005930.KS - Samsung Electronics Co., Ltd.

KSE - KSE Delayed Price. Currency in KRW
+300.00 (+0.51%)
At close: 3:30PM KST
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Previous Close58,800.00
Bid0.00 x 0
Ask0.00 x 0
Day's Range58,800.00 - 59,700.00
52 Week Range40,850.00 - 62,800.00
Avg. Volume11,884,291
Market Cap393.424T
Beta (5Y Monthly)0.95
PE Ratio (TTM)N/A
Earnings DateJan. 30, 2020
Forward Dividend & Yield1,416.00 (2.41%)
Ex-Dividend DateSep. 27, 2019
1y Target Est54,903.00
  • U.S. Threats Prove Hollow for a Friend in Need of Huawei

    U.S. Threats Prove Hollow for a Friend in Need of Huawei

    (Bloomberg) -- In the end, the prospect of eye-watering costs and delays to the roll-out of critical technology proved more daunting for the British government than American threats.On Tuesday, the U.S. lost its long battle to persuade the U.K. to ban China’s Huawei Technologies Co. from fifth-generation wireless networks. The decision to let Huawei build the periphery of the 5G system showed the awkward position of U.S. allies asked to choose between Washington and Beijing. It also reflects waning U.S. leverage in Europe—including post-Brexit U.K.—at a time when the transatlantic alliance is strained.President Donald Trump’s administration has been clear about what it sees as the problem: a potential Chinese breach of allied national security. It’s been less clear on a viable solution for countries desperate not to fall behind in the race for the infrastructure that will underpin such advances as driverless cars and automated factories.Read More: U.K. Allows Huawei to Build 5G NetworksWith few alternative companies able to supply the 5G market, the U.S. couldn’t counter the significant added costs and delays involved in banning Huawei outright. Secretary of State Michael Pompeo arrives in London on Wednesday and it’s now up to the U.S. to decide whether to raise the temperature in a public dispute between close allies.The threats so far have included cuts to intelligence sharing, although that would come at significant cost to the U.S. itself and British officials don’t believe it would follow through. GCHQ, the British equivalent of the U.S. National Security Agency, operates a hub for the “Five Eyes” members—Australia, Britain, Canada, New Zealand and the U.S.But as Britain leaves the European Union on Friday, there’s much more in play. The response to the Huawei decision has potential to bleed across to trade negotiations, British plans for a digital tax on tech giants and the broader post-Brexit relationship including a budding political friendship between Trump and Prime Minister Boris Johnson.“It’s in the U.S. gift to accept that even if we disagree in the details, we agree on the fundamentals and move on to the much more important issue of developing western vendors” for 5G telecommunication networks, said Malcolm Chalmers, a former U.K. diplomat and now deputy director of the Royal United Services Institute, or RUSI, in a briefing.QuicktakeHow Huawei Landed at the Center of a Global TussleThe EU is expected to announce on Wednesday guidelines for member states to use in deciding 5G issues, including rules that would permit, but not require, governments to restrict or ban the use of Huawei equipment.Going forward, said Chalmers, countries will need to redress the market failure at the root of the Huawei dispute: The tiny number of vendors—none of them American—that are able to build 5G networks at scale. Not only does that force an over-reliance on Chinese suppliers, it also reduces options to build backups into networks—a key cyber security tool—so that if one manufacturer’s antenna stops working, another’s will continue. Britain’s reliance on just three suppliers, including Huawei, is “crazy,” according to Ian Levy, technical director at Britain’s National Cyber Security Centre. He made the comment in a blogpost published on Tuesday to explain how U.K. security agencies plan to protect its 5G network.Samsung Electronics Co. Ltd. said last year it aimed to boost its share of the global telecommunications equipment market to 20% gear from less than 7%. But the hurdles to new entrants Levy checked off in his post—including low margins, high research and development costs, patent license fees and scale—are considerable.  U.S. OptionsThis month, Thomas Donahue, a former senior director for cyber operations on the U.S. National Security Council, wrote that the federal government had three options: invest heavily in Huawei’s European alternatives, Ericsson AB and Nokia Oyj, buy one of them, or massively fund the development of a U.S. competitor.The U.S. Defense Science Board recommended in June that the federal government should provide seed funding for “western industrial base alternatives” to Huawei.When it comes to an immediate Huawei ban, though, the U.S. has struggled to persuade European countries to follow the lead it has set with Australia, a Pacific nation that faces a more immediate security threat from China.The argument centers on whether, in the new world of 5G, risks posed by a potentially hostile equipment supplier can be managed. Britain’s electronic intelligence agencies appear to have rejected U.S. claims that in 5G networks the core has become “virtual” and so widely distributed that the distinction at the heart of Tuesday’s decision—between a sensitive core and dumb periphery—no longer exists.The edge of a network will still face the consumer and, if hacked, give access almost exclusively to metadata, not the sensitive materials in the core, said James Sullivan, RUSI’s head of cyber research. “5G networks are not revolutionary,” said Sullivan, who just completed a nine-month study on the issue. “They are evolutionary.”Huawei has been building mobile network infrastructure in the U.K. for more than 15 years. British officials were concerned enough about the security risks involved that in 2010 they set up an inspection center to reverse engineer the company’s equipment and assess it for security risks.The center’s annual reports have been damning. Last year’s concluded that “it will be difficult to appropriately risk-manage future products in the context of U.K. deployments, until the underlying defects in Huawei’s software engineering and cyber security processes are remediated.”It was because of the center’s work “that we know more about Huawei, and the risks it poses, than any other country in the world,” U.K. Foreign Secretary Dominic Raab told parliament on Tuesday. He also pledged to attract more 5G vendors.But if it shares U.S. concerns about Huawei, the U.K. is also in a very different starting position. To ban Huawei it would need to first rip out existing Huawei 4G hardware, causing significant costs and delays. That’s in addition to forgoing the steep price discount the company offers over competitors. In the U.S., the Chinese company has sold equipment only to some smaller rural networks.That cost raises questions about how much more secure it would be to use non-Chinese hardware, another gray area. Equipment supplied by Western companies is shot through with Chinese components, while some of the most prolific hacking is done by Russia, which does not produce any of the hardware it hacks.“The initial argument—why would you allow a Chinese provider, a frenemy, right into the core of your network—does sound crazy,” said Emily Taylor, chief executive of Oxford Information Labs, a cyber consultancy. “But when you look at it, no piece of equipment will ever be 100% secure.”To contact the author of this story: Marc Champion in London at mchampion7@bloomberg.netTo contact the editor responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net, Rodney JeffersonFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Everyone’s Favorite Climate Solution Has a Fire Problem

