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Goldman Rallied Off its 50-day line following earnings. Less rate sensitive than most banks.
Goldman Rallied Off its 50-day line following earnings. Less rate sensitive than most banks.
In one of the more light-hearted moments of Berkshire Hathaway's annual shareholders meeting on Saturday, Ajit Jain, vice chairman of Insurance Operations, was asked if he'd be willing to underwrite the insurance to cover Elon Musk's SpaceX mission to Mars, assuming Musk asked.
Prices are on the rise, but there are ways you can lessen the impact on your wallet.
Inflation is picking up in a major way, C-suites across the country warn.
Archegos has hired restructuring advisers to assess the potential legal claims from banks and to plan for a possible winding down of its operations, the report said, citing two people familiar with the matter. The family office's meltdown was triggered after ViacomCBS, a company Archegos was heavily exposed to, announced a stock offering in March. Global banks lost nearly $10 billion from the Archegos fallout.
It appears that Shark Tank investor Kevin O’Leary no longer thinks bitcoin is “garbage.” The chairman of O’Shares ETF told Yahoo Finance Live that he’s allocated 3% of his portfolio to the world’s largest cryptocurrency after his native Canada, and a handful of other countries, eased restrictions on institutional buying of the asset.
(Bloomberg) -- Jeff Bezos sold about $2.5 billion of Amazon.com Inc. stock, his first big disposal this year after offloading more than $10 billion worth of shares in 2020.Bezos sold around 739,000 shares this week under a pre-arranged trading plan, according to U.S. Securities and Exchange Commission filings. He plans to sell as many as 2 million shares, according to a separate filing.The world’s richest person continues to hold more than 10% of Amazon.com, the primary source of his $191.3 billion fortune, according to the Bloomberg Billionaires Index. In the 15 years after Amazon.com went public in 1997, Bezos sold about a fifth of the online retailer for roughly $2 billion. The value of his stake has ballooned in recent years to such an extent that he can now sell relatively small amounts for billions of dollars.Amazon stock is little changed this year after rallying 76% in 2020 as the Covid-19 pandemic kept people away from physical stores and encouraged online shopping.The Amazon founder has used stock sales to fund rocket company Blue Origin, while he’s committed $10 billion to the “Bezos Earth Fund” to help counter the effects of climate change.The rocket maker said Wednesday it has set July 20 for its first mission carrying people to space and plans to auction off one seat on its New Shepard rocket.Bezos would be far richer if it weren’t for his divorce from MacKenzie Scott. She received a 4% stake in Amazon as part of the split and quickly became one of the world’s most important philanthropists.(Updates with Blue Origin plans in seventh paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
As investor interest in cryptocurrency spikes, bitcoin could rise to $1 million over the next five years, one expert told Yahoo Finance Live.
TAIPEI (Reuters) -Taiwan's Foxconn said on Wednesday it has formed a joint venture with Yageo Corp to expand its presence in the semiconductor industry, as a global chip shortage rattles producers of goods from cars to electronics. The supply bottleneck has led to production cuts and warnings of supply chain disruption from manufacturers across the world this year. Electronics manufacturing conglomerate Foxconn, which counts tech giants such as Apple among its top clients, said in a statement the two companies will set up a new firm in Taiwan called XSemi Corporation.
