News of the week summary - 07/09/2023
US - China technology war intensifies
The United States is reportedly planning to restrict Chinese companies'
access to cloud-computing services provided by Amazon and Microsoft. Washington
is contemplating the requirement for cloud service providers to seek government
permission before serving Chinese firms that use these platforms for training
AI models. Microsoft Azure and Amazon Web Services are among the global leaders
in providing internet computing to enterprises and compete with local Chinese
providers through datacenter partnerships.
These restrictions are part of the Biden administration's efforts to
tighten export controls announced in October, primarily aimed at restricting
the sale of artificial-intelligence chips to China. The broader proposal from
the Commerce Department, expected in July, aims to revise export controls,
making it more challenging to sell certain chips to China without a license.
This has resulted in Beijing restricting the exports of gallium and germanium, along with their chemical compounds, effective from August 1.
Gallium and germanium are not commonly found in nature but are produced in small quantities as byproducts in the refining of other materials like zinc or alumina. Although these metals have niche markets, their applications are widespread in chipmaking, communications equipment, and defense. Gallium is crucial in the production of compound semiconductors used in TV and mobile phone screens, solar panels, and radars, while germanium is used in fiber-optic communication, night-vision goggles, and space exploration. China is the primary source of both metals, accounting for a significant portion of the global supply, and alternative sources may not meet demand if prices rise.
However, if China's export
restrictions lead to soaring prices, other suppliers may increase production,
and recycling could play a significant role in providing these metals. Some
mining projects, like the Kipushi zinc project in the Democratic Republic of
Congo, have higher concentrations of these metals.
Two exchange-traded funds (ETFs)
tracking corporate credit saw massive outflows of nearly $2 billion after
stronger than expected payrolls data. Blackrock's High Yield Corporate
Bond ETF witnessed outflows of $1.13 billion, the largest withdrawal
since March, while the Investment Grade Corporate Bond ETF of the same company saw outflows of about $760 million.
Exchange-Traded Funds (ETFs) are investment funds that are traded on stock exchanges, similar to individual stocks. They offer investors a way to buy a diversified portfolio of assets constructed by the seller of the ETF, and can track indexes like the S&P500 or the CAC40.
Market sentiment shifted after the data on job market strength increased expectations of a Fed rate hike. The withdrawals from credit ETFs are attributed to the market's belief that stronger job growth will lead to more Fed hikes, making the yields on existing bonds traded on the ETF less atractive.
India aims to produce semiconductors by next year
India is gearing up to build its first
semiconductor assembly plant, marking a significant step in the country's efforts
to manufacture its own microchips. Construction is set to begin in August, and the plant
aims to produce domestically manufactured microchips by the end of 2024. Indian Prime Minister Modi has led a $10 billion chip-making push.
India is not only focused on chip assembly but also actively seeking support from various partners, including suppliers of chemicals, gases, and manufacturing equipment, as well as groups interested in establishing silicon wafer fabrication plants. This ambitious initiative is part of India's broader goal to build capacity in areas like smartphones, batteries, electronics, and electric vehicles.
India has been working to strengthen its tech manufacturing sector, but it lags behind East Asian economies, particularly China, which started earlier and offered more subsidies.
This project aligns with increased collaboration between the United States and India in the semiconductor industry, as it is supported by the American company Micron Technology which is investing $800 million.