April 26, 2024 • 20 mins
Featuring:
Peiqian Liu, Asia Economist at Fidelity International, joins us to discuss the BOJ decision and Asia economic outlook.
Robert Lea, Bloomberg Intelligence Senior Analyst, sits down with us to discuss the impact of AI on big tech earnings.
Jill Disis, Bloomberg News Desk editor, joins us from Hong Kong to discuss Secretary Antony Blinken's visit to China.
Apple: https://podcasts.apple.com/us/podcast/bloomberg-daybreak-asia/id1663863437
Spotify: https://open.spotify.com/show/0Ccfge70zthAgVfm0NVw1b
TuneIn: https://tunein.com/podcasts/Asian-Talk/Bloomberg-Daybreak-Asia-Edition-p247557/?lang=es-es
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Daybreak Asia podcast. I'm Doug Krisner. You can join Brian
Curtis and myself for the stories, making news and moving
markets in the APAC region. You can subscribe to the
show anywhere you get your podcast and always on Bloomberg Radio,
(00:23):
the Bloomberg Terminal, and the Bloomberg Business App.
Speaker 2 (00:27):
It's the Bank of Japan day day two of the meeting,
and we will get some policy pronouncement coming up a
little bit later this morning. Joining us in our studios
in Singapore to talk about this is Pai Chian Leo,
who's Asia economist at Fidelity International. So we might get
a little bit of a change in terms of the
inflation expectations from the BOJ, but at least most BOJ
(00:48):
watchers are saying it won't be any policy change. Are
you in that camp or do you see perhaps a
change in policy?
Speaker 3 (00:57):
First, thank you for having me today. I actually expect
the BOG to keep monetary policy rates and policy setting
unchanged in this meeting. Other reason being there has been
a sew of actions been taken last month where the
BOG officially exited its negative interest regime For this month,
I think the focus would largely be, as you mentioned earlier,
(01:17):
on the revision of inflation for the boj's quarterly outlook
report that's going to be published. We also get a
new phixical year twenty six inflation and we expect all
of the inflation forecasts to be anchored around or above
two percent for the next three years.
Speaker 1 (01:35):
What's going on with the currency right now? And should
this be of great concern for the Bank of Japan
or are they Do you think they're comfortable with allowing
market forces to dictate where the enis trading and perhaps
import a lot more inflation into the economy.
Speaker 3 (01:52):
Well, I think, just broadly put into perspective, the weakening
Japanese yen is a result of the strong dollar rally
over the past few sessions. So broadly, not only the
Japanese y and Chinese yuan and other Issian effects are
also facing pressure of depreciation over the repressing of fat
(02:14):
rate paths and also the dollar strength. So on that note,
I think it as long as Japanese n is not
singled out in a depreciation path, the bog or mof
might be observing the pace of depreciation rather than a
specific level of it. Speaking of a weekend's impact on
the economy, I think definitely we're seeing more rising important
(02:37):
inflation that's contributing to the CPI numbers. But given that
the BOG is still firmly pushing for its reflation of
the economy and trying to get inflation back to above
two percent in a more sustainable manner, so I wouldn't
really think that having a little bit of important inflation
is bad for the economy after all.
Speaker 2 (02:57):
Yeah, exactly, it sort of helps them with their objective.
But it seems like here of late, you've seen a
lot more discomfort coming in the stock market hasn't responded
as it often responds to a weekend by going higher.
It's been a little bit troubled, and you're hearing more
and more of these threats from policymakers that they could intervene. Now,
I didn't think that it would be very likely that
(03:20):
they would intervene in these two days where the Bank
of Japan was meeting, But then Bloomberg did a story
saying history suggests that they are willing to do it.
It doesn't happen all that often, but they are willing
to do it, but I guess we're about ready to
get this decision, so at least so far, no intervention
going forward. Who knows.
Speaker 3 (03:40):
Yeah again, I think from a coordination or policy regime perspective, definitely,
the BOJ meeting today is worth watching out for, especially
what Governor oed is messaging about the week Japanese and
whether or not that affects the boj's forecast for inflation trajectory.
(04:00):
I think that will be also affecting the Japanese yen
performance after the meeting and will probably influencing the mof's
decision whether or not they should or would be intervening
in the market.
Speaker 1 (04:13):
You also mentioned a week Chinese currency, and the export
side of the China story has been one area of
the economy that's been holding up pretty well. Do you
expect that to continue well?
