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Trinh

@Trinhnomics

Dec 31, 2021 • 25 tweets • 10 min read • Read on X

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https://twitter.com/SenWarren/status/1476327168833581056

Ok, this is my last thread of 2021 & I'll talk about something that is MOST valuable in global exports - semiconductor - or chips, that powers the modern world. This is also very topical as we use it in our daily lives & at the center of politics & geopolitics given its shortages

https://twitter.com/SenWarren/status/1476327168833581056

In case you are wondering why we should know more about this most valuable global export item (worth about USD1trn & more valuable than oil), then we must not forget that in order for me to tweet this, we need chips. If we use the body analogy, chips = brain & oil is like blood.

Let's start with definition:
a) Semiconductor or in UN classification is known as cathode values & tubes & USD949bn was traded in global exports
b) It's a manufactured good & an INTERMEDIATE
c) U don't see it in the final product but products like CARS & laptops & mobiles need it

So the most valuable item in global trade is something you DON'T SEE as it is an intermediate product. You only see the final products such as cars/laptops/etc.

Chips are one of the US top exports (airplanes, oil, chips). China is a net importer of chips. Has a deficit of chips.

Meaning, money flows from China (USD350b) to chip exporters (North Asian countries like Taiwan (TSMC), South Korea (Samsung) & the US (Intel, Global Foundry). Let's talk about chips & its supply chain & why this is the US China trade-war & key to our national security (CHIPS ACT)

Chips were invented in the US & the US has 47% market share, Korea has 20% and Japan 10%, Europe 10%, & Taiwan 7%. China 5%.Now u may ask, well, why is the US fretting over chips if it DOMINATES. Because wants to retain the lead & this 47% includes design & manufacturing is less.

Before you say, "I'm so proud to be an American" and bask in your glory (well, I am rather proud), let's look at the value added by activity or supply chain of chips. And this is where the Biden administration (Trump before it) & Senator Warren are having issues: MANUFACTURING.

Let's put it a different way: American semiconductor firms are doing the R&D intensive part of the supply chain & they have OFFSHORED most of the manufacturing to Asia in various places in various segments of the supply chain, from Taiwan to Malaysia & Vietnam. India wants in too

Note that the US still remains MOST OF THE VALUE CHAIN but increasingly LESS. Consumes 25% of global semiconductor while China 24%, so the same. Europe about 20%.

So where's the beef? The issue is that we DON'T manufacture most of it in the US so have little control over supply.

I won't go into the R&D part of the US supply chain & go straight into the heart of the matter & why I quote Senator Warren's tweet, which I think is simplistic but sets the tone of the hour.

The USA lead in R&D but LAG in manufacturing. Who leads? Taiwan! Specially, TSMC.

To understand this chart, you need to understand a bit about chips but let me, a non engineer explain what this means: Foundries are where chips are manufactured. Manu of chips are capital intensive & very high tech. Basically u want smaller & faster chips & TW dominate < 10nm.

This chart shows u by region (basically we only have a few firms here so this is where Senator Warren goes off about too much concentration but the consolidation is necessary as it's EXPENSIVE to build a foundry).

TW & SK lead or TSMC & Samsung.
US has Intel + Global Foundry.

TSMC is ahead and DOMINATES <10nm & the US lags in this point. If u read the March 2021 US National Security Commission on AI paper, then it's all about the LACK OF MANUFACTURING in ADVANCED CHIPS that's a huge liability.

TMSC manus 54% of global chips.
nscai.gov/wp-content/upl…

Btw, the former CEO of Google is a key author of this report that calls for more support of US manufacturing of chips because it is the support from other governments that has allowed them to thrive.

Anyway, key pts are: we are good at R&D & bad at manu

nscai.gov/wp-content/upl…

Okay, let me wrap this up on why it matters to you, first, u use semiconductor as it is an input into electronics (the brain). U want a faster brain that is not too heavy right to help u with ur whatever tasks. Anyway, below is where the usage of chips is as a share of total. So?

Well, u know the SUPPLY of chips demand on INVESTMENT & it's capital intensive (at least 10bn for a decent foundry) & takes about 2 years. Plus we got Covid-19 related disruptions like Southeast Asia shutting down in Q3 2021.

Demand is HIGH & even acutely higher because Covid!

Note that I'm saying the following: we got supply that is relatively INELASTIC in the short-term for chips because of capacity constraints & time lag in investment & the fact we depend on TSMC for <10nm size. Second, operations were hit (remember my ASEAN note?) 3rd, demand high

@intel

Ok, so what happens now? First, the US will try to retain its lead. The Biden Administration has the CHIPS Act that has 52bn passed by the Senate waiting for the House to pass that gives incentives. Btw, @intel is basically the last American manu at the size that can compete. So?

