Pictet Asset Management’s Post

ROBERT D. ATKINSON (2024) CHINA IS RAPIDLY BECOMING A LEADING INNOVATOR IN ADVANCED INDUSTRIES. ITIF, SEPTEMBER 2024. https://lnkd.in/eP_5KHx8 You can certainly feel the passion in the commentary. Although Atkinson may have been ‘a voice in the wilderness’ for many years about China’s theft of US technology, he seems to be growing in reluctant admiration of their determination and strategic industrial policy. Much of his ire is directed at the many ‘experts’ who have a very superficial understanding of how China works and achieves its targets. A key aspect of their approach as this report clearly show is the scale up production, usually heavily subsidised, leading to overcapacity and the bankrupting of slowly moving high quality competitors, eventually leading to the capturing their market share. The model involves thin margins, high volume and directing production to the huge population in China and other less developed regions seeking good enough products at affordable prices. It’s almost as if ‘The Wealth of Nations’ never foresaw what could happen at such a scale. Atkinson rightly blames fluffy, complacent US economic commentators who perhaps believed in an economic theory developed outside China? The report does quite a good job delineating the evolution of the China model, which ignores many aspects of western economic theory and prioritises national power, driven by technology competition. While the report shows the complexities of technology interconnectedness between the US and China, it’s difficult to get away from a binary form of analysis. Perhaps a weak spot in the analysis is in relation to the contribution of foreign companies in high tech supply chains located in China. It’s difficult to specify, but foreign companies continue to play an important part as core component suppliers in these supply chains. Analysis of Apple’s supply chain shows this, and while there has been growth in Chinese suppliers, they still are in the minority. The report, however, does highlight the role of foreign components in areas like robots and machine tools. Obviously there is some degree of reconfiguration of supply chains away from China, but the overall sophistication of high technology ecosystems and supply chains in China remains very important. More work is needed to see how much of the value of high tech activity in China remains in China. Traditional trade economics cannot really handle the complexities of high tech value and supply chains.

The boom is evidence of how much geopolitical friction and competition are reshaping the globe’s economic landscape and driving multibillion-dollar investment decisions. https://lnkd.in/gtwYyKM3

Vietnam’s FDI expected to hit US$39-40 bln this year The Foreign Investment Agency (FIA) under the Ministry of Planning and Investment said in the first nine months of this year, the total registered foreign investment capital reached more than US$24.78 billion, an increase of 11.6% over the same period in 2023. According to the FIA, in September 2024, three major projects of Amkor, Luxcase, and Advance Tyre Vietnam Ltd Co adjusted investment capital, bringing additional investment capital to more than US$7.64 billion in nine months, an increase of 48.1% over the same period. Besides, Vietnam’s FDI attraction also saw a bright spot with an improved quality of the FDI flow. According to the FIA, in the first nine months, major projects in the fields of semiconductors, energy (production of batteries, photovoltaic cells, silicon bars), production of components, electronic products, and products with high added value have received additional investment. Many technology corporations are showing interest in investing in Vietnam. At the Innovate Vietnam 2024, a series of leading global technology corporations, such as NVIDIA, Qualcomm, Intel, AMD, Samsung, and Meta made their presence known. Raymond Teh, vice president of NVIDIA Corporation said that NVIDIA will help accelerate innovation in Vietnam's industries. https://lnkd.in/gihFvkYg

In the news this week: China curbs exports of semiconductor materials.   Gertjan van der Geer, Senior Investment Manager at Pictet Asset Management, explains why the impact of China’s curbs on shipments of key materials will be marginal and not derail investment opportunities in semiconductors and AI.   #Pictet #PictetAssetManagement #AI #Semiconductors #InvestmentOpportunities

There is an industry that lies at the heart of modern AI innovation, and it is not written in code. China is making significant strides with its state-backed "Big Fund," committing nearly $2 billion to boost the semiconductor sector. This major investment into memory chip firm Changxin Xinqiao is part of a broader strategy to enhance China's semiconductor capabilities and reduce reliance on foreign technology. The investment underscores China's ambition to be a leader in this critical industry, especially amidst growing global demand for advanced chips and ongoing geopolitical tensions affecting tech supply chains. I can highly recommend taking a look at this article below for more on this story. At Salamander Advisory Services, we recognise the transformative potential of such strategic investments. Our mission is to help businesses navigate complex market landscapes and capitalise on opportunities. Whether you’re looking to innovate or expand, our expert guidance can help you stay ahead in rapidly evolving industries. For more insights and to explore how we can assist your business, visit our website in the link below or get in touch with our team today. https://lnkd.in/gaAF-T82

China’s govt push boosts VC investments in AI and semiconductors The trend highlights the impact of the US-China tech supremacy battle and US sanctions, with the Chinese government stepping up state-funded investments to fill the gap left by withdrawing foreign investors.

