Pelosi means business
Speaker Nancy Pelosi left Taiwan today after a short visit that could have far-reaching consequences. It drew unusual support from Republicans, condemnation from Beijing and quiet opposition from its hosts in the face of Chinese threats. But Chinese experts predict there could be more fallout for businesses and investors from a trip that tested China’s appetite for confrontation.
“The world faces a choice between democracy and autocracy,” Pelosi said today during a meeting with the president of Taiwan, Tsai Ing-wen. “America’s resolve to preserve democracy here in Taiwan and around the world remains ironclad.” Economic growth and trade were high on her agenda – along with the pandemic, climate change, human rights and democratic governance – but these were overshadowed by geopolitics and China’s anger at her visit to a self-governing island that considers the territory her.
Among many other things, the trip was about chips. Pelosi spoke today with Mark Liu, chairman of Taiwan Semiconductor Manufacturing Company, the world’s largest chipmaker. TSMC is building a plant in Arizona, and Pelosi and Liu reportedly discussed the recently passed CHIPS and Science Act, which provides subsidies to companies opening chip factories in the US (more on that below).
China business reaction to Pelosi’s visit included a ban on some fish and fruit imports from Taiwan, but the broader impact could reach US shores. Bloomberg reported that China’s CATL, the world’s largest maker of electric car batteries, delayed its decision on a North American plant because of “tensions” surrounding the move. Shares in the semiconductor company fell yesterday on growing fears of conflict – particularly China’s plan to conduct live-fire military exercises in areas surrounding Taiwan starting on Thursday. TSMC’s Liu warned in an interview with CNN this week that the war over Taiwan threatens to disrupt the geopolitical landscape and the global economy, citing the effect of Russia’s invasion of Ukraine.
HERE’S WHAT’S GOING ON
Robinhood lays off nearly a quarter of its staff. The company’s brokerage app grew in popularity at the start of the pandemic, but is now losing customers, including 1.9 million monthly active users in the second quarter. Separately, New York state regulators announced they are fining Robinhood’s crypto unit $30 million for violating anti-money laundering and cybersecurity regulations.
Senators to propose a new regulator for Bitcoin and Ether. The legislation, backed by agriculture committee leaders, would make the Commodity Futures Trading Commission the lead regulator of the two largest cryptocurrencies. The SEC has recently increased its enforcement of cryptos, arguing that many digital assets should be regulated like stocks and other investments.
Forbes is at hand. The company said it was exploring a sale after a deal to go public through a merger with a special-purpose buyout company was called off in May. Forbes is looking for a buyer at a time when digital media companies are out of favor with investors and the value of SPAC transactions has sunk 90 percent.
Blake Masters, a Senate candidate backed by Peter Thiel, wins the Republican primary in Arizona. Masters, who was also endorsed by Donald Trump and has complained about “awakening,” will face Democratic incumbent Mark Kelly, who won a special election in 2020. Other election results yesterday included a victory for the right of abortion in Kansas, and a generally poor showing for candidates who follow Trump’s playbook.
Warner Bros. get the ax “Batgirl”. The studio, which spent $90 million on the nearly finished superhero film, said it would never see a theater go dark, or enter a streaming service. Warner said the decision was not based on the quality of the film, but was part of a new strategy to be more selective in the films it releases.
The CHIPS Act has strings attached
Lawmakers used an abandoned plan by Intel to expand its chip-making capacity by taking over an abandoned factory in Chengdu, China, as an argument for passing the CHIPS and Science Act, The Times’ Ana Swanson reports . The legislation, which contains $52 billion in subsidies and tax credits for global chipmakers that set up or expand operations in the US, would give the Commerce Department significant power over the private sector.
“This is not a blank check for these companies,” said Gina Raimondo, the commerce secretary. “There are a lot of strings attached and a lot of taxpayer protection.” Her department has the authority to review companies’ future investments in China and withdraw funds from any firms it deems to have broken its rules, as well as the ability to make some updates to rules on foreign investment over time. time.
China’s growing dominance of key global supply chains has generated new support among Republicans and Democrats for the government to nurture strategic industries. South Korea, Japan, the European Union and other governments have outlined aggressive plans to retire semiconductor factories. And the production of many advanced semiconductors in Taiwan has become for many an unsustainable security threat. “The question really needs to move from why we pursue an industrial strategy to how we pursue one,” said Brian Deese, director of the National Economic Council.
The bill still has many critics. By focusing its restrictions on new generations of semiconductors, the legislation could leave the door open for China to dominate the production of older chips used in cars and other consumer products. Some Republicans, such as Sen. Marco Rubio of Florida, say the guardrails are not strong enough to prevent the flow of American technology to China. Some Democrats and their allies, such as Sen. Bernie Sanders of Vermont, describe the bill as a corporate giveaway.
How efficiently will the funds be spent? The release of tens of billions of dollars in the coming years is likely to raise many questions about how these investments are allocated. And that could cause more concern among semiconductor companies that spent more than $20 million on lobbying in the first half of this year alone, according to their disclosures. A 10-year ban on investment in state-of-the-art facilities in China has been particularly controversial, with firms arguing that it would make them less globally competitive and ultimately turn the US into a race against Chinese competitors. But there are signs that the ban is already having an effect: two South Korean chipmakers are said to be rethinking their investments in China.
“I tried three courses and an expert on the other side, and the only thing I got out of it was an empty wallet.”
— Scott Mitchell, 33, who is one of many people trying to make money through an approach called YouTube automation.
An antitrust horror story
There’s a ghost lurking behind Penguin Random House’s proposed $2.2 billion deal to buy rival Simon & Schuster, writes our colleague Shira Ovide, author of The Times’s subscriber-only newsletter, On Tech. (Spoiler alert: It’s Amazon.)
Yesterday, Stephen King, the best-selling author known for his horror books, testified in support of the lawsuit filed by the Justice Department to block the merger. It is one of several efforts by the Biden administration to curb what it has said is excessive concentration in the American economy.
The administration says the merger will hurt perpetrators. The deal will reduce the number of major US mass-market book publishers to four from five. King testified that opportunities for authors to get published have dwindled since he began selling books in the mid-1970s. With fewer imprints competing, King said, advances have slowly dwindled, especially for writers without a sales history. The merger of two of the country’s biggest publishers would make it even harder for writers to make a living, he said.
But, Ovide argues, the trial is haunted by the ghost of the Amazon. “Book publishers want to get bigger and stronger in part to have more leverage over Amazon, by far the largest bookseller in the United States,” she wrote. “One version of Penguin Random House’s strategy boils down to this: our book publishing monopoly is the best defense against Amazon’s book selling monopoly.”
Companies have long tried to justify the acquisitions by saying they are trying to level the playing field.
Still, Ovide says, another mega-merger is unlikely to solve the book business’ concentration problem. Competition experts told her that the best way to deal with Amazon’s dominance in books is not to let publishers become monopolists themselves, but to counter Amazon’s overwhelming power with laws, regulations and enforcement. There is growing bipartisan support for such a move, but don’t hold your breath.
“This legal case about book publishing is a window into deep-seated problems in the American economy,” Ovide wrote. These problems “took decades to create and will take a long time to reverse.”
Neon, the film distributor behind the hit Parasite, is exploring a sale. (NYT)
Grubhub’s owner pegged its value at $3 billion, nearly half the purchase price last year. (FT)
Investment in start-ups in Africa more than doubled in the first half of the year, reducing global economic uncertainty. (Bloomberg)
The best of the rest
David F. Gallagher contributed to today’s DealBook.
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