Member Briefing June 20, 2023
Intel Spends $33 Billion in Germany, 4.6 Billion in Poland, in Landmark Expansion
Intel will spend more than 30 billion euros ($33 billion) to develop two chip-making plants in Magdeburg as part of its expansion push in Europe, a deal Chancellor Olaf Scholz hailed on Monday as Germany's biggest ever foreign investment. Berlin has agreed subsidies worth nearly 10 billion euros with the U.S. chipmaker, a person familiar with the matter said, more than the 6.8 billion euros it had initially offered Intel to build two leading-edge facilities in the eastern city.
The company also plans to invest up to $4.6 billion in a new semiconductor assembly and test facility near Wrocław, Poland, as part of a multi-billion-dollar investment drive across Europe to build chip capacity, it said on Friday. The facility in Poland will employ 2,000 workers and create several thousand additional jobs during the construction phase and hiring by suppliers, the company said in a statement.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Ukraine Won’t Get Formal Invite to Join NATO at July Summit, Stoltenberg Says – The Hill
- Russia Rejects U.N. Help as Death Toll from Breached Dam Rises – Reuters
- Both Sides Suffer Heavy Casualties as Ukraine Strikes Back Against Russia, UK Assessment Says – AP
- Why Ukraine’s Offensive Will Likely Be a Slow, Costly Grind – WSJ
- BBC on the Front Line as Ukraine Attacks Russian Trenches – BBC
- Britain to Keep Russian Assets Frozen Until Ukraine is Compensated – Reuters
- Ukraine Targets Initial $40 Billion for ‘Green Marshall Plan’ – Reuters
- Russia Had Means, Motive and Opportunity to Destroy Ukraine Dam, Drone Photos and Information Show – AP
- The Russians Packed A Robotic T-55 Tank With Explosives And Rolled It Toward Ukrainian Lines – Forbes
- New Trial of Russia’s Jailed Opposition Leader Navalny Begins “in Private” – NYT
- 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
Widespread Lean Adoption Would Make the US More Competitive
U.S. manufacturers are facing many troubling headwinds: supply chain disruption; competing against lower labor cost countries; workforce shortages; energy transition; and broadly sharing in the benefits from advanced production technology and Industry 4.0, according to a recent McKinsey Global Report. All will be easier to confront with higher productivity. An ITIF analysis, however, reports that productivity in the U.S. manufacturing sector has been flat to declining since 2011. To say that U.S. manufacturing is on a revitalized trajectory requires a quantum change in the number of globally competitive U.S. companies operating at top-tier productivity
Lean manufacturing is one of the few levers able to raise productivity at a national scale and drive a sustained reversal in the tidal outflow of manufacturing. Lean continuously eliminates waste and bottlenecks and improves customer value through employee engagement and data-driven tools. Companies often look to technology and equipment investment as the solution to productivity. Produce more with less labor. Lean achieves productivity gains by focusing on workforce-based continuous improvement.
Most S&P 500 Companies Said Their Median Worker Was Paid More in 2022, and About 100 of Them Said Pay Rose at Least 10%
In a year marked by tech layoffs and high inflation, competition for workers helped to lift paydays at most S&P 500 companies for the second straight year, according to a Wall Street Journal analysis. Compensation for the median worker at 278 companies in the S&P 500 index was higher in 2022 than in the year before, according to the Journal’s analysis of data collected by MyLogIQ. About 100 of the companies said their median worker’s pay rose 10% or more, roughly the same number as in 2021.
Despite the pullback by tech giants and other white-collar layoffs, many small and large employers have been hiring at a rapid clip this spring, keeping the U.S. unemployment rate near historic lows. The S&P 500 didn’t see major shifts in median pay from 2021 to 2022, according to The Journal’s analysis. In both years, similar numbers of companies reported paying their median workers more than $200,000, more than $100,000 and under $50,000.
COVID Update - Biden to Appoint Mandy Cohen to Lead the CDC
President Joe Biden on Friday said he will appoint Dr. Mandy Cohen to lead the Centers for Disease Control and Prevention. Cohen served as the head of North Carolina’s Department of Health and Human Services during the worst days of the Covid-19 pandemic. She previously helped implement Affordable Care Act programs as a senior official at the federal Centers for Medicare and Medicaid Services. Cohen is a doctor of internal medicine.
Cohen will take over a CDC that’s undergoing a restructuring to address criticisms that the agency acted too slowly during the pandemic and often gave health guidance that confused the public. CDC directors do not currently require Senate confirmation, though that will change in January 2025 due to recent legislation passed by Congress.
Congress is Stuck on Rewriting Permit Rules In Wake Sackett SCOTUS Decision.