Given that there is so much emphasis on getting US manu up to speed, one an reckon that more support will be lobbied by American firms, and specifically 2 left that manufacture & specially Intel to get it to the competitive level or the US won't have any (if can't compete, exit).

The US isn't the only country. EU has a similar strategy but the US has more to lose & what the supply shock crisis shows that we have too much concentration risk to East Asia & in some sector Southeast Asia for manufacturing in general & that means more diversification needed.

Arizona has emerged as a place where Intel is adding additional foundry (basically connecting to its existing). But TSMC is not silly. It is smart. It knows where the game is headed & building there too. So is Samsung.

In fact, TSMC also looking into the EU given policy shift.

Note that American firms such as Intel have a global footprint. Specifically, it has investment in Vietnam and just added USD7bn to Malaysia.

India just passed 10bn bill to attract semiconductor (it wants in too on the supply chain). Diversification will include ASEAN + India.

Hope I got u excited about semiconductor & know a bit more about the product that U DON'T SEE BUT SHAPE YOUR LIFE, CPI, INTEREST RATES, DOMESTIC POLITICS, GEOPOLITICS & geeky & cool at the same time.

And yes, I think the US SHOULD support the sector, both R&D & manufacturing.🙏

I have more too add but my threads always end up so long & let me end it by giving you the sources I used for this rant:

*Book: amazon.com/Fabless-Transf…
*The BBC video on semiconductor: bbc.com/reel/embed/p09…
*Policy paper: semiconductors.org/wp-content/upl…
*nscai.gov/wp-content/upl…

HNY!

@Trinhnomics

Have a happy new year! This was my way of saying thank u for being with me on Twitter Land. No matter how good/bad life is, key in my opinion is to focus on learning & processing what we learned to understand more about our world & each other!

See u in 2022!

💃@Trinhnomics

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Trinh

@Trinhnomics

Aug 22

Eight months after Trump has been inaugurated and we of course have now the EU US deal. What do we know about Trumponomics?

I would say my read is the Miran paper is a blueprint for Trump actions so far on trade. Let's see what I mean by that. And this has consequences of how Trump sees India, which I think is not just escalation to gain leverage.

First, let's talk about an important ally, the EU. The details are out and I would say this is actually rather good for the EU in the context of out of control Trump tariffs.

Why? EU tariffs are NOT stacked. They are ceilings. As in, they get 15% max, including sectoral tariffs like auto (including car parts), pharma, semiconductor, lumber etc but not steel & alum, which they are still trying to negotiate. There are some additional exemptions for EU products such as aircraft, parts, generic pharmas & ingredients etc.

Meaning, to trade for this 15%, the EU is falling closer into the US orbit via investment and trade as well as defense, which it is working on being more self sufficient with increased spending but not just yet.

Anyway, what can you say about other allies? It means South Korea and Japan can and hopefully have similar terms.

Remember that reciprocal tariffs under IEEPA aren't the only ones. Section 232s are pretty scary and more stuff being added all the time without warnings.

An example is steel where a few days ago 400 more products were added to include steel derivatives.

So if you want to have access, this is basically what the costs are and so what does that tell you about others? Here I go back to the Miran paper.

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Trinh

@Trinhnomics

Aug 21

Russia import imports since 2022. If this calculation is correct, the arbitrage is USD2.5/barrel currently, then annual saving is USD1.5bn.

India trade balance with BRICS: It buys way more than it sells.

Some say more BRICS is the answer. But looking at trade as it is right now, what needs to happen?

India total exports to all the countries in BRICS is less than just to the US alone.

Read 7 tweets

Trinh

@Trinhnomics

Aug 1

Guys, let's do it. All things Trump tariffs. Here we go. First, let's talk about the basics. 10% is the floor as in everyone gets that. And these are the economies that get higher than that:
15% (EU, Japan, South Korea and 33 countries: Angola, Botswana, etc.)
18% (Nicaragua)
19% (Cambodia, Indonesia, Malaysia, Pakistan, Philippines, Thailand)
20% (Bangladesh, Sri Lanka, Taiwan, Vietnam)
25% (Brunei, India, Kazakhstan, Moldova, Tunisia)
30% (Algeria, Bosnia and Herzegovina, Libya, South Africa)
35% (Iraq, Serbia)
39% (Switzerland)
40% (Laos, Myanmar)
41% (Syria)

In Asia, it looks like this. Excluding China and Myanmar, Laos, India got the highest - 25% and maybe more.

China is waiting for talks on extension. Right now, it's 10% reciprocal + 20% fentanyl during extension + 25% during Trump 1.0

Southeast Asia gets 20% to 19% except Laos & Myanmar at 40%, Brunei is 25% but energy is exempt so...

India original was 26% so 25% seems bad but frankly not too far from the Southeast Asians. That being said, India was aiming closer to 15% as Vietnam got dropped from 46% to 20%.

