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Time of India
3 days ago
- Automotive
- Time of India
China automakers' price war, overcapacity hurt finances
China's auto sector is reeling from overcapacity and an extended price war, raising alarm among regulators and industry executives who warn the turmoil is undermining the sector's long-term viability. China's top leaders have pledged to step up regulation of aggressive price-cutting and support the orderly phasing out of outdated production capacity, state media reported earlier this month. LSEG data for 33 listed automakers headquartered in China show a broad deterioration in key financial metrics over the past six years, highlighting the impact of a brutal price war that began in 2023. Data showed that the average time carmakers took to pay their suppliers and other short-term creditors widened to 108 days in 2024 from 99 days in 2019. On June 1, new regulation kicked in, requiring large companies to settle payments within 60 days of receiving goods, engineering services or materials. Joerg Wuttke, Washington-based partner at DGA-Albright Stonebridge Group, said that European and German suppliers generally paid suppliers within 40 to 50 days. "That (new regulation) is going to enforce a more level playing field and basically stop these automakers from turning their suppliers into bankers," he said. Among major brands, top electric vehicle seller BYD took an average of 127 days to pay suppliers and other short-term creditors in 2024, up from 81 days in 2019, the LSEG data showed. When asked about the data, BYD said its average payment period to suppliers that covered both accounts payable and notes payable dropped to 127 days by 2024 from 139 days in 2019. Geely Automobile's payment period also rose to 193 days in 2024 from 139 days in 2019, according to LSEG data. Geely declined to comment. Bucking the trend, Great Wall Motor Co shortened its payment cycle to 94 days in 2024 from 115 days in 2019. The company did not respond to a Reuters request for comment. The sector's combined inventory levels more than doubled to 370 billion yuan ($51.55 billion) in 2024 from 2019, even as dealers complained of many firms dumping cars on them to meet high sales targets. Total debt among carmakers surged 56% to 959 billion yuan last year from 2019's level. The median debt-to-equity ratio climbed by 21 percentage points to 51.3%. The sector's median net profit margin fell to just 0.83% in 2024 from 2.7% in 2019. BYD, however, boosted its profit margin to 5.4% from 1.7% in 2019. The company, which makes cars and mobile phone components, attributed the improvement to a change in its business mix as the contribution of automotive-related revenue as a share of total revenue grew from 49.5% to 79.4% over the period. Nio Inc and Xpeng Inc, two of China's best-known EV brands, had among the longest payment periods among the 33 firms. The two companies stretched their payment periods to suppliers and other short-term creditors to 223 days and 237 days, respectively. Both companies continued to remain in the red, although both improved their negative margins sharply over the period. Nio said it would commit to paying suppliers within 60 days. Xpeng said its cash liquidity continued to improve and referred to comments its CEO He Xiaopeng made last Thursday at a media event that the company would also, like other firms, endeavour to meet a commitment to pay suppliers within 60 days as soon as possible.>
Politico
4 days ago
- Business
- Politico
'Shock. Frustration. Anger.' Trump's tariff letters roil Asian allies
The White House is framing its decision to send letters as a means of shoring up meaningful engagement from the countries it contacted. 'We've got the leverage here,' a White House official said in an interview. When it comes to Japan and South Korea, in particular, 'We just haven't received serious offers from either of these countries, which is why we don't have a deal with either of them yet.' The White House is putting a particular emphasis in its talks with Asian governments on severing economic relations with China. In a preliminary agreement with Vietnam that Trump announced last week, the president said he would set a 40 percent tariff on goods shipped from the country that did not originate there. According to a draft framework, the deal will also 'establish favorable rules of origin' for each others' imports to reduce the transshipment of Chinese products. That agreement was greeted with concern among other governments in the region, particularly China, which said in a statement from its Ministry of Commerce that the country 'firmly opposes any deal made at the expense of China's interests in exchange for so-called tariff exemptions,' according to a spokesperson. 