MARKET REPORT
SHORT READ PART 1
2023 JULY ISSUE
Written by : Andrew Sia
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From the Desk of the Publisher
The first report has been highlighted for “key read”, the rest are just reports covering the other hot topics.
We mentioned about a new Covid variant, it is coded as “Arcturus” or XBB.1.16 to be exact. We hope that it will soon slowdown its spreading and allow us to live in normalcy.
In our last report we talked about the recover of China’s economy. We hope that it can continue and the joblessness of its young people can also improve.
Contents:
Calling Stop to Artificial Intelligence Development at GPT-4
Political Ads Are Challenged by Brussels Regulations for Online Political Campaign
Sri Lanka’s Latest Bailout by IMF
Reincarnation of Kunshan, a County Near to Shanghai
LG is Taking Part in Battery Manufacturing in the US
Billboard of Billionaires
Global Supply of Cobalt
COVID-19 is Winding Down
A COVID New Variant – Arcturus – Is Sweeping Across India Now
ByteDance Leads China Tech Giants With Record $25 billion Profit
Global PC Shipments Dropped Due to Weaker Demand
Lego’s Going Forward
China’s Economy Rebounds More Than Expects
Calling Stop to Artificial Intelligence Development at GPT-4
A.I. tools is said to pose risks to society and humanity. This is in according to the western world’s value and I have doubt if the communist regime would think the same. This letter is raised by 1,000 technology leaders and researchers who have come together to sign the letter to be released by the nonprofit Future of Life Institute asking the artificial intelligence labs to pause development of the most advanced systems.
This letter was released on March 29, 2023 of which Elon Musk, Steve Wozniak, co-founder of Apple, Andrew Yang, an entrepreneur and a 2022 presidential candidate, Rachel Bronson, president of the Bulletin of the Atomic Scientists, Gary Marcus, an entrepreneur and academic.
A.I. powered chatbots like ChatGPT, Microsoft’s Bing and Google’s Bard, which can carry out humanlike conversations, create essays on an endless variety of topics and perform complex tasks like writing computer code.
This push to develop more powerful chatbots has led the tech industry to a race than can determine the next leader of the industry. But these tools can also become so wrong that the details could be totally wrong and thus spread disinformation which is to the greatest regret afterwards.
The open letter has specified for a pause in the development of A.I. systems more powerful than GPT-4 and it is the chatbot introduced in March 2023 by the research lab OpenAI, which Elon Musk co-founded. The letter is calling for the share of safety protocols. The letter went further to say that if this stop can’t be enacted, governments should be called to step in and instate a moratorium.
Tech leaders expressed their intention for ensuring the powerful A.I. systems can bring positive effects with their risks manageable. Humanity should enjoy a flourishing future with A.I. and this time we should reap the rewards and engineer those systems to benefit our society.
Gary Marcus, the entrepreneur and academic pronounced that for the wider tech community to agree to a moratorium would be difficult. And asking the government to step in is slim as politicians don’t have the understanding of the technology. This has put a stop to lawmakers to regulate artificial intelligence. In Europe the situation is equally difficult as they failed to recognize the possible damage that may create by A.I. and this including facial recognition systems. Risk assessment such as health, safety and individual rights have been lingering.
GPT-4 which the A.I. researchers called a neural network is connected with our nerve system. It is a type of mathematical system that learns the skill by analyzing data. It is the same technology that the digital assistants like Siri from Apple and Alexa from Amazon use to recognize human spoken commands.
It was in 2018 that Google and OpenAI began to build neural networks that learned enormous amounts of digital text from books, Wikipedia, chat logs and other information culled from the internet. The networks are known as Large Language Models or L.L.M. And from that text L.L.M. learn to generate text on their own, post tweets, term papers, computer programs and could even carry a conversation.
But the system still makes mistakes, mixed up with information and to the researchers they are known as hallucination but it is difficult for people to tell for what is right or wrong. And the concern here is that this kind of disinformation can be spread with the speed that we have never seen before. When this is ended up in the hand of those who can turn this into a tool to coax behavior from people across the cyberspace.
It was told that OpenAl made changes that the GPT-4 can’t provide information as to suggest where to get illegal weapons. But we have to realize that there is a vast online community called rationalists or effective altruists who believe that A.I. could destroy humanity.
This letter gathered 1,000 signatures that brought out the voice of the world’s top tech experts calling for a six-month global pause on A.I. development but it is hard to persuade the wider community of companies and researchers to put a moratoriums in place. So that we know OpenAI CEO Sam Atman didn’t sign the letter.
Political Ads Are Challenged by Brussels Regulations for Online Political Campaign – FT, March 31, 2023
Brussels regulators are drawing up laws and get ready for next year to enforce large internet groups to reveal more about the political groups behind online campaigns and to which extent these political ads have operated. For instance, the contents, cost of the ads, who paid for them, how many people watched them. This will involve Facebook, Instagram, TikTok and Twitter.
