Posts Tagged ‘Economics’

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[INSERT SNAPPY TITLE TO SOMEHOW ACTUALLY MAKE PEOPLE WANT TO READ ABOUT A TRADE PACT HERE]

Tuesday, October 2nd, 2018

Late Sunday, President Donald Trump announced that the Canadian government had given in and was joining the United States and Mexico in a revision of the NAFTA trade agreement, one of Trump’s key 2016 campaign promises.

Here are some highlights of the agreement:

  1. Canada agreed to ease protections on its dairy market, among them, it will now provide US access to about 3.5% of the market (Canada is likely to compensate dairy farmers);
  2. The US relented on its demand to eliminate the dispute settlement system on Chapter 19, a big win for Canada;
  3. Canada agreed to the terms of the US-Mexico deal, among them a de minimis of US$100 (the amount of imports without duties, which in NAFTA is US$20), stricter rules of origin for autos, a 10 year sunset clause with a 6 year revision and an update on several topics from labor to commerce to intellectual property; and
  4. The US and Canada reached an agreement to protect Canada’s autos from high auto tariffs if the US imposes them under law 232 with a quota of 2.6 million vehicles exported. The latter is similar to the “side-letter” that Mexico agreed with the US that protects 2.4 million vehicles. So far there are no exemptions from steel and aluminum tariffs.

Here’s the text of the deal itself.

What strikes me is that the most contentious ongoing U.S. Canada trade dispute issue, softwood lumber, does not seem to have been addressed. (I say “seem” because a search of the document on the ustr.gov site just brought up an error.)

The Last Refuge was quite happy about the pact:

I’m still going through the USMCA text (even speed reading, it will likely take a while); here’s the link to the AGREEMENT DETAILS. However, many people have asked about how the NAFTA loophole was being closed.

Well, the answer is exactly what it had to be – there was really no option. The U.S. now has veto authority over any trade deal made by Canada and/or Mexico with third parties. This is what Ambassador Lighthizer described as the “Third pillar”.

Last year, despite the inevitability of it, we didn’t think Canada and Mexico would agree to it. The NAFTA loophole was/is a zero-sum issue: Either Can/Mex agree to give veto authority to the U.S. –OR– President Trump had no option to exit NAFTA completely.

Well, Canada and Mexico have agreed to the former, so there’s no need for the latter.

Then they print the text of Article 32.10.

Both Canada and Mexico structured key parts of their independent trade agreements to take advantage of their unique access to the U.S. market. Mexico and Canada generate billions in economic activity through exploiting the NAFTA loophole. China, Asia (writ large), and the EU enter into trade agreements with Mexico and Canada as back-doors into the U.S. market. So long as corporations can avoid U.S. tariffs by going through Canada and Mexico they would continue to exploit this approach.

By shipping parts to Mexico and/or Canada; and by deploying satellite manufacturing and assembly facilities in Canada and/or Mexico; China, Asia and to a lesser extent EU corporations exploited a loophole. Through a process of building, assembling or manufacturing their products in Mexico/Canada those foreign corporations can skirt U.S. trade tariffs and direct U.S. trade agreements. The finished foreign products entered the U.S. under NAFTA rules.

Why deal with the U.S. when you can just deal with Mexico, and use NAFTA rules to ship your product directly into the U.S. market?

This exploitative approach, a backdoor to the U.S. market, was the primary reason for massive foreign investment in Canada and Mexico; it was also the primary reason why candidate Donald Trump, now President Donald Trump, wanted to shut down that loophole and renegotiate NAFTA.

This loophole was the primary reason for U.S. manufacturers to relocate operations to Mexico. Corporations within the U.S. Auto-Sector could enhance profits by building in Mexico or Canada using parts imported from Asia/China. The labor factor was not as big a part of the overall cost consideration as cheaper parts and imported raw materials.

If the U.S. applies the same tariffs to Canada and Mexico we apply to all trade nations, then the benefit of using Canada and Mexico -by those trade nations- is lost. Corporations will no longer have any advantage, and many are likely to just deal directly with the U.S. This is the reason for retaining the Steel and Aluminum tariffs on Canada and Mexico.

I reached out to Vance Ginn of the Texas Public Policy Foundation, who is much more of a fan of the original NAFTA than President Trump, and asked him a few questions about the new agreement:

1. How big a win for President Trump is this, if it is indeed a win?

I’m cautiously optimistic about the USMCA because even though certain industries, like producers of autos and dairy products, will likely benefit, the provisions related to the auto sector will cost Americans more for autos along with potentially reducing profitability of the auto sector as higher priced cars reduce the number consumed. People prosper from trade so the focus should be on reducing trade barriers, which the USMCA may have done but we won’t know until all details are available. Based on what we do know, it appears that there is reason to believe the original NAFTA should have remained intact.

2. What do you see as the most important provision for increasing free trade?

Most important is that there aren’t many changes to the original, beneficial NAFTA. However, the USMCA provision to ban tariffs on digital trade appears to be the most important. In addition, removing trade uncertainty is a big plus, though there is now a 60 day waiting period before it can be voted on by Congress.