    Everyone’s Favorite Climate Solution Has a Fire Problem

    (Bloomberg) -- The explosion ruptured the dusk settling over the desert in Surprise, Arizona. For hours, smoke had poured from a metal shed packed with lithium-ion batteries at a small electric substation. The batteries were tied to the electric grid, and somehow they had caught fire.Firefighters searching for the source of the smoke opened the shed door, and minutes later gases seeping from damaged batteries caused the explosion. Body-camera footage from the scene showed a firefighter dazed and breathing heavily as blood ran down his forehead. Two of the four people injured had to be airlifted to a hospital.It’s likely that few people living near the substation, on the edge of suburban Phoenix, realized the facility held the kind of supersized batteries seen as key to unleashing renewable energy upon power grids and helping solve the climate change crisis.Plunging prices and intensifying efforts to reduce greenhouse-gas emissions have touched off a battery boom. Energy companies are plugging more battery packs into the grid as a way to store renewable power and replace fossil-fuel plants. Megaprojects are becoming the norm. Last year, regulators approved a battery installation in New York City that will be big enough to power 250,000 homes for eight hours. Developers near Las Vegas plan a similarly huge system to store energy from a 690-megawatt solar plant.But the April explosion in Arizona illustrated a lingering problem that has long dogged lithium-ion batteries: fires that can be difficult to douse. In South Korea, a global leader in battery manufacturing and adoption, there have been at least 23 fires over a roughly two-year period, according to BloombergNEF, spooking customers and prompting a government investigation.In little more than a decade, the rechargeable batteries invented in the 1970s have become a cornerstone technology of 21st century life. They are seldom far from any of us, powering toothbrushes and smartphones, toys and ear buds, laptops and Teslas. Global production is expected to triple within the next three years, according to BloombergNEF.If lithium-ion batteries started as consumer convenience, now they have emerged as an indispensable tool to combat global warming. Electric utilities need a way to soak up solar energy during the day for use after dark and bottle the output of wind farms for when breezes fade. Automakers are rolling out a fast-growing fleet of electric vehicles—not just cars, but pickups, buses and big rigs—to clean up transportation, the source of nearly a quarter of the world’s greenhouse-gas emissions. The battery’s moment has arrived.But rapidly swelling numbers will likely bring more battery fires. The incidents remain rare compared to the volume of batteries, but experts expect a surge as the technology becomes ever more inescapable.“If the percentage of failures holds, that could mean a lot of problems,” said Mike Simpson, senior technical leader at the Electric Power Research Institute. “Even a one-in-10 million likelihood of failure on the assembly line could still lead to many failures on the road.”Fear of fires isn’t killing global battery demand, which BloombergNEF predicts will grow more than seven-fold by the end of the decade. But the incidents have, at times, shaken public confidence. South Korea, the world’s third-largest battery maker, went on an installation binge of utility-scale batteries until a string of nearly two dozen fires prompted a backlash and government probe. In the end, the investigation blamed many of the fires on sloppy installation and operational errors.“This is early growing pains for a new technology and a new industry,” said Daniel Kammen, chair of the Energy & Resources Group at the University of California at Berkeley. “We didn’t even have grid-scale batteries a few years ago.”Some fires can be traced to manufacturing defects in the battery cells themselves, or physical damage after installation. Overcharging can also be a problem, Simpson said, as can poor integration with other electrical systems.Each of those factors can tip a battery cell into a dangerous, uncontrolled chain reaction known as thermal runaway. The flammable electrolyte inside the cell suddenly heats up and causes the same thing to happen in adjacent cells. Once ignited, the batteries can emit toxic fumes.Firefighters are learning on the fly how to respond. Dousing the flames takes a large amount of water, and cells can re-ignite hours after the initial fire has been extinguished. Following the explosion last year at the Arizona energy storage facility, investigators spent months carefully removing racks of batteries so they could be drained of energy.Brian O’Connor, an engineer with the National Fire Protection Association, said first responders need far more training on how to handle burning batteries. The association, which develops fire codes, recently issued standards for energy storage installations in buildings, including how far they should be spaced apart and which fire suppression systems to use. “The technologies do not come without risks,” O’Connor said.At a recent conference, the fire association hosted several sessions on the safety of battery installations. One was titled, “Energy Storage in Your Home: Can You Sleep at Night?”South Korea showed what can happen when battery fires cause alarm. A booming market that had seen more than 4 gigawatt-hours of capacity added in 2018 suddenly froze up. Installations in South Korea last year could have fallen 75 percent or more, according to preliminary BNEF estimates.Government investigators did not blame the fires on any inherent flaw in the batteries themselves. Instead, they faulted the design and operation of energy storage systems that included the batteries. In some coastal areas, for instance, energy systems lacked adequate protection against humid air. In other cases fuses designed to interrupt the flow of current had failed. Investigators even found simple bad wiring, as if in a house built by careless contractors.Logan Goldie-Scot, head of clean-power research at BloombergNEF, pins many of those problems on the Korean battery industry’s rapid growth. Spurred by government incentives, energy storage installations grew more than five-fold between 2017 and 2018. “It’s companies with relatively limited experience in installing and integrating these systems doing a lot in a very short space of time,” Goldie-Scot said.nThe investigation led to tighter government safety requirements for energy storage systems in Korea, in their design as well as operation, and more frequent inspections. But the new measures haven’t completely stopped the fires, leaving the South Korea market in limbo.Pinnacle West Capital Corp.’s Arizona Public Service, owner of the battery system that burned in April, remains committed to deploying 850 megawatts of energy storage on its grid, one of the largest commitments by a U.S. utility. But APS has halted installations while it investigates the fire’s cause, said Brad Albert, the company’s vice president of resource management.“The most important aspect of this is safety for us,” he said. “We need to understand whatever we can learn from this.”Another APS battery facility suffered a fire in 2012, and the two incidents prompted a member of the Arizona Corporation Commission to write in an August letter that the batteries “are not prudent and create unacceptable risks.” The energy storage industry wants to ensure that sentiment doesn’t spread. Its trade association has been developing standards for safe operations.“We just want to get out ahead of it,” said Kelly Speakes-Backman, chief executive officer of the U.S. Energy Storage Association. “Energy storage is growing quickly, but it is still a relatively small market. We want to make sure standards are in place by the time we hit a large penetration in the market.”To contact the authors of this story: David R Baker in San Francisco at dbaker116@bloomberg.netMark Chediak in San Francisco at mchediak@bloomberg.netTo contact the editor responsible for this story: Aaron Rutkoff at arutkoff@bloomberg.net, Lynn DoanFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Intel Can’t Take Off Another Round in Chip Battle

    Intel Can’t Take Off Another Round in Chip Battle

    (Bloomberg Opinion) -- Intel Inc. closed out 2019 learning the hard lesson that making cutting-edge semiconductors is truly difficult.Like a prizefighter who refuses to admit he just hit the mat, the world’s biggest chipmaker is coming out swinging. And it should, because how it gets through 2020 could decide the company’s fate. Once the most advanced supplier of semiconductors, Intel struggled last year to ramp up production of chips that use its latest 14-nanometer process node, “letting customers down,” as CEO Bob Swan said in October. Its full-year results released Thursday showed that revenue climbed 2% and that net income was flat — hiding the fact that Intel dodged a bullet when it wasn’t able to supply enough of its most advanced products when clients needed them most.It tried to offer some reassurance three months ago by noting that it would increase 14-nanometer capacity 25% this year while raising capital spending to nose-bleed levels. To help overcome that slip-up, executives are keen to tell investors how many customers have signed up for its latest offerings, including a chip dubbed Ice Lake and an upgrade to its Comet Lake mobile processor, which use the next-generation 10-nanometer process. In reality, Intel is badly lagging behind both contract manufacturer Taiwan Semiconductor Manufacturing Co. and South Korea’s Samsung Electronics Co. TSMC, for example, started selling its 10-nanometer chip technology in mid-2017 and last year boosted revenue from its more advanced 7-nanometer offerings by more than 200%. When Intel eventually hits 7 nanometers in 2021, it will be almost three years behind.Intel’s rebuttal is that so-called process-node technology isn’t the only thing. It’s right, and clients should look at total system performance to see how all the parts — the processor, memory and controllers — all slot together. No other company in the world can offer the breadth and depth that Intel can.But with Advanced Micro Devices Inc. back in the game after a decade in the wilderness and a raft of chip designers ready to tap TSMC’s technology advantage, Intel would be foolish to rest on the belief that it can stay ahead of the game while lagging behind on technology. It knows this and has committed to speeding up its migration from the pace of a new node every five to seven quarters to as little as four quarters. Yet investors ought to also note that the introduction of a new node compresses margins during the early stages before better yields provide economies of scale later. A quicker timetable won’t allow as much time to enjoy the upside before the next margin crunch comes.Intel’s strategy to offset this squeeze is to tap continued growth in the data-center market. Cloud providers like Amazon.com Inc., Alphabet Inc.’s Google and Alibaba Group Holding Ltd. are among customers for its 14-nanometer Cascade Lake products, while the global 5G rollout is expected to provide a couple of solid growth years. Its Data Center Group accounts for 32.6% of revenue but 46.4%  of operating income, making it Intel’s most lucrative business unit by operating margin.But that business relies on Intel’s ability to churn out leading-edge chips that, even if not equivalent to what TSMC can offer clients, won’t be too far behind. A data center operator might be willing to forgive a single-generation lag, reasoning that the broader platform integration Intel offers can provide the cost-benefit metrics it needs. A two-generation delay is hard to overlook, though. Intel’s size and strength means it won’t be easily knocked out. But it needs to get through this year unscathed if it’s to remain the undisputed heavyweight champ.(Updates with details about Intel’s 10-nanometer offerings in the fourth paragraph.)To contact the author of this story: Tim Culpan at tculpan1@bloomberg.netTo contact the editor responsible for this story: Daniel Niemi at dniemi1@bloomberg.netThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Apple Takes on European Union, This Time Over iPhone Chargers

