Sunday, December 4, 2011

Hua Hong NEC and Grace merger finally going through?

Reuters claims that the merger of Hua Hong NEC and Grace is nearly a done deal with the last hurdle being regulatory approval (link here).

Monday, October 3, 2011

Foxconn and Brazil: Wild Promises and the Realities of Currency Appreciation

Apparently, Foxconn is growing cold on making major manufacturing investments in Brazil (link here).  Well, knock me over with a feather.  As I pointed out in a post earlier this year (link here), it was always highly unlikely (read: never gonna happen) that Foxconn would invest in short order 12 billion USD in manufacturing in Brazil, a figure that represents more than its total manufacturing investment in China.  In the meantime, the Brazilian Reais has continued to appreciate against the dollar (and was appreciating against the renminbi until late July), and the Brazilian government wisely has bargained hard with Foxconn over tax breaks, technology transfer and the like.  Of course, Foxconn's stand is that the Brazilian government has to make it worth Foxconn's while to invest, but such a stance will probably only increase pressure for the Brazilian government to do something to protect local manufacturing due to the currency appreciation shock.  Indeed, for those Brazilians disgruntled by what they perceive to be Foxconn's tough bargaining (would we really expect anything less from hard-nosed Terry Gou?), protectionist measures would likely be most welcomed because they would work to undermine Foxconn's leverage i.e. the firm would have to set up some facilities in Brazil to get around the protectionist barriers whereas right now it can happily ship its goods from China.

Saturday, October 1, 2011

Chinese Yahoo: Who Cares(?)

Jack Ma, ever the provocateur, casually mentioned his interest in buying Yahoo at a seminar at Stanford University (link here).  The FT wondered whether this would be acceptable to Americans.  Certainly in Washington there will be the usual political grandstanding about Chinese investments in American "high-tech" firms, but given Yahoo's increasing irrelevance, would anyone outside the Beltway even care?

Friday, September 30, 2011

Global 450 Consortium's Albany R&D: Boon or Boondoggle?

The announcement Tuesday that the Global 450 Consortium (consisting of IBM, Intel, Samsung, GlobalFoundries and TSMC) will invest $4.4 billion in a R&D center in Albany has generated some excitement and considerable skepticism.   For the latter, take a look at the recent Mannerism's post (link here).  Beyond the vagueness of the promised R&D goals that Manners points out in his post, there are additional questions of the funding.  According to the companies and the New York state government, there are no state subsidies involved.  That should reassure those who fear that the project is simply a boondoggle by companies to extract subsidies out of governments' concerned about competitiveness.  However, the details of the plan have not been released and, as always, the devil is in the details.  One crucial area is tax breaks.  The state may not be giving these firms money, but IBM, which is reportedly spending 3.5 of the 4.4 billion, as a prominent New York corporate tax payer may benefit heavily from tax breaks.  Large tax breaks for a New York-based firm to do R&D where it has always done lots of R&D has the stench of a boondgoggle.  However, what makes economic and industrial policy so difficult is that it is hard to suss out from the beginning what benefits this large scale R&D project will have for upstate New York and the wider US semiconductor industry (the latter of course not being a concern of NY state pols).  We'll really only know if this project has proven to be a boon to the local economy and American industry many years into the operations.  Nevertheless, with firms like IBM no longer shy about moving highly skilled jobs to other locations around the world, one does not have to be a cockeyed optimist to think these operations may turn out to be slightly more of a boon than a bane, but only time and details of the tax deals will tell us which one it is.

Tuesday, August 9, 2011

TY Chiu is back at SMIC

The good news for SMIC is that TY Chiu is becoming CEO of SMIC (link here).   His expertise is running foundry fabs hyper-efficiently.  These skills should help SMIC's operations and were sorely missed at the SMIC since he left the firm the first time around in 2005. The bad news is that the conflicts between state shareholders and private shareholders and among the state shareholders of SMIC have not been resolved. The poor market outlook for the foundry in the coming months just adds to what look to be turbulent times for SMIC.

Tuesday, July 5, 2011

SMIC's Takeover

As I predicted last February (link here), the Chinese state's control of SMIC's board has finally had some adverse consequences for the firm.  The widely reported failure of CEO David N. K. Wang to get re-elected to the board is due to Datang's long-standing bid to turn SMIC into its subsidiary according to local media reports.  The fact that the other state board members abstained from voting thus ensuring Wang went down in defeat is not reassuring.  More disturbing still, in the wake of Wang's defeat Walden's Lip-Bu Tan and the other real independent director, Kawanishi, have resigned.  Given that Wang was in charge when the firm turned its first annual profit, apparently no good deed goes unpunished.

Wednesday, April 13, 2011

Clever Terry Gou

Clever Terry Gou really knows how to play both sides of the Taiwan Strait.  He can wring concessions out of Taiwan's government for his industrial park in Tucheng with one hand and with the other scratch the back of the PRC.  How else can one explain the recent announcement (link) that Foxconn will invest 12 billion US in Brazil just as Brazilian president, Dilma Rousseff, is visiting China?  Somebody had to help the PRC out by providing a little hard cash to go along with all the empty rhetoric about the many common interests of BRICs.  Like many investment announcements, this one is inflated and much more inflated than most.  Invest in Brazil, yes.  Invest in Brazil several multiples of what Foxconn's total declared investment in China, no way

Tuesday, March 15, 2011

Rare Earth Elements: Another Environmental Fiasco in China's Green Industries

This article from SCMP (link here) documents the horrendous environmental and health effects of China's rare earth elements industry.  The irony of course is that rare earth elements are a critical component in many "green" technologies.  And yet, these very un-green externalities are common across China's green industries.  See for example the heavy energy consumption of solar panel production in China.

Monday, March 14, 2011

Hong Kong in the Five-Year Plan

Hong Kong has finally gotten some significant space in the new 5YP document (see today's SCMP here).  However, calling for Hong Kong to be the "dragon head" of Pearl River Delta financial system does not really offer much reassurance that the long term goal is not to have Shanghai replace Hong Kong as China's main financial center.  Indeed, two years ago the State Council named 2020 as the year Shanghai will be a global financial center and the new 5YP acknowledges Shanghai as the hub for RMB financial services with Hong Kong given the smaller role of hub for international RMB services.  Siu-Kai Lau of the Central Policy Unit has trumpeted Hong Kong's 5YP-designated role as showing up Guangzhou's bid to become the financial hub of the Pearl River Delta.  True as this may be, Hong Kong should not really be competing with Guangzhou in the first place.  Oh well, at least Hong Kong can comfort itself with the fact that the snail's pace of liberalization towards the capital account openness that Shanghai will require to become a global financial center means that Hong Kong will remain the financial window on the world for China beyond the 2020 deadline.