'We urge all parties to stand on the side of fairness and justice and on the right side of history in resolutely upholding international trade rules and the multilateral trading system.' And it underscores the uncomfortable position Trump's push to wall off China is putting other Asian countries in. Beijing's trade with ASEAN nations totaled more than $900 billion in 2024, roughly double the value of trade the region did with the U.S. last year. China has also invested billions in infrastructure in Southeast Asia through the Belt and Road Initiative. Washington is pressuring Southeast Asian countries to not only block Beijing from using their nations as conduits for Chinese goods heading to the West, but also to join the U.S. in cracking down on Chinese companies trying to dodge tariffs. But without any guarantee tariffs will remain off, and duty levels higher than the start of the second Trump administration, the latest threat has countries questioning whether a deal with the U.S. is worth spurning their largest regional trading partner. 'It affirms China's narrative that, 'America is not reliable. America's far away, but we're next door and we want to open our markets,'' said Derek Mitchell, who was ambassador to Myanmar in the Obama administration. Japan, a treaty ally and the United States' fourth-largest trading partner, is larger and more independent, economically and politically, from China than many of its Southeast Asian neighbors. But the relationship with Tokyo remains crucial to curbing Beijing's influence in the Asia-Pacific. And Trump's seeming disregard for the long history of cooperation between Washington and Tokyo, as well as between Washington and Seoul risks fraying ties with both capitals, said Tami Overby, a partner at DGA-Albright Stonebridge Group who advises businesses on trade issues in South Korea.
The Star
16-06-2025
- Business
- The Star
‘Elephants trampling on global trade': EU sidelined by US-China showdown
Over two rounds of high-stakes talks on European soil, Europe has watched from the sidelines as the US and China tried to reach a truce that might stabilise the global trading system on which the continent is entirely reliant. Outcomes in Geneva and London that momentarily steadied the ship have been welcomed, even as officials in European capitals frantically parsed statements, posts and tweets for clues as to how the reverberations of US-China engagement would reshape Europe's trade ties, both with the superpowers and beyond. In Brussels and other capitals, the exchanges served as a reminder of the extent to which Europe's fortunes have become hostage to the whims of giants in Beijing and Washington. 'We are not a beneficiary of any of this [conflict]; we are victims of two elephants trampling on global trade,' said Joerg Wuttke, a partner at DGA-Albright Stonebridge Group, who spent decades as Europe's top business lobbyist in China. On Wednesday evening, European Union officials went to bed after hearing US Treasury Secretary Scott Bessent say it was 'highly likely' that a pause on Trump's 'reciprocal tariffs' of 50 per cent on EU goods would be extended beyond the July 9 deadline. They awoke on Thursday morning to Trump himself saying he would send letters to countries 'in about a week-and-a-half, two weeks ... telling them what the deal is'. 'At a certain point, we're just going to send letters out. And I think you understand that, saying this is the deal, you can take it or leave it,' Trump said. For Europe, the timing matters. A summit with China is set for July 24, and Brussels insiders have long believed that the outcome of Trump's tariff review would help determine what could be achieved during those crunch talks in Beijing. 'I personally wouldn't be shocked if they meet on July 24 and things have gone in reverse, where you have tariffs on Europe at 50 per cent and tariffs on China at 30 per cent. Can you imagine?' said Deborah Elms, head of trade policy at the Singapore-based Hinrich Foundation. 'It could be anything and you cannot expect to have greater clarity, or assume you are going to end up with a better situation in the future. I would say to the Europeans – and this is very hard to do – but you have to detach US policy from your own self-interest. What is it that will work for you?' While a loosening of China's export controls on rare earth elements would be welcomed in Europe, where companies have been hit by punishments designed for the US, there has not yet been any formal indication that this has happened. 'As far as I know, that has not been communicated to us yet in any structured way,' EU trade spokesman Olof Gill said on Tuesday. Anecdotally, EU business groups said licences were starting to be allocated. 