Member Briefing August 12, 2024
US Semiconductor Industry Faces Hurdles
The Chips Act, enacted two years ago Friday, is the nation’s most audacious foray into industrial policy since World War II. It’s essentially a bet that four companies — Intel Corp., Micron Technology Inc., Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. — can bring sophisticated chip production back to the US. In a sign of the ambition, one explicit goal is making a fifth of the world’s most advanced processors by 2030, up from roughly zero today.
The US is in many ways on track, but it’s been no simple task. Hundreds of firms spent months haggling over the money. Even US officials themselves have disagreed over which parts of the chip economy need the most help. They opted to give the biggest preliminary award to Intel — which Commerce Secretary Gina Raimondo has called “an American champion” — only to see the Silicon Valley pioneer disclose profound business problems earlier this month. It plans to slash more than 15,000 jobs as sales decline, and Intel’s stock is trading near its lowest level in more than a decade.
Read more at Bloomberg (Canada)
Suddenly, Hourly Workers Aren’t So Hard to Find
Employers and workers say the hourly labor market is beginning to show some of the same signs of strain as the white-collar economy, a shift that could have broad consequences for the U.S. economy and millions of American workers. There are plenty of jobs but the hiring frenzy is over. Many economists fear recent trends, such as lower job creation and weaker wage growth, portend a troubling downturn rather than simply a rebalancing of the labor market.
For months, hiring has been a bright spot for lower-wage workers. Even as companies from tech to banking pulled back on corporate recruiting, executives regularly bemoaned that they couldn’t find enough retail clerks, warehouse workers, cooks, housekeepers and others. That trend is shifting, one of the key factors weighing on the labor market. The first signs of a slowdown started showing up over a year ago, said Fred Goff, chief executive of Jobcase, a job board and networking community for hourly workers. As far back as January 2023, Goff said, employers were starting to pull back on seasonal and permanent hires. The pullback lines up with a shifting focus on profitability that may change companies’ long-term calculus on head count, he said.
Mortgage Rates Drop to 15-Month Low
Mortgage rates fell to the lowest level in more than a year, raising hopes for relief in the battered U.S. housing market. The average rate on the standard 30-year fixed mortgage fell around a quarter percentage point to 6.47%, according to a survey of lenders released Thursday by mortgage-finance giant Freddie Mac, a low not seen since May 2023 and the sharpest weekly decline in around nine months.
If sustained, lower mortgage rates could help shepherd some Americans back into a market that they have been priced out of in recent years. Home sales last year fell to their lowest level in nearly three decades, and they have been similarly sluggish in 2024. Mortgage rates have roughly doubled since the Federal Reserve began its campaign to curb inflation in early 2022, which has dramatically pushed up the monthly cost to borrow for a home.
Global Headlines
Middle East
- Israel And Hamas: The Latest News – The Guardian
- US Releases $3.5 Billion To Israel To Spend On US Weapons, Military Equipment - Reuters
- Iran Ramping Up Cyber Attacks Ahead Of US Presidential Vote, Microsoft Says – France 24
- Israel Agrees To Resume Gaza Cease-Fire Talks This Week - VOA
- Sinwar Power Grab Cements Hamas-Iran Ties - WSJ
- Families Flee New Israeli Assault In Gaza's Khan Younis - Reuters
- The Threat Israel Didn’t Foresee: Hezbollah’s Growing Drone Power – The Hill
- Iran Is Better Positioned to Launch Nuclear-Weapons Program, New U.S. Intelligence Assessment Says - WSJ
- Interactive Map- Israel’s Operation In Gaza – Institute For The Study Of War
- Map – Tracking Hamas’ Attack On Israel – Live Universal Awareness Map
Ukraine
- Ukraine And Russia: The Latest News – The Guardian
- Russia Fighting Intense Battles Against Major Ukrainian Incursion - Reuters
- Russia's Lipetsk Region Hit By 'Massive' Drone Attack, Governor Says – Reuters
- Russia Launches 'Counter-Terror Operations' In Three Border Regions – France 24
- Even In Death, Navalny Helped Biden And Scholz Get To A ‘Yes’ On The Prisoner Swap – Politico
- Russian Prosecutors Seek 15-Year Sentence For US-Russian Woman In Treason Trial - AP