Anyway, let's talk about details of the White House info.

It goes into effect 7th August. But if you got stuff in ports/front-loading and not yet consumed till 1 October, there are varied rates for them.

Long story short, there is still time to negotiate this down before it goes into effect basically.

Read 13 tweets

Trinh

@Trinhnomics

Jul 30

Trump tariff strikes India at 25% plus Russian oil import punishment. Is it a surprise? Not exactly. I have been thinking for a week what a US India deal look like. And to be honest, I think I saw this coming. I think India can negotiate down from this threat btw. It's not final. But how much lower and what are the costs?

Why is it not a surprise that India is not getting the deal that it is working hard on?

First, let's look at the EU and Japan - they got smacked with 15% tariff & got reprieve for auto (and other sectors) but auto is key at 15%.

So 15% is the best India can get. And it won't get it. Why? Well, it has to offer a lot to Trump to get that and it won't.

Remember that this is just a threat (similar to what Trump did with Japan before they settled on a lower number) and the threat I suppose can be real or not. Irrespective, he cares about it enough to post about it.

Trump has a few agendas that he wants India or Modi's help with.

Ending that Ukraine War is one. And India is not interested in that. It's an emerging country that buys where it can cheapest.

Russian oil is cheapest & so it buys from Russia & Trump wants to starve Russia of oil revenue. India doesn't want to not buy the cheapest oil possible. Besides, Russia is neither a foe nor a friend.

Maybe the West's foe but not India. So on this point, very hard. What are the costs to India? Well, it will have to pay more for its oil if it doesn't buy the cheapest oil.

Trump is adding to that costs - tariff.

Read 6 tweets

Trinh

@Trinhnomics

Jul 28

India imported 15,000 cars a year. Why? It has 110% tariff on autos. Now, trade negotiations are not going well and it's approaching the WTO on Trump's 25% auto tariff.

But the reason is simple. India exports more than it imports autos. Why? It has pretty high tariff on auto.

What would an India trade deal look like then? Is there going to be one?

What's interesting is that the UK and India signed a trade deal that is supposedly a huge game changer.

Let's take a look at it.

Under the agreement, tariffs on imports of internal combustion engine (ICE) cars will be slashed to 30-50% in the first year of implementation, but with the benefit limited to a quota of 20,000 cars.

The tariffs will be reduced gradually, and after 15 years, they will become 10 per cent, with the quota set at 15,000 units. For out-of-quota imports of ICE cars, the duties are reduced to 60-95 per cent in the first year, and further to 45-50 per cent from the tenth year onwards.

So on the surface, it looks like a big deal but the quotas are so tiny that it makes one wonder.

Of course, relative to annual import, quotas are HUGE as it is MORE than annual import.

But why do people care so much about US 25% auto tariff but don't care so much about India's 110% auto tariff?

Well, because the US imports 8m cars EVERY YEAR.

Look at the big deal that is the UK and India trade deal liberalization. There is a limit in quota.

The quota that the US sets for the UK is 100,000. So in other words, the US remains a big deal and one that needs to be negotiated with.

Read 4 tweets

Trinh

@Trinhnomics

Jul 16

Reading this article with great amusement with tons of comments that are so emotional & not backed by why. And they all seem so surprised on outcome. I have been saying this all along - the pass-through of tariffs are not as you think it will be. Why? Because you need to understand how they work & who has the negotiating power.

First, this statement here: "China’s retaliatory tariffs on American imports, the most sustained and significant of any country, have not had the same effect, with overall income from custom duties only 1.9 per cent higher in May 2025 than the year before."

ft.com/content/82e32f…

I mean, it seems to admire China's retaliation, as in it, that is the great thing to do.

Why didn't China collect more import duties even though it retaliated?

Well, because China is not GROWING its imports. It's exporting its deflation.

So its retaliation doesn't have as much "meat" so to speak. They need to sell more than they need to buy.

"But despite US tariffs hitting levels not seen since the 1930s, the timidity of the global response to Trump has forestalled a retaliatory spiral of the kind that decimated global trade between the first and second world wars."

They are so upset at the world for not retaliating. You can sense that in the usage. But remember, the US is a lot of countries' number 1 export market.

So you are not going to PISS off your #1 customer. It's just that simple. Why? Because a lot of countries just don't want to be powering their GROWTH via GROWING IMPORTS.

So what? Well, you then be captive to your "customer". You can always sell somewhere else.

Remember that India got like TONS OF TARIFFS. No one says much. They just say, well, they just tariff Indians & make it expensive for them to buy. Do they retaliate with the same tariff? No. They can, but why would you match someone's policies.

These are Trump's policies on US IMPORTS. You can also TAX your own imports. Btw, MANY COUNTRIES DO.

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