Welcome to "Investment IN General Manager" It can be said that it has been an eventful period recently. The war between Russia and Ukraine has not yet ended. The conflict between Israel and Iran has heated up again. As geopolitical risks become more and more tense, the impact on the economy has also expanded. Therefore, today's episode Let’s talk about the risks and opportunities in the economic war between the United States and China that have escalated to the next level. We already said in episode 31 that one of the reasons for being bullish on oil stocks this year is that the conflicts between the oil-producing countries in the Middle East continued. At that time, we It is also assumed that there are two situations. One is that the youth movement rebels attack merchant ships, causing the British and American coalition forces to counterattack. The other is that a serious conflict breaks out between Israel and Iran . Unfortunately, the opening fire between Israel and Iran caused oil, gold and other commodities to rise instantly , and in the geopolitical Against the background of rising political risks , the competition between the United States, the world's second largest economy, and China has not slowed down but has continued to escalate. We can see that in early April, before U.S. Treasury Secretary Yellen visited China, the United States had already established the two major economies. Direction: 1. China’s 3 major subsidized industries including electric vehicles, solar cells, etc. already have overcapacity. 2. Warning Beijing not to aid Russia. Compared with Yellen ’s remarks against U.S.-China decoupling when she last visited China in 2023, there was a clear change in attitude this time. During the visit, Maintaining a strong stance. However, before Yellen left China, Russian Foreign Minister Lavrov also paid a high-profile visit to China. This shows that the confrontation between the United States and China shows no signs of easing. After Yellen's visit to China, she even stated that the United States will not accept emerging technologies. The industry has been hit hard by China's import subsidies, a repeat of the influx of cheap Chinese goods in the early 2000s , which led to the loss of 2 million manufacturing jobs in the United States. According to the "Wall Street Journal" report, the United States believes that China has overcapacity , but China believes that this is their manufacturing strength . Let’s look at another statistical data: China’s actual use of foreign capital in the first quarter of 2024 , that is, FDI decreased by 26.1% year -on-year . What’s special is that this is data denominated in RMB. In the past, the FDI indicator that was more often denominated in US dollars is no longer published. Even though In this way, we can still get clues from the annual change rate of FDI. The current data has hit the worst performance since 2018, showing that foreign investors are leaving the country behind. At the same time, the pace of global adjustment of supply chains has not stopped. China is facing supply chain externalities. By the impact of the relocation, the industrial capacity utilization rate in the first quarter of 2024 has dropped to 73.6% , which is also a seven-year low. If we take a closer look at various industries, according to the statistics of the Asia Economic Data, the production capacity of China's automobile manufacturing industry in the first quarter of 2024 The utilization rate is as low as 65%. The following electrical equipment industry is 73%, and the computer and communications industry is about 75%. Among them (compared to the same period last year), the largest decrease is actually the automobile manufacturing industry . Why is this happening? Before further explanation, you are welcome to join the channel membership in 2024. What remains unchanged in the 50th anniversary of Financial News is the recognition and persistence of Taiwan’s values. If you also cherish this common concept, welcome to join the channel and become a member to support us. We will continue to accompany you and welcome the next 50 years. According to the Kiel Institute of World Economics in Germany According to the report, BYD, the leader of Chinese electric vehicles, received about 220 million euros in government subsidies in 2020, which surged to 2.1 billion euros in 2022, which is about NT$73 billion. The government subsidies accounted for BYD's revenue also increased from 1.1% to 3.5%. China Electric The automobile industry has received so many subsidies from the government and its export volume has surpassed that of Japan. The profit should be considerable. In fact, it is quite the opposite. Lei Jun, chairman of Xiaomi , which recently launched the SU7 electric car, admitted on April 18 that he had never heard of any pure electric car company . Enterprises make money. Some cars will lose RMB 10 or tens of thousands of yuan. So far, except for Tesla, which can still make money, other brands have lost money. Citigroup’s report also predicts that Xiaomi will lose money for every SU7 sold this year. 68,000 RMB The entire car manufacturing business is estimated to lose 4.1 billion RMB. This also represents the serious degree of price bargaining in the electric vehicle industry. Faced with such fierce competition, Tesla CEO Musk announced an