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What the semiconductor industry tells us about the world economy – The Economist

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THE SETTING for Robert Harris’s thriller, “Enigma”, is wartime Britain, where everything is rationed except for the rain. It follows Tom Jericho, a young prodigy stationed at Bletchley Park, the real-life centre of code-breaking operations, who is part of a team of cryptologists trying to break the code used by Germany’s armed forces. The work has frustration built in. Any progress can be undone if the enemy changes the code—which he will if he suspects that it has been cracked.

The novel comes to mind when considering the mysteries of shifts in the economic cycle and market reactions. The mood has clearly changed for the better since the middle of last year. Fears of recession have receded. Global equity prices have rallied. Bond yields have perked up. A truce in the trade war, however fragile, has helped. But the improvement in mood coincided with signs of life in Asia’s manufacturing hubs.

The key to these coded messages is the semiconductor industry. Cars, smartphones, gadgets and cloud-computing servers rely on components, notably memory chips, that are disproportionately made in emerging Asia. The mood-sensitive parts of aggregate demand—capital spending by firms and non-essential purchases by consumers—have microchips in there somewhere. The chip industry itself has savage mini-cycles. When it turns down, it is a sign of trouble ahead in the world economy. When it perks up, as it has done recently, there is reason to be more optimistic.

The cost structure of the chip business is central to this enigma. A semiconductor fabrication plant, or fab, costs billions of dollars to build. A sudden jump in orders, such as occurred in 2017, is met with increased capacity. But when demand falls, the fabs just keep producing. They are highly automated with few staff, so running costs are low. Continuous output makes sense but leads to occasional gluts and sagging prices, as happened through most of last year. Stocks become bloated. When demand picks up again, as it did late last year, stocks are drawn down and prices begin to stabilise.

Until quite recently the industry’s rhythms, and the tautness or slackness of Asia’s supply chains in general, were dictated by the two- or three-year life-cycle of smartphones. Export orders for Taiwanese electronics, for instance, tended to spike whenever a new Apple or Galaxy handset was launched. But the smartphone market is now saturated. Consumers find that an old model works almost as well as a newer one—and this might still be the case even when the new 5G generation of phones reaches the market. What drives growth in demand now is cloud computing, electrification of cars, wearable gadgetry and gaming, says Shawn Kim of Morgan Stanley. The cloud is a particular force. As firms ramp up capital spending of all kinds, that in turn spurs investment in cloud capacity, where business-related software lives.

What signals should market cryptologists be looking at? One measure is exports of semiconductors from South Korea, says Alicia Garcia-Herrero, chief economist for Asia at Natixis, an investment bank, who is based in Hong Kong. South Korea is pivotal to Asia’s supply chain, she says, and its shipments of semiconductors help predict exports in the region more generally. After a brutal 2019 the trend has bottomed out and is turning (see chart). Another signal is the financial health of big Asian chip companies, such as Samsung and SK Hynix. Those averse to digging deep into financial statements could simply monitor industry share prices. Or they could look for inflection points in the price of DRAM, a type of memory chip used to store data on servers and computers.

Technology’s share of global GDP will continue to grow. In principle, then, these signals will become even more closely watched. But other forces are at work. China has designs to be self-sufficient in electronic components, a goal made more urgent by the trade-tech wars. The short-term effect is to give a boost to Asia’s tech industry. But in the longer term, firms might find themselves displaced by Chinese rivals, at least in China’s own market.

To the extent that China succeeds, it will devalue the signals that arrive from the more open parts of emerging Asia. Market-watchers will come to feel the same frustration felt by Mr Harris’s fictional codebreakers at Bletchley. The codes keep changing. For now, though, the message from Asia is that the sun is peeking through the clouds—or, at least, that it has stopped raining.

This article appeared in the Finance and economics section of the print edition under the headline “What the semiconductor industry tells us about the world economy”

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Between the economy and coronavirus pandemic, Biden keeps his advantage nationally: POLL – ABC News

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Biden’s 54%-44% advantage over Trump in a two-way contest precisely matches the last national ABC/Post poll in mid-August. Biden’s support slips to 49% when the Libertarian and Green Party candidates are included, versus 43% for Trump.

