Reporter Wen Qiao
Before Apple could sit comfortably in the OpenAI board observer seat, there was a new variable in the situation.
Last week, the outside world was still discussing how Apple's attendance at the OpenAI board of directors would make Microsoft's position more delicate. A week later, Microsoft and Apple announced that they would give up their observer seats on the OpenAI board, leaving onlookers bewildered.
Analysis suggests that Microsoft and Apple's withdrawal from OpenAI's board of directors is a form of "abandoning the car to protect the leader" in a tightening regulatory environment. According to Cori Crider, director of law firm Foxglove, this move is just "another game on the chessboard" and tech giants are playing a "cat and mouse" game with antitrust agencies.
However, even so, the industry still believes that this cannot dispel regulatory concerns about antitrust, and this does not mean that the two companies are "decoupled" from OpenAI. It is reported that after Microsoft and Apple withdraw from the board, OpenAI will regularly hold other meetings outside the board with partners such as Microsoft and Apple, as well as investors.
Photo by Liu Xuemei, Daily Economic News
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On July 9th local time, Microsoft announced the abandonment of its observer position on the OpenAI board of directors. In a letter to OpenAI on the same day, Microsoft wrote, "Over the past eight months, we have witnessed significant progress by the newly established board of directors and are confident in the direction of the company. Our limited role as board observers is no longer necessary
Microsoft's investment in OpenAI began as early as 2019, and as of now, Microsoft has invested $13 billion in OpenAI.
But it wasn't until last year's OpenAI "palace forcing incident" that Microsoft had the opportunity to join the board of directors. In November last year, after Altman's return as OpenAI CEO and restructuring of the board, Microsoft took advantage of the opportunity to obtain a non voting observer seat.
With Microsoft's exit, Apple, which has just joined OpenAI's board of directors through a cooperation agreement, will not hold similar positions. The OpenAI board of directors will no longer hold the position of observer.
According to foreign media interpretation, the withdrawal of Microsoft and Apple from the board of directors is a "abandoning the car to protect the leader" in a tightened regulatory environment. According to Cori Crider, director of law firm Foxglove, "Microsoft's' abandonment 'of OpenAI's board seat is just another game on the chessboard. Tech giants are well aware that they are playing a cat and mouse game with antitrust agencies." It is reported that the law firm is participating in further investigations by regulatory agencies into the partnership between Microsoft and OpenAI.
Since the emergence of ChatGPT, the collaboration between Microsoft and OpenAI has been a model of innovation between tech giants and startups for a long time. But since the beginning of the year, antitrust agencies in countries such as the United States, the European Union, and the United Kingdom have focused on cooperation between tech giants and startup AI companies represented by OpenAI.
Giants including Microsoft, Nvidia, Google's parent company, and Amazon have invested billions of dollars in the AI field. Although these investments and collaborations are the lifeline of startups, regulatory agencies are concerned that they may lead to the concentration of power in the hands of giants.
Every chart (data source: Bloomberg)
In January of this year, the Federal Trade Commission (FTC) announced that it was investigating Microsoft's investment in OpenAI; In March of this year, the European Commission, the EU antitrust enforcement agency, issued inquiries to companies such as Microsoft, Google, and Meta regarding their investments in AI startups, and conducted separate investigations into the investment situation of Microsoft and OpenAI; In April, UK regulators also stated that they would conduct a more in-depth investigation into the cooperation between companies such as Microsoft and OpenAI, Amazon and Anthropic; In June, the FTC began investigating news that Microsoft and Reflection AI were aimed at evading regulatory scrutiny.
But outside of the tightened regulatory environment, some analysts believe that Microsoft's emphasis on a "limited role" in the memo may be intended to indicate that it is not satisfied with its position of only playing a limited role in OpenAI.
Bloomberg technology journalist Mark Gurman previously believed that attending board meetings simultaneously with Microsoft and Apple could put these two tech giants in a tricky situation, as they have been competitors for decades. Some board meetings may involve future AI plans between OpenAI and Microsoft, with the latter potentially hoping to exclude Apple.
Leaving does not mean 'decoupling'
Microsoft and Apple still have strategic influence on OpenAI
Although Microsoft and Apple have withdrawn from the OpenAI board of directors, it does not mean that they will decouple from it. After all, Microsoft is the largest investor in OpenAI, holding a 49% stake in the latter's for-profit division, enjoying dividends from the latter's profits, and the right to use OpenAI technology. And Apple and OpenAI had already finalized a cooperation agreement in black and white last month.
According to an FTC official familiar with the matter, this move by Microsoft and Apple is unlikely to address regulatory concerns.
Bloomberg has also reached a similar conclusion, with litigation analyst Justin Teresi and technology analyst Anurag Rana stating that Microsoft and Apple's decision to withdraw from OpenAI's board of directors may be due to regulatory pressure, but it will not weaken their influence on OpenAI's product strategy or end antitrust investigations, and the FTC and other regulatory agencies can also see this clearly.
However, in the long run, the aforementioned analysts believe that as demand increases and OpenAI faces more scrutiny globally, other cloud services such as Amazon Web Services and even Google will become OpenAI's first choice.
Regarding how Microsoft and Apple will learn about OpenAI's latest news after leaving the board, the Financial Times stated that OpenAI will instead hold regular meetings with partners such as Microsoft and Apple, as well as investors Thrive Capital and Khosra Ventures - as part of OpenAI's recently appointed CFO Sarah Friar plan.
The reporter from the Daily Economic News noticed that the increased regulatory efforts to encircle and suppress technology giants and OpenAI also come at a time when OpenAI is moving further and further away on the path of profitability. Since ChatGPT led the wave of generative AI, OpenAI's development path has been criticized by many as "deviating from its original intention," including one of the company's founders, Elon Musk.
At the beginning of its establishment in 2015, OpenAI carried the aura of a "non-profit organization" and was committed to developing AI in the most likely way to benefit the entire human race. But in 2019, OpenAI broke free from this position and established a for-profit subsidiary (OpenAI Global) that enabled it to raise external funding, including from Microsoft. The non-profit board of directors of the company controls and promises to pay a portion of its profits to investors within the upper limit, in order to receive more commercial investment.
This transformation indirectly led to disputes between internal non-profit and for-profit factions, triggering last year's OpenAI shocking global "palace forcing incident".
Currently, OpenAI's valuation has skyrocketed, reaching $86 billion. During the six-month period from December last year to June this year, OpenAI's annualized revenue increased from $1.6 billion to $3.4 billion.
According to a report by The Information last month, Altman told investors that negotiations are still underway to consider transforming OpenAI's architecture into a for-profit company that is not controlled by a non-profit board of directors, similar to for-profit welfare companies like Anthropic or xAI.
Reporter | Wen Qiao