Speaker 1: This is Bloomberg Daybreak Weekend, our global look at the
Speaker 1: top stories in the coming week from our Daybreak anchors
Speaker 1: all around the world. Straight ahead on the program. But
Speaker 1: holidays are over, so how did the nation's retailers fare.
Speaker 1: I'm Tom Busby in New York.
Speaker 2: I'm Stephen Caron and London, who are asking if peliscal
Speaker 2: and business leaders can rebuild trust at this year's Wild
Speaker 2: Economic Forum in Davos.
Speaker 3: I'm Brian Curtis in Hong Kong. With Taiwan election results looming,
Speaker 3: we look at Taiwan Semiconductor at delegate time in the
Speaker 3: chip industry.
Speaker 4: I'm Kavid Lyons in Washington, where we're looking ahead to
Speaker 4: the Iowa Caucasus.
Speaker 5: That's all straight ahead on Bloomberg Daybreak Weekend. The business
Speaker 5: news you need to wrap up your week, Available on Apple, Spotify,
Speaker 5: the Bloomberg Business Appen everywhere you get your podcasts.
Speaker 1: Good day to you. I'm Tom Busby. We begin today's
Speaker 1: program with a look at the strength of the US
Speaker 1: consumer through the lens of the holidays and fourth quarter
Speaker 1: retail sales, and we take a peek at the year ahead.
Speaker 1: We're joined today by Poonham Goyle, Senior retail analysts for
Speaker 1: Bloomberg Intelligence and Molly Smith, Bloomberg News Economy editor. Thank
Speaker 1: you both for being here. Poonam. It's still a little early,
Speaker 1: but what we've heard so far about retail sales and
Speaker 1: December's numbers. We know the National Retail Federation says sales
Speaker 1: last month up three percent five percent for all of
Speaker 1: last year. Master cards spending pulse an increase of three
Speaker 1: point one not spectacular, but would you say pretty solid?
Speaker 6: Yeah, I'd say, you know, the holiday season ring in
Speaker 6: pretty solid results. In fact, a number that you didn't
Speaker 6: cite was the Adobe number where they came out with
Speaker 6: also a slight increase, which suggests that online sales also
Speaker 6: did well. So we think holiday overall did do well
Speaker 6: and a large part of that was the strength that
Speaker 6: we saw in November versus December. So it was a
Speaker 6: great start to holiday, It ended okay and led the
Speaker 6: season to be higher than what most expected.
Speaker 1: And Molly, I'm going to ask you about what that
Speaker 1: means for the consumer. We have a very strong labor market, right,
Speaker 1: unemployment holding steady just three point seven percent last month.
Speaker 1: What appears to be a soft landing. What does it
Speaker 1: look like?
Speaker 7: I think it's it's maybe a little bit more complicated
Speaker 7: than that that the jobs report on the surface that
Speaker 7: we got for the month of December, well, it's great
Speaker 7: from the headline number in terms of the payrolls, the
Speaker 7: unemployment figure that you cited, wage growth, but there are
Speaker 7: a few other things under the surface, like duration of
Speaker 7: unemployment growing longer, and a few other caveats that made
Speaker 7: this maybe just not as strong as you might expect.
Speaker 7: And it's kind of contributing then to what we're expecting
Speaker 7: to be a slowdown in consumer spending this year. I
Speaker 7: know we've been calling for that for a while. There
Speaker 7: have been people who would have expected us to have
Speaker 7: a recession already, Like you said, look like that's probably
Speaker 7: not going to happen, But there has just been this
Speaker 7: really outsize strength and consumer spending. Given all of these
Speaker 7: this other macro backdrop, that you would expected consumer spending
Speaker 7: to taper off by now. And I think the cumulative
Speaker 7: effect of the inflation that we've had for the last
Speaker 7: year and a half plus now, higher borrowing costs and
Speaker 7: how much longer they're going to stay this elevated level,
Speaker 7: is probably going to lead to consumer spend tapering off
Speaker 7: in this year, and you talked.
Speaker 1: About the higher borrowing costs. We're consumer spending. We're still spending,
Speaker 1: but it looks like we're charging more more than ever before.
Speaker 7: There is Yeah, definitely has been a pickup in credit
Speaker 7: card balances. I think important though to keep that in
Speaker 7: the context of deposits, and those are still pretty high,
Speaker 7: so when you look at card balances to deposits, it's
Speaker 7: not as startling of a rise as if you were
Speaker 7: to just look at card balances in an absolute dollar amount.
Speaker 7: So I think that's important to remember. And when we
Speaker 7: talk about the consumer, obviously like that's you know, millions
Speaker 7: and millions of people, there's obviously a lot of different
Speaker 7: income brackets within that, a lot of different spending propensities.
Speaker 7: So important to keep in mind that this isn't really
Speaker 7: a broad, you know, decline in spending power. It's really
Speaker 7: more affecting consumers at the lower end the most as
Speaker 7: you would expect, and higher end, you know, higher income
Speaker 7: earners are still really propping up a lot of the
Speaker 7: aggregate numbers.
Speaker 8: Poon let's starn to you.