3. The summaries I’ve seen don’t cover the longest-running and thorniest US/Canadian trade dispute, namely softwood lumber subsidies and tariffs. What, if anything, does the agreement do to address that dispute?

I haven’t seen anything. Mostly covers the trade dispute of dairy products. One of the things to look for when the details are revealed.

4. How applicable will the 2018 NAFTA precedent be for President Trump’s other trade disputes?

The USMCA could provide a framework to get marginal gains while protecting specific sectors, like manufacturing, comes at a cost. The takeaway shouldn’t be that tariffs are a good bargaining chip because taxes aren’t a reasonable tool to use for that purpose. Taxes should be used to only collect revenue to fund limited government spending. Instead of looking at trade deficits and fair trade rhetoric, there should be a focus on making the U.S. and states as competitive as possible in the global market by instituting sound policies while working to eliminate barriers to trade.

My own impression is that President Trump scored a solid single here thanks to his unorthodox negotiating style, and probably increased his trade negotiating leverage somewhat with other countries.

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Posted in Economics | 2 Comments »

Semiconductor Update: GlobalFoundries Gives Up On 7nm​

Thursday, August 30th, 2018

GlobalFoundries has given up work on their 7nm process node. This is a direct result of AMD choosing TSMC over GlobalFoundries to fab their next generation microprocessor.

GlobalFounderies was always something of an odd duck. It was spun out from AMD in 2009 to turn their manufacturing arm into a foundry because AMD itself could no longer afford the huge upfront capital investment state-of-the-art wafer fabrication plants demanded. As it exists today, GlobalFounderies​ is a Frankenstein’s monster of agglomeration, having gobbled up Singapore-based Chartered Semiconductor and what remained of IBM’s fab infrastructure (back in the day, IBM had some of the best semiconductor design capabilities in the world) in New York and Vermont. (SK Hynix, NXP and ON Semiconductor, all integrated device manufacturers rather than foundries, are similar merger-assembled aggregations.) GlobalFounderies actual owner is the Emirate of Abu Dhabi.

With UMC screwing the pooch by letting Chinese spies walk out the door with Micron design IP, there was an opening for a (sorta, kinda) American chip foundry to provide a viable rival to TSMC, but GlobalFoundries evidently found it too difficult to do profitably.

TSMC has already broken ground on a fab that will theoretically take them down to 5nm and is expected to cost $500 billion NT, which works out to over $16 billion US at current exchange rates. That’s more outlay than all the profit TSMC made all of last year.

Some thoughts (partially based on scuttlebutt, gossip, etc.):

  • Right now there’s no non-TSMC foundry choice if a fabless chip company wants to attempt a sub 14nm design. It’s Taiwan or nothing.
  • To the best of my knowledge, no one outside TSMC, Intel and Samsung are even attempting 7nm. Word is that TSMC’s 7nm is actually closer to 10nm, and Intel is evidently in a world of hurt getting yields up on its 10nm process.
  • Samsung says they’re going to 7nm in 2019 using Extreme Ultraviolet (EUV) lithography, a long, long awaited technological shift that will probably involve its own painful learning curve. Others have speculated that, despite those plans, Samsung seems pretty happy sitting at 14nm with high yields for most of its own chip needs (as opposed to its foundry customers).

    • What this means is that the cutting edge of wafer fabrication technology is probably going to be centered on the Pacific rim for the foreseeable future. China won’t be on that cutting edge, because they can’t steal technology fast enough or hire enough enough qualified process techs to get it done.

    We may finally have reached a point that building a cutting edge, state-of-the-art wafer fabrication plant is a money-losing proposition for everyone.

    That means fabless chip designers working at the cutting edge will be dependent on Taiwan and South Korea for the foreseeable future, a fact that has a lot of foreign policy relevance, especially in relation to China…

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    Posted in Economics, Foreign Policy | 1 Comment »

    President Trump Announces New Trade Deal With Mexico

    Tuesday, August 28th, 2018

    President Donald Trump announced a new trade deal with Mexico:

    President Donald Trump said Monday the U.S. and Mexico have reached a new trade deal, paving the way for the possible revision of the North American Free Trade Agreement.

    In an Oval Office announcement, Trump said the new agreement would be called the United States Mexico trade agreement and would replace NAFTA, which he said had “bad connotations” for the United States.

    “It’s a big day for trade,” he said. “It’s a big day for our country.”

    Trump said he intends to terminate NAFTA and that the U.S. would immediately begin negotiations with Canada, the third party in the trilateral trade pact that he has called the “worst deal ever.”

    “If they would like to negotiate fairly, we will do that,” Trump said. He said it’s possible that a separate deal could be reached with Canada.

    The announcement of a deal between the U.S. and Mexico comes after five consecutive weeks of talks between the two nations to revise key parts of the NAFTA.

    In a phone call with Trump, Mexican President Enrique Pena Nieto called the deal “something very positive for the United States and Mexico.”