(Bloomberg) -- Discover what’s driving the global economy and what it means for policy makers, businesses, investors and you with The New Economy Daily. Sign up hereBrazil’s central bank lifted its benchmark interest rate by 75 basis points and promised another hike of the same size next month in a renewed push to bring inflation back to target.The bank on Wednesday raised the Selic to 3.5%, in line with estimates from all economists in a Bloomberg survey and the guidance given by policy makers at their prior meeting in March. If it makes good on its promise, the bank will have raised borrowing costs by 225 basis points to 4.25% by June.“A partial normalization of the policy rate remains appropriate to keep some degree of monetary stimulus during the economic recovery,” central bank board members in wrote in a statement accompanying their decision. “However, the Committee emphasizes that there is no commitment with this plan, and that future steps of monetary policy could be adjusted to assure the achievement of the inflation target.”The bank, led by its President Roberto Campos Neto, is acting to rein in inflation that’s surged above the target ceiling to a four-year high. Food and fuel costs have jumped in recent months, and the government recently restarted emergency aid that will firm up demand. Put together, analysts see consumer prices above target this year and next despite an incipient recovery.What Bloomberg Economics Says“The central bank tried to reach a compromise: it promised another sharp rate hike of 75 basis points in the next meeting, but warned that it is not ready yet to fully normalize monetary policy. Despite acknowledging the decline in underlying inflation and mentioning -- for the first time ever -- its dual mandate, we believe that the overall tone of the statement was somewhat hawkish.”--Adriana Dupita, Latin America economistClick here for the full reportThe decision makes room for the real to extend recent gains. The Brazilian currency is the best performer among majors in the past month, up 4.4% amid rising commodity prices. A stronger exchange rate helps fight inflation by making imports less expensive.Real Has Scope to Gain After BCB’s Hiking Signal: Inside Brazil“They are continuing the hawkish tilt,” said Sacha Tihanyi, head of emerging market strategy at TD Securities in Toronto. “Hike aggressively sooner, and then create some breathing space for the real.”Nearing 8%For the first time, policy makers mentioned their secondary mandate of fostering full employment, introduced in the same law that gave the bank its long-sought formal autonomy earlier this year. Yet they offered a positive outlook, saying recent economic indicators have been better than expected despite the pandemic, and predicting uncertainties over growth to gradually return to normal.Last month, President Jair Bolsonaro’s administration started paying out another round of monthly stipends at a total cost of 44 billion reais ($8.2 billion). Lawmakers have recently indicated they will seek an extension of that aid if the government does not accelerate plans for a new social program as the coronavirus continues to spread through the country.Read More: Brazil’s Budget Foreshadows Another Year of Massive SpendingConsumer prices rose 6.17% in the year through mid-April, and many economists see that reading approaching 8% in May. The central bank targets annual inflation at 3.75% this year, with a tolerance range of plus or minus 1.5 percentage points.In their statement, policy makers wrote various measures of underlying inflation are already at the top of the range compatible with hitting their target. Complicating matters, commodity prices continue to increase, and higher energy costs are pressuring prices in the short-term.“The central bank is signaling it plans to get to a 5% Selic in 75-basis point hikes, though it leaves the space to change its mind,” said David Beker, chief Brazil economist at Bank of America Corp.(Updates with central bank statement in third paragraph, economist quote in fifth)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- When automakers were first hit with chip shortages at the end of last year, they tried idling factories until the troubles blew over. But with the crisis stretching into its fifth month and getting worse, they’re getting creative to keep at least some production moving forward.Nissan is leaving navigation systems out of thousands of vehicles that typically would have them because of the shortages. Ram no longer offers its 1500 pickups with a standard “intelligent” rearview mirror that monitors for blind spots. Renault has stopped offering an oversized digital screen behind the steering wheel on its Arkana SUV -- also to save on chips.The crisis is an historic test for the century-old auto industry just as it is trying to accelerate a shift toward smarter, electric vehicles. For decades, carmakers moved steadily to include more and better advanced features; now, they’re stripping some of them out -- at least temporarily -- to salvage their sales.That rollback underscores the depth of the issues facing the industry. Just last week, BMW AG, Honda Motor Co. and Ford Motor Co. all flagged worsening problems from chip shortages. A failure to secure critical supplies is a massive short-term setback -- millions of vehicle sales will be lost this year -- and bodes ill for the future as competition from tech-savvy internet and consumer-electronics companies intensifies.