouraging more individual investors to buy Japanese stocks.

“I’m neutral about that,” said Takeshi Niinami, chief executive officer of whisky and beverage giant Suntory, when asked if he thought it would be a good idea for more Japanese people to invest in the market. Stock investing is risky, he said. And many Japanese people remain wary of participating in the market, because of the severity of prior downturns.

“I think perhaps increasing interest rates is better for people,” he said.

—Chieko Tsuneoka and Alastair Gale contributed to this article

Inside Apple’s Spectacular Failure to Build a Key Part for Its New iPhones

The new iPhone models unveiled last week are missing a proprietary silicon chip that Apple had spent several years and billions of dollars trying to develop in time for the rollout.

The 2018 marching orders from Apple Chief Executive Tim Cook to design and build a modem chip—a part that connects iPhones to wireless carriers—led to the hiring of thousands of engineers. The goal was to sever Apple’s grudging dependence on Qualcomm, a longtime chip supplier that dominates the modem market.

The obstacles to finishing the chip were largely of Apple’s own making, according to former company engineers and executives familiar with the project.

Apple had planned to have its modem chip ready to use in the new iPhone models. But tests late last year found the chip was too slow and prone to overheating. Its circuit board was so big it would take up half an iPhone, making it unusable.

Investors had counted on Apple saving money with an in-house chip to help compensate for weak demand in the larger smartphone market. Apple—which hasn’t publicly acknowledged its modem project, much less its shortcomings—is estimated to have paid more than $7.2 billion to Qualcomm last year for the chips.

Engineering teams working on Apple’s modem chip have been slowed by technical challenges, poor communication and managers split over the wisdom of trying to design the chips rather than buy them, these people said. Teams were siloed in separate groups across the U.S. and abroad without a global leader. Some managers discouraged the airing of bad news from engineers about delays or setbacks, leading to unrealistic goals and blown deadlines.

“Just because Apple builds the best silicon on the planet, it’s ridiculous to think that they could also build a modem,” said former Apple wireless director Jaydeep Ranade, who left the company in 2018, the year the project began.

There were two reasons for the push, said former Apple executives and engineers familiar with the matter: Apple believed it could replicate the success of the microprocessor chips it designed for iPhones. Adoption of those chips fattened profit margins and improved performance for billions of devices. Second, Apple wanted to sever ties with Qualcomm, which it had accused in a 2017 lawsuit of overcharging for its patent royalties.

The companies settled the suit in 2019, and Apple, facing the expiration of its previous Qualcomm agreement, announced a deal last week to continue buying the company’s modem chips through 2026. Apple isn’t expected to produce a comparable chip until late 2025, people familiar with the matter said. There could be further delays, these people said, but the company believes it will eventually succeed.

Apple found that designing a microprocessor, essentially a tiny computer to run software, was easy by comparison. Modem chips, which transmit and receive wireless data, must comply with strict connectivity standards to serve wireless carriers around the world.

“These delays indicate Apple didn’t anticipate the complexity of the effort,” said Serge Willenegger, a former longtime Qualcomm executive who left the company in 2018 and doesn’t know the current state of the Apple chip. “Cellular is a monster.”

Apple’s push to build more of the various semiconductors used in its products stretches back more than a decade. In 2010, the company began using its own processing chips in iPhones and iPads. The chips helped Apple outperform many of its Android rivals, which relied on chips from Qualcomm, Taiwan-based MediaTek and other makers.

The company in 2020 began replacing processor chips from Intel, used for years in Mac computers, with a proprietary chip that allowed its laptops to run faster and generate less heat, improvements that helped boost flagging Mac sales. The Apple chip also saved the company an estimated $75 to $150 on every computer.

Credit for the success of Apple processor chips brought praise and increased authority to Johny Srouji, the company’s chip leader. “After shipping the first iPhone, we decided that the best way to deliver the best experience to our customers is to own and develop and design our silicon in-house,” Srouji said this year at Technion-Israel Institute of Technology, his alma mater.

Split screen

Apple code-named its modem chip project Sinope, after the nymph in Greek mythology who outsmarted Zeus. It began taking shape in 2018, following the directive of Cook, Srouji, and others for Apple to build its own wireless components, said Chris Deaver, a former Apple human-resources executive and co-founder of BraveCore consultants.

By then, Apple’s relationship with Qualcomm had turned ugly. The companies bickered and swapped accusations of lying, theft and monopolistic practices.

Rubén Caballero, Apple’s longtime head of wireless, supported the Intel chip partnership at the time, while Srouji, senior vice president of hardware technologies, backed the pursuit of a company-built chip, said people involved in the project. Caballero left Apple in 2019.