Meta, mother company of Facebook, is concerned by the definition of political ads which can drive away all paid-for political campaigns although the revenues generated by political ads were small compared with its wider business. Its CEO Mark Zuckerberg even argued that private companies should not be an “arbiter of truth.” However, Meta temporary stopped to take any political advertising.
Sri Lanka’s Latest Bailout by IMF – New York Times, March 21, 2023
International Monetary Fund approved a $3 billion loan for Sri Lanka through its financial crisis that has been found to be very disturbing to the country’s economic and political challenges. IMF agreed in principle to extend the funds on conditions that included Sri Lanka’s tightening its finances and renegotiate the terms of repayment of debts it owes to China, India and Japan.
Before the announcement made by IMF, Sri Lanka’s stock market jumped 6%, its bonds gas gained 20% this year and its currency, the rupee, became steadier to the dollar.
Its economy is still in the precarious state, its inflation ran at 50.6%.
The government is now led by the new President Wickremesinghe who steadied the country and moved forward to meet those targets made over the past five months. It has restructured its bilateral debts after meeting with its international creditors—China, India and Japan. It was only after China agreed to a two-year moratorium on Sri Lanka’s debt payment, Things started to look up for IMF’s approval.
Also the country’s tourist business has improved and it is expected that 1.5 million of them will arrive this year. Before the pandemic, about 2 million tourists visited Sri Lanka.
A year ago, the country was facing 12-hour power outage on a daily basis and cars were waiting in miles for fuel. There were the shortage of food and medicine. This year, the situation has improved.
The former president, Gotabaya Rajapaksa, led the country into the crisis as he borrowed the loan from China and built the enormous projects near his village in Hambantota. It included an international airport and a shipping port in the region which proved to be insufficient to draw the volume business. Then he loosen the monetary policy by printing more money. This mismanagement and policy missteps caused vulnerabilities to the country’s economy.
The war in Ukraine drove up the price of food and fuel worldwide, and it fall harder on Sri Lanka.
With the release of funds from IMF will allow Sri Lanka to recoup but going forward will still depend a lot from President Wickremesinghe’s policy.
Sri Lanka will receive one immediate and eight subsequent disbursements. Each about $333 million over the course of the four-year IMF program.
Billboard of Billionaires – FT, March 24, 2023
Disregard of all the turbulences caused by the global pandemic, China is still the world’s “absolute No. 1” for billionaires.
According to the 2023 M3M Hurun Global Rich List, the number of billionaires in China fell by 164 to 969 compared with a decline of 25 to 691 in the U.S.
Asia with 57% of the world’s population, accounted for 49% of the world’s billionaires and 39% of its wealth.
North America and Europe together had 15% of the world’s population, accounted for 46% of its billionaires and 57% of its wealth.
India had the third-highest number of billionaires at 187. Germany in the fourth position with 144 billionaires. The U.K. is in the fifth position with 134 billionaires. Russia’s billionaires decline by 2 to 70 and remained in its eighth position in spite of sanctions by the western world imposed after their invasion in Ukraine.
In the ten global rich list, Bernard Arnault of LVMH is No. 1 with $202 billion and this is followed by Elon Musk with $157 billion. The only Asian billionaire in the top 10 was Mukesh Ambani, the Indian oil, petrochemicals, telecoms and retail magnate with $82 billion.
Beijing had the most billionaires of any city in the world with 109 of them, this is followed by 105 in New York City, and 103 in Shanghai. London was ranked fifth behind the southern Chinese tech capital of Shenzhen.
Reincarnation of Kunshan, a County Near to Shanghai – FT, March 27, 2023
Kunshan is a county 50 km from Shanghai in the Jiangsu province. With almost 1 million people, it has 1,529 export-focused manufacturers from Taiwan alone and is known as China’s richest county. Its workers are receiving wages 30% higher than those in less-developed interior provinces. The manufacturing workers are doing the assembling work mainly.
But these companies are cutting back now because of the falling export orders. In fact the Chinese export has been declining for five straight months since last October as buyers have reduce their orders amid high inflation and gloomy economic outlook.
Kunshan reflects the challenges faced by China’s export-led economy as its three years of pandemic restrictions and also the change of policy to find for another economic growth engine to offset its decline in foreign trade.
What followed are a strings of cost cutting, such as the shrinking of headcounts, cutting the hourly rate by a third, scrapping sign-on bonus, turning down older labor applicants, and these have all due to the labor oversupply in a situation like this.
On top of this, the Taiwan manufacturers are relocating manufacturing to other countries to limit their exposure to the US-China political tensions. This is also due to the Biden administration who tried to secure supply chains of critical electronics on national security ground and pressing the U.S. companies to reshore operation and restrict trading with China.