    The U.S. and Mexico are hoping to get a final deal signed before Peña Nieto leaves office on Dec. 1. But before the U.S. can sign the deal, Congress must be given 90 days’ notice. A formal notice will be sent to Congress on Friday.

    Pena Nieto repeatedly expressed interest for Canada to be incorporated into the agreement. Trump said the U.S. would have a deal with Canada “one way or another.”

    “It’ll either be a tariff on cars or it’ll be a negotiated deal,” he said. “Frankly, a tariff on cars is a much easier way to go. Perhaps, the other would be much better for Canada.”

    In Mexico City, Marcelo Ebrard, Mexico’s incoming foreign minister under President-elect Andres Manuel Lopez Obrador, said Monday he was pleased to see the U.S and Mexico craft a new trade deal, according to Reuters.

    “We see the agreement announced today as positive progress … in the coming days we will continue in trilateral negotiations with Canada, which is vital to be able to renew the (trade) pact,” said Marcelo Ebrard, the future foreign minister.

    Douglas George, the Detroit-based consul general of Canada responsible for Michigan, Ohio, Indiana and Kentucky, sounded upbeat on Monday.

    “We’re encouraged by the optimism shown by our negotiating partners,” George told the Detroit Free Press on Monday. “Progress between Mexico and the U.S. is a necessary requirement for any renewed NAFTA agreement. While they’ve been negotiating, we’ve been in regular contact with them over the last weeks. We’ll continue to work toward a modernized NAFTA. We have a three-way negotiation that’s been ongoing.”​

    How can we analyze the costs and benefits of this agreement compared to NAFTA?

    Well, we can’t yet. The text of the agreement isn’t available. Ace of Spades zeroes in on this:

    According to a fact sheet from the United States Trade Representative, the agreement includes new rules of origin to incentivize manufacturers to source goods and materials in North America — including requiring 75 percent of auto content be made in the United States and Mexico.

    I’m going to guess that the point of this is to require Mexico to buy the bulk of the steel used in making cars from US/Mexican steel-makers, which probably means “US steel makers” in practice. Rather than, say, Chinese or Canadian or other makers.

    I’m not a fan of the trade warrior fetishization of steel over other industries, but as previously noted, President Trump’s unorthodox negotiating style seems to be lowering trade barriers for American products. The success with Mexico will likely increase pressure on Canada and Mexico to do the same.

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    Posted in Economics, Foreign Policy | No Comments »

    LinkSwarm for August 3, 2018

    Friday, August 3rd, 2018

    I’m hoping that this week is Peak Busy for me. Enjoy a Friday LinkSwarm:

  • Rasmussen: “Today’s [President Donald Trump] approval ratings among black voters: 29% This time last year: 15%.” Overall Trump approval rating at 50%.
  • Related: “President Donald Trump was lauded by inner-city pastors, including one who said he may go down as the ‘most pro-black president’ in recent history, during a White House roundtable on Wednesday that was focused on efforts to reform the prison system.” (Hat tip: Da Tech Guy via The Other McCain.)
  • ObamaCare is now optional:

    At long last, the Trump administration has created a “freedom option” for people suffering under Obamacare. A final rulemaking issued Wednesday reverses an Obama-era regulation that exposed the sick to medical underwriting. The new rule will expand consumer protections for the sick, cover up to two million uninsured people, reduce premiums for millions more, protect conscience rights, and make Obamacare’s costs more transparent. And unlike President Barack Obama’s implementation of his signature healthcare legislation, it works within the confines of the law.

    Federal law exempts “short-term, limited duration” health insurance from having to carry the unwanted coverage and hidden taxes Obamacare requires. Many consumers have understandably taken refuge from soaring Obamacare premiums in short-term plans.

    Hoping to force those consumers into Obamacare plans, the Obama administration sabotaged short-term plans by stripping them of crucial consumer protections. It cut the maximum plan term from 12 months to three months, and forbade issuers from offering “renewal guarantees” that allow the sick to continue purchasing short-term policies at healthy-person rates. State insurance regulators protested that these restrictions literally stripped sick patients of their coverage.

    Wednesday’s rule reinstates and even expands the consumer protections Obama curtailed. It allows short-term plans to last 12 months, and allows insurers to offer them with renewal guarantees.

    You read that right. Democrats curtailed consumer protections; Republicans are expanding them.

    (Hat tip: Stephen Green at Instapundit.)

  • Yesterday’s controversy de jour: “Sarah Jeong: NY Times stands by racist tweets reporter.”
  • Andrew Sullivan on the same topic:

    Is the newest member of the New York Times editorial board, Sarah Jeong, a racist?