Many members of Caballero’s team who were versed in wireless chip design were placed under Srouji. Other employees engaged in complementary wireless work, such as antenna design, were split off into the hardware engineering group. One of the top project managers on Srouji’s team had no background in wireless technology, said people who worked on the project.

Apple, which had been poaching engineering talent from Qualcomm for years, stepped up those efforts in March 2019. The company announced a new engineering hub in San Diego, Qualcomm’s hometown, and planned to add around 1,200 local jobs. That summer, Apple announced the acquisition of Intel’s wireless team and a portfolio of wireless patents.

Srouji flew to Munich to greet Apple’s newly acquired Intel wireless employees in December 2019. He told a gathering that the modem-chip project would be a game changer for Apple, the next step in the company’s evolution, said people who watched the meeting. He said the chip would distinguish Apple devices, as Apple’s processors had done.

As Apple filled the project’s ranks with Intel engineers and others hired from Qualcomm, company executives set a goal to have the modem chip ready for fall 2023. It soon became apparent to many of the wireless experts on the project that meeting the goal was impossible.

Apple found that employing the brute force of thousands of engineers, a strategy successful for designing the computer brain of its smartphones and laptops, wasn’t enough to quickly produce a superior modem chip.

Tall order

Modem chips are trickier to make than processing chips because they must work seamlessly with 5G wireless networks, as well as the 2G, 3G and 4G networks used in countries around the world, each with its own technological quirks. Apple microprocessors run software programs designed solely for its iPhones and laptops.

Apple executives who didn’t have experience with wireless chips set tight timelines that weren’t realistic, former project engineers said. Teams had to build prototype versions of the chips and certify they would work with the many wireless carriers worldwide, a time-consuming job.

Executives better understood the challenge after Apple tested its prototypes late last year. The results weren’t good, according to people familiar with the tests. The chips were essentially three years behind Qualcomm’s best modem chip. Using them threatened to make iPhone wireless speeds slower than its competitors.

The company scratched plans to use the chips in Apple’s 2023 models, and the planned rollout was moved to 2024. Eventually, Apple executives realised the company wouldn’t meet that goal either. Apple instead opened negotiations with Qualcomm to continue supplying the modem chips. Apple’s licensing deal with Qualcomm expires in April 2025, though it can be extended for another two years.

Apple has the cash and the desire to keep pursuing its modem chip, according to people involved with the project.

“Apple isn’t going to give up,” said Edward Snyder, a managing director of Charter Equity Research and a wireless industry expert. “They hate Qualcomm’s living guts.”

Higher Interest Rates Not Just for Longer, but Maybe Forever

On Wednesday, Federal Reserve officials surprised markets by signalling interest rates won’t fall as much as previously planned.

The tweak might be more important than it looks. In their projections and commentary, some officials hint that rates might be higher not just for longer, but forever. In more technical terms, the so-called neutral rate, which keeps inflation and unemployment stable over time, has risen.

This matters to any investor, business or household whose plans depend on interest rates over a decade or longer. It could explain why long-term Treasury yields have risen sharply in the past few months, and why stocks are struggling.

The neutral rate isn’t literally forever, but that captures the general idea. In the long run neutral is a function of very slow moving forces: demographics, the global demand for capital, the level of government debt and investors’ assessments of inflation and growth risks.

The neutral rate can’t be observed, only inferred by how the economy responds to particular levels of interest rates. If current rates aren’t slowing demand or inflation, then neutral must be higher and monetary policy isn’t tight.

Indeed, on Wednesday, Fed Chair Jerome Powell allowed that one reason the economy and labor market remain resilient despite rates between 5.25% and 5.5% is that neutral has risen, though he added: “We don’t know that.”

Before the 2007-09 recession and financial crisis, economists thought the neutral rate was around 4% to 4.5%. After subtracting 2% inflation, the real neutral rate was 2% to 2.5%. In the subsequent decade, the Fed kept interest rates near zero, yet growth remained sluggish and inflation below 2%. Estimates of neutral began to drop. Fed officials’ median estimate of the longer-run fed-funds rate—their proxy for neutral—fell from 4% in 2013 to 2.5% in 2019, or 0.5% in real terms.

As of Wednesday, the median estimate was still 2.5%. But five of 18 Fed officials put it at 3% or higher, compared with just three officials in June and two last December.

In 2026, officials project the economy growing at its long-term rate of 1.8%, unemployment at its long-run natural level of 4%, and inflation at its 2% target. Those conditions would normally be consistent with interest rates at neutral. As it happens, officials think the fed-funds rate will end the year at 2.9%—another hint they think neutral has risen.