“This probably gets worse before it gets better,” said Stacy Rasgon, who covers the semiconductor industry for Sanford C. Bernstein. “It just takes a long time to bring this capacity online.”NXP Semiconductor NV Chief Executive Officer Kurt Sievers said the shift to electric vehicles is happening faster than anticipated, which has added to the increased demand for automotive chips. NXP plans to ship at least 20% more auto chips by revenue in the first half of 2021 compared with the first half of 2019, even though car production has dropped about 10% over the period, he said.Mark Liu, chairman of Taiwan Semiconductor Manufacturing Co., cautioned the crisis is far from over. His company, which is the world’s most advanced chipmaker and will be critical to any resolution, will begin to meet auto clients’ minimum requirements by June, but expects the car-chip shortages could last until early 2022, he said in an interview with CBS.Automakers can’t just wait. One reaction to the shortage is to allocate the scarce components to more profitable and better-selling vehicles at the expense of other models -- something manufacturers like France’s Renault SA and Japan’s Nissan Motor Co. are doing.Carmakers are also building vehicles with less technology. Peugeot is going back to old-fashioned analog speedometers for its 308 hatchbacks, rather than use digital versions that need hard-to-find chips. General Motors Co. said it built some Chevrolet Silverado pickup trucks without a certain fuel-economy module, costing drivers about 1 mile per gallon. Nissan is cutting the number of vehicles with pre-installed navigation systems by about a third, according to a person familiar with the matter.Why Can’t We Just Make More Chips?The Japanese manufacturer, which in early January became one of the first automakers to warn of an impending shortage, is also prioritizing chip supply to the two best-selling models in each major market, the person said. In one instance, Nissan flew chip supplies from India to the U.S. on a chartered cargo flight to help production move forward there. A representative for Nissan declined to comment.Buyers of Renault’s sporty Arkana now have to settle for a smaller display without a navigation map, and forgo an option for a phone charger by induction.Stellantis NV -- formed from the merger of Fiat Chrysler and PSA Group -- has modified the Ram 1500 pickup so that the digital rearview mirror that usually comes standard is now available only as an upgrade option, according to a person familiar with the matter. The manufacturer is also using parts that don’t require chips from its more basic Ram Classic truck to keep the pricier version moving down the assembly line.“Given the fluid nature of this complex issue, Stellantis employees across the enterprise are finding creative solutions every day to minimize the impact to our vehicles so we can build the most in-demand products as possible,” spokeswoman Jodi Tinson said in an email.The car industry’s predicament dates back to poor planning during the pandemic and limited chipmaking capacity, but it’s been compounded by shrinking available cargo space as the global economy recovers from Covid-19. When automakers can secure orders, their chips often can’t ship.That bottleneck is compounded by the fact that major car-chip makers NXP, Infineon Technologies AG and Renesas Electronics Corp. account for just 40% of supply, with the remaining 60% split between tens of thousands of smaller designers. Those smaller players often lack the influence to get their chips manufactured at foundries when capacity is tight.In at least one case, carmakers are asking a major chipmaker to send microcontrollers that don’t meet standard specifications, a person familiar with the matter said. Those sub-standard chips wouldn’t jeopardize safety essentials, like brakes, the person said, but they could mean in-car entertainment or emissions monitoring systems are more likely to malfunction in extreme weather.Automakers and suppliers can accept whatever chips are available and rewrite the software to give them a new task, said Sig Huber, a consultant at Conway MacKenzie and a former head of purchasing at Fiat Chrysler. Tesla Inc. said last week it alleviated issues by reaching out to new semiconductor suppliers and then quickly writing new firmware for those chips.Stellantis is working on more standardization across its vehicle lineup rather than having to use specific chips for some models, Chief Financial Officer Richard Palmer said on an call with reporters this week.