Kunshan has begun to attract other foreign investors with higher technological demands and also focus on domestic sales for its growth. This strategy has attracted companies from Europe because of its well established supply chain and proximity to Shanghai. Shanghai is also China’s largest high-end consumer market and hub of technical research and development.
One example is the incubator for European manufacturers, Bernd Reitmiere, whose business is based in Kunshan, is motivating his members to go to Kunshan to localize their manufacturing and to sell into the Chinese market. This approach is different from those Taiwan companies as it is more longer term and can help to build the industry of Kunshan on a more solid ground.
Kunshan is expected to receive $1.1 billion for foreign investment this year compared with $1.7 billion in 2022.
LG is Taking Part in Battery Manufacturing in the US – New York Times, March 25, 2023
The South Korean battery manufacturer, LG, announced that it would quadruple its planned investment in a new factory in Arizona as part of the investment that was driven by federal incentives. It is also said to meet the growing demand from automakers that are trying to ramp up production of electric cars and trucks.
LG Energy Solution said that it would invest $5.5 billion to build the complex near Phoenix to produce batteries in 2025 and then the energy storage systems the following year. LG also said that the decision was driven in part by the Inflation Reduction Act. LG is among the world’s largest makers of batteries for electric vehicles and serving some of the world’s largest names in auto vehicles such as General Motors, Ford motor, Honda and Tesla.
Among the investors, we have found that Ford is going to build a battery factory in Michigan, using the technology and services from the world’s largest battery manufacturer, the Chinese company Contemporary Amperex Technology Company Limited (CATL). Ford is building a battery plant in Kentucky and Tennessee with another Korean company known as SK On.
In December, the Department of Energy said that it would lend $2.5 billion to Ultium Cells, a joint venture owned by General Motor and LG to build battery factories in Ohio, Tennessee and Michigan. Honda and LG are also investing $3.5 billion to build a battery plant in Ohio.
These new factories would increase battery manufacturing capacity in North America by tenfold from 2021 to 2030. It will help to lower the price of the electric vehicles by cutting transportation costs. In the meantime, reduce the dependence on China who dominates the battery supply chain.
What will need to follow is the local mining of lithium and the construction of electric vehicle chargers along the U.S. highways.
Global Supply of Cobalt – FT, March 13, 2023
China is trying to tighten its grip on the global supply on cobalt as the price of the metal used in electric car batteries hit a 32-month low despite there is the surge in production. Over the next two years, China’s share of cobalt production is expected to reach half of the world’s output, up from 44% at this moment.
In fact everyone is trying to gain control over supply chains for critical minerals such as cobalt, lithium and nickel which are essential for making electric car batteries.
China’s refining capacity had reached 140,000 tons in 2022, more than double of its capacity five years ago. The rest of the world processed 40,000 tons. China has a lion’s share of 77% of the global share of refining capacity.
But the price of cobalt is running the opposite direction, from $40 a pound in May 2022 to $16 a pound now. This is due to the reasons of the relaxation of logistic issues, weak consumer electronic sales and a technology shift towards lower or no cobalt EV batteries.
Global cobalt output increased 23% or by 35,000 tons in 2022. This was driven by Glencore, the Swiss commodity group who increased the production in the Democratic Republic of Congo. Also Indonesia emerged as a major producer for cobalt.
One thing that would need to point out and it has to do with China’s investment in Democratic Republic of Congo, where Tenke Fungurume, the world’s second largest cobalt mine. It is now banned for export due to a tax dispute since last July. Cobalt price can fall further if this can be resolved.
COVID-19 is Winding Down
It is said that to be the newborn in the year 2023 and there afterwards, they are entering into a world where the coronavirus is ubiquitous. The virus will be one of the first serious pathogens that all infants would meet. It is like those viral diseases—polio, chicken pox, mumps, SARS and measles. And COVID is very likely to be the very first virus they would get infected, but they could have a degree of immunity to the virus at their young age.
We have observed in recent months that the flux of COVID-19 cases and hospitalizations in most countries have stabilized into a kind of seasonal disease. This is because the vaccines are now common in most countries. In the meantime, the immunity has developed and together with the vaccines and to take the protocols of protecting oneself, we may say that the COVID-19 is under control.
This may appear to us as the aftermath of the 1918 flu pandemic whereas the virus struck around but never caused the devastation again. After sparking a devastating pandemic in the 19th century, it’s possible that the virus no longer managed to wreck much more havoc than a common cold.
A COVID New Variant – Arcturus – Is Sweeping Across India Now – Fortune Well, April 14, 2023
A new Omicron spawn and cause a surge of cases in India. It is considered as the most transmissible COVID variant yet has reached the U.S. in according to the Centers of Disease Control and Prevention.
This variant, XBB.1.16 is known as “Arcturus” NY variant trackers, is estimated to be representing 7% of CIVID cases in the country this week.