Speaker 3 (04:23):
I think the export some of whatever outperformances in the
past few months is mainly driven by a resumption or
resilience of the developmrket's demand. So that was in line
with a kind of a hot data showing that the
demand and export cycle is turning in an upswing. So
from that perspective, I think yes, we probably will see
(04:46):
a continuation of this, especially with the pickup of semiconductor
supply chain as well as the goods expots. But having
said that, I think ultimately China's growth still should likely
to be domestically driven, which which is still somewhat in
a gradual recovery path. So that's why in our base case,
we think that China's growth this year most likely will
(05:07):
following the range of controlled stabilization rather than any strong
reflation driven by added domestic or excellent demand at this moment.
Speaker 2 (05:17):
So in the US, and now you look at the
US as well, GDP rising and analyze one point six
percent trailing every forecast in a Bloomberg survey and inflation
a lot harder than expected three point seven percent. Is
this still sort of in the noise category or is
this a trend now that we really have to be
cognizant of.
Speaker 3 (05:37):
Well, I think for the US, our base case is
that it's gradually becoming the case that soft lending becomes
more likely. There are some resilience in the US economy
being exhibited, for example, of a somewhat resilient labor market,
inflation print still hovering at somewhat elevated levels, so that
all gives us a signal that with this resilience, it's
(05:59):
really the case that the US the fat might be
holding a rate for a bit longer.
Speaker 2 (06:06):
Yeah, all right, mister do you thank you very much
for joining us. Leophen they're Asia economist at Fidelity International.
We've talked a lot about tech earnings this morning. We
want to get a closer look at some of the
ins and outs with Robert Lee, Bloomberg Intelligence Senior Analyst.
(06:29):
So I know that some of these companies, Robert, are
not companies that you cover specifically, so we want to
talk I guess more in generalities about the impact on
companies here, perhaps that you do follow a company like
ten Cent in the tech sphere. So we had very
strong earnings from Alphabet and Microsoft, the stocks rewarded Meta.
Parts of Meta's earnings were pretty solid, particularly the profit
(06:54):
revenue in the prior quarter, but it's the forecast that
got them in trouble. So what are some of the
what are you gleaning from some of these earnings? And
let's throw in as well heinex yesterday and you know
what we heard from TSMC and others like TI.
Speaker 4 (07:10):
Okay, not much to go through then, but let's say
I'll do my best.
Speaker 2 (07:14):
Yeah, yeah, give you thirty seconds.
Speaker 4 (07:18):
It's all AI, It's all going up. But I'm joking.
I think taking a step back and looking at common
themes that impact both the US that have relevance to
the mag seven and also the stocks here in Asia,
I think maybe, as I've said before, you know, most
people would agree as we do, that the secular trend
(07:39):
in AI is something that's gonna It's a multi year trend,
arguably a multi decade decade trend. The benefits to consumer
and enterprise clients are potentially significant over the long run.
Who's making money from it in the moment, No, clearly
in video and the infrastructure players are and you know
in videos really in the sweet spot winner ticks or
(08:00):
because of the supply constraints. However, you look at the
software companies in the middle and they are shelling out
tens of billions in capex at a time when their
monetization strategies are an early stage or even immature. And
I think that was that chickens came home to roost,
if that's the right expression for meta on that front,
because it's kapex burden is rising, impacting its free cust
(08:23):
flower generation a time when its monetization is relatively low.
Obviously investors took that quite negatively.
Speaker 1 (08:30):
So the Campex, so I would argue, is tied not
only to AI, but VR as well. And we know
that the Zuckerberg is very much committed to kind of
the metaverse and the virtual reality space. But let's for
the sake of this discussion remain focused on AI. One
of the things that you highlighted there was the accelerators
made by Nvidia, and that's not the only part of
(08:52):
the AI story. When you're building out these data centers,
the memory chip makers, the high bandwidth memory chip makers
in particular, are a fitting in a big way. Next
week we're going to get Samsung. Can you give me
a sense of what to expect, what we might look
for in Samsung numbers?
Speaker 3 (09:09):
No?
Speaker 4 (09:09):
No, No, definitely. So the major supplies, the three main
memory supplies globally, Samson being the largest, ESK Heinex in
Korea and then Micron in the States. So the whilst
Samson is the leading volume player with a large exposure
and dependence on the PC market, the leader in high
bandwidth memory, which goes into these AI servers is Heinex.
(09:31):
So Samson is playing catch up, and I think the
thing to watch for in next week's results is, you
know what progress that they're making that front, and they're
managing to narrow the gap with the leader, Heinex. But
DRAM or the memory chips is in aoriously volatile market.
Things seem to be going the right way for the
moment as PC demand picks up and the dynamics of
(09:53):
supply and demand move more in their favor. But having
said that, look at Intel last night. Intel clearly disappointed.