- Interactive Map: Assessed Control Of Terrain In Ukraine – Institute For The Study Of War
- Map – Tracking Russia’s Invasion Of Ukraine – Live Universal Awareness Map
Other Headlines
- In Secret Talks, U.S. Offers Amnesty to Venezuela’s Maduro for Ceding Power - WSJ
- Magnitude-5.3 Earthquake Hits Tokyo After Japan Issued Megaquake Advisory - Reuters
- Catalan Separatist Carles Puigdemont Is Out Of Spain And On His Way To Belgium, Says Top Ally - Politico
- Pandas Debut At San Diego Zoo As ‘Panda Diplomacy’ Resumes (Photos) - Forbes
- Bangladesh Seen Heading Toward Political Crisis - VOA
- Hundreds Arrested In UK As Police Brace For More Violence – France 24
- Venezuela's Maduro Blocks X Access In Country For 10 Days - Reuters
- UN Emphasizes Scale Of Human Suffering In Sudan Hunger Crisis – France 24
- Why Beijing Won’t Give Up on a Failing Model – Foreign Affairs
Policy and Politics
Biden Administration Bolsters Energy-Efficient Manufacturing Using Wartime Authority
The Biden administration is doling out a second round of funding for energy efficient heating systems, again using its wartime authority in the fight against climate change. The Department of Energy is putting $85 million to accelerate the production of heat pumps under the Defense Production Act, it first told The Hill. The funds will go to five facilities in New York, Tennessee, Texas and Rhode Island. The administration said the move is expected to create more than 500 jobs, nearly half of which will be in disadvantaged communities.
The investments are expected to enable the manufacture of an additional 155,000 residential heat pumps, 440,000 residential water heaters, 2,000 school heat pumps, 120 industrial water heaters and 20,000 additional heat pump components. The money announced Wednesday will go to facilities owned by: Daikin Comfort Technologies North America Inc., A. O. Smith, Modine Manufacturing Company and BITZER Scroll Inc. The funds are in addition to an additional $169 million that bolstered heat pump manufacturing under the Defense Production Act last year.
New Nuclear Power Will Be On The Agenda When NY Officials Hold Energy Summit In Syracuse
Governor Kathy Hochul last week announced New York State will convene global experts to discuss the role of next generation clean energy technologies and strategies to accelerate renewable energy deployment while collectively supporting economic development in New York. The “Future Energy Economy Summit,” to be held on September 4-5, will convene relevant state agencies and authorities, global and federal leaders, power producers, technical experts, labor groups, environmental groups, business groups and other interested stakeholders.
The summit will explore how next generation clean energy technologies can support the establishment and expansion of commercial and industrial enterprises, as well as how the state can accelerate the deployment of dispatchable emissions-free resources that will be needed to bolster its notable and ongoing efforts to scale renewable energy. Two of the agenda items are focused on nuclear power (which perhaps explains why the summit will be in Syracuse, near the state’s three remaining nuclear power plants). NYSERDA Chair Doreen Harris readily acknowledged the role nuclear must play in filling the zero-emission generation
Read the Governor’s press release
Democrats Call On Administration To Enforce ‘March-In Rights’ To Counter High Drug Prices
A trio of lawmakers who caucus as Democrats are calling on the Biden administration to bolster and finalize a federal rule utilizing the government’s legal authority to seize taxpayer-funded patents in order to combat the high price of drugs, despite Republicans arguing recent Supreme Court rulings supersede such powers. Rep. Lloyd Doggett (D-Texas) and Sens. Angus King (I-Maine) and Elizabeth Warren (D-Mass.) signed a letter to Health and Human Services (HHS) Secretary Xavier Becerra and Commerce Secretary Gina Raimondo urging them to quickly finalize guidance on exercising federal “march-in rights.”
The NAM opposes the practice. “This radical new proposal is a major threat to manufacturers in America and counter to the president’s goals of growing the sector,” NAM President and CEO Jay Timmons said. “Empowering the government to march in and seize the rights to private-sector patents and technologies threatens American innovation and R&D, putting millions of well-paying manufacturing jobs at risk. Policymakers must protect manufacturers’ intellectual property rights and stop this government overreach.
