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Glenn Profile picture
Glenn
@GlennLuk
Co-founder @HealthCareInc | Previously @Catalyte_io | VC/PE @Investcorp Technology Partners — Tech | Economic Development | Investing | Greater China
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Jul 6 • 27 tweets • 7 min read
For millennia, the value of land was largely tied to its underlying agricultural productivity.

The clean energy transition is completely flipping this longstanding paradigm.

We can see this in the real-time energy economics of solar projects vs. farming (corn).

🧵 The world's largest solar was just switched on in Xinjiang:

▪️ 3,500 GW nameplate capacity
▪️ 6.1 TWh annual power generation (20% capacity factor)
▪️ Occupies 32,947 acres (~133 km2 i.e. slightly smaller than Liechtenstein; 38 km2/GW)

msn.com/en-us/money/co…
Jul 2 • 26 tweets • 5 min read
I see much debate on whether we can economically scale clean energy ➡️ green hydrogen ➡️ hydrocarbon conversion projects and then I see large integrated projects like this one in Inner Mongolia aiming to produce 350k tonnes of e-kerosene p.a. using wind.

rechargenews.com/energy-transit… Project economics:

▪️ Input: ¥10.7B ($1.48B) total project cost including 1 GW of wind power
▪️ Output: ~350k tonnes e-kerosene. @ $824/tonne this equates to $288M of annual revenue*
▪️ Revenue payback of ~5.1 years on investment cost

* Note: article mentions ¥4.2B ($583M) of revenue but may be based on higher kerosene price assumptions.
Jun 22 • 17 tweets • 6 min read
The EV sector industrial subsidy figures released last week by @CSIS are inflated by at least ~$80B, mainly from poor assumptions made to calculate the NEV Sales Tax Exemption that (i) don't pass the sanity check and (ii) are out-of-whack with disclosed actuals amounts.

🧵 https://www.csis.org/blogs/trustee-china-hand/chinese-ev-dilemma-subsidized-yet-striking As disclosed in the CSIS analysis, the Sales Tax Exemption assumption is based on a very simple premise:

To incent purchases of NEVs (new energy vehicles i.e. BEVs+PHEVs) over ICE vehicles, most NEVs are exempt from the sales tax exemption, which is assumed to be 10%. Image
Jun 17 • 18 tweets • 6 min read
In China, "Retail Sales" is a bit weird.

It's important to understand (i) what goes into it, (ii) nominal vs. real dynamics in those categories, and (iii) perhaps even most significantly, the categories that it omits.

It only captures a subset of broad-based consumption.Image As always, let's start with the source data. Here are the categories that make up "Retail Sales".

What stands out?

"Building & decoration materials", household appliances, furniture ... which are tied to the real estate economy. https://www.stats.gov.cn/sj/zxfb/202406/t20240617_1954709.html
Jun 3 • 6 tweets • 2 min read
21st Century Fordism, indeed.

Over the 16-year period since 2008, the number of years it takes for an average Chinese manufacturing worker to afford a basic plug-in EV has fallen from ~9 years to <1.

This is while the technical/performance specs have increased dramatically.Image This is quite comparable to increasing relative affordability of the Ford Model T over a 16-year period from 1909 to 1925 when the number of weeks it took for an average worker fell from 76 to 11.

Jun 1 • 4 tweets • 2 min read
Everyone knows about the scale of clean energy growth in China by now.

What was more surprising / meaningful about this chart to me was how the RoW is also growing faster than the G7. This should be concerning.

Forget about China. The rich world is lagging the *entire rest of the globe* in clean energy deployment.

The transition to clean energy is potentially as impactful as the shift to petroleum/combustion in the 20th century or the shift to coal/steam in the 18th and 19th.

If things don’t change, we may be witnessing the disruptive effects of technological change discussed in Clay Cristensen “Innovator’s Dilemma” but on a planetary scale in the 21st.
May 28 • 20 tweets • 8 min read
Yes, country-level trade surpluses are not caused by comparative advantage.

But @SteveRattner op-ed never even mentioned surpluses! The title/meme is a strawman.

Stepping farther out, this was a confusing piece that deserves clarification.

🧵

ft.com/content/8e24a1… 1⃣ Things we can probably agree on:

▪️ Comparative advantage is driven by production efficiencies (incl. natural endowments)
▪️ Comparative advantage is a relative concept and "nets out" at the country level (that's why it cannot cause trade surpluses or deficits)
▪️ Relative production/natural efficiencies in one segment enable comparative advantage for that segment
▪️ If there is no trade, any trade benefits are merely theoretical, obviously. Hence the need to be "expressed through exchange"

No disagreements on any of this; it's classical Ricardian theory.Image
May 26 • 12 tweets • 4 min read
Thinking about “stock” and “flow” of comparative advantage in STEM and applied sciences sectors.

These charts represent the “flow” of new STEM resources into the STEM labor pool “stock”.

Function of total number of college graduates and % STEM.

Image
Image Actual comparative advantage “flow” in STEM-related fields is a function of per capita.

When adjusted for population, China (2.5 per 1,000) and the U.S. (2.4) are actually quite evenly matched in per capita new STEM graduates.
May 23 • 27 tweets • 8 min read
Some are pointing to this article and saying, "hey even Chinese solar insiders think there is overcapacity!".

This is a misinterpretation. Let's dive into solar, its similarities with commodity chips, & "overcapacity" in growing vs. mature sectors.

bloomberg.com/news/articles/… 1⃣ Solar cells are similar to commodity chips

At a very high level, production of solar cells and chips is an exercise drawing patterns on silicon through a variety of steps. And then packaging it up.