Speaker 1: Let's talk about some of the retailers that really did
Speaker 1: benefit no matter who the shoppers are, high end low end.
Speaker 1: We heard from Abercrombie and Fitch, Lulu, Lemon, American Eagle,
Speaker 1: all reporting strong sales and strong outlooks. Who else have
Speaker 1: you heard from?
Speaker 6: Well, those are the few that we've heard from, and
Speaker 6: we'll hear from more as a report earning, but we
Speaker 6: did see strength and the Amazon numbers based on our
Speaker 6: own channel checks and what we're hearing, so we do
Speaker 6: think that's another retailer or web giant that will continue
Speaker 6: to take share, not just for the holiday but even
Speaker 6: as we move into twenty twenty four, as spending just
Speaker 6: shifts more online. Broadly speaking, the one interesting thing that
Speaker 6: I will call out, and just to piggyback on Molly's
Speaker 6: comments on the credit card, you know, part of the
Speaker 6: reason that we saw such strength in twenty twenty four
Speaker 6: was the rise of BNPL, which is buy now, pay later,
Speaker 6: and in fact, from data that we're seeing in four
Speaker 6: q BNPL spending online was up fourteen percent year every year,
Speaker 6: and that's based on Adobe's estimate. So as consumers leverage
Speaker 6: this new payment option and really use that to stretch
Speaker 6: their wallets, we'll probably continue to see more of that
Speaker 6: heading into twenty twenty four too.
Speaker 1: And you talked about more use by the lower end consumer.
Speaker 1: Let's talk about the lower and consumer and where we
Speaker 1: see some of the big giants like Walmart, Target, Coals
Speaker 1: another big discounter. What did you see this past season
Speaker 1: and what do you see ahead Poonam for those big retailers.
Speaker 6: Yes, I think the big retailers, you know, it's a
Speaker 6: double edged sword for them because they are getting spend
Speaker 6: from people that are trading down or people that want
Speaker 6: to stretch their dollars further. They're seeing that spend come through,
Speaker 6: but then at the same time they're also ground with
Speaker 6: just consumers that don't have enough to spend and also deflation. Right,
Speaker 6: we saw deflation kick in at least in a lot
Speaker 6: of the consumables later in the year. So because of that,
Speaker 6: you're seeing some pressure on their top line, which we
Speaker 6: think could continue into twenty twenty four, especially early twenty
Speaker 6: twenty four.
Speaker 1: Now, you wrote a piece, I think it came out
Speaker 1: just last week about the challenges in retail specific to
Speaker 1: the retail calendar. What did you tell us about that?
Speaker 6: Yeah, so it's interesting, you know, regardless of where consumer
Speaker 6: spending shapes out to be this year, we're entering the
Speaker 6: year with fewer shopping days between Thanksgiving and Christmas, and
Speaker 6: that's five fewer shopping days. So that means that consumers
Speaker 6: are going to have to consolidate their purchases in a
Speaker 6: shorter window, and there's fewer days for retailers to try
Speaker 6: to sell them more. That's a negative. The other negative
Speaker 6: is coming up shortly, which is Easter. Easter this year
Speaker 6: falls on March thirty first, versus later in April in
Speaker 6: years past, so that means temperatures will be cooler. It
Speaker 6: means that consumers maybe spending a little less. Historically, when
Speaker 6: Easter has come earlier, it has impacted sales of food
Speaker 6: and clothing, and that could occur again this year.
Speaker 1: Molly, where do you see the calendar falling in for
Speaker 1: consumer spending?
Speaker 7: I just always have to like smile a little because,
Speaker 7: you know, we always say, like the weather one way
Speaker 7: or the other seems to play a role in this.
Speaker 7: You know, it was like two cold people didn't shop,
Speaker 7: it was two warm people wanted to play outside and
Speaker 7: didn't shop. So there's always some kind of factor and
Speaker 7: you know, who the heck knows, so it'll it'll play
Speaker 7: out into time. That's certainly more Punam's specialty than mine
Speaker 7: to forecast how the weather will factor into spending patterns.
Speaker 7: But you know, she raised an interesting point though about
Speaker 7: how retailers have been seeing deflation for a few months,
Speaker 7: and that was something that when we just got the
Speaker 7: Consumer Price Index report last week that was for the
Speaker 7: month of December, really important moment here where the good sector,
Speaker 7: you know, this is where all of like the purchases
Speaker 7: of stuff like cars, furniture, clothing, things of that nature,
Speaker 7: that sector has been showing price declines, had been showing
Speaker 7: price declined, sorry, for six months, and that unexpectedly stopped
Speaker 7: in December. That was a that's a really key potential
Speaker 7: turning point because this has been in the broader context
Speaker 7: of where is inflation going? The good sector has been
Speaker 7: driving so much of the disinflation that we've been seeing
Speaker 7: in recent months, and now it's kind of raising some questions,
Speaker 7: is that running out of steam? How much more can
Speaker 7: the supply side continue to help? So that's going to
Speaker 7: be a really key question going forward for retailers and
Speaker 7: for the economy.
Speaker 1: Unless you're selling houses, of course.