The results underscore Trump’s precarious position as the first president in 81 years of modern polling never to achieve majority approval for his work in office. He’s at 44% approval among all Americans, ranging from 52% for handling the economy to 40% on the coronavirus outbreak. Fifty-eight percent disapprove of his performance on the pandemic, a key to Biden’s support.

At the same time, the presence of Libertarian candidate Jo Jorgensen and Green Party candidate Howie Hawkins could pose a challenge to Biden in close states. Biden’s 5-point decline when these candidates are included is a significant, albeit slight, shift.

See PDF for full results, charts and tables.

Biden continues to trail Trump, by 20 percentage points, in strong enthusiasm among their respective likely voters in this poll, produced for ABC by Langer Research Associates. Still, another measure finds broad antipathy toward Trump: Among those who don’t support him, 59% say his reelection would be a crisis for the country. Among those not backing Biden, fewer — but still 50% — say it’d be a crisis if he won.

It’s true, as well, that national preferences don’t always reflect Electoral College outcomes, as was the case in 2016 and 2000. Recent ABC/Post state-level polls found virtually even races in Florida and Arizona and a close contest in Wisconsin, although a wide Biden lead in Minnesota, which Trump has sought to contest.

Trump and Biden meet Tuesday in their first presidential campaign debate.

Change?

What’s likely to matter more is turnout, a question complicated this year by pandemic-related concerns. Just 46% of likely voters plan to cast their ballot in person on Election Day; 50% instead plan to vote early or absentee. Who goes through with it is highly consequential: Trump leads by 19 points, 58%-39%, among Election Day voters, while it’s Biden by more than a 2-1 margin, 67%-31%, among those who intend to vote before then.

Issues

The pandemic, of course, has disrupted far more than balloting plans. Sixty-two percent of adults worry that they or an immediate family member may catch the virus, which has claimed more than 200,000 American lives. Likely voters who express this concern favor Biden, 71%-27%.

The economy, even in a pandemic-prompted recession, works better for Trump. While just 40% of Americans say it’s in good shape, that’s up from 31% just last month. And Trump leads by 82%-17% among likely voters who rate the economy positively. Further, a quarter call the economy the top issue in their vote, and those economy-focused voters favor Trump by 80%-18%.

That said, in a head-to-head test, the two candidates run very closely in trust to handle the economy, 49%-46%, Trump-Biden. And other results on trust are revealing: While Trump has hit hard on the issue of crime and safety, it’s Biden who’s slightly ahead in trust to handle it, 50%-44%. Biden leads by eight points in trust to handle the next Supreme Court nomination (as reported Friday), 11 points on the pandemic, 16 points on health care and 20 points on equal treatment of racial groups.

Trust on crime is about the same in the suburbs, 50%-46%, Biden-Trump, as nationally overall. Suburban men trust Trump more on crime by 20 points, but suburban women — a group Trump has focused on — trust Biden more, by 61%-37%. That tilts to Biden because of the share of suburban women — about 1 in 3 — who are racial or ethnic minorities. (Among suburban white women, it’s 51%-46%, Biden-Trump.)

There’s one warning flare here for Biden: His lead on trust to handle the pandemic has shrunk from 20 points during the summertime surge in cases in mid-July, 54%-34%, to today’s 11-point margin, 51%-40%.

As noted, the economy leads as the most important issue, with no consensus on what comes next. Seventeen percent pick the pandemic as their top issue, and likely voters who say so support Biden by 84%-13%. About as many say it’s either health care or equal treatment of racial groups; again more than 8 in 10 in both of these groups back Biden. Twelve percent cite crime and safety as their main concern — and in this group, 84% support Trump. Lastly, 11% focus on the next Supreme Court nomination, with closer vote preferences, 54%-45%, Biden-Trump.

In another delineating result, the public by 54%-42% supports recent protests against police treatment of Black people. Eight in 10 supporters of these protests favor Biden; 77% of opponents are with Trump.

Across issues, these results illuminate the logic of the current campaign, as Trump touts economic recovery and raises crime concerns while Biden pushes on the pandemic response, health care and equal treatment, and both navigate the trickier Supreme Court issue.

