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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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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
Apr 13 • 10 tweets • 3 min read
Toyota is betting its EV strategy on solid-state battery technology.

This is a repeat of its failed bet on fuel cells a decade ago.

And with the scale of the rise of EVs, this may be a company-breaking problem this time around.

electrek.co/2024/01/11/toy… The problem is not that solid-state battery technology itself is unlikely to win over traditional liquid pouch designs.

I don’t know enough about the technical details to comment on the below from CATL, which seems negative on it (but could certainly be biased).
Apr 10 • 15 tweets • 6 min read
Vietnam "has decided to prioritize the construction of two high-speed railroad lines in the north before 2030, including one connecting with China"

e.vnexpress.net/news/news/traf…
Connecting ASEAN's 3rd-largest (by population after Indonesia and the Philippines) and fastest-growing economy is a key part of an envisioned rail network in Southeast Asia that connects it to the southwestern region of China.

Apr 9 • 16 tweets • 4 min read
In the ICE era, there were ~28 car-producing countries that produced the vast majority of cars.

In the EV era b/c cars are less complex in some ways, more will/should produce their own cars.

This shifts leverage in value chain to key component, software + tools cos.
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Image EVs have between 5 to 10x fewer parts than ICE vehicle. Even the parts themselves have fewer parts e.g. combustion engine vs. electric motor.

This makes them easier to assemble.

Instead, software is used to integrate more of the components in an EV.
https://www.bcg.com/publications/2020/transformative-impact-of-electric-vehicles-on-auto-manufacturing
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Apr 8 • 26 tweets • 6 min read
That so many people buy into this reflects:

(i) how we as a country are now so far removed from manufacturing that we understand so little of it (as demonstrated here and many similar replies), and

(ii) the difference between ideas and execution. As an early EV pioneer, Tesla had an interesting idea which was to “diecast” a much larger metal chassis instead of welding together multiple pieces as had been traditionally done.

This is related in part to the re-design of the chassis around a large battery pack.

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Apr 6 • 25 tweets • 6 min read
This is a proxy for expansion in *advanced manufacturing facilities.

The median new factory being installed in China is a “Gigafactory”.

This was also two years ago. China’s lead has only expanded since as it has been shifting resources away from property investment. Nice profile on Shenzhen Innovance which is a rising leader in the automation space.

It was founded by former Huawei engineers.

This is what I mean when I say Huawei is the Gizmo of Chinese tech, spawning “little Huawei” spinoffs all the time.
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Apr 2 • 15 tweets • 5 min read
A few years ago, I wrote about the story of Qualcomm, Huawei and the "Race to 5G"

I discussed the history, technology and geopolitics of wireless in five Acts leading up to the arrest of Meng Wanzhou in December 2018.

readwriteinvest.com/p/how-will-the… Act I opens up w/ a scene of a fictional Gordon Gekko talking on a cellular "brick" in the closing scenes of Wall Street.

The "new world of hitherto unimaginable wealth that [Bud Fox] was about to enter" was a nice metaphor for mobile telecommunications.

readwriteinvest.com/i/20386833/act…
Mar 31 • 25 tweets • 5 min read
There are weaknesses in the Chinese system and it is useful to think about how these weaknesses manifest.

e.g. the property problem was not one of overinvestment in the aggregate, but one of distribution resulting in oversupply in some places & undersupply in others The cookie-cutter nature of the land finance mechanism coupled with a wide distribution of physical geography/topography, bureaucratic talent, resources and funding support are the main reasons for this phenomenon.
Mar 30 • 15 tweets • 6 min read
The key premise of the passage is actually that “overcapacity” is viewed as generally positive:

(i) learning spillovers

(ii) developing country adoption curves are predictable; new capacity will eventually be absorbed

(iii) spurs competition which drive production efficiencies


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Image And if you step outside this translated passage and read the rest of the book which I am currently deep into👇 (and highly recommend)

… it discusses how policymakers are well aware of potentially misaligned local-level incentives …
Mar 23 • 6 tweets • 2 min read
This is a strawman as 🇨🇳 are also aggressive at investing in local mfg + generating related mfg jobs.