Speaker 7: Yes still pretty far. Insurance yes still both of those
Speaker 7: also still pretty expensive, so also have not really turned
Speaker 7: out to be the bigger disinflation story that you would
Speaker 7: have hoped to see in rents. So far those are
Speaker 7: still pretty expensive.
Speaker 1: Now, Molly, one more thing I want to ask you
Speaker 1: and Poonum, it looks excuse me, it looks like we're
Speaker 1: not going to see an interest rate cut anytime soon,
Speaker 1: maybe maybe according to the FED, back half of the year,
Speaker 1: and that will certainly impact borrowing costs. How do you
Speaker 1: think that will help consumers?
Speaker 7: Well, I think right now, you know, the bets are
Speaker 7: still kind of coalescing around the earliest being for a
Speaker 7: March reduction, which FED officials have pushed back on that
Speaker 7: pretty strongly. But I mean, it's it's still really tough
Speaker 7: to tell when that is going to come. I mean,
Speaker 7: I don't think the you know, the reports that we
Speaker 7: were just talking about, the CPI that we just got,
Speaker 7: or retail sales coming up, those aren't going to really
Speaker 7: you know, move the needle in terms of where that's
Speaker 7: where when that cut's going to happen. But for I mean,
Speaker 7: consumers can definitely count on borrowing costs coming down this year.
Speaker 7: It's more a question just of when rather than if.
Speaker 1: And Poonam final thoughts.
Speaker 6: Yeah, And I'd say if both borrowing boss do come down,
Speaker 6: which they are likely too. That is on the note like,
Speaker 6: it would be positive for consumer spending. Right, Just the
Speaker 6: idea of boring costs coming down and the rates coming
Speaker 6: down would be positive to consumer spending this year.
Speaker 1: Oh that's great. Well, our thanks to Punham Goyle, She's
Speaker 1: senior retail analyst from Bloomberg Intelligence, and Molly Smith, Bloomberg
Speaker 1: News Economy editor. Coming up on Bloomberg day Break Weekend,
Speaker 1: It's that time of year for the World Economic Forum
Speaker 1: in Davos, Switzerland. Who's going and what's on the agenda.
Speaker 1: I'm Tom Busby and this is Bloomberg. This is Bloomberg
Speaker 1: Daybreak Weekend, our global look ahead at the top stories
Speaker 1: for investors in the coming week. I'm Tom Busby in
Speaker 1: New York. Up later in our program, the Iowa Coxes
Speaker 1: begin jump starting the Republican presidential nominating race. But first,
Speaker 1: the globe's political, corporate, and cultural elite gathering in a
Speaker 1: tiny alpine village in Switzerland for the World Economic Forum.
Speaker 1: For a look at what to expect, we turned to
Speaker 1: Stephen Carroll in London.
Speaker 2: Tom, It's the annual pilgrimage to Davos, for the event
Speaker 2: that's over the year has been dubbed everything from globalist
Speaker 2: Glastonbury to speed dating for CEOs. This year's World Economic
Speaker 2: Forum will be attended by more than twenty seven hundred
Speaker 2: political and business leaders, including the Chinese Premier League Chung Francis,
Speaker 2: Emmanuel Macron, the EU Commission President our Slavanda Line, and
Speaker 2: the Israeli President Isaac Hertzog. There's plenty to discuss on
Speaker 2: the geopolitical front, but also the hundreds of CEOs attending
Speaker 2: will be talking about economic issues as well as new
Speaker 2: technologies and climate change. Will have full coverage across Bloomberg
Speaker 2: Radio and television throughout the event. Our editor at large,
Speaker 2: Francin and Lacort, will be there speaking to some of
Speaker 2: the big names. And she's with me now, fran This is,
Speaker 2: of course, in theory an economic event, but our economic
Speaker 2: issues this year in Davos being overshadowed by things like
Speaker 2: the wars in the Middle East and in Ukraine.
Speaker 9: One hundred percent. I think there are mainly three themes,
Speaker 9: and I know it's always mean. The themes that the
Speaker 9: World Economic Form pick are always I guess the you know,
Speaker 9: building too. We make jokes about it. Because some of
Speaker 9: the predictions don't end up actually being the right ones.
Speaker 9: But rebuilding trust. I think there are probably focused on
Speaker 9: three things. It is monetary, so it's what's happening with
Speaker 9: interest rates, Do we have a big pivot from central banks?
Speaker 9: What does to inflation and therefore does that help and
Speaker 9: support governments and companies. Remember twenty twenty three was meant
Speaker 9: to be the wash out year. We started the year
Speaker 9: by saying companies will go bus countries will get into
Speaker 9: very very large debt situations, and it hasn't really played
Speaker 9: out yet. The second thing, the World Economic Form participants.
