20 November 2023

General Overview

In a rapidly evolving global economy, innovation and regulation are often intertwined across various sectors. October’s developments in the most disruptive and innovative sectors of the economy certainly reflect that, whether its a clash between China and the European Union over subsidies for Chinese electric vehicles, U.K. regulators scrutinizing cloud services licensing practices by Microsoft and Amazon, or AT&T’s complaints to the FCC that SpaceX’s Gen2 Starlink cellular test is using the wrong regulatory process and risks interference with other carriers’ signals. 

As these stories unfold, they offer valuable insights into the complex interplay between technological progress and the rules that govern it. 

Sector Specific Updates

Automobile Innovation

In October, the China Association of Automobile Manufacturers (CAAM) expressed dissatisfaction with the European Union’s investigation into subsidies for Chinese electric vehicles (EVs). CAAM criticized the “very short” consultation time provided by the EU and labelled the probe an “obvious act of protectionism” that could impede global EV industry growth. 

The European Commission officially initiated the investigation to determine whether tariffs are necessary to protect EU manufacturers from an influx of subsidized Chinese EV imports. The Commission’s information indicates that Chinese producers benefit from various subsidies, including grants, preferential loans, tax cuts, and state-provided goods at below-market prices. 

China’s commerce ministry stated that the investigation lacks evidence and doesn’t follow World Trade Organization rules. China also raised concerns about the lack of consultation materials provided and vowed to monitor the Commission’s investigation to protect its firms’ interests. 

The EU invited China for consultations without specifying a timeframe. The Commission noted that China’s share of EVs in Europe has reached 8% and could grow to 15% by 2025. Parties interested in a hearing have 15 days to request one, with a 37-day deadline for comments.¹

Cybersecurity

The University of Calgary has unveiled its new Cyber Assessment, Training, and Experimentation (CATE) Centre, a cutting-edge facility dedicated to the study of and defence against cybercrimes. This state-of-the-art center is capable of simulating various digital environments, possible threats, and defence strategies. It serves as Alberta’s inaugural hub for cyber safety and research, uniting industry experts and law enforcement.

CATE Centre, established through a private-public partnership, involves major players like U.S. defence contractor Raytheon and local cyber range provider Enfocom, as well as funding from the Alberta government. 

This facility is at the forefront of innovative research and development efforts, essential for equipping the next generation of cybersecurity and privacy experts. The CATE Centre’s mission is to advance cyber resilience and cybersecurity expertise through collaboration and simulation, setting a significant precedent in the field.² 

Cloud Computing

Microsoft and Amazon are facing scrutiny from the U.K.’s Competition and Markets Authority (CMA) in a new investigation into their  cloud services licensing practices. 

This investigation stems from concerns raised in October by the telecoms regulator Ofcom, which identified various issues in the provision of cloud services that hindered customers’ ability to switch between providers. These issues include charges for data migration, exclusive discounts with a single provider, and technical barriers.

Although Amazon is not explicitly named, Ofcom’s market study highlighted that Microsoft and Amazon control a significant portion of the U.K.’s public cloud infrastructure, making them particular subjects of concern. 

The CMA’s market investigation could span up to 18 months. During this period, the regulator will outline potential consumer harms and suggest remedies. The CMA holds the authority to enforce remedies if necessary, up to and including requiring companies to divest parts of their business to enhance competition.³

E-Gaming

The 2023 Global Gamer Study from Newzoo, released in October, reveals a generational shift in entertainment preferences, with video games taking the lead among younger generations. Gen Alpha and Gen Z rank gaming as their top source of leisure, while only 10% of Baby Boomers engage in gaming during their leisure time. Gaming is also becoming an integral part of younger generations’ identities, with Gen Alpha players most likely to identify themselves as gamers.

Mobile remains the most accessible platform for gaming across all generations, while console and PC gaming see greater popularity among younger players. Gen Alpha emerges as the most prominent group of multi-platform players, embracing cross-platform play options and PC and console games that move to mobile. 

Younger gamers exhibit greater willingness to spend on gaming experiences, with 58% of Gen Alpha players converting to payers. In-game spending habits differ among generations, with younger players favouring playable characters, while Gen X and Baby Boomers allocate their spending toward in-game currencies and gear. 

Brands are increasingly integrating into gaming, with younger generations positively reacting to branded content within games. Over 50% of Gen Alpha players discover and purchase from brands featured in games.⁴ 

Genomics

Eli Lilly and Co. has announced its acquisition of Point Biopharma Global for $1.4 billion, granting the company access to cutting-edge therapies that precisely target cancer.

Point Biopharma is in late-stage studies of their radioligand therapy candidates, PNT2002 and PNT2003. These therapies combine cancer-killing radioactive particles with molecules that attach to tumours. The PNT2002 therapy, intended for advanced prostate cancer patients unresponsive to hormone therapy, is expected to compete with Novartis’ Pluvicto therapy, available in the U.S. since 2022. The deal will also incorporate PNT2003, an experimental therapy for an ultra-rare digestive tract cancer, into Lilly’s oncology pipeline. 

The acquisition offers a premium of about 87% on Point Biopharma’s last stock closing price and includes Point Biopharma’s Indianapolis manufacturing plant for radiopharmaceuticals. Analysts foresee no regulatory concerns due to non-overlapping therapies between the companies.⁵ 

Fintech

Mastercard and JPMorgan Chase have announced the launch of their pay-by-bank tool in the United States. This collaboration utilizes Mastercard’s open banking technology and J.P. Morgan Payments’ ACH capabilities to enable merchants to accept direct payments from customers’ bank accounts. The partnership, initiated last year, caters to the rising consumer interest in alternative payment methods.