    Apple Takes on European Union, This Time Over iPhone Chargers

    (Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.Apple Inc. is pushing back against a European Union initiative that would standardize chargers for all types of smartphones and devices.The European Commission, the bloc’s executive body, is currently considering legislation to cut back on electronic waste, after a previous voluntary approach didn’t meet its expectations, according to an EU official.European lawmakers have been complaining that users are often required to carry different chargers for similar devices. The iPhone maker’s so-called lightning charging cables for Apple products don’t plug into devices made by Samsung Electronics Co. or other electronics companies. Being forced to use a common standard could turn a bespoke product that Apple sells at high prices into a commodity, cutting into its profit.“We believe regulation that forces conformity across the type of connector built into all smartphones stifles innovation rather than encouraging it, and would harm consumers in Europe and the economy as a whole,” Apple said in a statement published Thursday.Apple has butted heads with the EU before. The iPhone maker is appealing an order by the European Commission that the company to pay Ireland 13 billion euros ($14.4 billion) in unpaid taxes -- a decision Apple Chief Executive Officer Tim Cook once called “political crap.” The commission also is looking into an antitrust complaint by Spotify Technology SA alleging Apple favors its own music service, and is asking questions about its Apple Pay product.The initiative comes as the EU is pursuing a sweeping economic transformation, dubbed the “Green Deal,” across the 28-nation bloc. It plans to impose stricter emissions standards on industries, energy taxes and tougher air quality standards.Electronic waste is expected to grow to more than 12 million tons by 2020, according to the EU, making it one of the fastest growing so-called waste streams.“The amount of cables and chargers produced and thrown away each year is simply unacceptable,” Roza Thun und Hohenstein, vice chair of the European Parliament’s internal market committee, said in a parliamentary debate earlier in January. She urged the commission to unveil a legislative proposal within the next six months.The commission is set to release the results of a study it launched assessing the impact of a common charger on consumers by the end of January.Cupertino, California-based Apple said forcing through regulatory changes would disrupt hundreds of millions of active devices and accessories in Europe alone and would create “an unprecedented volume of electronic waste.”The EU in 2009 settled on a voluntary, industry standards-based approach to try to harmonize chargers after considering regulation. Had the EU mandated that all smartphones use only USB-Micro B connectors, that would have restricted advances leading to today’s chargers, which allow for sleeker and smaller gadgets and faster charging times, Apple said.Apple said the industry is also standardizing on its own as companies move toward using USB Type-C through a connector or cable assembly.To contact the reporter on this story: Natalia Drozdiak in Brussels at ndrozdiak1@bloomberg.netTo contact the editors responsible for this story: Giles Turner at gturner35@bloomberg.net, Amy ThomsonFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Apple Stems IPhone Sales Drop in India With Hopes High for 2020

    Apple Stems IPhone Sales Drop in India With Hopes High for 2020

    (Bloomberg) -- Apple Inc.’s iPhone shipments in India grew 6% in 2019 compared with a 43% decline in the previous year, stabilizing its position in a rare market that still exhibits growth in smartphone demand.Discounting the iPhone XR by $250 in the middle of the year made it Apple’s best-selling phone in the country, according to Counterpoint Technology Market Research. The fall introduction of the iPhone 11, with a reduced starting price, “helped to gain share during the festive season and in its launch quarter in India,” the researchers added.In a country where the annual per-capita income barely exceeds $2,100, an iPhone with a four-figure price tag is an out-of-reach aspirational object for most. Apple is having to go up against Android rivals averaging prices below $200 and its market share is correspondingly low: of the roughly 158 million smartphones shipped in India in 2019, Apple sold less than 2 million.“Apple is shifting focus from older-generation iPhones to selling the latest models and that is a big change,” said Tarun Pathak, a Gurgaon-based associate director at Counterpoint. The iPhone 11 family of devices arrived in India a month after its global launch, a significant acceleration on previous years.New Low-Cost IPhone Said to Enter Production in FebruaryAdditionally, Apple is set to unveil a successor to the iPhone SE in March, Bloomberg News has reported, which will offer its latest processor and software at a lower cost. The original iPhone SE of 2016 started life at a $399 price point, which, while still premium by Indian standards, would be more attainable than the flagship iPhone price.Counterpoint’s data indicates that India’s premium segment is growing at a 20% rate, almost doubling the roughly 10% growth of the local smartphone market overall, which suggests greater opportunity for Apple. Pathak said that Apple is “making it even more affordable to Indians by selling at zero-interest monthly installments.”While Apple has managed to reverse the massive slide of 2018, its 2019 shipments are still down more than a quarter from 2016. The iPhone maker continues to struggle to make headway in India against cheaper smartphones from the likes of OnePlus and Samsung Electronics Co.Over a year ago, the U.S. phone maker revamped its distributor partnerships and started assembling in India through its partners Hon Hai Precision Industry Co. and Wistron Corp., helping it avoid hefty import duties of 20%. The company has also been eyeing locations for brick-and-mortar Apple stores in India, showing renewed interest in the fast-growing market.“In 2020, Apple will go all-out on India,” Pathak said.To contact the reporter on this story: Saritha Rai in Bangalore at srai33@bloomberg.netTo contact the editors responsible for this story: Edwin Chan at echan273@bloomberg.net, Vlad Savov, Colum MurphyFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Samsung May See Passive Funds Cut Exposure Sooner Than Expected

    Samsung May See Passive Funds Cut Exposure Sooner Than Expected

    (Bloomberg) -- A cap on Samsung Electronics Co.’s weight in a Korean equity index could kick in earlier than planned, triggering fears that billions of dollars will exit the stock.Instead of the bi-annual adjustment, the Korea Exchange is considering putting a 30% limit on Samsung’s weighting on the Kospi 200 Index earlier due to the stock’s recent rally, said Ahn Kil-Hyun, the manager of the team that oversees the index. Given the gauge’s popularity among passive funds, research provider Smartkarma’s Douglas Kim expects between $1.2 billion and $1.5 billion in net selling of Samsung shares as a result. The bourse adopted the 30% cap in June 2019 to prevent a potential plunge in the entire market due to a single stock, rebalancing every June and December. Smartkarma says there’s an 80%-90% chance the rule will kick in for Samsung in March or April.“It is true that the Kospi 200 Index is being distorted because of Samsung,” Ahn said. “We just want to minimize shocks to the market.”Ahn added that details have yet to be confirmed, including the frequency of rebalancing. The Kospi 200 index is a market-cap weighted gauge provided by the Korea Exchange. About $30 billion passive funds track the index, according to Gilbert Choi, analyst at NH Investment & Securities. After soaring 44% in 2019 and 9.5% so far this year, Samsung currently accounts for 33.1% in Kospi 200 Index, up from about 28% in September.A Samsung Electronics spokesman declined to comment on the exchange’s discussions.The potential forced selling in Samsung shares shows decisions by index providers have grown increasingly important for stock markets in recent years, thanks to the rising popularity of passive investment strategies.Samsung’s outsized influence on the Korean gauge compares with just a 4.8% weighting of the U.S.’s largest company, Apple Inc., on the S&P 500 Index.“I’m not sure if such a cap can prevent a distortion in the stock market, as the cap itself could be a factor for distortion,” said Hyun Choi, head of equities at Barings Korea. “It may result in investors increasing exposure to other large caps in their portfolio, which can lead to price distortion.”SK Hynix Inc., a peer of Samsung and the second-biggest member on Kospi 200, has a 6.4% weight on the measure, followed by Naver Corp.’s 2.65% and Hyundai Motor Co.’s 2.09%.Other global indices including DAX and Euro Stoxx 50 have market-cap restrictions for a single stock, with both having a limit of 10% for any one stock and they are adjusted on a quarterly basis, according to a note from Smartkarma.(Updates Samsung’s latest weighting, share movement in 5th paragraph)\--With assistance from Abhishek Vishnoi, Hitomi Kimura and Sohee Kim.To contact the reporter on this story: Heejin Kim in Seoul at hkim579@bloomberg.netTo contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Naoto HosodaFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Bloomberg