    From one perspective — that commonly held by people outside the confines of the political left — she obviously is. A series of tweets from 2013 to 2015 reveal a vicious hatred of an entire group of people based only on their skin color. If that sounds harsh, let’s review a few, shall we? “White men are bullshit,” is one. A succinct vent, at least. But notice she’s not in any way attacking specific white men for some particular failing, just all white men for, well, existing. Or this series of ruminations: “have you ever tried to figure out all the things that white people are allowed to do that aren’t cultural appropriation. there’s literally nothing. like skiing, maybe, and also golf. white people aren’t even allowed to have polo. did you know that. like don’t you just feel bad? why can’t we give white people a break. lacrosse isn’t for white people either. it must be so boring to be white.” Or this: “basically i’m just imagining waking up white every morning with a terrible existential dread that i have no culture.” I can’t say I’m offended by this — it’s even mildly amusing, if a little bonkers. (Has she read, say, any Shakespeare or Emily Dickinson?) But it does reveal a worldview in which white people — all of them — are cultural parasites and contemptibly dull.

    A little more disturbing is what you might call “eliminationist” rhetoric — language that wishes an entire race could be wiped off the face of the earth: “#cancelwhitepeople.” Or: “White people have stopped breeding. you’ll all go extinct soon. that was my plan all along.” One simple rule I have about describing groups of human beings is that I try not to use a term that equates them with animals. Jeong apparently has no problem doing so. Speaking of animals, here’s another gem: “Dumbass fucking white people marking up the internet with their opinions like dogs pissing on fire hydrants.” Or you could describe an entire race as subhuman: “Are white people genetically disposed to burn faster in the sun, thus logically being only fit to live underground like groveling goblins.” And then there’s this simple expression of the pleasure that comes with hatred: “oh man it’s kind of sick how much joy I get out of being cruel to old white men.” I love that completely meretricious “old” to demean them still further. And that actual feeling: joy at cruelty!

    Another indicator that these statements might be racist comes from replacing the word “white” with any other racial group. #cancelblackpeople probably wouldn’t fly at the New York Times, would it? Or imagine someone tweeting that Jews were only “fit to live underground like groveling goblins” or that she enjoyed “being cruel to old Latina women,” and then being welcomed and celebrated by a liberal newsroom. Not exactly in the cards.

  • Venezuela’s socialist President Nicolas Maduro admits that socialism doesn’t work. Just think how much pain could be avoided if he had admitted this before people had to eat their dogs…
  • California Democratic Senator Dianne Feinstein had a Chinese spy on her staff for nearly 20 years. (Hat tip: Director Blue.)
  • Mistaken police call for an active shooter at a McAllen mall turns out to be an illegal alien robbery gang. Result? Seven illegal alien criminal suspects arrested.
  • Fort Myers, Florida: “Police Officer Dies After Being Shot By Illegal Alien.” (Hat tip: Ace of Spades HQ.)
  • “Noncitizens across U.S. find it easy to register to vote, cast ballots.” And some have even had other people do it for them without their knowledge… (Hat tip: Ace of Spades HQ.)
  • Sheldon Silver Sentenced: Seven in Sing Sing. (Actually, it’s not clear the former New York Assembly speaker will be serving his sentence in Sing Sing, but we can only hope, for the sake of the alliteration…)
  • Maryland forces 90-year old woman to tear down wheelchair ramp she built for he own home.
  • Kane bodyslams Democratic opponent in Mayor of Knox County race.
  • Tommy Robinson freed in the UK.
  • Related tweet:

  • Woman rams car for having a Trump bumper sticker.
  • China cracks down on illegal coffins. Which is to say, any coffins, since cremation is now mandated. Including seizing and destroying coffins old people have spent their entire lives saving for.
  • “He Made the Most Beautiful Films of All Time and They Put Him in Prison For It.” He being Sergei Parajanov and they being the Soviet Union. (Hat tip: Don Webb on Facebook.)
  • Liberal NYC lawyer who worked under both Bloomberg and De Blasio talks about just how bad De Blasio sucks:

    When Bill de Blasio became mayor of New York in 2014, things changed drastically. I started to hear rumblings early on. My former colleagues who were dedicated public servants were concerned by a large-scale rollback of Bloomberg’s strategic initiatives. These seemed to be based on partisan politics and black-and-white thinking as opposed to critical analysis. It was very disappointing for me since I had also voted for de Blasio.

    Although I was still working in the same social-services agency where I had remained at the end of Bloomberg’s term, my job changed radically. I had no contact with the new commissioner who appeared to be disengaged from substantive discussions about social-services programs for an extremely vulnerable population. In fact, she was much more preoccupied with renovating her office — I heard her new desk alone cost thousands of dollars. She even requested that a private bathroom be built for her. She had the attitude of an oligarch and was disturbed that she had to vet invitations to galas through legal and City Hall. She wanted carte blanche to attend expensive events.

    She also refused to meet with the lawyers in her department and she kept the door to her office closed and didn’t know the names of the people who worked in her agency.

    Under my commissioner, there were no benchmarks, no goals and she did not hold regular meetings with her general counsel. Under her tenure, the legal unit was gutted. And there were no consequences for failing to meet performance goals because there were no performance goals.

  • Comics video blogger Jeremy Hambly attacked at GenCon. “The Quartering also provided another update claiming five eyewitness have identified the attacker as Matt Loter, the owner of Elm City Games.” GenCon promptly expelled Loter. Ha! Just kidding!