One of the reasons for that is ongoing soft demand
within mainstream PCs, so we shouldn't forget about that. At
the moment.
Speaker 2 (10:07):
I thought that this earning season we might see a
switch from the providers of the AI chips to focus
on them more into use case the software and the
consumer facing companies like Google and perhaps even Microsoft. I'm
not sure that we're quite there yet, but might we
get teased some of that from Samsung.
Speaker 4 (10:32):
Again, you look at Samson's business, the major profit and
earning strivers for on the memory chips, so again DRAM
and nan Flash, which are very very cyclical and very
very volatile industries. But with demand currently beginning to outstrip supply,
that's you know, that's pushing pricing up and driving margins
within those core businesses. Samson is also a major supplier
(10:52):
of smartphones globally. That's a sort of lower growth business
these days. So the thing to watch force is Samson's
results next week of really the memory side. That's what
underpins their profit growth. And as I said, we need
to see evidence that they are narrowing the technology gap
with the leader Heinez at the moment. So I think
it's all in potentially in Samson's favor on that front.
(11:12):
The other thing, very quickly is great to focus on
shareholder returns, enhanced shareholder returns. Obviously, Samson is sitting on
a substantial cash balance, is inherently very cash generitive. Could
we see enhancements on the shareholder return side as we
saw from Google last night with its inaugural dividend.
Speaker 1 (11:30):
Before we let you go, Robert, I'm sorry to cut
you off there, because I want to be able to
get your perspective on the Chinese chip manufacturers. The Huawei,
I think is coming to sharp focus given you just
mentioned the smartphone market. Huawei is I think doing very
well on that front, what do we know about chip
manufacturing going on in China right now and whether or
not companies like Samsung need to look over their shoulder.
Speaker 4 (11:53):
It's probably a little bit early days for Samson and
others to worry about the threat from the Chinese. But
at the end of the day, the way of the
state is backing Huawei and SMIC and SMIC being the
Chinese equivalent of TIERSMC, So you've got you know, you've
got a lot of national pride, a lot of strategic
national long term objectives, and a lot of money flowing
(12:14):
into lact sector. However, they have two major barriers to overcome.
One is the export restrictions on the ASML Advanced lethography
equipment that is going to be a multi year challenge
for them to overcome. And the yields they're generating on
these five andanimeter chips, which is the one that caught
the headline at the end of last year, they look
(12:34):
to be quite low. So they are making progress, but
there's multiple, well three four generations behind where the US
and TSMC is at the moment.
Speaker 2 (12:43):
Do you see the heat getting turned up in the
relationship between US and China When it comes to things
like semiconductors or do you see that heat perhaps being
lowered in the next few months.
Speaker 4 (12:54):
Again, another great question. I think china strategy at the
moment is these rests friction on the lithography equipment and
not impacting the mainstream And obviously China is the workshop
to the world, isn't it to make everything from vacuum
cleaners to air conditioning units. These use mainstream chips and
China's strategy at the moment seems to be increasing its
market share within the mass market, which does not suffer
(13:17):
these restrictions. That's the strategy. At the same time putting
a huge amount of effort onto the R and D side,
But that's a multi yeah challenge.
Speaker 2 (13:24):
I know you have to run off to television much
in demand, Robert, thank you, Robert Lee Bloomberg Intelligence Senior Analyst.
Secretary of State Anthony Blinkett raising concerns over what the
US perceives as unfair trade practices in China and the
(13:47):
Global Times, a Communist Party paper responded by saying, why
does the US side turn a normal visit into what
seems like an ultimatum? Joining US now? Is Jill deesis
in our studios right here in Hong Kong, Bloomberg News
Desk editor to take a closer look. There wasn't all
that much that came out of these meetings yesterday except
kind of restating positions. I would say, what do.
Speaker 5 (14:08):
You say, yeah, Brian, I agree with you. I think
that makes sense though here, because really what Blinkin is
doing here is just driving home this drumbeat of criticisms
that the US has been building, particularly over the last
several months against China. So one is this criticism of
industrial overcapacity that the US has levied against China, the
(14:28):
idea that China is exporting incredibly cheap goods around the
world and creating a lot of economic imbalances. We saw
this come up during US Treasury Secretary Jenet Yellen's trip
to Beijing just a couple of weeks ago, blink and
hitting on that again during this trip to Shanghai and Beijing.
The other thing too, though, is that he's you know,
when it comes to some of those unfair trade practices.
(14:50):
A major points of contention is China's relationship with Russia
and how much China may be you know, sort of
funding different industries with in Russia that are contributing to
the war efforts in Ukraine. This is also, i will say, Brian,
just something that came up with Janet Yellen. So you
sort of raise the prospect that there could be French
fresh sanctions on Chinese banks helping Russia in that respect.