As additional technology sectors seek to follow in 2024, here are three global investment trends technology CXOs should consider when assessing their operations overseas. https://ukg.inc/3HP8Hsx #innovation

China’s govt push boosts VC investments in AI and semiconductors The trend highlights the impact of the US-China tech supremacy battle and US sanctions, with the Chinese government stepping up state-funded investments to fill the gap left by withdrawing foreign investors. A recent report indicates that China’s major venture capital investments increasingly focus on technology sectors that are aligned with government policies, such as AI and semiconductors. Despite an overall decline in funding, China accounted for 90% of global venture capital (VC) in the chip sector last year, investing $22.2 billion, more than double the $9.5 billion from 2022. According to Preqin, a private investment data company, three significant deals, primarily involving partnerships between municipal authorities and Sino IC Capital, accounted for half of the semiconductor venture investments. Sino IC Capital manages the state-backed China Integrated Circuit Industry Investment Fund, also known as the Big Fund. Overall, the report highlights three key takeaways. Firstly, China’s clean technology VC deals have surpassed those in the US in both value and volume for 2022 and 2023, especially in electric vehicles. Secondly, overall venture capital in Greater China has dropped sharply, a 42% decrease from the previous quarter, due to geopolitical tensions and fewer exit opportunities. Thirdly, foreign VC investments in Chinese firms have plummeted from $67 billion in 2021 to $19 billion in 2023, while domestic investments have remained stable. Why does it matter? The trend is clear evidence of the ongoing US-China tech supremacy war and the effect of US sanctions. With the US trade tariffs and restrictions on American venture capital firms prompting foreign investors to withdraw from the region, this report reveals how the Chinese government, in response, has stepped up and is backing state-funded entities to fill the void, with significant investments also coming from domestic tech companies.

Last week IFC participated in the Costa Rica’s Semiconductor Roadmap Launch. The event spanned March 21st and March 22nd and included Costa Rican Government Representatives, Industry Associations, Financiers and private sector Companies. The 1st day of the event kicked off with the Minister for Foreign Trade, Manuel Tovar, welcoming the delegates and stressing the importance and focus of the Costa Rican authorities in keeping the momentum in semiconductor investment that was started with the investment by Intel in the country in the 1990s. The second day, IFC co-hosted the Semiconductor Supply Chain Workshop on Financing and Industry Perspectives with COMEX. I had the honor to moderate a panel on International Finance. Big thanks to Femi Akinrebiyo, IFC-Global Manager for Manufacturing & Trade Supplier Finance; Francisco Javier Urra, Country Representative - Costa Rica, Interamerican Development Bank Group; Annie Do, Export-Import Bank of the United States Senior Advisor; and Takayuki Sato, Japan Bank for International Cooperation Senior Advisor, for your invaluable contributions. Very interesting discussion about the commitment of leading DFIs on supporting Costa Rica in its efforts to develop and grow the semiconductors industry with the aim to increase the global supply chain resilience. The semiconductor industry is critical for global development including the growth in Electric Vehicles, Internet of Things, Artificial Intelligence, among others. The sector is expected to grow from US$526 billion in 2023 to a trillion dollars by 2030. Costa Rica was ranked as the leading destination (in relation to the size of its economy) for Greenfield FDI in 2022 and 2023. Costa Rica was announced as the first official partner of the U.S. State Department under its International Technology Security and Innovation Fund (“ITSI” Fund”), created by the CHIPS and Science Act of 2022, demonstrating the potential key role the country can play in the semiconductor industry to create a stronger, more resilient, global supply chain. Costa Rica is well suited in this space with both Intel and Qorvo calling it home for more than 50 years between the two, in addition to the more than 150 U.S. companies in other key high-tech industries such as advanced manufacturing and medical devices.   IFC supports Manufacturing, and in particular Sustainable Manufacturing, through our investments, advisory work, and partnerships. Manufacturing is vital for job creation, enhancing access to skills and education, improving living standards, and boosting economic development. IFC considers manufacturing in sub-sectors such as semiconductors to be strategic, recognizing the global need for supply chain resilience.

A small stab at a big question: how does China innovate? "It is the latter, application- and scale-driven innovation that China in particular excels at: finding ways to industrialize and commercialize cutting-edge R&D results. In turn, China transforms that scale into strategically valuable and financially lucrative market power." https://lnkd.in/gtaN5dhU