Speaker 9: I think we'll really focus on is AI and we're
Speaker 9: expecting number of papers from the World Economic Forum to
Speaker 9: trying to figure out exactly how you protect yourself for disinformation,
Speaker 9: for fake news, especially in an election year. And now
Speaker 9: I'm not only talking about the US. We have the
Speaker 9: European Parliament. We have I think over fifty percent of
Speaker 9: world GDP going to the poll, so a lot of
Speaker 9: the folks will be on that. And then third one
Speaker 9: one hundred percent will be geopolitics. So we have two
Speaker 9: active wars Ukraine, the one between Israel and Hamas, and
Speaker 9: there's you know, concerns that, of course, the Middle East
Speaker 9: tensions spill over, so I think a lot of the
Speaker 9: sessions and the conversations will be around that and what
Speaker 9: it means for the world economy.
Speaker 2: Now, every year of the World's Economic Forum publishers, it's Global
Speaker 2: Risks reports. Top of the list you mentioned, they're misinformation
Speaker 2: and disinformation. This year you've been speaking to the forums
Speaker 2: Managing director Sadi is Ahiti about this. Let's take a listen.
Speaker 10: In the two year timeframe, miss and disinformation number one risk.
Speaker 10: So we put together the views of fifteen hundred experts
Speaker 10: and that's what they're most worried about, very closely followed
Speaker 10: by extreme weather, societal polarization, inflation. These are some of
Speaker 10: the topics that are top of mind. But ten years out,
Speaker 10: four top risks all about the environment, including for the
Speaker 10: first time crossing tipping points for the Earth systems. That's
Speaker 10: something that is top of mind, and I think the
Speaker 10: predictions that that could happen in ten years and how
Speaker 10: severe that could be.
Speaker 9: Deeply concerning disinformation, fake news is extremely worrying. In an
Speaker 9: election year, we have a large percentage of world GDP
Speaker 9: actually going to the polls this year, how worried are
Speaker 9: you about the US election?
Speaker 10: I mean, depending on how you count it, major economies
Speaker 10: with large populations, India, the US are going into these elections.
Speaker 10: And what we found is that at each country level,
Speaker 10: in addition to the global risk around miss and disinformation,
Speaker 10: it's usually ranked very high among the top five risks
Speaker 10: around the world, as is concerns about ourn economic downturn.
Speaker 10: So what we're thinking is when these two things come together,
Speaker 10: the economic hardship being faced by many people and the
Speaker 10: rise of synthetic content, combined with going into an election
Speaker 10: year where people get to make decisions about who's going
Speaker 10: to be leading them, that together can be a very
Speaker 10: potent mix. And in particular, if some of those views
Speaker 10: start spilling over into very different perceptions of reality when
Speaker 10: it comes to health, when it comes to what people
Speaker 10: are thinking about education, what people think about specific people,
Speaker 10: who then becomes the owner of the truth?
Speaker 9: And again, do you have a breakdown of Actually this
Speaker 9: misinformation is its state actors, and Russia has been involved
Speaker 9: in the past in US elections.
Speaker 10: So we're seeing a concern that this could be become
Speaker 10: much more pervasive. To some extent, it's almost easier to
Speaker 10: track some of that state sponsored disinformation and misinformation. But
Speaker 10: now at some point that starts spilling over and it
Speaker 10: becomes very difficult to track, especially without tracking systems, water
Speaker 10: marking systems, and especially without the public being well educated
Speaker 10: about the risks of synthetic content and especially when that
Speaker 10: is fake news.
Speaker 9: Does that have a clear impact on the economy, As
Speaker 9: I guess, chief executives don't want to spend because they
Speaker 9: don't know what pans out in the next twelve months.
Speaker 10: So there's a lot of economic uncertainty. We're seeing a
Speaker 10: risk of the lack of economic opportunity, we're seeing inflation
Speaker 10: in the top ten or we're seeing a lot of
Speaker 10: concerns around what exactly happens. And that's because of two
Speaker 10: different situations. One is, of course, there continues to be
Speaker 10: uncertainty as to what the policy outlook will be. Yes,
Speaker 10: we are starting to tend towards a softer landing, but
Speaker 10: at the same time, I think there are new pressures
Speaker 10: coming in, supply side pressures that are coming in. There's
Speaker 10: geopolitical risks out there and that may change what happens
Speaker 10: over the course of the coming year. And then there's
Speaker 10: a longer term economic risk and that has a lot
Speaker 10: more to do with the divergence between developed and developing economies,
Speaker 10: and that also has a lot to do with the
Speaker 10: divergence between high income people and low income people across
Speaker 10: all countries.
Speaker 2: That is the World's Economic Forums. Sadiaz Ahdi, managing director there,
Speaker 2: speaking to Francine Lack where Francine is still with us Fan.
Speaker 2: You mentioned there the fact that it's a big election
Speaker 2: year globally, with all those different elections happening. Does that
Speaker 2: make the conversations in Davos different if some of those
Speaker 2: world leaders who are going to be attending, we're also
Speaker 2: going to be face the electors.
Speaker 9: I think so. I think if you look at the
Speaker 9: world economy and what we've been speaking with a number
Speaker 9: of participants in the markets, is that actually an election year,
Speaker 9: probably the incumbent will spend a lot more So if
Speaker 9: you look at the economy, it's probably going to be
Speaker 9: more resilient this year had we not had elections, because
Speaker 9: no one wants to go into an election with a
Speaker 9: week economy.