  • Liberal Chicago Sun-Times reporter: “Donald Trump is going to be re-elected in 2020. The Democrats don’t have anyone who can touch him. Bank on it.”
  • “Millennial Drops Support For Socialism After Learning How Hard It Is To Get Avocado Toast In Venezuela.” The Babylon Bee has just been tearing it up recently. I probably need to add them to the blog roll.

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    Posted in Border Control, Communism, Crime, Democrats, Economics, Foreign Policy, Jihad, Media Watch, ObamaCare, Regulation, Republicans, Social Justice Warriors, Texas | No Comments »

    EU Cries Uncle On Trade Tariffs

    Thursday, July 26th, 2018

    When President Donald Trump announced that he was raising tariffs in an attempt to force other countries to lower trade barriers to American goods, All The Best People scoffed. That simply wasn’t the way the trade game was played, old bean. Other countries wouldn’t lower tariffs, they’d raise them on American goods and start a trade war, plunging the world into recession.

    Well guess what?

    President Trump announced during a Wednesday press conference that his meeting with European officials yielded key trade concessions, including an increase in American soybean and liquefied natural gas (LNG) exports to Europe, and a commitment to work toward eliminating non-auto tariffs entirely.

    “We have agreed today to work toward zero tariffs, zero tariff barriers and zero subsidies on non-auto industrial goods,” Trump said, reciting a joint statement crafted with European Commission president Jean-Claude Juncker. “We will also work to reduce barriers and increase trade in services, chemicals, pharmaceuticals, medical products, as well as soybeans. The European Union is going to start almost immediately to but a lot of soybeans, they’re a tremendous market, to buy a lot of soybeans from our famers in the midwest primarily.”

    “The European Union wants to import more liquefied natural gas from the United States and they’re going to be a very big buyer. We’re going to make it much easier for them but they will be massive buyers, so that they will be able to diversify their energy supply,” he added.

    Trump pledged to “not go against the spirit” of ongoing negotiations, presumably by refraining from implementing further tariffs, and said he would “resolve” existing “retaliatory tariffs.”

    Juncker also vowed to work toward reducing existing tariffs, which were first implemented last month in tit-for-tat fashion after the Trump administration slapped 10 and 25 percent tariffs on steel and aluminum respectively and the EU retaliated by placing tariffs on just over $3 billion in American goods. The E.U. trade chief also confirmed that he had in fact committed to importing more soy-beans and natural gas from the U.S.

    The agreement comes after a series of reports Wednesday morning that indicated Trump is advocating the implementation of 25 percent tariffs on foreign-made cars, against the advice of his trade advisers. The specifics regarding auto tariffs were reportedly still being developed as Trump’s meeting with Juncker came to a close.

    As always with trade agreements, the devil is in the details. If the EU does drop all the tariffs Juncker has promised, then this will be a big win for President Trump’s unorthodox negotiating style. His immediate presidential predecessors seemed to mostly leave the issue of achieving lower trade barriers to underlings negotiating multilateral agreements like TPP or GATT. President Trump is the first to pursue a policy of personally negotiating from strength to lower trade barriers to American commerce. This was a risky strategy that most (myself included) believed would not work. But right now it appears to be working.

    There’s no doubt that if President Trump’s trade strategy does work, those decrying it now will still sniff at Trump “winning the wrong way” by “alienating allies…”

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    China’s Semiconductor Play

    Saturday, June 23rd, 2018

    This is interesting:

    Beijing is set to announce a new fund of about 300 billion yuan ($47.4 billion) for the development of China’s semiconductor industry, The Wall Street Journal reported Friday, citing sources familiar with the matter.

    The government-backed China Integrated Circuit Investment Fund is heading up the new investment vehicle, the report said. The fund was not available for comment outside of Beijing business hours.

    The 300 billion yuan fund would go toward improving China’s ability to design and manufacture advanced microprocessors and graphic-processing units, among other initiatives, the Journal said, citing one source. The size of the fund and other details could change, another source told the newspaper.

    Last week, Chen Yin, spokesman and chief engineer of China’s Ministry of Industry and Information Technology, said the fund welcomes foreign investment.

    “The second phase of fundraising is underway, and we welcome foreign companies to participate in this round of financing,” Chen said at a news conference in Beijing, according to a report from state-run English-language newspaper China Daily.

    Beijing is seeking to develop domestic technological innovation in areas such as robotics and semiconductors through an initiative called “Made in China 2025.” One of the U.S. trade delegation’s aims in talks with China this week was to ask Beijing to stop subsidies of that program. The visit ended Friday with little apparent progress in resolving a trade dispute between the two countries.

    Should we worry? About that, no. Semiconductors are a very complex and expensive game to play. China is already in the game, and goodly portion of any semiconductor spending in China goes into the pockets of American and Japanese fab equipment suppliers like Applied Materials, LAM Research and Tokyo Electron. China has a native semiconductor equipment industry, but it’s hardly setting the world afire.