'China understands that it is a weapon that they need to be very cautious [about] using, because it forces both America and Europe to invest massively in their capabilities,' said Jens Eskelund, chair of the EU Chamber of Commerce in China. A lowering of tariffs could help reduce the potential for trade diversion, a downstream impact of Trump's policies that has terrified EU companies. But the broader superpower tensions, Eskelund said, gave Europe a stronger hand when dealing with Beijing. 'No matter how much they actually agree in London, China will seek to decouple from the United States. I think there's so much animosity now that for China, as well as the United States, it is all about reducing dependencies right now,' Eskelund said. 'That is where I think there is a fundamentally different relationship with Europe. You need someone to counterbalance what you lose when you decouple yourself from the United States, and that is where I think, for China, there's a role for Europe to play.' In the meantime, the mood music ahead of the EU-China summit continued to confuse. While Beijing was talking up the potential for positive outcomes, EU officials remained gloomy. Ambassadors from the 27 member states discussed the leaders' summit agenda on Wednesday, with far more negative items floated than issues of cooperation. China's ties with Russia and unbalanced trade are expected to be the EU's top priorities in discussions with Chinese President Xi Jinping and Premier Li Qiang. On June 23, meanwhile, EU foreign ministers are scheduled to discuss China in the context of European security. 'Asking for optimism these days is not a small ask, and I think that is important to keep in mind,' the EU's deputy director general for trade, Maria Martin-Prat, said at an event in Brussels last week, adding that there was 'a huge amount of work that needs to be done between now and the summit'. Several EU insiders rejected a recent statement by China's commerce ministry claiming that a deal that would replace the bloc's tariffs on Chinese-made electric vehicles with a complex price undertaking arrangement was in the 'final stages'. One of the sources claimed there had been little movement on the talks this year, while a second recognised it as an effort from Beijing to pressure European Commission negotiators to reach a deal. While open to reaching an agreement on EVs, Brussels has doubled down on its tough approach to Beijing on other fronts. A new package of Russia sanctions proposed this week targets two regional Chinese banks accused of using cryptocurrency transactions to import goods covered by previous EU sanctions, the Financial Times reported. The bloc on Tuesday slapped a 62.4 per cent anti-dumping duty on Chinese shipments of hard plywood. The commission said it was also monitoring soft plywood imports over suspicions that Chinese sellers were camouflaging exports of hard plywood to dodge duties. These add to recent moves to put a flat tax of €2 (US$2.30) on small packages after a flood of deliveries from Chinese e-commerce platforms Temu and Shein threatened to overwhelm the bloc's postage services, and to ban Chinese med-tech companies from lucrative EU procurement tenders. Beijing, on the other hand, continued to look for openings in Europe. Amid reports that it would offer to buy hundreds of Airbus craft ahead of the summit, the Post reported this week that China wanted EU regulators to certify its domestically produced C919 aircraft. Such accreditation would help open the door for international airlines and lessors to start purchasing the aircraft, although Europe's aviation regulator said in April that it needed between three and six years to certify the Comac jet. This week also saw developments in two areas in which China was seen to have retaliated against the EU's tariffs on Chinese-made EVs. Sources in the brandy industry confirmed that a range of minimum prices has been offered to Beijing in a bid to have anti-dumping duties removed from EU cognac imports. This would cover some shipments but leave others unaffected. The proposal comes amid job losses among French drink companies, and as some smaller companies have had to stop selling to China due to the rising costs. An industry source described it as a 'survival strategy' ahead of the summit, where they hoped leaders would resolve the feud. Earlier this week, meanwhile, China extended the deadline for an anti-dumping investigation into EU pork shipments until December, buying Spanish, Danish and Dutch farmers a reprieve. But Brussels is unlikely to be moved by a delay in Beijing's application of retaliation against what the EU sees as a legitimate investigation into China's EV subsidies. The bloc has been holding out for something more meaningful. 'Generally, I think the message with China is that it should not be taking for granted the openness of the EU market,' said Martin-Prat. 'I think China has realised how we have been developing a whole range of autonomous measures, what we refer to as our toolbox, and how we are ready to use those tools.' - SOUTH CHINA MORNING POST