Speaker 6: Now.
Speaker 9: I know it's a very simplistic way of looking at it,
Speaker 9: but it's probably something that gives us a little bit
Speaker 9: of support for the outlook for a lot of these countries.
Speaker 9: Longer term, it's a really question mark about what happens.
Speaker 9: So some of the policies in place. It can be
Speaker 9: here in the UK, it could of course be the
Speaker 9: US which changes everything in our relationship with China, climate change,
Speaker 9: some of the support that a potential for example, President
Speaker 9: Trump would give to companies. But if you also listened
Speaker 9: to what Zadia was saying about the top ten risks,
Speaker 9: and I don't think we should underestimate this Stephen, is
Speaker 9: that if you look at the two year horizon, so
Speaker 9: people that they surveyed worry about misinformation, extreme weather events,
Speaker 9: social paroles, cybersecurity. Ten years, it's critical changes to earth systems, bidiversity,
Speaker 9: extreme weather. But if you worry about what's happening in
Speaker 9: the next two years, and if you have bigger concerns
Speaker 9: that are different ten years, then you don't address the
Speaker 9: longer term concerns. So there's also a real worry of
Speaker 9: everyone splitting and not really get anything done to managing
Speaker 9: the longer term risks.
Speaker 2: Yeah, and it's part of the sort of dilemma that
Speaker 2: faces Davos every year is that often there are big
Speaker 2: long term issues that need to be talked about, but
Speaker 2: everyone's much more focused on what's happening in the coming
Speaker 2: months or the coming weeks as well. Much is made
Speaker 2: every year of the politicians who do and don't go
Speaker 2: to the World Economic Forum. Here in the UK, we
Speaker 2: had the opposition labor leader Career Starmer being criticized for
Speaker 2: attending last year. Is it a bad look any year?
Speaker 2: What we're talking about rebuilding trust. If you go to
Speaker 2: Davos or if you don't go, I.
Speaker 9: Think it depends. I think it depends on cultural sensitivities
Speaker 9: of the country. I think if you're an emerging economy,
Speaker 9: showing up in Davos and getting deals done on trade
Speaker 9: is a good thing. If you're Rishie Sunac and you're
Speaker 9: married to a billionaire, it's probably not a good look,
Speaker 9: which is why he stayed away last year. He's not
Speaker 9: expected to show up this year as well. If you're
Speaker 9: you know, mister Zelenski, President of Ukraine, then it probably
Speaker 9: would be a good look, whether it's by video or
Speaker 9: in person, to show up to make sure that people
Speaker 9: don't forget Ukraine. So I think it's very personal and
Speaker 9: whether you show up or not really gives you a
Speaker 9: glimpse actually of what your country is facing or your
Speaker 9: company is facing.
Speaker 2: Okay, I'm looking forward to hearing the answers to those
Speaker 2: questions as well. Our editor at large, Fancy and Laqua
Speaker 2: full coverage from the World Economic Forum in Davos throughout
Speaker 2: the week. Here a call across Bloomberg Radio, television, and
Speaker 2: of course online on the terminal as well. I'm Stephen
Speaker 2: Carolyn London. You can catch us every weekday morning here
Speaker 2: for Bloomberg Daybreak here at beginning at six am in
Speaker 2: London and one am on Wall Street.
Speaker 1: Tom, thank you, Steven, and coming up here on Bloomberg
Speaker 1: day Break weekend, we take a look at the geopolitical
Speaker 1: machinations surrounding the business of computer chip manufacturing. I'm Tom Busby,
Speaker 1: and this is Bloomberg. This is Bloomberg day Break Weekend,
Speaker 1: our global look ahead at the top stories for investors
Speaker 1: in the coming week. I'm Tom Busby in New York.
Speaker 1: The incredibly complex, high stakes business of making semiconductors has
Speaker 1: always been a battle of corporate giants. Now it's also
Speaker 1: a race among governments, especially between China, the US and Taiwan,
Speaker 1: with the Taiwan election now underway, an event closely watched
Speaker 1: by China, we take a look at the chip industry
Speaker 1: and how the geopolitics play out.
Speaker 3: Tom will know the full results of the Taiwan election shortly.
Speaker 3: In the meantime, we thought it was a good time
Speaker 3: to take a look at the business climate on the island,
Speaker 3: especially through the prism of TSMC. Taiwan Semi is arguably
Speaker 3: one of the most important companies in the world and
Speaker 3: sits at the nexus of the relationship among the US,
Speaker 3: China and Taiwan. Joining US now to look at TSMC
Speaker 3: and possibly the up and coming challenge from Huawei Technologies
Speaker 3: is Bloomberg's savov Tech editor here in Hong Kong, so Vlad.
Speaker 3: Recently we learned that Huawei Technology's latest laptop was running
Speaker 3: on a chip made by TSMC. This was a five
Speaker 3: nanimeter chip and it was actually made by TSMC instead
Speaker 3: of Huawei, and that seemed to head off some of
Speaker 3: the talk about a Chinese technological breakthrough. How much did
Speaker 3: that revelation sort of mean in lowering the temperature in
Speaker 3: the relationship between US and China and chips.