    Tsinghua Unigroup is already in the process of building three fabs at a cost of $70 billion, focused on the memory business. Samsung is currently the top player in this space, followed by Hynix and Micron, and right now that space is pretty profitable.

    In China the question is always how much of that investment is real, and how much is illusion. A lot of those “under construction” fabs never materialize, either unable to attract investors or having their funds magically siphoned off to some other enterprise. Also, memory chips are an extremely volatile business: In boom times (like now), they make money hand-over-fist. During busts (which are always around the corner), memory fabs barely break even, which is a big problem if you’re trying to earn back your $10 billion investment in a cutting edge 300mm fab.

    A bigger concern for any foreign investor who helps build a fab in China to serve the Chinese manufacturing market is the blatant intellectual property theft, and China retaliating when a foreign manufacturer blows the whistle:

    Three weeks ago, Micron and South Korean chipmakers Samsung and SK Hynix all reported that the Chinese government had launched antitrust probes into their firms, and accused them of setting artificially high prices for memory chips.

  • Yes, but: American companies and the U.S. government have long been suspicious about the link between China’s anti-monopoly policies and its industrial goals.
  • “They want access to the intellectual property. They need us to teach them how to do it. Once they have the industry, they want to push us out,” an industry source familiar with China’s investigation into Micron tells Axios.
  • The price hikes, the source says, are largely due to a boom in demand for memory chips in everything from smartphones to autonomous vehicles. China’s investigation is “a clear indication that they’re not ready to make [semiconductors] work,” says the source.

    • Micron’s fight to protect its IP is not new. Other U.S. firms have run up against the same Chinese antitrust policies or regulations and have been forced to strike deals with Beijing.

  • The New York Times’ Paul Mozur dove into the story a heist of Micron’s crown jewel — its chip design — in Taiwan, where the company keeps its trade secrets.
  • Qualcomm tangled with China: “To get back in Beijing’s good graces, the company agreed to lower its prices in China, promised to shift more of its high-end manufacturing to partners in China, and pledged to upgrade the country’s technology capabilities,” the New York Times’ David Barboza reports.
  • The same thing has happened to IBM and Apple and others.
  • “‘I’m not sure who’s fought China and won, just like I’m not sure who’s fought a casino and won in the long run,” says Bruce Mehlman, who was an assistant secretary of commerce for technology policy under the Bush administration and now lobbies for several tech companies.
  • Worth noting: Japan, South Korea and Taiwan all have thriving semiconductor industries, too. The difference is, these countries accept competition, whereas Beijing wants to give its national champions the advantage, Jimmy Goodrich, vice president of global policy at the Semiconductor Industry Association, says.
  • The bottom line, per the industry source: “We’re all dependent on China because everything is assembled there.”

    • This is a bigger problem, and will remain a bigger problem until American companies commit to building the infrastructure for a full-blown American flexible manufacturing supply chain to rival China’s.

    All that said, IP theft only gets you so far in semiconductors. By the time you’ve stolen all the IP you need for a current generation chip, chances are good your rivals have already started to fab the next generation of product. And it’s not just the chip design you need to steal; you also need to steal the hundreds, if not thousands, of process step tweaks you need to properly fab 50 layer, 7nm node chips at acceptable uniformity across 300mm wafers. Screw up any one of those steps and your wafer yields crash and you’re making really large, expensive coasters.

    Equally challenging for China is hiring qualified semiconductor engineers in China, people with the knowledge and experience to correct process steps to improve yields. There aren’t nearly enough being produced domestically, so China has recently started setting up satellite offices in America and Japan.

    Tawain, on the other hand, has all the pieces to the puzzle (save, once again, semiconductor equipment manufacturing), with TSMC dominating the global foundry market. Foundries don’t design their own chips, they manufacture chips designed by others, and TSMC’s mastery of process control is probably second only to Intel’s. This is one reason defending Taiwan is in America’s national interest.

    The Trump Administration should continue to push China on the intellectual property issue, and if the cost of doing business in China is giving away your intellectual property, foreign companies should refrain from manufacturing in China. (Alas, a resolution that’s easier said than done…)

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    Posted in Economics | 5 Comments »

    Eurocrats 1, Italian Voters 0

    Tuesday, May 29th, 2018

    Remember the Eurozone crisis? It’s back!

    Or, to be more accurate, it never went away.

    Today’s locus of instability is Italy, where two Euroskeptic parties, one left (Five Star Movement) and one right (the League, AKA the Northern League), were prevented from forming a coalition government by the country’s Europhilic President Sergio Mattarella, who vetoed their pick of Paolo Savona for finance minister because he advocates leaving the Euro. Like Spain, Italy found out that if they went too strongly against the EU’s wishes, they’d simply be required to keep voting until they got it “right.”