(15:13):
So lot's going on here.
Speaker 1 (15:14):
It's not just Russia. The sanctions on the Chinese banks
also tied to this flow of Iranian crude oil that
has been going to the refineries in China. That seems
to be pretty real because it was baked into this
Foreign aid bill. I'm sure that that was talked about
in this meeting, and I'm wondering that it probably supposing
(15:35):
that it's not going down very well in Beijing.
Speaker 5 (15:38):
No, Doug, I don't think it is. I think you're
right that, you know, I mean, it's difficult to think
that that wouldn't be discussed during all these meetings with
Lincoln this week. I think it really just underscores this
idea that there's still a lot of points of contention
and a lot of room for volatility within the US
China relationship because you've got, yes, all of these you know,
(15:58):
dignitaries from the US visiting China recently. That's certainly an
improvement from where we were just you know, a year
eighteen months ago when you saw much bigger icing out
of communications. So there's at least that presumption of high
level talks between US and Chinese officials. But as we've
seen with a lot of you know, the responses, particularly
from the US recently on potential sanctions on different aspects
(16:20):
of China, again, it's just there's still a lot of
points of contention here.
Speaker 2 (16:25):
Yeah, I was looking for a way to finish off
our story that we wrote for the Radio earlier, and
it seemed that, you know, you could say that although
to a certain degree the relations have stabilized, but the
two countries are still battling over technology, human rights, trade, Ukraine,
(16:45):
North Korea, and the Middle East. So I was curious
what Jilldicis thinks is what's the sorest of the point.
Speaker 5 (16:54):
I mean, I think at this point, really a lot
of those issues over tech national security in particular, are
very very difficult. I'm looking over the last year where
that I think the Biden administration has been the most
effective and really crimping a lot of China's ambitions. Is
on some of those technological issues. I mean, you know,
we've seen some fairly effective sanctions on chip makers and
(17:16):
you know, on chip supply chains directed at China that
I think have really created some pain points. Obviously, China
has found some ways to sort of work around those things.
We saw that you know, big Huawei phone launch last
fall that was you know, very successful. But it's very clear,
especially when you're seeing this brought up in hijin Ping,
you know, addresses and things by other Chinese leaders, that
(17:38):
this idea that you know, China is very concerned about
ways in which it sees the US as you know,
really really crimping a lot of its technological ambitions. And
I think that's pretty a particular sore.
Speaker 1 (17:49):
Point, crimpling technological innovations perhaps, but certainly standing in the
way of a lot of what Beijing would like to
do in the South China. See, I think we can
agree on that as well, don't you think definitely?
Speaker 5 (18:00):
I mean, look, I think that you know, military defense
issues are certainly a major sticking point here. I mean,
it's really you have to go back to Nancy Pelosi's
visit to Taiwan when she was a US House speaker,
really kicked off, you know, quite a bit of anger
from Beijing. I mean, you know, just a few months
later we had the ledged Chinese spy balloon flying over
(18:21):
the US that actually iced up earlier trip b Lincoln
was supposed to take to China last year. I mean, yes,
it's very clear that I think, you know, anything involving
the US's support of Taiwan in particular is going to
be a major sticking point with Beijing and create some
additional volatility there.
Speaker 2 (18:38):
In our b N story on this, we didn't mention
about a possible meeting with President Chi Jinping. Is that
seemingly now off the table or might it happen today?
Speaker 5 (18:46):
I think, Brian, we're really not going to know until
really the last minute here. I mean, it's certainly possible,
and remember Blincoln did meet with she last year when
he was in town, so you know, there's certainly precedent there.
I'd say it's still it's still a float. It is
a possibility, but it may not be until quite late
this afternoon that we actually get some kind of confirmation
on whether that meeting is actually taking place.
Speaker 1 (19:09):
Okay, Jill, thirty seconds did they talk about TikTok?
Speaker 5 (19:12):
I mean its certainly like it's got to come up right, Like,
I mean, when you've got this massive US legislation that's
just passed two hundred and seventy days to divest or
to leave the US, I mean again, another religious underscoring
a lot of that major points of contention there.
Speaker 2 (19:29):
Yeah, they went to a basketball game the night before,
I mean, yesterday was the first full day of meetings,
and that's kind of interesting. So Anthony blinkoln getting a
little culture there in China. Jill, thanks so much for
joining us here in our studios. Jill desis Bloomberg News
Desk Editor.
Speaker 1 (19:46):
This has been the Bloomberg Daybreak Asia podcast, bringing you
the stories making news and moving markets in the Asia Pacific.