CNBC
12-06-2025
- Business
- CNBC
China's racing to build its AI ecosystem as U.S. tech curbs bite. Here's how its supply chain stacks up
With the U.S. restricting China from buying advanced semiconductors used in artificial intelligence development, Beijing is placing hopes on domestic alternatives such as Huawei. The task has been made more challenging by the fact that U.S. curbs not only inhibit China's access to the world's most advanced chips, but also restrict availing technology vital for creating an AI chip ecosystem. Those constraints span the entire semiconductor value chain, ranging from design and manufacturing equipment used to produce AI chips to supporting elements such as memory chips. Beijing has mobilized tens of billions of dollars to try to fill those gaps, but while it has been able to "brute force" its way into some breakthroughs, it still has a long way to go, according to experts. "U.S. export controls on advanced Nvidia AI chips have incentivized China's industry to develop alternatives, while also making it more difficult for domestic firms to do so," said Paul Triolo, partner and senior vice president for China at advisory firm DGA-Albright Stonebridge Group. Here's how China stacks up against the rest of the world in four key segments needed to build AI chips. Nvidia is regarded as the world's leading AI chip company, but it's important to understand that it doesn't actually manufacture the physical chips that are used for AI training and computing. Rather, the company designs AI chips, or more precisely, graphics processing units. Orders of the company's patented GPU designs are then sent to chip foundries — manufacturers that specialize in the mass production of other companies' semiconductor products. While American competitors such as AMD and Broadcom offer varying alternatives, GPU designs from Nvidia are widely recognized as the industry standard. The demand for Nvidia chips is so strong that Chinese customers have continued to buy any of the company's chips they can get their hands on. But Nvidia is grappling with Washington's tightening restrictions. The company revealed in April that additional curbs had prevented it from selling its H20 processor to Chinese clients. Nvidia's H20 was a less sophisticated version of its H100 processor, designed specifically to skirt previous export controls. Nevertheless, experts say, it was still more advanced than anything available domestically. But China hopes to change that. In response to restrictions, more Chinese semiconductor players have been entering the AI processor arena. They've included a wide array of upstarts, such as Enflame Technology and Biren Technology, seeking to soak up billions of dollars in GPU demand left by Nvidia. But no Chinese firm appears closer to providing a true alternative to Nvidia than Huawei's chip design arm, HiSilicon. Huawei's most advanced GPU in mass production is its Ascend 910B. The next-generation Ascend 910C was reportedly expected to begin mass shipments as early as May, though no updates have emerged. Dylan Patel, founder, CEO and chief analyst at SemiAnalysis, told CNBC that while the Ascend chips remain behind Nvidia, they show that Huawei has been making significant progress. "Compared to Nvidia's export-restricted chips, the performance gap between Huawei and the H20 is less than a full generation. Huawei is not far behind the products Nvidia is permitted to sell into China," Patel said. He added that the 910B was two years behind Nvidia as of last year, while the Ascend 910C is only a year behind. But while that suggests China's GPU design capabilities have made great strides, design is just one aspect that stands in the way of creating a competitive AI chip ecosystem. To manufacture its GPUs, Nvidia relies on TSMC, the world's largest contract chip foundry, which produces most of the world's advanced chips. TSMC complies with U.S. chip controls and is also barred from taking any chip orders from companies on the U.S. trade blacklist. Huawei was placed on the list in 2019. That has led to Chinese chip designers like Huawei to enlist local chip foundries, the largest of which is SMIC. SMIC is far behind TSMC — it's officially known to be able to produce 7-nanometer chips, requiring less advance tech than TSMC's 3-nanometer production. Smaller nanometer sizes lead to greater chip processing power and efficiency. There are signs that SMIC has made progress. The company is suspected to have been behind a 5-nanometer 5G chip for Huawei's Mate 60 Pro, which had rocked confidence in U.S. chip controls in 2023. The company, however, has a long way to go before it can mass-produce advanced GPUs in a cost-efficient manner. According to