May 12, 2024
Another week, another set of stories…
1: US bans on chip making in China won't hurt ASML
Summary: ASML feels further US export controls won’t affect the company in the next five years.
Analysis: With the US adding more controls and restrictions to semiconductors and the supply chains that feed them, companies are worried that their business will take a hit.
2: Congressional China hawks criticize Intel for letting Huawei use its chips
Summary: Some in Congress are calling for a ban on any sale to Huawei, and pressure is building for the US government to do something that could severely hobble Huawei.
Analysis: Many in Congress want further restrictions on Chinese companies and to stop progress in technology that can be used against the US either in business or a military conflict.
3: Huawei chips keep advancing despite US export controls
Summary: Huawei has made advancements in semiconductors despite US controls, but progress is slow and expensive.
Analysis: In talking with “people familiar with the matter,” the US is trying to slow Chinese technology capacity, and for the country to expend large amounts of resources to get around export controls (so the resources are not used in other areas). Despite this, Chinese companies are moving forward and technology advancing rapidly, far faster than expected.
4: TikTok ban puts US companies in China at risk
Summary: As the US has put in a Tiktok ban, Beijing is expected to launch attacks against US firms, making them riskier.
Analysis: The Tiktok ban will have consequences, but it is doubtful China will attack US businesses inside the country. China has been pulling its punches when retaliating against the US, or US firms, and has rarely gone after companies in-country that contribute to taxes, jobs, and the country’s growth. How will it respond to a Tiktok ban? Well, let’s see what happens over the next few years. It is TBD if Tiktok will truly be banned after US courts look at it, even then, a potential solution could be found. The government is not going to respond to each slight, without thinking of the consequences such actions would create.
5: Global debt ratios haven't been this high since the Napoleonic Wars
Summary: Slowing economic growth and high government debt around the world is putting stress on global systems, and hasn’t been this high since the 1820’s.
Analysis: High debt is hobbling governments with energy transitions, funding defense and social benefits, as well as infrastructure and education costs. Inflation isn’t helping either. Take the CHIPS ACT for example. The amount slated to help chip companies build new factories was $53B, but the numbers were based on per-pandemic inflation models. After the last several years, with roughly 25% inflation, that number is worth around $40B. Expect some form of additional subsidies for chip makers as they complain about higher costs and projects continue to be delayed.
Something unique…
Barbie SUV's killed Target in Canada
In 2014, Target Canada faced supply chain challenges during its expansion such as overflowing distribution centers and empty store shelves. An example was a pink Barbie-branded SUV. Mismatched barcodes and other problems hindered inventory management. These challenges ultimately broke Target Canada and the company had to leave the market.