Visit the Bloomberg Podcast channel on YouTube to get more
episodes of this and other shows from Bloomberg. Subscribe to
the podcast on Apple, Spotify, or anywhere else you listen,
and always on Bloomberg Radio, the Bloomberg Terminal, and the
(20:07):
Bloomberg Business app.
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Daybreak Asia podcast. I'm Doug Krisner. You can join Brian
Curtis and myself for the stories, making news and moving
markets in the APAC region. You can subscribe to the
show anywhere you get your podcast and always on Bloomberg Radio,
(00:23):
the Bloomberg Terminal, and the Bloomberg Business App.
Speaker 2 (00:27):
It's the Bank of Japan day day two of the meeting,
and we will get some policy pronouncement coming up a
little bit later this morning. Joining us in our studios
in Singapore to talk about this is Pai Chian Leo,
who's Asia economist at Fidelity International. So we might get
a little bit of a change in terms of the
inflation expectations from the BOJ, but at least most BOJ
(00:48):
watchers are saying it won't be any policy change. Are
you in that camp or do you see perhaps a
change in policy?
Speaker 3 (00:57):
First, thank you for having me today. I actually expect
the BOG to keep monetary policy rates and policy setting
unchanged in this meeting. Other reason being there has been
a sew of actions been taken last month where the
BOG officially exited its negative interest regime For this month,
I think the focus would largely be, as you mentioned earlier,
(01:17):
on the revision of inflation for the boj's quarterly outlook
report that's going to be published. We also get a
new phixical year twenty six inflation and we expect all
of the inflation forecasts to be anchored around or above
two percent for the next three years.
Speaker 1 (01:35):
What's going on with the currency right now? And should
this be of great concern for the Bank of Japan
or are they Do you think they're comfortable with allowing
market forces to dictate where the enis trading and perhaps
import a lot more inflation into the economy.
Speaker 3 (01:52):
Well, I think, just broadly put into perspective, the weakening
Japanese yen is a result of the strong dollar rally
over the past few sessions. So broadly, not only the
Japanese y and Chinese yuan and other Issian effects are
also facing pressure of depreciation over the repressing of fat
(02:14):
rate paths and also the dollar strength. So on that note,
I think it as long as Japanese n is not
singled out in a depreciation path, the bog or mof
might be observing the pace of depreciation rather than a
specific level of it. Speaking of a weekend's impact on
the economy, I think definitely we're seeing more rising important
(02:37):
inflation that's contributing to the CPI numbers. But given that
the BOG is still firmly pushing for its reflation of
the economy and trying to get inflation back to above
two percent in a more sustainable manner, so I wouldn't
really think that having a little bit of important inflation
is bad for the economy after all.
Speaker 2 (02:57):
Yeah, exactly, it sort of helps them with their objective.
But it seems like here of late, you've seen a
lot more discomfort coming in the stock market hasn't responded
as it often responds to a weekend by going higher.
It's been a little bit troubled, and you're hearing more
and more of these threats from policymakers that they could intervene. Now,
I didn't think that it would be very likely that
(03:20):
they would intervene in these two days where the Bank
of Japan was meeting, But then Bloomberg did a story
saying history suggests that they are willing to do it.
It doesn't happen all that often, but they are willing
to do it, but I guess we're about ready to
get this decision, so at least so far, no intervention
going forward. Who knows.
Speaker 3 (03:40):
Yeah again, I think from a coordination or policy regime perspective, definitely,
the BOJ meeting today is worth watching out for, especially
what Governor oed is messaging about the week Japanese and
whether or not that affects the boj's forecast for inflation trajectory.
(04:00):
I think that will be also affecting the Japanese yen
performance after the meeting and will probably influencing the mof's
decision whether or not they should or would be intervening
in the market.
Speaker 1 (04:13):
You also mentioned a week Chinese currency, and the export
side of the China story has been one area of
the economy that's been holding up pretty well. Do you
expect that to continue well?
Speaker 3 (04:23):
I think the export some of whatever outperformances in the
past few months is mainly driven by a resumption or
resilience of the developmrket's demand. So that was in line
with a kind of a hot data showing that the
demand and export cycle is turning in an upswing. So
from that perspective, I think yes, we probably will see
(04:46):
a continuation of this, especially with the pickup of semiconductor
supply chain as well as the goods expots. But having
said that, I think ultimately China's growth still should likely
to be domestically driven, which which is still somewhat in
a gradual recovery path. So that's why in our base case,
we think that China's growth this year most likely will
(05:07):
following the range of controlled stabilization rather than any strong
reflation driven by added domestic or excellent demand at this moment.
