Arvind's Newsletter

1.In April, business activity recorded its most rapid expansion in nearly 14 years, driven by robust demand, according to a report on the India Composite Purchasing Managers' Index (PMI) compiled by S&P Global and HSBC, released on Tuesday.

The PMI rose to 62.2 in April from March's 61.8. Services activity led the expansion, with the index reaching a three-month high of 61.7. Services growth was fuelled by increased new business activities, indicating strong demand. International demand remained robust during the month.

2.Amid India’s chip push, Taiwan flags talent gaps, high import 

A “cumbersome” administrative structure, lack of experienced engineers, high tariffs on electronics component imports and inadequate infrastructure — these are some of the challenges that India needs to address before chip companies from the island territory start to commit serious investments, a top Taiwanese government representative said.

Responding to a question from The Indian Express on what has stopped Taiwanese chip companies from investing in India, Joseph Wu, Taiwan’s Minister of Foreign Affairs, also said the country should focus on signing a long-negotiated free trade agreement (FTA) with Taiwan that would allow companies in the semiconductor supply chain to import components, equipment and material to India easily.

3.But Taiwan is facing problems with its Semiconductor project in USA as well where TSMC workers are facing a cultural gap.

Its project in Phoenix, Arizona is behind schedule, with the start of operations put back from this year to next. Hundreds of Taiwanese workers have relocated, but the factory remains a construction site. US hires, meanwhile, found nearly all communication was in Mandarin and Taiwanese, and relied on Google Translate. They also struggled with TSMC’s work ethic: They were shamed for not completing tasks urgently enough or for not working long hours, and not trusted with important tasks.

Taiwanese managers were instructed “not to yell at employees in public, or threaten to fire them,” but, one employee told Rest of World, “I think in the heat of the moment, they forgot.”

4.US Congress approves bill banning TikTok unless Chinese owner ByteDance sells platform

TikTok has become a leading source of information in USA. About one-third of Americans under 30 regularly get their news from it. 

TikTok is also owned by a company based in the leading global rival of the United States. And that rival, especially under President Xi Jinping, treats private companies as extensions of the state. “This is a tool that is ultimately within the control of the Chinese government,” Christopher Wray, the director of the F.B.I., has told Congress.

When you think about the issue in these terms, you realize there may be no other situation in the world that resembles China’s control of TikTok. American law has long restricted foreign ownership of television or radio stations, even by companies based in friendly countries. “Limits on foreign ownership have been a part of federal communications policy for more than a century,” the legal scholar Zephyr Teachout explained in The Atlantic.

The same is true in other countries. India doesn’t allow Pakistan to own a leading Indian publication, and vice versa. China, for its part, bars access not only to American publications but also to Facebook, Instagram and other apps.

Already, there is evidence that China uses TikTok as a propaganda tool.

Posts related to subjects that the Chinese government wants to suppress — like Hong Kong protests and Tibet — are strangely missing from the platform, according to a recent report by two research groups reported New York Times. The same is true about sensitive subjects for Russia and Iran, countries that are increasingly allied with China.

The report also found a wealth of hashtags promoting independence for Kashmir, a region of India where the Chinese and Indian militaries have had recent skirmishes. A separate Wall Street Journal analysis, focused on the war in Gaza, found evidence that TikTok was promoting extreme content, especially against Israel. (China has generally sided with Hamas.)

Adding to this circumstantial evidence is a lawsuit from a former ByteDance executive who claimed that its Beijing offices included a special unit of Chinese Communist Party members which monitored “how the company advanced core Communist values.”

5.US tech giants Tesla and Apple are suffering as they face intense competition from Chinese competitors.

Elon Musk’s EV company reported a 55% drop in profit and 9% drop in first-quarter revenue Tuesday, its biggest year-on-year fall since 2012. Analysts began forecasting trouble for Musk’s EV empire after Tesla announced price cuts in China. Apple, meanwhile, saw a 19% dip in smartphone shipments to China this quarter, its worst performance since 2020, as it lost ground to local competitors like Huawei. Chinese smartphones are cheaper than iPhones, and have gained traction with more premium design and software features.

6.Driven by growing conflicts across the world, global defence spending grew 7% to a record $2.4 trillion in 2023, the fastest annual rise since 2009. 

The wars in Ukraine and Gaza have driven much of the increase and reshaped defence strategies worldwide, SIPRI, a leading security think tank, said. 

“The past two years of war in Ukraine have fundamentally changed the security outlook … with the NATO target of 2% increasingly being seen as a baseline rather than a threshold to reach,” one of the report’s authors said. 

The US and China alone accounted for almost 50% of global expenditure, but for the first time in SIPRI’s 60-year history, every continent saw an increase in defence spending.

7.Tesla shares rise on plans to accelerate launch of ‘more affordable’ models

Tesla has pledged to bring forward the launch of more affordable models of its electric vehicles, helping its stock recover some of its recent losses despite reporting a 9 per cent decline in first-quarter revenue amid a sharp fall in sales.

In a filing on Tuesday evening, the electric-car maker said it had updated our future vehicle line-up to accelerate the launch of new models ahead of our previously communicated start of production in the second half of 2025. It added that these would include more affordable vehicles that could be produced on its existing manufacturing lines.

Tesla shares rose more than 13 per cent on Wednesday. Chief executive Elon Musk said in January that Tesla was preparing to start production of a new lower-cost car next year, priced at $25,000 and dubbed Model 2. The stock had fallen on a Reuters report earlier this month that the project had been shelved, which Musk denied.

It will be interesting to see if Tesla manufactures the affordable car in its existing factories in US, Germany or China or in India where it may be setting up a new project as predicted by Business Standard.