Friday 19/05/23

1. In TECH & TELCOS NEWS, we look at chipmaking in Japan, the plan for semiconductors in the UK, TikTokers taking Montana to court, Apple restricting employee use of ChatGPT and BT’s job-cutting plans
2. In CONSUMER, RETAIL & LEISURE NEWS, consumer sentiment continues to improve, Walmart sees stronger sales, Asda plans headcount reduction, Burberry does well despite the VAT problem and EasyJet takes off
3. In CAR-RELATED NEWS, Geely takes a bigger slice of Aston Martin, Tata gets closer to building a UK gigafactory but we look at why this isn’t necessarily a good thing
4. In INDIVIDUAL COMPANY NEWS, Eskom chief warns of blackouts, Revolut looks unlikely to get a banking licence and Royal Mail is in a pickle
5. AND FINALLY, I show you how drummers knock on doors…

So Japan and the UK up their respective chip games, TikTokers sue Montana, Apple restricts the use of ChatGPT and BT is about to wield the axe…

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

Global chipmakers to expand in Japan as tech decoupling accelerates (Financial Times, Leo Lewis and Kana Inagaki) shows that heads of seven of the world’s biggest semiconductor manufacturers (including TSMC, Samsung Electronics, Intel and Micron) met in Tokyo yesterday and outlined plans to increase manufacturing and deepen tech partnerships in Japan in a concerted effort to pivot away from reliance on China. * SO WHAT? * This sounds like a very good deal for Japan and is further evidence of the repercussions of the ongoing US-China tensions and resultant re-jigging of supply chains.

Staying with semiconductors, PM unveils semiconductor plan to counter China’s threat to Taiwan (Daily Telegraph, Gareth Corfield) shows that the PM will today unveil a £1bn semiconductor strategy at the G7 summit in Tokyo. The government will pour £100m per year for the next ten years into the British semiconductor industry and create a national institute for semiconductors and a new incubator for British start-ups. This sounds great and all, but TBH where chips are concerned I don’t think that £1bn over 10 years is all that much. Still, the proof of it all will be in the execution…

Elsewhere, TikTok Creators Sue Montana Over State’s Ban of Short-Video Platform (Wall Street Journal, Meghan Bobrowsky) highlights the immediate backlash against Montana’s decision to ban TikTok as a group of creators is suing Montana’s state attorney, saying that the ban is unconstitutional and voilates the First Amendment among other things. This was the obvious move, but we’ll have to wait and see how things develop…

Apple Restricts Employee Use of ChatGPT, Joining Other Companies Wary of Leaks (Wall Street Journal, Aaron Tilley and Miles Kruppa) shows that the tech giant has decided to restrict the use of ChatGPT and other external AI tools for some employees while it develops its own. They are worried that use of ChatGPT could expose confidential data because when people use ChatGPT, they unconsciously send data back to the developer. * SO WHAT? * I think that we are going to see this kind of action more frequently as users realise that what they put into tools like ChatGPT will be used by the developers. It may occur so frequently, in fact, that OpenAI may have to change its model to assuage concerns like this otherwise its development is likely to lose momentum.

Closer to home, BT hails AI opportunity as it unveils plan to cut up to 42% of workforce (Financial Times, Anna Gross) shows that BT announced plans to make huge cuts to its workforce over the next ten years (which will no doubt do absolute wonders for the morale of its staff!) in its most dramatic cost-cutting plan since it was privatised in the 1980s. In his glee at unveiling this “leaner…brighter future”, he extolled the opportunities that AI would bring whilst being light on specifics. This drama came at the same time as the company announced what was a mixed bag of results. BT/UK broadband: job cuts will arrive only in the best of possible worlds (Financial Times, Lex) points out that the cuts aren’t as dramatic as they sound because this was always going to happen when it completed its rollout of fibre, particularly as many of them are contractors. BT also faces a tricky future because of fewer future projects, lower maintenance requirements for fibre networks and growing competition from providers building their own fibre, including companies like Hyperoptic, CityFibre and toob.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Consumer sentiment improves, Walmart does well, Asda aims for a headcount reduction, Burberry puts in a strong performance and EasyJet takes off…

Consumer sentiment still on the rise (The Times, Mehreen Khan) cites the results of the latest GfK survey which show that consumer confidence in the UK is continuing to rise as households seem to be taking heart from a stronger-than-expected economy (remember, everyone was talking about recession last year). The survey’s gauge of consumer sentiment rose for the fourth consecutive month!

In terms of retailers, Bargain Hunters Turn to Walmart, Boosting Sales (Wall Street Journal, Sarah Nassauer) America’s biggest retailer unveiled rising sales in the most recent quarter as it benefits from shoppers seeking out lower prices. These results made the company confident enough to raise its outlook on sales and profits for the full year. Walmart: come for the everyday low prices, stay for the side hustles (Financial Times, Lex) said that Walmart has benefited from its exposure to groceries (this segment generated almost 57% of total US revenues last year) which are the least susceptible product to being cut out of tightened budgets. The company tends to do well when people are feeling strapped for cash but it is possible that Walmart could still benefit when economies recover as it has also managed to diversify away from low-margin groceries and into building an online marketplace and selling digital advertising.  * SO WHAT? * Clearly Walmart is doing well with groceries at the moment but its side hustles – especially its advertising business – mean that the party needn’t end when the economy starts to climb out of its current rut…

Meanwhile, Asda plans 5% pay cut for about 7,000 workers just outside London (The Guardian, Sarah Butler) shows that Asda is making plans to cut costs because the cost of financing its debt has shot up dramatically as interest rates have risen since the Issa brothers and TDR Capital bought it in 2020. It has already cut premiums for delivery drivers, closed pharmacies and changed night shifts – and now it’s going to cut a supplement that has been paid to workers based close to – but outside – the M25.

