The New Tech Gold Rush: Nvidia's Milestone, WTO Shocks, and Supply Chain Dramas

Could the next gold rush be in the tech industry? Join me, Tony Hines, as I discuss Nvidia's astounding leap to a $2 trillion market value, propelled by the generative AI sector's insatiable hunger for advanced chips. Dive into the intricacies of global trade as India's bold proposal at the World Trade Organization meeting threatens to shake the foundations of digital e-commerce, with potential ripple effects for semiconductor behemoths like Qualcomm, Intel, AMD, and Nvidia. It's a rollercoaster week in the world of supply chains, and you're getting the full, unvarnished picture.

The episode also casts a critical eye on the bittersweet realities of the chocolate industry, examining Mondelez's trademark dispute with Tony's Chocolonely over their iconic purple packaging. It's a tale of brand identity, intellectual property, and the ethical challenges that lace the cocoa supply chain. Plus, don't miss the latest turbulence in aviation as Boeing's 737 Max program faces yet another executive departure. Strap in for a session brimming with gripping insights on the logistics, challenges, and controversies that are currently shaping the fast-paced world of supply chains.

Transcript

Speaker 1: 0:00

Hi, tony Hines, here you're listening to the Chain Reaction Podcast, all about supply chain advantage. This is the Business Catch-Up Edition procurement, operations, strategy, trucks, ships, planes and trains, logistics and markets all in today's edition. Well, there was a frenzy in the markets this week as Nvidia hit a valuation on Wall Street at $2 trillion. Nvidia chips are used by almost all of the new generative AI players, from chat, gpt, open AI and Google, and it's helped the company shift its valuation from a trillion dollars to two trillion dollars market value in just about eight months, so it's being labeled the new gold rush. The progress of AI is dependent on companies like Nvidia producing these intelligent chips, and the numbers are eye-watering, really, because analysts are expecting revenues to rise by around $2 billion each quarter throughout the fiscal year of 2025 as more chips are sold.

Speaker 1: 1:22

Well, there was a surprising move this week by the Indian contingent at the WTO meeting in Abu Dhabi. A global consortium of semiconductor industry groups is asking India to revisit its plan to push for duties on cross-border digital e-commerce and data transfers. They say that India's stance will actually limit its own growth. Ministers from around the globe are meeting for a World Trade Organization meeting in Abu Dhabi early in the next week to discuss several trade related issues, which include extending a moratorium that's been in place since 1998 on applying duty on electronic transmission. India, south Africa and Indonesia are opposing efforts by the United States and Europe to extend the moratorium and if that happens, it would end later this year and it would mean that digital tariffs would be in place, raising costs. It would probably add to the difficulties and disruptions of chip production and shortages, and the world semiconductor council, the WSC, has written to the Indian Prime Minister, narendra Modi, on Thursday. The Indian government are trying to increase growth, of course, and want £10 billion as an incentive package to boost the industry, but many claim that this would be disruptive to the industry and actually not help the Indian government achieve its objectives. Qualcomm, intel, amd and Nvidia would all be affected and it's seen as many to be a mistake to impose such duties.

Speaker 1: 2:58

Now, it's not the first time we've seen chocolate wars, but this week Mondele were taking legal action against Tony Chocolonely, and that's because it's seen to be imitating its purple packaging. Tony's Chocolonely launched four new temporary wrappers in which they appear to copy bars such as Milka, made by other firms, including Mars. There's been a campaign in Germany and Austria to highlight the use of child labour by major suppliers in the cocoa industry. It's always a very murky industry. The supply of cocoa. Mondele said that they owned the colour trademark in Europe. It's incredible, isn't it? You can own colour and there's a legal issue in relation to the trademark infringement. Spokesman for Mondele said that they always will protect the value of their brands, which they say they've worked hard over hundreds of years, and they always express concern and raise issues with third parties when they see a potential threat. It's always interesting to see when a company such as Mondele claims that they have built up the brand over a hundred years, because Mondele didn't even exist a hundred years ago, but the companies which they own did that. They've taken over, so perhaps they need to be a little bit more precise in their argument.

