China Catches Up to Intel as Tesla and Apple Stumble
Intel (INTC) was also in the headlines this week.
Washington awarded the US chipmaker up to $8.5 billion in grants and $11 billion in loans to lift domestic semiconductor output under America’s 2022 CHIPS and Science Act.
The goal is to help Intel’s plan for new, expanded, chip foundries (‘fabs’) across Arizona, Ohio, New Mexico, and Oregon. Intel was once the world’s largest chipmaker before it started missing opportunities while losing its technology edge.
In 2006, Intel was the first to make 45 nanometer (nm) chips, but it can do only 10nm today. Meanwhile, China has been in a big “catch-up” mode and last year surprised many with a 7nm chip. Taiwan Semiconductor (TSM) is the leader and can produce high-performance 3nm chips. It has a new fab plant in Japan that is up and running, but has struggled to build a new chip fab in Arizona, due to high costs, and a lack of local talent and suppliers.
Lastly, the China effect is working in reverse for companies such as Tesla (TSLA) and Apple (APPL). Both have deep financial and technological exposure to China. About 20% of Apple’s sales are in China and most of its products are sourced there as well. Tesla’s flagship Shanghai factory accounts for over half of production and the bulk of its profits.
In 2024, Apple shipments to China are down 33% as Huawei gains market share and Tesla is slowing production in China due to weaker demand and the rise of China’s EV makers such as BYD.
China’s vaunted consumer markets are sputtering. In 2022 and 2023, a slowdown in China’s domestic demand resulted in the country’s exports exceeding its imports by about $1.7 trillion.
When should you buy the pullback of Tesla (TSLA) and Apple (APPL) and which is the best semiconductor stock? Become a paid subscriber of Global Gambits and find out today.