Third party

The impact of third-party candidates may be tough to gauge, since the pandemic has constrained their campaigns just as it has Trump’s and Biden’s. This survey asked two-candidate preferences first, then re-asked the question with Jorgensen and Hawkins added. Biden, as noted goes from 54% to 49% with these two included; that decline is significant at the 90% confidence level, as opposed to the conventional standard, 95%.

Trump moving from 44% to 43% is not statistically significant. Four percent express support for Jorgensen, who’s on the ballot in all 50 states; 3% for Hawkins, who’s on the ballot in 28 states. (In 2016, the Libertarian won 3%, the Green candidate, 1%.)

Groups

Using two-candidate preferences, huge gaps are evident across population groups. Trump leads by 13 points among men; Biden, by a wide 31 points among women. Trump’s up 6 points against Biden among nongraduates, while Biden leads by 30 points among college grads. The race is close among likely voters age 50 and older, while those younger than 30 back Biden by nearly 2-1 (using registered voters for an adequate sample size).

Unpeeling some groups demonstrates the depth of the gender gap, in particular. While the race is a close 52-47%, Biden-Trump, in the suburbs, that’s 60-38%, Trump-Biden, among suburban men, compared with 66-34%, Biden-Trump, among suburban women. And it’s Trump up 8 among men who are political independents, versus a 77%-20% Biden-Trump blowout among independent women.

In another sharp difference, evangelical white Protestants, a core Republican group, support Trump by an expected 75%-25% — but non-evangelical white Protestants go 58%-41%, Biden-Trump. (White Protestants account for nearly 3 in 10 likely voters; 57% are evangelicals, the rest not.)

Notable, too, is that Trump and Biden are dead even, 49%-49%, in households that include a veteran or active-duty member of the military; these generally are thought to be a more pro-GOP group. Trump took criticism in the past month for reports that he had disparaged military service, which he denied.

Among other groupings, Biden leads by 54%-42% in the 13 states that currently are the most contested by the candidates (Arizona, Florida, Georgia, Iowa, Michigan, Minnesota, Nevada, New Hampshire, North Carolina, Ohio, Pennsylvania, Texas and Wisconsin). Moreover, it’s Biden by 20 points in the blue states won by Hillary Clinton, while dead even, 49%-49%, in the 2016 red states. Trump won those states four years ago by 53%-42%.

2016 comparisons

Comparisons to 2016, based on ABC News exit poll results, are telling. Among the most striking differences:

  • Clinton won political moderates by 12 points. Biden leads among them by 47 points, 72%-25%.
  • Clinton won independent women by four points. As noted, Biden leads among them by a remarkable 57 points.
  • Trump won whites by 20 points in 2016; he’s up six points among whites now. One reason: White women have switched from plus-9 points for Trump in 2016 to plus-15 points for Biden now, 57%-42%. That includes a vast shift among college-educated white women, from up 7 points for Clinton to up 41 points for Biden now.
  • Clinton won college-educated voters overall by 10 points; as noted, Biden now leads in this group by 30 points. In addition to college-educated white women, the change is sharp among people with postgraduate degrees, from up 21 points for Clinton four years ago to up 47 points for Biden now.
  • Non-evangelical white Protestants, as mentioned, support Biden by a 17-point margin; that compares to essentially an even split in 2016, 48%-45%, Trump-Clinton.
  • Trump, at the same time, has retained and even consolidated his core support groups. Overall, among 2020 likely voters who report having supported him in 2016, 91% support him now. He’s backed by 87% of conservatives, who account for a substantial 36% of all likely voters. And while Biden would be just the second Catholic president, white Catholics — an on-again, off-again swing voter group — side with Trump, 55%-44%.

    Methodology

    This ABC News/Washington Post poll was conducted by landline and cellular telephone Sept. 21 to 24, 2020, in English and Spanish, among a random national sample of 1,008 adults, including 889 registered voters and 739 likely voters. Results have a margin of sampling error of 3.5 points, including design effects, for the full sample and registered voters, and 4.0 points for likely voters. Partisan divisions are 31%-27%-37%, Democrats-Republicans-independents, among all respondents; 33%-29%-35% among registered voters; and 33%-32%-32% among likely voters.