There are plenty of reasons for a higher neutral. After the global financial crisis, businesses, households and banks were paying down debt instead of borrowing, reducing demand for savings while holding down growth and inflation. As the crisis faded, so did the downward pressure on interest rates.

Another is government red ink: Federal debt held by the public now stands at 95% of gross domestic product, up from 80% at the start of 2020, and federal deficits are now 6% of GDP and projected to keep rising, from under 5% before the pandemic. To get investors to hold so much more debt probably requires paying them more. The Fed bought bonds after the financial crisis and again during the pandemic to push down long-term interest rates. It is now shedding those bond holdings.

Inflation should not, by itself, affect the real neutral rate. However, before the pandemic the Fed’s principal concern was that inflation would persist below 2%, a situation that makes it difficult to stimulate spending and can lead to deflation, and that is why it kept rates near zero from 2008 to 2015. In the future it will worry more that inflation persists above 2%, and err on the side of higher rates with little appetite for returning to zero.

Other factors are still pressing down on neutral, such as an aging world population, which reduces demand for homes and capital goods to equip workers.

So neutral has probably risen since 2019, but not to its pre-2008 level. Indeed, futures markets peg rates a decade from now at around 3.75%.

Of course, this is all just a forecast. If inflation comes down painlessly in the next year, if growth slows abruptly, or if Treasury yields drop, then estimates of neutral will also come down. For now, the evidence suggests the public should get used to higher rates as far as the eye can see.

Apple Watch Series 9 Review: Why the Watch Isn’t as Useful as It Could Be

If you asked me, “Should I upgrade my Apple Watch to the Series 9 this year?” I’d probably say no.

It’s a fine watch. It’s just not much better than the Series 8, which you can get cheaper, even refurbished right from Apple.

I have been testing the $399-and-up Series 9 for nearly a week. Available on Sept. 22, it includes a few upgrades, including a one-handed, double-tap gesture and a brighter screen. Apple says one version of it—the aluminium case with Sport Loop band—is carbon neutral.

Many things, though, remain unchanged from last year’s, including the health sensors and design. I’m most grumpy about the battery life. Back in 2015, Apple promised 18 hours. Today, Apple promises…18 hours. Eight years and a dozen models later, we still need to charge these watches daily.

The Apple Watch is the bestselling smartwatch in the world, but battery life is where competitors such as Garmin still have an edge. It’s what holds the Apple Watch back from true all-day/all-night/all-weekend usefulness.

Double tap and new features

The improvements to the Series 9 are internal, enabling new features that are nice-to-haves. There are no game-changers.

Double tap: The new watch senses when you pinch your thumb and index finger twice, in quick succession. The gesture triggers an action that varies depending on what you’re doing. If you’re playing a song, you can double-tap to pause or skip. For incoming texts, it starts a reply with voice dictation. For calls, it picks up the phone. For timers, it dismisses the alert.

Double tap will come in an update rolling out next month. It’s useful for one-handed operation, while you’re holding on to a subway pole or cup of coffee. It also works while you’re wearing gloves.

A similar accessibility feature called AssistiveTouch is available on Series 4 models and newer. You can even double-pinch to dismiss notifications. In my tests, AssistiveTouch wasn’t always as responsive as double-tapping on the Series 9, but if you already have an Apple Watch, it’s worth enabling.

Offline Siri: Apple’s voice assistant can now process some queries faster and more accurately, because it doesn’t need to send the request to the server over Wi-Fi or cellular. You can set timers—even multiple timers in the WatchOS 10—almost instantaneously.

Brighter screen: The display goes up to 2,000 nits, up from 1,000 nits last year. If you don’t speak nits, that translates to a screen that’s easier to see outdoors on a sunny day. Its dimmest setting is also lower, way down to one nit. The Apple Watch adjusts screen brightness automatically based on ambient light, so the brighter screen isn’t noticeable in most settings.

Precision iPhone finding: I use my Apple Watch’s Find My iPhone ping basically every day, so I thought I’d like precision finding. When you’re within about 30 feet of the iPhone, you can see its distance and direction—similar to an AirTag. It’s nice for those who might be unable to hear the audible ping triggered by older models, but that never failed me. And this trick only works with an iPhone 15 model.

Stalled battery life

In its quest to make the smartwatch a jack-of-all-trades wearable with a high-resolution, multitouch screen, Apple has sacrificed battery life. The new S9 processor is 25% more power efficient than last year’s model. But over the years, the company has added more sensors, brighter screens and other energy-sucking elements.