The top circulating lineages look like the following:
XBB.1.5 – 78%
XBB.1.16 – 7.2%
XBB.1.9.1 – 6.5%
XBB.1.9.2 – 2.5%
Earlier on, XBB.1.5 also known as “Kraken” dominates the U.S. and the rest of the world during a winter wave of cases. It is still representing more than three-quarters of the U.S. cases, but the levels are waning.
XBB.1.16 is currently high in south central region, it is projected to represent more than 20% of the cases, and on the West Coast, it is around 10%.
Reported COVID cases are on the decline in much of the world, but reported cases are increasing in Southeast Asia region, which includes India, Indonesia, Thailand, Bangladesh, Nepal, Sri Lanka, Maldives, Bhutan and Timor-Leste on according to the World Health Organization.
The cases are up nearly 500% month on month in the region, and India is responsible for much of the rise. Reported cases are on the rise in the Eastern Mediterranean region where they have increased slightly more than 100% month over month.
COVID deaths are also on the rise in both regions, up 109% month over month in Southern Asia and 138% in the Eastern Mediterranean.
ByteDance Leads China Tech Giants With Record $25 billion Profit – FT, April 10, 2023
ByteDance, parent company of TikTok, overtaking China’s long reigning tech giants Tencent and Alibaba for the first time. Its earnings before interest, tax, depreciation and amortization (EBITDA) reached $25 billion in 2022. It is about a 79% surge it is up from $14 billion a year before.
Its growth comes from TikTok who is facing security concerns raised by governments and regulators around the world. The U.S. government even went further to call for a ban of this short-form video app and asked for it to be separated from its Chinese owner.
ByteDance was valued at $300 billion last year with almost $85 billion in sales in 2022, generated 80% of its revenues in China last year. It grew by 30% from a year before with the increase of advertising from TikTok and its local Chinese app Douyin. TikTok was losing money but remain as a potential of its future profit engine.
Tencent and Alibaba reported EBITDA of $23.9 billion and $22.5 billion respectively. But both groups have been hit hard by Beijing’s two-year regulatory crackdown on large tech companies.
ByteDance’s international business which includes TikTok recorded about $15 billion sales in 2022, which is more than double of last year. The ban on TikTok would be a great loss to its future potential given its growth rate.
Global PC Shipments Dropped Due to Weaker Demand – WSJ, April 11, 2023
Global PC shipment sank to 56.9 million units in the first quarter, it tumble by 29% from a year earlier and below 59.2 million units shipped in the first quarter of 2019 before the pandemic which drove a surge in the demand.
Apple commands 17.2% of the global PC market, saw shipment tumbled by 40.5% and it is leading the drop across the first five PC companies. We can find Lenovo Group fell 30.3%, HP Inc., dropped 24.2%, Dell Technologies Inc., dropped 31%, and ASUS dropped by 30.3%.
With heavy discount, inventories have come down but are still elevating and this will continue into the middle of the year and potentially into the third quarter.
It is expecting the market to replace its aging computer next year but if the economy will not improve, then the recovery will not take place.
The current slowdown is giving the industry the time to consider to switch its supply than to rely on China only.
Lego’s Going Forward – FT, April 8, 2023
This Danish company is in its fourth generation and it is looking for handing the management into its four generation after developing a Lego theme park which is an attraction. Its brick kits are appealing to the kids. The family patriarch, Kirk Kristiansen, is overseeing the handover, has just transferred a third of the votes of family holding company Kirkbi to a non-profit foundation, K2. It is the hint of a future initial public offering.
A sales of $9.3 billion and an operating profit of $2.6 billion last year have both risen 60% since 2019. Its profit margins are double of its peer, Hasbro, and higher when compared with Mattel.
China’s Economy Rebounds More Than Expects – FT, April 18, 2023
China’s gross domestic product expands 4.5% year-on-year in this first quarter of the year. It is compounded with growth in exports, infrastructure investment, rise of the property prices and retail consumption. It seemed that the country has exited the pandemic control last year and its abrupt policy changes although the garment aimed at the full-year target of 5%. It is showing that the recovery is on track if not stronger than expected.
Its export shows a strong growth of 8.4% in the first quarter, manufacturing investment rose by 7%, and state-led infrastructure went up 8.8%, and overall fixed investment rose 5.1%. But private investment is still very weak, just 0.6% only.
New housing moving at 19.2% in the first quarter, home sales in some area fall 1.8% but sales value rose 4.1%. In March it was a record in 21 months that the prices rose at the fastest pace.
Joblessness rate fell to 5.3% in March from 5.6% in February. But the youth unemployment hit the second-highest mark on record at 19.6%.
The weak demand in private sector is an obstacle now, both in consumption and investment. That goes back to the state-led economy which is driving the economy of China.