    The current reckoning has been a long time coming:

    Accepting Italy as one of the eurozone’s founding members was a decision only made possible by ignoring common sense, by twisting statistics, and by making a mockery of the rules. But it was a Pyrrhic victory: Italy was allowed to trick its way onto a voyage that damned it. The euro simply did not fit the realities of Italy’s economy or its politics. By dramatically cutting the country’s financing costs (borrowing lire would have carried a significantly higher nominal cost) adopting the single currency allowed Rome to avoid tackling the country’s high debt load, a debt load that was made all the more dangerous now that it was all denominated in a ‘foreign’ currency. Italy could no longer print lire to pay off its creditors.

    When the eurozone crisis hit, Italy was one of the victims, and so, in some respects was its democracy. In something that came uncomfortably close to a coup, the eurozone leadership essentially used Italy’s financial fragility as a lever to secure the replacement in 2011 of Prime Minister Berlusconi by a Brussels man, Mario Monti, a pliable, unelected proconsul. Next time you hear Brussels lecturing Eastern Europeans on democracy remember that.

    Italy weathered the crisis in a ‘just a flesh wound’ sort of way. Its problems became chronic, rather than acute, if that’s the correct adjective to describe the consequences of staying stuck in the euro’s deflationary trap: High rates of unemployment and anemic economic growth.

    The Independent:

    Per capita GDP in Italy is still more than 8 per cent lower than it was when Lehman Brothers went bust in 2008. Quite incredibly, it is even lower than it was when the country joined the eurozone back at the turn of the millennium. Unemployment stands at 11 per cent, down from a peak of 13.1 per cent in 2014, but still double the 5.8 per cent low seen in 2007.

    As the largest of the PIIGS and the third largest economy in the Eurozone, Italy’s participation in the Euro is a lot more vital than Greece’s, which is why the EU has actively been trying to crush any hint of (pick your neologism) Quitaly or Italeave.

    Never mind the fact that, as in Spain, Italian voters want to have their cake and eat it too, advocating polices (in the form of “rolling back pension reforms and government subsidies to the unemployed”) that would only pile on further debt in a country that already has a national debt running at over 130% of GDP, secondly only to Greece in the Eurozone. That doesn’t change the fact that Italy has “ceded its sovereignty to the European Union and international financial markets.”

    Naturally, traders have responded to the crisis by selling off Italian stocks and bonds.

    Stay tuned…

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    Posted in Budget, Economics, Elections, Foreign Policy | No Comments »

    Christmas Video: Deck the Halls With Macro Follies

    Monday, December 25th, 2017

    Economic primer cast as Christmas holiday commercial. Silly, but slicker production values than you usually see.

    Merry Christmas, one and all!

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    Posted in Economics, video | No Comments »

    Venezuela Officially Bankrupt

    Thursday, November 16th, 2017

    The inevitable has happened: The Magic Power of Socialism™ has officially bankrupted Venezuela:

    Milton Friedman once joked that if you put the government in charge of the Sahara Desert in five years there would be a shortage of sand. He could have been talking about Venezuela and its oil wealth. But it is no joke.

    On Monday Caracas missed interest payments due on two government bonds and one bond issued by the state-owned oil monopoly known by its Spanish initials PdVSA. Venezuela owed creditors $280 million, which it couldn’t manage even after a 30-day grace period.

    Venezuela is broke, which takes some doing. For much of the second half of the 20th century, a gusher of oil exports made dollars abundant in Venezuela and the country imported the finest of everything. There were rough patches in the 1980s and 1990s, but by 2001 Venezuela was the richest country in South America.

    Then in 2005 the socialist Hugo Chávez declared that the central bank had “excessive reserves.” He mandated that the executive take the excess from the bank without compensation. Today the central bank has at best $1 billion in reserves.

    Falling oil prices are partly to blame, but the main problem is that chavismo has strangled entrepreneurship. Faced with expropriation, hyperinflation, price controls and rampant corruption, human and monetary capital has fled Venezuela.

    As of Tuesday evening, the Investment Swaps and Derivatives Association still had not declared Venezuela in default. That matters because this will trigger the insurance obligations inherent in the credit default swaps. But S&P Global Ratings declared the country in default Monday. On Tuesday morning the Luxembourg Stock Exchange issued a suspension notice for the bonds with missed payments.

    From the richest nation in latin America to one where people have to eat their own pets to stave off starvation.

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    Posted in Communism, Economics, Foreign Policy | 3 Comments »

    LinkSwarm for October 27, 2017

    Friday, October 27th, 2017

    Let’s take a break from talking about Hillary Clinton’s scandals so we can talk about Barack Obama’s scandals. At the end of the day, though, there’s a significant chance they all tie up together in one giant knotted scandal tangle…

  • “‘Smoking gun’ email reveals Obama DOJ blocked conservative groups from settlement funds“:

    While Eric Holder was U.S. attorney general, the Justice Department allowed prosecutors to strike agreements compelling big companies to give money to outside groups not connected to their cases to meet settlement burdens. Republican lawmakers long have decried those payments as a “slush fund” that boosted liberal groups, and the Trump DOJ ended the practice earlier this year.

    But internal Justice Department emails released Tuesday by Goodlatte indicated that not only were officials involved in determining what organizations would get the money, but also Justice Department officials may have intervened to make sure the settlements didn’t go to conservative groups.

