Quoteworthy: "There have been thoughtful, respectful, productive conversations but I don’t know where this is going to end up." — Securities and Exchange Commission Chair Gary Gensler, referring to talks between US and China on possible delistings of Chinese companies listed in US
Apple weighs more memory chip suppliers, including China
Apple Inc is exploring new sources of the memory chips that go into iPhones, including potentially its first Chinese provider, after a production disruption at a key Japanese partner exposed the risks to its global supply.
It is considering expanding a roster of suppliers that already includes Micron Technology Inc and Samsung Electronics Co after Kioxia Holdings Corp lost a batch of output to contamination in February, people familiar with the matter said. While Samsung and SK Hynix Inc — the world’s largest makers of flash memory — are likely to pick up the slack, Apple remains keen to diversify its network and offset the risk of further disruption from the pandemic and shipping snarls, they said.
The iPhone maker is now testing sample NAND flash memory chips made by Hubei-based Yangtze Memory Technologies, the people said, asking not to be identified discussing private deliberations. Apple’s been discussing the tie-up with Yangtze, owned by Beijing-backed chipmaking champion Tsinghua Unigroup Co, for months though no final decisions have been made.
A contract for Yangtze and its well-connected parent would be a milestone for China’s ambitions to build a world-class domestic chip industry that can compete with the US. For semiconductor players aspiring to build a business on a national scale, memory is typically a gateway because production capabilities count more than the intricate designs needed for advanced processors and other logic chips although it requires enormous investment to sustain.
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Tying up with Yangtze could open Apple to criticism back home given ties between Washington and Beijing are fraying over China’s ambiguous stance on the Ukraine war as well as American efforts to contain its technological ascent. US lawmakers have long railed against the way Beijing champions and subsidises local industry.
The testing and discussions are no guarantee Yangtze chips will ultimately ship. It is unclear if the Chinese firm can convince Apple of its dependability, the people said. Yangtze Memory technology is at least one generation behind and could at best be a backup choice to Apple’s main suppliers like Korea’s Hynix and Samsung, they said. Even if Apple qualifies Yangtze’s components, it will need to gauge its reliability in terms of yields and quality. It took years for Beijing-based BOE Technology Group Co, another prominent Chinese Apple supplier, to reach high-volume production of iPhone displays.
Yet because memory chips are largely commoditised, Apple could conceivably decide to use Yangtze’s product in lower-end devices such as the iPhone SE, the people said. Representatives for Yangtze Memory and Apple declined to comment.
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Component shortages and Covid-triggered logistics issues have plagued the world’s biggest consumer electronics brands for the past two years, prompting a rethink of supply chains that once relied on just-in-time inventory and global networks. In February, Kioxia halted production at two plants in Japan due to material contamination, highlighting the risks of over-reliance on a particular supplier. That could help push flash memory chip prices up 5% to 10% in the June quarter, industry tracker Trendforce estimated. — Bloomberg
China tech stocks fall as US signals tough stance on delisting
Chinese technology stocks slid after the US securities regulator played down the prospect of an imminent deal to keep local firms listed on American exchanges.
The Hang Seng Tech Index, which tracks some of the biggest Chinese tech firms, fell as much as 2.3% on Thursday, poised to snap a three-day advance. Baidu Inc and Meituan were among the worst performers.
A spate of recent regulatory developments is making traders wary again, reminding them of the risks of investing in China stocks. The Securities and Exchange Commission added Baidu to a growing list of Chinese firms that may get kicked off American stock exchanges barring better audit disclosure. On Thursday, the Chinese securities regulator said talks are continuing with the US on the issue.
Just a day earlier, Beijing vowed greater scrutiny on online streaming platforms, spooking investors who were expecting regulatory crackdowns to ease after Vice-Premier Liu He’s mid-March pledge to stabilise capital markets and support the economy. China’s state council reiterated similar promises again late Wednesday.
There seems to be “irreconcilable difference” between the two countries, said Hao Hong, head of research at Bocom International Holdings in Hong Kong. “China wants to disclose some but not all companies but the US demands full disclosure and compliance is measured on a country level, not on individual companies level.”
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“I think Chinese firms should be preparing for their eventual return,” Hong added.
