Crypto News: Supply Lines: Let the chips fall

South Korean chipmakers reported their first fall in factory shipments in almost three years in July, an early sign of weakening demand for vital components in consumer and industrial goods that serve as a barometer for the global economy.

Semiconductor shipments tumbled almost 23% from a year earlier, after a 5.1% rise in June, according to the national statistics office on Wednesday. Nationwide inventories were up 80% from a year earlier and unchanged from the month prior. (Read the full story here.)

These, combined with other economic and market disruptions, are creating new twists in nations' trade balances: Economists forecast South Korea — traditionally an export powerhouse — to report on Thursday a record trade deficit for August.

Meanwhile, chip shortages are still holding back production in key areas of supply chains globally.

On Tuesday, the CEO of Taiwan Semiconductor Manufacturing warned that a persistent dearth of chips costing anywhere from 50 cents to $10 still weighs on auto manufacturers, which rely on them to operate their autonomous, connected and electric cars.

The ongoing shortage of auto components continues to hamper major carmakers like Toyota and Honda, whose global output have suffered from supply disruptions this year. US rivals, like General Motors, complain that chip shortage is still dragging their production volumes.

Most new vehicles now include some level of advanced driver-assist systems and connectivity features such as Bluetooth, wireless internet and navigation systems. That means increased demand for chips like integrated circuits, graphic cards, processors, transceivers, sensors, and analog devices.

While global demand for semiconductors continues to be strong, there are broader signals that the industry is bracing for a downturn.

Accelerating inflation and slowing global growth has reduced consumer demand for big-ticket purchases like personal computers and electronics. In the second quarter, shipments of desktop processors fell to the lowest level in nearly three decades, according to Mercury Research.

Worldwide sales of semiconductors jumped 13.3% in the second quarter from a year earlier, but for June alone, they fell 15% from the same month in 2021, according to the Semiconductor Industry Association.

Overcapacity may soon cause a glut as governments race to subsidize the development of new chip factories. A key example came this month when US President Joe Biden signed the $52 billion Chips and Science Act, which aims to to subsidize domestic semiconductor production.

—Bryce Baschuk in Geneva and Sam Kim in Seoul

Top headaches | American firms' optimism about China has fallen to a record low, with President Xi Jinping's Covid Zero policy causing more than half of companies to delay or cancel investment, a new survey from an US business group shows. Pandemic-related shutdowns pose an even bigger headache to US companies in China than worsening relations between Beijing and Washington, according to a survey by the US-Business Council. Only 51% of respondents expressed some degree of optimism about their five-year business outlook in the world's second-largest economy, down from 69% last year.

Power vacuum | China's factory activity contracted for a second straight month, with the economy taking a hit from power shortages on top of a property market crisis and Covid outbreaks. Meanwhile, China slowdown means contrasting fortunes for Asia's exporters.
Top estimates | Best Buy's CEO has some good news for US consumers grappling with high inflation: Holiday deals are coming back.
Factory spend | First Solar, America's biggest panel maker, plans to invest about $1.2 billion to expand its US manufacturing capacity after Congress passed a landmark climate bill.
Crisis intensifies | Europe's energy crisis escalated as Russian natural-gas giant Gazprom said it will halt supplies to French utility Engie because of a disagreement over payments.
Last call | Thousands of British pubs will be driven out of business by soaring energy bills unless they receive urgent state support, beer industry bosses said. Meanwhile, the UK is set to be hit by the latest in a number of national train strikes next month.
Railroad snarls | The world desperately needs more grain, and Canada is set to harvest a bumper crop. The only problem is that snags in the country's railway system may make it difficult to ship.

USMCA boost | The US-Mexico-Canada Agreement has put Mexico in a privileged position to attract more investment at a time when companies are rethinking their global supply chains after weaknesses exposed by the pandemic, the war in Ukraine and growing tensions between the US and China, Bloomberg Intelligence says.
Beating headwinds | China Merchants Port's revenue and net profit may edge up in second half as the effects of intense Covid-19 lockdowns fade, Bloomberg Intelligence says.
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