A key difference ofc is that the patterns are physically many orders-of-magnitude larger in solar than chips.
May 18 • 34 tweets • 11 min read
I argue here that the irony of Trade Wars are Class Wars is that it is Beijing's proactive policy support of the lower class often at the expense of the mass affluent in the post-GFC era is what is causing global spillovers and financial markets and trade. 1⃣ Absolute income growth

Broad consensus that China's HH income and wage growth have outpaced every major economy in the post-GFC era.

Absolute HH income growth drives HH demand (expenditures and investments like housing) which drives quality of life and welfare improvements.Image
Image
May 16 • 19 tweets • 7 min read
Highlighting an example of this problematic framing: how China's structural disadvantages in natural endowments like land & oil are effectively weaponized in criticisms of its economic & trade policies.

This matters to developing nations that have similar disadvantages. One reason why China was historically poor was not being blessed with enough land compared to a huge population.

e.g. per capita arable land is ~6x higher in the U.S. than China 👇.

May 12 • 12 tweets • 3 min read
While I wait for the Harlem Costco to open (PSA: 10am on Sundays), a few thoughts on the increase in EV tariffs on China

ft.com/content/9b79b3… 1. Tariffs are a necessary but supremely insufficient condition to strengthen the domestic EV manufacturing and supply chain.
May 12 • 10 tweets • 3 min read
This will be a litmus test for my broken-record rants about how rising leverage (debt/GDP) was largely driven by the multi-decade shift to leverageable long-lived assets like housing + how the shift to shorter-lived assets and services will result in deleveraging. Debt in China is tied to accumulated capital stock.

Long-lived assets like housing and infrastructure can be highly leveraged.

Shorter-lived assets like factory equipment or often funded with equity, not debt.

I walk through the mechanics here 👇
May 11 • 24 tweets • 5 min read
David highlights an important acctg point that also has broader implications on LT auto industry development.

This has to do with three key aspects of the car business that are rapidly evolving in the ICE-to-EV transition: mfg, R&D and marketing/distribution.

🧵 1⃣ Manufacturing is everything that happens on the factory floor and is primarily captured in the cost of sales line for most automakers.

Manufacturing comprises both fixed and variable costs so determining per-unit profitabilty is a function of both.
May 10 • 23 tweets • 6 min read
I very much enjoy @scholars_stage deep analysis, particularly on the long historical cycles and relevance of the Chinese term 新一轮科技革命和产业变革 or "upcoming round of techno-scientific revolution and industrial transformation" and recommend reading this: I would like to augment this piece on the "plan to save China through science" from two perspectives:

1⃣ The framing of 新一轮科技革命和产业变革 in the context of a "weak economy"

2⃣ Highlighting the biggest component of 科技革命: the LT implications of abundant clean energy.
May 8 • 7 tweets • 3 min read
The global economy is continuing the long transition from finite to "non-finite" goods & services.

This post was written in 2018 and I think its arguments have only gotten stronger since.

readwriteinvest.com/p/what-will-ha… To start, we need to define "finite" vs. "non-finite"
Image
Image
Apr 30 • 33 tweets • 8 min read
What is the significance of the ~1 year delay of the Third Plenum?

More time needed to analyze the problem areas (e.g. LGFVs) and put together more substantive reforms?

More time needed to process rapid and substantial technological changes e.g. clean energy? Thoughts on ST and LT pressing economic issues from a year ago.

Since then, the economy has “gotten going” although still not back to pre-COVID track.

Shift in resources from property and “old” infrastructure to advanced industries and “new” infrastructure has been smooth.
Apr 27 • 25 tweets • 6 min read
Nice set of LT credit & other charts.

I interpret it somewhat differently by thinking about asset & resource rotation:

Replacement of low-RoI housing & “old” infrastructure assets w/ higher-RoI industrial & services + low-RoI clean energy infrastructure assets.

🧵 This rotation results in a tailwind to LT GDP growth although ST could be bumpy.

First, let me remind readers that last year OP highlighted the sectoral rotation from property and “old” infrastructure to industrial assets with this very important chart.
Apr 26 • 17 tweets • 4 min read
China’s domestic infrastructure boom was followed by a traditional infrastructure-focused Belt & Road with a 10-15 year delay.

China’s domestic advanced manufacturing and clean energy infrastructure boom is being followed up with “BRI Phase 2” on a shorter delay (5-10 years). This is a recurring theme I have been hammering on.

China and the developing world, especially ASEAN, are become increasingly economically linked.

Given the populations involved, this is arguably the most significant trade story of the next 20 years.
Apr 24 • 42 tweets • 11 min read
I had not expected the 🧵 on TSMC Phoenix to 🎆. I had started it as a playful observation of the 🇹🇼mindset, the cultural institution that is 99 Ranch, and focus on kids' education.

But clearly this is a topic that is top-of-mind for many out there.

I am going to follow up with a more organized explanation of key points + some follow-up reactions to other key points brought up by others, probably in a long form post.

But first I'd like to step back and examine how TSMC evolved from humble origins to its status today as perhaps the most geopolitically significant company on the planet. TSMC started in the mid-80s to tackle one of the most technically demanding industries and competing against dominant incumbents like Intel and TI that had billions in their warchests.

TSMC's first fab in Hsinchu 👇 https://anysilicon.com/history-and-milestones-of-tsmc/
Apr 23 • 23 tweets • 6 min read
"About half" of the ~2,200 employees at TSMC's Arizona plant are from Taiwan.

There are two things that matter to them and their families. Image The local 99 Ranch Market, located in Chandler which opened in May 2021. https://www.abc15.com/news/business/asian-grocer-99-ranch-market-to-anchor-renovated-chandler-shopping-center