“More standardization and flexibility, which is key when we have supply constraints,” he said. “We’re managing scarcity.”Manufacturers are also stocking incomplete cars, or “building shy” in industry parlance, to keep production lines humming. In Hamtramck, greater Detroit, an area stretching several blocks is filled with Ford F-150 pickup trucks sans some chips. General Motors said it is also storing unfinished vehicles while awaiting semiconductors.Meanwhile, behind the scenes, car suppliers are going to unusual lengths to try to secure chips. A Stellantis partner called JVIS-USA LLC tried to sue NXP in a Michigan court in April in a Hail Mary attempt to get more chips, but a judge rejected its request. Automotive supplier Visteon Corp. flagged that carmakers may seek compensation because of the shortages. In Japan, Toyota Motor Corp. President Akio Toyoda visited a Renesas plant that had suffered a fire to hasten its return to production.Yet no relief is in sight, with even Apple Inc., whose high-specification iPhones and aggressive demands typically place it at the front of the chip-customer line, saying last week it’s starting to feel the pinch. That may leave carmakers wanting even when chip manufacturers eventually manage to increase capacity.“This has the potential to be a longer-term issue,” said Anna-Marie Baisden, an automotive analyst at Fitch Solutions. “This will only be exacerbated as vehicles become technologically advanced and use more chips.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Indonesia is setting its sights on a sharp turnaround starting this quarter as it assembles more stimulus programs to lift stubbornly weak domestic demand.Gross domestic product declined 0.74% in the first quarter from a year ago, the statistics bureau said Wednesday, worse than the median estimate of -0.65% in a Bloomberg survey of economists. Still, it represented an improvement from the 2.19% contraction in the final quarter of 2020.Southeast Asia’s largest economy should return to growth this quarter as the government readies tax and sales measures to support the retail sector, Coordinating Minister for Economic Affairs Airlangga Hartarto said in a briefing. GDP is expected to expand 6.9%-7.8% in the second quarter period, a pace that would be its fastest since 2008, according to Bloomberg data.“The trend of economic recovery is toward positive growth,” Hartarto said. “The curve is V-shaped, as seen in many other countries.”“Until we return the consumer confidence that will revive demand, the risk will be on the downside,” said Enrico Tanuwidjaja, an economist at PT Bank UOB Indonesia in Jakarta. He added that he’d be downgrading his full-year outlook because of the first-quarter numbers.The country’s benchmark stock index pared the day’s gains to 0.2% after the GDP data were released. The rupiah was little changed at 14,435 to the dollar.“The virus resurgence at the start of the year is likely to have put a dent in consumption, even though there have been some signs of nascent recovery more recently,” said Wellian Wiranto, an economist at Oversea-Chinese Banking Corp in Singapore. “Bank Indonesia is most likely going to continue to keep its policy rate unchanged, focusing on pushing for more forthright transmission of its previous rounds of rate cuts by the banking system.”Main DriversThe government recently maintained its outlook for 4.5%-5.3% GDP growth for 2021, expecting consumption around Eid celebrations in April-May to boost growth in the second quarter. On Tuesday it cut its forecast for 2022, now expecting growth of 5.2%-5.8% next year, down from an earlier projection of 5.4%-6.0%.What Bloomberg Economics Says...“Indonesia’s recovery should continue to advance in 2Q in year-on-year terms, but more quarterly contractions this year can’t be ruled out given the higher infection rate of Covid-19 variants now circulating alongside relatively slow inoculations. We still expect a muted recovery this year, with growth coming in well short of the central bank’s 4.1-5.1% forecast range.”-- Tamara Mast Henderson, Asean economistSolid performance in trade and investment have been the main growth drivers early this year. Exports and imports bested estimates, while foreign direct investment climbed to a three-year high, mostly in provinces outside the main growth engine of Java.