    Intel and Softbank Beware. Open Source Is Coming to the Chip Business

    (Bloomberg) -- After revolutionizing software, the open-source movement is threatening to do same to the chip industry.Big technology companies have begun dabbling with RISC-V, which replaces proprietary know-how in a key part of the chip design process with a free standard that anyone can use. While it’s early days, this could create a new crop of processors that compete with Intel Corp. products and whittle away at the licensing business of Arm Holdings Plc.In December, about 2,000 people packed into a Silicon Valley conference to learn about RISC-V, a new set of instructions that control how software communicates with semiconductors. In just a few years, RISC-V has grown from a college teaching tool into an open-source standard being explored by industry giants including Google, Samsung Electronics Co., Alibaba Group Holding Ltd., Qualcomm Inc. and Nvidia Corp.“Most of the major companies are putting substantial efforts into RISC-V,” said Krste Asanovic, a computer scientist at the University of California, Berkeley, who was part of the team that developed the standard. He’s co-founder of SiFive Inc., a startup that sells chip designs based on RISC-V (pronounced “risk five”).Open source harnesses the contributions of multitudes, not just the proprietary ideas of a few companies. New code is shared, so anyone can see it, improve it and build their own contributions on top of it. After being dismissed by giants like Microsoft Corp. in the 1990s, this expanding body of work has become the foundation of the internet, smartphones and many software applications. Last year, IBM bought open-source pioneer Red Hat in the biggest software deal in history. Even Microsoft got on board, acquiring GitHub, the largest repository of open-source code.Opening up even small parts of the chipmaking process is anathema to many in the $400 billion industry. But if enough companies commit to an open-source approach, that could create a shared pool of knowledge that may be hard for Intel and Arm to keep up with.Early developments focus on instruction sets, which govern the basic functions of processors. Only two have mattered for years. One is Intel‘s X86, which dominates computer processors. Buying a chip from Intel or licensee Advanced Micro Devices Inc. is the only real way to use this instruction set. And Intel is the only company that can change it.The other instruction set is the basis of all major smartphone components. It is owned by Arm, a unit of Softbank Group Corp. This can be licensed for a fee, so other companies use it to design their own chips. But again, only Arm can alter the fundamentals.This has left the rest of the industry relying on the innovation of just two companies. That was not a problem for decades because most processors were general-purpose components that got faster and more efficient each year through production advances. Those industry axioms are unraveling, though. The steady march of chip miniaturization has bumped up against the laws of physics, while artificial intelligence and a flood of data from the internet and smartphones require new ways of processing information. A fresh set of instructions will help create better chips to power driverless cars, speech recognition and other AI tasks, RISC-V’s backers say.Google is using RISC-V in its OpenTitan project, which is developing security chips for data center servers and storage devices. “There are a range of other computational tasks, such as machine learning, that could benefit from an open computing architecture,” said Urs Holzle, who has overseen the technical infrastructure of Google’s massive data centers for years.Samsung said it will use SiFive designs in chips it’s making for mobile phone components. RISC-V has appeared in microcontrollers – a basic form of a processor – that are part of more complex chips sold by Qualcomm and Nvidia. Western Digital Corp., one of the largest makers of data-storage devices, plans to use the technology in some products and has open-sourced its designs. Alibaba has announced a chip based on RISC-V and several universities have published open-source designs.There are 200 Chinese members of the RISC-V Foundation, a non-profit group created in 2015 to promote the use of the instruction set. An Indian project developed six processors using the technology.RISC-V specifications are developed, ratified and maintained by the foundation’s technical committee, made up of engineers and other contributors from several member companies. Proposed revisions are posted on GitHub. RISC-V designs can either be free or licensed. While there’s no strict requirement to stick to the official specifications, members have an incentive to make their designs compatible. This gives chip customers multiple options for the blueprints they need to design components that communicate properly with the software, according to backers of the project.It’s still very early days, though. In terms of actual chips created, sold and used, RISC-V is nowhere. Arm’s technology is in almost all the 1.4 billion smartphones made each year. More than 200 million PCs sold annually are based on Intel’s X86 instruction set.One criticism of RISC-V is that it won’t end up saving money because there’s more work involved in using open standards. This echoes complaints raised about Linux and other open-source software when they were gaining ground decades ago.Arm said the idea that RISC-V reduces costs doesn’t make sense. “Innovation goes far beyond an instruction set,” said Tim Whitfield, a vice president of strategy at the company. “Arm’s IP is highly configurable and provides our partners with the flexibility to innovate and differentiate where they can add real value while minimizing risk and cost.”Martin Fink, Western Digital’s former chief technology officer who still advises the CEO, said it’s about spurring innovation in a crucial field that’s still locked down, rather than saving money. “It’s free as in freedom not as in free beer,” he added. “It’s about community and collaboration.”Other RISC-V backers argue that the more-collaborative process will eventually reduce the cost of creating chips, especially for data center operators and other companies that are increasingly designing their own processors, according to David Patterson, a former Berkeley professor and a distinguished engineer at Google. “Companies all over the world are collaborating to develop because it saves them money,” he said.Pressure on the incumbents to step up their game might be the biggest immediate impact of RISC-V. Last year, Arm announced a try-before-you-buy plan with a much lower fee so smaller companies and academic institutions could do exploratory work using its instruction set.Intel said it is adding new instructions that will help with AI processing and other new areas. “Intel engineers have continually advanced the X86 architecture standard, providing best-in-class performance,” the company added in a statement. Qualcomm, one of Arm’s biggest customers, sees room for multiple approaches, including RISC-V, according to Keith Kressin, a senior vice president of product management at Qualcomm.To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.netTo contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Alistair Barr, Vlad SavovFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Bloomberg