Health and Wellness
Mental Health Crisis Driving $14T Health Care Cost
People with mental health diagnoses face higher rates of chronic illnesses, highlighting the interconnectedness of mental and physical health, according to a new report from the Meharry School of Global Health and the Deloitte Health Equity Institute. The report found mental health inequities across the United States could lead to $14 trillion in costs between now and 2040 if not addressed. The report studied the overlap of mental health and physical health conditions including diabetes, stroke, hypertension, ischemia and HIV. Among its findings are that people of all ages with mental health conditions have a higher prevalence of chronic physical conditions and vice versa.
About 90% of Americans believe the country is experiencing a mental health crisis, and their opinions appear to be justified as prescriptions for antidepressants rose 15% between 2015 and 2019 for adults and 38% for adolescents. Trends in mental illness and substance use disorders that were worsening prior to the pandemic have escalated since 2020, noted the study.
NYS COVID Update
The Governor updated COVID data for the week ending August 9th.
Deaths:
- Weekly: 40
- Total Reported to CDC: 83,683
Hospitalizations:
- Average Daily Patients in Hospital statewide: 1,214
- Patients in ICU Beds: 114
7 Day Average Cases per 100K population
- 10.2 positive cases per 100,00 population, Statewide
- 12.0 positive cases per 100,00 population, Mid-Hudson
Useful Websites:
Election 2024
- Trump And Harris To Debate On ABC; Trump Says He Wants Two More - Reuters
- Harris Walks Perilous Line Between Viral And ‘Cringe’ – The Hill
- Trump Assassination Attempt: New Bodycam Footage Shows Police Scrambling To Reach Gunman On Roof - Forbes
- RFK Jr.'s Spot On N.Y. Ballot In Albany Judge's Hands – Times Union
- Trump Campaign Says Its Internal Communications Were Hacked – The Hill
- RFK Jr. And Third Parties Could Pose Danger For Trump, Polling Suggests – The Hill
- Real Clear Politics Latest General Election Polls – Real Clear Politics
- Latest Polls - FiveThirtyEight
Industry News
TSMC Sales Soared 45% in July on Strong AI Demand
Taiwan Semiconductor Manufacturing Co.’s revenue rose 45% in July, accelerating its pace of growth from the June quarter and bolstering hopes for sustained strong demand for artificial intelligence chips from the likes of Nvidia Corp. Sales for the month reached NT$256.95 billion ($7.9 billion). For the third quarter, analysts project TSMC revenue should grow 37% to NT$747.4 billion, with the July result suggesting TSMC may surpass those expectations. Taiwan’s biggest company is one of the key bellwethers for AI demand, as the go-to chipmaker for leading accelerator makers Nvidia and Advanced Micro Devices Inc. It’s also the sole supplier of processors for Apple Inc.’s iPhones, at a time the mobile device market is showing signs of bouncing off post-Covid era lows.
Last month, the world’s largest contract chipmaker raised its full-year growth outlook to beyond the maximum mid-20% it had guided toward previously. TSMC offered an upbeat assessment of its business and prospects when it last reported earnings, with Chief Executive Officer C.C. Wei signaling the company may have room to raise prices as more of its customers transition to its most advanced technology and have to compete for limited capacity. High-performance computing, led by AI, contributed 52% of TSMC’s revenue last quarter, the first time it has accounted for more than half.
Hong Kong Carrier Places 30 Jet Order with Airbus
Cathay Group is buying an estimated $7.8 billion worth of widebody A330neo aircraft to update its current fleet and expand its regional service. At book value, the new jets have a value of $7.8 billion, though neither Airbus nor Cathay confirmed the acquisition cost. Neither party offered any detail on the delivery schedule for the new aircraft, though current order backlogs suggest the order will not be completed before the decade.