    In one such email in July 2014, a senior Justice Department official expressed “concerns” about what groups would receive settlement money from Citigroup — saying they didn’t want money going to a group that does “conservative property-rights legal services.”

  • The IRS has finally admitted that it illegally targeted conservatives:

    In an unprecedented victorious conclusion to our years-long legal battle against the IRS, the bureaucratic agency has just admitted in federal court that it wrongfully targeted Tea Party and conservative groups during the Obama Administration and issued an apology to our clients for doing so. In addition, the IRS is consenting to a court order that would prohibit it from ever engaging in this form of unconstitutional discrimination in the future.

    In a proposed Consent Order filed with the Court yesterday, the IRS has apologized for its treatment of our clients (36 Tea Party and other conservative organizations from 20 states that applied for 501(c)(3) and (c)(4) tax-exempt status with the IRS between 2009 and 2012) during the tax-exempt determinations process. Crucially, following years of denial by the IRS and blame-shifting by IRS officials, the agency now expressly admits that its treatment of our clients was wrong.

  • House Republicans manage to pass something resembling a budget. Is it a good or bad budget? “Answer cloudy, ask again later.”
  • How Democrats committed political suicide passing the assault weapons ban in 1994.

    “So mostly everybody is like jumping for joy. And I’m walking around like a zombie. But nobody really gave a damn what my feelings were. So I went back to the office and I got a call from Congressman [Jack] Brooks who is the congressman from Texas and Chairman of [the Judiciary] committee and he said, ‘Well you just lost me my seat.’ And he and I had a good relationship. I said, ‘Well, you voted against it. The president doesn’t want you to do anything going forward that would jeopardize you. And if we come back from the conference and all that stuff…’ And he was just really down, down, down… He said, ‘my seat is done.’”

    Snip.

    In all, eight Democratic Senators lost their races and 54 Democratic House members too. The list included those who opposed the assault weapons ban but reluctantly voted for it (like Speaker Tom Foley) and those who had tried to strip the crime bill of the assault weapons ban, like Brooks.

  • Left-wing heroes that treat women like garbage. In addition to Harvey and Teddy, there’s Bill Clinton, Andreas Baader, several Black Panthers, and assorted “male feminists,” though it occasionally veers into the weeds.
  • “What Harvey Weinstein tells us about the liberal world.”

    Harvey Weinstein seemed to fit right in. This is a form of liberalism that routinely blends self-righteousness with upper-class entitlement. That makes its great pronouncements from Martha’s Vineyard and the Hamptons. That routinely understands the relationship between the common people and showbiz celebrities to be one of trust and intimacy.

    Countless people who should have known better are proclaiming their surprise at Harvey Weinstein’s alleged abuses. But in truth, their blindness is even more sweeping than that. They are lost these days in a hall of moral mirrors, weeping tears of admiration for their own virtue and good taste.

    You know what’s really shocking? That piece is from liberal commentator Thomas What’s the Matter With Kansas Frank…

  • Besides Hollywood, you know what other powerful liberal establishment is full of sexual harassers? The EU Parliament.
  • Joe Bob Briggs on how illegal aliens knock Americans off the lowest rungs of the economic ladder:

    One of the cruelest things we do to prisoners is pump them up with the idea that, if they educate themselves in prison and learn a trade, they will be able to work when they get out. This is a lie. They probably won’t be able to work, because, aside from typical job-interview demerits like too many nasty facial tattoos, that felony conviction automatically eliminates them on most application forms. As late as the ’70s, in Arkansas, it was considered a badge of civic pride if you hired a couple of convicts and a couple of blind, deaf, or wheelchair-bound citizens at your business—which is why we didn’t use the term “hardcore” for any of the unemployed.

    Would it be a stretch to say all these convicts have been replaced by young able-bodied illegals? I don’t think so.

    Snip.

    “Get rid of the illegal Mexicans and see how fast that wage goes up to $15 on its own, no government intervention needed.”

  • “Tucker Carlson: If Robots Are Killing Jobs, Why Allow 1M Low-Skilled Workers To Immigrate Legally?” (Hat tip: Director Blue.)
  • Flake flakes.
  • Boston “fair wage” pizza shop dedicated to “economic justice and healthy food” fails. (Hat tip: Ace of Spades HQ.)
  • Young Chinese are taking a pass on Communist propaganda.
  • Evidently actually reading the Constitution is not a requirement to be head of the DNC. (Hat tip: Stephen Green at Instapundit.)
  • Another week, another fake hate crime. (Hat tip: The Other McCain.)
  • The “sexual assault” allegation against George H. W. Bush is just silly.
  • Program automatically produces Slashdot headlines. Too bad these are fake, as I would totally read “Sun Sues New Star Trek To Stop The Math.”
  • Evergreen cartoon:

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    Posted in Border Control, Budget, Communism, Crime, Democrats, Economics, Foreign Policy, Guns, Republicans | No Comments »

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