Also weighing on the outlook for Chinese equities was the country’s lockdowns in major cities that are disrupting business operations and hurting consumption. China’s purchasing managers’ indexes showed both manufacturing and services activity falling into contraction in March, missing estimates. Economists have been cutting growth forecasts of late, citing the Covid outbreak.— Bloomberg
PM Lee says Ukraine war poses ‘awkward questions’ for China
Singapore Prime Minister Lee Hsien Loong said Russia’s invasion of Ukraine raises “awkward questions” for China because it violates Beijing’s closely-held principles of territorial integrity, sovereignty and non-interference.
Lee was asked during an event organised by the Washington-based Council on Foreign Relations on Wednesday whether he thinks China has paid a political price in the region for maintaining ties with Russia.
“I think it presents them with awkward questions because on Ukraine, it violates the principles which the Chinese hold very dearly — territorial integrity, and sovereignty and non-interference,” Lee said. “And if you can do that to Ukraine, and if the Donbas can be considered to be enclaves and maybe republics,” he added before the moderator interrupted to ask what about Taiwan.
“Or other parts of non-Han China?” Lee then said. “So, that is a very difficult question.
His remarks echo concerns in Asia and elsewhere on whether China would use the war in Ukraine to advance its own strategic interests closer to home. Much of the Asia-Pacific depends on Beijing as a key economic partner and Lee said China’s refusal to distance itself from Russia will not negatively impact its standing in the region.
“I do not think that in the region, the fact that China refuses to distance itself from Russia, costs it,” he said. “All the countries in the region — they worry about sovereignty and the principles of the UN charter — but at the same time, they want their ties with China and quite a few of them have significant ties with Russia, for example, India.”
Most Asian nations have refrained from imposing sanctions against Russia even as several condemned the invasion at the United Nations. Singapore is the only country in Southeast Asia to do so thus far with Lee saying during a joint statement with President Joe Biden on Tuesday that the territorial integrity of countries “must be respected”.
Since the war started, Beijing has sought to portray itself as neutral. China has issued statements supporting Ukraine’s sovereignty and expressed concern about civilian casualties while supporting Russia at the UN and blaming the US for provoking the war by encouraging the expansion of the North Atlantic Treaty Organization.
Lee said the developments in Ukraine are bound to have a big impact on US-China relations. “It will strain them; it has already strained them,” he said. “You hope that with contacts between President Biden and President Xi at the highest level, rational calculations will be made, and the relations will hold. In other words, not become worse than they already are.”
Singapore’s Prime Minister also said he thought China unlikely to volunteer a mediator role in the war. Minister for Foreign Affairs Vivian Balakrishnan earlier this month said he hoped China will use its “enormous influence” on Russia to help end the conflict.
“I do not think it is very likely that the Chinese will volunteer for this task,” Lee said. “I think they would much rather somebody else stand up to it and I do not think that lack of a mediator is the problem in Ukraine.” — Bloomberg
Ukraine’s economy to shrink by a fifth this year, EBRD says
Ukraine’s economy will shrink by a fifth this year before bouncing back in 2023, according to the European Bank for Reconstruction and Development, under a scenario where a ceasefire is brokered in a couple of months.
The forecast is subject to major downside risks “should hostilities escalate or should exports of gas or other commodities from Russia become restricted,” the EBRD said in its biannual Regional Economic Update published on March 31.
Russia’s invasion of Ukraine has created the greatest supply shock since at least the early 1970s, the EBRD said, snarling supply chains, upending the energy trade and threatening food exports due to both countries’ key agricultural sectors.
“Currently, the war is happening on territories that produce 60% of Ukrainian GDP,” the EBRD said in the report. About 30% of businesses have stopped production, and electricity consumption is estimated at 60% of pre-war levels, it added.
The forecasts assume that a cease-fire will be negotiated within a couple of months, and reconstruction of the country can begin in 2023, the economy will grow 23% next year, it said.
Russia’s economy is forecast to shrink by 10% this year and stagnate in 2023, according to the EBRD. Russia’s recession could be deeper if Europe joins a ban on its oil imports or severely reduces the use of Russian natural gas.— Bloomberg