    ASML Chief Dismisses U.S., China Tensions as a Headache

    (Bloomberg) -- ASML Holding NV’s top executive brushed off concerns about tensions between the U.S. and China, a market that’s growing in importance to the Dutch chip gear-maker.“Someone needs to make those chips and to make those chips you would need EUV, and there is basically only one place where they can get it,” Chief Executive Officer Peter Wennink said in an interview with Bloomberg Radio, referring to its advanced lithography equipment. “For our total business it doesn’t really matter.“ASML, which has a monopoly on advanced lithography equipment needed to make next-generation chips, is already a crucial supplier to Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co. but hopes to drive deeper into China. Beijing wants to build a world-class homegrown chip industry to wean itself off foreign imports -- an effort that would need ASML’s one-of-a-kind machines. Yet it’s faced difficulty getting the Dutch government to renew a license to export to China amid ongoing trade tensions.ASML shares rose 0.2% at 1:14 p.m. in Amsterdam trading.“It’s up to the Dutch government to determine whether there is a national security risk and of course there are views in the U.S. and China whether that’s a risk,” Wennink said, adding that the company has responded to requests for information from the Dutch government.Asked whether he was optimistic about obtaining the license, Wennink said “the Dutch government takes very due care when it concerns the facts and the circumstances.”Read more: China Stockpiles U.S. Chips as ‘Silicon Curtain’ DescendsChina relies on imported chip manufacturing equipment for its audacious ambition of creating a self-reliant semiconductor industry, which supplies key components for a wide spectrum of electronics from smartphones to satellites. ASML is an essential link in that plan, which will drive Chinese purchases of more than $30 billion of semiconductor equipment between 2020 and 2021, according to industry organization SEMI. China’s Ministry of Foreign Affairs said in a statement last week the Netherlands should make an objective decision on ASML’s exports based on its own interests.U.S. PressureEuropean businesses have been caught in the middle of trade tensions between the U.S. and China, even as Washington and Beijing last week sealed the first phase of a trade deal. But the U.S. still maintains tariffs on roughly two-thirds of imports from China and both sides still need to negotiate the pact’s second phase, with discussions expected to be difficult.U.S. officials have urged allies to scrutinize business ties with Beijing, invoking concerns around national security and espionage. The White House, concerned about China’s ambitions to dominate a swath of technology from AI to semiconductors, has sought ways to contain the country’s rise. China, meanwhile, has threatened European countries with retaliation on trade if its companies are shunned.European telecom operators are among those squeezed between the two major world powers after Washington called on European governments to exclude Huawei Technologies Co.’s equipment from the build-out of their 5G networks.The Dutch government has held back on renewing the license ASML needs to export its extreme ultraviolet lithography machines under pressure from U.S. officials, Reuters reported this month. That equipment is key to any chipmaker that wants to fabricate next-generation chips, say of 7 nanometer or lower nodes.Last week, U.S. ambassador to the Netherlands Pete Hoekstra told Dutch newspaper Het Financieele Dagblad that ASML’s technology “doesn’t belong in certain places,” suggesting China. The Chinese ambassador, Xu Hong, had warned days earlier in the same paper that the relationship between the Netherlands and China was at risk if the government blocks EUV machine exports.For its part, the Netherlands says it will take its own decision on the matter, independent of foreign influence. “They are free to express their view and we take note of that, but it is not decisive,” Dutch Prime Minister Mark Rutte said of the U.S. and Chinese ambassadors’ comments last week.ASML’s EUV technology has both civilian and military applications and therefore is subject to EU dual-use licensing obligations under the Wassenaar Arrangement, according to the Dutch Foreign Ministry.EUV LicenseWennink said at a press conference the Dutch government had asked the company questions about the EUV technology, how it works, and who the customer is. The level of detail the government is seeking “is probably more than they would normally do,” he said.The delay in getting the EUV license has “zero” impact on the company’s business, he said. The licensing issue concerns their first-ever EUV order from a customer in China, where few companies are at the stage of ordering the cutting-edge technology. ASML mostly ships the machines, which cost roughly 150 million euros, to the U.S., Korea and Taiwan.The company forecast first-quarter sales largely in line with analyst expectations and said it won orders for nine more of its EUV lithography machines in the last quarter. The Dutch company said it expects sales of 3.1 billion euros ($3.4 billion) to 3.3 billion euros for the first quarter, compared with an average estimate of 3.26 billion euros.ASML also announced a share buy-back program of as much as 6 billion euros over three years, as it said it expects to win 4.5 billion euros in EUV revenue this year.(Updates with CEO comments from the 15th paragraph)\--With assistance from Joost Akkermans and Gao Yuan.To contact the reporters on this story: Ellen Proper in Amsterdam at eproper@bloomberg.net;Natalia Drozdiak in Brussels at ndrozdiak1@bloomberg.netTo contact the editors responsible for this story: Edwin Chan at echan273@bloomberg.net, Amy ThomsonFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • South Korea’s Economy Ends Bad Year With Unexpected Growth Spurt

    South Korea’s Economy Ends Bad Year With Unexpected Growth Spurt

    (Bloomberg) -- Sign up here to receive the Davos Diary, a special daily newsletter that will run from Jan. 20-24.South Korea’s economy finished its slowest year of growth since the global financial crisis with a spurt that suggests the worst may be over for the Asian bellwether of global tech trade.Gross domestic product expanded in the fourth quarter at its fastest pace since 2017, the Bank of Korea said Wednesday. The stronger-than-expected growth was fueled by an aggressive spending push by President Moon Jae-in’s government and a jump in factory investment that included spending on equipment for making semiconductors.While government spending has been a critical prop for the Korean economy during 2019, the improved facilities investment adds to other signs out of South Korea that a tech industry slump may be bottoming, a potential positive sign for Korean and global growth this year.Korea’s economy grew 1.2% from the previous three months in the final quarter, almost twice as fast as economists’ forecasts for 0.7%. On an annual basis the economy expanded 2%, for its weakest growth since 2009.“Overall it’s looking up after bottoming out,” said Park Sang-hyun, an economist for HI Investment & Securities.The KOSPI index rose after the report, gaining 0.3%, while other regional equities benchmarks dropped on concern over the spread of a deadly flu virus from China.Government PropThe quarterly growth was helped by an extra government budget approved in summer to help counter a prolonged export slump that has hit the economy hard. President Moon’s economic policy, which includes a drive to raise the minimum wage, is intended to stoke domestic demand and wean the economy off its dependency on trade.“I believe government finance played a substantial role last year,” said Finance Minister Hong Nam-ki, acknowledging the administration’s support for the economy. “Government finance should play a complementary role when the private sector is in trouble.”The Bank of Korea has also played its part, cutting rates twice in the second half of the year to support growth.While the economy was in desperate need of public spending and rate cuts in 2019, the government may be able to pull back its support in 2020 if the tech sector and global demand pick up sufficiently. The central bank looks set to hold back on further rate cuts for the time being.“The government helped keep the numbers on track while exports were struggling,” An Ki-tae, an analyst at NH Investment & Securities. “Now it may step back a little for a couple of quarters to watch how other indicators do.”Chip HopesRecent data offer signs of improvement. Samsung Electronics Co., the country’s biggest company and one of the world’s top suppliers of semiconductors, this month beat earnings forecasts. Preliminary export data for the first part of January shows chip exports on track for the first monthly gain in more than a year.BOK Governor Lee Ju-Yeol last week also struck a more optimistic tone as the board voted to keep interest rates on hold. Lee said the economy would grow faster this year than in 2019 as he pointed to easing trade tensions between the U.S. and China and a looming recovery in chip exports.Investment in chip-making equipment and other facilities rose 1.5% last quarter, while construction outlays jumped 6.3%, according to the growth report. Government spending increased 2.6%.“Given the latest numbers came largely from government spending, it’s a bit hard to embrace them completely as positive,” said An Young-jin, an economist at SK Securities. “Still, a greater government role is a global trend, with improving outlooks for major economies owing much to fiscal policy.”What Bloomberg’s Economist Says“Looking ahead, we forecast GDP growth of 2.3% in 2020, reflecting a gradual recovery in exports and investment. On the policy front, an expansionary fiscal stance will likely take the lead in supporting the economy. Our baseline expectation is for the Bank of Korea to stand pat in the year ahead.”\--Justin Jimenez, Bloomberg EconomicsClick here to read the report.(Adds economist comments, chart and further context.)To contact the reporter on this story: Sam Kim in Seoul at skim609@bloomberg.netTo contact the editors responsible for this story: Malcolm Scott at mscott23@bloomberg.net, Jason Clenfield, Paul JacksonFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Apple Partner Pegatron to Set Up Production in Vietnam

    Apple Partner Pegatron to Set Up Production in Vietnam

    (Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Taiwan’s Pegatron Corp. plans to set up production facilities in Vietnam, according to people familiar with the matter, becoming the latest Apple Inc. assembly partner to establish a presence in the Southeast Asian nation as they diversify beyond China.Taipei-listed Pegatron is looking for a site to build a brand new facility in the north of the country, according to people familiar with the matter who asked not to be identified discussing private plans. It already has rented a separate facility in the northern city of Haiphong, they said. Pegatron will make styluses for Samsung Electronics Co.’s smartphones there, one of the people said. The gadget manufacturer’s share price remained largely unchanged in Tuesday trading.Pegatron joins Apple’s two other iPhone assemblers -- Wistron Corp. and Hon Hai Precision Industry Co. -- in developing manufacturing facilities or building extra capacity in Vietnam. None of the three are making iPhones in Vietnam and have no imminent plans to do so. The only Apple device Pegatron makes is iPhones. GoerTek Inc. is now making AirPods in the country, while two other Apple assembly partners, Compal Electronics Inc. and Luxshare Precision Industry Co., also have a presence in Vietnam.An almost two-year-long trade war with the U.S. has put China’s position as factory for the world of technology in jeopardy, undermining a decades-old global supply chain and pushing electronics companies to look for alternative production bases. Though Washington and Beijing have signed a phase-one trade deal, supply-chain diversification is still essential in the longer term given tensions are unlikely to fully subside and labor costs are rising in China.Taiwanese companies have been particularly active in their search for options, with companies from Inventec Corp. to Foxconn Technology Group either moving production back home or to more distant regions around Asia, seeking to escape U.S. tariffs.Vietnam has been a top beneficiary from tariff-related trade diversions. Indonesia has also gained, including garnering investment from Pegatron.“Vietnam’s enhanced vocational training has helped boost the quality of its pool of workers to close to China’s level and its government has been keen to clear hurdles including bureaucracy for foreign companies to invest in the country,” said Roy Lee, a researcher at Taipei-based Chung-Hua Institution for Economic Research.(Updates with share details in second paragraph)To contact the reporter on this story: Debby Wu in Taipei at dwu278@bloomberg.netTo contact the editors responsible for this story: Edwin Chan at echan273@bloomberg.net, Colum Murphy, Vlad SavovFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Bloomberg