estimated 10% global layoffs on April 15. More than 14,000 people will be laid off , followed by a price cut announced on April 19 in an attempt to ease inventory pressure. If we look back at Tesla's operating strategy, in 2019, Musk went to Shanghai to set up a factory in Shanghai and obtained free land to solve mass production problems. The condition is to place the component supply chain in China. Then Tesla starts mass production, coupled with the global energy transformation and its unique operating strategy, which makes Musk the world's richest man in one fell swoop . However, after the strong rise of Chinese brands, Tesla is now being squeezed out. We also talked about the leading position of electric vehicles in episode 34. Europe and the United States have launched various restrictions in the face of competition from Chinese electric vehicles . For example, in October 2023, the European Union investigated whether China’s imported electric vehicles involved improper government subsidies . The U.S. Department of Commerce In March this year , there was an investigation into the risks of China's Internet cars on the grounds of national security risks. In addition to electric cars , another industry that affects the competition between major countries is semiconductors. We reviewed the status of the semiconductor industry through TSMC's April press conference. President of TSMC Wei Zhejia last estimated that the semiconductor industry would grow by more than 10% in 2024 , but this time it was revised down to 10%. The global foundry industry output value was also revised down from the last growth of 20% to a growth of 14% to 19%. As for TSMC this year The revenue growth still maintains the original forecast of about 21% to 26%. This means that the demand for mature semiconductor processes such as automotive consumer electronics is weakening. Both price and volume are not as expected. If you still have the impression that the United States did not resort to aggression against China before Has the semiconductor ban been lifted? At that time, China rushed to buy mature process equipment as much as possible. This is one of the reasons why the revenue of ASMO Tokyo Weili Technology in the past few quarters has grown rapidly. We can also infer that China’s semiconductor acceptance will be high in the future. After government subsidies and the purchase of mature process equipment, it is about to enter the global competition, from Yellen's visit to China to the competition in the automobile industry. As well as the future prospects of the semiconductor industry, we can make a simple summary of the U.S. economic war strategy, which is to use tariffs to respond to China's low-price dumped products. For example, Biden has called for tariffs on China's steel and aluminum and is also considering resuming tariffs on solar energy. In addition to investigating the risks of China's connected cars, issues related to U.S. national security will gradually replace China-made port cranes with products from Japan's Mitsui Group. As for the most recent AI revolution, in addition to government restrictions on various The ban on the sale of high-end technologies requires American private companies to join in. For example , Microsoft recently invested US$1.5 billion in artificial intelligence giant G42 in the United Arab Emirates . The condition is that G42 must abandon the use of Huawei equipment . So what is China's response strategy? Diplomatically, besides In terms of wooing the Russian economy, it is better to continue to maintain low-price manufacturing exports to grab the market rather than stimulate domestic consumer demand. This is also in line with Xi Jinping 's line that he does not like to provide welfare to the people and wants everyone to ask for hardship. This will cause the impact of continued low prices for Chinese products. In the global market , the risks of competition and investment in industries such as semiconductors , mature wafers, electric vehicles, solar cells , and traditional steel, petrochemicals, textiles, and consumer goods related to mass production in China will increase significantly. If approached from this perspective, this will also be an opportunity for friendly shore outsourcing for Taiwanese businessmen. Including strong power grids, national defense and security satellites and network communications , and even medical equipment and medicines, we can see that the increased importance of national security is also reflected in the actual figures, making the prices of high-end technology for infrastructure security materials easy to rise but difficult to fall. This will increase the stickiness of inflation and delay the timing of U.S. interest rate cuts. Financial news fans, where do you think the opportunities for investors are as the U.S. and China continue to tussle ? A Tesla encounters headwinds and the long-term investment value emerges B Semiconductor advanced processes avoid the killing of mature processes C AI industry will continue to drive technological innovation and development D National defense and security are gradually receiving more attention with geopolitical tensions Let us know in the comments Today's "Investment IN General Manager" ends here If you like this program Viewers please remember to like and share for us. See you next time