Speaker 2 (05:17):
So in the US, and now you look at the
US as well, GDP rising and analyze one point six
percent trailing every forecast in a Bloomberg survey and inflation
a lot harder than expected three point seven percent. Is
this still sort of in the noise category or is
this a trend now that we really have to be
cognizant of.
Speaker 3 (05:37):
Well, I think for the US, our base case is
that it's gradually becoming the case that soft lending becomes
more likely. There are some resilience in the US economy
being exhibited, for example, of a somewhat resilient labor market,
inflation print still hovering at somewhat elevated levels, so that
all gives us a signal that with this resilience, it's
(05:59):
really the case that the US the fat might be
holding a rate for a bit longer.
Speaker 2 (06:06):
Yeah, all right, mister do you thank you very much
for joining us. Leophen they're Asia economist at Fidelity International.
We've talked a lot about tech earnings this morning. We
want to get a closer look at some of the
ins and outs with Robert Lee, Bloomberg Intelligence Senior Analyst.
(06:29):
So I know that some of these companies, Robert, are
not companies that you cover specifically, so we want to
talk I guess more in generalities about the impact on
companies here, perhaps that you do follow a company like
ten Cent in the tech sphere. So we had very
strong earnings from Alphabet and Microsoft, the stocks rewarded Meta.
Parts of Meta's earnings were pretty solid, particularly the profit
(06:54):
revenue in the prior quarter, but it's the forecast that
got them in trouble. So what are some of the
what are you gleaning from some of these earnings? And
let's throw in as well heinex yesterday and you know
what we heard from TSMC and others like TI.
Speaker 4 (07:10):
Okay, not much to go through then, but let's say
I'll do my best.
Speaker 2 (07:14):
Yeah, yeah, give you thirty seconds.
Speaker 4 (07:18):
It's all AI, It's all going up. But I'm joking.
I think taking a step back and looking at common
themes that impact both the US that have relevance to
the mag seven and also the stocks here in Asia,
I think maybe, as I've said before, you know, most
people would agree as we do, that the secular trend
(07:39):
in AI is something that's gonna It's a multi year trend,
arguably a multi decade decade trend. The benefits to consumer
and enterprise clients are potentially significant over the long run.
Who's making money from it in the moment, No, clearly
in video and the infrastructure players are and you know
in videos really in the sweet spot winner ticks or
(08:00):
because of the supply constraints. However, you look at the
software companies in the middle and they are shelling out
tens of billions in capex at a time when their
monetization strategies are an early stage or even immature. And
I think that was that chickens came home to roost,
if that's the right expression for meta on that front,
because it's kapex burden is rising, impacting its free cust
(08:23):
flower generation a time when its monetization is relatively low.
Obviously investors took that quite negatively.
Speaker 1 (08:30):
So the Campex, so I would argue, is tied not
only to AI, but VR as well. And we know
that the Zuckerberg is very much committed to kind of
the metaverse and the virtual reality space. But let's for
the sake of this discussion remain focused on AI. One
of the things that you highlighted there was the accelerators
made by Nvidia, and that's not the only part of
(08:52):
the AI story. When you're building out these data centers,
the memory chip makers, the high bandwidth memory chip makers
in particular, are a fitting in a big way. Next
week we're going to get Samsung. Can you give me
a sense of what to expect, what we might look
for in Samsung numbers?
Speaker 3 (09:09):
No?
Speaker 4 (09:09):
No, No, definitely. So the major supplies, the three main
memory supplies globally, Samson being the largest, ESK Heinex in
Korea and then Micron in the States. So the whilst
Samson is the leading volume player with a large exposure
and dependence on the PC market, the leader in high
bandwidth memory, which goes into these AI servers is Heinex.
(09:31):
So Samson is playing catch up, and I think the
thing to watch for in next week's results is, you
know what progress that they're making that front, and they're
managing to narrow the gap with the leader, Heinex. But
DRAM or the memory chips is in aoriously volatile market.
Things seem to be going the right way for the
moment as PC demand picks up and the dynamics of
(09:53):
supply and demand move more in their favor. But having
said that, look at Intel last night. Intel clearly disappointed.
One of the reasons for that is ongoing soft demand
within mainstream PCs, so we shouldn't forget about that. At
the moment.
Speaker 2 (10:07):
I thought that this earning season we might see a
switch from the providers of the AI chips to focus
on them more into use case the software and the
consumer facing companies like Google and perhaps even Microsoft. I'm
not sure that we're quite there yet, but might we
get teased some of that from Samsung.
