Thursday 25/05/23

1. In TECH NEWS, Samsung faces its first ever strike, TikTok adapts, Meta begins its final round of layoffs, tablets get the upper hand and Embracer abosolutely tanks
2. In CAR-RELATED NEWS, the UK car industry calls for more slack on export rules, JLR is closer to choosing the UK for its battery factory and China takes risks to corner the lithium market
3. In RETAIL NEWS, M&S puts in a strong performance and Kingfisher suffers
4. In MISCELLANEOUS NEWS, inflation falls, house price growth steadies and London rents rise faster
5. AND FINALLY, I bring you a fake non-alcoholic Pimm’s and Cornish worm-charming…

So Samsung could face its first-ever strike, TikTok adapts, Meta is to announce more job losses, tablets overtake laptops and Embracer crumbles…

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:

Samsung faces threat of first-ever strike amid chip slump (Financial Times, Song Jung-a) shows that the electronics giant is getting dangerously close to experiencing its first ever strike as it is sticking to its guns by offering its workers a 4% pay rise versus its union wanting a 6% rise. This is coming at a tricky time for Samsung as it just unveiled a record $3.4bn loss in its semiconductor division in Q1. It has had to cut chip production because of the wider industry slowdown and the ongoing US-China issues. * SO WHAT? * This is an interesting story for a number of reasons. One of them is that this is part of a wider story of a general crackdown on trade unions by conservative president Yoon Suk Yeol, who is trying to blunt their power. Another reason is that this also throws light on what’s changing at Samsung as only 9% of its workers are unionised versus the 46% average at other big South Korean companies. Thirdly, this highlights the very difficult position that Samsung is being put in by the government after the latter effectively threw Samsung and Hynix under a bus by forcing them to make the decision as to whether they should make up the shortfall of chips that China will have after it decided to ban US company Micron Technology. You would have thought that Samsung is going to HAVE to supply the Chinese because it may have no alternative! The drama will continue to develop…

TikTok reshapes ecommerce unit in bid to crack western markets (Financial Times, Cristina Criddle) shows that the short-form video platform has restructured TikTok Shop, its ecommerce business, to optimise it for markets that already offer the service (rather than continuing to roll it out elsewhere). Staff around the world have been relocating accordingly and all eyes are now on how TikTok Shop does in the UK, where it was introduced in 2021 as its first

market outside Asia. * SO WHAT? * Parent company ByteDance is keen to make social commerce (where social networks are used to facilitate transactions between creators and customers) work outside the Asian market where it has been hugely successful. Unfortunately, it has not really caught on yet but I think that it is a wise decision not to expand right now given the uncertainty that would come from potential bans (particularly in the US).

Elsewhere, Facebook owner Meta begins final round of mass layoffs (The Guardian, Reuters) shows that Meta just initiated the final phase of its three-part round of layoffs yesterday as part of the plan it announced back in March to cut 10,000 roles while Personal computers: tablets should finally take over from notebooks (Financial Times, Lex) cites research by Canalys which shows that tablet sales are on the verge of overtaking PC sales, finally fulfilling the prophecy that they would do so when the iPad first came out back in 2010! The global PC market has been shrinking for years but this contraction has become particularly acute in Q1 where total shipments of desktops and notebooks fell by a third over the previous year in its fourth consecutive quarter of double-digit decreases. Lenovo – the world’s biggest PC maker – fell short of its forecasts yesterday and weak sales in China – the world’s biggest market – are just making things even worse. At the same time, tablet shipments have increased by 40%. * SO WHAT? * TBH, I don’t believe that the death of the laptop is nigh. It seems to me that PC and laptop sales got an abnormal boost when we went under lockdown because there was a sudden jump in the number of people who had to work from home. I would suggest (although it’s only my opinion!) that the replacement cycle for firms is anything between three and five years and so I would have thought that we could actually be approaching another uptick in the not-too-distant future. I still believe that laptops are generally more robust than tablets and that the overall screen size and power is generally still superior – so I expect that the gap will widen once more when people replace their lockdown laptops!