    The survey was produced for ABC News by Langer Research Associates of New York, with sampling and data collection by Abt Associates of Rockville, Maryland. See details on the survey’s methodology here.

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    Asia Today: Morrison vows ‘titanic effort’ to lift economy – 570 News

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    CANBERRA, Australia — Prime Minister Scott Morrison says the Australian budget, to be delivered Oct. 6, will be a “titanic effort” to return the country to economic growth amid the coronavirus pandemic.

    Morrison told reporters Sunday that the budget will the “most unprecedented investment in Australia’s future.”

    Australia’s gross domestic product shrank 7% in the quarter form April to June, the largest contraction since record-keeping began in 1959. That followed a 0.3% decline in the first quarter, meaning Australia was technically in recession for the first time in 30 years.

    Australia was the only major economy not to go into recession during the 2008 global financial crisis, its strength supported by strong demand, especially from China, for its natural resources — coal, natural gas and iron ore.

    Even before the coronavirus, the economy was affected by massive bushfires in January that hit small businesses, which depend on tourism. Business shutdowns forced by the pandemic cost almost 1 million jobs and resulted in a major reduction in household spending despite Morrison’s government providing almost $200 billion Australian dollars ($140.5 billion) in economic stimulus.

    Morrison said the upcoming budget “will be a titanic effort that we’re involved in to ensure that this country can get back on the growth path that we want to be on. That means we’re going to have to do some very heavy lifting in this budget and that comes at a significant cost.”

    Treasurer Josh Frydenbeg, who will deliver the budget speech, on Thursday provided a downbeat economic outlook. Frydenberg said the economy likely will be 6% smaller by mid-2021 than forecast at the end of last year.

    He said the government’s focus will be on economic recovery rather than budget repair until unemployment is “comfortably” less than 6%.

    “Australia’s future population will be smaller and older than we previously assumed because of the sharp drop we are seeing in net overseas migration,” Frydenberg said. “While migration will eventually return to the levels we are accustomed to, lost migrants will not be replaced.”

    ___

    Follow AP’s pandemic coverage at http://apnews.com/VirusOutbreak and https://apnews.com/UnderstandingtheOutbreak

    The Associated Press

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    Asia Today: Morrison vows ‘titanic effort’ to lift economy – 660 News

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    CANBERRA, Australia — Prime Minister Scott Morrison says the Australian budget, to be delivered Oct. 6, will be a “titanic effort” to return the country to economic growth amid the coronavirus pandemic.

    Morrison told reporters Sunday that the budget will the “most unprecedented investment in Australia’s future.”

    Australia’s gross domestic product shrank 7% in the quarter form April to June, the largest contraction since record-keeping began in 1959. That followed a 0.3% decline in the first quarter, meaning Australia was technically in recession for the first time in 30 years.

    Australia was the only major economy not to go into recession during the 2008 global financial crisis, its strength supported by strong demand, especially from China, for its natural resources — coal, natural gas and iron ore.

    Even before the coronavirus, the economy was affected by massive bushfires in January that hit small businesses, which depend on tourism. Business shutdowns forced by the pandemic cost almost 1 million jobs and resulted in a major reduction in household spending despite Morrison’s government providing almost $200 billion Australian dollars ($140.5 billion) in economic stimulus.

    Morrison said the upcoming budget “will be a titanic effort that we’re involved in to ensure that this country can get back on the growth path that we want to be on. That means we’re going to have to do some very heavy lifting in this budget and that comes at a significant cost.”

    Treasurer Josh Frydenbeg, who will deliver the budget speech, on Thursday provided a downbeat economic outlook. Frydenberg said the economy likely will be 6% smaller by mid-2021 than forecast at the end of last year.

    He said the government’s focus will be on economic recovery rather than budget repair until unemployment is “comfortably” less than 6%.

    “Australia’s future population will be smaller and older than we previously assumed because of the sharp drop we are seeing in net overseas migration,” Frydenberg said. “While migration will eventually return to the levels we are accustomed to, lost migrants will not be replaced.”

    ___

    Follow AP’s pandemic coverage at http://apnews.com/VirusOutbreak and https://apnews.com/UnderstandingtheOutbreak

    The Associated Press

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