independent chip and technology analyst Ray Wang, SMIC's known operation capacity is dwarfed by TSMC's. "Huawei is a very good chip design company, but they are still without good domestic chipmakers," Wang said, noting that Huawei is reportedly working on its own fabrication capabilities. But the lack of key manufacturing equipment stands in the way of both companies. SMIC's ability to fulfill Huawei's GPU requirements is limited by the familiar problem of export controls, but in this case, from the Netherlands. While Netherlands may not have any prominent semiconductor designers or manufacturers, it's home to ASML, the world's leading supplier of advanced chipmaking equipment — machines that use light or electron beams to transfer complex patterns onto silicon wafers, forming the basis of microchips. In accordance with U.S. export controls, the country has agreed to block the sale of ASML's most advanced ultraviolet (EUV) lithography machines. The tools are critical to making advanced GPUs at scale and cost-effectively. EUV is the most significant barrier for Chinese advanced chip production, according to Jeff Koch, an analyst at SemiAnalysis. "They have most of the other tooling available, but lithography is limiting their ability to scale towards 3nm and below process nodes," he told CNBC. SMIC has found methods to work around lithography restrictions using ASML's less advanced deep ultraviolet lithography systems, which have seen comparatively fewer restrictions. Through this "brute forcing," producing chips at 7 nm is doable, but the yields are not good, and the strategy is likely reaching its limit, Koch said, adding that "at current yields it appears SMIC cannot produce enough domestic accelerators to meet demand." SiCarrier Technologies, a Chinese company working on lithography technology, has reportedly been linked to Huawei. But imitating existing lithography tools could take years, if not decades, to achieve, Koch said. Instead, China is likely to pursue other technologies and different lithography techniques to push innovation rather than imitation, he added. While GPUs are often identified as the most critical components in AI computing, they're far from the only ones. In order to operate AI training and computing, GPUs must work alongside memory chips, which are able to store data within a broader "chipset." In AI applications, a specific type of memory known as HBM has become the industry standard. South Korea's SK Hynix has taken the industry lead in HBM. Other companies in the field include Samsung and U.S.-based Micron. "High bandwidth memory at this stage of AI progression has become essential for training and running AI models," said analyst Wang. As with the Netherlands, South Korea is cooperating with U.S.-led chip restrictions and began complying with fresh curbs on the sale of certain HBM memory chips to China in December. In response, Chinese memory chip maker ChangXin Memory Technologies, or CXMT, in partnership with chip-packaging and testing company Tongfu Microelectronics, is in the early stages of producing HBM, according to a report by Reuters. According to Wang, CXMT is expected to be three to four years behind global leaders in HBM development, though it faces major roadblocks, including export controls on chipmaking equipment. SemiAnalysis estimated in April that CXMT remained a year away from ramping any reasonable volume. Chinese foundry Wuhan Xinxin Semiconductor Manufacturing is reportedly building a factory to produce HBM wafers. A report from SCMP said that Huawei Technologies had partnered with the firm in producing HBM chips, although the companies did not confirm the partnership. Huawei has leaned on HBM stockpiles from suppliers like Samsung for use in their Ascend 910C AI processor, SemiAnalysis said in an April report, noting that while the chip was designed domestically, it still relies on foreign products obtained prior to or despite restrictions. "Whether it be HBM from Samsung, wafers from TSMC, or equipment from America, Netherlands, and Japan, there is a big reliance on foreign industry," SemiAnalysis said.
Nikkei Asia
26-05-2025
- Business
- Nikkei Asia
Targeting DeepSeek won't fix Washington's flawed AI strategy on China
Paul Triolo is a Partner at DGA-Albright Stonebridge Group and Global Tech Policy Lead of DGA Group. The Trump administration appears poised to take a series of actions targeting DeepSeek, a fast-rising Chinese artificial intelligence startup whose advanced AI models have quickly gained traction among developers and tech enthusiasts worldwide. A recent congressional report called DeepSeek a "profound threat" to national security, citing concerns about potential data transfers to China, censorship applied to model outputs, and allegations that the firm used restricted Nvidia chips to train its models.