Then in Embracer’s shares plummet after $2bn partnership deal evaporates (Financial Times, Anna Gross) we see that the Swedish gaming group saw its share price bomb after it emerged that a $2bn partnership deal had fallen through. The company’s share price has more than halved over the last week when it announced a profit warning and delays in some licensing deals. On the plus side, it also announced a “transformative” deal with Amazon to make a game from its Lord of the Rings IP.

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!

The UK car industry appeals to government, JLR is closer to building its battery factory in the UK and China takes risks to corner the lithium market…

Resurgent motor industry calls on government to ease export rules (The Times, Robert Lea) shows that car production has gone up for the third consecutive month, according to the latest stats published by the Society of Motor Manufacturers and Traders (SMMT). This surge in exports has prompted the SMMT to appeal to the government to sort out post-Brexit rules that will slap 10% duty on vehicles being sent to mainland Europe. Under the current agreement, from next year 55% of a car built in Britain will have to be sourced locally for it to be exported to the EU. * SO WHAT? * It’s great to hear that motor manufacturing is rebounding from the horrendous last few years and you can understand why the SMMT is keen to bring the tax thing up with the government. Fun fact: 82% of cars produced in the UK went for export last month! Over 50% of UK exports go to the European Union!

It sounds like there’s even more good news in the pipeline in JLR owner to pick UK for electric car battery factory, say reports (The Guardian, PA Media) which shows that Tata, owner of JLR, is edging closer to building its proposed EV battery factory in Somerset! It’s not 100% confirmed yet but Tata is due to meet Rishi Sunak next week. * SO WHAT? * It sounds like things could potentially turn around quite dramatically for EVs in the UK if the stars align! From the embarrassment of Britishvolt’s failure and neverending criticism by car manufacturers of the negative impact

of Brexit, we now hear that Elon Musk is thinking of plonking a gigafactory in England and Tata looks like it’s actually GOING to build one here. Maybe the UK automotive industry could yet have a positive future instead of suffering death from a thousand cuts, which seemed to be the direction it had been heading in…

I thought I’d include China’s Risky Strategy to Control One-Third of the World’s Lithium Supply (Wall Street Journal, Sha Hua and Alexandra Wexler) because it’s an interesting article on how China is taking risks to gain a chokehold on the world’s lithium supplies in its bid to be at the forefront of EV manufacturing. China has dominated lithium refining for years but they are now looking to get even closer to the source by buying up stakes in mines in the developing world to ensure they insulate themselves against any potential western sanctions. * SO WHAT? * China only has 8% of the world’s lithium reserves and is now spending billions in countries that have unstable governments because the risk is deemed to be worth it to ensure that their supply chains remain intact. In the last two years, it has spent around $4.5bn in buying up stakes in almost 20 lithium mines, generally in Latin America and Africa, which include investments in countries such as Mali, Nigeria, Zimbabwe, Mexico and Chile. Interestingly, Chile, Bolivia and Argentina are currently talking about the potential formation of a lithium cartel – basically, a lithium version of OPEC. China is willing to take risks in places like Bolivia – which has form in revoking lithium agreements with foreign companies and has about 20% of the world’s lithium resources – because it needs to cast its net wide.

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!