The court’s May 25 decision shrinking federal wetlands protections took a wrecking ball to an expansive permitting regime that has been in place for nearly 50 years ― and it’s already having a ripple effect in how agencies enforce a wide range of other environmental safeguards. The 5-4 ruling put at least half the country’s marshes, swamps and other wetlands outside the reach of federal water protections, an outcome that could speed the way for pipelines, power lines, highways and housing projects across the U.S.
The ruling in Sackett v. EPA delivered a win for an array of industries, legal experts say — and it may enable many projects to avoid federal scrutiny altogether. “Sackett is not a Promised Land. It didn’t clear up everything. But boy did it clear up a lot,” said Molly Cagle, senior counsel at the law firm Baker Botts who advises infrastructure developers on permitting. The court decision addressed what has been one of the biggest regulatory hurdles for a wide range of projects: obtaining a Clean Water Act permit to fill in streams and wetlands.
Oil Prices Fall On Fears Over China Growth
Oil prices lost some of last week’s gains Monday on fears about China’s growth ahead of expectations Beijing will cut another key interest rate Tuesday. Brent, the international oil benchmark, fell more than 0.6% to $76.16 a barrel in early trading. It is still up 11.3% since the beginning of the year. Futures for West Texas Intermediate (WTI) crude, the U.S. benchmark, were also down 0.6%, to $76.17 a barrel.
China’s economic recovery after Beijing relaxed Covid-19 restrictions has been slower than expected. Earlier this month, the country posted producer-price inflation that was weaker than expected for May, with prices falling 4.6% from the same period the previous year. It was the weakest reading since 2016. Economists have been downgrading China’s growth—the latest came from Goldman Sachs , which cited coming turbulence when cutting forecasts for 2023 gross domestic product to 5.4% from 6%, CNBC reported.
Medicare Surge to Drive U.S. Health Care Spending to $7 Trillion by 2031
Health expenditures are projected to rise to 19.6% of gross domestic product, up from 18.3% in 2021, according to an analysis published Wednesday in the journal Health Affairs. The figures tally both government and private spending. The US spent $4.3 trillion on health care in 2021, more relative to the size of its economy than any other developed country. The new estimates from the Centers for Medicare and Medicaid Services show that trend is set to persist as outsize health expenses drag on taxpayers, businesses and families.
Spending on Medicare, the US health program for older and disabled people, is expected to rise faster than in the private sector, averaging 7.5% a year. The gains are due in part to the last wave of enrollment by the baby boomer generation, researchers said. The US is taking some steps to rein in outlays. But overall, the changes won’t save money for the Medicare program itself until 2031, the researchers said.
China’s Post-Covid Economy Was Meant to Roar. But it is Faltering Again
China prides itself on firm, “unswerving” leadership and stable economic growth. That should make its fortunes easy to predict. But in recent months, the world’s second-biggest economy has been full of surprises, wrong-footing seasoned China-watchers and savvy investors alike. In the first three months of this year, for example, China’s economy grew more quickly than expected, thanks to its surprisingly abrupt exit from the covid-19 pandemic.
Then in April and May, the opposite happened: the economy recovered more slowly than hoped. Figures for retail sales, investment and property sales all fell short of expectations. And the unemployment rate among China’s urban youth rose above 20%, the highest since data began to be recorded in 2018. Some economists now think the economy might not grow at all in the second quarter, compared with the first (see chart). By China’s standards that would count as a “double dip”, says Ting Lu of Nomura, a bank.
Pentagon Expected to Block New F-35 Deliveries Amid Testing Delays
According to multiple reports the U.S. Dept. of Defense will stop taking deliveries of new F-35 Joint Strike Fighter aircraft next month, because those aircraft will be updated with the Tech Refresh 3 hardware and software intended to bring the jets up-to-date with current standards for data collection/recall, as well as displays. The explanation for the expected halt is that the new TR-3 hardware and software has not yet cleared the Pentagon’s testing and approval processes.
According to the Pentagon F-35 Joint Program Office: “As we reported to Congress in March, we still see risk of TR-3 delivery slipping until the December 2023-April 2024 timeframe. Delivering combat capable aircraft to our warfighters is our #1 priority and TR-3 provides the computational horsepower that ensures the F-35 remains superior to potential adversaries for decades to come,” spokesman Russ Goemaere stated. The number of aircraft that may be affected is not known. Lockheed Martin, the lead contractor of the extensive F-35 program, delivered 141 aircraft during 2022.