In addition to its Cathay Pacific airline the group includes budget carrier HK Express and cargo service Air Hong Kong. Almost a year ago Cathay Group ordered 32 A321neo and A320neo jets, a purchase estimated at about $3.8 billion. The A330neo has a range of 7,200 nautical miles / 13,330 km / 8,290 mi) and is outfitted to carry up to 287 passengers. The twin-engine aircraft will be powered by Rolls-Royce Trent 7000 engines. Airbus noted the A330neo is able to operate with up to 50% Sustainable Aviation Fuel, and that it is working to increase that capability to 100% by 2030.
Read more at American Machinist
Boeing’s New CEO Is Hands On. He’s Being Handed a Company in Crisis.
Robert “Kelly” Ortberg was well known on Wall Street for striking big deals as the leader of Rockwell Collins. But back in Iowa, the aerospace executive was known for paying attention to issues that rarely made headlines, like the VIP spots in the company parking lot. With little fanfare, Ortberg removed the assigned spaces for higher-ranking employees at the headquarters of Rockwell Collins. Ortberg, 64, who takes over Thursday as the CEO of Boeing will need both strategic vision and an eye for such details as he tries to revamp an American manufacturing giant that has been hobbled by production delays, factory flubs and quality lapses that have marred its reputation and drained its finances.
It is a turnaround that his two predecessors—Dennis Muilenburg, an engineer who spent his entire career climbing the Boeing ranks, and David Calhoun, a General Electric veteran and Blackstone executive with a fix-it reputation—attempted and failed to pull off. “They clearly need to get back to basics, and Kelly is a person who will do that,” said Don Beall, former CEO of what was then Rockwell International, who worked with Ortberg as he rose through the company. “He’s a very hands-on guy. He’ll get out on the shop floor.”
Labor Dispute: Boeing’s Bad Year Is About To Get Worse
Boeing’s machinist union has been urging members to save money for a strike since 2019. On Monday, the negotiations that will determine whether they need it will kick into high gear. Teams from Boeing management and the International Association of Machinists, the company’s largest union that represents the 32,000 workers who assemble Boeing planes in Washington State, will check into a Seattle-area hotel to hammer out a new contract, the first since 2008, before the current one expires on Sept. 12.
Many industry observers think the two sides are headed for an impasse, and a strike. That would exacerbate the pile of problems Boeing is struggling with this year. A lengthy work stoppage could derail the ramp-up in plane deliveries that the company desperately needs to stop bleeding cash. It's anyone's guess how the situation will be handled by Boeing’s brand-new CEO, Kelly Ortberg, who reported to work Thursday with the tall task of repairing Boeing and its relationship with its workers, customers, the government and the public. The machinists’ leverage is high given skilled labor shortages. Also high: the anger of longtime union members. Over the past decade Boeing executives used the threat of relocating work away from the Seattle area to negotiate a series of contract extensions that held wages stagnant, took away workers’ pension plans and shifted healthcare costs to them.
Manufacturing’s Hidden Risk Will Be Outdated SAP Systems
The manufacturing industry faces a ticking time bomb in the form of outdated SAP enterprise resource planning (ERP) systems. While SAP, the number three ERP provider after Microsoft Dynamics and Workday, is rapidly innovating and migrating its software to the cloud and implementing Business AI, many manufacturers are clinging to on-premise deployments of older SAP versions, particularly SAP's ECC (ERP Central Component). This creates a significant security risk, as these legacy systems become increasingly vulnerable after 2027 when mainstream maintenance support ends for Business Suite 7.
The consequences of inaction are severe. With nearly three-quarters of SAP customers yet to make the transition, a significant portion of the manufacturing industry remains vulnerable. Companies that fail to address this challenge risk running unsupported software, exposing themselves to critical security vulnerabilities and rising cyberattacks. These attacks can cripple production lines, cause significant financial losses, and damage a company's reputation. Manufacturers must prioritize modernizing their SAP infrastructure and implementing robust security measures to safeguard their critical operations and sensitive data.