At the other end of the scale, Revitalised Burberry bemoans UK tax own goal (The Times, Isabella Fish) shows that the luxury goods brand announced a decent rise in sales for the quarter thanks to a rebound in China after Covid restrictions were eased. It kept its mid-term revenue targets unchanged, citing an uncertain economic landscape – but it also used the opportunity to slag off the removal of VAT refunds in 2020 which it blamed for turning tourists away. * SO WHAT? * The brand has had a refresh with a new creative director, new logo and release of a new version of its trench coat as it tries to regain its Britishness. Things seem to be going well so far…

Then in EasyJet losses narrow as holiday bookings take off for the summer (The Times, Dominic Walsh) we see that EasyJet managed to cut losses and boost guidance for the full year as bookings were trending back to normal levels. Its holiday business, which has thus far only operated out of the UK, will commence operations from new markets – starting with Switzerland next year! In terms of trends, all-inclusive holidays were proving to be particularly popular because they have an element of certainty in terms of cost, plus the fact that they are perceived to provide good value. * SO WHAT? * This is great news from EasyJet – and it just confirms trends we’ve been seeing recently from airlines, hotels and travel operators that consumers are still spending on holidays despite the cost-of-living crisis!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Geely buys more Aston, Tata edges closer to a decision and there are reasons not to have a gigafactory…

Chinese carmaker pumps more than £200m into Aston Martin (Daily Telegraph, Howard Mustoe) shows that China’s Geely has almost doubled its existing stake in the luxury carmaker to 17%, making it the company’s third biggest shareholder behind exec chairman Lance Stroll and Saudi Arabia’s Public Investment Fund. Geely will get a seat on the board but will not be able to increase its stake above 22% until August 2024. * SO WHAT? * Geely’s tried to buy Aston Martin in the past, so maybe it is now playing a waiting game but China buys Aston Martin time – but not a future (Daily Telegraph, Ben Marlow) says that although Geely has form in rehabilitating European marques (like Volvo, which has flourished under it) it doesn’t really address Aston Martin’s deeper financial problems that have led it to go bust so many times in the past or do anything to help its move towards electrification. Geely may well become the full owner in the not-too-distant future if Stroll can’t cope with the stress of taming this ferocious burner of cash!

In battery related chat, Tata closer to UK gigafactory decision (Daily Telegraph, Howard Mustoe) shows that the owner of Jaguar Land Rover is edging closer towards choosing Britain as its site for a proposed new gigafactory. Both Britain and Spain are in the mix to secure the site at the moment and there is speculation that Chancellor Jeremy Hunt’s offer of £500m in subsidies may have just swung it for us. However, Britain should be wary of joining Europe’s gigafactory stampede (Daily Telegraph, Ambrose Evans-Pritchard) is a really interesting article which says that although it’d be nice to have a gigafactory in some ways, not getting it might not be soooooo bad because there’s a risk that other alternative technologies may render such factories obsolete in the not-too-distant future. Solid state, sodium-ion and lithium-sulphur technology could yet prove to be game-changers – so we mustn’t forget these higher value new alternatives!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Eskom warns, Revolut faces rejection and Royal Mail makes excuses…

In a quick scoot around some of today’s other interesting stories, Eskom chief warns South Africans to prepare for worst-ever blackouts (Financial Times, Joseph Cotterill) shows that the Eskom nightmare continues as the acting chief exec said that rolling blackouts could hit the country badly in the colder winter months unless it can stop its aging power plants from breaking down. South Africans are now getting accustomed to power cuts lasting up to 12 hours in every 32 hours, but could be facing power cuts of up to 16 hours this winter! Jason Tuvey, of Capital Economics, reckons that “the amount of electricity distributed is at its lowest level since 2002” – and the economy was a third smaller back then! Eskom has been, and continues to be, a disaster. This just can’t be good for South Africa’s economy or the prospects for inward investment.

Meanwhile, Bank plans to reject Revolut licence bid (Daily Telegraph, James Titcomb and Simon Foy) shows that the Bank of England has told the Treasury that it is likely to reject Revolut’s banking licence application after a two year campaign by the fintech. The application looks likely to fail due to concerns over its balance sheet after it got a qualified audit opinion in its most recent (delayed) accounts. The situation is ongoing but it’s not looking good for Revolut…

Then in Royal Mail owner swings to £1bn loss as demand falls and wage costs rise (Financial Times, Oliver Telling) we see that Royal Mail announced a massive £1bn loss and does not expect to see a profit until 2025 as it is being held back by massive redundancy payments and difficulties in modernising its offering. The drama continues…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

Yesterday, I brought you a video showing how Hollywood actors run. Today, I thought I’d bring you a video on how drummers knock on doors! My favourite (and default) knock would be Wipeout for sure (although it looks a bit exhausting) 👍