    Samsung Engineering Maven to Lead World’s Top Phone Business

    (Bloomberg) -- Samsung Electronics Co. has appointed Taemoon Roh the head of its smartphone division, tasking a veteran executive with oversight of the world’s largest mobile devices business.Roh, who was formerly the unit’s No. 2 executive, will take over the top job from Koh Dong-Jin from Monday. Koh remains head of the Korean conglomerate’s IT and mobile communications division but hands the reins of smartphones over to a lieutenant credited with building up the marquee Galaxy line of smartphones and tablets. Roh, a two-decade veteran of Korea’s largest corporation, is regarded internally as an engineering maven who’s meticulous about phone features.Samsung’s shares climbed as much as 2.5% in Seoul. The largest maker of mobile phones, displays and memory chips shakes up its executive ranks each year, with the extent of the changes often correlated to how its businesses are doing. This month, the company reported preliminary earnings that showed operating income declining by about a third from a year earlier.Korea’s largest company is racing to secure an early lead in fifth-generation wireless smartphones as well as foldables, both of which will take centerstage during its annual Unpacked event in San Francisco in February. While it still sells more devices than any other brand, Samsung in recent years has come under assault from both long-time adversary Apple Inc. as well as new rivals from Huawei Technologies Co. to fellow Chinese names Oppo and Vivo.“Roh is known to be a person who expanded Samsung’s original design manufacturing policy for low- to mid-range smartphones,” said CIMB analyst Lee Dohoon. “Samsung may now gradually follow Apple in focusing on design and developments. Though it’s expanded outsourcing for production, Samsung will keep a tighter rein on quality control to protect its brands.”The Korean tech giant will try to keep expanding its market share in Asia and Europe this year while closest rival Huawei is struggling to protect its market share in the wake of Trump administration sanctions, Lee added.Read more: Samsung Profit Beats After Chip Prices Stage Comeback Samsung said Roh is taking the division’s helm at 52, using the Korean method of calculating age, although he was born in Sept. 1968 and would be 51 by a Western count.Regardless, that means he’ll be orchestrating things when Samsung unveils on Feb. 11 what’s expected to be a second foldable device that folds into a square. The company’s mainstream flagship device -- whose name is rumored to be the Galaxy S20, a change in naming scheme -- is also likely to be unveiled at that event.Its devices accounted for 54% of the global 5G smartphone market as of November 2019, after it shipped more than 6.7 million Galaxy 5G smartphones last year, the company has said. Separately, Huawei said last week that it shipped more than 6.9 million 5G phones in 2019.Roh will also assume responsibility for repairing the mobile division’s reputation. Under Koh’s leadership, Samsung suffered from major quality issues at least twice: In 2016, Samsung killed off the Note 7 for good after models tended to burst into flames. Last year, Samsung also had to delay the Galaxy Fold by several months after review models exhibited issues with displays that were easily peeled off. Those debacles were widely seen as a result of the company’s rushing phones to market to try and steal a march on Apple and Huawei.Away from smartphones, the chiefs of three key Samsung divisions -- semiconductors, consumer appliances and electronics and IT services -- remained the same. That ensures stability given vice chairman and heir apparent Jay Y. Lee is defending himself in court over graft allegations, raising the possibility of a potential leadership vacuum.Samsung also promoted several presidents in its latest restructuring including Kyungwhoon Cheun, who now heads networking.Read more: Behind Samsung’s $116 Billion Bid for Chip Supremacy(Updates with Roh’s age in the seventh paragraph)To contact the reporter on this story: Sohee Kim in Seoul at skim847@bloomberg.netTo contact the editors responsible for this story: Peter Elstrom at pelstrom@bloomberg.net, Edwin Chan, Colum MurphyFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Samsung appoints new mobile chief as Huawei chips away at market share

    Samsung appoints new mobile chief as Huawei chips away at market share

    Samsung Electronics Co Ltd on Monday named its youngest president as its new smartphone chief as the firm seeks to defend its lead in the handset market from rising challenges from rivals such as Huawei Technologies Co Ltd. The South Korean firm also promoted the head of its network equipment business, which analysts said got a lift from a U.S. campaign to convince allies to bar Huawei from their networks. Samsung took an early lead in smartphones running on quicker fifth-generation (5G) telecommunication networks, but Huawei is widely expected to boost sales of 5G-capable smartphones and equipment this year, leveraging its huge home market.

  • Samsung invests $500M to set up a smartphone display plant in India

    Samsung invests $500M to set up a smartphone display plant in India

    Samsung, which once led India’s smartphone market, is investing $500 million in its India operations to set up a manufacturing plant on the outskirts of New Delhi to produce displays. In the filing, the company disclosed that it has allocated some land area from its existing factory in Noida for the new plant. In 2018, Samsung opened a factory in Noida that it claimed was the world’s largest mobile manufacturing plant.

  • The $150 Million Machine With $200 Billion at Stake for China

    The $150 Million Machine With $200 Billion at Stake for China

    (Bloomberg Opinion) -- Huawei Technologies Co. has become very much the U.S.’s whipping boy in the battle to nip China’s technological ascendancy in the bud. President Donald Trump’s administration has slapped sanctions and curbs on the Shenzhen-based company and lobbied allies to do the same. Last month growing resistance against Huawei among lawmakers in Germany’s governing coalition sparked threats of retaliation from the Chinese ambassador. But what’s happening next door in the Netherlands has higher stakes for China. There, Beijing’s envoy this week said there will be negative consequences if the Dutch continue to block the export of a single piece of high-tech manufacturing equipment made by ASML Holding NV. According to Reuters, the U.S. has exerted pressure to prevent the sale to a Chinese firm. But it’s not just any machine. It’s a $150 million state-of-the-art apparatus that could ensure Moore’s Law — which says that processing power doubles every 18 months — continues apace, and the microchips powering our smartphones, computers and networks get ever smaller.Like with Huawei, U.S. Secretary of State Mike Pompeo cited intelligence concerns, though Reuters didn’t specify what they are. The Hague subsequently rescinded an export license it had previously granted for the machine.Any individual nation state cutting Huawei, the world’s largest networking business, out of the supply chain for its 5G networks will of course be a blow to the Chinese firm. But the impact on China as a whole will be limited. Beijing will still be able to build its own next-generation telecommunication networks, and losing a few exports will have a minor effect on the economy as a whole. Huawei’s sales in Europe, the Middle East and Africa totaled $31 billion in 2018.A ban on buying machines from ASML is potentially far more significant, because it will hinder China’s ambitious goals to strengthen its super high-tech manufacturing industry.As far as tech giants go, ASML doesn’t have the global brand cachet of an Apple Inc., Samsung Electronics Co. or Amazon.com Inc. That’s partly because its products are two steps removed from the electronic devices that reside in consumers’ pockets, on their desktops or in their living rooms: ASML builds the machines that make the semiconductors that go into their devices. But it’s one of Europe’s biggest three technology companies, and its top customers include chipmakers Intel Corp., Samsung and Taiwan Semiconductor Manufacturing Co., which is known as TSMC and makes chips for Apple and Huawei alike.The Dutch firm stands out from rivals Nikon Corp. and Canon Inc. because it’s alone in having mastered an approach known as extreme ultraviolet lithography, which is needed for the manufacture of the next generation of chips. Lithography is the process by which circuit patterns are etched onto silicon wafers, and the EUV process will allow the printing of circuits that are more than 10 times smaller than the current standard.QuicktakeHow Chinese Technology Grew to Rival Silicon ValleySo you can see why China would be particularly interested in using ASML’s equipment. Although the country is a hub of electronics manufacturing, much of that is simply assembling iPhones, laptops, smart speakers and the like. The underlying tech is often imported, including some $200 billion-worth of semiconductors each year.Beijing wants to reduce that dependence on imports by investing $150 billion over a decade in an effort to take the lead in technology design and manufacturing. Access to machines made by ASML will be essential to achieving that. By the end of next year, as much as half of TSMC’s revenue will depend at least partly on some EUV processes, according to Bloomberg Intelligence analyst Masahiro Wakasugi. That could be $18 billion worth of chips. TSMC said on Thursday that its deployment of EUV machines was on schedule, advancing at a similar rate to earlier technologies, as it reported earnings that exceeded analyst expectations.While it could take a decade and more than one EUV machine for Chinese firms such as Semiconductor Manufacturing International Corp. to rival that, that is clearly the long-term goal. (SMIC is reportedly the company that placed the order at the heart of the current spat.)Dutch newspaper Het Financieele Dagblad reported last year that ASML was the target of theft by a rival with ties to the Chinese state, though the company later said that any “suggestion that we were somehow victim of a national conspiracy is wrong.” Chief Executive Officer Peter Wennink surely doesn’t want to lose China’s business: It’s ASML’s fastest-growing market.What makes the Dutch move so remarkable is that the U.S. can only unilaterally block sales abroad if components or R&D contributions originating domestically exceed 25% for the relevant product. Here, it seems to have succeeded in leaning on the Dutch government to prevent the sale even though, according to press reports, ASML’s extreme ultraviolet lithography machine doesn’t meet that test. An even greater risk would be that other important suppliers of underlying technology follow suit, whether under U.S. duress or not.(Adds TSMC comment on latest technology in fourth-to-last paragraph.)\--With assistance from Tim Culpan.To contact the author of this story: Alex Webb at awebb25@bloomberg.netTo contact the editor responsible for this story: Melissa Pozsgay at mpozsgay@bloomberg.netThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Apple Chipmaker TSMC’s Profit Bigger Than Expected