Speaker 1: 4:18

There are some other bars involved, such as Kit Kat and Twix, made by Nestle, and Mars and Ferrero Rocher are also in the mix. Tony's Chocol Only is a Dutch based company and they claim that many of the big chocolate companies aren't paying a living wage to producers of the cocoa and that leads to exploitation on cocoa farms, with about one and a half million children involved in the supply chain in places like Ghana and Côte d'Ivoire. Tony's has since replaced the offensive purple wrapper with a grey wrapper. Back in 2021, the Dutch chocolate brand Tony's Chocol Only apologised for deliberately leaving out one of the advent calendar windows to highlight inequality in the industry. It would be interesting to see how this particular infringement claim plays out, whether it reaches Côte, is settled out of Côte or whatever happens. Boeing announced this week that the leader of the troubled 737 Max programme at Clark would be leaving the company. You may recall that there's been lots of trouble with the 737 Max 9 plane. That's the plane in which the four boats on the door on an Alaska jet were missing, and then they found similar planes with the same problem. So the finger has been pointed at quality issues of Boeing and if you listen back to the previous episode of Business Catch-Up, you'll hear the full story about what happened at Boeing.

Speaker 1: 5:55

Truck sales are up in the United Kingdom. Figures from the SMMT in the UK show that new truck sales and registrations were up by almost 46,227 units. This is the final quarter data. There was a fall in the registration of 6x2 tractor units for the first time in 2023. The 44 tonne 6x2 tractor unit is the most popular type of truck in the UK and is an indicator of the trend in the overall market. That's, according to truck pages, scania is the best seller in 2023. They're a Swedish manufacturer and they're growing at twice the rate of the overall market. Daf trucks were down slightly on the year, as were Mercedes. Daf were down about 12.4% and Mercedes down by 5.6%. And if we look at the top 10 trucks, we've got DAF, scania, volvo, mercedes, man, eviko, renault, isuzu, denys, eagle and Fuso. But the biggest growth was Scania, volvo, man, eviko and Renault, along with Isuzu. Fuso also grew by 37%. Big growth. And the numbers of HGV registrations in quarter four, as we said, over the 12,000. So, a year on year increase.

Speaker 1: 7:22

Well, the Houthis in Yemen continue to attack ships, and they attacked a British ship in the last week, and this is put costs up with disruption, as ships have to sail around Suez, around the Horn of Africa, instead of going up through the Balalman Deb Strait and into Suez, and this is put container shipping up by about 300% over the year. But prices are expected to fall later in the year. Of course, when shipping costs rise, the only people that make money are shippers and consumers and businesses who purchase goods and have to purchase logistics to bring those goods to the markets they serve. They all incur cost and if the costs are going up, they pass it on to consumers and consumer prices go up. And we all know what that means. It means inflation. It's the markets that bring inflation down, but if prices are going up, there's little that the government can do to restrain it, apart from trying to pull the blunt levers of monetary policy or interest rates. But that has little impact on disruptions such as those currently experienced by global shipping and the rebel action by the Houthis in Yemen. The reasons for the expected fall in prices include the additional shipping that's coming online in 2025, which starts later in this year, and as tonnage comes online, that means there are going to be more ships to pick up the containers and move them around. So the increase in shipping capacity, with those ships coming online, means competition increases and it means prices will become lower and the shippers themselves are saying that prices are under control despite the longer journeys that those ships are having to make presently. And, of course, if the Houthi attacks are stopped, then of course that will open up sewers again and that will be safer and shorter.

Speaker 1: 9:26

The Singapore Air Show took place this week and China unveiled its new passenger jet C919 Erliner. It's the first Erliner produced by China. This is Asia's biggest air show. Supply chain issues are limiting the ability of many airlines to upgrade their fleets and service their aircraft. This biennial show features, for the first time outside of China territories, china's first homegrown passenger jet, comac's narrowbody C919. The world's two dominant plane makers of course Airbus and Boeing, and both are struggling to ramp up production and meet demand for new planes presently, so it leaves a chink in the armor from a strategic point of view for Comac to promote its alternative. The plane, of course, doesn't yet meet international regulations. It's only been signed off by China's regulators, and it does rely on international supply chains for its parts. So it will be interesting to see how it's received outside of the Chinese territories.

Speaker 1: 10:36

Nike announced this week that it will cut about 2% of its total workforce, which is around 1600 jobs. The announcement was made on Thursday and the sports world giant said it's to lower expenses as demand for shoes and sneakers declines. It blames high rentals and interest rates that have led customers to cut back spending on luxury products, and brands such as Nike Sportswear, nike and Adidas have suffered as a result of the lack of consumer spending on such products. Retailers are lowering their orders through the wholesale channels. Back in December, nike produced plans to save $2 billion over the next three years by tightening supplies of some products and reducing management costs. These cost cuts would include about 400 million to 450 million in severance costs to employees. Nike had 83,700 employees worldwide on May 31st 2023. This might not be the end of the cost-cutting exercise, of course.