Speaker 4 (10:32):
Again, you look at Samson's business, the major profit and
earning strivers for on the memory chips, so again DRAM
and nan Flash, which are very very cyclical and very
very volatile industries. But with demand currently beginning to outstrip supply,
that's you know, that's pushing pricing up and driving margins
within those core businesses. Samson is also a major supplier
(10:52):
of smartphones globally. That's a sort of lower growth business
these days. So the thing to watch force is Samson's
results next week of really the memory side. That's what
underpins their profit growth. And as I said, we need
to see evidence that they are narrowing the technology gap
with the leader Heinez at the moment. So I think
it's all in potentially in Samson's favor on that front.
(11:12):
The other thing, very quickly is great to focus on
shareholder returns, enhanced shareholder returns. Obviously, Samson is sitting on
a substantial cash balance, is inherently very cash generitive. Could
we see enhancements on the shareholder return side as we
saw from Google last night with its inaugural dividend.
Speaker 1 (11:30):
Before we let you go, Robert, I'm sorry to cut
you off there, because I want to be able to
get your perspective on the Chinese chip manufacturers. The Huawei,
I think is coming to sharp focus given you just
mentioned the smartphone market. Huawei is I think doing very
well on that front, what do we know about chip
manufacturing going on in China right now and whether or
not companies like Samsung need to look over their shoulder.
Speaker 4 (11:53):
It's probably a little bit early days for Samson and
others to worry about the threat from the Chinese. But
at the end of the day, the way of the
state is backing Huawei and SMIC and SMIC being the
Chinese equivalent of TIERSMC, So you've got you know, you've
got a lot of national pride, a lot of strategic
national long term objectives, and a lot of money flowing
(12:14):
into lact sector. However, they have two major barriers to overcome.
One is the export restrictions on the ASML Advanced lethography
equipment that is going to be a multi year challenge
for them to overcome. And the yields they're generating on
these five andanimeter chips, which is the one that caught
the headline at the end of last year, they look
(12:34):
to be quite low. So they are making progress, but
there's multiple, well three four generations behind where the US
and TSMC is at the moment.
Speaker 2 (12:43):
Do you see the heat getting turned up in the
relationship between US and China When it comes to things
like semiconductors or do you see that heat perhaps being
lowered in the next few months.
Speaker 4 (12:54):
Again, another great question. I think china strategy at the
moment is these rests friction on the lithography equipment and
not impacting the mainstream And obviously China is the workshop
to the world, isn't it to make everything from vacuum
cleaners to air conditioning units. These use mainstream chips and
China's strategy at the moment seems to be increasing its
market share within the mass market, which does not suffer
(13:17):
these restrictions. That's the strategy. At the same time putting
a huge amount of effort onto the R and D side,
But that's a multi yeah challenge.
Speaker 2 (13:24):
I know you have to run off to television much
in demand, Robert, thank you, Robert Lee Bloomberg Intelligence Senior Analyst.
Secretary of State Anthony Blinkett raising concerns over what the
US perceives as unfair trade practices in China and the
(13:47):
Global Times, a Communist Party paper responded by saying, why
does the US side turn a normal visit into what
seems like an ultimatum? Joining US now? Is Jill deesis
in our studios right here in Hong Kong, Bloomberg News
Desk editor to take a closer look. There wasn't all
that much that came out of these meetings yesterday except
kind of restating positions. I would say, what do.
Speaker 5 (14:08):
You say, yeah, Brian, I agree with you. I think
that makes sense though here, because really what Blinkin is
doing here is just driving home this drumbeat of criticisms
that the US has been building, particularly over the last
several months against China. So one is this criticism of
industrial overcapacity that the US has levied against China, the
(14:28):
idea that China is exporting incredibly cheap goods around the
world and creating a lot of economic imbalances. We saw
this come up during US Treasury Secretary Jenet Yellen's trip
to Beijing just a couple of weeks ago, blink and
hitting on that again during this trip to Shanghai and Beijing.
The other thing too, though, is that he's you know,
when it comes to some of those unfair trade practices.
(14:50):
A major points of contention is China's relationship with Russia
and how much China may be you know, sort of
funding different industries with in Russia that are contributing to
the war efforts in Ukraine. This is also, i will say, Brian,
just something that came up with Janet Yellen. So you
sort of raise the prospect that there could be French
fresh sanctions on Chinese banks helping Russia in that respect.
(15:13):
So lot's going on here.
Speaker 1 (15:14):
It's not just Russia. The sanctions on the Chinese banks
also tied to this flow of Iranian crude oil that
has been going to the refineries in China. That seems
to be pretty real because it was baked into this
Foreign aid bill. I'm sure that that was talked about
in this meeting, and I'm wondering that it probably supposing
(15:35):
that it's not going down very well in Beijing.