“The process of economic recovery will differ between provinces and sectors,” Suhariyanto, head of the country’s Statistics Office, said in announcing the GDP data. “Sectors that are highly dependent on public mobility, such as transportation and accommodation, will take longer to be able to pick up.”While factory activity and consumer confidence have shown a steady increase, core inflation and retail sales remain subdued as movement curbs limits household spending, which accounts for almost 60% of the economy.Other details from Wednesday’s release:The economy shrank 0.96% from the previous quarter on a non-seasonally adjusted basis, worse than the 0.85% drop forecast by economistsSectors that expanded the most in the first quarter, in year-on-year terms, include information and communications, +8.72%; water supply, +5.49%; health services, +3.64%; and agriculture, +2.95%Biggest decliners were transportation and warehousing, down 13.12%; accommodation, food and beverage, -7.26%; company services, -6.1%; and other services, -5.15%Private consumption fell 2.23%, while government spending rose 2.96% and gross fixed capital formation declined 0.23%Exports rose 6.74% from a year ago. Imports rose 5.27%Vaccine DriveAs many as 12.7 million Indonesians had been inoculated as of early May, though that’s still a small percentage of the country’s 270 million population. Private companies will begin inoculating workers once the government sets a selling price on vaccines.“The high frequency mobility data we track from Google suggest that government restrictions and social distancing remain a major drag on activity,” Gareth Leather, senior Asia economist at Capital Economics Ltd., wrote in a research note.By maintaining restrictions even as infections decline, “the government is making a clear trade-off to get ahead of the infection curve, because the cost of future lockdowns will be even worse for the economy,” UOB’s Tanuwidjaja said. “This is necessary to get a more sustainable recovery in coming quarters.”(Recasts lead and adds minister’s comments in third and fourth paragraphs.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- U.S. support for a proposal to waive intellectual-property protections for Covid-19 vaccines might be good news for the global inoculation campaign, but it’s an unwelcome turn for firms whose share prices have been buoyed by profits from coronavirus shots.Trade Representative Katherine Tai told Bloomberg News that the Biden administration will actively take part in negotiations for the text of a waiver of the rights at the World Trade Organization, and encourage other countries to back it. That sent stocks involved in vaccine production in Asia lower, even as many countries in the region are struggling with a resurgence in a virus.Shanghai Fosun Pharmaceutical Group Co., which has the rights to develop and market BioNTech SE’s mRNA shot in China, plunged as much as 26% in Hong Kong, the most ever. CanSino Biologics Inc., which makes one of China’s domestic vaccines, tanked 21%, the most in a year. Walvax Biotechnology Co. dropped as much as 16% and Chongqing Zhifei Biological Products Co. fell 14%, dragging the CSI 300 Index’s healthcare gauge more than 5% lower.In Japan, JCR Pharmaceuticals Co., a local partner for AstraZeneca Plc’s vaccine, slid as much as 2.2% even as positive news around inculcations in western economies helped boost the benchmark Topix index 1.9% higher.Vaccines have been a big business for the firms that make them, with Pfizer Inc., BioNTech’s partner outside of China, raising its forecast for 2021 vaccine sales to $26 billion just this week. Shares of Moderna Inc., BioNTech and Novavax Inc. earlier fell on the IP rights news.The U.S. move “probably isn’t great news for the vaccine manufacturers who will now face generic copies of their vaccine, but as the mutation of the virus has shown, continued research and innovation will be needed and that should provide those companies with future earnings from newer vaccines so I would expect the impact to be short-lived and possibly limited,” said Olivier d’Assier, head of APAC applied research at Qontigo GmbH. International Federation of Pharmaceutical Manufacturers & Associations condemned the move as “disappointing.” “A waiver is the simple but the wrong answer to what is a complex problem,” the group said in a statement. “Waiving patents of Covid-19 vaccines will not increase production nor provide practical solutions needed to battle this global health crisis.”Umer Raffat, a senior managing director at Evercore ISI who specializes in the pharmaceutical industry, urged caution on the news, noting U.S. support didn’t mean it was a “100% done deal” as other countries are also opposed. It “remains to be seen if US leadership’s position sways others,” Ruffat wrote in a note.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
The direction of the June Comex gold futures contract is likely to be determined by trader reaction to the pivot at $1777.10.