Speaker 11: Well, a good way to think about it is if
Speaker 11: it wasn't the case, if it was Huawei actually making
Speaker 11: five and animated chips. This would be the story we're
Speaker 11: we're talking about for the inside January. National Security Adviser
Speaker 11: Jake Sullivan would have dropped everything else. He's got a
Speaker 11: very busy agenda, but he would have dropped everything else
Speaker 11: because this would have been a breakthrough that would have
Speaker 11: been entirely unforeseen. When you think about the sanctions that
Speaker 11: the US is imposed on Chinese chip makers, this was
Speaker 11: what they were trying to prevent, so you can say
Speaker 11: they've been effective. But the reason we're talking about this
Speaker 11: in the first place is because of Huawei seven nanimeter,
Speaker 11: a generation behind breakthrough that happened in August last year
Speaker 11: that was also unforeseen and unexpected.
Speaker 8: It's worth bearing in mind again.
Speaker 11: That this chip that Huawei would have stuck part from
Speaker 11: TSMC way back in twenty twenty is still one or
Speaker 11: two generations ahead of what Huawei is capable of doing.
Speaker 11: Where China and manufacturers such a Smick, which is Huawe's
Speaker 11: domestic partner, our positioned at the moment. So what we
Speaker 11: can really say is that Huawei is certainly trying. There
Speaker 11: are a number of voices, including a video one of
Speaker 11: TSMC's biggest customers that say that Huawei and a whole
Speaker 11: bunch of China mainline startups are going to be legitimate competitors.
Speaker 11: But we haven't seen the evidence this would have been
Speaker 11: it it didn't happen.
Speaker 3: Let me ask a question that may sound political, but
Speaker 3: it's not really. The sanctions that are in place by
Speaker 3: the US, is this slowing down the develop and Bismic
Speaker 3: and by Juawei and others, or in a sense, is
Speaker 3: it actually speeding it up because now in China domestically
Speaker 3: they know they need this.
Speaker 11: Well, absolutely, it's political, but I keep saying every tech
Speaker 11: story nowadays a political story. Every political story has attach angle,
Speaker 11: So of course it is. I think the answer is
Speaker 11: yes to both aspects of your question. It has categorically
Speaker 11: slowed down Chinese domestic chip making. You have these key
Speaker 11: machines which are bus sized and they cost hundreds of
Speaker 11: thousands millions of dollars each made by ASML in the Netherlands.
Speaker 11: Because of US and Dutch relations, SMO doesn't ship those
Speaker 11: super advanced machines into China. They are the effectively the
Speaker 11: gateway to get into five ninimeters and beyond. TSMC has
Speaker 11: a bunch of them, is spent tens of billions of
Speaker 11: dollars acquiring them. They can't get into China without them.
Speaker 11: China has to invent effectively alternative methods to get to
Speaker 11: those super advice.
Speaker 8: On manufacturing techniques.
Speaker 11: Now that being said again to the latter aspect of
Speaker 11: your question, because China, Beijing, its government sees no breakthrough,
Speaker 11: no path to coming to terms and acquiring those machines
Speaker 11: in straightforward fashion, it is pouring money resources. Like I say,
Speaker 11: all these startups are effectively state back startups to again
Speaker 11: invent its way out of its issue or maybe come
Speaker 11: up with more inventive ways of acquiring the machines.
Speaker 3: Can these companies in China catch up or will they
Speaker 3: always be one or two generations behind?
Speaker 11: Well, if you ask the US, they want them a
Speaker 11: couple of generations behind. That's effective their entire agenda. They
Speaker 11: don't want to shut down Chinese tech manufacturing altogether. They
Speaker 11: have repeatedly said that it's tailored sanctions that they have
Speaker 11: to prevent China's military from acquiring advanced tech. So if
Speaker 11: it's two three generations behind, they're comfortable with that. Will
Speaker 11: they make I mean effectively the answer to your question
Speaker 11: is we'll try to make a breakthrough that nobody is expecting.
Speaker 11: We saw some of that again last year from Huawei.
Speaker 11: Will they repeat defeat? It's open to a member of guesswork.
Speaker 8: I suppose.
Speaker 3: In recent days, TSMC gave us its fourth quarter revenue.
Speaker 3: Some of these numbers were pretty decent. They did beat
Speaker 3: estimates of a decline, but there's obviously a little bit
Speaker 3: of a slow path ahead. What they said was that
Speaker 3: demand from AI players offset the slower smartphone and laptop
Speaker 3: chip sales. Where are we now in terms of full
Speaker 3: recovery by the chip makers, including TSMC.
Speaker 11: Well, one of the things that we did over the
Speaker 11: course of the year on the terminal is we tracked
Speaker 11: Taiwanese supplies to Apple, surely the most important tech company
Speaker 11: in the world, and every month it was red figures.