The tool addresses several challenges billers face by incorporating Mastercard’s Smart Payment Decisioning Tools to optimize payment timing based on the payer’s transaction behaviour and risk patterns. This approach ensures successful payments and reduces the risk of insufficient funds. 

Using consumers’ authentication protocols with their banks, the tool securely facilitates payments for various expenses, such as rent, utilities, tuition, insurance, and healthcare. 

Verizon is slated to pilot the pay-by-bank tool in the near future, highlighting the growing adoption of this payment method in the United States. Merchants are motivated to embrace pay-by-bank as it can significantly reduce payment processing fees by up to 80%, and consumers favour these open banking options to avoid high credit card interest rates.⁶ 

Robotics & Automation

HIVE Digital and Visual Capitalist released a study in October on the impact of AI and the metaverse on the data sphere, the infrastructure storing and processing our data. Key findings reveal the rising demands for data speed and capacity in the next decade. 

Most of what we stream now—music, video, web content, and gaming—has relatively low bitrate needs, with streaming gaming coming in on the high end at 1 Mbps. In contrast, AR, VR, and holograms for the metaverse will require up to 300 Mbps and very low latency (less than five milliseconds) to ensure users don’t experience motion sickness. This means the average household data demand will rise from 27 GB per day to a whopping 644 GB per day, necessitating significantly faster data transfer.

Currently, the global data sphere encompasses 5,065 data centers, with the United States being the world leader with 1,974 centres online (39% of all data centers). The UK (278), Germany (247), Canada (189), and France (167) round out the Top Five, with India (160) and China (87) included in the Top 10 globally. 

Data centers adapt by going big, like China Telecom’s Inner Mongolia Information Park, or going small through edge computing to reduce latency, which is vital for self-driving vehicles. Global investment in edge data centers is projected to reach $208 billion in 2023, a 13.1% increase from 2022, according to the report.⁷ 

5G

AT&T and the Rural Wireless Association have raised concerns and filed regulatory complaints with the FCC regarding SpaceX’s application for “special temporary authority” (STA) to launch and test a second-generation Starlink satellite by this December. Both AT&T and the Rural Wireless Association have been urging SpaceX since the spring to provide more technical details about the new satellites’ cellular service capabilities and to offer proof it won’t interfere with other carriers’ signals.

AT&T now asserts that SpaceX is using the wrong regulatory process for the Starlink cellular test. The Rural Wireless Association concurs, emphasizing the need to demonstrate interference prevention before undertaking real-world tests. 

Despite these concerns, SpaceX has applied for the test and outlined plans for Gen2 Starlink satellites equipped with “direct-to-cellular communications payloads” to connect mobile phones to SpaceX satellites. 

SpaceX intends to launch its Starlink cellular plan for customers next year, potentially competing with AST Space Mobile’s cellular satellite system, which has AT&T as a partner.⁸ 

EDGE ETF: Investment in Innovation

The Evolve Innovation Index Fund (EDGE ETF) is an 8-in-1 innovation fund that invests in disruptive innovation themes across a broad range of industries, including: cloud computing, cybersecurity, eGaming & eSports, automobile innovation, 5

G, fintech, genomics, and robotics & automation. For more information on EDGE ETF, visit our website at https://evolveetfs.com/edge/ or click here. Give your portfolio an EDGE. 

Portfolio Strategy and Activity

For the month, Verizon Communications Inc made the largest contribution to the Fund, followed by AT&T Inc and Keyence Corporation. The largest detractors to performance for the month were Evolve Automobile Innovation Index Fund, followed by Genmab A/S and Evolve Cloud Computing Index Fund. 

 

Sources 

1. “China rebukes EU after formal launch of EV subsidy probe,” Reuters, October 4, 2023; https://www.reuters.com/business/autos-transportation/china-rebukes-eus-rushed-request-consultations-over-ev-subsidy-probe-2023-10-04/
2. Toy, A., “Cybersecurity training, research centre opens at University of Calgary,” MSN.com, Octover 11, 2023; https://www.msn.com/en-ca/money/technology/cybersecurity-training-research-centre-opens-at-university-of-calgary/ar-AA1i08ox
3. Warren, T., “Microsoft and Amazon face U.K. regulator investigation over cloud services,” The Verge, October 5, 2023; https://www.theverge.com/2023/10/5/23904375/U.K.-cma-microsoft-amazon-cloud-investigation
4. Meehan, O., “New free report: How and why different generations engage with video games in 2023,” Newzoo, October 19, 2023; https://newzoo.com/resources/blog/how-and-why-different-generations-engage-with-video-games-in-2023
5. Leo, L. & Satija, B., “Lilly eyes targeted cancer therapies with $1.4 billion Point Biopharma deal,” Reuters, October 3, 2023; https://www.reuters.com/markets/deals/eli-lilly-buy-point-biopharma-14-billion-2023-10-03/
6. “JPMorgan and Mastercard Pay-by-Bank Tool Goes Live,” PYMNTS, October 20, 2023; https://www.pymnts.com/news/payment-methods/2023/jpmorgan-and-mastercard-pay-by-bank-tool-goes-live/
7. Dickert, C. & Alexander, A., “How AI and the Metaverse Will Impact the Datasphere,” Visual Capitalist, October 5, 2023; https://www.visualcapitalist.com/sp/how-ai-and-the-metaverse-will-impact-the-datasphere/
8. Kan, M., “AT&T Moves to Disrupt Test of SpaceX’s Starlink Cellular Service,” PC Magazine, October 16, 2023; https://www.pcmag.com/news/att-moves-to-disrupt-test-of-spacexs-starlink-cellular-service

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