Read more at Supply Chain Brain
New Rolls Royce B-52 Engine, The F130, Enters Next Phase Of Testing
Ground testing on the F130 engine that will be used on the US Air Force’s B-52 Stratofortress for the next thirty years has started in Indianapolis. The US Air Force has a fleet of 76 Boeing B-52 Stratofortress bombers, each powered by eight engines which it wants to keep in service “through 2050”. The B-52A first flew in 1954.The US Air Force selected Rolls-Royce’s F130 to re-engine the aircraft in 2021, awarding it a US$2.6 billion contract to supply 608 engines.
The engine produces 17,000 lbf and is a variant of Rolls-Royce’s BR725 commercial engine. The F130 series of engines already powers aircraft in the US Air Force fleet, including the E-11A and C-37 aircraft.Sea-level testing of the First Engine to Test at Indianapolis will run the initial software release for the F130 in the recently refurbished Test Cell 114. In addition, engineers will finish Rapid Twin Pod Tests with the F130 this week at NASA Stennis. These tests were the first time F130 engines were run in the dual-pod engine configuration that will be used on the B-52 aircraft. The tests produced critical performance data, validating Rolls-Royce’s analytical predictions – including performance in crosswind conditions, de-risking the integration of the F130 engine onto the B-52.
Read More at Aerospace Testing
Costco Cracks Down On Membership Sharing With New Card-Scanning Rules
The membership-only bulk shopping store Costco is rolling out new entry rules that will require members to scan their card at the shop and, in some cases, present photo IDs in an attempt to stop people from shopping using someone else’s membership. As it stands now, shoppers entering Costco usually quickly show their membership cards to someone working at the front of the store and are allowed to proceed inside, not presenting their card again until check out (much of which is self-service).
But in the coming months, the store said in a post to its website, people will have to physically scan the barcode on their cards via a machine that will pull up the member’s account—and the photo associated with it to verify their identity. If the account doesn’t have a photo, the person will be asked to present a valid photo ID matching the name on the membership card. Non-members will still be able to enter the store to shop with members, but the new rules will crack down on people giving their cards out to friends or family and allowing multiple households to shop using the same membership. Costco first started testing the new system at a handful of stores in January.
Cyberattack and Tropical Storm Debby Disrupt Blood Supply
Hospitals in the U.S. Southeast are invoking emergency procedures to conserve blood and platelets after a blood distributor suffered a cyberattack and as a tropical storm brings historic flooding to the region. OneBlood, a nonprofit that supplies blood and blood products to more than 250 hospitals in Florida, Alabama, Georgia and the Carolinas, continues work to recover technology systems it shut down after a ransomware attack on July 29.
It was the third cyberattack in recent months against organizations that manage blood products, said John Riggi, national adviser for cybersecurity and risk at the American Hospital Association. “These are not typical cybercrimes. They are a direct threat to life,” he said. Riggi, who consults with the U.S. government and the healthcare industry’s threat intelligence group, attributed the three strikes to Russian hackers. Heavy rains and flooding as Tropical Storm Debby sweeps through the Southeast also have closed some OneBlood donation centers and idled some of its signature Big Red buses in Florida and Georgia, Forbes said. Closures will happen ahead of the storm’s path, she added.
Susan Wojcicki, Former YouTube CEO and Influential Google Exec, Dies at 56
Susan Wojcicki, who served as CEO of YouTube for nine years during a period of massive growth for the video platform and was one of Google’s first hires, died on Friday, Aug. 9. She was 56. Wojcicki’s death after a two-year fight with cancer was announced by her husband, Dennis Troper, in a public post Friday evening on Facebook. In her multiple stints at Google, Wojcicki had overseen product management of AdSense, Google Book Search and Google Video as well as the syndication of the company’s products. Prior to Google, she worked at Intel, Bain & Co. and R.B. Webber & Co.
Wojcicki joined Google in 1999 as the 16th employee, becoming the search engine’s first marketing exec. Co-founders Larry Page and Sergey Brin initially ran the company out of her garage in Menlo Park, Calif. Among her other accomplishments, she cut the company’s first deals to license search technology and led the initial development of Google’s image search. In February 2014, Wojcicki was named YouTube’s CEO. Google’s appointment of Wojcicki, one of the company’s most senior execs, reflected how important the video platform had become to its advertising business. She stepped down as CEO of YouTube in February 2023, while remaining an adviser to the company.