Speaker 1: 11:45

Nat West Group unveiled its highest yearly profits since before the financial crisis back in 2007. Pretax profits £6.2 billion over 2023, higher than expected. It's also named the permanent boss, paul Thwaite. He replaces Dame Alison Rose, who resigned after admitting discussing the closure of Nigel Farage's bank account. It was a very public affair, of course. The board said he was the right person for the job to shape the future of the group. Now some may be quite cynical about this and say the announcement of both the new permanent boss of the bank and the profit position will help the potential sale of shares to the general public. The government owns 35% of the bank since it bailed it out to the tune of £46 billion back in the days of the financial crash 2007-08. But the UK government's investment, ukgi the company that's responsible for government investments has been wanting to sell shares since the chancellor announced plans in 2023. Nat West previously was known as the Royal Bank of Scotland, and the government's been gradually reducing its stake in the bank in recent years. So with the profits on the rise and the new boss of the bank, that means confidence and maybe a higher price for those shares.

Speaker 1: 13:13

Other news from the UK this week also stated that the UK economy officially was in recession in December. Now it's not likely to last. It's likely to come out of recession reasonably quickly, but nevertheless the economy was in recession, according to the latest figures from the Office of National Statistics in December. Now the Conservative government in the UK is currently proposing to put in place a number of tax cuts. Again, if one is cynical, this is probably to buy votes in the general election later in the year. But the way they're proposing to fund it is through public service cuts, and that can't be a good idea, because public services are already under severe pressure to deliver and Britain's become a country in which nothing works as well as it should or could do. So, rather than cut the public service sector, it would be as well to invest.

Speaker 1: 14:13

Well, it's that time of year again where the fashion industry is preparing to host London Fashion Week. It's the 40th anniversary of London Fashion Week. It's now become a biannual event. It was originally the brainchild of Lynn Franks, who was a PR guru back in the 1980s 1990s, and it's now become a regular feature on the global fashion calendar. It was launched in 1984. It's the youngest of all of the five big fashion weeks, and the glitz and the glam come back to London until Tuesday.

Speaker 1: 14:49

Fashion Council chair David Pempsall said economic challenges are putting pressure on the industry. Cost of living, crisis, interest rates, brexit were all creating difficulties for designers and fashion houses, but he insisted that the industry remained resilient, quality is respected and we've got phenomenal designers doing amazing things, he said. So London Fashion Week LFW as it's known will have 67 designers across 46 catwalks and 36 events, according to the organisers, with collections by many more up-and-coming designers expected to make an appearance off-grid, and it's usually a good event for up-and-coming designers to test out their words in a public marketplace. So it's a very important event, london Fashion Week, and it's good that it manages to keep going. It's always an interesting event when landmark places such as Covent Garden, london Eye, the Royal Opera House, were all lit up on Thursday in green to mark the start of the LFW anniversary celebrations. Much British talent has passed through LFW over the years, including supermodels such as Naomi Campbell, kate Moss and, of course, iconic designers such as Alexander McQueen and Stella McCartney. Lynn Frank she might recalls the inspiration for Absolutely Fabulous and the character Edina Monson. So London keeps up with New York, milan, paris and Tokyo, and it's good that it does.

Speaker 1: 16:24

Well, let's take a quick look at the markets around the globe. In under a minute we see the Brent crude is down slightly at $82.2. Copper is down slightly, but it's still $725.6. Gold stands at $20.26.4, up slightly. Currency exchange rates euro to the US dollar $108.3,. Gbpan to the US dollar just under the $127. Japan to the US dollar $0.0066. Standard and pause on the 500 and stands at 5087, eur stocks 4878 and the FTSE 100, 7693. The NICI at 39098. And those are the markets this week. Well, that's it for this week. I just want to finish off by saying do drop by next week when we have a great show for you where I interview Bindiya Vakil and she's the CEO at Reslink, and Bindiya talks about supply chain risk and how to get that resilient supply chain. So drop by and pick that one up. I'll see you next time. I'm Tony Hines. I'm signing off. Bye for now.