New UAW President Shawn Fain Issues Strongest Warning Yet About Strikes Against 3 Detroit Automakers
The new president of the United Auto Workers gave his strongest warning yet Friday that the union is preparing for strikes against Detroit’s three automakers when contracts expire in September. Fain repeated the union’s goals of winning back cost-of-living pay raises and pensions lost as the industry faced financial peril in 2009. They also want general pay raises and elimination of tiers of workers who are paid different wage rates, many for doing the same jobs. The union also wants to represent workers at joint-venture electric vehicle battery plants and get them top wages.
Whether there are strikes depends on how the companies react, Fain said, repeating that the automakers have made billions in the past 10 years but haven’t rewarded workers. “We have to be able to do whatever we have to do if you want to have these gains. The companies aren’t going to freely give it,” he said.
Siemens to Spend $2.2 bln to Ramp up Global Production
Siemens will spend 2 billion euros ($2.2 billion) on a new global investment plan, the German engineering group said on Thursday, to make its operations more resilient against supply chain disruptions and geopolitical tensions. Siemens will build new factories, research and development centres and training sites around the world, the company said, as it also aims to take maximum benefit of stimulus packages in the United States and Europe.
The company has previously said it expects its total addressable market for its products, which range from trains to industrial software, to expand by 7% per year between 2022 to 2027. The expansion programme - which will see further investment in Europe and the United States - could be a response to the global COVID-19 pandemic, which gummed up supply chains and logistics.
Food Producers Band Together in Face of Cyber Threats
Food and agriculture companies in the U.S. face mounting cybersecurity threats, executives in the sector say, spurring them to formalize how they share information with each other. Concerns about cybersecurity vulnerabilities in the U.S. agricultural sector have deepened after incidents at several large companies. While those attacks had limited impacts, experts say they are warning signs of how easily a cyberattack could disrupt the nation’s food supply.
Last month, the IT-ISAC announced that the food and agriculture sector would finally be getting its own, dedicated platform. Similar groups already exist to enable companies in the financial services, retail, automobile and other sectors to exchange details about threats their peers should watch out for. “There’s been a long recognition that the food and ag sector was one of the few critical infrastructure industries without an ISAC,” said Scott Algeier, executive director of both the IT-ISAC and the new Food and Ag-ISAC. Founding board members include PepsiCo, Bunge, Tyson, Cargill, Conagra Brands and Corteva.
Up, Up and Away: Paris Air Show Opens After Four-Year Absence
The Paris Airshow opened on Monday with last-minute jet order negotiations and supply chain headaches competing for attention with rows of missiles, drones and futuristic transport. The world's largest air show, which alternates with Farnborough in Britain, is at Le Bourget for the first time in four years after the 2021 edition fell victim to the pandemic. French President Emmanuel Macron flew in to the packed aerospace bazaar by helicopter and watched a flying demonstration including the French Rafale fighter. The U.S. F-35 fighter was due to fly later on Monday.
On the commercial side, planemakers arrived with growing demand expectations as airlines rush for capacity to meet demand and help reach industry goals of net zero emissions by 2050. But they also face a challenge to meet that demand as suppliers struggle with rising costs, parts shortages and a scarcity of skilled labour in the wake of the pandemic.
In Paris Airbus Wins Record 500-Plane Order from India's IndiGo
Europe's Airbus (AIR.PA) secured a historic deal on Monday involving the most jets ever bought by a single airline, with an order for 500 narrowbody jets from Indian budget carrier IndiGo (INGL.NS) on the opening day of the Paris Airshow. The multibillion-dollar deal eclipses Air India's combined purchase of 470 jets earlier this year as India's two largest carriers plan for a sharp expansion in regional travel demand.
Efforts by Indian carriers to keep pace with the world's fastest-growing aviation market, serving the largest population, have sent industry records tumbling even though manufacturers are struggling to meet output goals. Indian carriers now have the second-largest order book, with an over 6% share of the industry backlog, behind only the United States, according to a June 1 report by Barclays. But some analysts have expressed concern that airlines could be over-ordering jets in pursuit of the same passengers.
AI: How Much Would $10,000 Invested in Nvidia Stock 20 Years Ago Be Worth Today?
Nvidia Corp. has been one of the most sensational stocks of the year. Shares of the semiconductor firm are up 194% year to date through June 14. That's especially impressive considering Nvidia's large size: The chipmaker now commands a $1 trillion market capitalization, making it the fifth-largest company in the U.S. by market cap. While Nvidia's stock price has gone to the stratosphere this year, the company was hardly an overnight success story. It completed its initial public offering way back in 1999 and has steadily built up its business over the years to get to the point where it was able to become one of the country's most important enterprises.
A $10,000 investment in Nvidia made in June 2003 would have grown to a stunning $2.286 million today. This works out to an incredible 31.2% compound annual growth rate for investors that held on over the past 20 years. This return trounced the S&P 500, which delivered a 9.8% compound annual growth rate over the same time period.