During the watch’s recent unveiling, Deidre Caldbeck, the director of Apple Watch product marketing, highlighted the company priority: “This powerful custom silicon is what allows us to maintain all-day 18-hour battery life while adding new features and systemwide improvements.”

Garmin wearables, meanwhile, have lower-resolution displays that can last days. Some models have solar panels embedded in their watch faces, and can last weeks. It’s something I’m painfully reminded of every time I forget my Apple Watch charger on a weekend trip. Cue the gloating by my Garmin-wearing husband, who never brings his charger.

Apple often touts the watch’s health-tracking capabilities in marketing materials. For this to work, though, it has to be on your wrist—even at night, while you sleep. That’s tough when it needs to be charged once a day.

Charging wouldn’t be as problematic if the Apple Watch didn’t need its own proprietary puck to power up. (Garmin’s new Vivomove Trend is one of the first to work with standard Qi wireless charging.)

I’m not saying Apple Watches are useless without default multi day battery life. I wear mine so often that I have a squircle-shaped tan on my wrist. But a battery-life quantum leap is needed.

That could be coming next year. The Apple Watch was announced 10 years ago next fall, and that anniversary could mean a big redesign. According to a Bloomberg report, a new band system could make room in the watch’s case for more sensors—or, I hope, a bigger battery—and a switch to a more energy-efficient microLED display could lead to power gains.

How to get longer battery life

If you want the longest battery life right now, there’s the $799 Apple Watch Ultra. It lasts a day and a half by default. But even the new, modestly upgraded model is a bulky chunkster, especially on smaller wrists. Anyone else looking for a big Apple Watch change should wait until 2024.

Meanwhile, you can temporarily double the battery life by taking away power-draining features.

• Enable low-power mode: You can quickly enable low-power mode for set periods. Press the side button to open the Control Center, then tap on the battery percentage and scroll down.

Just beware: It does disable some of the lifesaving heart-rate notifications and the power-hungry always-on display. When double tap is available, low-power mode will also disable that gesture.

• Reduce workout sensor readings: Go to Settings > Workout, then tap Fewer GPS and Heart Rate Readings to enable. When in low-power mode, the watch won’t capture GPS or heart-rate data as frequently during outdoor workouts, further extending battery life.

You can also disable some functions. I managed to squeeze 48 hours out of the Series 9 by turning off the most battery-intensive ones, but it’s a trade-off:

• Double tap: When the feature rolls out to Series 9 models next month, you can turn it off. Go to Settings > Gestures > Double Tap to disable.

• Always-on display: Go to Settings > Display & Brightness. Tap Always On to disable.

• Background app refresh: Go to Settings > General. Scroll down to Background App Refresh to disable entirely or turn off for certain apps.

• Reduce display brightness: In Settings > Display & Brightness, you can adjust the default setting.

Bentley’s 2023 Continental GTC Speed: A Cheetah in a Lion Suit

To most driving enthusiasts, there is nothing as pleasurable as a warm day tooling round country roads in a ragtop. The smell of freshly mown lawns wafts in your nostrils; the sun’s rays bathe the atmosphere in warm tones. It doesn’t get much better.

Well, actually it does. Make the car a Bentley Continental GT. Glutton for more fun? Make that Bentley a convertible, or GTC Speed. Recently, Penta had the opportunity to wend our way around Sullivan County, New York, and put a GTC Speed through its paces.

The Drive

Given its weight, at roughly 4,800 pounds, it is no surprise that it offers a solid feel and holds the road without much effort. The GTC Speed feels a bit like a land yacht, but in a good sense. That is, when you climb aboard you know right away that you’re in for a treat and that the ride could take you anywhere. And like the U.S. Navy, the GTC Speed (standard MSRP US$317,000) projects power.

The car we drove was priced at US$379,00 because it was ladled with cushy options like a custom-made sound system, so that you can share your musical faves with your neighbours; 22-inch wheels for better grip and handling; and a high-gloss fibre finish, among many other accoutrements. A king’s ransom? Yes. However, the Bentley is often measured against the Ferrari Roma or the Mercedes Benz S65 AMG. That’s rarefied competitive air. The engineers in Crewe, England, pride themselves on making sure this GTC is capable of taking you on a long drive comfortably at 90 mph as well as on a quick run to the local grocery store. Think of a cheetah in a lion’s suit, and you get the picture.

It tops out at 208 mph, in case you need a latte really quickly. We took it to 161 mph in sport mode for a few moments and enjoyed a marvelous and mischievous thrill ride, and no smokies with radar guns. For obvious reasons, what interstate we managed this is a top business secret. [But don’t try this at home!] And if you love big engines, note that next year’s models will be the last with such W-12 muscle, part of a greener Bentley, as Penta has previously reported.