    Apple Chipmaker TSMC’s Profit Bigger Than Expected

    (Bloomberg) -- Taiwan Semiconductor Manufacturing Co. projected quarterly revenue well above analysts’ estimates, brushing aside concerns that tighter U.S. sanctions on No. 2 customer Huawei Technologies Co. could dampen its business.Shares in the world’s largest contract chipmaker have slid two straight days on worries that Washington will tighten existing restrictions on exports to Huawei, potentially curtailing shipments from TSMC and other non-American firms. If the U.S. does move ahead, any disruption would be short-term because TSMC could replace some of the lost Huawei business with orders from other customers thanks to the 5G boom, Chairman Mark Liu said during a post-earnings conference with analysts.TSMC has recruited Intel’s former chief lobbyist to gauge the temperature in Washington and lessen any fallout from U.S.-Chinese tensions, including policies involving Huawei.“We are prepared to deal with this export control regulation,” Liu said, adding that if any new controls were introduced, TSMC would carefully “evaluate product by product eligibility of export.”But some analysts judged Liu’s assessment too rosy. TSMC may be over-estimating the ability of other customers to pick up the slack were its Huawei business to be curtailed, Bernstein analyst Mark Li said. “The forecast, according to TSMC, assumes ‘business as usual’. The company sees any disruption will be short-lived and for example commented that smaller telco infrastructure suppliers can quickly pick up the shortfall if Huawei can’t deploy 5G as planned. We find that too optimistic,” Li said.TSMC reported better-than-expected net income of NT$116 billion ($3.9 billion) in the December quarter. Gross margins came in at 50.2%, also exceeding estimates. It forecast revenue of $10.2 billion to $10.3 billion in the March quarter, surpassing estimates for $9.6 billion.Apple Inc.’s main chipmaker is banking that the rollout of fifth-generation enabled smartphones in 2020 will galvanize growth. Semiconductor orders from Huawei account for 10% of its revenue, according to Bloomberg data. TSMC’s robust results demonstrate how the world’s largest contract chipmaker is investing in technology to safeguard its market lead over Samsung Electronics Co. and Intel Corp. TSMC spent almost $15 billion on technology and capacity in 2019 and is prepared to shell out as much as $16 billion this year, anticipating the advent of fifth-generation smartphones. The company, a barometer for the tech industry thanks to its heft and place in the supply chain, has said the advent of 5G will result in more chips in devices than before.Capex growth this year will mainly come from an increase in specialty technology including CMOS sensors -- which turn light into digital signals for smartphone cameras -- and power management chips, and packaging technology, according to Chief Financial Officer Wendell Huang.TSMC previously reported record fourth-quarter revenue of NT$317.2 billion. Chief Executive Officer C. C. Wei has expressed hopes that the emergence of 5G, the foundation of future technologies from automated factories and smart homes to faster consumer electronics, will underpin its business in coming years.In addition to 5G, TSMC’s counting on growing demand for high-performance computing. Positive comments from Micron Technologies Inc. and Samsung suggest the global semiconductor market is poised for a gradual recovery on the back of demand related to 5G, artificial intelligence and automotive applications.(Updates with details on preparation for Huawei curbs)To contact the reporters on this story: Debby Wu in Taipei at dwu278@bloomberg.net;Gao Yuan in Beijing at ygao199@bloomberg.netTo contact the editors responsible for this story: Peter Elstrom at pelstrom@bloomberg.net, Edwin Chan, Colum MurphyFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Specter of More U.S. Restrictions Weighs on Huawei

    Specter of More U.S. Restrictions Weighs on Huawei

    (Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. The so-called phase-one U.S.-China trade pact has done little to allay fears about Huawei Technologies Co.’s prospects and those of its key suppliers, two analyst research reports suggest.Morgan Stanley and Credit Suisse warned of the likely trickle-down impact of U.S. sanctions on Huawei should they remain in place or be tightened even further. Restrictions could slow the pace of China’s fifth-generation networking rollout, which would affect Taiwan Semiconductor Manufacturing Co. and fellow technology and manufacturing providers, one report said.Tensions over tech are likely to remain as the Trump administration considers steps to further limit the ability of American companies to supply Huawei. This comes even as Treasury Secretary Steve Mnuchin said on Wednesday he doesn’t “view Huawei as a chess piece” in continuing negotiations with China.Tech Industry Shudders as U.S. Weighs New Limits on Huawei SalesMorgan Stanley analysts forecast Huawei’s total smartphone volume at 200 million this year, a decline of 40 million from 2019. Without regaining access to the Google Mobile Services suite on Android, Huawei’s “smartphone shipments would be close to zero in Western Europe,” said the analysts. That compares to shipments of 29 million units in 2018 and 21 million devices through the first three quarters of 2019 for the region, they added. The European market had served as a catalyst for Huawei’s consumer division, which was itself the biggest growth engine for the Chinese company.Closer controls on Huawei would also impact its key suppliers. Chipmaking giant TSMC, which counts Huawei as its second largest customer after Apple Inc., relies on its semiconductor orders for 10% of revenue, according to Bloomberg data. Credit Suisse wrote that TSMC would lose a chunk of that business in the event of increased sanctions, though the hit would be partially offset by other customers like Apple and Advanced Micro Devices Inc. expanding their orders. TSMC reports earnings later today, hoping to shake off a two-day decline in share price amid added uncertainty about U.S. pressure.Some Asian tech names stand to benefit under new supply chain scenarios, Samsung Electronics Co. most notable among them. It’s expected to soak up the Western Europe smartphone demand that would emerge without competitive Huawei devices on the market, Morgan Stanley said. Credit Suisse echoed the positive sentiment, adding that the Samsung LSI chipmaking division would “benefit supplying the mid-tier Qualcomm chips and Exynos family” in the absence of Huawei from key global markets.Read more: TSMC Hires Ex-Intel Lobbyist to Deal With U.S.-China Tensions\--With assistance from Cindy Wang.To contact the reporter on this story: Vlad Savov in Tokyo at vsavov5@bloomberg.netTo contact the editors responsible for this story: Edwin Chan at echan273@bloomberg.net, Colum MurphyFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • India Proposes Incentives to Woo Apple, Samsung Suppliers