Speaker 5 (15:38):
No, Doug, I don't think it is. I think you're
right that, you know, I mean, it's difficult to think
that that wouldn't be discussed during all these meetings with
Lincoln this week. I think it really just underscores this
idea that there's still a lot of points of contention
and a lot of room for volatility within the US
China relationship because you've got, yes, all of these you know,
(15:58):
dignitaries from the US visiting China recently. That's certainly an
improvement from where we were just you know, a year
eighteen months ago when you saw much bigger icing out
of communications. So there's at least that presumption of high
level talks between US and Chinese officials. But as we've
seen with a lot of you know, the responses, particularly
from the US recently on potential sanctions on different aspects
(16:20):
of China, again, it's just there's still a lot of
points of contention here.
Speaker 2 (16:25):
Yeah, I was looking for a way to finish off
our story that we wrote for the Radio earlier, and
it seemed that, you know, you could say that although
to a certain degree the relations have stabilized, but the
two countries are still battling over technology, human rights, trade, Ukraine,
(16:45):
North Korea, and the Middle East. So I was curious
what Jilldicis thinks is what's the sorest of the point.
Speaker 5 (16:54):
I mean, I think at this point, really a lot
of those issues over tech national security in particular, are
very very difficult. I'm looking over the last year where
that I think the Biden administration has been the most
effective and really crimping a lot of China's ambitions. Is
on some of those technological issues. I mean, you know,
we've seen some fairly effective sanctions on chip makers and
(17:16):
you know, on chip supply chains directed at China that
I think have really created some pain points. Obviously, China
has found some ways to sort of work around those things.
We saw that you know, big Huawei phone launch last
fall that was you know, very successful. But it's very clear,
especially when you're seeing this brought up in hijin Ping,
you know, addresses and things by other Chinese leaders, that
(17:38):
this idea that you know, China is very concerned about
ways in which it sees the US as you know,
really really crimping a lot of its technological ambitions. And
I think that's pretty a particular sore.
Speaker 1 (17:49):
Point, crimpling technological innovations perhaps, but certainly standing in the
way of a lot of what Beijing would like to
do in the South China. See, I think we can
agree on that as well, don't you think definitely?
Speaker 5 (18:00):
I mean, look, I think that you know, military defense
issues are certainly a major sticking point here. I mean,
it's really you have to go back to Nancy Pelosi's
visit to Taiwan when she was a US House speaker,
really kicked off, you know, quite a bit of anger
from Beijing. I mean, you know, just a few months
later we had the ledged Chinese spy balloon flying over
(18:21):
the US that actually iced up earlier trip b Lincoln
was supposed to take to China last year. I mean, yes,
it's very clear that I think, you know, anything involving
the US's support of Taiwan in particular is going to
be a major sticking point with Beijing and create some
additional volatility there.
Speaker 2 (18:38):
In our b N story on this, we didn't mention
about a possible meeting with President Chi Jinping. Is that
seemingly now off the table or might it happen today?
Speaker 5 (18:46):
I think, Brian, we're really not going to know until
really the last minute here. I mean, it's certainly possible,
and remember Blincoln did meet with she last year when
he was in town, so you know, there's certainly precedent there.
I'd say it's still it's still a float. It is
a possibility, but it may not be until quite late
this afternoon that we actually get some kind of confirmation
on whether that meeting is actually taking place.
Speaker 1 (19:09):
Okay, Jill, thirty seconds did they talk about TikTok?
Speaker 5 (19:12):
I mean its certainly like it's got to come up right, Like,
I mean, when you've got this massive US legislation that's
just passed two hundred and seventy days to divest or
to leave the US, I mean again, another religious underscoring
a lot of that major points of contention there.
Speaker 2 (19:29):
Yeah, they went to a basketball game the night before,
I mean, yesterday was the first full day of meetings,
and that's kind of interesting. So Anthony blinkoln getting a
little culture there in China. Jill, thanks so much for
joining us here in our studios. Jill desis Bloomberg News
Desk Editor.
Speaker 1 (19:46):
This has been the Bloomberg Daybreak Asia podcast, bringing you
the stories making news and moving markets in the Asia Pacific.
Visit the Bloomberg Podcast channel on YouTube to get more
episodes of this and other shows from Bloomberg. Subscribe to
the podcast on Apple, Spotify, or anywhere else you listen,
and always on Bloomberg Radio, the Bloomberg Terminal, and the
(20:07):
Bloomberg Business app.
Popular Podcasts
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
The Nikki Glaser Podcast
Every week comedian and infamous roaster Nikki Glaser provides a fun, fast-paced, and brutally honest look into current pop-culture and her own personal life.