(Bloomberg) -- Actress Jessica Alba cemented her claim to one of the most lucrative side gigs in Hollywood after shares of her beauty business, the Honest Co., soared 44% in its market debut.The “clean” beauty- and baby-products maker’s stock closed at $23 Wednesday after it priced the shares at $16 in its initial public offering. Alba’s roughly 5% stake is valued at $98 million, according to the Bloomberg Billionaires Index. She also has exercisable options valued at about $24 million.Read more: Alba’s Honest Co. Set for Opening Bell After $413 Million IPO“I feel like I’m in a dream, to be honest. Wow. Is this really happening?” Alba said in an interview with Bloomberg TV. “I’m so grateful to our very loyal community. Thank you for bringing us into your home. Thank you for trusting us with you most precious people, your little people.”Alba, 40, founded the business in 2011, motivated by the dearth of baby products that were free of harsh chemicals. The carbon-neutral company makes diapers, wipes, shampoo and lotions it bills as “clean and natural,” and targets a customer base of parents who are eco-conscious, aspirational and relatively affluent. Honest Co. had revenue of about $301 million in 2020, a 28% jump from a year earlier, and an operating loss of $13.5 million.The Los Angeles-based company is now valued at almost $2.1 billion, or $2.45 billion when fully diluted to include employee stock options and restricted stock units. That’s significantly more than its $860 million implied valuation in a 2017 funding round, according to Pitchbook. Honest has been dogged in the past by product recalls and controversy over its claims to use only natural ingredients. Prior to those issues, it was valued at $1.7 billion in a 2015 funding round.Rare ExampleThe IPO marks an almost 260% return for L Catterton, the private equity firm backed by billionaire Bernard Arnault that invested $200 million in 2018. The company sold about half its stake in the offering.The actress is a rare example of someone successfully bridging a career between Hollywood and Wall Street. While many celebrities strike licensing deals for fashion lines or products such as perfume or vodka, few have gone on to found publicly traded companies.Alba, whose official title is chief creative officer, continues to work as an actor, most recently starring in the crime television series, “L.A.’s Finest.”“I was born into a hardworking Mexican-American family. My parents worked multiple jobs, doing whatever it took to get by,” Alba wrote in a letter included in the company’s prospectus, describing a childhood marked by poor health and hospital stays. “By the time I was ten, I became aware of how wellness can define your whole life. That’s never left me.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
The latest in NYDIG’s year of institutional partnerships has perhaps the broadest potential for financial inclusion in Bitcoin yet.
The new indexes, S&P Bitcoin Index, S&P Ethereum Index and S&P Crypto Mega Cap Index, will measure the performance of digital assets tied to them. The list will expand to include additional coins later this year, the division of financial data provider S&P Global said. "Traditional financial markets and digital assets are no longer mutually exclusive markets," said Peter Roffman, global head of innovation and strategy at S&P Dow Jones Indices.
Stocks fell Tuesday after a mixed session a day earlier, with technology stocks leading the way lower as investors awaited the next set of corporate earnings results.
Gold prices edged lower on Wednesday as the dollar crept higher. U.S. Treasury yields moved lower following a slightly softer than expected ADP private payroll report. Gold prices moved higher on Wednesday but remained rangebound.
(Bloomberg) -- Bond investors Down Under are starting to look at a very unlikely spot for yield -- Japan.While the Asian nation’s huge bond market is now best known for negative rates and low returns, by using cross-currency hedges, Australian investors are able to juice returns, allowing them to earn around 2.3% when buying 10-year Japanese government bonds.There has been “strong interest” from Australian investors wanting to buy hedged Japanese government bonds, Morgan Stanley analysts Belle Chang and Shoki Omori wrote in a note to clients.The flow goes against the recent trend of Japanese investors piling into Australian debt, attracted by low currency hedging costs and higher bond yields. Japanese investors were net buyers of Aussie debt for 11 straight months before offloading the bonds in February.The market for owning hedged Japanese bonds via asset swaps for Aussie investors, known in investor circles as JGB asset swap repacks, hasn’t been active for a few years but could make a return, wrote Martin Whetton, head of fixed income and FX strategy at Commonwealth Bank of Australia in Sydney.A liquid high-grade domestic bond in the 10-year bucket yields 30 to 40 basis points less than an asset-swapped Japanese bond, which is “compelling,” according to Whetton.