    India Proposes Incentives to Woo Apple, Samsung Suppliers

    (Bloomberg) -- India is considering a plan to offer subsidized loans to mobile handset manufacturers in a bid to attract Apple Inc. and Samsung Electronics Co.’s suppliers to open factories in the nation, said a government official.The proposals by the Ministry of Electronics and Information Technology includes offering interest subsidy on local borrowing by manufacturers, may form part of the federal budget to be unveiled on Feb. 1, the official said, asking not to be identified citing rules on speaking to the media. It also includes setting up of industrial zones equipped with taxation and customs clearance, along with infrastructure such as roads, power and water supply, the official said.India plans to make $190 billion worth of mobile phones by 2025 from $24 billion now, the official said. Two calls made to the spokesman of the ministry remained unanswered.Prime Minister Narendra Modi’s government, which is under pressure to bring down a jobless rate that’s the highest in 45 years, wants to attract overseas component makers and help boost the share of manufacturing in Asia’s third-largest economy to a quarter of the nation’s gross domestic product. Modi’s flagship “Make in India” program has been foundering as poor road and port facilities deter investors.There has been some success. Foxconn Technology Group, the largest assembler of Apple handsets, is ramping up manufacturing of iPhones in India. It already has two factories in the southern Indian states of Andhra Pradesh and Tamil Nadu, where it makes devices for Xiaomi and Nokia. Adding more production in India would help Apple and Foxconn diversify from China amid ongoing trade tensions with the U.S.The proposals have been forwarded to the finance ministry but no decision has been taken, the official said.With the manufacturing of high-end mobile handsets for Apple and Samsung, India plans to shift its export focus to Europe and the U.S., the official said.To contact the reporter on this story: Ragini Saxena in New Delhi at rsaxena30@bloomberg.netTo contact the editors responsible for this story: Unni Krishnan at ukrishnan2@bloomberg.net, Arijit GhoshFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Display Maker Royole Is Said to Have Filed for Confidential U.S. IPO

    Display Maker Royole Is Said to Have Filed for Confidential U.S. IPO

    (Bloomberg) -- Chinese flexible display maker Royole Corp. has filed confidentially for a U.S. initial public offering to raise about $1 billion, people familiar with the matter said.The startup seeks funding to expand its sales and marketing and research facilities, the people said, requesting not to be named because the matter is private. It had originally planned to raise that amount via a private financing round at a valuation of about $8 billion, people familiar with that deal said in March. But the Chinese company is now tapping U.S. markets after liquidity tightened during a downturn in China’s venture capital sector, the people said.Royole, known for manufacturing the world’s first commercial foldable phone, competes with Samsung Electronics Co. and BOE Technology Group Co. to produce bendable screens using cutting-edge organic light-emitting diode technology. The company, which gave away wraparound-screen hats at the 2018 World Cup in Russia, this month unveiled a smart speaker that packs a bendable display around a cylinder.It’s unclear what timeframe the company’s looking at, the people said. A Royole representative declined to comment.Royole is regarded as one of a coterie of Chinese technology startups working to dismantle the decades-old image of China as a clone factory by leading in design and innovation. Like Huami and Insta360, these upstarts aim to take advantage of home bases in China close to where devices are manufactured, developing products faster and more cheaply.Founded by Stanford alumni Bill Liu, Peng Wei and Xiaojun Yu, Royole needs capital to plow back into research and expand production. The company, valued at about $5 billion in a previous funding round, invested 11 billion yuan ($1.6 billion) into a flexible display plant in Shenzhen that commenced production in June. Royole is working with Airbus to install displays in planes and also collaborates with clothing, furniture and kitchen-supply customers. Royole has said it secured a deal with Louis Vuitton that will see the two companies putting flexible screens on handbags of the future.Its full line of products encompasses head-mounted displays intended for use as so-called mobile theaters and other wearable flexible displays. The company even has a smart writing pad that it sells on Amazon.com, JD.com and in stores across China, the U.S. and Europe.Royole’s earlier investors include Knight Capital, IDG Capital, Poly Capital Management, AMTD Group, the funds of Chinese tycoon Xie Zhikun and the venture capital arm of the Shenzhen city government.Read more: The Trade War Spurs China’s Technology Innovators Into Overdrive(Updates with details on Royole’s inception from the fifth paragraph)To contact the reporters on this story: Julia Fioretti in Hong Kong at jfioretti4@bloomberg.net;Lulu Yilun Chen in Hong Kong at ychen447@bloomberg.netTo contact the editors responsible for this story: Edwin Chan at echan273@bloomberg.net, Colum MurphyFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • US patents hit record 333,530 granted in 2019; IBM, Samsung (not the FAANGs) lead the pack

    US patents hit record 333,530 granted in 2019; IBM, Samsung (not the FAANGs) lead the pack

    IFI Claims, a company that tracks patent activity in the US, released its annual tally of IP work today underscoring that theme: it noted that 2019 saw a new high-watermark of 333,530 patents granted by the US Patent and Trademark Office. Indeed, the fact that one of the oldest tech companies, IBM, is also the biggest patent filer almost seems ironic in that regard.

  • Huawei Helps China Overtake Germany in Receiving U.S. Patents

    Huawei Helps China Overtake Germany in Receiving U.S. Patents

    (Bloomberg) -- Huawei Technologies Co. broke into the top 10 recipients of U.S. patents last year, according to an analysis of filings with the U.S. Patent and Trademark Office, the latest sign that Chinese companies are aggressive in pursuing the U.S. lead in global technology.The telecom company’s 2,418 patents, along with 2,177 new patents issued to display-screen maker BOE Technology Group, help propel China into the rank of fourth-biggest recipient of U.S. patents, behind Japan and South Korea but ahead of Germany for the first time, according to the analysis by Fairview Research’s IFI Claims Patent Services.“China’s growing rapidly but they’re still way behind the U.S. in terms of patents,” said Larry Cady, a senior analyst with IFI.International Business Machines Corp. retained its title of top recipient of patents for the 27th year, with a record 9,262 patents, far ahead of No. 2 Samsung Electronics Co. and No. 3 Canon Inc.Overall, the patent office issued 333,530 patents, an all-time high and a 15% jump after a decline in 2018. Cady said the increase likely reflects efforts to release a bottleneck over what can qualify for a patent, such as in the fields of artificial intelligence.AI, cloud computing, blockchain and security were among the top areas for IBM, the Armonk, New York, company said. The IBM patents reflect the work of more than 8,500 inventors over 45 states and 54 countries, the company added.While IBM may be consistently the top recipient of patents, its holdings aren’t the largest, IFI found. That title belongs to Samsung Electronics Co. of South Korea, with Canon Inc. of Japan the second-largest corporate owner of patents. The difference, Cady said, is that IBM doesn’t keep all of its patents.“We really look at new patents as an indication of innovation and we regularly review and prune our patent assets,” said Jason McGee, chief technology officer for IBM Cloud Platform. “We may get rid of ones that we don’t think are strategic or could be better served with someone else.”IBM also announced that it’s joined the License on Transfer, or LOT, Network, which was co-founded by Red Hat Inc. IBM bought the software company for $34 billion last year.Group members pledge that all network members will get a license to any patent that ends up with what’s known as a “patent assertion entity,” meaning a company that doesn’t make products and whose sole purpose is to extract royalties from those who do. The group helps protects automakers and retailers who are just entering the technology arena that’s often marked by lawsuits.“If you want to be any successful company, you have to be a successful high-tech company,” said Ken Seddon, head of the LOT Network.Overall, the list of top recipients is dominated by American and Asian technology companies. Behind IBM, Samsung and Canon are Microsoft Corp., Intel Corp., LG Electronics Inc. and Apple Inc. topping the list after Canon. Ford Motor Co., which broke into the top 10 last year, was just ahead of Amazon.com Inc. and then Huawei.While the numbers are small, the fastest-growing patent classifications were in the gene-splicing technology known as CRISPR, hybrid plants, 3-D printing and cancer therapies, the analysis showed.Many of the patents issued to Huawei relate to things like high-frequency transmission that are needed for the next generation of wireless technology known as 5G.President Donald Trump’s administration in May moved to restrict U.S. companies from doing business with Huawei. The administration has said Huawei gear could be used for spying -- an allegation the company denied.“The U.S. is kind of at a funny position with Huawei -- we’re threatening them with limiting access to technology and access to the markets,” Cady said. “At the same time, 5G is rolling out and they’re the dominant in 5G.”To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net;Christopher Yasiejko in Wilmington, Delaware, at cyasiejko1@bloomberg.netTo contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Elizabeth Wasserman, John HarneyFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.