M&S strengthens nicely but Kingfisher has issues…

In Marks and Spencer lifts sales as turnaround strategy bears fruit (Financial Times, Laura Onita) we see that the retailer posted an increase in annual sales and profits prompting the share price to jump by 12% in trading yesterday. The stock is up by a chunky 46% this year and is the best performing retailer in the FTSE250 and FTSE100! Food, clothing and home divisions all reported better-than-expected performances but M&S shareholders have reason to regret the Ocado tie-up (Financial Times, Jonathan Eley) points out that Ocado Retail (its JV with Ocado) is still loss-making and could further suck money out of the rest of the business. M&S’s endless self-checkout rollout carries big risks (Daily Telegraph, Ben Marlow) cautions that, in its quest to cut costs by doing things like putting in more self-checkouts, it risks alienating the customers that are currently powering the retailer’s resurgence. * SO WHAT? * I think it’s only right for the retailer to bask in its current glory as such moments have been relatively rare in the last few years! I really do think that M&S’s increasing open-mindedness to new initiatives and a broader product range including sales of third-party merchandise has really helped. Some of the articles say that M&S has been a disaster for the last 20 years – but I disagree. I know I’m showing my age here, but when I was a broker at Cazenove, M&S underwent a pretty dramatic transformation in the late 90’s/early 2000’s where it introduced new brands like Per Una

and Autograph which went down an absolute storm. Then there was that food p0rn campaign with the oozing chocolate fondant and the breathless Irish lady purring in chocolate-induced pleasure etc.etc. which did wonders for sales! It’s had its ups and downs but I do think that its recent embracing of modern ideas like hiring clothes, recycling etc. is doing wonders for its dowdy reputation. Even the Ocado thing was good at the time because M&S’s digital presence was rubbish. Although I think that it’s still trying to be all things to all people and needs to be a bit more targeted, it seems to be doing the right things! Keep going 👍

Meanwhile, Poor spring weather cast cloud over Kingfisher (The Times, Isabella Fish) shows that Britain’s biggest DIY retailer (Kingfisher owns B&Q and Screwfix) reported a bit of a mixed bag in terms of performance over the most recent quarter. Like-for-like sales fell overall and although Screwfix’s revenues rose, B&Q’s sales fell. The chief exec blamed “unusually poor” spring weather in the UK and France for seasonal sales (generally speaking, more DIY is done when the weather is better), but on the plus side there were strong sales of “big ticket” items despite cost-of-living pressures. * SO WHAT? * It sounds like things could have been worse, but we are heading into the summer now and it’ll be interesting to see whether things improve in the DIY stakes and if any new “hot” products emerge like the patio heaters and home swimming pools of the last few years!

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!

Inflation falls, house prices steady and London rents rise faster than the norm…

In a quick scoot around some of today’s other interesting stories, Gilt yields soar towards mini-Budget levels after inflation disappoints (Financial Times, Chris Giles and Mary McDougall) highlights major disappointment as official figures yesterday showed that inflation fell to 8.7% in April, down from 10.1% in March. This sounds good but it was a) more than the Bank of England was expecting (it expected 8.4%) and b) still a lot higher than inflation in Europe and the US. There are fears now that the interest rate will have to go even higher than expected – so maybe Goldman’s prediction of a 5% peak may actually pan out!

In UK real estate trends, House price growth holds firm as confidence returns to the market (The Times, Dominic Walsh) cites the latest house price index which shows that house price growth is slowing down, but it still more robust than had been expected at 4.1% on an annualised basis. Buyers are starting to enjoy more choice in the market and rising confidence is helping. It’s bad news for renters in London rent rises outpace record UK increase in April (Financial Times, Valentina Romei) as the ONS figures show that residential rents in the capital shot up at a record rate last month thanks to higher borrowing costs and a relative lack of properties. Tricky times…

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…

Is it Pimm’s o’clock yet?? For many people (including me!) it only properly feels like summer when you’ve had your first Pimm’s. I haven’t had one yet (although I’ve managed to do two BBQs so far!) and if you don’t fancy the alcohol content for whatever reason, Pimm’s fans suggest unusual ingredient gives drink its distinctive summer taste (The Mirror, Julia Banim) has a really useful alternative! I have heard of it before (vaguely), but have not tried it. It sounds like it must be good so I may well give it a go although I am a fan of the “real” stuff 😁.

Then if you fancy doing something a bit unusual over this upcoming long weekend, how about looking to this for inspiration: Brits flock to Cornwall to try and ‘charm’ worms with music and interpretive dances (The Mirror, Greg Martin and Milo Boyd). Will this work in your local park??