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Europe was naive to outsource so much of its semiconductor design and manufacturing to other regions and needs to redress the balance, the European Union’s top industry official said.Industry Commissioner Thierry Breton said a global chip shortage that’s disrupting the car industry and supplies of electronic goods is proof that it’s time to act.“We want to come back to our former market share of production for the needs of our industry,” Breton said in an interview with Bloomberg News. Europe’s share of semiconductor manufacturing has dropped over the years because the region has been “too naive, too open,” he said.The European Commission, the EU’s executive body, laid out plans Wednesday to diversify supply chains and carry out regular sector reviews to tackle its lack of industrial independence in strategic areas including semiconductors.An analysis it published at the same time showed the region’s semiconductor supply chain is increasingly vulnerable to high barriers to entry in key industries, as well as trade tensions and a heavy reliance on Asian advanced chip manufacturing and U.S. chip design tools.The EU’s response should focus on clawing back design and production of semiconductors that power data processing, communication, infrastructure and artificial intelligence, the paper said.The commission plans to double chip production to at least 20% of world supply by 2030. Breton is trying to rally Europe’s leading chipmakers, research centers and more than a dozen EU governments behind the plans. At least 22 countries have already signed a letter of intent.The alliance will have to decide how to boost the design and production of 20-nanometer to 10-nanometer chips, which are smaller and more powerful than most that are currently manufactured in Europe, Breton said. Advances in manufacturing are measured in nanometers, or billionths of a meter, with smaller and smaller transistors crammed onto silicon wafers.In parallel, the EU will work on plans to produce the next generation of leading-edge chips by 2030. Officials are targeting production below 5-nanometers down to 2-nanometers, an ambitious goal not yet reached by industry leaders Taiwan Semiconductor Manufacturing Co. and South Korea’s Samsung Electronics Co.Uphill BattleProducing even 20nm chips will be a challenge for most European semiconductor companies, which have long outsourced production at that scale, said Jan-Peter Kleinhans, head of technology and geopolitics at think tank Stiftung Neue Verantwortung. He said the companies’ automotive and industrial customers may need to be willing to pay more for chips “made in the EU.”And not all European chip companies are keen to sign up to the EU’s plans. STMicroelectronics NV Chief Executive Officer Jean-Marc Chery told BFM TV on Tuesday his firm was unlikely to join the alliance.“If it’s about advanced technologies, we don’t have any reason to participate. That’s marginal to our activities,” said Chery.Europe once accounted for a big chunk of semiconductor manufacturing, but that’s collapsed from a global market share of around 44% in 1990 to closer to 10% today. Taiwan, South Korea and Japan account for about 60% of production, according to the Boston Consulting Group and the Semiconductor Industry Association. European chip designers including NXP Semiconductors NV and Infineon Technologies AG now outsource most production to TSMC and other foundry operators. The decline partly reflects the waning of Europe’s consumer technology sector, including the failure of Nokia Corp. and Ericsson AB’s once-popular mobile phones, according to Kleinhans.Now Europe’s auto industry has been hit hard by the global chip shortage. Ford Motor Co. said Monday it would halt output at German plants for several weeks due to a chip shortage, joining a growing list of manufacturers idling factories.While the EU’s semiconductor strategy is aimed at cutting reliance on foreign suppliers, its plan to go below 5 nanometers is so ambitious that the bloc will need help from those same players. Companies like TSMC have dedicated years of research and invested billions of dollars to develop their expertise.“We know that to go there, it will be better to do this with partners,” Breton said of the 2-nanometer goal. He said the strategy is like “going to the moon.”Intel Corp., the world’s largest chipmaker, has backed the EU’s plans. It’s already expanding 7nm production in Europe and is also considering building a state-of-the-art semiconductor foundry in the region. But the company has struggled to advance its manufacturing in recent years, and its CEO suggested last week the company would likely need hefty financial support from European governments to invest in the bloc’s strategy.An Intel spokesman pointed to companies in Asia that get roughly 40% of the costs of building a new factory subsidized by the state. A new factory costs at least $10 billion and it would need two of them in one location to take advantage of economies of scale, the spokesman said.(Updates with EU announcement from fourth paragraph, STMicro and analyst comments)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.