Speaker 11: It's TSMC, Fox gone, et cetera. It was always down
Speaker 11: on the prior year's results. So just having a quarter
Speaker 11: that was flat that was the same as the prior
Speaker 11: year is heading in the right direction. TSMC executives, including
Speaker 11: CEO cc Way, have said that they expect to rebound
Speaker 11: in twenty twenty four. Canna lists, one of the market
Speaker 11: research companies. They said that in the final quarter of
Speaker 11: the year, the PC market and laptop market were up
Speaker 11: just by a couple of percentage points, like three percent altogether,
Speaker 11: But again, comparing that to double digit declines over the
Speaker 11: previous several months, that's a big upside. So all of
Speaker 11: it seems to point toward an improvement in consumer demand.
Speaker 11: In Ventory glots that used to exist at the start
Speaker 11: of the year I have gone away, so things are
Speaker 11: looking up.
Speaker 3: You referred earlier to the Huawei May sixty pro and
Speaker 3: the fact that it had a seven nanometer processor in it.
Speaker 3: What sort of progress is Smick making in selling that
Speaker 3: outside of China.
Speaker 11: Well, I think whatever Snick is able to make in
Speaker 11: terms of manufacturing that particular chip, it's probably all going Huawei.
Speaker 11: When we talk to analysts looking at teas prospects. It
Speaker 11: has already taken market share back from Apple in the
Speaker 11: iPhone in mainland China. One of the topics that might
Speaker 11: actually intensify in importance over the course of this year
Speaker 11: is the iPhone's fate in China, which has been increasingly down.
Speaker 11: It was bad to begin with, it was underwhelming, and
Speaker 11: then it got worse. So Huawei is reclaiming that market
Speaker 11: share but when we talk to analysts, they say that
Speaker 11: its limitation, if anything, on shipments is the amount of
Speaker 11: chips and devices that it can produce.
Speaker 3: So when we look at the diminishing sales of Apple,
Speaker 3: who's gaining the lion's share of that in China?
Speaker 8: Right as I say it is Huawei.
Speaker 11: Huawei is number one, But then you have Honor, which
Speaker 11: is a company that spun out of Huawei in twenty twenty.
Speaker 11: It's an independent company. It's pursuing an IPO probably in
Speaker 11: the next year or so. That's what the company has said.
Speaker 11: Shaomi has done a really good job with over the
Speaker 11: past few months. The company is Vivo and Appo, who
Speaker 11: used to be number one.
Speaker 8: Two, three.
Speaker 11: Every quarter they would shift places. We are actually struggling.
Speaker 11: The answer really is that the Chinese smallphone manufacturing ecosystem
Speaker 11: is kind of shifting positions show me and huilbe I
Speaker 11: would say in the strongest position at the moment, and
Speaker 11: even worth mentioning, Samsung, which has had a tiny share
Speaker 11: of the Chinese market for a long time, is making
Speaker 11: efforts making in roads as well.
Speaker 3: Lad outside of China, you mentioned Samsung, what are the
Speaker 3: prospects for its latest phone?
Speaker 11: Well, it's promising us the first AI phone, which is
Speaker 11: a promise that we've heard actually for years. At this point,
Speaker 11: the whole idea of branding your phone as an AI
Speaker 11: device is going to be the theme of twenty twenty
Speaker 11: four across every smartphone manufacturer, and I'm looking forward to
Speaker 11: seeing Samsung, which is generally a serious company, try to
Speaker 11: justify that label.
Speaker 8: We can also look forward to Google.
Speaker 11: The designer and provider of the Android software and ecosystem,
Speaker 11: to do more on this front. I expect Google has
Speaker 11: always been a leader in AI. One of the things
Speaker 11: that came out of the Sea Yes Trade show just
Speaker 11: recently is that Google and Samsung announced that they collaborating
Speaker 11: on a quick sharing function, which is effectively the equivalent
Speaker 11: to Apple's ed Drup.
Speaker 3: All right, Lad, thanks so much for joining us. Bloomberg's
Speaker 3: Lad Salvov, tech editor here in Hong Kong. I'm Brian
Speaker 3: Curtis along with Doug Krisner. You can catch us every
Speaker 3: weekday here for Bloomberg day Break Asia, beginning at seven
Speaker 3: am in Hong Kong and six pm on Wall Street.
Speaker 1: Tom Thank you, Brian. Coming up on Bloomberg day Break
Speaker 1: weekend to look ahead to the Iowa Caucuses. I'm Tom
Speaker 1: Busby and this is Bloomberg. I'm Tom Busby in New
Speaker 1: York with your global look ahead at the top stories
Speaker 1: for investors in the coming week. The official start to
Speaker 1: the twenty twenty four GOP presidential nominating process, the Iowa caucuses,
Speaker 1: begins on Monday, with just a handful of candidates on
Speaker 1: the ballot, one of them former president and clear front
Speaker 1: runner Donald Trump. What can we expect to see for more?
Speaker 1: Let's add to our Bloomberg ninety nine one newsroom in
Speaker 1: Washington and Bloomberg Sound On co host Joe Matthew and
Speaker 1: Kaylee Lines.
Speaker 4: Yeah. Tom. We spoke with Kyle Condick of Sabado's Crystal
Speaker 4: Ball at the University of Virginia and started by asking him,
Speaker 4: if we know Trump's probably gonna win in Iowa anyway,
Speaker 4: what kind of margin matters?
