SEMI’s 2020 ITPC, which was held virtually instead of its usual Hawaiian location, offered such robust panel discussions, that it seemed a high-level summary alone couldn’t do it justice. So we decided to also provide a deeper look at each panel, beginning with the ITPC Geopolitical/Economic panel discussion.
- Hamid Zarringhalam, Corporate Vice President Nikon
- Marco Chisari Managing Director Global Head of Semiconductor Investment Banking Bank of America Merrill-Lynch
- Matt Gertken Strategist BCA Research
- Carolyn L. Evans Chief Economist Intel
Early on in the proceedings, it was mentioned that politics were to be kept out of the discussion, which Matt Gertken of BCA promptly ignored in the ITPC Geopolitical/Economic Panel Discussion. It’s difficult to have a discussion about an industry that has manufacturing and development in nearly every region of the world and leave the geopolitical discussion out of the equation.
Fortunately, Gertken was bipartisan and pointed out that the United States and China have been on a collision course for over 10 years. The situation in part is a result of the United States having somewhat isolationist tendencies. As a result, the US government has a tendency to arrive and react late to international strategic situations. Gertken pointed out that due to Russia and China starting to improve relationships, that the US needs to repair relationships with Europe so that the United States will not stand alone in the Geopolitical issues that will continue to emerge as China continues to emerge as a world leader.
From the economic perspective, Carolyn Evans of Intel pointed out, what will shape the economic recovery from the pandemic is the pandemic. At the moment Evans was predicting a W-shaped recovery, in part due to the potential for the spiking of the pandemic. Evans also stated that Governments will need to be patient with the recovery, the world is in a deep hole and it will take time to climb out. Evans pointed out that the pandemic had accelerated the digital transformation that had been taking place, technology had also facilitated the ability of the world to maintain some sense of normalcy during the pandemic. Evans also pointed out that the pandemic had made the digital divide wider, and that those that had the ability to work from home or learn from home were in a better economic situation than those who were not. In the Q&A session, Evans commented that there were several worldwide projects that are looking to close the digital divide, Evans thought the private sector needed to play a bigger role and that we needed to think about this from a worldwide perspective.
Marco Chisari of Bank of America closed out the first session. From a financial perspective technology companies are in very good shape as stock valuations are high, and many have sought out investment-grade financing while interest rates are low. The easy access to money and high stock prices is driving M&A. Because of the geopolitical situation, China plays a key role in the approval process. Chisari stated that China will need to be very strategic in this role; Otherwise, China could find itself in an isolationist role in the future.
In the Q&A session it was pointed out that while at the moment China is working to develop an independent supply chain for the semiconductor and electronics industry if somehow, they happened to annex Taiwan the situation would change immediately.
ITPC Geopolitical/Economic Panel Summary
In Summary, China and the United States continue to be on a collision course in trade due to the United States Isolationist policies. These trends are unlikely to change with the next administration. The US needs to repair relationships with Europe so they don’t face a rising China Russia trade partnership alone. Some of these trade decisions will be driven by the economic outlook which is still driven by the pandemic and at the moment predicted to have a W-shaped recovery. During the pandemic technology facilitated the ability of most to maintain some sort of normalcy, with the ability to video conference. Unfortunately, the pandemic also accelerated the width of the digital divide. Those able to work and learn from home are in a better economic situation than those who can not. The success of technology during the pandemic drove stock valuations to high levels and enable companies to have access to cheap money. The valuations and easy money has driven M&A activity to extremely active levels. China finds itself in a unique role in the approval process. China will need to be very strategic in this role; Otherwise, they could find themselves in an isolationist role themselves.