Far more aggressive than 🇺🇸 & EU cos. at investing in local mfg. in developing countries.

Their main competition on outbound FDI is 🇯🇵🇰🇷🇹🇼 . Just look at EVs.

Chinese companies are setting up local manufacturing in SE Asia, Latin America and India.

The only developing country Tesla & German automakers have invested in EV is China.

Japan is all over SE Asia but MIA on EVs.

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Mar 23 • 31 tweets • 6 min read
Conventional wisdom is that Belt & Road (BRI) was about exporting Chinese “over-capacity”.

I do not disagree conceptually, but examining this from the human capital angle may help us better understand its more nuanced policy motivations.

Also what Phase II will look like. China began its infrastructure push decades before the GFC (when the world really started to take notice).

Infrastructure depends on civil engineering human capital: skills & knowledge related to construction of rail, highways, bridges, dams, power plants etc.
Mar 17 • 14 tweets • 3 min read
The more I mull this over, the less likely that even a forced/partial sale of TikTok US is on the cards or even possible.

For a number of reasons. 1️⃣ The bill is not specific on what a “ban” means in practice. Is it a ban on App Store / Google Play? Is it an IP ban? Is it a ban on onshore operations?

Without specifics, it is hard for the company to react. Maybe they can live any or all of these.
Mar 14 • 20 tweets • 5 min read
Continuing this discussion on "Pareto efficiency" and the nature of productivity gain in developing countries:

I introduce a new framework to illustrate the trade-off between productivity and labor-intensity.
Image Here I define the productivity (Y-axis) as a combination of two key factors:

▪️ Remaining productivity gains within the sector (distance from "Pareto-optimal")

▪️ The productivity impact on the broad economy (productivity drivers vs. absorbers).
Mar 13 • 9 tweets • 2 min read
Both @gonglei89 and @tphuang have been more bullish on China’s commercial airline prospects than me.

Neither of them believed the $72B was real and both also keep a close eye on the underlying technology and supply chain development.

Same for chipmaking, by the way. Last summer — discussion points from Lei about how China’s C919, especially in key areas like engine development, was progressing faster than many realized.
Mar 13 • 28 tweets • 8 min read
I randomly came across COMAC’s financials and was at first surprised at how low the cumulative net loss figures were: ¥16.5B (~$2B) from 2008-22.

I had previously heard a whopping $72B (!) was invested in the C919 program.

After digging into it, the $72B is off by 6-14x. COMAC is the Commercial Aircraft Corporation of China.

It was formed in 2008 as a national-level SOE under SASAC to develop commercial aviation.

The ARJ21, a smaller regional jet, was developed by AVIC (aerospace & defense) and contributed to COMAC.
Mar 11 • 13 tweets • 3 min read
The Lewis Turning Point (LWT) is a well-known (in econ world) example of this "Pareto efficiency" framework, especially for developing countries.

h/t @brad_setser (who as an aside I met with IRL for the first time this morning along with @IrvingSwisher 😀) LWT considers how surplus agricultural labor is absorbed into the mfg sector and impacts on wages/productivity.

↗️ agricultural productivity creates this "surplus" — in the case of 🇨🇳 triggered by early Deng reforms.

Shifting labor to mfg results in a huge productivity boost.
Mar 11 • 10 tweets • 3 min read
Continuing this 🧵

India is likely the best bet for the 🇺🇸 to replace 🇨🇳 as a source of labor-intensive goods manufacturing.

🇮🇳 and 🇨🇳 have frosty relations (e.g. border dispute) and this has shown up in many of 🇮🇳 trade policies.

🇮🇳 will likely make a more concerted effort to reduce reliance on the 🇨🇳 upstream / intermediate goods supply chain.

But such an approach may also make its exports less globally competitive until it is able to move upstream itself.