Speaker 12: So the Trump campaign has noted accurately that of all
Speaker 12: the you know, contested, you know, non incumbent Republican Iowa
Speaker 12: caucuses and over history, the biggest margin of victory is
Speaker 12: twelve points, and so they're sort of setting the bar like, hey,
Speaker 12: we win by more than twelve points, that's good. I
Speaker 12: personally don't you know if they would buy like thirteen
Speaker 12: or fourteen. I don't think that that's some sort of
Speaker 12: impressive performance given what the polls are showing now, which
Speaker 12: is more like he's up by like thirty points. You know,
Speaker 12: what is the difference between a good performance and a
Speaker 12: bad one? I don't know, maybe that's like forty percent
Speaker 12: or something like that, which actually, you know, given the polls,
Speaker 12: he's consistently but over fifty forty percent would seem maybe
Speaker 12: not that great. So there is you know, there are
Speaker 12: maybe there's maybe a higher bar for Trump to impress
Speaker 12: in Iowa, but if he matches the polls, he will
Speaker 12: have done that. I also think it's probably fair to
Speaker 12: treat Trump differently than you would a normal non incumbent
Speaker 12: race because he has sort of like a quasi incumbent,
Speaker 12: given that he's the you know, he's aiming for a
Speaker 12: third straight Republican presidential nomination and has already served the
Speaker 12: term as president before. So I don't know where I
Speaker 12: put the number necessarily, but you know, just just matching
Speaker 12: or slightly exceeding that historical you know, twelve point margin
Speaker 12: that that probably is not good enough to be impressive.
Speaker 12: And in fact, I think would probably be disappointing if
Speaker 12: it's close to that number. Again, given what the polls saying.
Speaker 13: Well, of course everyone's banking on a surprise in New
Speaker 13: Hampshire because it's New Hampshire. Of course it's not a
Speaker 13: surprise if you're expecting it. But after Chris Christie dropped
Speaker 13: out of the race, Kyle, I wonder your thoughts on
Speaker 13: the impact it could have on Nikki Haley. We've seen
Speaker 13: polls that show Donald Trump and Haley within single digits.
Speaker 13: This would make up the different there. But we also
Speaker 13: heard from Christy himself, hot Mike, she's not up for this,
Speaker 13: She's going to get smoked, which Christie is right.
Speaker 12: Look, I would not be surprised by Haley winning in
Speaker 12: New Hampshire. I think she frankly needs to win New
Speaker 12: Hampshire to really to really justify staying in the contest. Frankly,
Speaker 12: you know, her home state of South Carolina votes like
Speaker 12: a month after New Hampshire, and so you kind of
Speaker 12: enter like a little bit of a dead period. There's
Speaker 12: there are contests in Nevada in early February, but there's
Speaker 12: a caucus that's actually awarding the delegates that Donald Trump's
Speaker 12: probably gonna win easily, and then there's like a beauty
Speaker 12: contest primary that Haley's competing and she's not competing for
Speaker 12: the delegates, which she'll probably win comfortably. I don't know
Speaker 12: what you really do with that. So after New Hampshire,
Speaker 12: the focus will really go go to South Carolina. But again, Haley,
Speaker 12: the coalition Haley is building is kind of kind of
Speaker 12: centered on more moderate voters. You know, a lot of
Speaker 12: independence can cross over and vote in the New Hampshire primary.
Speaker 12: It probably will and probably incline to support a candidate
Speaker 12: like her, particularly with Chris Crusty out of the race.
Speaker 12: You know, if Haley can't win there, and let's say
Speaker 12: Trump wins Iowa and New Hampshire, I don't know if
Speaker 12: there's much of a rationale for anyone else to even
Speaker 12: continue given that. You know, I guess at that point,
Speaker 12: the only real threat that Trump would be some of
Speaker 12: these legal matters he's dealing with. But he would have
Speaker 12: you know, he would have basically stopped DeSantis in Iowa
Speaker 12: and stopped Haley in New Hampshire. But again, I could
Speaker 12: definitely see Haley winning New Hampshire. But that's not enough
Speaker 12: to make this thing a real horse race. I think
Speaker 12: Trump would have to lose South Carolina too in order
Speaker 12: fore Weekness to go on to Super Tuesday and say, hey,
Speaker 12: this thing is really opened up.
Speaker 4: That's Kyle Condick from Savado's Crystal Ball and Tom, the
Speaker 4: twenty twenty four race is really just about to get started.
Speaker 1: Thank you, Kaylee and Joe. And that was Bloomberg Sound
Speaker 1: On co host Joe Matthew and Kaylee Lines reporting from
Speaker 1: our Bloomberg ninety nine one newsroom in Washington, and you
Speaker 1: can hear sound on weekdays one to three pm on
Speaker 1: Bloomberg Radio and coming up here on Bloomberg day Break Weekend,
Speaker 1: we take a look at the geo political machination surrounding
Speaker 1: the business of computer chip manufacturing. I'm Tom Busby, and
Speaker 1: this is Bloomberg