The Specs

The vast hood hides a 6.0-litre, twin-turbocharged W12 engine, a monster that delivers bold power as well more graceful manoeuvring than otherwise might be expected from such a heavy car. The horsepower is rated at 650 and the car obtains gas mileage of 15 city and 22 highway. Bentley says it will do 0 to 60 mph in 3.6 seconds. Other Bentley Continental GTs are available with a V8 engine, for those more concerned about the environment.

The Bentley GTC Speed offers four driving modes: Comfort mode is a likable combination of a speedy roadster that will take you to 100 mph, before you even notice. Call it relaxed cruising.

Move to Sport mode and the GTC does its unique version of a squat thrust, and off you go. Sport mode optimises the engine, transmission, and suspension to boost dynamic ability, and when engaged, it should be immediately felt by the driver. And the engine, normally quiescent, begins to roar through the two exhausts in the rear. The other modes are Bentley, a combo of sport and comfort, and Custom. The chassis system features rear-wheel steering, which improves cornering at speed.

The colour of the model we drove is called Kingfisher.
Vito Racanelli

From the front, back, or side it’s a handsome car, and certainly gets its share of acknowledging looks from pedestrians. The Bentley GTC driver quickly learns to recognize the envy of onlookers and other drivers. The color of the model we drove is called Kingfisher. We plebs would say it was a sweet shade of light blue. OK, Kingfisher, if you must. The GT hardtop is just US$259,000 before options but we recommend the GTC Speed convertible, unless you live way up North. The Bentley line up consists of a range of GT and GTC models that can be customized for engine size and hp; convertibles and hardtops; and colors, etc., among other accouterments.

The Cabin

In a few words, luxurious and spacious for the front two passengers, but little room for others in the back seat. It’s a GT 2+2, typical in that the back seats are negligible for humans. As we tested a convertible, we shoehorned a 6-footer into the back seat with the top down, but the advantage of being able to lick your knees was somehow lost on our uncomfortable passenger. Best to keep the backseats to dogs or children.

What’s Not to Like

Penta has noted in other expensive luxury sports competitors to Bentley: the invasion of plastic in the cabin. Yes, it lightens the car’s weight, improves performance, yadda, yadda, yadda. But even a little is a lot for cars at this price level. This Bentley does have plastic here and there in the cabin. Not a lot, but really, one might expect control knobs made of gold in this price range. And the gasoline tank dial could be bigger and better placed, but you get used to it. Maybe you don’t want to see, or care, for that matter.

At the end of a long summer’s day driving the GTC Speed, you feel as if you are in a fast and mobile Four Seasons Suite.

Opulence and open plan living await in this elevated environment

If Melbourne is the most liveable city in Australia then the inner circle location of St Kilda must be amongst the most liveable suburbs in the southern capital. Vibrant restaurants and cultural activities, including the iconic Luna Park, are within easy distance of the popular beach, which is itself rimmed by parkland and the Bay Trail.

Overlooking this view of bush, sand and sea is St Moritz at 14-16 The Esplanade. Designed by Fender Katsilidis, the building offers residents direct views of the beach, down the Peninsula and across the waters to Williamstown.

Completed less than two years ago, the exclusive residence was constructed on the former St Moritz ice rink. Since opening, it has become synonymous with the best of residential luxury design while offering facilities more commonly seen in five-star hotels, including a 25m pool, sauna and spa room, a fully equipped gym, a cryotherapy and floatation tank as well as a yoga and pilates space. In addition, there is also a library, a cinema and champagne bar plus a wine storage space, tasting room and private dining area.

While the properties were quick to sell, the sub penthouse has just come onto the market, offering a rare opportunity to buy into this boutique development. Positioned on the sixth floor, the three-bedroom apartment feels more like a house, with multiple thoughtfully planned living spaces and separate dining area. The marble kitchen is fully equipped for entertaining, with Gaggenau appliances, Vintec wine storage and restaurant-style Sub Zero fridges.

The master bedroom offers a full suite experience, with extensive wardrobe and dressing room and a sanctuary-style bathroom complete with generous bath and rainwater showerheads.

There’s also a dedicated four-car garage and fifth parking space, the final luxury for an outstanding property.

 

Address:  601G/14-16 St Moritz, The Esplanade, St Kilda

Agent: Michael Paproth 0488 300 800 The Agency Victoria

Open for inspection: Wednesday September 20, 4.30pm-5pm